þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kilroy Realty Corporation
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Maryland
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95-4598246
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Kilroy Realty, L.P.
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Delaware
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95-4612685
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064
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||
(Address of principal executive offices) (Zip Code)
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||
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(310) 481-8400
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||
(Registrant's telephone number, including area code)
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||
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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Kilroy Realty Corporation
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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|||
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Kilroy Realty, L.P.
|
|
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
þ
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
|
•
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Combined reports better reflect how management and the analyst community view the business as a single operating unit;
|
•
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Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
|
•
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Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
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•
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Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
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•
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consolidated financial statements;
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•
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the following notes to the consolidated financial statements:
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◦
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Note 5, Secured and Unsecured Debt of the Operating Partnership;
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◦
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Note 6, Noncontrolling Interests on the Company's Consolidated Financial Statements;
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◦
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Note 7, Preferred and Common Stock of the Company;
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◦
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Note 8, Preferred and Common Units of the Operating Partnership;
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◦
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Note 15, Net Income Available to Common Stockholders Per Share of the Company;
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◦
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Note 16, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
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◦
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Note 18, Pro Forma Results of the Company;
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◦
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Note 19, Pro Forma Results of the Operating Partnership;
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•
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"Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of the Company"; and
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•
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"Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of the Operating Partnership."
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Page
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PART I-FINANCIAL INFORMATION
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Item 1.
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FINANCIAL STATEMENTS
OF KILROY REALTY CORPORATION
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Item 1.
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FINANCIAL STATEMENTS
OF KILROY REALTY, L.P.
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|
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Item 2.
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Item 3.
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Item 4.
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CONTROLS AND PROCEDURES
(KILROY REALTY CORPORATION AND KILROY REALTY, L.P.)
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PART II-OTHER INFORMATION
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Item 1.
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||
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
|
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MINE SAFETY DISCLOSURES
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Item 5.
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||
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Item 6.
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||
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2012
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2011
|
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2012
|
|
2011
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
94,265
|
|
|
$
|
80,158
|
|
|
$
|
184,484
|
|
|
$
|
157,155
|
|
Tenant reimbursements
|
9,065
|
|
|
7,130
|
|
|
17,369
|
|
|
13,152
|
|
||||
Other property income
|
592
|
|
|
1,102
|
|
|
1,479
|
|
|
1,856
|
|
||||
Total revenues
|
103,922
|
|
|
88,390
|
|
|
203,332
|
|
|
172,163
|
|
||||
EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
21,196
|
|
|
17,356
|
|
|
38,731
|
|
|
34,865
|
|
||||
Real estate taxes
|
8,881
|
|
|
8,127
|
|
|
17,270
|
|
|
16,017
|
|
||||
Provision for bad debts
|
—
|
|
|
120
|
|
|
2
|
|
|
146
|
|
||||
Ground leases
|
615
|
|
|
424
|
|
|
1,417
|
|
|
763
|
|
||||
General and administrative expenses
|
9,251
|
|
|
7,440
|
|
|
18,018
|
|
|
14,000
|
|
||||
Acquisition-related expenses
|
1,813
|
|
|
1,194
|
|
|
3,341
|
|
|
1,666
|
|
||||
Depreciation and amortization
|
40,624
|
|
|
31,378
|
|
|
77,370
|
|
|
59,819
|
|
||||
Total expenses
|
82,380
|
|
|
66,039
|
|
|
156,149
|
|
|
127,276
|
|
||||
OTHER (EXPENSES) INCOME:
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment (losses) gains (Note 12)
|
(110
|
)
|
|
58
|
|
|
374
|
|
|
242
|
|
||||
Interest expense (Note 5)
|
(19,155
|
)
|
|
(21,228
|
)
|
|
(40,318
|
)
|
|
(42,104
|
)
|
||||
Total other (expenses) income
|
(19,265
|
)
|
|
(21,170
|
)
|
|
(39,944
|
)
|
|
(41,862
|
)
|
||||
INCOME FROM CONTINUING OPERATIONS
|
2,277
|
|
|
1,181
|
|
|
7,239
|
|
|
3,025
|
|
||||
DISCONTINUED OPERATIONS (Note 14)
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations
|
—
|
|
|
2,291
|
|
|
900
|
|
|
5,314
|
|
||||
Net gain on dispositions of discontinued operations
|
—
|
|
|
—
|
|
|
72,809
|
|
|
—
|
|
||||
Total income from discontinued operations
|
—
|
|
|
2,291
|
|
|
73,709
|
|
|
5,314
|
|
||||
NET INCOME
|
2,277
|
|
|
3,472
|
|
|
80,948
|
|
|
8,339
|
|
||||
Net loss (income) attributable to noncontrolling common units of the Operating Partnership
|
20
|
|
|
10
|
|
|
(1,775
|
)
|
|
(24
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
2,297
|
|
|
3,482
|
|
|
79,173
|
|
|
8,315
|
|
||||
PREFERRED DISTRIBUTIONS AND DIVIDENDS:
|
|
|
|
|
|
|
|
||||||||
Distributions to noncontrolling cumulative redeemable preferred units of the Operating Partnership
|
(1,397
|
)
|
|
(1,397
|
)
|
|
(2,794
|
)
|
|
(2,794
|
)
|
||||
Preferred dividends (Note 7)
|
(1,700
|
)
|
|
(2,402
|
)
|
|
(4,721
|
)
|
|
(4,804
|
)
|
||||
Original issuance costs of redeemed preferred stock (Note 7)
|
—
|
|
|
—
|
|
|
(4,918
|
)
|
|
—
|
|
||||
Total preferred distributions and dividends
|
(3,097
|
)
|
|
(3,799
|
)
|
|
(12,433
|
)
|
|
(7,598
|
)
|
||||
NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
(800
|
)
|
|
$
|
(317
|
)
|
|
$
|
66,740
|
|
|
$
|
717
|
|
Loss from continuing operations available to common stockholders per common share - basic (Note 15)
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Loss from continuing operations available to common stockholders per common share - diluted (Note 15)
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Net (loss) income available to common stockholders per share - basic (Note 15)
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Net (loss) income available to common stockholders per share - diluted (Note 15)
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Weighted average common shares outstanding - basic (Note 15)
|
68,344,734
|
|
|
57,685,710
|
|
|
65,996,719
|
|
|
55,008,765
|
|
||||
Weighted average common shares outstanding - diluted (Note 15)
|
68,344,734
|
|
|
57,685,710
|
|
|
65,996,719
|
|
|
55,008,765
|
|
||||
Dividends declared per common share
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
$
|
0.70
|
|
|
$
|
0.70
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders'
Equity
|
|
Noncontrol-
ling Interests
- Common
Units of the
Operating
Partnership
|
|
Total
Equity
|
|||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2010
|
$
|
121,582
|
|
|
52,349,670
|
|
|
$
|
523
|
|
|
$
|
1,211,498
|
|
|
$
|
(247,252
|
)
|
|
$
|
1,086,351
|
|
|
$
|
31,379
|
|
|
$
|
1,117,730
|
|
Net income
|
|
|
|
|
|
|
|
|
8,315
|
|
|
8,315
|
|
|
24
|
|
|
8,339
|
|
|||||||||||
Issuance of common stock
|
|
|
6,037,500
|
|
|
61
|
|
|
220,954
|
|
|
|
|
221,015
|
|
|
|
|
221,015
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
68,727
|
|
|
1
|
|
|
2,155
|
|
|
|
|
2,156
|
|
|
|
|
2,156
|
|
||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
2,813
|
|
|
|
|
2,813
|
|
|
|
|
2,813
|
|
||||||||||||
Repurchase of common stock and restricted stock units
|
|
|
(11,485
|
)
|
|
|
|
(732
|
)
|
|
|
|
(732
|
)
|
|
|
|
(732
|
)
|
|||||||||||
Exercise of stock options
|
|
|
15,000
|
|
|
|
|
395
|
|
|
|
|
395
|
|
|
|
|
395
|
|
|||||||||||
Exchange of common units of the Operating Partnership
|
|
|
5,000
|
|
|
|
|
91
|
|
|
|
|
91
|
|
|
(91
|
)
|
|
—
|
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(3,223
|
)
|
|
|
|
(3,223
|
)
|
|
3,223
|
|
|
—
|
|
|||||||||||
Preferred distributions and dividends
|
|
|
|
|
|
|
|
|
(7,598
|
)
|
|
(7,598
|
)
|
|
|
|
(7,598
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.70 per share/unit)
|
|
|
|
|
|
|
|
|
(39,381
|
)
|
|
(39,381
|
)
|
|
(1,204
|
)
|
|
(40,585
|
)
|
|||||||||||
BALANCE AS OF JUNE 30, 2011
|
$
|
121,582
|
|
|
58,464,412
|
|
|
$
|
585
|
|
|
$
|
1,433,951
|
|
|
$
|
(285,916
|
)
|
|
$
|
1,270,202
|
|
|
$
|
33,331
|
|
|
$
|
1,303,533
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
Common Stock
|
|
Total
Stock-
holders'
Equity
|
|
Noncontrol-
ling Interests
- Common
Units of the
Operating
Partnership
|
|
Total
Equity
|
|||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2011
|
$
|
121,582
|
|
|
58,819,717
|
|
|
$
|
588
|
|
|
$
|
1,448,997
|
|
|
$
|
(277,450
|
)
|
|
$
|
1,293,717
|
|
|
$
|
33,765
|
|
|
$
|
1,327,482
|
|
Net income
|
|
|
|
|
|
|
|
|
79,173
|
|
|
79,173
|
|
|
1,775
|
|
|
80,948
|
|
|||||||||||
Issuance of Series G Preferred stock (Note 7)
|
96,155
|
|
|
|
|
|
|
|
|
|
|
96,155
|
|
|
|
|
96,155
|
|
||||||||||||
Redemption of Series E and Series F Preferred stock (Note 7)
|
(121,582
|
)
|
|
|
|
|
|
|
|
(4,918
|
)
|
|
(126,500
|
)
|
|
|
|
(126,500
|
)
|
|||||||||||
Issuance of common stock (Note 7)
|
|
|
10,063,189
|
|
|
101
|
|
|
408,374
|
|
|
|
|
408,475
|
|
|
|
|
408,475
|
|
||||||||||
Issuance of share-based compensation awards (Note 9)
|
|
|
62,137
|
|
|
|
|
657
|
|
|
|
|
657
|
|
|
|
|
657
|
|
|||||||||||
Noncash amortization of share-based compensation (Note 9)
|
|
|
|
|
|
|
3,827
|
|
|
|
|
3,827
|
|
|
|
|
3,827
|
|
||||||||||||
Repurchase of common stock and restricted stock units (Note 9)
|
|
|
(22,312
|
)
|
|
|
|
(603
|
)
|
|
|
|
(603
|
)
|
|
|
|
(603
|
)
|
|||||||||||
Exercise of stock options
|
|
|
5,000
|
|
|
|
|
129
|
|
|
|
|
129
|
|
|
|
|
129
|
|
|||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(4,950
|
)
|
|
|
|
(4,950
|
)
|
|
4,950
|
|
|
—
|
|
|||||||||||
Preferred distributions and dividends
|
|
|
|
|
|
|
|
|
(7,515
|
)
|
|
(7,515
|
)
|
|
|
|
(7,515
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.70 per share/unit)
|
|
|
|
|
|
|
|
|
(48,785
|
)
|
|
(48,785
|
)
|
|
(1,204
|
)
|
|
(49,989
|
)
|
|||||||||||
BALANCE AS OF JUNE 30, 2012
|
$
|
96,155
|
|
|
68,927,731
|
|
|
$
|
689
|
|
|
$
|
1,856,431
|
|
|
$
|
(259,495
|
)
|
|
$
|
1,693,780
|
|
|
$
|
39,286
|
|
|
$
|
1,733,066
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
80,948
|
|
|
$
|
8,339
|
|
Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations):
|
|
|
|
||||
Depreciation and amortization of building and improvements and leasing costs
|
76,792
|
|
|
61,029
|
|
||
Increase in provision for bad debts
|
2
|
|
|
146
|
|
||
Depreciation of furniture, fixtures and equipment
|
584
|
|
|
530
|
|
||
Noncash amortization of share-based compensation awards
|
3,419
|
|
|
2,239
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
5,310
|
|
|
6,884
|
|
||
Noncash amortization of net (below)/above market rents (Note 3)
|
(2,589
|
)
|
|
1,398
|
|
||
Net gain on dispositions of discontinued operations (Note 14)
|
(72,809
|
)
|
|
—
|
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,465
|
)
|
|
(4,668
|
)
|
||
Straight-line rents
|
(10,575
|
)
|
|
(8,906
|
)
|
||
Net change in other operating assets
|
(4,318
|
)
|
|
(2,493
|
)
|
||
Net change in other operating liabilities
|
7,285
|
|
|
(8,033
|
)
|
||
Insurance proceeds received for property damage
|
(951
|
)
|
|
—
|
|
||
Net cash provided by operating activities
|
78,633
|
|
|
56,465
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties, net of cash acquired (Note 2)
|
(272,256
|
)
|
|
(378,554
|
)
|
||
Expenditures for acquisition of development properties (Note 2)
|
(79,157
|
)
|
|
—
|
|
||
Expenditures for operating properties
|
(40,218
|
)
|
|
(28,230
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(26,084
|
)
|
|
(12,347
|
)
|
||
Net proceeds received from dispositions of operating properties (Note 14)
|
143,161
|
|
|
—
|
|
||
Insurance proceeds received for property damage
|
951
|
|
|
—
|
|
||
Increase in acquisition-related deposits
|
(28,250
|
)
|
|
(16,500
|
)
|
||
Decrease in restricted cash
|
261
|
|
|
112
|
|
||
Net cash used in investing activities
|
(301,592
|
)
|
|
(435,519
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of Series G preferred stock (Note 7)
|
96,155
|
|
|
—
|
|
||
Redemption of Series E and Series F preferred stock (Note 7)
|
(126,500
|
)
|
|
—
|
|
||
Net proceeds from issuance of common stock (Note 7)
|
408,475
|
|
|
221,015
|
|
||
Borrowings on unsecured line of credit
|
253,000
|
|
|
302,000
|
|
||
Repayments on unsecured line of credit
|
(333,000
|
)
|
|
(216,000
|
)
|
||
Proceeds from issuance of secured debt
|
97,000
|
|
|
135,000
|
|
||
Principal payments on secured debt
|
(103,254
|
)
|
|
(3,403
|
)
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
150,000
|
|
|
—
|
|
||
Repayments of exchangeable senior notes (Note 5)
|
(148,000
|
)
|
|
—
|
|
||
Financing costs
|
(3,644
|
)
|
|
(5,201
|
)
|
||
Decrease in loan deposits
|
—
|
|
|
2,027
|
|
||
Repurchase of common stock and restricted stock units (Note 9)
|
(603
|
)
|
|
(732
|
)
|
||
Proceeds from exercise of stock options
|
129
|
|
|
395
