This Supplemental Financial Report 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. These statements include, among other things, information concerning lease expirations, debt maturities, potential investments, development and redevelopment activity, projected construction costs, dispositions and other forward-looking financial data. In some instances, forward-looking statements can be identified by the use of forward-looking terminology such as "expect," "future," "will," "would," "pursue," or "project" and variations of such words and similar expressions that do not relate to historical matters. Forward-looking statements are based on Kilroy Realty Corporation's 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 Kilroy Realty Corporation's control. Accordingly, actual performance, results and events may vary materially from those indicated or implied 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, Texas 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 enactment or implementations of, tax laws or other 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; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. 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 Kilroy Realty Corporation's business and financial performance, see the factors included under the caption "Risk Factors" in Kilroy Realty Corporation's annual report on Form 10-K for the year ended December 31, 2021, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report 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.
Pictured on cover page, in order of appearance: 10615 Burnet Rd І Austin, TX, 26th Street І Santa Monica, CA, Netflix // On Vine І Hollywood, CA
01
Corporate Data and Financial Highlights
-Company Background
-Executive Summary
-Financial Highlights
-Market Capitalization and Common Stock Data
-Net Income Available to Common Stockholders / FFO Guidance and Outlook
-Consolidated Balance Sheets
-Consolidated Statements of Operations
-Funds From Operations and Funds Available for Distribution
-Net Operating Income
Q1 2022 Supplemental Financial Report
Company Background
Kilroy Realty Corporation (NYSE: KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is a leading U.S. landlord and developer, with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, Greater Seattle and Austin, Texas. The Company has over seven decades of experience developing, acquiring and managing office, life science and mixed-use real estate assets. At March 31, 2022, the Company's stabilized portfolio totaled approximately 15.2 million square feet of primarily office and life science space that was 91.3% occupied and 93.1% leased. The Company also has 1,001 residential units in the Los Angeles and San Diego regions, which had an average occupancy of 93.7% for the quarter ended March 31, 2022.
Board of Directors
Executive and Senior Management Team
Investor Relations
John Kilroy
Chairman
John Kilroy
Chief Executive Officer
12200 W. Olympic Blvd., Suite 200
Los Angeles, CA 90064
(310) 481-8400
Web: www.kilroyrealty.com
E-mail: investorrelations@kilroyrealty.com
Edward F. Brennan, PhD
Lead Independent
Tyler H. Rose
President
Jolie Hunt
Robert Paratte
Executive VP, Leasing and Business Development
Scott S. Ingraham
Heidi R. Roth
Executive VP, Chief Administrative Officer
Louisa G. Ritter
Justin W. Smart
Executive VP, Development and Construction Services
Senior VP, Chief Accounting Officer and Controller
Equity Research Coverage
BofA Securities
J.P. Morgan
James Feldman
(646) 855-5808
Anthony Paolone
(212) 622-6682
BMO Capital Markets Corp.
KeyBanc Capital Markets
John P. Kim
(212) 885-4115
Todd M. Thomas
(917) 368-2286
BTIG
Mizuho Securities USA LLC
Thomas Catherwood
(212) 738-6140
Vikram Malhotra
(212) 282-3827
Citigroup Investment Research
RBC Capital Markets
Emmanuel Korchman
(212) 816-1382
Mike Carroll
(440) 715-2649
Deutsche Bank Securities, Inc.
Robert W. Baird & Co.
Derek Johnston
(210) 250-5683
David B. Rodgers
(216) 737-7341
Evercore ISI
Scotiabank
Steve Sakwa
(212) 446-9462
Nicholas Yulico
(212) 225-6904
Goldman Sachs & Co. LLC
Wells Fargo
Caitlin Burrows
(212) 902-4736
Blaine Heck
(443) 263-6529
Green Street Advisors
Wolfe Research
Daniel Ismail
(949) 640-8780
Andrew Rosivach
(646) 582-9250
Jefferies LLC
Peter Abramowitz
(212) 336-7241
Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Kilroy Realty Corporation's performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Kilroy Realty Corporation or its management. Kilroy Realty Corporation does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.
1
Q1 2022 Supplemental Financial Report
Executive Summary
Quarterly Financial Highlights
Quarterly Operating Highlights
• Net income available to common stockholders per share of $0.45, including a net
• Stabilized portfolio was91.3%occupied and 93.1% leased at quarter-end
$0.02 per share of non-recurring income
• 217,241 square feet of leases commenced in the stabilized portfolio
• FFO per share of $1.16, including the net $0.02 per share noted above
• 183,251 square feet of leases executed in the stabilized portfolio
• Revenues of $265.5 million
◦GAAP rents increased approximately 32.9% from prior levels
• Same Store NOI increased 9.1% compared to the prior year
◦Cash rents increased approximately 6.7% from prior levels
• Same Store Cash NOI increased 12.8% compared to the prior year
Capital Markets Highlights
Strategic Highlights
• As of the date of this report, approximately $1.3 billion of total liquidity comprised
• In March, completed the acquisition of a 2.9-acre land site in the Stadium District of
of $175.0 million of cash and cash equivalents and full availability under the
Austin, adjacent to the Domain, for a cash purchase price of $40.0 million. The site
$1.1 billion unsecured revolving credit facility
is also adjacent to Austin's MLS Q2 Stadium and is fully-entitled for approximately
493,000 square feet of new Class A office development
• In March, commenced construction on the life science redevelopments of 12400
High Bluff Drive in the Del Mar submarket and 4690 Executive Drive in the
University Towne Center submarket of San Diego in connection with executed
leases
________________________
Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 35-36 "Definitions Included in Supplemental."
2
Q1 2022 Supplemental Financial Report
Financial Highlights
(unaudited, $ in thousands, except per share amounts)
Three Months Ended
3/31/2021 (1)
6/30/2021 (1)
9/30/2021
12/31/2021 (1)
3/31/2022
INCOME ITEMS:
Capitalized Interest and Debt Costs
16,908
18,073
23,447
21,773
19,098
Net Income Available to Common Stockholders
497,631
35,839
47,028
47,646
53,128
Net Income Available to Common Stockholders per common share - diluted (2)
$
4.26
$
0.30
$
0.40
$
0.40
$
0.45
Funds From Operations per common share - diluted (3)
Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 35-36 "Definitions Included in Supplemental."
(1)Net Income Available to Common Stockholders also includes $5.3 million, $0.5 million, and $457.3 million of gains on sale of depreciable operating properties for the three months ended December 31, 2021, June 30, 2021, and March 31, 2021, respectively.
(2)Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(3)Please refer to page 8 for reconciliations of GAAP Net Income Available to Common Stockholders to Funds From Operations available to common stockholders and unitholders and Funds Available for Distribution to common stockholders and unitholders and page 9 for a reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution to common stockholders and unitholders.
(4)Please refer to pages 37-38 for reconciliations of GAAP Net Income Available to Common Stockholders to Net Operating Income and EBITDA, as adjusted. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
3
Q1 2022 Supplemental Financial Report
Market Capitalization and Common Stock Data
(unaudited, $ and shares/units in thousands, except per share amounts)
(1)Please refer to page 28 for additional information regarding our capital structure.
(2)Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(3)As of the end of the period.
