Contact: | FOR RELEASE: |
Tyler H. Rose | February 3, 2020 |
Executive Vice President | |
and Chief Financial Officer | |
(310) 481-8484 or | |
Michelle Ngo | |
Senior Vice President | |
and Treasurer | |
(310) 481-8581 |
• | Net income available to common stockholders per share of $0.67 |
• | Funds from operations available to common stockholders and unitholders (“FFO”) per share of $1.00 |
• | Revenues of $220.2 million |
• | Stabilized portfolio was 94.6% occupied and 97.0% leased at December 31, 2019 |
• | Signed approximately 244,000 square feet of new or renewing leases, bringing the full year total to 1.8 million square feet |
• | In October, acquired an office campus totaling approximately 152,000 square feet that is 100% leased to creative tenants and is located at 3103-3243 La Cienega Blvd. in the Culver City submarket of Los Angeles for $186.0 million. The company plans to significantly increase the square footage of the campus through redevelopment over time |
• | In October, completed the sale of a 272,000 square foot operating property located at 2211 Michelson, the company’s last remaining Orange County property, for gross proceeds of $115.5 million and a gain on sale of operating properties of $29.6 million |
• | In October, executed a 12-year lease with Stripe, Inc. for approximately 421,000 square feet of space at Kilroy Oyster Point - Phase I, which is now 100% leased |
• | During the quarter, completed construction and commenced GAAP revenue recognition on the second phase of The Exchange on 16th, which represents approximately 30% of the 750,000 square foot development project located in San Francisco’s Mission Bay district. As a result of the completion of the first two phases of the project in 2019, the company was recognizing GAAP revenue on 82% of the project at year-end. The office component of the project, approximately 738,000 square feet, is 100% leased to Dropbox |
• | In December, executed a long-term lease with a major technology company for 100% of 9455 Towne Centre Drive, a 160,000 square foot development project in the University Towne Center submarket of San Diego |
• | In December, completed the acquisition of a 1.4-acre land site, located at 500 and 600 Olive Way, 601 Stewart Street, 1825 7th Avenue and 1818 16th Avenue, in the central business district of Seattle for a cash purchase price of $133.0 million. The company plans to seek entitlements to develop a mixed-use project over time |
• | During the fourth quarter, executed 12-month forward equity sale agreements under the ATM program for 1,945,906 shares at a weighted average sales price of $82.64. As of the date of this release, the company had not drawn down any portion of the shares sold under these forward equity sale agreements |
• | Achieved a company record in annual leasing, signing 3.5 million square feet of leases, including just over 1.8 million square feet of new or renewal leases in the stabilized portfolio and 1.7 million square feet in the in-process development pipeline |
• | Fully leased 333 Dexter, a 635,000 square foot office project in Seattle |
• | Fully leased Kilroy Oyster Point, Phase 1, a 656,000 square foot office and life science project in South San Francisco |
• | Fully leased 9455 Towne Centre Drive, a 160,000 square foot office project in San Diego |
• | Completed construction on 237 of 608 residential units, the first of three phases of the residential development at the company’s One Paseo mixed-use project in the Del Mar submarket of San Diego. Phase I of the residential development was 63% leased as of the date of this release |
• | Acquired approximately $359.0 million of operating properties and land |
• | Generated gross proceeds of approximately $133.8 million from the company’s capital recycling program through the disposition of non-core assets |
• | Issued $500.0 million of 10-year, 3.05% senior unsecured notes |
• | Executed 12-month forward equity sale agreements under the ATM program for 3,147,110 shares at a weighted average sales price of $80.08 |
• | Increased the annual dividend on the company’s common stock by 6.6% to $1.94 per share |
• | Maintained industry leadership position in sustainability, including repeat awards from GRESB, NAREIT and the EPA |
• | First North American REIT to have made commitment to be carbon neutral operations by year end 2020 |