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(45,713
|
)
|
|
(37,877
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(7,752
|
)
|
|
(7,598
|
)
|
||
Net cash provided by financing activities
|
236,293
|
|
|
389,626
|
|
||
Net increase in cash and cash equivalents
|
13,334
|
|
|
10,572
|
|
||
Cash and cash equivalents, beginning of period
|
4,777
|
|
|
14,840
|
|
||
Cash and cash equivalents, end of period
|
$
|
18,111
|
|
|
$
|
25,412
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $7,021 and $3,327 as of June 30, 2012 and 2011, respectively
|
$
|
36,935
|
|
|
$
|
34,568
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
13,062
|
|
|
$
|
9,966
|
|
Tenant improvements funded directly by tenants to third parties
|
$
|
9,838
|
|
|
$
|
3,027
|
|
Assumption of secured debt with property acquisitions (Notes 2 and 5)
|
$
|
35,690
|
|
|
$
|
30,042
|
|
Assumption of other assets and liabilities with operating and development property acquisitions, net (Note 2)
|
$
|
4,940
|
|
|
$
|
4,438
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
24,726
|
|
|
$
|
21,064
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,577
|
|
|
$
|
1,909
|
|
Issuance of share-based compensation awards, net (Note 9)
|
$
|
30,762
|
|
|
$
|
7,216
|
|
Exchange of common units of the Operating Partnership into shares of the Company's common stock
|
$
|
—
|
|
|
$
|
91
|
|
|
June 30,
2012 |
|
December 31,
2011 |
||||
|
(unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
REAL ESTATE ASSETS:
|
|
|
|
||||
Land and improvements (Note 2)
|
$
|
576,433
|
|
|
$
|
537,574
|
|
Buildings and improvements (Note 2)
|
3,137,665
|
|
|
2,830,310
|
|
||
Undeveloped land and construction in progress (Note 2)
|
557,657
|
|
|
430,806
|
|
||
Total real estate held for investment
|
4,271,755
|
|
|
3,798,690
|
|
||
Accumulated depreciation and amortization
|
(801,083
|
)
|
|
(742,503
|
)
|
||
Total real estate assets held for investment, net
|
3,470,672
|
|
|
3,056,187
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 14)
|
—
|
|
|
84,156
|
|
||
CASH AND CASH EQUIVALENTS
|
18,111
|
|
|
4,777
|
|
||
RESTRICTED CASH
|
97
|
|
|
358
|
|
||
MARKETABLE SECURITIES (Note 12)
|
6,546
|
|
|
5,691
|
|
||
CURRENT RECEIVABLES, NET (Note 4)
|
7,643
|
|
|
8,395
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 4)
|
110,689
|
|
|
101,142
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Notes 2 and 3)
|
168,488
|
|
|
155,522
|
|
||
DEFERRED FINANCING COSTS, NET
|
18,919
|
|
|
18,368
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 11)
|
46,357
|
|
|
12,199
|
|
||
TOTAL ASSETS
|
$
|
3,847,522
|
|
|
$
|
3,446,795
|
|
LIABILITIES, NONCONTROLLING INTEREST AND CAPITAL
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt (Notes 2, 5 and 12)
|
$
|
381,097
|
|
|
$
|
351,825
|
|
Exchangeable senior notes, net (Notes 5 and 12)
|
161,844
|
|
|
306,892
|
|
||
Unsecured debt, net (Notes 5 and 12)
|
1,130,732
|
|
|
980,569
|
|
||
Unsecured line of credit (Notes 5 and 12)
|
102,000
|
|
|
182,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
98,940
|
|
|
81,713
|
|
||
Accrued distributions (Note 17)
|
25,975
|
|
|
22,692
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Notes 2 and 3)
|
108,462
|
|
|
79,781
|
|
||
Rents received in advance and tenant security deposits
|
31,768
|
|
|
26,917
|
|
||
Liabilities and deferred revenue of real estate assets held for sale (Note 14)
|
—
|
|
|
13,286
|
|
||
Total liabilities
|
2,040,818
|
|
|
2,045,675
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 11)
|
|
|
|
||||
7.45% SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS
|
73,638
|
|
|
73,638
|
|
||
CAPITAL:
|
|
|
|
||||
Partners' Capital (Note 8):
|
|
|
|
||||
7.80% Series E Cumulative Redeemable Preferred units, 1,610,000 units issued and outstanding ($40,250 liquidation preference)
|
—
|
|
|
38,425
|
|
||
7.50% Series F Cumulative Redeemable Preferred units, 3,450,000 units issued and outstanding ($86,250 liquidation preference)
|
—
|
|
|
83,157
|
|
||
6.875% Series G Cumulative Redeemable Preferred units,
4,000,000 units issued and outstanding ($100,000 liquidation preference)
|
96,155
|
|
|
—
|
|
||
Common units, 68,927,731 and 58,819,717 held by the general partner and 1,718,131 and 1,718,131 held by common limited partners issued and outstanding, respectively
|
1,634,174
|
|
|
1,203,259
|
|
||
Total partners' capital
|
1,730,329
|
|
|
1,324,841
|
|
||
Noncontrolling interest in consolidated subsidiaries
|
2,737
|
|
|
2,641
|
|
||
Total capital
|
1,733,066
|
|
|
1,327,482
|
|
||
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND CAPITAL
|
$
|
3,847,522
|
|
|
$
|
3,446,795
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
94,265
|
|
|
80,158
|
|
|
$
|
184,484
|
|
|
$
|
157,155
|
|
|
Tenant reimbursements
|
9,065
|
|
|
7,130
|
|
|
17,369
|
|
|
13,152
|
|
||||
Other property income
|
592
|
|
|
1,102
|
|
|
1,479
|
|
|
1,856
|
|
||||
Total revenues
|
103,922
|
|
|
88,390
|
|
|
203,332
|
|
|
172,163
|
|
||||
EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
21,196
|
|
|
17,356
|
|
|
38,731
|
|
|
34,865
|
|
||||
Real estate taxes
|
8,881
|
|
|
8,127
|
|
|
17,270
|
|
|
16,017
|
|
||||
Provision for bad debts
|
—
|
|
|
120
|
|
|
2
|
|
|
146
|
|
||||
Ground leases
|
615
|
|
|
424
|
|
|
1,417
|
|
|
763
|
|
||||
General and administrative expenses
|
9,251
|
|
|
7,440
|
|
|
18,018
|
|
|
14,000
|
|
||||
Acquisition-related expenses
|
1,813
|
|
|
1,194
|
|
|
3,341
|
|
|
1,666
|
|
||||
Depreciation and amortization
|
40,624
|
|
|
31,378
|
|
|
77,370
|
|
|
59,819
|
|
||||
Total expenses
|
82,380
|
|
|
66,039
|
|
|
156,149
|
|
|
127,276
|
|
||||
OTHER (EXPENSES) INCOME:
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment (losses) gains (Note 12)
|
(110
|
)
|
|
58
|
|
|
374
|
|
|
242
|
|
||||
Interest expense (Note 5)
|
(19,155
|
)
|
|
(21,228
|
)
|
|
(40,318
|
)
|
|
(42,104
|
)
|
||||
Total other (expenses) income
|
(19,265
|
)
|
|
(21,170
|
)
|
|
(39,944
|
)
|
|
(41,862
|
)
|
||||
INCOME FROM CONTINUING OPERATIONS
|
2,277
|
|
|
1,181
|
|
|
7,239
|
|
|
3,025
|
|
||||
DISCONTINUED OPERATIONS (Note 14)
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations
|
—
|
|
|
2,291
|
|
|
900
|
|
|
5,314
|
|
||||
Net gain on dispositions of discontinued operations
|
—
|
|
|
—
|
|
|
72,809
|
|
|
—
|
|
||||
Total income from discontinued operations
|
—
|
|
|
2,291
|
|
|
73,709
|
|
|
5,314
|
|
||||
NET INCOME
|
2,277
|
|
|
3,472
|
|
|
80,948
|
|
|
8,339
|
|
||||
Net income attributable to noncontrolling interests in consolidated subsidiaries
|
(43
|
)
|
|
(32
|
)
|
|
(96
|
)
|
|
(65
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
2,234
|
|
|
3,440
|
|
|
80,852
|
|
|
8,274
|
|
||||
Preferred distributions (Note 8)
|
(3,097
|
)
|
|
(3,799
|
)
|
|
(7,515
|
)
|
|
(7,598
|
)
|
||||
Original issuance costs of redeemed preferred units (Note 8)
|
—
|
|
|
—
|
|
|
(4,918
|
)
|
|
—
|
|
||||
Total preferred distributions
|
(3,097
|
)
|
|
(3,799
|
)
|
|
(12,433
|
)
|
|
(7,598
|
)
|
||||
NET (LOSS) INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
(863
|
)
|
|
$
|
(359
|
)
|
|
$
|
68,419
|
|
|
$
|
676
|
|
Loss from continuing operations available to common unitholders per common unit - basic (Note 16)
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Loss from continuing operations available to common unitholders per common unit - diluted (Note 16)
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Net (loss) income available to common unitholders per unit - basic (Note 16)
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Net (loss) income available to common unitholders per unit - diluted (Note 16)
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Weighted average common units outstanding - basic (Note 16)
|
70,062,865
|
|
|
59,407,687
|
|
|
67,714,850
|
|
|
56,731,316
|
|
||||
Weighted average common units outstanding - diluted (Note 16)
|
70,062,865
|
|
|
59,407,687
|
|
|
67,714,850
|
|
|
56,731,316
|
|
||||
Distributions declared per common unit
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
$
|
0.70
|
|
|
$
|
0.70
|
|
|
Partners'
Capital
|
|
Total
Partners'
Capital
|
|
Noncontrolling
Interests
in
Consolidated
Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
|
Total
Capital
|
|||||||||||||
BALANCE AS OF DECEMBER 31, 2010
|
$
|
121,582
|
|
|
54,072,801
|
|
|
$
|
994,511
|
|
|
$
|
1,116,093
|
|
|
$
|
1,637
|
|
|
$
|
1,117,730
|
|
Net income
|
|
|
|
|
8,274
|
|
|
8,274
|
|
|
65
|
|
|
8,339
|
|
|||||||
Issuance of common units
|
|
|
6,037,500
|
|
|
221,015
|
|
|
221,015
|
|
|
|
|
221,015
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
68,727
|
|
|
2,156
|
|
|
2,156
|
|
|
|
|
2,156
|
|
|||||||
Noncash amortization of share-based compensation
|
|
|
|
|
2,813
|
|
|
2,813
|
|
|
|
|
2,813
|
|
||||||||
Repurchase/redemption of common units and restricted stock units
|
|
|
(11,485
|
)
|
|
(732
|
)
|
|
(732
|
)
|
|
|
|
(732
|
)
|
|||||||
Exercise of stock options
|
|
|
15,000
|
|
|
395
|
|
|
395
|
|
|
|
|
395
|
|
|||||||
Preferred distributions
|
|
|
|
|
(7,598
|
)
|
|
(7,598
|
)
|
|
|
|
(7,598
|
)
|
||||||||
Distributions declared per common unit ($0.70 per unit)
|
|
|
|
|
(40,585
|
)
|
|
(40,585
|
)
|
|
|
|
(40,585
|
)
|
||||||||
BALANCE AS OF JUNE 30, 2011
|
$
|
121,582
|
|
|
60,182,543
|
|
|
$
|
1,180,249
|
|
|
$
|
1,301,831
|
|
|
$
|
1,702
|
|
|
$
|
1,303,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Partners'
Capital
|
|
Total
Partners'
Capital
|
|
Noncontrolling
Interests
in
Consolidated
Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
|
Total
Capital
|
|||||||||||||
BALANCE AS OF DECEMBER 31, 2011
|
$
|
121,582
|
|
|
60,537,848
|
|
|
$
|
1,203,259
|
|
|
$
|
1,324,841
|
|
|
$
|
2,641
|
|
|
$
|
1,327,482
|
|
Net income
|
|
|
|
|
80,852
|
|
|
80,852
|
|
|
96
|
|
|
80,948
|
|
|||||||
Issuance of Series G Preferred units (Note 8)
|
96,155
|
|
|
|
|
|
|
96,155
|
|
|
|
|
96,155
|
|
||||||||
Redemption of Series E and Series F Preferred units (Note 8)
|
(121,582
|
)
|
|
|
|
(4,918
|
)
|
|
(126,500
|
)
|
|
|
|
(126,500
|
)
|
|||||||
Issuance of common units (Note 8)
|
|
|
10,063,189
|
|
|
408,475
|
|
|
408,475
|
|
|
|
|
408,475
|
|
|||||||
Issuance of share-based compensation awards (Note 9)
|
|
|
62,137
|
|
|
657
|
|
|
657
|
|
|
|
|
657
|
|
|||||||
Noncash amortization of share-based compensation (Note 9)
|
|
|
|
|
3,827
|
|
|
3,827
|
|
|
|
|
3,827
|
|
||||||||
Repurchase/redemption of common units and restricted stock units (Note 9)
|
|
|
(22,312
|
)
|
|
(603
|
)
|
|
(603
|
)
|
|
|
|
(603
|
)
|
|||||||
Exercise of stock options
|
|
|
5,000
|
|
|
129
|
|
|
129
|
|
|
|
|
129
|
|
|||||||
Preferred distributions
|
|
|
|
|
(7,515
|
)
|
|
(7,515
|
)
|
|
|
|
(7,515
|
)
|
||||||||
Distributions declared per common unit ($0.70 per unit)
|
|
|
|
|
(49,989
|
)
|
|
(49,989
|
)
|
|
|
|
(49,989
|
)
|
||||||||
BALANCE AS OF JUNE 30, 2012
|
$
|
96,155
|
|
|
70,645,862
|
|
|
$
|
1,634,174
|
|
|
$
|
1,730,329
|
|
|
$
|
2,737
|
|
|
$
|
1,733,066
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
80,948
|
|
|
$
|
8,339
|
|
Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations):
|
|
|
|
||||
Depreciation and amortization of building and improvements and leasing costs
|
76,792
|
|
|
61,029
|
|
||
Increase in provision for bad debts
|
2
|
|
|
146
|
|
||
Depreciation of furniture, fixtures and equipment
|
584
|
|
|
530
|
|
||
Noncash amortization of share-based compensation awards
|
3,419
|
|
|
2,239
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
5,310
|
|
|
6,884
|
|
||
Noncash amortization of net (below)/above market rents (Note 3)
|
(2,589
|
)
|
|
1,398
|
|
||
Net gain on dispositions of discontinued operations (Note 14)
|
(72,809
|
)
|
|
—
|
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,465
|
)
|
|
(4,668
|
)
|
||
Straight-line rents
|
(10,575
|
)
|
|
(8,906
|
)
|
||
Net change in other operating assets
|
(4,318
|
)
|
|
(2,493
|
)
|
||
Net change in other operating liabilities
|
7,285
|
|
|
(8,033
|
)
|
||
Insurance proceeds received for property damage
|
(951
|
)
|
|
—
|
|
||
Net cash provided by operating activities
|
78,633
|
|
|
56,465
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties, net of cash acquired (Note 2)
|
(272,256
|
)
|
|
(378,554
|
)
|
||
Expenditures for acquisition of development properties (Note 2)
|
(79,157
|
)
|
|
—
|
|
||
Expenditures for operating properties
|
(40,218
|
)
|
|
(28,230
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(26,084
|
)
|
|
(12,347
|
)
|
||
Net proceeds received from dispositions of operating properties (Note 14)
|
143,161
|
|
|
—
|
|
||
Insurance proceeds received for property damage
|
951
|
|
|
—
|
|
||
Increase in acquisition-related deposits
|
(28,250
|
)
|
|
(16,500
|
)
|
||
Decrease in restricted cash
|
261
|
|
|
112
|
|
||
Net cash used in investing activities
|
(301,592
|
)
|
|
(435,519
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of Series G preferred units (Note 8)
|
96,155
|
|
|
—
|
|
||
Redemption of Series E and Series F preferred units (Note 8)
|
(126,500
|
)
|
|
—
|
|
||
Net proceeds from issuance of common units (Note 8)
|
408,475
|
|
|
221,015
|
|
||
Borrowings on unsecured line of credit
|
253,000
|
|
|
302,000
|
|
||
Repayments on unsecured line of credit
|
(333,000
|
)
|
|
(216,000
|
)
|
||
Proceeds from issuance of secured debt
|
97,000
|
|
|
135,000
|
|
||
Principal payments on secured debt
|
(103,254
|
)
|
|
(3,403
|
)
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
150,000
|
|
|
—
|
|
||
Repayments of exchangeable senior notes (Note 5)
|
(148,000
|
)
|
|
—
|
|
||
Financing costs
|
(3,644
|
)
|
|
(5,201
|
)
|
||
Decrease in loan deposits
|
—
|
|
|
2,027
|
|
||
Repurchase/redemption of common units and restricted stock units (Note 9)
|
(603
|
)
|
|
(732
|
)
|
||
Proceeds from exercise of stock options
|
129
|
|
|
395
|
|
||
Distributions paid to common unitholders
|
(45,713
|
)
|
|
(37,877
|
)
|
||
Distributions paid to preferred unitholders
|
(7,752
|
)
|
|
(7,598
|
)
|
||
Net cash provided by financing activities
|
236,293
|
|
|
389,626
|
|
||
Net increase in cash and cash equivalents
|
13,334
|
|
|
10,572
|
|
||
Cash and cash equivalents, beginning of period
|
4,777
|
|
|
14,840
|
|
||
Cash and cash equivalents, end of period
|
$
|
18,111
|
|
|
$
|
25,412
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $7,021 and $3,327 as of June 30, 2012 and 2011, respectively
|
$
|
36,935
|
|
|
$
|
34,568
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
13,062
|
|
|
$
|
9,966
|
|
Tenant improvements funded directly by tenants to third parties
|
$
|
9,838
|
|
|
$
|
3,027
|
|
Assumption of secured debt with property acquisitions (Notes 2 and 5)
|
$
|
35,690
|
|
|
$
|
30,042
|
|
Assumption of other assets and liabilities with operating and development property acquisitions, net (Note 2)
|
$
|
4,940
|
|
|
$
|
4,438
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of distributions payable to common unitholders
|
$
|
24,726
|
|
|
$
|
21,064
|
|
Accrual of distributions payable to preferred unitholders
|
$
|
1,577
|
|
|
$
|
1,909
|
|
Issuance of share-based compensation awards, net (Note 9)
|
$
|
30,762
|
|
|
$
|
7,216
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage Occupied
|
||||
Office Properties
(1)
|
114
|
|
|
12,227,267
|
|
|
457
|
|
|
89.3
|
%
|
Industrial Properties
|
39
|
|
|
3,413,354
|
|
|
59
|
|
|
92.5
|
%
|
Total Stabilized Portfolio
|
153
|
|
|
15,640,621
|
|
|
516
|
|
|
90.0
|
%
|
(1)
|
Includes
ten
office properties acquired in
three
transactions during the
six
months ended
June 30, 2012
encompassing
794,126
rentable square feet (see Note 2 for additional information).