4
Q1 2022 Supplemental Financial Report
Net Income Available to Common Stockholders / FFO Guidance and Outlook
(unaudited, $ and shares/units in thousands, except per share amounts)
The Company is providing an updated guidance range of NAREIT-defined FFO per diluted share for its fiscal year 2022 of $4.44 to $4.58 per share with a midpoint of $4.51 per share.
Full Year 2022 Range
Low End
High End
Net income available to common stockholders per share - diluted
$
1.78
$
1.92
Weighted average common shares outstanding - diluted (1)
117,850
117,850
Net income available to common stockholders
$
210,000
$
226,000
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership
2,250
2,650
Net income attributable to noncontrolling interests in consolidated property partnerships
24,500
25,500
Depreciation and amortization of real estate assets
327,000
327,000
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
(35,250)
(36,250)
Funds From Operations (2)
$
528,500
$
544,900
Weighted average common shares and units outstanding - diluted (3)
119,050
119,050
FFO per common share/unit - diluted (3)
$
4.44
$
4.58
Key 2022 assumptions:
•Dispositions of $200.0 million to $500.0 million
•Same Store Cash NOI growth of 5.0% to 6.0% (2)
•Year-end occupancy of approximately 91.0% to 92.0%
•Total remaining development spending of approximately $500.0 million to $575.0 million
________________________
(1)Calculated based on estimated weighted average shares outstanding including non-participating share-based awards.
(2)See pages 32-33 for Management Statements on Funds From Operations and Same Store Cash Net Operating Income.
(3)Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of contingently issuable shares, and assuming the exchange of all 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 2022, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this report, 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 report. 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.
5
Q1 2022 Supplemental Financial Report
Consolidated Balance Sheets
(unaudited, $ in thousands)
3/31/2022
12/31/2021
9/30/2021
6/30/2021
3/31/2021
ASSETS:
Land and improvements
$
1,715,192
$
1,731,982
$
1,702,423
$
1,551,653
$
1,539,542
Buildings and improvements
7,509,311
7,543,585
7,282,341
6,682,208
6,480,857
Undeveloped land and construction in progress
2,158,279
2,017,126
2,237,742
2,318,215
1,771,762
Total real estate assets held for investment
11,382,782
11,292,693
11,222,506
10,552,076
9,792,161
Accumulated depreciation and amortization
(2,034,193)
(2,003,656)
(1,962,730)
(1,900,740)
(1,838,338)
Total real estate assets held for investment, net
9,348,589
9,289,037
9,259,776
8,651,336
7,953,823
Cash and cash equivalents
331,685
414,077
348,417
519,307
657,819
Restricted cash
13,007
13,006
13,042
450,457
1,028,759
Marketable securities
25,829
27,475
27,285
25,885
24,089
Current receivables, net
12,107
14,386
11,646
9,773
12,855
Deferred rent receivables, net
420,895
405,665
394,297
384,475
370,470
Deferred leasing costs and acquisition-related intangible assets, net
228,426
234,458
229,334
184,510
190,721
Right of use ground lease assets
126,946
127,302
127,657
141,529
95,312
Prepaid expenses and other assets, net
57,338
57,991
60,063
67,494
50,505
TOTAL ASSETS
$
10,564,822
$
10,583,397
$
10,471,517
$
10,434,766
$
10,384,353
LIABILITIES AND EQUITY:
Liabilities:
Secured debt, net
$
247,030
$
248,367
$
249,690
$
251,000
$
252,298
Unsecured debt, net
3,821,433
3,820,383
3,673,183
3,672,152
3,671,094
Accounts payable, accrued expenses and other liabilities
391,920
391,264
441,357
429,168
408,552
Ground lease liabilities
125,414
125,550
125,676
143,885
97,617
Accrued dividends and distributions
61,951
61,850
61,845
59,455
59,472
Deferred revenue and acquisition-related intangible liabilities, net
171,121
171,151
160,687
122,902
123,794
Rents received in advance and tenant security deposits
80,192
74,962
68,441
62,739
68,634
Total liabilities
4,899,061
4,893,527
4,780,879
4,741,301
4,681,461
Equity:
Stockholders' Equity
Common stock
1,167
1,165
1,165
1,165
1,165
Additional paid-in capital
5,149,968
5,155,232
5,146,049
5,134,320
5,122,584
Retained earnings
274,193
283,663
297,250
311,458
334,496
Total stockholders' equity
5,425,328
5,440,060
5,444,464
5,446,943
5,458,245
Noncontrolling Interests
Common units of the Operating Partnership
53,472
53,746
53,788
53,810
53,930
Noncontrolling interests in consolidated property partnerships
186,961
196,064
192,386
192,712
190,717
Total noncontrolling interests
240,433
249,810
246,174
246,522
244,647
Total equity
5,665,761
5,689,870
5,690,638
5,693,465
5,702,892
TOTAL LIABILITIES AND EQUITY
$
10,564,822
$
10,583,397
$
10,471,517
$
10,434,766
$
10,384,353
6
Q1 2022 Supplemental Financial Report
Consolidated Statements of Operations
(unaudited, $ and shares in thousands, except per share amounts)
Three Months Ended March 31,
2022
2021
REVENUES
Rental income
$
263,208
$
234,656
Other property income
2,293
990
Total revenues
265,501
235,646
EXPENSES
Property expenses
45,424
38,859
Real estate taxes
25,870
25,266
Ground leases
1,826
1,828
General and administrative expenses
22,781
21,985
Leasing costs
1,013
692
Depreciation and amortization
88,660
75,932
Total expenses
185,574
164,562
OTHER INCOME (EXPENSES)
Interest and other income, net
81
1,373
Interest expense
(20,625)
(22,334)
Gains on sales of depreciable operating properties
-
457,288
Total other (expenses) income
(20,544)
436,327
NET INCOME
59,383
507,411
Net income attributable to noncontrolling common units of the Operating Partnership
(516)
(4,886)
Net income attributable to noncontrolling interests in consolidated property partnerships
(5,739)
(4,894)
Total income attributable to noncontrolling interests
(6,255)
(9,780)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
$
53,128
$
497,631
Weighted average common shares outstanding - basic
116,650
116,344
Weighted average common shares outstanding - diluted
117,060
116,801
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE
Net income available to common stockholders per share - basic
$
0.45
$
4.27
Net income available to common stockholders per share - diluted
$
0.45
$
4.26
7
Q1 2022 Supplemental Financial Report
Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
Three Months Ended March 31,
2022
2021
FUNDS FROM OPERATIONS: (1)
Net income available to common stockholders
$
53,128
$
497,631
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership
516
4,886
Net income attributable to noncontrolling interests in consolidated property partnerships
5,739
4,894
Depreciation and amortization of real estate assets
87,001
74,431
Gains on sales of depreciable real estate
-
(457,288)
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
(8,618)
(8,310)
Funds From Operations (1)(2)
$
137,766
$
116,244
Weighted average common shares/units outstanding - basic (3)
118,628
118,333
Weighted average common shares/units outstanding - diluted (4)
119,038
118,790
FFO per common share/unit - basic (1)
$
1.16
$
0.98
FFO per common share/unit - diluted (1)
$
1.16
$
0.98
FUNDS AVAILABLE FOR DISTRIBUTION: (1)
Funds From Operations (1)(2)
$
137,766
$
116,244
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures
(13,285)
(26,909)
Amortization of deferred revenue related to tenant-funded tenant improvements (2)(5)
(4,261)
(4,204)
Net effect of straight-line rents
(15,230)
(16,893)
Amortization of net below market rents (6)
(2,892)
(1,181)
Amortization of deferred financing costs and net debt discount/premium
821
794
Non-cash executive compensation expense (7)
5,256
8,256
Lease related adjustments, leasing costs and other (8)
1,264
1,635
Adjustments attributable to noncontrolling interests in consolidated property partnerships
1,455
364
Funds Available for Distribution (1)
$
110,894
$
78,106
________________________
(1)See page 33 for Management Statements on Funds From Operations and Funds Available for Distribution. Reported per common share/unit amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(2)FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.3 million and $4.2 million for the three months ended March 31, 2022 and 2021, respectively. These amounts are adjusted out of FFO in our calculation of FAD.
