Market Overview

Kilroy Realty Corporation Reports Second Quarter Financial Results

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Kilroy Realty Corporation (NYSE:KRC) today reported
financial results for its second quarter ended June 30, 2018.

Second Quarter Highlights

Financial Results

  • Net income available to common stockholders per share of $0.27
  • Funds from operations available to common stockholders and unitholders
    ("FFO") per share of $0.86, including a $0.05 per share charge for
    provision for bad debts
  • Revenues of $187.1 million
  • Increased the regular quarterly cash dividend to common stockholders
    by 7.1% to $0.455 per share; an annualized rate of $1.82 per share

Stabilized Portfolio

  • Stabilized portfolio was 94.0% occupied and 96.8% leased at June 30,
    2018
  • Signed approximately 1.3 million square feet of new or renewing leases
    in the stabilized portfolio during the second quarter, increasing the
    year-to-date total to just over 1.6 million square feet

Acquisitions

  • Committed to acquire the 110,000 square foot office property located
    at 345 Brannan Street in San Francisco's SOMA district for a cash
    purchase price of approximately $146.0 million that is expected to
    close by the end of 2018. The office space is currently 100% occupied
    by Dropbox
    • In May, signed termination agreements with Dropbox in conjunction
      with a new lease with GM Cruise, LLC for approximately 375,000
      square feet at two existing KRC properties, 301 and 333 Brannan
      Street, and all of 345 Brannan Street

Development

  • In June, completed the acquisition of Kilroy Oyster Point, an
    approximately 39-acre development site in South San Francisco, fully
    entitled for 2.5 million square feet of life science and office space,
    for a cash purchase price of approximately $308.2 million
  • In June, transferred 100 Hooper, a $270.0 million, 400,000 square foot
    development project located in San Francisco's SOMA district from
    under construction to the tenant improvement phase. The property's
    314,000 square feet of office space is fully leased to Adobe and the
    lease is expected to commence in the third quarter of 2018. The
    remaining 86,000 square feet of production, distribution and repair
    ("PDR") space is currently 39% leased
  • In June, transferred The Exchange on 16th, a $570.0 million, 750,000
    square foot development project located in San Francisco's Mission Bay
    from under construction to the tenant improvement phase. The office
    portion is fully leased to Dropbox, and the lease will commence in
    phases

Finance

  • In May, completed a private placement of $50.0 million of eight-year,
    4.30% unsecured senior notes and $200.0 million of eight-year 4.35%
    unsecured senior notes, both with delayed draw options
    • In July, drew the entire $50.0 million of 4.30% notes
    • Expect to draw down the entire $200.0 million of 4.35% notes by
      October 22, 2018
  • In May, issued all common stock remaining under the company's 2014
    $300.0 million at-the-market ("ATM") offering program at a weighted
    average price of $73.01 per share before selling commissions,
    generating net proceeds of $98.7 million
  • In June, established a new $500.0 million ATM offering program and
    issued common stock under the program at a weighted average price of
    $76.23 per share before selling commissions, generating net proceeds
    of $26.3 million

Results for the Quarter Ended June 30, 2018

For the second quarter ended June 30, 2018, KRC reported net income
available to common stockholders of $27.5 million, or $0.27 per share,
compared to $29.8 million, or $0.30 per share, in the second quarter of
2017. FFO in the second quarter of 2018 was $88.6 million, or $0.86 per
share, compared to $88.8 million, or $0.87 per share, in the
year-earlier quarter. Current period net income available to common
stockholders and FFO per share included a $0.05 per share charge for
provision for bad debts, primarily related to a $0.07 per share charge
for one tenant that the company is in ongoing discussions with,
partially offset by a $0.02 per share reversal of provision due to the
assignment of a lease to a credit tenant. Revenues in the period totaled
$187.1 million, up from $180.6 million in the prior year's second
quarter.

All per share amounts in this report are presented on a diluted basis.