|
Property
|
|
Date of Acquisition
|
|
Number of
Buildings
|
|
Rentable Square
Feet
|
|
Occupancy as of June 30, 2012
|
|
Purchase
Price
(in millions)
(1)
|
|||
4100-4700 Bohannon Drive
|
|
|
|
|
|
|
|
|
|
|
|||
Menlo Park, CA
(2)
|
|
February 29, 2012
|
|
7
|
|
374,139
|
|
|
77.0%
|
|
$
|
162.5
|
|
701 and 801 N. 34th Street
|
|
|
|
|
|
|
|
|
|
|
|||
Seattle, WA
(3)
|
|
June 1, 2012
|
|
2
|
|
308,407
|
|
|
99.4%
|
|
105.4
|
|
|
837 N. 34th Street
|
|
|
|
|
|
|
|
|
|
|
|||
Seattle, WA
(2)
|
|
June 1, 2012
|
|
1
|
|
111,580
|
|
|
100.0%
|
|
39.2
|
|
|
Total
|
|
|
|
10
|
|
794,126
|
|
|
|
|
$
|
307.1
|
|
(1)
|
Excludes acquisition-related costs and includes assumed unpaid leasing commissions, tenant improvements, and other property related liabilities.
|
(2)
|
As of June 30, 2012, these properties are temporarily being held in separate VIEs to facilitate potential Section 1031 Exchanges (see Note 1).
|
(3)
|
We acquired these properties through the acquisition of the ownership interest of the bankruptcy remote LLC that owns the properties. In connection with this acquisition we also acquired cash of approximately
$4.0 million
, other assets of approximately
$0.2 million
and we assumed current liabilities of approximately
$0.6 million
and secured debt with an outstanding principal balance of
$34.0 million
and a premium of
$1.7 million
as a result of recording the debt at fair value at the acquisition date (see Note 5.)
|
|
4100-4700 Bohannon Drive,
Menlo Park, CA
(1)
|
|
All Other
Acquisitions
(2)
|
|
Total
|
||||||
|
(in thousands)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Land and improvements
(3)
|
$
|
38,810
|
|
|
$
|
—
|
|
|
$
|
38,810
|
|
Buildings and improvements
(4)
|
124,617
|
|
|
143,968
|
|
|
268,585
|
|
|||
Cash and cash equivalents
|
—
|
|
|
3,973
|
|
|
3,973
|
|
|||
Deferred leasing costs and acquisition-related intangible assets
(5)
|
9,470
|
|
|
15,980
|
|
|
25,450
|
|
|||
Prepaid expenses and other assets
|
—
|
|
|
184
|
|
|
184
|
|
|||
Total assets acquired
|
172,897
|
|
|
164,105
|
|
|
337,002
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Deferred revenue and acquisition-related intangible liabilities
(6)
|
10,380
|
|
|
13,650
|
|
|
24,030
|
|
|||
Secured debt
(7)
|
—
|
|
|
35,690
|
|
|
35,690
|
|
|||
Accounts payable, accrued expenses and other liabilities
|
137
|
|
|
554
|
|
|
691
|
|
|||
Total liabilities assumed
|
10,517
|
|
|
49,894
|
|
|
60,411
|
|
|||
Net assets and liabilities acquired
(8)
|
$
|
162,380
|
|
|
$
|
114,211
|
|
|
$
|
276,591
|
|
(1)
|
The purchase of 4100-4700 Bohannon Drive, Menlo Park, CA, represents the largest acquisition and approximately
53%
of the total aggregate purchase price of the operating properties acquired during the six months ended June 30, 2012.
|
(2)
|
The purchase price of all other acquisitions completed during the six months ended June 30, 2012 were individually less than
5%
and in aggregate less than
10%
of the Company's total assets as of December 31, 2011.
|
(3)
|
In connection with the acquisitions of 701, 801, and 837 N. 34th Street, Lake Union, WA, we assumed the lessee obligations under a ground lease with an initial expiration in December 2041. The ground lease obligation contains
three
10
-year extension options and
one
45
-year extension option (see Note 11 for additional information pertaining to this ground lease).
|
(4)
|
Represents buildings, building improvements and tenant improvements.
|
(5)
|
Represents in-place leases (approximately
$17.3 million
with a weighted average amortization period of
6.1 years
), above-market leases (approximately
$0.1 million
with a weighted average amortization period of
2.7 years
), leasing commissions (approximately
$7.5 million
with a weighted average amortization period of
3.9 years
), and a below-market ground lease obligation (approximately
$0.5 million
with a weighted average amortization period of
59.6 years
).
|
(6)
|
Represents below-market leases (approximately
$22.9 million
with a weighted average amortization period of
7.2 years
) and an above-market ground lease obligation (approximately
$1.1 million
with a weighted average amortization period of
29.6 years
).
|
(7)
|
Represents the fair value of the mortgage loan assumed, which includes an unamortized premium of approximately
$1.7 million
at the date of acquisition (see Note 5).
|
(8)
|
Reflects the purchase price plus cash received, net of assumed secured debt and other lease-related obligations.
|
|
Total
|
||
|
(in thousands)
|
||
Assets
|
|
||
Undeveloped land and construction in progress
|
$
|
84,014
|
|
Prepaid expenses and other assets
|
1,300
|
|
|
Total assets acquired
|
85,314
|
|
|
|
|
||
Liabilities
|
|
||
Accounts payable, accrued expenses and other liabilities
|
6,157
|
|
|
Total liabilities assumed
|
6,157
|
|
|
Net assets and liabilities acquired
|
$
|
79,157
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in thousands)
|
||||||
Deferred Leasing Costs and Acquisition-related Intangible Assets, net
(1)
:
|
|
|
|
||||
Deferred leasing costs
|
$
|
149,603
|
|
|
$
|
142,652
|
|
Accumulated amortization
|
(53,642
|
)
|
|
(52,974
|
)
|
||
Deferred leasing costs, net
|
95,961
|
|
|
89,678
|
|
||
Above-market operating leases
|
26,677
|
|
|
28,143
|
|
||
Accumulated amortization
|
(9,232
|
)
|
|
(8,101
|
)
|
||
Above-market operating leases, net
|
17,445
|
|
|
20,042
|
|
||
In-place leases
|
74,915
|
|
|
61,355
|
|
||
Accumulated amortization
|
(20,422
|
)
|
|
(15,753
|
)
|
||
In-place leases, net
|
54,493
|
|
|
45,602
|
|
||
Below-market ground lease obligation
|
690
|
|
|
200
|
|
||
Accumulated amortization
|
(101
|
)
|
|
—
|
|
||
Below-market ground lease obligation, net
|
589
|
|
|
200
|
|
||
Total deferred leasing costs and acquisition-related intangible assets, net
|
$
|
168,488
|
|
|
$
|
155,522
|
|
Acquisition-related Intangible Liabilities, net
(1)(2)
:
|
|
|
|
||||
Below-market operating leases
|
$
|
59,496
|
|
|
$
|
37,582
|
|
Accumulated amortization
|
(10,497
|
)
|
|
(6,158
|
)
|
||
Below-market operating leases, net
|
48,999
|
|
|
31,424
|
|
||
Above-market ground lease obligation
|
6,320
|
|
|
5,200
|
|
||
Accumulated amortization
|
(71
|
)
|
|
(37
|
)
|
||
Above-market ground lease obligation, net
|
6,249
|
|
|
5,163
|
|
||
Total acquisition-related intangible liabilities, net
|
$
|
55,248
|
|
|
$
|
36,587
|
|
(1)
|
Balances and accumulated amortization amounts at June 30, 2012 reflect the write-off of the following fully amortized amounts at January 1, 2012: deferred leasing costs (approximately
$9.5 million
), above-market leases (approximately
$1.6 million
), in-place leases (approximately
$3.7 million
), and below-market leases (approximately
$1.0 million
).
|
(2)
|
Included in deferred revenue and acquisition-related intangible liabilities, net in the consolidated balance sheets.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Deferred leasing costs
(1)
|
$
|
5,293
|
|
|
$
|
3,970
|
|
|
$
|
9,791
|
|
|
$
|
7,738
|
|
Above-market operating leases
(2)
|
1,375
|
|
|
972
|
|
|
2,746
|
|
|
1,625
|
|
||||
In-place leases
(1)
|
4,598
|
|
|
2,686
|
|
|
8,379
|
|
|
4,859
|
|
||||
Below-market ground lease obligation
(3)
|
51
|
|
|
—
|
|
|
101
|
|
|
—
|
|
||||
Below-market operating leases
(4)
|
(3,439
|
)
|
|
(227
|
)
|
|
(5,335
|
)
|
|
(227
|
)
|
||||
Above-market ground lease obligation
(5)
|
(19
|
)
|
|
(5
|
)
|
|
(35
|
)
|
|
(5
|
)
|
||||
Total
|
$
|
7,859
|
|
|
$
|
7,396
|
|
|
$
|
15,647
|
|
|
$
|
13,990
|
|
(1)
|
The amortization of deferred leasing costs and in-place leases is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.
|
(2)
|
The amortization of above-market operating leases is recorded as a decrease to rental income in the consolidated statements of operations for the periods presented.
|
(3)
|
The amortization of the below-market ground lease obligation is recorded as an increase to ground lease expense in the consolidated statements of operations for the periods presented.
|
(4)
|
The amortization of below−market operating leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.
|
(5)
|
The amortization of the above-market ground lease obligation is recorded as a decrease to ground lease expense in the consolidated statements of operations for the periods presented.
|
Year Ending
|
Deferred Leasing Costs
|
|
Above-Market Operating Leases
(1)
|
|
In-Place Leases
|
|
Below-Market Ground Lease Obligation
(2)
|
|
Below-Market Operating Leases
(3)
|
|
Above-Market Ground Lease Obligation
(4)
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Remaining 2012
|
$
|
10,528
|
|
|
$
|
2,729
|
|
|
$
|
8,486
|
|
|
$
|
104
|
|
|
$
|
(5,550
|
)
|
|
$
|
(50
|
)
|
2013
|
19,115
|
|
|
4,908
|
|
|
14,394
|
|
|
8
|
|
|
(10,178
|
)
|
|
(101
|
)
|
||||||
2014
|
17,005
|
|
|
4,015
|
|
|
11,314
|
|
|
8
|
|
|
(9,563
|
)
|
|
(101
|
)
|
||||||
2015
|
13,436
|
|
|
2,387
|
|
|
7,353
|
|
|
8
|
|
|
(7,427
|
)
|
|
(101
|
)
|
||||||
2016
|
10,915
|
|
|
1,412
|
|
|
4,636
|
|
|
8
|
|
|
(5,399
|
)
|
|
(101
|
)
|
||||||
Thereafter
|
24,962
|
|
|
1,994
|
|
|
8,310
|
|
|
453
|
|
|
(10,882
|
)
|
|
(5,795
|
)
|
||||||
Total
|
$
|
95,961
|
|
|
$
|
17,445
|
|
|
$
|
54,493
|
|
|
$
|
589
|
|
|
$
|
(48,999
|
)
|
|
$
|
(6,249
|
)
|
(1)
|
Represents estimated annual amortization related to above-market operating leases. Amounts will be recorded as a decrease to rental income in the consolidated statements of operations.