(3)Calculated based on weighted average shares outstanding including participating share-based awards and assuming the exchange of all common limited partnership units outstanding.
(4)Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options and contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
(5)Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements.
(6)Represents the non-cash adjustment related to the acquisition of buildings with above and/or below market rents.
(7)Includes non-cash amortization of share-based compensation and accrued potential future executive retirement benefits.
(8)Includes other cash and non-cash adjustments attributable to lease-related matters including GAAP revenue recognition timing differences, leasing costs and other.
8
Q1 2022 Supplemental Financial Report
Reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution
(unaudited, $ in thousands)
Three Months Ended March 31,
2022
2021
GAAP Net Cash Provided by Operating Activities
$
178,659
$
144,152
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures
(13,285)
(26,909)
Depreciation of non-real estate furniture, fixtures and equipment
(1,659)
(1,501)
Net changes in operating assets and liabilities (1)
(40,821)
(27,278)
Noncontrolling interests in consolidated property partnerships' share of FFO and FAD
(7,163)
(7,946)
Cash adjustments related to investing and financing activities
(4,837)
(2,412)
Funds Available for Distribution (2)
$
110,894
$
78,106
_______________________
(1)Primarily includes changes in the following assets and liabilities: marketable securities; current receivables; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities; and rents received in advance and tenant security deposits.
(2)Please refer to page 33 for a Management Statement on Funds Available for Distribution.
9
Q1 2022 Supplemental Financial Report
Net Operating Income (1)
(unaudited, $ in thousands)
Three Months Ended March 31,
2022
2021
% Change
Operating Revenues:
Rental income (2)
$
226,272
$
203,212
11.3
%
Tenant reimbursements (2)
36,936
31,444
17.5
%
Other property income
2,293
990
131.6
%
Total operating revenues
265,501
235,646
12.7
%
Operating Expenses:
Property expenses
45,424
38,859
16.9
%
Real estate taxes
25,870
25,266
2.4
%
Ground leases
1,826
1,828
(0.1)
%
Total operating expenses
73,120
65,953
10.9
%
Net Operating Income
$
192,381
$
169,693
13.4
%
________________________
(1)Please refer to page 31 for Management Statements on Net Operating Income and page 37 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.
(2)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
10
02
Portfolio Data
-Same Store Analysis
-Stabilized Portfolio Occupancy Overview by Region
-Information on Leases Commenced & Leases Executed
(1)Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2021 and still owned and included in the stabilized portfolio as of March 31, 2022. Same Store includes 100% of consolidated property partnerships as well as the residential tower at Columbia Square and the residential units at our One Paseo mixed-use project.
(2)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
(3)Please refer to page 37 for a reconciliation of GAAP Net Income Available to Common Stockholders to Same Store Net Operating Income and Same Store Cash Net Operating Income.
12
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview by Region
Portfolio Breakdown
Occupied at
Leased at
STABILIZED OFFICE PORTFOLIO (1)
Buildings
YTD NOI %
SF %
Total SF
3/31/2022
12/31/2021
3/31/2022
Greater Los Angeles
Culver City
19
1.2
%
1.0
%
151,908
100.0
%
100.0
%
100.0
%
El Segundo
5
4.1
%
7.3
%
1,103,595
93.2
%
94.1
%
93.2
%
Hollywood
10
7.6
%
7.9
%
1,200,419
89.5
%
89.4
%
90.2
%
Long Beach
7
2.0
%
6.3
%
955,291
76.1
%
77.9
%
76.8
%
West Hollywood
4
0.9
%
1.2
%
189,260
71.2
%
71.3
%
77.5
%
West Los Angeles
10
4.7
%
5.6
%
856,847
82.1
%
81.0
%
88.2
%
Total Greater Los Angeles
55
20.5
%
29.3
%
4,457,320
85.7
%
86.1
%
87.5
%
San Diego County
Del Mar
15
12.0
%
9.6
%
1,461,845
96.5
%
96.7
%
99.4
%
I-15 Corridor
3
1.2
%
2.9
%
441,560
60.2
%
94.7
%
60.2
%
Point Loma
1
0.5
%
0.7
%
107,456
96.5
%
96.5
%
100.0
%
University Towne Center
1
1.1
%
1.1
%
160,444
100.0
%
92.4
%
100.0
%
Total San Diego County
20
14.8
%
14.3
%
2,171,305
89.4
%
95.9
%
91.5
%
San Francisco Bay Area
Menlo Park
7
2.0
%
2.5
%
378,358
74.2
%
74.2
%
80.3
%
Mountain View
3
2.6
%
3.0
%
457,066
87.2
%
87.2
%
99.9
%
Palo Alto
2
1.3
%
1.1
%
165,574
100.0
%
100.0
%
100.0
%
Redwood City
2
3.2
%
2.3
%
347,269
100.0
%
100.0
%
100.0
%
San Francisco
10
27.8
%
22.3
%
3,394,039
91.6
%
90.7
%
93.6
%
South San Francisco
6
8.8
%
5.3
%
806,109
100.0
%
100.0
%
100.0
%
Sunnyvale
4
4.2
%
4.3
%
663,460
100.0
%
100.0
%
100.0
%
Total San Francisco Bay Area
34
49.9
%
40.8
%
6,211,875
92.9
%
92.4
%
95.3
%
Greater Seattle
Bellevue
2
5.5
%
6.0
%
919,295
99.0
%
93.7
%
99.1
%
Denny Regrade
1
3.8
%
3.5
%
539,226
99.7
%
100.0
%
99.7
%
Lake Union
6
5.5
%
6.1
%
922,891
99.1
%
99.1
%
99.1
%
Total Greater Seattle
9
14.8
%
15.6
%
2,381,412
99.2
%
97.2
%
99.3
%
TOTAL STABILIZED OFFICE PORTFOLIO
118
100.0
%
100.0
%
15,221,912
91.3
%
91.9
%
93.1
%
Average Office Occupancy
Quarter-to-Date
91.4%
________________________
(1)Includes stabilized retail space, which contributed approximately3.2% of YTD NOI.