Operating and Leasing Activity

At June 30, 2018, KRC's stabilized office portfolio totaled
approximately 13.9 million square feet of space located in Los Angeles,
Orange County, San Diego, the San Francisco Bay Area and Greater
Seattle. During the second quarter, the company signed new or renewing
leases in the stabilized office portfolio totaling 1.3 million square
feet of space. At quarter-end, the stabilized office portfolio was 94.0%
occupied and 96.8% leased, compared to occupancy of 94.3% at March 31,
2018 and 93.9% at June 30, 2017.

Real Estate Development Activity

At June 30, 2018, KRC had three projects under construction, including
333 Dexter in the South Lake Union submarket of Seattle, Phase I of
Academy on Vine, a mixed-use project in the Hollywood submarket of Los
Angeles, and Phases I and II of One Paseo, a mixed-use project in the
Del Mar submarket of San Diego. These three projects encompass
approximately 1.0 million square feet of office space, 608 residential
units and 120,000 square feet of retail space and represent a total
estimated investment of approximately $1.1 billion.

Net Income Available to Common Stockholders / FFO Guidance and
Outlook

The company has updated its guidance range of NAREIT-defined FFO per
diluted share for the full year 2018 to $3.47 to $3.57 per share, with a
midpoint of $3.52 per share, reflecting management's views on current
and future market conditions, including assumptions with respect to
rental rates, occupancy levels, and the earnings impact of events
referenced in this press release.

     

Full Year 2018 Range at
June 30, 2018

Low End High End
Net income available to common stockholders per share - diluted $ 1.30 $ 1.40
 
Weighted average common shares outstanding - diluted (1) 101,000 101,000
 
Net income available to common stockholders $ 131,000 $ 141,000
Adjustments:
Net income attributable to noncontrolling common units of the
Operating Partnership
2,600 3,000
Net income attributable to noncontrolling interests in consolidated
property partnerships
14,500 15,500
Depreciation and amortization of real estate assets 237,000 237,000
Gains on sales of depreciable real estate
Funds From Operations attributable to noncontrolling interests in
consolidated property partnerships
(23,500 ) (24,500 )
Funds From Operations (2) $ 361,600   $ 372,000  
 
Weighted average common shares/units outstanding – diluted (3) 104,300 104,300
 
Funds From Operations per common share/unit – diluted (2)(3) $ 3.47   $ 3.57  
 

Key 2018 assumptions include:

  • Dispositions of $250.0 to $750.0 million
  • Same store cash net operating income growth of 1 to 2%
  • Year-end occupancy of 94.0% to 95.0%
  • Net operating income margin of approximately 70.0% to 70.5%
  • Remaining development spending of approximately $250.0 to $300.0
    million

________________________

(1)     Calculated based on estimated weighted average shares outstanding
including participating share-based awards (i.e. nonvested stock and
certain time based restricted stock units).
(2) See management statement for FFO on page 9.
(3) Calculated based on estimated 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 estimated common limited partnership units outstanding.
Reported amounts are attributable to common stockholders, common
unitholders and restricted stock unitholders.

The company's guidance estimates for the full year 2018, and the
reconciliation of net income available to common stockholders per share
- diluted and FFO per share and unit - diluted included within this
press release, reflect management's views on current and future market
conditions, including assumptions with respect to rental rates,
occupancy levels, and the earnings impact of the events referenced in
this press release. Although these guidance estimates reflect the impact
on the company's operating results of an assumed range of future
disposition activity, these guidance estimates do not include any
estimates of possible future gains or losses from possible future
dispositions because the magnitude of gains or losses on sales of
depreciable operating properties, if any, will depend on the sales price
and depreciated cost basis of the disposed assets at the time of
disposition, information that is not known at the time the company
provides guidance, and the timing of any gain recognition will depend on
the closing of the dispositions, information that is also not known at
the time the company provides guidance and may occur after the relevant
guidance period. We caution you not to place undue reliance on our
assumed range of future disposition activity because any potential
future disposition transactions will ultimately depend on the market
conditions and other factors, including but not limited to the company's
capital needs, the particular assets being sold and the company's
ability to defer some or all of the taxable gain on the sales. These
guidance estimates also do not include the impact on operating results
from potential future acquisitions, possible capital markets activity,
possible future impairment charges or any events outside of the
company's control. There can be no assurance that the company's actual
results will not differ materially from these estimates.