|
(2)
|
Represents estimated annual amortization related to below−market ground lease obligations. Amounts will be recorded as an increase to ground lease expense in the consolidated statements of operations.
|
(3)
|
Represents estimated annual amortization related to below-market operating leases. Amounts will be recorded as an increase to rental income in the consolidated statements of operations.
|
(4)
|
Represents estimated annual amortization related to above−market ground lease obligations. Amounts will be recorded as a decrease to ground lease expense in the consolidated statements of operations.
|
|
June 30,
2012 |
|
December 31,
2011 |
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
10,207
|
|
|
$
|
10,985
|
|
Allowance for uncollectible tenant receivables
|
(2,564
|
)
|
|
(2,590
|
)
|
||
Current receivables, net
|
$
|
7,643
|
|
|
$
|
8,395
|
|
|
June 30,
2012 |
|
December 31,
2011 |
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
113,537
|
|
|
$
|
104,548
|
|
Allowance for deferred rent receivables
|
(2,848
|
)
|
|
(3,406
|
)
|
||
Deferred rent receivables, net
|
$
|
110,689
|
|
|
$
|
101,142
|
|
|
3.25% Exchangeable Notes
|
|
4.25% Exchangeable Notes
|
||||||||||||
|
June 30,
2012 |
|
December 31, 2011
|
|
June 30,
2012 |
|
December 31,
2011 |
||||||||
|
(in thousands)
|
||||||||||||||
Principal amount
|
$
|
—
|
|
|
$
|
148,000
|
|
|
$
|
172,500
|
|
|
$
|
172,500
|
|
Unamortized discount
|
—
|
|
|
(924
|
)
|
|
(10,656
|
)
|
|
(12,684
|
)
|
||||
Net carrying amount of liability component
|
$
|
—
|
|
|
$
|
147,076
|
|
|
$
|
161,844
|
|
|
$
|
159,816
|
|
Carrying amount of equity component
|
|
|
$33,675
|
|
$19,835
|
||||||||||
Maturity date
|
|
|
April 2012
|
|
November 2014
|
||||||||||
Stated coupon rate
(1)
|
|
|
3.25%
|
|
4.25%
|
||||||||||
Effective interest rate
(2)
|
|
|
5.45%
|
|
7.13%
|
||||||||||
Exchange rate per $1,000 principal value of the Exchangeable Notes, as adjusted
(3)
|
|
|
|
|
27.8307
|
||||||||||
Exchange price, as adjusted
(3)
|
|
|
|
|
$35.93
|
||||||||||
Number of shares on which the aggregate consideration to be delivered on conversion is determined
(3)
|
|
|
|
|
4,800,796
|
(1)
|
Interest on the 4.25% Exchangeable Notes is payable semi-annually in arrears on May 15
th
and November 15
th
of each year.
|
(2)
|
The rate at which we record interest expense for financial reporting purposes, which reflects the amortization of the discounts on the Exchangeable Notes. This rate represents our conventional debt borrowing rate at the date of issuance.
|
(3)
|
The exchange rate, exchange price, and the number of shares to be delivered upon conversion are subject to adjustment under certain circumstances including increases in our common dividends.
|
|
4.25% Exchangeable Notes
(1)
|
|
|
Referenced shares of common stock
|
4,800,796
|
|
|
Exchange price including effect of capped calls
|
$
|
42.81
|
|
(1)
|
The capped calls mitigate the dilutive impact to us of the potential exchange of all of the 4.25% Exchangeable Notes into shares of common stock.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Per share average trading price of the Company's common stock
|
$46.75
|
|
$39.90
|
|
$44.82
|
|
$38.94
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands)
|
||||||||||||||
Contractual interest payments
|
$
|
2,020
|
|
|
$
|
3,035
|
|
|
$
|
5,055
|
|
|
$
|
6,070
|
|
Amortization of discount
|
1,155
|
|
|
1,722
|
|
|
2,952
|
|
|
3,410
|
|
||||
Interest expense attributable to the Exchangeable Notes
|
$
|
3,175
|
|
|
$
|
4,757
|
|
|
$
|
8,007
|
|
|
$
|
9,480
|
|
(1)
|
We may elect to borrow, subject to bank approval, up to an additional
$200.0 million
under an accordion feature under the terms of the Credit Facility.
|
(2)
|
The Credit Facility interest rate was calculated based on an annual rate of LIBOR plus
1.750%
as of both
June 30, 2012
and
December 31, 2011
.
|
(3)
|
The facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we also incurred origination and legal costs of approximately
$8.3 million
that are currently being amortized through the maturity date of the Credit Facility.
|
(4)
|
Under the terms of the Credit Facility, we may exercise an option to extend the maturity date by one year.
|
Year Ending
|
(in thousands)
|
|
||
Remaining 2012
|
$
|
2,051
|
|
|
2013
|
6,373
|
|
|
|
2014
|
262,443
|
|
|
|
2015
|
494,028
|
|
|
|
2016
|
158,151
|
|
|
|
Thereafter
|
863,230
|
|
|
|
Total
|
$
|
1,786,276
|
|
(1)
|
(1)
|
Includes gross principal balance of outstanding debt before impact of all debt discounts and premiums.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
23,489
|
|
|
$
|
23,293
|
|
|
$
|
48,483
|
|
|
$
|
46,148
|
|
Capitalized interest
|
(4,334
|
)
|
|
(2,065
|
)
|
|
(8,165
|
)
|
|
(4,044
|
)
|
||||
Interest expense
|
$
|
19,155
|
|
|
$
|
21,228
|
|
|
$
|
40,318
|
|
|
$
|
42,104
|
|
|
March 2012 Market Measure-based RSU Grant
|
|
Grant date fair value per share
|
$41.20
|
|
Expected share price volatility
|
31.00%
|
|
Risk-free interest rate
|
1.60%
|
|
Dividend yield
|
3.80%
|
|
Expected life
|
7 years
|
|
|
Nonvested RSUs
|
|
Vested RSUs
|
|
Total RSUs
|
|||||||
|
Amount
|
|
Weighted-Average
Grant Date Fair Value Per Share
|
|
||||||||
Outstanding at January 1, 2012
|
147,961
|
|
|
$
|
32.18
|
|
|
694,714
|
|
|
842,675
|
|
Granted
(1)
|
204,829
|
|
|
44.34
|
|
|
—
|
|
|
204,829
|
|
|
Vested
|
(58,940
|
)
|
|
36.80
|
|
|
58,940
|
|
|
—
|
|
|
Issuance of dividend equivalents
(2)
|
|
|
|
|
14,546
|
|
|
14,546
|
|
|||
Canceled
(3)
|
|
|
|
|
(4,221
|
)
|
|
(4,221
|
)
|
|||
Outstanding as of June 30, 2012
|
293,850
|
|
|
$
|
41.57
|
|
|
763,979
|
|
|
1,057,829
|
|
(1)
|
Includes
103,239
RSUs issued to the Company's Chief Executive Officer, as described above.
|
(2)
|
RSUs issued as dividend equivalents are vested upon issuance.
|
(3)
|
We accept the return of RSUs, at the current quoted closing share price of the Company's common stock, to satisfy minimum statutory tax-withholding requirements related to either RSUs that have vested or RSU dividend equivalents in accordance with the terms of the 2006 Plan.
|
|
RSUs Granted
|
|
RSUs Vested
|
||||||||||
Six Months Ended June 30,
|
Non-Vested RSUs Issued
|
|
Weighted-Average Grant Date Fair Value Per Share
|
|
Vested RSUs
|
|
Total Vest-Date Fair Value
(1)
(in thousands)
|
||||||
2012
|
204,829
|
|
|
$
|
44.34
|
|
|
(58,940
|
)
|
|
$
|
2,420
|
|
2011
|
107,673
|
|
|
37.94
|
|
|
(23,035
|
)
|
|
897
|
|
(1)
|
Total fair value of RSUs vested was calculated based on the quoted closing share price of the Company's common stock on the NYSE on the day of vesting.
|
Nonvested Shares
|
Shares
|
|
Weighted-Average
Grant Date
Fair Value Per Share
|
|||
Outstanding at January 1, 2012
|
83,966
|
|
|
$
|
39.83
|
|
Granted
|
62,137
|
|
|
41.84
|
|
|
Vested
(1)
|
(35,623
|
)
|
|
37.90
|
|
|
Outstanding as of June 30, 2012
|
110,480
|
|
|
$
|
41.64
|
|
(1)
|
The total shares vested include
22,312
shares that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the restricted shares that have vested. We accept the return of shares at the current quoted closing share price of the Company's common stock to satisfy tax obligations.
|
|
Shares Granted
|
|
Shares Vested
|
||||||||||
Six Months Ended June 30,
|
Non-Vested Shares Issued
|
|
Weighted-Average Grant Date Fair Value Per Share
|
|
Vested Shares
|
|
Total Fair Value at Vest Date
(1)
(in thousands)
|
||||||
2012
|
62,137
|
|
|
$
|
41.84
|
|
|
(35,623
|
)
|
|
$
|
1,388
|
|
2011
|
68,727
|
|
|
37.83
|
|
|
(9,474
|
)
|
|
370
|
|
(1)
|
Total fair value of shares vested was calculated based on the quoted closing share price of the Company's common stock on the NYSE on the date of vesting.
|
|
February 2012 Option Grant
|
|
Fair value of options granted per share
|
$9.20
|
|
Expected stock price volatility
|
33.00%
|
|
Risk-free interest rate
|
1.35%
|
|
Dividend yield
|
3.80%
|
|
Expected life of option
|
6.5 years
|
|
|
Number of Options
|
|
Exercise Price
|
|
Remaining Contractual Term (years)
|
|
Outstanding at January 1, 2012
(1)
|
5,000
|
|
|
$25.77
|
|
|
Granted
|
1,550,000
|
|
|
42.61
|
|
|
Exercised
|
(5,000
|
)
|
|
25.77
|
|
|
Forfeited
|
(10,000
|
)
|
|
42.61
|
|
|
Outstanding at June 30, 2012
(2)(3)
|
1,540,000
|
|
|
$42.61
|
|
9.7
|
(1)
|
Stock options outstanding as of December 31, 2011 were granted in 2002 and exercised in 2012 prior to expiration. No stock options were granted during 2003 through 2011.
|
(2)
|
As of June 30, 2012,
none
of the outstanding stock options were exercisable.
|
(3)
|
The total intrinsic value of options outstanding at June 30, 2012 was
$8.9 million
.
|
Year Ending
|
(in thousands)
|
||
Remaining 2012
|
$
|
176,516
|
|
2013
|
355,682
|
|
|
2014
|
328,315
|
|
|
2015
|
283,224
|
|
|
2016
|
247,101
|
|
|
Thereafter
|
741,997
|
|
|
Total
|
$
|
2,132,835
|
|
Property
|
Contractual Expiration Date
(1)
|
601 108th Ave NE in Bellevue, Washington
|
November 2093
|
701, 801 and 837 N. 34th Street in Seattle, Washington
(2)
|
December 2041
|
Kilroy Airport Center Phases I, II, and III in Long Beach, California
|
July 2084
|
370 3rd Street in San Francisco, California
(3)
|
December 2022
|
(1)
|
Reflects the contractual expiration date prior to the impact of any extension or purchase options held by the Company.
|
(2)
|
The Company has
three
10
-year and
one
45
-year extension option for this ground lease which if exercised would extend the expiration date to December 2116.
|
(3)
|
The Company has an option to acquire the land underlying this ground lease during the period from November 2012 through October 2013 for a total estimated purchase price not to exceed
$27.5 million
.
|
Year Ending
|
(in thousands)
|
||
Remaining 2012
|
$
|
2,138
|
|
2013
|
3,095
|
|
|
2014
|
3,095
|
|
|
2015
|
3,095
|
|
|
2016
|
3,095
|
|
|
Thereafter
|
163,019
|
|
|
Total
(1)(2)(3)(4)(5)
|
$
|
177,537
|
|
(1)
|
Reflects the minimum ground lease obligations before the impact of ground lease extension options.
|
(2)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years; however, the lease includes ground rent subprotection and infrastructure rent credits which currently limit our annual rental obligations to
$1.0 million
. The contractual obligations for that ground lease included above assumes the lesser of
$1.0 million
or annual lease rental obligation in effect as of
June 30, 2012
.
|
(3)
|
One of our ground lease obligations includes a component which is based on the percentage of gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every five years based on
50%
of the average annual percentage rent for the previous five years. Currently, gross income does not exceed the threshold requiring us to pay percentage rent. The contractual obligations included above assumes the annual lease rental obligation in effect as of
June 30, 2012
.
|
(4)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years based on a combination of CPI adjustments and third-party appraisals limited to maximum increases annually. The contractual obligations included above assumes the annual lease rental obligation in effect as of
June 30, 2012
.
|
(5)
|
The contractual obligation included for one of our ground lease obligations assumes that the Company will exercise the land purchase option during 2012. The amount presented above excludes the estimated purchase price which is not to exceed
$27.5 million
.
|
|
Fair Value (Level 1)
(1)
|
||||||
Description
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
6,546
|
|
|
$
|
5,691
|
|
Deferred compensation plan liability
(3)
|
6,451
|
|
|
5,597
|
|
(1)
|
Based on quoted prices in active markets for identical securities.
|
(2)
|
The marketable securities are held in a limited rabbi trust.
|
(3)
|
The deferred compensation plan liability is reported on our consolidated balance sheets in accounts payable, accrued expenses, and other liabilities.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Description
|
June 30, 2012
|
|
June 30, 2011
|
|
June 30, 2012
|
|
June 30, 2011
|
||||||||
|
(in thousands)
|
||||||||||||||
Net (loss) gain on marketable securities
|
$
|
(155
|
)
|
|
$
|
26
|
|
|
$
|
280
|
|
|
$
|
213
|
|
Decrease (increase) to compensation cost
|
155
|
|
|
(26
|
)
|
|
(280
|
)
|
|
(213
|
)
|
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
|
June 30, 2012
|
|
December 31, 2011
|
||||||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt
(1)
|
$
|
381,097
|
|
|
$
|
397,843
|
|
|
$
|
351,825
|
|
|
$
|
367,402
|
|
Exchangeable senior notes, net
(1)
|
161,844
|
|
|
177,803
|
|
|
306,892
|
|
|
320,919
|
|
||||
Unsecured debt, net
(2)
|
1,130,732
|
|
|
1,218,422
|
|
|
980,569
|
|
|
1,011,982
|
|
||||
Unsecured line of credit
(1)
|
102,000
|
|
|
102,023
|
|
|
182,000
|
|
|
182,299
|
|
(1)
|
Fair value calculated using Level II inputs which are based on model−derived valuations in which significant inputs and significant value drivers are observable in active markets.