13
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview by Region, continued
Submarket
Square Feet
Occupied
Leased
Greater Los Angeles, California
3101-3243 La Cienega Boulevard
Culver City
151,908
100.0
%
100.0
%
2240 E. Imperial Highway
El Segundo
122,870
100.0
%
100.0
%
2250 E. Imperial Highway
El Segundo
298,728
96.9
%
96.9
%
2260 E. Imperial Highway
El Segundo
298,728
100.0
%
100.0
%
909 N. Pacific Coast Highway
El Segundo
244,880
88.3
%
88.3
%
999 N. Pacific Coast Highway
El Segundo
138,389
73.5
%
73.5
%
1350 Ivar Avenue
Hollywood
16,448
100.0
%
100.0
%
1355 Vine Street
Hollywood
183,129
100.0
%
100.0
%
1375 Vine Street
Hollywood
159,236
100.0
%
100.0
%
1395 Vine Street
Hollywood
2,575
100.0
%
100.0
%
1500 N. El Centro Avenue (1)
Hollywood
113,447
28.8
%
28.8
%
1525 N. Gower Street
Hollywood
9,610
100.0
%
100.0
%
1575 N. Gower Street
Hollywood
264,430
100.0
%
100.0
%
6115 W. Sunset Boulevard
Hollywood
26,238
80.0
%
80.0
%
6121 W. Sunset Boulevard
Hollywood
93,418
100.0
%
100.0
%
6255 W. Sunset Boulevard
Hollywood
331,888
87.9
%
90.6
%
3750 Kilroy Airport Way
Long Beach
10,718
100.0
%
100.0
%
3760 Kilroy Airport Way
Long Beach
166,761
91.5
%
95.5
%
3780 Kilroy Airport Way
Long Beach
221,452
83.1
%
83.1
%
3800 Kilroy Airport Way
Long Beach
192,476
87.7
%
87.7
%
3840 Kilroy Airport Way (1)
Long Beach
136,026
0.0
%
0.0
%
3880 Kilroy Airport Way
Long Beach
96,923
100.0
%
100.0
%
3900 Kilroy Airport Way
Long Beach
130,935
86.7
%
86.7
%
8560 W. Sunset Boulevard (1)
West Hollywood
76,359
39.1
%
49.3
%
8570 W. Sunset Boulevard
West Hollywood
49,276
95.0
%
95.0
%
8580 W. Sunset Boulevard
West Hollywood
6,875
41.0
%
100.0
%
8590 W. Sunset Boulevard
West Hollywood
56,750
97.4
%
97.4
%
12100 W. Olympic Boulevard
West Los Angeles
155,679
65.8
%
99.0
%
12200 W. Olympic Boulevard
West Los Angeles
150,832
90.2
%
90.2
%
12233 W. Olympic Boulevard
West Los Angeles
160,094
74.4
%
74.4
%
12312 W. Olympic Boulevard
West Los Angeles
76,644
100.0
%
100.0
%
1633 26th Street
West Los Angeles
43,857
69.9
%
69.9
%
2100/2110 Colorado Avenue
West Los Angeles
102,864
100.0
%
100.0
%
3130 Wilshire Boulevard
West Los Angeles
90,074
84.0
%
84.0
%
501 Santa Monica Boulevard
West Los Angeles
76,803
78.5
%
78.5
%
Total Greater Los Angeles
4,457,320
85.7
%
87.5
%
________________________
(1)This property is part of a complex of properties and is analyzed at the complex level.
14
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview by Region, continued
Submarket
Square Feet
Occupied
Leased
San Diego County, California
12225 El Camino Real
Del Mar
58,401
100.0
%
100.0
%
12235 El Camino Real
Del Mar
53,751
100.0
%
100.0
%
12390 El Camino Real
Del Mar
69,421
100.0
%
100.0
%
12770 El Camino Real
Del Mar
75,035
100.0
%
100.0
%
12780 El Camino Real
Del Mar
140,591
100.0
%
100.0
%
12790 El Camino Real
Del Mar
87,944
100.0
%
100.0
%
12830 El Camino Real
Del Mar
196,444
93.1
%
100.0
%
12860 El Camino Real
Del Mar
92,042
100.0
%
100.0
%
12348 High Bluff Drive
Del Mar
39,193
83.6
%
100.0
%
3579 Valley Centre Drive
Del Mar
54,960
100.0
%
100.0
%
3611 Valley Centre Drive
Del Mar
132,425
96.4
%
96.4
%
3661 Valley Centre Drive
Del Mar
131,662
87.4
%
100.0
%
3721 Valley Centre Drive
Del Mar
115,193
100.0
%
100.0
%
3811 Valley Centre Drive
Del Mar
118,912
100.0
%
100.0
%
3745 Paseo Place
Del Mar
95,871
89.4
%
95.9
%
13480 Evening Creek Drive North (1)
I-15 Corridor
154,157
5.6
%
5.6
%
13500 Evening Creek Drive North
I-15 Corridor
143,749
100.0
%
100.0
%
13520 Evening Creek Drive North
I-15 Corridor
143,654
78.9
%
78.9
%
2305 Historic Decatur Road
Point Loma
107,456
96.5
%
100.0
%
9455 Towne Centre Drive
University Towne Center
160,444
100.0
%
100.0
%
Total San Diego County
2,171,305
89.4
%
91.5
%
________________________
(1)This property is part of a complex of properties and is analyzed at the complex level.
15
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview by Region, continued
Submarket
Square Feet
Occupied
Leased
San Francisco Bay Area, California
4100 Bohannon Drive
Menlo Park
47,379
100.0
%
100.0
%
4200 Bohannon Drive
Menlo Park
45,451
70.8
%
70.8
%
4300 Bohannon Drive
Menlo Park
63,079
48.7
%
85.3
%
4400 Bohannon Drive (1)
Menlo Park
48,146
21.3
%
21.3
%
4500 Bohannon Drive
Menlo Park
63,078
100.0
%
100.0
%
4600 Bohannon Drive
Menlo Park
48,147
70.7
%
70.7
%
4700 Bohannon Drive
Menlo Park
63,078
100.0
%
100.0
%
1290-1300 Terra Bella Avenue (1)
Mountain View
114,175
48.9
%
99.7
%
680 E. Middlefield Road
Mountain View
171,676
100.0
%
100.0
%
690 E. Middlefield Road
Mountain View
171,215
100.0
%
100.0
%
1701 Page Mill Road
Palo Alto
128,688
100.0
%
100.0
%
3150 Porter Drive
Palo Alto
36,886
100.0
%
100.0
%
900 Jefferson Avenue
Redwood City
228,505
100.0
%
100.0
%
900 Middlefield Road
Redwood City
118,764
100.0
%
100.0
%
100 Hooper Street
San Francisco
417,914
100.0
%
100.0
%
100 First Street
San Francisco
480,457
92.3
%
96.3
%
303 Second Street
San Francisco
784,658
84.9
%
84.9
%
201 Third Street
San Francisco
346,538
77.3
%
77.3
%
360 Third Street
San Francisco
429,796
88.8
%
99.6
%
250 Brannan Street
San Francisco
100,850
100.0
%
100.0
%
301 Brannan Street
San Francisco
82,834
100.0
%
100.0
%
333 Brannan Street
San Francisco
185,602
100.0
%
100.0
%
345 Brannan Street
San Francisco
110,050
99.7
%
99.7
%
350 Mission Street
San Francisco
455,340
99.7
%
99.7
%
345 Oyster Point Boulevard
South San Francisco
40,410
100.0
%
100.0
%
347 Oyster Point Boulevard
South San Francisco
39,780
100.0
%
100.0
%
349 Oyster Point Boulevard
South San Francisco
65,340
100.0
%
100.0
%
350 Oyster Point Boulevard
South San Francisco
234,892
100.0
%
100.0
%
352 Oyster Point Boulevard
South San Francisco
232,215
100.0
%
100.0
%
354 Oyster Point Boulevard
South San Francisco
193,472
100.0
%
100.0
%
505 Mathilda Avenue
Sunnyvale
212,322
100.0
%
100.0
%
555 Mathilda Avenue
Sunnyvale
212,322
100.0
%
100.0
%
599 Mathilda Avenue
Sunnyvale
76,031
100.0
%
100.0
%
605 Mathilda Avenue
Sunnyvale
162,785
100.0
%
100.0
%
Total San Francisco Bay Area
6,211,875
92.9
%
95.3
%
________________________
(1)This property is part of a complex of properties and is analyzed at the complex level.