Conference Call and Audio Webcast

KRC management will discuss earnings guidance for fiscal year 2018
during the company's July 26, 2018 earnings conference call. The call
will begin at 10:00 a.m. Pacific Time and last approximately one hour.
Those interested in listening via the Internet can access the conference
call at https://services.choruscall.com/links/krc180426.html.
It may be necessary to download audio software to hear the conference
call. Those interested in listening via telephone can access the
conference call at (866) 312-7299. International callers should dial
(412) 317-1070. In order to bypass speaking to the operator on the day
of the call, please pre-register anytime at http://dpregister.com/10115553.
A replay of the conference call will be available via telephone on July
26, 2018 through August 9, 2018 by dialing (877) 344-7529 and entering
passcode 10115553. International callers should dial (412) 317-0088 and
enter the same passcode. The replay will also be available on our
website at http://investors.kilroyrealty.com/CustomPage/Index?KeyGenPage=1073743647.

About Kilroy Realty Corporation

Kilroy Realty Corporation (KRC), a publicly traded real estate
investment trust and member of the S&P MidCap 400 Index, is one of the
West Coast's premier landlords. The company has over 70 years of
experience developing, acquiring and managing office and mixed-use real
estate assets. The company provides physical work environments that
foster creativity and productivity and serves a broad roster of dynamic,
innovation-driven tenants, including technology, entertainment, digital
media and health care companies.

At June 30, 2018, the company's stabilized portfolio totaled
approximately 13.9 million square feet of office space located in the
coastal regions of Los Angeles, Orange County, San Diego, the San
Francisco Bay Area and Greater Seattle and 200 residential units located
in the Hollywood submarket of Los Angeles. In addition, KRC had three
projects under construction totaling approximately 1.0 million square
feet of office space, 608 residential units and 120,000 square feet of
retail space as well as two projects in the tenant improvement phase
totaling approximately 1.2 million square feet of office and PDR space.
The office components of the two projects are fully leased to Adobe and
Dropbox.

The company has been recognized by GRESB as the North American leader in
office sustainability for the last four years and is listed in the Dow
Jones Sustainability World Index. At the end of the second quarter, the
company's stabilized portfolio was 59% LEED certified and 76% of
eligible properties were ENERGY STAR certified. More information is
available at http://www.kilroyrealty.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are based on our current expectations,
beliefs and assumptions, and are not guarantees of future performance.
Forward-looking statements are inherently subject to uncertainties,
risks, changes in circumstances, trends and factors that are difficult
to predict, many of which are outside of our control. Accordingly,
actual performance, results and events may vary materially from those
indicated in the forward-looking statements, and you should not rely on
the forward-looking statements as predictions of future performance,
results or events. Numerous factors could cause actual future
performance, results and events to differ materially from those
indicated in the forward-looking statements, including, among others:
global market and general economic conditions and their effect on our
liquidity and financial conditions and those of our tenants; adverse
economic or real estate conditions generally, and specifically, in the
States of California and Washington; risks associated with our
investment in real estate assets, which are illiquid, and with trends in
the real estate industry; defaults on or non-renewal of leases by
tenants; any significant downturn in tenants' businesses; our ability to
re-lease property at or above current market rates; costs to comply with
government regulations, including environmental remediation; the
availability of cash for distribution and debt service and exposure to
risk of default under debt obligations; increases in interest rates and
our ability to manage interest rate exposure; the availability of
financing on attractive terms or at all, which may adversely impact our
future interest expense and our ability to pursue development,
redevelopment and acquisition opportunities and refinance existing debt;
a decline in real estate asset valuations, which may limit our ability
to dispose of assets at attractive prices or obtain or maintain debt
financing, and which may result in write offs or impairment charges;
significant competition, which may decrease the occupancy and rental
rates of properties; potential losses that may not be covered by
insurance; the ability to successfully complete acquisitions and
dispositions on announced terms; the ability to successfully operate
acquired, developed and redeveloped properties; the ability to
successfully complete development and redevelopment projects on schedule
and within budgeted amounts; delays or refusals in obtaining all
necessary zoning, land use and other required entitlements, governmental
permits and authorizations for our development and redevelopment
properties; increases in anticipated capital expenditures, tenant
improvement and/or leasing costs; defaults on leases for land on which
some of our properties are located; adverse changes to, or
implementations of, applicable laws, regulations or legislation, as well
as business and consumer reactions to such changes; risks associated
with joint venture investments, including our lack of sole
decision-making authority, our reliance on co-venturers' financial
condition and disputes between us and our co-venturers; environmental
uncertainties and risks related to natural disasters; and our ability to
maintain our status as a REIT. These factors are not exhaustive and
additional factors could adversely affect our business and financial
performance. For a discussion of additional factors that could
materially adversely affect our business and financial performance, see
the factors included under the caption "Risk Factors" in our annual
report on Form 10-K for the year ended December 31, 2017 and our other
filings with the Securities and Exchange Commission. All forward-looking
statements are based on currently available information, and speak only
as of the date on which they are made. We assume no obligation to update
any forward-looking statement made in this press release that becomes
untrue because of subsequent events, new information or otherwise,
except to the extent we are required to do so in connection with our
ongoing requirements under federal securities laws.