|
(2)
|
Fair value calculated primarily using Level I inputs which are based on quoted prices for identical instruments in active markets. The fair value of the Series B unsecured senior notes and the Unsecured Term Loan Facility are calculated using Level II inputs which are based on model−derived valuations in which significant inputs and significant value drivers are observable in active markets. The carrying value and fair value of these Level II instruments is
$233.0 million
and
$240.0 million
, respectively, as of June 30, 2012. The carrying value and fair value of the Level II instruments, which only included the Series B unsecured senior notes at December 31,2011, was
$83.0 million
and
$88.9 million
, respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||||
|
(in thousands)
|
|
||||||||||||||
Reportable Segment - Office Properties
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues
(1)
|
$
|
97,510
|
|
|
$
|
81,726
|
|
|
$
|
190,235
|
|
|
$
|
159,022
|
|
|
Property and related expenses
|
29,004
|
|
|
24,470
|
|
|
53,971
|
|
|
47,215
|
|
|
||||
Net Operating Income
|
68,506
|
|
|
57,256
|
|
|
136,264
|
|
|
111,807
|
|
|
||||
Non-Reportable Segment - Industrial Properties
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues
(1)
|
6,412
|
|
|
6,664
|
|
|
13,097
|
|
|
13,141
|
|
|
||||
Property and related expenses
|
1,688
|
|
|
1,557
|
|
|
3,449
|
|
|
4,576
|
|
|
||||
Net Operating Income
|
4,724
|
|
|
5,107
|
|
|
9,648
|
|
|
8,565
|
|
|
||||
Total Segments:
|
|
|
|
|
|
|
|
|
||||||||
Operating revenues
(1)
|
103,922
|
|
|
88,390
|
|
|
203,332
|
|
|
172,163
|
|
|
||||
Property and related expenses
|
30,692
|
|
|
26,027
|
|
|
57,420
|
|
|
51,791
|
|
|
||||
Net Operating Income
|
$
|
73,230
|
|
|
$
|
62,363
|
|
|
$
|
145,912
|
|
|
$
|
120,372
|
|
|
Reconciliation to Consolidated Net Income:
|
|
|
|
|
|
|
|
|
||||||||
Total Net Operating Income for segments
|
$
|
73,230
|
|
|
$
|
62,363
|
|
|
$
|
145,912
|
|
|
$
|
120,372
|
|
|
Unallocated (expenses) income:
|
|
|
|
|
|
|
|
|
||||||||
General and administrative expenses
|
(9,251
|
)
|
|
(7,440
|
)
|
|
(18,018
|
)
|
|
(14,000
|
)
|
|
||||
Acquisition-related expenses
|
(1,813
|
)
|
|
(1,194
|
)
|
|
(3,341
|
)
|
|
(1,666
|
)
|
|
||||
Depreciation and amortization
|
(40,624
|
)
|
|
(31,378
|
)
|
|
(77,370
|
)
|
|
(59,819
|
)
|
|
||||
Interest income and other net investment (losses) gains
|
(110
|
)
|
|
58
|
|
|
374
|
|
|
242
|
|
|
||||
Interest expense
|
(19,155
|
)
|
|
(21,228
|
)
|
|
(40,318
|
)
|
|
(42,104
|
)
|
|
||||
Income from continuing operations
|
2,277
|
|
|
1,181
|
|
|
7,239
|
|
|
3,025
|
|
|
||||
Income from discontinued operations
(2)
|
—
|
|
|
2,291
|
|
|
73,709
|
|
|
5,314
|
|
|
||||
Net income
|
$
|
2,277
|
|
|
$
|
3,472
|
|
|
$
|
80,948
|
|
|
$
|
8,339
|
|
|
(1)
|
All operating revenues are comprised of amounts received from third-party tenants.
|
(2)
|
See Note 14 for the breakdown of income from discontinued operations by segment.
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in thousands)
|
||||||
Assets:
|
|
|
|
||||
Reportable Segment - Office Properties
|
|
|
|
||||
Land, buildings, and improvements, net
|
$
|
2,770,594
|
|
|
$
|
2,480,338
|
|
Undeveloped land and construction in progress
|
557,657
|
|
|
430,806
|
|
||
Total assets
(1)
|
3,605,101
|
|
|
3,248,661
|
|
||
|
|
|
|
||||
Non-Reportable Segment - Industrial Properties
|
|
|
|
||||
Land, buildings, and improvements, net
|
142,421
|
|
|
145,043
|
|
||
Total assets
(1)
|
152,391
|
|
|
156,741
|
|
||
|
|
|
|
||||
Total Segments
|
|
|
|
||||
Land, buildings, and improvements, net
|
2,913,015
|
|
|
2,625,381
|
|
||
Undeveloped land and construction in progress
|
557,657
|
|
|
430,806
|
|
||
Total assets
(1)
|
3,757,492
|
|
|
3,405,402
|
|
||
|
|
|
|
||||
Reconciliation to Consolidated Assets:
|
|
|
|
||||
Total assets allocated to segments
|
$
|
3,757,492
|
|
|
$
|
3,405,402
|
|
Other unallocated assets:
|
|
|
|
||||
Cash and cash equivalents
|
18,111
|
|
|
4,777
|
|
||
Restricted cash
|
97
|
|
|
358
|
|
||
Marketable securities
|
6,546
|
|
|
5,691
|
|
||
Deferred financing costs, net
|
18,919
|
|
|
18,368
|
|
||
Prepaid expenses and other assets, net
|
46,357
|
|
|
12,199
|
|
||
Total consolidated assets
|
$
|
3,847,522
|
|
|
$
|
3,446,795
|
|
|
|
|
|
(1)
|
Includes land, buildings, and improvements, undeveloped land and construction in progress, real estate assets held for sale, current receivables, deferred rent receivables, deferred leasing costs, and acquisition-related intangible assets, all shown on a net basis.
|
Location
|
Property Type
|
|
Month of Disposition
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
Sales Price (in millions)
|
|||
15004 Innovation Drive and 10243 Genetic Center Drive, San Diego, CA
(1)
|
Office
|
|
January
|
|
2
|
|
253,676
|
|
|
$
|
146.1
|
|
(1)
|
Properties were classified as held-for-sale on the consolidated balance sheets as of December 31, 2011.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
—
|
|
|
$
|
3,294
|
|
|
$
|
870
|
|
|
$
|
6,587
|
|
Tenant reimbursements
|
—
|
|
|
380
|
|
|
133
|
|
|
780
|
|
||||
Other property income
|
—
|
|
|
—
|
|
|
—
|
|
|
659
|
|
||||
Total revenues
|
—
|
|
|
3,674
|
|
|
1,003
|
|
|
8,026
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
—
|
|
|
227
|
|
|
27
|
|
|
407
|
|
||||
Real estate taxes
|
—
|
|
|
286
|
|
|
70
|
|
|
565
|
|
||||
Depreciation and amortization
|
—
|
|
|
870
|
|
|
6
|
|
|
1,740
|
|
||||
Total expenses
|
—
|
|
|
1,383
|
|
|
103
|
|
|
2,712
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations before net gain on dispositions of discontinued operations
|
—
|
|
|
2,291
|
|
|
900
|
|
|
5,314
|
|
||||
Net gain on dispositions of discontinued operations
|
—
|
|
|
—
|
|
|
72,809
|
|
|
—
|
|
||||
Total income from discontinued operations
|
$
|
—
|
|
|
$
|
2,291
|
|
|
$
|
73,709
|
|
|
$
|
5,314
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
(1)
|
|
2012
|
|
2011
(1)
|
||||||||
|
(in thousands)
|
||||||||||||||
Reportable Segment
|
|
|
|
|
|
|
|
||||||||
Office Properties
|
$
|
—
|
|
|
$
|
1,574
|
|
|
$
|
73,709
|
|
|
$
|
3,883
|
|
Non-Reportable Segment
|
|
|
|
|
|
|
|
||||||||
Industrial Properties
|
—
|
|
|
717
|
|
|
—
|
|
|
1,431
|
|
||||
Total income from discontinued operations
|
$
|
—
|
|
|
$
|
2,291
|
|
|
$
|
73,709
|
|
|
$
|
5,314
|
|
(1)
|
Includes
two
office and
one
industrial buildings encompassing
282,611
rentable square feet that were disposed of in 2011.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
2,277
|
|
|
$
|
1,181
|
|
|
$
|
7,239
|
|
|
$
|
3,025
|
|
Loss from continuing operations attributable to noncontrolling common units of the Operating Partnership
|
20
|
|
|
75
|
|
|
134
|
|
|
136
|
|
||||
Preferred distributions and dividends
|
(3,097
|
)
|
|
(3,799
|
)
|
|
(12,433
|
)
|
|
(7,598
|
)
|
||||
Allocation to participating securities (nonvested shares and time-based RSUs)
|
(432
|
)
|
|
(327
|
)
|
|
(818
|
)
|
|
(649
|
)
|
||||
Numerator for basic and diluted loss from continuing operations available to common stockholders
|
(1,232
|
)
|
|
(2,870
|
)
|
|
(5,878
|
)
|
|
(5,086
|
)
|
||||
Income from discontinued operations
|
—
|
|
|
2,291
|
|
|
73,709
|
|
|
5,314
|
|
||||
Income from discontinued operations attributable to noncontrolling common units of the Operating Partnership
|
—
|
|
|
(65
|
)
|
|
(1,909
|
)
|
|
(160
|
)
|
||||
Numerator for basic and diluted net (loss) income available to common stockholders
|
$
|
(1,232
|
)
|
|
$
|
(644
|
)
|
|
$
|
65,922
|
|
|
$
|
68
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
68,344,734
|
|
|
57,685,710
|
|
|
65,996,719
|
|
|
55,008,765
|
|
||||
Effect of dilutive securities - contingently issuable shares and stock options
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted weighted average vested shares and common share equivalents outstanding
|
68,344,734
|
|
|
57,685,710
|
|
|
65,996,719
|
|
|
55,008,765
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations available to common stockholders per share
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Income from discontinued operations per common share
|
0.00
|
|
|
0.04
|
|
|
1.09
|
|
|
0.09
|
|
||||
Net (loss) income available to common stockholders per share
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations available to common stockholders per share
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Income from discontinued operations per common share
|
0.00
|
|
|
0.04
|
|
|
1.09
|
|
|
0.09
|
|
||||
Net (loss) income available to common stockholders per share
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
(1)
|
Dilutive securities were not included in the current period presentation of the 2011 weighted average shares outstanding because we reported a net loss from continuing operations attributable to common stockholders for the six months ended June 30, 2011 resulting from the reclassification of the revenues and expenses of operating properties that were sold during 2011 and 2012.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands, except unit and per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
2,277
|
|
|
$
|
1,181
|
|
|
$
|
7,239
|
|
|
$
|
3,025
|
|
Income from continuing operations attributable to noncontrolling interests in consolidated subsidiaries
|
(43
|
)
|
|
(32
|
)
|
|
(96
|
)
|
|
(65
|
)
|
||||
Preferred distributions
|
(3,097
|
)
|
|
(3,799
|
)
|
|
(12,433
|
)
|
|
(7,598
|
)
|
||||
Allocation to participating securities (nonvested units and time-based RSUs)
|
(432
|
)
|
|
(327
|
)
|
|
(818
|
)
|
|
(649
|
)
|
||||
Numerator for basic and diluted loss from continuing operations available to common unitholders
|
(1,295
|
)
|
|
(2,977
|
)
|
|
(6,108
|
)
|
|
(5,287
|
)
|
||||
Income from discontinued operations
|
—
|
|
|
2,291
|
|
|
73,709
|
|
|
5,314
|
|
||||
Numerator for basic and diluted net (loss) income available to common unitholders
|
$
|
(1,295
|
)
|
|
$
|
(686
|
)
|
|
$
|
67,601
|
|
|
$
|
27
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
70,062,865
|
|
|
59,407,687
|
|
|
67,714,850
|
|
|
56,731,316
|
|
||||
Effect of dilutive securities - contingently issuable shares and stock options
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
70,062,865
|
|
|
59,407,687
|
|
|
67,714,850
|
|
|
56,731,316
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations available to common unitholders per unit
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Income from discontinued operations per common unit
|
0.00
|
|
|
0.04
|
|
|
1.09
|
|
|
0.09
|
|
||||
Net (loss) income available to common unitholders per unit
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations available to common unitholders per unit
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
Income from discontinued operations per common unit
|
0.00
|
|
|
0.04
|
|
|
1.09
|
|
|
0.09
|
|
||||
Net (loss) income available to common unitholders per unit
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.00
|
|
|
$
|
0.00
|
|
(1)
|
Dilutive securities were not included in the current period presentation of the 2011 weighted average units outstanding because the Operating Partnership reported a net loss from continuing operations attributable to common unitholders for the six months ended June 30, 2011 resulting from the reclassification of the revenues and expenses of operating properties that were sold during 2011 and 2012.
|
|
Three Months Ended
(1)
June 30,
|
|
Six Months Ended
(1)
June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands except per share amounts)
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
103,661
|
|
|
$
|
91,576
|
|
|
$
|
205,210
|
|
|
$
|
178,306
|
|
Net (loss) income available to common stockholders
(2)(3)
|
$
|
(935
|
)
|
|
$
|
(659
|
)
|
|
$
|
67,330
|
|
|
$
|
(580
|
)
|
Net (loss) income available to common stockholders per share - basic
(2)(3)
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
1.01
|
|
|
$
|
(0.02
|
)
|
Net (loss) income available to common stockholders per share - diluted
(2)(3)
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
1.01
|
|
|
$
|
(0.02
|
)
|
(1)
|
The purchase of 4100-4700 Bohannon Drive, Menlo Park, CA, represents the largest acquisition and
53%
of the total aggregate purchase price of the operating properties acquired during the six months ended June 30, 2012.
|
(2)
|
The pro forma results for the
three
and
six
months ended
June 30, 2012
were adjusted to exclude acquisition-related expenses of approximately
$0.1 million
and
$0.5 million
, respectively, incurred in 2012 for the acquisition of 4100-4700 Bohannon Drive, Menlo Park, CA. The pro forma results for the
three
and six months ended
June 30, 2011
were adjusted to include these expenses.
|
(3)
|
The pro forma results for all periods presented includes incremental interest expense assuming the acquisitions were funded by pro forma borrowings under the Credit Facility. The pro forma interest expense estimate is calculated based on the actual interest rate in effect on the Credit Facility for each respective period. Actual funding of the acquisitions may be from different sources and the pro forma borrowings and related pro forma interest expense estimate assumed herein are not indicative of actual results.
|
(1)
|
Reflects the net operating income less depreciation for these properties and amortization of lease-related intangibles.
|
|
Three Months Ended
(1)
June 30,
|
|
Six Months Ended
(1)
June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands except per share amounts)
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
103,661
|
|
|
$
|
91,576
|
|
|
$
|
205,210
|
|
|
$
|
178,306
|
|
Net (loss) income available to common unitholders
(2)(3)
|
$
|
(1,001
|
)
|
|
$
|
(711
|
)
|
|
$
|
69,024
|
|
|
$
|
(659
|
)
|
Net (loss) income available to common unitholders per unit - basic
(2)(3)
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
1.01
|
|
|
$
|
(0.02
|
)
|
Net (loss) income available to common unitholders per unit - diluted
(2)(3)
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
1.01
|
|
|
$
|
(0.02
|
)
|
(1)
|
The purchase of 4100-4700 Bohannon Drive, Menlo Park, CA, represents the largest acquisition and
53%
of the total aggregate purchase price of the operating properties acquired during the six months ended June 30, 2012.
|
(2)
|
The pro forma results for the
three
and
six
months ended
June 30, 2012
were adjusted to exclude acquisition-related expenses of approximately
$0.1 million
and
$0.5 million
, respectively, incurred in 2012 for the acquisition of 4100-4700 Bohannon Drive, Menlo Park, CA. The pro forma results for the
three
and
six
months ended
June 30, 2011
were adjusted to include these expenses.
|
(3)
|
The pro forma results for all periods presented includes incremental interest expense assuming the acquisitions were funded by pro forma borrowings under the Credit Facility. The pro forma interest expense estimate is calculated based on the actual interest rate in effect on the Credit Facility for each respective period. Actual funding of the acquisitions may be from different sources and the pro forma borrowings and related pro forma interest expense estimate assumed herein are not indicative of actual results.
|
(1)
|
Reflects the net operating income less depreciation for these properties and amortization of lease-related intangibles.