16
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Occupancy Overview by Region, continued
Submarket
Square Feet
Occupied
Leased
Greater Seattle, Washington
601 108th Avenue NE
Bellevue
490,738
98.5
%
98.5
%
10900 NE 4th Street
Bellevue
428,557
99.6
%
99.9
%
2001 West 8th Avenue
Denny Regrade
539,226
99.7
%
99.7
%
701 N. 34th Street
Lake Union
141,860
100.0
%
100.0
%
801 N. 34th Street
Lake Union
173,615
100.0
%
100.0
%
837 N. 34th Street
Lake Union
112,487
100.0
%
100.0
%
320 Westlake Avenue North
Lake Union
184,644
95.5
%
95.5
%
321 Terry Avenue North
Lake Union
135,755
100.0
%
100.0
%
401 Terry Avenue North
Lake Union
174,530
100.0
%
100.0
%
Total Greater Seattle
2,381,412
99.2
%
99.3
%
TOTAL STABILIZED OFFICE PORTFOLIO
15,221,912
91.3
%
93.1
%
Average Residential Occupancy
COMPLETED RESIDENTIAL PROPERTIES
Submarket
Total No. of Units
Quarter-to-Date
Greater Los Angeles
1550 N. El Centro Avenue
Hollywood
200
94.8%
6390 De Longpre Avenue
Hollywood
193
80.0%
San Diego County
3200 Paseo Village Way
Del Mar
608
97.6%
TOTAL COMPLETED RESIDENTIAL PROPERTIES
1,001
93.7%
17
Q1 2022 Supplemental Financial Report
Information on Leases Commenced (1)
1st & 2nd Generation
2nd Generation
# of Leases (2)
Square Feet (2)
Retention
Rates
TI/LC
Per Sq.Ft. (3)
TI/LC
Per Sq.Ft. /Year (3)
Changes in
GAAP Rents
Changes in
Cash Rents
Weighted
Average Lease
Term (Mo.)
New
Renewal
New
Renewal
Quarter to Date
13
7
141,137
76,104
24.0
%
$
73.23
$
10.59
25.4
%
5.9
%
83
Information on Leases Executed (1)
1st & 2nd Generation
2nd Generation
# of Leases (4)
Square Feet (4)
TI/LC
Per Sq.Ft. (3)
TI/LC
Per Sq.Ft. /Year (3)
Changes in
GAAP Rents
Changes in
Cash Rents
Weighted
Average Lease
Term (Mo.)
New
Renewal
New
Renewal
Quarter to Date (5)
9
7
107,147
76,104
$
92.61
$
11.70
32.9
%
6.7
%
95
________________________
(1)Includes 100% of consolidated property partnerships and leases for which re-leasing timing was impacted by the COVID-19 pandemic and restrictions intended to prevent its spread.
(2)Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three months ended March 31, 2022, including first and second generation space, net of month-to-month leases.
(3)Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
(4)Represents leasing activity for leases signed at properties in the stabilized portfolio during the three months ended March 31, 2022, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
(5)During the three months ended March 31, 2022, 7 new leases totaling 99,684 square feet were signed but not commenced as of March 31, 2022.
18
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Capital Expenditures
($ in thousands)
Q1 2022
1st Generation (Nonrecurring) Capital Expenditures: (1)
Capital Improvements
$
2,113
Tenant Improvements & Leasing Commissions (2)
924
Total
$
3,037
Q1 2022
2nd Generation (Recurring) Capital Expenditures: (1)
Capital Improvements
$
4,945
Tenant Improvements & Leasing Commissions (2)
8,340
Total
$
13,285
________________________
(1)Includes 100% of capital expenditures of consolidated property partnerships.
($ in thousands, except for annualized rent per sq. ft.)
# of Expiring Leases
11
13
15
18
22
18
22
69
59
50
56
25
22
35
29
20
% of Total Leased Sq. Ft.
1.1
%
0.8
%
1.3
%
1.4
%
4.8
%
2.3
%
2.5
%
7.6
%
5.3
%
13.4
%
8.9
%
7.0
%
6.9
%
10.3
%
13.1
%
13.3
%
Annualized Base Rent
$6,291
$4,729
$8,340
$8,586
$33,862
$14,184
$19,455
$47,913
$36,298
$84,032
$48,079
$61,856
$52,180
$83,692
$120,860
$126,634
% of Total Annualized Base Rent (4)
0.8
%
0.6
%
1.1
%
1.1
%
4.5
%
1.9
%
2.6
%
6.3
%
4.8
%
11.1
%
6.4
%
8.2
%
6.8
%
11.1
%
16.0
%
16.7
%
Annualized Rent per Sq. Ft.
$41.64
$43.39
$48.51
$48.91
$51.98
$45.19
$55.94
$46.00
$49.74
$45.87
$39.63
$64.34
$55.44
$59.35
$67.25
$69.51
________________________
(1)For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of March 31, 2022, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of March 31, 2022.
(2)Adjusting for leasing transactions executed as of March 31, 2022 but not yet commenced, the 2022 expirations would be reduced by 64,058 square feet.
(3)On April 5, 2021, DIRECTV, LLC's successor-in-interest ("DIRECTV") filed suit in Los Angeles Superior Court against a subsidiary of the Company, claiming that DIRECTV properly exercised its contraction rights as to certain space leased by DIRECTV at the property located at 2250 East Imperial Highway, El Segundo, California. The Company strongly disagrees with the contentions made by DIRECTV and will vigorously defend the litigation.
(4)Includes 100% of annualized base rent of consolidated property partnerships.
20
Q1 2022 Supplemental Financial Report
Stabilized Portfolio Lease Expiration Schedule by Region
($ in thousands, except for annualized rent per sq. ft.)
Year
Region
# of
Expiring Leases
Total
Square Feet
% of Total
Leased Sq. Ft.
Annualized
Base Rent (1)
% of Total
Annualized
Base Rent
Annualized Rent
per Sq. Ft.