 

KILROY REALTY CORPORATION

SUMMARY OF QUARTERLY RESULTS

(unaudited, in thousands, except per share data)

 

   
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Revenues $ 187,072 $ 180,598 $ 369,894 $ 359,906
 
Net income available to common stockholders (1) $ 27,549 $ 29,833 $ 63,795 $ 56,162
 
Weighted average common shares outstanding – basic 99,692 98,275 99,221 97,834
Weighted average common shares outstanding – diluted 100,151 98,827 99,688 98,427
 
Net income available to common stockholders per share – basic (1) $ 0.27 $ 0.30 $ 0.63 $ 0.56
Net income available to common stockholders per share – diluted (1) $ 0.27 $ 0.30 $ 0.63 $ 0.56
 
Funds From Operations (1)(2)(3) $ 88,629 $ 88,767 $ 184,914 $ 170,701
 
Weighted average common shares/units outstanding – basic (4) 102,879 101,551 102,457 101,219
Weighted average common shares/units outstanding – diluted (5) 103,338 102,103 102,924 101,812
 
Funds From Operations per common share/unit – basic (3) $ 0.86 $ 0.87 $ 1.80 $ 1.69
Funds From Operations per common share/unit – diluted (3) $ 0.86 $ 0.87 $ 1.80 $ 1.68
 
Common shares outstanding at end of period 100,560 98,351
Common partnership units outstanding at end of period 2,071   2,077  
Total common shares and units outstanding at end of period 102,631 100,428
 
June 30, 2018 June 30, 2017
Stabilized office portfolio occupancy rates: (6)
Greater Los Angeles 94.3 % 91.2 %
Orange County 89.6 % 94.7 %
San Diego County 98.5 % 93.5 %
San Francisco Bay Area 93.8 % 95.1 %
Greater Seattle 90.4 % 97.0 %
Weighted average total 94.0 % 93.9 %
 
Total square feet of stabilized office properties owned at end of
period: (6)
Greater Los Angeles 4,182 4,181
Orange County 272 272
San Diego County 2,045 2,718
San Francisco Bay Area 5,317 5,158
Greater Seattle 2,066   2,066  
Total 13,882 14,395

________________________

(1)     Net income available to common stockholders and funds from
operations includes a provision for bad debts of $5.6 million and
$5.4 million for the three and six months ended June 30, 2018,
respectively, and a non-cash charge for the original issuance costs
of redeemed preferred stock of $3.8 million for the six months ended
June 30, 2017. Net income available to common stockholders includes
gains on sales of depreciable operating properties of $2.3 million
for the six months ended June 30, 2017.
(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 (i.e.
nonvested stock and time based restricted stock units), dilutive
impact of stock options and contingently issuable shares 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 June 30, 2017
include the office properties that were sold subsequent to June 30,
2017.
 