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
||||||||||||||||||||||||
|
Number of
Leases
(2)
|
|
Rentable
Square Feet
(2)
|
|
TI/LC per Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(6)
|
|
Changes in
Cash Rents
(5)
|
|
Retention Rates
(7)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|||||||||||||||||||
Office Properties
|
25
|
|
|
14
|
|
|
226,146
|
|
|
143,230
|
|
|
$
|
32.12
|
|
|
12.5
|
%
|
|
8.9
|
%
|
|
29.0
|
%
|
|
67
|
|
Industrial Properties
|
—
|
|
|
2
|
|
|
—
|
|
|
243,133
|
|
|
0.47
|
|
|
(21.4
|
)%
|
|
(28.1
|
)%
|
|
100.0
|
%
|
|
49
|
|
|
Total portfolio
|
25
|
|
|
16
|
|
|
226,146
|
|
|
386,363
|
|
|
$
|
17.77
|
|
|
3.3
|
%
|
|
(0.8
|
)%
|
|
52.4
|
%
|
|
59
|
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
||||||||||||||||||||||||
|
Number of
Leases
(2)
|
|
Rentable
Square Feet
(2)
|
|
TI/LC per Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(6)
|
|
Changes in
Cash Rents
(5)
|
|
Retention Rates
(7)
|
|
Weighted
Average
Lease Term
(in months)
|
||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|||||||||||||||||||
Office Properties
|
44
|
|
|
32
|
|
|
391,475
|
|
|
334,222
|
|
|
$
|
29.14
|
|
|
8.1
|
%
|
|
3.4
|
%
|
|
41.4
|
%
|
|
65
|
|
Industrial Properties
|
1
|
|
|
4
|
|
|
5,000
|
|
|
308,814
|
|
|
0.51
|
|
|
(20.9
|
)%
|
|
(26.8
|
)%
|
|
75.8
|
%
|
|
48
|
|
|
Total portfolio
|
45
|
|
|
36
|
|
|
396,475
|
|
|
643,036
|
|
|
$
|
19.24
|
|
|
2.0
|
%
|
|
(2.8
|
)%
|
|
52.9
|
%
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
|||||||||||||||||||||
|
Number of Leases
(2)
|
|
Rentable Square Feet
(2)
|
|
TI/LC per Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(6)
|
|
Changes in
Cash Rents
(5)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
||||||||||||||
Office Properties
|
22
|
|
|
16
|
|
|
301,852
|
|
|
190,431
|
|
|
$
|
37.63
|
|
|
18.8
|
%
|
|
11.7
|
%
|
|
69
|
|
Industrial Properties
|
1
|
|
|
4
|
|
|
15,000
|
|
|
339,155
|
|
|
0.89
|
|
|
(16.0
|
)%
|
|
(21.5
|
)%
|
|
43
|
|
|
Total portfolio
|
23
|
|
|
20
|
|
|
316,852
|
|
|
529,586
|
|
|
$
|
22.09
|
|
|
12.8
|
%
|
|
5.9
|
%
|
|
58
|
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
|||||||||||||||||||||
|
Number of Leases
(2)
|
|
Rentable Square Feet
(2)
|
|
TI/LC per Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(6)
|
|
Changes in
Cash Rents
(5)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
||||||||||||||
Office Properties
|
39
|
|
|
29
|
|
|
468,602
|
|
|
256,001
|
|
|
$
|
35.74
|
|
|
16.5
|
%
|
|
8.9
|
%
|
|
68
|
|
Industrial Properties
|
2
|
|
|
4
|
|
|
20,000
|
|
|
339,155
|
|
|
0.96
|
|
|
(16.2
|
)%
|
|
(21.7
|
)%
|
|
43
|
|
|
Total portfolio
|
41
|
|
|
33
|
|
|
488,602
|
|
|
595,156
|
|
|
$
|
23.62
|
|
|
12.1
|
%
|
|
4.7
|
%
|
|
59
|
|
(1)
|
First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream.
|
(2)
|
Represents leasing activity for leases that commenced or signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
|
(3)
|
Amounts exclude tenant-funded tenant improvements.
|
(4)
|
Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired.
|
(5)
|
Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired.
|
(6)
|
Excludes commenced and executed leases of approximately 100,000 and 69,000 rentable square feet, respectively, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a meaningful market comparison.
|
(7)
|
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
|
(8)
|
For the three months ended June 30, 2012, 8 leases totaling approximately 69,000 rentable square feet were signed but not commenced as of June 30, 2012. For the six months ended June 30, 2012, 9 leases totaling approximately 118,000 rentable square feet were signed but not commenced as of June 30, 2012.
|
Year of Lease Expiration
|
|
Number of
Expiring
Leases
|
|
Total Square Feet
|
|
% of Total Leased Sq. Ft.
|
|
Annualized Base Rent
(2)
|
|
% of Total Annualized Base Rent
(2)
|
|
Annualized Base Rent per Sq. Ft.
(2)
|
||||||||
Office Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Remainder of 2012
|
|
31
|
|
|
182,107
|
|
|
1.3
|
%
|
|
$
|
5,689
|
|
|
1.6
|
%
|
|
$
|
31.24
|
|
2013
|
|
94
|
|
|
1,167,702
|
|
|
8.4
|
%
|
|
33,047
|
|
|
9.4
|
%
|
|
28.30
|
|
||
2014
|
|
92
|
|
|
1,135,182
|
|
|
8.2
|
%
|
|
31,178
|
|
|
8.9
|
%
|
|
27.47
|
|
||
2015
|
|
136
|
|
|
2,068,132
|
|
|
14.9
|
%
|
|
63,108
|
|
|
18.1
|
%
|
|
30.51
|
|
||
2016
|
|
68
|
|
|
784,087
|
|
|
5.6
|
%
|
|
19,695
|
|
|
5.6
|
%
|
|
25.12
|
|
||
2017
|
|
83
|
|
|
1,840,625
|
|
|
13.2
|
%
|
|
53,329
|
|
|
15.2
|
%
|
|
28.97
|
|
||
Total Office
|
|
504
|
|
|
7,177,835
|
|
|
51.6
|
%
|
|
$
|
206,046
|
|
|
58.8
|
%
|
|
$
|
28.71
|
|
Industrial Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Remainder of 2012
|
|
3
|
|
|
168,133
|
|
|
1.2
|
%
|
|
$
|
971
|
|
|
0.3
|
%
|
|
$
|
5.78
|
|
2013
|
|
8
|
|
|
426,277
|
|
|
3.1
|
%
|
|
3,074
|
|
|
0.9
|
%
|
|
7.21
|
|
||
2014
|
|
17
|
|
|
554,620
|
|
|
4.0
|
%
|
|
4,436
|
|
|
1.3
|
%
|
|
8.00
|
|
||
2015
|
|
14
|
|
|
712,351
|
|
|
5.1
|
%
|
|
4,672
|
|
|
1.3
|
%
|
|
6.56
|
|
||
2016
|
|
9
|
|
|
426,947
|
|
|
3.1
|
%
|
|
2,952
|
|
|
0.8
|
%
|
|
6.91
|
|
||
2017
|
|
4
|
|
|
149,482
|
|
|
1.1
|
%
|
|
888
|
|
|
0.3
|
%
|
|
5.94
|
|
||
Total Industrial
|
|
55
|
|
|
2,437,810
|
|
|
17.6
|
%
|
|
$
|
16,993
|
|
|
4.9
|
%
|
|
$
|
6.97
|
|
Total
|
|
559
|
|
|
9,615,645
|
|
|
69.2
|
%
|
|
$
|
223,039
|
|
|
63.7
|
%
|
|
$
|
23.20
|
|
(1)
|
The information presented reflects leasing activity through
June 30, 2012
. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases and vacant space as of
June 30, 2012
.
|
(2)
|
Annualized base rent is calculated as the GAAP straight lined rental revenue for the last month of the reporting period multiplied by 12 months. 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 tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Annualized base rent also excludes month−to−month leases and vacant space as of June 30, 2012. 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. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption "Information on Leases Commenced and Executed."
|
|
Office Properties
|
|
Industrial Properties
|
|
Total
|
||||||||||||
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||||||
Total as of June 30, 2011
|
107
|
|
|
11,465,821
|
|
|
40
|
|
|
3,605,407
|
|
|
147
|
|
|
15,071,228
|
|
Acquisitions
(1)(2)
|
12
|
|
|
1,200,632
|
|
|
|
|
|
|
12
|
|
|
1,200,632
|
|
||
Properties moved to the redevelopment portfolio
|
(1
|
)
|
|
(111,318
|
)
|
|
|
|
|
|
(1
|
)
|
|
(111,318
|
)
|
||
Dispositions
|
(4
|
)
|
|
(344,234
|
)
|
|
(1
|
)
|
|
(192,053
|
)
|
|
(5
|
)
|
|
(536,287
|
)
|
Remeasurement
|
|
|
16,366
|
|
|
|
|
|
|
|
|
16,366
|
|
||||
Total as of June 30, 2012
|
114
|
|
|
12,227,267
|
|
|
39
|
|
|
3,413,354
|
|
|
153
|
|
|
15,640,621
|
|
(1)
|
Excludes 370 3rd Street in San Francisco, California, which was added to our redevelopment portfolio upon acquisition in December 2011.
|
(2)
|
Excludes 690 E. Middlefield Road in Mountain View, California, which was added to our development portfolio upon acquisition in May 2012.
|
Region
|
Number of
Buildings
|
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
6/30/2012
|
|
3/31/2012
|
|
12/31/2011
|
|||||||||
Office Properties:
|
|
|
|
|
|
|
|
|
|
|||||
Los Angeles and Ventura Counties
|
28
|
|
|
2,981,473
|
|
|
88.0
|
%
|
|
87.0
|
%
|
|
83.5
|
%
|
San Diego
|
59
|
|
|
5,184,287
|
|
|
87.5
|
|
|
91.7
|
|
|
92.5
|
|
Orange County
|
5
|
|
|
540,656
|
|
|
93.6
|
|
|
93.3
|
|
|
93.4
|
|
San Francisco Bay Area
|
13
|
|
|
2,210,367
|
|
|
91.4
|
|
|
89.2
|
|
|
93.3
|
|
Greater Seattle
|
9
|
|
|
1,310,484
|
|
|
93.8
|
|
|
90.3
|
|
|
89.9
|
|
|
114
|
|
|
12,227,267
|
|
|
89.3
|
|
|
90.0
|
|
|
90.1
|
|
Industrial Properties:
|
|
|
|
|
|
|
|
|
|
|
||||
Orange County
|
39
|
|
|
3,413,354
|
|
|
92.5
|
|
|
97.0
|
|
|
100.0
|
|
|
39
|
|
|
3,413,354
|
|
|
92.5
|
|
|
97.0
|
|
|
100.0
|
|
Total Stabilized Portfolio
|
153
|
|
|
15,640,621
|
|
|
90.0
|
%
|
|
91.6
|
%
|
|
92.4
|
%
|
|
Average Occupancy for Three Months Ended
June 30,
|
||||||||||
|
Stabilized Portfolio
(1)
|
|
Same Store Portfolio
(2)
|
||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||
Office Properties
|
89.3
|
%
|
|
88.1
|
%
|
|
89.0
|
%
|
|
86.8
|
%
|
Industrial Properties
|
95.5
|
|
|
97.0
|
|
|
95.5
|
|
|
96.8
|
|
Total Portfolio
|
90.7
|
%
|
|
90.2
|
%
|
|
90.7
|
%
|
|
89.4
|
%
|
|
Average Occupancy for Six Months Ended
June 30,
|
||||||||||
|
Stabilized Portfolio
(1)
|
|
Same Store Portfolio
(2)
|
||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||
Office Properties
|
89.6
|
%
|
|
88.4
|
%
|
|
89.7
|
%
|
|
88.5
|
%
|
Industrial Properties
|
96.2
|
|
|
95.7
|
|
|
96.2
|
|
|
95.5
|
|
Total Portfolio
|
91.1
|
%
|
|
90.2
|
%
|
|
91.4
|
%
|
|
90.3
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized portfolio as of the end of the period presented.
|
(2)
|
Occupancy percentages reported are based on Office Properties and Industrial Properties owned and stabilized as of January 1,
2011
and still owned and stabilized as of
June 30, 2012
. See discussion under "Results of Operations" for additional information.
|
•
|
Same Store Office Properties - which includes the results of all of the office properties that were owned and included in our stabilized office portfolio as of January 1,
2011
and still owned and and included in the stabilized portfolio as of
June 30, 2012
;
|
•
|
Office Acquisitions Properties - which includes the results, from the dates of acquisition through the periods presented, for the ten office buildings we acquired during 2011 and the
ten
office buildings we acquired during the
six months ended June 30, 2012
;
|
•
|
Other Office - which includes the results generated by two buildings that were moved out of the stabilized office portfolio during 2011 to redevelopment since the properties are being repositioned (the “Redevelopment Properties”);
|
•
|
Same Store Industrial Properties - which includes the results of all the industrial properties that were owned and included in our stabilized industrial portfolio as of January 1, 2011 and still owned and included in the stabilized portfolio as of
June 30, 2012
.