2022
Greater Los Angeles
30
321,898
2.5
%
$
14,806
2.0
%
$
46.00
San Diego
5
19,241
0.1
%
988
0.1
%
51.35
San Francisco Bay Area
2
30,829
0.2
%
1,785
0.2
%
57.90
Greater Seattle
2
59,997
0.4
%
1,781
0.2
%
29.68
Total
39
431,965
3.2
%
$
19,360
2.5
%
$
44.82
2023
Greater Los Angeles
46
443,991
3.2
%
$
23,454
3.1
%
$
52.83
San Diego
10
181,367
1.4
%
7,923
1.0
%
43.68
San Francisco Bay Area
16
389,560
2.9
%
24,515
3.2
%
62.93
Greater Seattle
8
473,753
3.5
%
20,195
2.8
%
42.63
Total
80
1,488,671
11.0
%
$
76,087
10.1
%
$
51.11
2024
Greater Los Angeles
40
508,555
3.7
%
$
20,839
2.7
%
$
40.98
San Diego
7
49,125
0.4
%
2,815
0.4
%
57.30
San Francisco Bay Area
13
245,831
1.8
%
15,912
2.1
%
64.73
Greater Seattle
9
238,026
1.7
%
8,347
1.1
%
35.07
Total
69
1,041,537
7.6
%
$
47,913
6.3
%
$
46.00
2025
Greater Los Angeles
23
207,664
1.5
%
$
9,077
1.2
%
$
43.71
San Diego
17
150,353
1.1
%
6,768
0.9
%
45.01
San Francisco Bay Area
9
230,843
1.7
%
14,901
2.0
%
64.55
Greater Seattle
10
140,831
1.0
%
5,552
0.7
%
39.42
Total
59
729,691
5.3
%
$
36,298
4.8
%
$
49.74
2026
Greater Los Angeles
17
348,888
2.6
%
$
14,183
1.9
%
$
40.65
San Diego
10
210,096
1.5
%
9,906
1.3
%
47.15
San Francisco Bay Area
13
878,994
6.4
%
43,812
5.8
%
49.84
Greater Seattle
10
394,087
2.9
%
16,131
2.1
%
40.93
Total
50
1,832,065
13.4
%
$
84,032
11.1
%
$
45.87
2027
and
Beyond
Greater Los Angeles
55
1,843,615
13.5
%
$
86,999
11.5
%
$
47.19
San Diego
58
1,310,030
9.6
%
74,306
9.9
%
56.72
San Francisco Bay Area
43
3,959,139
28.9
%
288,497
38.1
%
72.87
Greater Seattle
31
1,031,793
7.5
%
43,499
5.7
%
42.16
Total
187
8,144,577
59.5
%
$
493,301
65.2
%
$
60.57
________________________
(1)Includes 100% of annualized base rent of consolidated property partnerships.
21
Q1 2022 Supplemental Financial Report
Top Fifteen Tenants (1)
($ in thousands)
Tenant Name
Region
Annualized Base Rental Revenue (2)
Rentable
Square Feet
Percentage of
Total Annualized Base Rental Revenue
Percentage of
Total Rentable
Square Feet
Year(s) of Lease Expiration
GM Cruise, LLC
San Francisco Bay Area
$
36,337
374,618
4.7
%
2.4
%
2031
Amazon.com
Greater Seattle
33,800
780,757
4.4
%
5.0
%
2023 / 2029 / 2030
Stripe, Inc.
San Francisco Bay Area
33,110
425,687
4.3
%
2.7
%
2034
LinkedIn Corporation / Microsoft Corporation
San Francisco Bay Area
29,752
663,460
3.9
%
4.3
%
2024 / 2026
Adobe Systems, Inc.
San Francisco Bay Area / Greater Seattle
27,897
523,416
3.6
%
3.4
%
2027 / 2031
salesforce.com, inc.
San Francisco Bay Area
24,076
451,763
3.1
%
2.9
%
2031 / 2032
DoorDash, Inc.
San Francisco Bay Area
23,842
236,759
3.1
%
1.5
%
2032
DIRECTV, LLC (3)
Greater Los Angeles
23,152
684,411
3.0
%
4.4
%
2027
Fortune 50 Publicly-Traded Company
Greater Seattle /
San Diego County
23,059
472,427
3.0
%
3.0
%
2032 / 2033
Okta, Inc.
San Francisco Bay Area
22,387
273,371
2.9
%
1.8
%
2028
Netflix, Inc. (4)
Greater Los Angeles
21,943
362,899
2.8
%
2.3
%
2022 / 2032
Box, Inc.
San Francisco Bay Area
20,390
341,441
2.6
%
2.2
%
2028
Cytokinetics, Inc.
San Francisco Bay Area
18,014
234,892
2.3
%
1.5
%
2033
Riot Games, Inc.
Greater Los Angeles
15,681
251,307
2.0
%
1.6
%
2023 / 2024
Synopsys, Inc.
San Francisco Bay Area
15,492
342,891
2.0
%
2.2
%
2030
Total Top Fifteen Tenants
$
368,932
6,420,099
47.7
%
41.2
%
________________________
(1)The information presented is as of March 31, 2022.
(2)Includes 100% of annualized base rental revenues of consolidated property partnerships.
(3)On April 5, 2021, DIRECTV, LLC's successor-in-interest ("DIRECTV") filed suit in Los Angeles Superior Court against a subsidiary of the Company, claiming that DIRECTV properly exercised its contraction rights as to certain space leased by DIRECTV at the property located at 2250 East Imperial Highway, El Segundo, California. The Company strongly disagrees with the contentions made by DIRECTV and will vigorously defend the litigation.
(4)The 2022 lease expiration represents 1,480 rentable square feet expiring on June 30, 2022.
900 Jefferson Avenue and 900 Middlefield Road, Redwood City, CA (2)
Local developer
Redwood City
347,269
93%
____________________
(1)For breakout of Net Operating Income by partnership, refer to page 37, Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income.
(2)Reflects the KRC ownership percentage at time of agreement. Actual percentage may vary depending on cash flows or promote structure.
23
03
Development
-In-Process Development & Redevelopment
-Future Development Pipeline
Q1 2022 Supplemental Financial Report
In-Process Development & Redevelopment
($ in millions)
Location
Construction Start Date
Estimated Stabilization Date (2)
Estimated Rentable Square Feet (3)
Total Estimated Investment
Total Cash Costs Incurred as of
3/31/2022 (4)
% Leased
Total Project % Occupied
TENANT IMPROVEMENT (1)
Office
San Diego County
2100 Kettner
Little Italy
3Q 2019
3Q 2022
235,000
$
140.0
$
112.1
-%
-%
Greater Seattle
333 Dexter
South Lake Union
2Q 2017
3Q 2022
635,000
410.0
378.4
100%
49%
Austin
Indeed Tower
Austin CBD
2Q 2021
1Q 2024
734,000
690.0
578.1
58%
15%
TOTAL:
1,604,000
$
1,240.0
$
1,068.6
66%
26%
UNDER CONSTRUCTION
Location
Construction Start Date
Estimated Stabilization Date (2)
Estimated Rentable Square Feet (3)
Total Estimated Investment (5)
Total Cash Costs Incurred as of
3/31/2022 (4)(5)
% Leased
Office / Life Science
San Francisco Bay Area
Kilroy Oyster Point - Phase 2
South San Francisco
2Q 2021
4Q 2024
875,000
$
940.0
$
250.3
-%
San Diego County
9514 Towne Centre Drive
University Towne Center
3Q 2021
4Q 2023
71,000
60.0
15.0
100%
12340 El Camino Real (6)
Del Mar
4Q 2021
3Q 2022
96,000
40.0
22.9
100%
12400 High Bluff Drive (6)
Del Mar
1Q 2022
3Q 2022
182,000
50.0
28.3
100%
4690 Executive Drive (6)
University Towne Center
1Q 2022
3Q 2023
52,000
25.0
5.8
100%
TOTAL:
1,276,000
$
1,115.0
$
322.3
31%
________________________
(1)Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
(2)For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. For projects being redeveloped, redevelopment will occur in phases based on existing lease expiration dates and timing of the tenant improvement build-out.
