Kilroy Realty (KRC) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues were $280.7 million, with net income available to common stockholders of $49.2 million ($0.41 per diluted share), and FFO of $132.6 million ($1.10 per share), reflecting ongoing recovery in key markets, especially San Diego, Bellevue, and San Francisco, with AI and life science sectors driving demand.

• Leasing activity accelerated with 235,000 sq ft signed in Q2 and an additional 184,000 sq ft in July, including a major SAP renewal in Bellevue.

• Organizational changes include a new CFO, CEO transition, promotion of General Counsel, and new leasing leadership to align resources with market opportunities.

Financial highlights

• Q2 FFO was $1.10 per share, down from $1.19–$1.20 in Q2 2023, mainly due to lower interest income and higher G&A; NOI margin was 67.5%.

• Same-store cash NOI was flat year-over-year, but same store NOI declined 5.7%; stabilized portfolio 83.7% occupied and 85.4% leased at quarter end.

• Net debt to trailing twelve-month EBITDA was 6.4x; liquidity over $1.9 billion, including $835.9 million cash and $1.1 billion undrawn credit.

• $2.5 million lease termination fee in Bellevue, not previously included in guidance, impacted same-store NOI but not FFO.

• Total debt as a percentage of total market capitalization was 58.3% as of June 30, 2024.

Outlook and guidance

• 2024 FFO guidance raised to $4.21–$4.31 per share (midpoint $4.26), up $0.04 due to better net reimbursements and parking revenue.

• Average occupancy expected at 82.75%–83.75%; cash same-store NOI projected between -3% and -4%.

• Development spend for 2024 expected at $225–$275 million; no acquisitions or dispositions forecast.

• Three large move-outs (Salesforce, Microsoft, Capital One) totaling 350,000 sq ft expected in H2 2024, with some backfilling underway.

• Regular quarterly dividend of $0.54 per share/unit declared.