• | Selected for inclusion in the 2020 Bloomberg Gender-Equality Index (GEI). The GEI is currently comprised of 325 companies headquartered across 42 countries with a combined market capitalization of over $14 trillion. The GEI measures gender equality across five pillars: female leadership and talent |
Full Year 2020 Range | |||||||||
Low End | High End | ||||||||
Net income available to common stockholders per share - diluted | $ | 2.01 | $ | 2.21 | |||||
Weighted average common shares outstanding - diluted (1) | 109,000 | 109,000 | |||||||
Net income available to common stockholders | $ | 219,000 | $ | 241,000 | |||||
Adjustments: | |||||||||
Net income attributable to noncontrolling common units of the Operating Partnership | 4,300 | 4,700 | |||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | 20,500 | 23,500 | |||||||
Depreciation and amortization of real estate assets | 233,500 | 233,500 | |||||||
Gains on sales of depreciable real estate | — | — | |||||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (32,000 | ) | (35,000 | ) | |||||
Funds From Operations (2) | $ | 445,300 | $ | 467,700 | |||||
Weighted average common shares/units outstanding – diluted (3) | 111,000 | 111,000 | |||||||
Funds From Operations per common share/unit – diluted (2)(3) | $ | 4.01 | $ | 4.21 | |||||
• | Dispositions of approximately $150.0 million to $300.0 million |
• | Same store cash net operating income growth of 6.5% to 7.5% |
• | Year-end occupancy of 93.0% to 94.0% |
• | Total development spending of approximately $500.0 million to $600.0 million |
(1) | Calculated based on estimated weighted average shares outstanding including non-participating share-based awards. |
(2) | See management statement for FFO at end of release. |
(3) | Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options, contingently issuable shares, and shares issuable under forward equity sale agreements and assuming the exchange of all common limited partnership units outstanding. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues (1) | $ | 220,235 | $ | 190,842 | $ | 837,454 | $ | 747,298 | |||||||
Net income available to common stockholders (1) | $ | 72,500 | $ | 160,220 | $ | 195,443 | $ | 258,415 | |||||||
Weighted average common shares outstanding – basic | 106,013 | 100,747 | 103,201 | 99,972 | |||||||||||
Weighted average common shares outstanding – diluted | 106,748 | 101,380 | 103,849 | 100,482 | |||||||||||
Net income available to common stockholders per share – basic (1) | $ | 0.68 | $ | 1.59 | $ | 1.87 | $ | 2.56 | |||||||
Net income available to common stockholders per share – diluted (1) | $ | 0.67 | $ | 1.58 | $ | 1.86 | $ | 2.55 | |||||||
Funds From Operations (1)(2)(3) | $ | 109,518 | $ | 81,330 | $ | 418,478 | $ | 360,491 | |||||||
Weighted average common shares/units outstanding – basic (4) | 109,138 | 103,892 | 106,342 | 103,167 | |||||||||||
Weighted average common shares/units outstanding – diluted (5) | 109,872 | 104,524 | 106,991 | 103,677 | |||||||||||
Funds From Operations per common share/unit – basic (1)(3) | $ | 1.00 | $ | 0.78 | $ | 3.94 | $ | 3.49 | |||||||
Funds From Operations per common share/unit – diluted (1)(3) | $ | 1.00 | $ | 0.78 | $ | 3.91 | $ | 3.48 | |||||||
Common shares outstanding at end of period | 106,016 | 100,747 | |||||||||||||
Common partnership units outstanding at end of period | 2,023 | 2,025 | |||||||||||||
Total common shares and units outstanding at end of period | 108,039 | 102,772 | |||||||||||||
December 31, 2019 | December 31, 2018 | ||||||||||||||
Stabilized office portfolio occupancy rates: (6) | |||||||||||||||
Greater Los Angeles | 95.2 | % | 95.1 | % | |||||||||||
Orange County | N/A | 89.6 | % | ||||||||||||
San Diego County | 89.7 | % | 89.3 | % | |||||||||||
San Francisco Bay Area | 95.0 | % | 96.4 | % | |||||||||||
Greater Seattle | 97.7 | % | 93.6 | % | |||||||||||
Weighted average total | 94.6 | % | 94.4 | % | |||||||||||
Total square feet of stabilized office properties owned at end of period: (6) | |||||||||||||||
Greater Los Angeles | 4,026 | 3,956 | |||||||||||||
Orange County | N/A | 272 | |||||||||||||
San Diego County | 2,048 | 2,046 | |||||||||||||
San Francisco Bay Area | 5,600 | 5,161 | |||||||||||||
Greater Seattle | 1,802 | 1,798 | |||||||||||||
Total | 13,476 | 13,233 |
(1) | Effective January 1, 2019, the company adopted ASC 842 “Leases.” Please refer to our consolidated statements of operations for a description of the changes made to our consolidated financial statements. In accordance with the adoption of the new standard, previously reported periods are not restated for the impact of the standard. |