(3)For projects being redeveloped, represents the total square footage leased.
(4)Represents costs incurred as of March 31, 2022, excluding GAAP accrued liabilities and leasing overhead.
(5)For redevelopment projects, includes the existing depreciated basis for the buildings to be redeveloped, except for 12400 High Bluff Drive, which includes 66% of the depreciated basis, representing the 66% of the building that will be redeveloped.
(6)Redevelopment project.
25
Q1 2022 Supplemental Financial Report
Future Development Pipeline
($ in millions)
FUTURE DEVELOPMENT PIPELINE
Location
Approx. Developable
Square Feet (1)
Total Cash Costs Incurred as of 3/31/2022 (2)
San Diego County
Santa Fe Summit - Phases 2 and 3
56 Corridor
600,000 - 650,000
$
95.5
2045 Pacific Highway
Little Italy
275,000
49.2
Kilroy East Village
East Village
TBD
62.8
San Francisco Bay Area
Kilroy Oyster Point - Phases 3 and 4
South San Francisco
875,000 - 1,000,000
192.0
Flower Mart
SOMA
2,300,000
433.9
Greater Seattle
SIX0 - Office & Residential
Denny Regrade
925,000
150.5
Austin
10615 Burnet Road (3)
Stadium District / Domain
493,000
40.3
TOTAL:
$
1,024.2
________________________
(1)The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design.
(2)Represents costs incurred as of March 31, 2022, excluding accrued liabilities recorded in accordance with GAAP.
(3)This fully-entitled 2.9-acre land site was acquired in March 2022 for $40.0 million.
26
04
Debt and
Capitalization Data
-Capital Structure
-Debt Analysis
Q1 2022 Supplemental Financial Report
Capital Structure
As of March 31, 2022 ($ in thousands)
Debt Balance (3)
Stated Rate
Maturity Date
Unsecured Debt (4)
$
425,000
3.45
%
12/15/2024
$
400,000
4.38
%
10/1/2025
$
50,000
4.30
%
7/18/2026
$
200,000
4.35
%
10/18/2026
$
175,000
3.35
%
2/17/2027
$
400,000
4.75
%
12/15/2028
$
75,000
3.45
%
2/17/2029
$
400,000
4.25
%
8/15/2029
$
500,000
3.05
%
2/15/2030
$
350,000
4.27
%
1/31/2031
$
425,000
2.50
%
11/15/2032
$
450,000
2.65
%
11/15/2033
Secured Debt
$
162,581
3.57
%
12/1/2026
$
85,074
4.48
%
7/1/2027
________________________
(1)Value based on closing share price of $76.42as of March 31, 2022.
(2)Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
(3)Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
(4)As of March 31, 2022, there was no outstanding balance on the unsecured revolving credit facility.
28
Q1 2022 Supplemental Financial Report
Debt Analysis
As of March 31, 2022
TOTAL DEBT COMPOSITION (1)
Weighted Average
Interest Rate
Years to Maturity
Secured vs. Unsecured Debt
Unsecured Debt
3.6%
7.1
Secured Debt
3.9%
4.9
Floating vs. Fixed-Rate Debt
Floating-Rate Debt
-%
-
Fixed-Rate Debt
3.7%
7.0
Stated Interest Rate
3.7%
7.0
GAAP Effective Rate
3.7%
GAAP Effective Rate Including Debt Issuance Costs
3.9%
KEY DEBT COVENANTS
Covenant
Actual Performance
as of March 31, 2022
Unsecured Credit Facility and Private Placement Notes (as defined in the Credit Agreements):
Total debt to total asset value
less than 60%
29%
Fixed charge coverage ratio
greater than 1.5x
3.5x
Unsecured debt ratio
greater than 1.67x
3.25x
Unencumbered asset pool debt service coverage
greater than 1.75x
4.05x
Unsecured Senior Notes due 2024, 2025, 2028, 2029, 2030, 2032 and 2033 (as defined in the Indentures):
Total debt to total asset value
less than 60%
34%
Interest coverage
greater than 1.5x
8.4x
Secured debt to total asset value
less than 40%
2%
Unencumbered asset pool value to unsecured debt
greater than 150%
297%
________________________
(1)As of March 31, 2022, there was nooutstanding balance on the unsecured revolving credit facility.
29
05
Non-GAAP Supplemental
Measures
Q1 2022 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures
Included in this section are management's statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations available to common stockholders and common unitholders ("FFO"), in the Company's earnings release on April 27, 2022 and the reasons why management believes that these measures provide useful information to investors about the Company's financial condition and results of operations.
Net Operating Income:
Management believes that Net Operating Income ("NOI") is a useful supplemental measure of the Company's operating performance. The Company defines NOI as follows: consolidated operating revenues (rental income and other property income) less consolidated property and related expenses (property expenses, real estate taxes and ground leases). Other real estate investment trusts ("REITs") may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to other REITs.
Because NOI excludes leasing costs, general and administrative expenses, interest expense, depreciation and amortization, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the consolidated revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a portfolio basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base have on the Company's results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company's financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.
However, NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results from operations.
Same Store Net Operating Income:
Management believes that Same Store NOI is a useful supplemental measure of the Company's operating performance. Same Store NOI represents the consolidated NOI for all of the properties that were owned and included in the Company's stabilized portfolio for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company's Same Store NOI may not be comparable to other REITs.
However, Same Store NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results from operations.
31
Q1 2022 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures, continued
Same Store Cash Net Operating Income:
Management believes that Same Store Cash NOI is a useful supplemental measure of the Company's operating performance. Same Store Cash NOI represents the consolidated NOI for all of the properties that were owned and included in the Company's stabilized portfolio for two comparable reporting periods, adjusted for the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles, and the provision for bad debts. Because Same Store Cash NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends on a cash basis such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store Cash NOI, and accordingly, our Same Store Cash NOI may not be comparable to other REITs.
However, Same Store Cash NOI should not be viewed as an alternative measure of the Company's financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results from operations.
EBITDA, as adjusted:
Management believes that consolidated earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, gains and losses on depreciable real estate, net income attributable to noncontrolling interests, preferred dividends and distributions, original issuance costs of redeemed preferred stock and preferred units, and impairment losses ("EBITDA, as adjusted") is a useful supplemental measure of the Company's operating performance. When considered with other GAAP measures and FFO, management believes EBITDA, as adjusted, gives the investment community a more complete understanding of the Company's consolidated operating results, including the impact of general and administrative expenses and acquisition-related expenses, before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA, as adjusted, as it is used in several of the Company's financial covenants for both its secured and unsecured debt. However, EBITDA, as adjusted, should not be viewed as an alternative measure of the Company's operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Company's results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA, as adjusted, and, accordingly, the Company's EBITDA, as adjusted, may not be comparable to other REITs. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
32
Q1 2022 Supplemental Financial Report
Management Statements on Non-GAAP Supplemental Measures, continued
Funds From Operations:
The Company calculates 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.