|
Property Type
|
|
# of Buildings
|
|
Rentable Square Feet
|
|
Office Properties
|
|
|
|
|
|
Same Store Office Properties
|
|
94
|
|
9,860,746
|
|
Office Acquisitions Properties
|
|
20
|
|
2,366,521
|
|
Total Office Properties
|
|
114
|
|
12,227,267
|
|
|
|
|
|
|
|
Industrial Properties
|
|
|
|
|
|
Same Store Industrial Properties
|
|
39
|
|
3,413,354
|
|
Total Industrial Properties
|
|
39
|
|
3,413,354
|
|
|
|
|
|
|
|
Total Stabilized Portfolio
|
|
153
|
|
15,640,621
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2012
|
|
2011
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Net Operating Income, as defined
|
|
|
|
|
|
|
|
|||||||
Office Properties
|
$
|
68,506
|
|
|
$
|
57,256
|
|
|
$
|
11,250
|
|
|
19.6
|
%
|
Industrial Properties
|
4,724
|
|
|
5,107
|
|
|
(383
|
)
|
|
(7.5
|
)
|
|||
Total portfolio
|
73,230
|
|
|
62,363
|
|
|
10,867
|
|
|
17.4
|
|
|||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined for the total portfolio
|
73,230
|
|
|
62,363
|
|
|
10,867
|
|
|
17.4
|
|
|||
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
(9,251
|
)
|
|
(7,440
|
)
|
|
(1,811
|
)
|
|
24.3
|
|
|||
Acquisition-related expenses
|
(1,813
|
)
|
|
(1,194
|
)
|
|
(619
|
)
|
|
51.8
|
|
|||
Depreciation and amortization
|
(40,624
|
)
|
|
(31,378
|
)
|
|
(9,246
|
)
|
|
29.5
|
|
|||
Interest income and other net investment (losses) gains
|
(110
|
)
|
|
58
|
|
|
(168
|
)
|
|
(289.7
|
)
|
|||
Interest expense
|
(19,155
|
)
|
|
(21,228
|
)
|
|
2,073
|
|
|
(9.8
|
)
|
|||
Income from continuing operations
|
2,277
|
|
|
1,181
|
|
|
1,096
|
|
|
92.8
|
|
|||
Income from discontinued operations
|
—
|
|
|
2,291
|
|
|
(2,291
|
)
|
|
(100.0
|
)
|
|||
Net income
|
$
|
2,277
|
|
|
$
|
3,472
|
|
|
$
|
(1,195
|
)
|
|
(34.4
|
)%
|
|
2012
|
|
2011
|
||||||||||||||||||||||||||||||||||||
|
Same Store Office
|
|
Office Acquisitions
|
|
Other Office
|
|
Same Store Industrial
|
|
Total
|
|
Same Store Office
|
|
Office Acquisitions
|
|
Other Office
|
|
Same Store Industrial
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
71,691
|
|
|
$
|
16,333
|
|
|
$
|
844
|
|
|
$
|
5,397
|
|
|
$
|
94,265
|
|
|
$
|
70,091
|
|
|
$
|
3,932
|
|
|
$
|
362
|
|
|
$
|
5,773
|
|
|
$
|
80,158
|
|
Tenant reimbursements
|
5,364
|
|
|
2,708
|
|
|
35
|
|
|
958
|
|
|
9,065
|
|
|
5,285
|
|
|
914
|
|
|
34
|
|
|
897
|
|
|
7,130
|
|
||||||||||
Other property income
|
289
|
|
|
246
|
|
|
—
|
|
|
57
|
|
|
592
|
|
|
1,108
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
1,102
|
|
||||||||||
Total
|
77,344
|
|
|
19,287
|
|
|
879
|
|
|
6,412
|
|
|
103,922
|
|
|
76,484
|
|
|
4,846
|
|
|
396
|
|
|
6,664
|
|
|
88,390
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
16,253
|
|
|
3,587
|
|
|
316
|
|
|
1,040
|
|
|
21,196
|
|
|
15,168
|
|
|
886
|
|
|
424
|
|
|
878
|
|
|
17,356
|
|
||||||||||
Real estate taxes
|
6,407
|
|
|
1,533
|
|
|
293
|
|
|
648
|
|
|
8,881
|
|
|
6,697
|
|
|
362
|
|
|
426
|
|
|
642
|
|
|
8,127
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
120
|
|
||||||||||
Ground leases
|
224
|
|
|
106
|
|
|
285
|
|
|
—
|
|
|
615
|
|
|
330
|
|
|
60
|
|
|
34
|
|
|
—
|
|
|
424
|
|
||||||||||
Total
|
22,884
|
|
|
5,226
|
|
|
894
|
|
|
1,688
|
|
|
30,692
|
|
|
22,278
|
|
|
1,308
|
|
|
884
|
|
|
1,557
|
|
|
26,027
|
|
||||||||||
Net Operating Income (Loss), as defined
|
$
|
54,460
|
|
|
$
|
14,061
|
|
|
$
|
(15
|
)
|
|
$
|
4,724
|
|
|
$
|
73,230
|
|
|
$
|
54,206
|
|
|
$
|
3,538
|
|
|
$
|
(488
|
)
|
|
$
|
5,107
|
|
|
$
|
62,363
|
|
|
Three Months Ended June 30, 2012 as compared to the Three Months Ended June 30, 2011
|
||||||||||||||||||||||||||
|
Same Store Office
|
|
Office Acquisitions
|
|
Same Store Industrial
|
|
Total
|
||||||||||||||||||||
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
||||||||||||
|
|
|
|
|
|
|
($ in thousands)
|
|
|
||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Rental income
|
$
|
1,600
|
|
|
2.3
|
%
|
|
$
|
12,401
|
|
|
315.4
|
%
|
|
$
|
(376
|
)
|
|
(6.5
|
)%
|
|
$
|
14,107
|
|
|
17.6
|
%
|
Tenant reimbursements
|
79
|
|
|
1.5
|
|
|
1,794
|
|
|
196.3
|
|
|
61
|
|
|
6.8
|
|
|
1,935
|
|
|
27.1
|
|
||||
Other property income
|
(819
|
)
|
|
(73.9
|
)
|
|
246
|
|
|
100.0
|
|
|
63
|
|
|
(1,050.0
|
)
|
|
(510
|
)
|
|
(46.3
|
)
|
||||
Total
|
860
|
|
|
1.1
|
|
|
14,441
|
|
|
298.0
|
|
|
(252
|
)
|
|
(3.8
|
)
|
|
15,532
|
|
|
17.6
|
|
||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Property expenses
|
1,085
|
|
|
7.2
|
|
|
2,701
|
|
|
304.9
|
|
|
162
|
|
|
18.5
|
|
|
3,840
|
|
|
22.1
|
|
||||
Real estate taxes
|
(290
|
)
|
|
(4.3
|
)
|
|
1,171
|
|
|
323.5
|
|
|
6
|
|
|
0.9
|
|
|
754
|
|
|
9.3
|
|
||||
Provision for bad debts
|
(83
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
(100.0
|
)
|
|
(120
|
)
|
|
100.0
|
|
||||
Ground leases
|
(106
|
)
|
|
(32.1
|
)
|
|
46
|
|
|
76.7
|
|
|
—
|
|
|
—
|
|
|
191
|
|
|
45.0
|
|
||||
Total
|
606
|
|
|
2.7
|
|
|
3,918
|
|
|
299.5
|
|
|
131
|
|
|
8.4
|
|
|
4,665
|
|
|
17.9
|
|
||||
Net Operating Income, as defined
|
$
|
254
|
|
|
0.5
|
%
|
|
$
|
10,523
|
|
|
297.4
|
%
|
|
$
|
(383
|
)
|
|
(7.5
|
)%
|
|
$
|
10,867
|
|
|
17.4
|
%
|
•
|
An increase of
$10.5 million
attributable to the Office Acquisition Properties.
|
•
|
An increase of
$0.3 million
attributable to the Same Store Office Properties which is primarily comprised of:
|
▪
|
An increase in rental income of
$1.6 million
primarily resulting from an increase in average occupancy of 2.2%, from 86.8% for the
three
months ended
June 30, 2011
, to 89.0% for the
three
months ended
June 30, 2012
; and
|
▪
|
An offsetting decrease in other property income of
$0.8 million
primarily as the result of a $0.6 million cash distribution received during the prior year period under a bankruptcy claim related to a former tenant that defaulted on their lease in 2009. Other property income for both periods consist primarily of lease termination fees and other miscellaneous income;
|
•
|
An increase in property and related expenses of
$0.6 million
primarily resulting from:
|
•
|
$0.5 million of repairs incurred during the three months ended June 30, 2012 as the result of water damage at one of our properties which we anticipate receiving an insurance reimbursement for later this year; and
|
•
|
An increase of $0.5 million in property expenses primarily as a result of an increase in certain recurring operating costs such as property management expenses and janitorial and other service-related costs primarily as a result of an increase in average occupancy, as described above; and
|
•
|
An offsetting decrease in real estate taxes of
$0.3 million
as a result of successful property tax appeals; and
|
•
|
An offsetting decrease of
$0.4 million
attributable to the Same Store Industrial Properties primarily resulting from a decrease in average occupancy of 1.3%, from 96.8% for the
three
months ended
June 30, 2011
, to 95.5% for the
three
months ended
June 30, 2012
; and
|
•
|
A net operating loss of
$0.5 million
for the three months ended June 30, 2011 attributable primarily to Other Office generated by the Redevelopment Properties. This net operating loss represented the operating expenses for the Redevelopment Properties for the three months ended June 30, 2011. Operating expenditures for the Redevelopment Properties during the three months ended June 30, 2012 qualified for capitalization and were included as a cost of redevelopment.
|
|
Six Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2012
|
|
2011
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Net Operating Income, as defined
|
|
|
|
|
|
|
|
|||||||
Office Properties
|
136,264
|
|
|
111,807
|
|
|
24,457
|
|
|
21.9
|
|
|||
Industrial Properties
|
9,648
|
|
|
8,565
|
|
|
1,083
|
|
|
12.6
|
|
|||
Total portfolio
|
145,912
|
|
|
120,372
|
|
|
25,540
|
|
|
21.2
|
|
|||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined for the total portfolio
|
145,912
|
|
|
120,372
|
|
|
25,540
|
|
|
21.2
|
|
|||
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
(18,018
|
)
|
|
(14,000
|
)
|
|
(4,018
|
)
|
|
28.7
|
|
|||
Acquisition-related expenses
|
(3,341
|
)
|
|
(1,666
|
)
|
|
(1,675
|
)
|
|
100.5
|
|
|||
Depreciation and amortization
|
(77,370
|
)
|
|
(59,819
|
)
|
|
(17,551
|
)
|
|
29.3
|
|
|||
Interest income and other net investment gains
|
374
|
|
|
242
|
|
|
132
|
|
|
54.5
|
|
|||
Interest expense
|
(40,318
|
)
|
|
(42,104
|
)
|
|
1,786
|
|
|
(4.2
|
)
|
|||
Income from continuing operations
|
7,239
|
|
|
3,025
|
|
|
4,214
|
|
|
139.3
|
%
|
|||
Income from discontinued operations
|
73,709
|
|
|
5,314
|
|
|
68,395
|
|
|
1,287.1
|
%
|
|||
Net income
|
$
|
80,948
|
|
|
$
|
8,339
|
|
|
$
|
72,609
|
|
|
870.7
|
%
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
||||||||||||||||||||||||||||||||||||
|
Same Store Office
|
|
Office Acquisitions
|
|
Other Office
|
|
Same Store Industrial
|
|
Total
|
|
Same Store Office
|
|
Office Acquisitions
|
|
Other Office
|
|
Same Store Industrial
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
143,475
|
|
|
$
|
28,466
|
|
|
$
|
1,612
|
|
|
$
|
10,931
|
|
|
$
|
184,484
|
|
|
$
|
140,564
|
|
|
$
|
4,442
|
|
|
$
|
730
|
|
|
$
|
11,419
|
|
|
$
|
157,155
|
|
Tenant reimbursements
|
10,225
|
|
|
4,934
|
|
|
119
|
|
|
2,091
|
|
|
17,369
|
|
|
10,397
|
|
|
974
|
|
|
66
|
|
|
1,715
|
|
|
13,152
|
|
||||||||||
Other property income
|
1,151
|
|
|
253
|
|
|
—
|
|
|
75
|
|
|
1,479
|
|
|
1,818
|
|
|
—
|
|
|
31
|
|
|
7
|
|
|
1,856
|
|
||||||||||
Total
|
154,851
|
|
|
33,653
|
|
|
1,731
|
|
|
13,097
|
|
|
203,332
|
|
|
152,779
|
|
|
5,416
|
|
|
827
|
|
|
13,141
|
|
|
172,163
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
29,927
|
|
|
6,167
|
|
|
488
|
|
|
2,149
|
|
|
38,731
|
|
|
29,866
|
|
|
923
|
|
|
810
|
|
|
3,266
|
|
|
34,865
|
|
||||||||||
Real estate taxes
|
12,523
|
|
|
2,835
|
|
|
612
|
|
|
1,300
|
|
|
17,270
|
|
|
13,451
|
|
|
429
|
|
|
852
|
|
|
1,285
|
|
|
16,017
|
|
||||||||||
Provision for bad debts
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
121
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
146
|
|
||||||||||
Ground leases
|
449
|
|
|
302
|
|
|
666
|
|
|
—
|
|
|
1,417
|
|
|
632
|
|
|
60
|
|
|
71
|
|
|
—
|
|
|
763
|
|
||||||||||
Total
|
42,901
|
|
|
9,304
|
|
|
1,766
|
|
|
3,449
|
|
|
57,420
|
|
|
44,070
|
|
|
1,412
|
|
|
1,733
|
|
|
4,576
|
|
|
51,791
|
|
||||||||||
Net Operating Income (Loss), as defined
|
$
|
111,950
|
|
|
$
|
24,349
|
|
|
$
|
(35
|
)
|
|
$
|
9,648
|
|
|
$
|
145,912
|
|
|
$
|
108,709
|
|
|
$
|
4,004
|
|
|
$
|
(906
|
)
|
|
$
|
8,565
|
|
|
$
|
120,372
|
|
|
Six Months Ended June 30, 2012 as compared to the Six Months Ended June 30, 2011
|
||||||||||||||||||||||||||
|
Same Store Office
|
|
Office Acquisitions
|
|
Same Store Industrial
|
|
Total
|
||||||||||||||||||||
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
||||||||||||
|
|
|
|
|
|
|
($ in thousands)
|
|
|
||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Rental income
|
$
|
2,911
|
|
|
2.1
|
%
|
|
$
|
24,024
|
|
|
540.8
|
%
|
|
$
|
(488
|
)
|
|
(4.3
|
)%
|
|
$
|
27,329
|
|
|
17.4
|
%
|
Tenant reimbursements
|
(172
|
)
|
|
(1.7
|
)
|
|
3,960
|
|
|
406.6
|
|
|
376
|
|
|
21.9
|
|
|
4,217
|
|
|
32.1
|
|
||||
Other property income
|
(667
|
)
|
|
(36.7
|
)
|
|
253
|
|
|
100.0
|
|
|
68
|
|
|
971.4
|
|
|
(377
|
)
|
|
(20.3
|
)
|
||||
Total
|
2,072
|
|
|
1.4
|
|
|
28,237
|
|
|
521.4
|
|
|
(44
|
)
|
|
(0.3
|
)
|
|
31,169
|
|
|
18.1
|
|
||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Property expenses
|
61
|
|
|
0.2
|
|
|
5,244
|
|
|
568.1
|
|
|
(1,117
|
)
|
|
(34.2
|
)
|
|
3,866
|
|
|
11.1
|
|
||||
Real estate taxes
|
(928
|
)
|
|
(6.9
|
)
|
|
2,406
|
|
|
560.8
|
|
|
15
|
|
|
1.2
|
|
|
1,253
|
|
|
7.8
|
|
||||
Provision for bad debts
|
(119
|
)
|
|
(98.3
|
)
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
(100.0
|
)
|
|
(144
|
)
|
|
(98.6
|
)
|
||||
Ground leases
|
(183
|
)
|
|
(29.0
|
)
|
|
242
|
|
|
403.3
|
|
|
—
|
|
|
—
|
|
|
654
|
|
|
85.7
|
|
||||
Total
|
(1,169
|
)
|
|
(2.7
|
)
|
|
7,892
|
|
|
558.9
|
|
|
(1,127
|
)
|
|
(24.6
|
)
|
|
5,629
|
|
|
10.9
|
|
||||
Net Operating Income, as defined
|
$
|
3,241
|
|
|
3.0
|
%
|
|
$
|
20,345
|
|
|
508.1
|
%
|
|
$
|
1,083
|
|
|
12.6
|
%
|
|
$
|
25,540
|
|
|
21.2
|
%
|
•
|
An increase of
$20.3 million
attributable to the Office Acquisition Properties;
|
•
|
An increase of
$3.2 million
attributable to the Same Store Office Properties which primarily comprised of:
|
▪
|
An increase in rental income of
$2.9 million
primarily resulting from an increase in average occupancy of 1.2%, from 88.5% for the six months ended
June 30, 2011
, to 89.7% for the
six months ended June 30, 2012
; and
|
•
|
A decrease in property and related expenses of
$1.2 million
primarily resulting from:
|
•
|
Receipt of approximately $1.0 million in insurance proceeds during the
six months ended June 30, 2012
which were recorded as a reduction of property expenses since the charge for the related property damage was recorded as property expenses in prior periods; and
|
•
|
A decrease in real estate taxes of
$0.9 million
as a result of successful property tax appeals; and
|
•
|
An increase of $0.5 million in property expenses primarily as a result of an increase in certain recurring operating costs such as property management expenses and janitorial and other service-related costs primarily as a result of an increase in average occupancy, as described above; and
|
•
|
An offsetting increase of $0.5 million for repairs incurred during the six months ended June 30, 2012 attributable to water damage at one of our properties which we anticipate receiving an insurance reimbursement for later this year.