(2) | Reconciliation of Net income available to common stockholders to Funds From Operations available to common stockholders and unitholders and management statement on Funds From Operations are included after the Consolidated Statements of Operations. |
(3) | Reported amounts are attributable to common stockholders, common unitholders, and restricted stock unitholders. |
(4) | Calculated based on weighted average shares outstanding including participating share-based awards (i.e. nonvested stock and certain time based restricted stock units) and assuming the exchange of all common limited partnership units outstanding. |
(5) | Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options, contingently issuable shares, and shares issuable under forward equity sale agreements and assuming the exchange of all common limited partnership units outstanding. |
(6) | Occupancy percentages and total square feet reported are based on the company’s stabilized office portfolio for the periods presented. Occupancy percentages and total square feet shown for December 31, 2018 include the office properties that were sold subsequent to December 31, 2018. |
December 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
REAL ESTATE ASSETS: | |||||||
Land and improvements | $ | 1,466,166 | $ | 1,160,138 | |||
Buildings and improvements | 5,866,477 | 5,207,984 | |||||
Undeveloped land and construction in progress | 2,296,130 | 2,058,510 | |||||
Total real estate assets held for investment | 9,628,773 | 8,426,632 | |||||
Accumulated depreciation and amortization | (1,561,361 | ) | (1,391,368 | ) | |||
Total real estate assets held for investment, net | 8,067,412 | 7,035,264 | |||||
Real estate assets and other assets held for sale, net | — | — | |||||
Cash and cash equivalents | 60,044 | 51,604 | |||||
Restricted cash | 16,300 | 119,430 | |||||
Marketable securities | 27,098 | 21,779 | |||||
Current receivables, net | 26,489 | 20,176 | |||||
Deferred rent receivables, net | 337,937 | 267,007 | |||||
Deferred leasing costs and acquisition-related intangible assets, net | 212,805 | 197,574 | |||||
Right of use ground lease assets (1) | 96,348 | — | |||||
Prepaid expenses and other assets, net | 55,661 | 52,873 | |||||
TOTAL ASSETS | $ | 8,900,094 | $ | 7,765,707 | |||
LIABILITIES AND EQUITY | |||||||
LIABILITIES: | |||||||
Secured debt, net | $ | 258,593 | $ | 335,531 | |||
Unsecured debt, net | 3,049,185 | 2,552,070 | |||||
Unsecured line of credit | 245,000 | 45,000 | |||||
Accounts payable, accrued expenses and other liabilities | 418,848 | 374,415 | |||||
Ground lease liabilities (1) | 98,400 | — | |||||
Accrued dividends and distributions | 53,219 | 47,559 | |||||
Deferred revenue and acquisition-related intangible liabilities, net | 139,488 | 149,646 | |||||
Rents received in advance and tenant security deposits | 66,503 | 60,225 | |||||
Liabilities and deferred revenue of real estate assets held for sale | — | — | |||||
Total liabilities | 4,329,236 | 3,564,446 | |||||
EQUITY: | |||||||
Stockholders’ Equity | |||||||
Common stock | 1,060 | 1,007 | |||||
Additional paid-in capital | 4,350,917 | 3,976,953 | |||||
Distributions in excess of earnings | (58,467 | ) | (48,053 | ) | |||
Total stockholders’ equity | 4,293,510 | 3,929,907 | |||||
Noncontrolling Interests | |||||||
Common units of the Operating Partnership | 81,917 | 78,991 | |||||
Noncontrolling interests in consolidated property partnerships | 195,431 | 192,363 | |||||
Total noncontrolling interests | 277,348 | 271,354 | |||||
Total equity | 4,570,858 | 4,201,261 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 8,900,094 | $ | 7,765,707 |
(1) | Effective January 1, 2019, the company adopted ASC 842 “Leases,” which requires right of use assets and liabilities for leases in which the company is the lessee to be presented on the company’s consolidated balance sheets. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
REVENUES (1) | |||||||||||||||
Rental income | $ | 217,140 | $ | 166,957 | $ | 826,472 | $ | 656,631 | |||||||
Tenant reimbursements | — | 20,511 | — | 80,982 | |||||||||||
Other property income | 3,095 | 3,374 | 10,982 | 9,685 | |||||||||||
Total revenues | 220,235 | 190,842 | 837,454 | 747,298 | |||||||||||
EXPENSES | |||||||||||||||
Property expenses (1) | 42,044 | 34,386 | 160,037 | 133,787 | |||||||||||
Real estate taxes (1) | 21,534 | 18,399 | 78,097 | 70,820 | |||||||||||
Provision for bad debts (1) | — | (1,029 | ) | — | 5,685 | ||||||||||
Ground leases (1) | 1,978 | 1,450 | 8,113 | 6,176 | |||||||||||