Management believes that FFO is a useful supplemental measure of the Company's 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 the Company's 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, the Company's 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, management believes that FFO along with the required GAAP presentations provides a more complete measurement of the Company's performance relative to its 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 the Company's operating performance since 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 the Company's properties, which are significant economic costs and could materially impact the Company's results from operations.
Funds Available for Distribution:
Management believes that Funds Available for Distribution available to common stockholders and common unitholders ("FAD") is a useful supplemental measure of the Company's liquidity. The Company computes FAD by adding to FFO the non-cash amortization of deferred financing costs, debt discounts and premiums and share-based compensation awards, amortization of above (below) market rents for acquisition properties and non-cash executive compensation expense then subtracting recurring tenant improvements, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements, adjusting for other lease related items and amounts of gain or loss on marketable securities related to the Company's executive deferred compensation plan that are capitalized as development costs, and after adjustment for amounts attributable to noncontrolling interests in consolidated property partnerships. FAD provides an additional perspective on the Company's ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company's financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company's FAD may not be comparable to other REITs.
33
06
Definitions and Reconciliations
Q1 2022 Supplemental Financial Report
Definitions Included in Supplemental
Annualized Base Rent:
Includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue.
Change in GAAP/Cash Rents (Leases Commenced):
Calculated as the change between GAAP/cash rents for new/renewed leases and the expiring GAAP/cash rents for the same space. Includes leases for which re-leasing timing was impacted by the COVID-19 pandemic and restrictions intended to prevent its spread. Excludes leases for which the space was vacant when the property was acquired by the Company.
Change in GAAP/Cash Rents (Leases Executed):
Calculated as the change between GAAP/cash rents for signed leases and the expiring GAAP/cash rents for the same space. Includes leases for which re-leasing timing was impacted by the COVID-19 pandemic and restrictions intended to prevent its spread. Excludes leases for which the space was vacant when the property was acquired by the Company.
Estimated Stabilization Date (Development):
Management's estimation of the earlier of stabilized occupancy (95%) or one year from the date of the cessation of major base building construction activities for office and retail properties and upon substantial completion for residential properties.
FAD Payout Ratio:
Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FAD.
First Generation Capital Expenditures:
Capital expenditures for newly acquired space, newly developed, redeveloped, or repositioned space. These costs are not subtracted in our calculation of FAD.
Fixed Charge Coverage Ratio:
Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums) and current year accrued preferred dividends.
FFO Payout Ratio:
Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FFO attributable to common stockholders and unitholders.
35
Q1 2022 Supplemental Financial Report
Definitions Included in Supplemental, continued
GAAP Effective Rate:
The rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of any discounts/premiums, excluding debt issuance costs.
Interest Coverage Ratio:
Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums).
Net Effect of Straight-Line Rents:
Represents the straight-line rent income recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases and the provision for bad debts recorded for deferred rent receivable balances.
Net Operating Income Margins:
Calculated as Net Operating Income divided by total revenues.
Retention Rates (Leases Commenced):
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
Same Store Portfolio:
Our Same Store portfolio includes all of our properties owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2021 and still owned and included in the stabilized portfolio as of March 31, 2022. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, completed residential developments not yet stabilized and properties held-for-sale. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.
Stated Interest Rate:
The rate at which interest expense is recorded per the respective loan documents, excluding the impact of the amortization of any debt discounts/premiums.
Tenant Improvement Phase:
Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
36
Q1 2022 Supplemental Financial Report
Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income
(unaudited, $ in thousands)
Three Months Ended March 31,
2022
2021
Net Income Available to Common Stockholders
$
53,128
$
497,631
Net income attributable to noncontrolling common units of the Operating Partnership
516
4,886
Net income attributable to noncontrolling interests in consolidated property partnerships
5,739
4,894
Net Income
59,383
507,411
Adjustments:
General and administrative expenses
22,781
21,985
Leasing costs
1,013
692
Depreciation and amortization
88,660
75,932
Interest income and other income, net
(81)
(1,373)
Interest expense
20,625
22,334
Gain on sale of depreciable operating property
-
(457,288)
Net Operating Income, as defined (1)
192,381
169,693
Wholly-Owned Properties
168,431
146,326
Consolidated property partnerships: (2)
100 First Street (3)
5,922
6,397
303 Second Street (3)
12,000
10,937
Crossing/900 (4)
6,028
6,033
Net Operating Income, as defined (1)
192,381
169,693
Non-Same Store Net Operating Income (5)
(35,190)
(25,560)
Same Store Net Operating Income
157,191
144,133
GAAP to Cash Adjustments:
GAAP Operating Revenues Adjustments, net (6)
(8,599)
(12,371)
GAAP Operating Expenses Adjustments, net (7)
105
91
Same Store Cash Net Operating Income
$
148,697
$
131,853
________________________
(1)Please refer to pages 31-32 for Management Statements on Net Operating Income, Same Store Net Operating Income and Same Store Cash Net Operating Income.
(2)Reflects Net Operating Income for all periods presented.
(3)For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.
(4)For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City, CA.
(5)Includes the results of one office property disposed of during the first quarter 2021, two office operating properties disposed of during the fourth quarter 2021, our 193-unit residential project added to the stabilized portfolio in the second quarter of 2021, one office development project added to the stabilized portfolio in the first quarter of 2021, one office development building added to the stabilized portfolio in the second quarter of 2021, two office development buildings added to the stabilized portfolio in the third quarter of 2021, two office development buildings added to the stabilized portfolio in the fourth quarter of 2021, one operating property acquired during the third quarter of 2021, and our in-process and future development projects.
(6)Includes the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles and revenue reversals (recoveries) related to tenant creditworthiness.
(7)Includes the amortization of above and below market lease intangibles for ground leases.
37
Q1 2022 Supplemental Financial Report
Reconciliation of Net Income Available to Common Stockholders to EBITDA, as Adjusted
(unaudited, $ in thousands)
Three Months Ended March 31,
2022
2021
Net Income Available to Common Stockholders
$
53,128
$
497,631
Interest expense
20,625
22,334
Depreciation and amortization
88,660
75,932
Net income attributable to noncontrolling common units of the Operating Partnership
516
4,886
Net income attributable to noncontrolling interests in consolidated property partnerships
5,739
4,894
Gain on sale of depreciable operating property
-
(457,288)
EBITDA, as adjusted (1)
$
168,668
$
148,389
________________________
(1)Please refer to page 32 for a Management Statement on EBITDA, as adjusted. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
38
Attachments
Original Link
Original Document
Permalink
Disclaimer
Kilroy Realty Corporation published this content on 28 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2022 10:14:15 UTC.
Kilroy Realty Corporation is a self-administered real estate investment trust active in office, life science and mixed-use property types in the United States. The Company owns, develops, acquires and manages real estate assets, consisting primarily of Class A properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle and Austin. Its stabilized portfolio includes all of its properties with the exception of development properties committed for construction, under construction, or in the tenant improvement phase, redevelopment properties under construction, undeveloped land and real estate assets held for sale. It added two development projects to its stabilized portfolio consisting of two buildings totaling 829,591 square feet of office space in San Diego, California and Austin, Texas. Its stabilized portfolio of operating properties comprises 121 stabilized office properties. It owns its interests in all of its real estate assets through Kilroy Realty, L.P.