KILROY REALTY CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

   
June 30, 2018 December 31, 2017
(unaudited)

ASSETS

REAL ESTATE ASSETS:
Land and improvements $ 1,127,100 $ 1,076,172
Buildings and improvements 5,017,999 4,908,797
Undeveloped land and construction in progress 1,993,314   1,432,808  
Total real estate assets held for investment 8,138,413 7,417,777
Accumulated depreciation and amortization (1,361,811 ) (1,264,162 )
Total real estate assets held for investment, net 6,776,602 6,153,615
 
Cash and cash equivalents 50,817 57,649
Restricted cash 9,149
Marketable securities 22,519 20,674
Current receivables, net 15,144 16,926
Deferred rent receivables, net 256,558 246,391
Deferred leasing costs and acquisition-related intangible assets, net 186,649 183,728
Prepaid expenses and other assets, net 76,495   114,706  
TOTAL ASSETS $ 7,384,784   $ 6,802,838  
 

LIABILITIES AND EQUITY

LIABILITIES:
Secured debt, net $ 338,189 $ 340,800
Unsecured debt, net 2,156,521 2,006,263
Unsecured line of credit 295,000
Accounts payable, accrued expenses and other liabilities 278,508 249,637
Accrued dividends and distributions 47,348 43,448
Deferred revenue and acquisition-related intangible liabilities, net 146,741 145,890
Rents received in advance and tenant security deposits 58,604   56,484  
Total liabilities 3,320,911   2,842,522  
 
EQUITY:
Stockholders' Equity
Common stock 1,006 986
Additional paid-in capital 3,951,289 3,822,492
Distributions in excess of earnings (149,368 ) (122,685 )
Total stockholders' equity 3,802,927 3,700,793
Noncontrolling Interests
Common units of the Operating Partnership 78,223 77,948
Noncontrolling interests in consolidated property partnerships 182,723   181,575  
Total noncontrolling interests 260,946   259,523  
Total equity 4,063,873   3,960,316  
TOTAL LIABILITIES AND EQUITY $ 7,384,784   $ 6,802,838  
 
 

KILROY REALTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

 

   
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
REVENUES
Rental income $ 164,515 $ 158,925 $ 327,386 $ 315,573
Tenant reimbursements 19,567 19,267 38,717 38,563
Other property income 2,990   2,406   3,791   5,770  
Total revenues 187,072   180,598   369,894   359,906  
 
EXPENSES
Property expenses 32,567 33,304 64,238 64,545
Real estate taxes 17,813 16,543 34,959 34,507
Provision for bad debts 5,641 409 5,376 1,707
Ground leases 1,586 1,547 3,147 3,189
General and administrative expenses 21,763 14,303 37,322 29,236
Depreciation and amortization 64,006   62,251   126,721   123,170  
Total expenses 143,376   128,357   271,763   256,354  
 
OTHER (EXPENSES) INCOME
Interest income and other net investment gain/loss 771 1,038 805 2,103
Interest expense (12,712 ) (17,973 ) (26,210 ) (35,325 )
Total other (expenses) income (11,941 ) (16,935 ) (25,405 ) (33,222 )
 
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE 31,755 35,306 72,726 70,330
Gains on sale of depreciable operating properties       2,257  
NET INCOME 31,755   35,306   72,726   72,587  
 
Net income attributable to noncontrolling common units of the
Operating Partnership
(566 ) (616 ) (1,317 ) (1,239 )
Net income attributable to noncontrolling interests in consolidated
property partnerships
(3,640 ) (3,242 ) (7,614 ) (6,375 )
Total income attributable to noncontrolling interests (4,206 ) (3,858 ) (8,931 ) (7,614 )
 