General and administrative expenses | 22,365 | 33,872 | 88,139 | 90,471 | |||||||||||
Leasing costs (1) | 2,016 | — | 7,615 | — | |||||||||||
Depreciation and amortization | 69,513 | 64,860 | 273,130 | 254,281 | |||||||||||
Total expenses | 159,450 | 151,938 | 615,131 | 561,220 | |||||||||||
OTHER INCOME (EXPENSES) | |||||||||||||||
Interest income and other net investment gain (loss) | 1,436 | (1,706 | ) | 4,641 | (559 | ) | |||||||||
Interest expense | (13,932 | ) | (12,436 | ) | (48,537 | ) | (49,721 | ) | |||||||
Loss on early extinguishment of debt | — | (12,623 | ) | — | (12,623 | ) | |||||||||
Gain on sales of land | — | 11,825 | — | 11,825 | |||||||||||
Gains on sales of depreciable operating properties | 29,633 | 142,926 | 36,802 | 142,926 | |||||||||||
Total other income (expenses) | 17,137 | 127,986 | (7,094 | ) | 91,848 | ||||||||||
NET INCOME | 77,922 | 166,890 | 215,229 | 277,926 | |||||||||||
Net income attributable to noncontrolling common units of the Operating Partnership | (1,343 | ) | (3,185 | ) | (3,766 | ) | (5,193 | ) | |||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | (4,079 | ) | (3,485 | ) | (16,020 | ) | (14,318 | ) | |||||||
Total income attributable to noncontrolling interests | (5,422 | ) | (6,670 | ) | (19,786 | ) | (19,511 | ) | |||||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 72,500 | $ | 160,220 | $ | 195,443 | $ | 258,415 | |||||||
Weighted average common shares outstanding – basic | 106,013 | 100,747 | 103,201 | 99,972 | |||||||||||
Weighted average common shares outstanding – diluted | 106,748 | 101,380 | 103,849 | 100,482 | |||||||||||
Net income available to common stockholders per share – basic | $ | 0.68 | $ | 1.59 | $ | 1.87 | $ | 2.56 | |||||||
Net income available to common stockholders per share – diluted | $ | 0.67 | $ | 1.58 | $ | 1.86 | $ | 2.55 |
(1) | Effective January 1, 2019, the company adopted ASC 842 “Leases,” which required the following changes for all periods beginning and subsequent to January 1, 2019. In accordance with the adoption of the new standard under the modified retrospective method, previously reported periods are not restated for the impact of the standard. |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income available to common stockholders | $ | 72,500 | $ | 160,220 | $ | 195,443 | $ | 258,415 | |||||||
Adjustments: | |||||||||||||||
Net income attributable to noncontrolling common units of the Operating Partnership | 1,343 | 3,185 | 3,766 | 5,193 | |||||||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | 4,079 | 3,485 | 16,020 | 14,318 | |||||||||||
Depreciation and amortization of real estate assets | 68,078 | 63,640 | 268,045 | 249,882 | |||||||||||
Gains on sales of depreciable real estate | (29,633 | ) | (142,926 | ) | (36,802 | ) | (142,926 | ) | |||||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (6,849 | ) | (6,274 | ) | (27,994 | ) | (24,391 | ) | |||||||
Funds From Operations(1)(2)(3) | $ | 109,518 | $ | 81,330 | $ | 418,478 | $ | 360,491 | |||||||
Weighted average common shares/units outstanding – basic (4) | 109,138 | 103,892 | 106,342 | 103,167 | |||||||||||
Weighted average common shares/units outstanding – diluted (5) | 109,872 | 104,524 | 106,991 | 103,677 | |||||||||||
Funds From Operations per common share/unit – basic (2) | $ | 1.00 | $ | 0.78 | $ | 3.94 | $ | 3.49 | |||||||
Funds From Operations per common share/unit – diluted (2) | $ | 1.00 | $ | 0.78 | $ | 3.91 | $ | 3.48 |
(1) | We calculate Funds From Operations available to common stockholders and common unitholders (“FFO”) in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders. |
(2) | Reported amounts are attributable to common stockholders, common unitholders, and restricted stock unitholders. |
(3) | FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.2 million and $4.7 million for the three months ended December 31, 2019 and 2018, respectively, and $19.2 million and $18.4 million for the twelve months ended December 31, 2019 and 2018, respectively. |
(4) | Calculated based on weighted average shares outstanding including participating share-based awards (i.e. nonvested stock and certain time based restricted stock units) and assuming the exchange of all common limited partnership units outstanding. |
(5) | Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options, contingently issuable shares, and shares issuable under forward equity sale agreements and assuming the exchange of all common limited partnership units outstanding. |