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 and strong leasing in San Diego, Bellevue, and San Francisco, especially from AI sector tenants.

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

• Stabilized portfolio occupancy was 83.7% and leased percentage was 85.4% at quarter-end, with 121 office, life science, and mixed-use properties totaling 17.0 million sq. ft. and 1,001 residential units.

• Organizational changes included a new CFO, CEO transition, promotion of General Counsel, and new SVP Leasing for Northern California.

• Total liquidity exceeded $1.9 billion, including $835.9 million in cash and $1.1 billion available under the revolving credit facility.

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 expenses.

• Net income available to common stockholders was $49.2 million, down 11.5% year-over-year.

• Same-store Q2 cash NOI was roughly flat, but same store NOI declined 5.7% year-over-year.

• Net debt to trailing twelve-month EBITDA was 6.4x; fixed charge coverage ratio was 3.3x.

• Cash and cash equivalents at June 30, 2024 were $835.9 million.

Outlook and guidance

• 2024 FFO guidance is $4.21–$4.31 per share (midpoint $4.26), with full-year net income per share guidance of $1.50–$1.59.

• No acquisitions or dispositions forecast for 2024; development spend for the year is $100–$150 million, with total 2024 development spending expected at $225–$275 million.

• $400 million bond maturity in December to be funded with cash on hand.

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

• Anticipates three large move-outs totaling 350,000 sq ft in H2 2024, with some backfilling underway.