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION 27,549   31,448   63,795   64,973  
 
Preferred dividends (1,615 ) (4,966 )
Original issuance costs of redeemed preferred stock       (3,845 )
Total preferred dividends   (1,615 )   (8,811 )
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 27,549   $ 29,833   $ 63,795   $ 56,162  
 
Weighted average common shares outstanding – basic 99,692 98,275 99,221 97,834
Weighted average common shares outstanding – diluted 100,151 98,827 99,688 98,427
 
Net income available to common stockholders per share – basic $ 0.27   $ 0.30   $ 0.63   $ 0.56  
Net income available to common stockholders per share – diluted $ 0.27   $ 0.30   $ 0.63   $ 0.56  
 
 

KILROY REALTY CORPORATION

FUNDS FROM OPERATIONS

(unaudited, in thousands, except per share data)

 

   
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Net income available to common stockholders $ 27,549 $ 29,833 $ 63,795 $ 56,162
Adjustments:
Net income attributable to noncontrolling common units of the
Operating Partnership
566 616 1,317 1,239
Net income attributable to noncontrolling interests in consolidated
property partnerships
3,640 3,242 7,614 6,375
Depreciation and amortization of real estate assets 62,956 61,000 124,633 120,734
Gains on sales of depreciable real estate (2,257 )
Funds From Operations attributable to noncontrolling interests in
consolidated property partnerships
(6,082 ) (5,924 ) (12,445 ) (11,552 )
Funds From Operations(1)(2)(3) $ 88,629   $ 88,767   $ 184,914   $ 170,701  
 
Weighted average common shares/units outstanding – basic (4) 102,879 101,551 102,457 101,219
Weighted average common shares/units outstanding – diluted (5) 103,338 102,103 102,924 101,812
 
Funds From Operations per common share/unit – basic (2) $ 0.86   $ 0.87   $ 1.80   $ 1.69  
Funds From Operations per common share/unit – diluted (2) $ 0.86   $ 0.87   $ 1.80   $ 1.68  

________________________

(1)     We calculate Funds From Operations available to common stockholders
and common unitholders ("FFO") in accordance with the 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.
 
We believe that FFO is a useful supplemental measure of our
operating performance. The exclusion from FFO of gains and losses
from the sale of operating real estate assets allows investors and
analysts to readily identify the operating results of the assets
that form the core of our activity and assists in comparing those
operating results between periods. Also, because FFO is generally
recognized as the industry standard for reporting the operations of
REITs, it facilitates comparisons of operating performance to other
REITs. However, other REITs may use different methodologies to
calculate FFO, and accordingly, our FFO may not be comparable to all
other REITs.
 
Implicit in historical cost accounting for real estate assets in
accordance with GAAP is the assumption that the value of real estate
assets diminishes predictably over time. Since real estate values
have historically risen or fallen with market conditions, many
industry investors and analysts have considered presentations of
operating results for real estate companies using historical cost
accounting alone to be insufficient. Because FFO excludes
depreciation and amortization of real estate assets, we believe that
FFO along with the required GAAP presentations provides a more
complete measurement of our performance relative to our competitors
and a more appropriate basis on which to make decisions involving
operating, financing and investing activities than the required GAAP
presentations alone would provide.
 
However, FFO should not be viewed as an alternative measure of our
operating performance because it does not reflect either
depreciation and amortization costs or the level of capital
expenditures and leasing costs necessary to maintain the operating
performance of our properties, which are significant economic costs
and could materially impact our results from operations.
 
(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 $4.6 million and $4.5 million for the three months
ended June 30, 2018 and 2017, respectively, and $8.9 million and
$8.2 million for the six months ended June 30, 2018 and 2017,
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 (i.e.
nonvested stock and time based restricted stock units), dilutive
impact of stock options and contingently issuable shares and
assuming the exchange of all common limited partnership units
outstanding.

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