|
▪
|
An offsetting decrease in other property income of
$0.7 million
primarily due to a $0.6 million cash distribution received during the prior year period under a bankruptcy claim related to a former tenant that defaulted on their lease in 2009. Other property income for both periods consist primarily of lease termination fees and other miscellaneous income;
|
•
|
An increase of
$1.1 million
attributable to the Same Store Industrial Properties primarily resulting from legal fees and consulting costs of $1.3 million incurred during the six months ended
June 30, 2011
as compared to the
six months ended June 30, 2012
, primarily related to a dispute with a former tenant at one of our industrial properties;
|
•
|
A net operating loss of
$0.9 million
for the six months ended June 30, 2011 attributable to Other Office generated by the Redevelopment Properties. This net operating loss represented the operating expenses for the Redevelopment Properties for the six months ended June 30, 2011. Operating expenditures for the Redevelopment Properties during the
six months ended June 30, 2012
qualified for capitalization and were included as a cost of redevelopment.
|
|
Shares/Units at
June 30, 2012
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
||||
|
($ in thousands)
|
||||||||
Debt:
|
|
|
|
|
|
||||
Credit Facility
|
|
|
$
|
102,000
|
|
|
1.9
|
%
|
|
Unsecured Term Loan Facility
|
|
|
150,000
|
|
|
2.8
|
|
||
4.25% Unsecured Exchangeable Notes due 2014
(1)
|
|
|
172,500
|
|
|
3.2
|
|
||
Unsecured Senior Notes due 2014
|
|
|
83,000
|
|
|
1.5
|
|
||
Unsecured Senior Notes due 2015
(1)
|
|
|
325,000
|
|
|
6.0
|
|
||
Unsecured Senior Notes due 2018
(1)
|
|
|
325,000
|
|
|
6.0
|
|
||
Unsecured Senior Notes due 2020
(1)
|
|
|
250,000
|
|
|
4.6
|
|
||
Secured debt
(1)
|
|
|
378,776
|
|
|
7.0
|
|
||
Total debt
|
|
|
1,786,276
|
|
|
33.0
|
|
||
Equity and Noncontrolling Interests:
|
|
|
|
|
|
|
|||
7.450% Series A Cumulative Redeemable Preferred units
(2)
|
1,500,000
|
|
|
75,000
|
|
|
1.4
|
|
|
6.875% Series G Cumulative Redeemable Preferred stock
(3)
|
4,000,000
|
|
|
100,000
|
|
|
1.9
|
|
|
Common limited partnership units outstanding
(4)(5)
|
1,718,131
|
|
|
83,175
|
|
|
1.5
|
|
|
Common shares outstanding
(5)
|
68,927,731
|
|
|
3,336,791
|
|
|
62.2
|
|
|
Total equity and noncontrolling interests
|
|
|
3,594,966
|
|
|
67.0
|
|
||
Total Market Capitalization
|
|
|
$
|
5,381,242
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of the unamortized discounts and premiums as of
June 30, 2012
.
|
(2)
|
Value based on $50.00 per unit liquidation preference.
|
(3)
|
Value based on $25.00 per share liquidation preference.
|
(4)
|
Represents common units not owned by the Company.
|
(5)
|
Value based on closing price per share of our common stock of
$48.41
as of
June 30, 2012
.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Credit Facility;
|
•
|
Proceeds from additional secured or unsecured debt financings;
|
•
|
Proceeds from public or private issuance of debt or equity securities; and
|
•
|
Proceeds from the disposition of nonstrategic assets through our capital recycling program.
|
•
|
Property or undeveloped land acquisitions;
|
•
|
Property operating and corporate expenses;
|
•
|
Capital expenditures, tenant improvement and leasing costs;
|
•
|
Debt service and principal payments, including debt maturities;
|
•
|
Distributions to common and preferred security holders;
|
•
|
Development and redevelopment costs; and
|
•
|
Outstanding debt repurchases.
|
•
|
During the second quarter of 2012, the Operating Partnership acquired two secured mortgage loans with a combined principal balance of $131.0 million and repaid two secured mortgage loans with a combined outstanding principal balance of $101.0 million that were scheduled to mature in August 2012 (see Note 5 to our consolidated financial statements included in this report for additional information). Subsequent to June 30, 2012, the Operating Partnership assumed two secured mortgage loans with a combined principal balance of $137.3 million in connection with two acquisitions (see Note 17 to our consolidated financial statements included in this report for additional information).
|
•
|
In April 2012, the Company redeemed all 1,610,000 outstanding shares of its Series E Preferred Stock and all 3,450,000 outstanding shares of its Series F Preferred Stock at a redemption price of $25.00 per share plus all accumulated and unpaid dividends up to and including the redemption date of April 16, 2012, for total payment of $129.4 million (see Note 7 to our consolidated financial statements included in this report for additional information).
|
•
|
In April 2012, the Operating Partnership repaid its 3.25% Exchangeable Notes with an aggregate principal amount of $148.0 million and entered into a new $150.0 million unsecured term loan facility (the "Unsecured Term Loan Facility") in March 2012 (see Note 5 to our consolidated financial statements included in this report for additional information).
|
•
|
During the second quarter of 2012 we issued
575,689
shares under our at−the−market stock offering program. The net offering proceeds, after deducting underwriting discounts and commissions, of approximately
$26.5 million
were contributed to the Operating Partnership (see "— Liquidity Sources" below for additional information).
|
•
|
In March 2012, the Company issued 4,000,000 shares of its Series G Preferred Stock at a public offering price of $25.00
|
•
|
In February 2012, the Company completed an underwritten public offering of 9,487,500 shares of its common stock. The net offering proceeds, after deducting underwriting discounts and commissions and offering expenses, of approximately
$382.1 million
were contributed to the Operating Partnership (see Notes 7 and 8 to our consolidated financial statements included in this report for additional information).
|
•
|
In January 2012, the Company completed the sale of two office buildings to an unrelated third party for a cash sales price of approximately $146.1 million (see Note 14 to our consolidated financial statements included in this report for additional information).
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in thousands)
|
||||||
Outstanding borrowing
|
$
|
102,000
|
|
|
$
|
182,000
|
|
Remaining borrowing capacity
|
398,000
|
|
|
318,000
|
|
||
Total borrowing capacity
(1)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Interest rate
(2)
|
2.00
|
%
|
|
2.05
|
%
|
||
Facility fee - annual rate
(3)
|
0.350%
|
||||||
Maturity date
(4)
|
August 2015
|
(1)
|
We may elect to borrow, subject to bank approval, up to an additional $200.0 million under an accordion feature under the terms of the Credit Facility.
|
(2)
|
The Credit Facility interest rate was calculated based on an annual rate of LIBOR plus 1.750% as of both
June 30, 2012
and
December 31, 2011
.
|
(3)
|
The facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we also incurred origination and legal costs of approximately $8.3 million that are currently being amortized through the maturity date of the Credit Facility.
|
(4)
|
Under the terms of the Credit Facility, we may exercise an option to extend the maturity date by one year.
|
|
Aggregate
Principal
Amount Outstanding
|
||
|
(in thousands)
|
||
Unsecured Term Loan Facility due 2016
|
$
|
150,000
|
|
4.25% Exchangeable Notes due 2014
(1)
|
172,500
|
|
|
Unsecured Senior Notes due 2014
|
83,000
|
|
|
Unsecured Senior Notes due 2015
(1)
|
325,000
|
|
|
Unsecured Senior Notes due 2018
(1)
|
325,000
|
|
|
Unsecured Senior Notes due 2020
(1)
|
250,000
|
|
|
Secured Debt
(1)
|
378,776
|
|
|
Total Exchangeable Notes, Unsecured Debt, and Secured Debt
|
$
|
1,684,276
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized discounts and premiums as of
June 30, 2012
.
|
|
Percentage of Total Debt
|
|
Weighted Average Interest Rate
|
||||||||
|
June 30,
2012 |
|
December 31,
2011 |
|
June 30,
2012 |
|
December 31,
2011 |
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured
(1)
|
78.8
|
%
|
|
80.9
|
%
|
|
4.7
|
%
|
|
4.7
|
%
|
Secured
|
21.2
|
|
|
19.1
|
|
|
5.0
|
|
|
5.2
|
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
14.1
|
|
|
9.9
|
|
|
2.0
|
|
|
2.0
|
|
Fixed-rate
(1)
|
85.9
|
|
|
90.1
|
|
|
5.2
|
|
|
5.1
|
|
Stated rate
(1)
|
|
|
|
|
4.8
|
|
|
4.8
|
|
||
GAAP effective rate
(2)
|
|
|
|
|
5.0
|
|
|
5.2
|
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
5.4
|
%
|
|
5.6
|
%
|
(1)
|
Excludes the impact of the amortization of any debt discounts/premiums.
|
(2)
|
Includes the impact of the amortization of any debt discounts/premiums, excluding debt issuance costs.
|
|
Payment Due by Period
|
|
|
||||||||||||||||
|
Less than
1 Year
(Remainder
of 2012)
|
|
1–3 Years
(2013-2014)
|
|
4–5 Years
(2015-2016)
|
|
More than
5 Years
(After 2016)
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal payments—secured debt
(1)
|
$
|
2,051
|
|
|
$
|
13,316
|
|
|
$
|
75,179
|
|
|
$
|
288,230
|
|
|
$
|
378,776
|
|
Principal payments—4.25% Exchangeable Notes
(2)
|
—
|
|
|
172,500
|
|
|
—
|
|
|
—
|
|
|
172,500
|
|
|||||
Principal payments—unsecured debt
(3)
|
—
|
|
|
83,000
|
|
|
475,000
|
|
|
575,000
|
|
|
1,133,000
|
|
|||||
Principal payments—Credit Facility
|
—
|
|
|
—
|
|
|
102,000
|
|
|
—
|
|
|
102,000
|
|
|||||
Interest payments—fixed-rate debt
(4)
|
39,678
|
|
|
156,335
|
|
|
109,773
|
|
|
130,602
|
|
|
436,388
|
|
|||||
Interest payments—variable-rate debt
(5)
|
2,520
|
|
|
10,080
|
|
|
7,150
|
|
|
—
|
|
|
19,750
|
|
|||||
Ground lease obligations
(6)
|
29,638
|
|
|
6,190
|
|
|
6,190
|
|
|
163,019
|
|
|
205,037
|
|
|||||
Lease and contractual commitments
(7)
|
45,748
|
|
|
4,308
|
|
|
1,835
|
|
|
—
|
|
|
51,891
|
|
|||||
Redevelopment and development commitments
(8)
|
48,000
|
|
|
104,000
|
|
|
—
|
|
|
—
|
|
|
152,000
|
|
|||||
Total
|
$
|
167,635
|
|
|
$
|
549,729
|
|
|
$
|
777,127
|
|
|
$
|
1,156,851
|
|
|
$
|
2,651,342
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized premium of approximately
$2.3 million
as of
June 30, 2012
.
|
(2)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately
$10.7 million
as of
June 30, 2012
.
|
(3)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately $2.2 million as of
June 30, 2012
.
|
(4)
|
As of
June 30, 2012
,
85.9%
of our debt was contractually fixed. The information in the table above reflects our projected interest rate obligations for these fixed−rate payments based on the contractual interest rates, interest payment dates, and scheduled maturity dates.
|
(5)
|
As of
June 30, 2012
,
14.1%
of our debt bore interest at variable rates which was incurred under the Unsecured Term Loan Facility and Credit Facility. The variable interest rate payments are based on LIBOR plus a spread of 1.750% as of
June 30, 2012
. The information in the table above reflects our projected interest rate obligations for these variable−rate payments based on outstanding principal balances as of
June 30, 2012
, the scheduled interest payment dates, and the contractual maturity dates.
|
(6)
|
Reflects minimum lease payments as discussed in Note 11 to our consolidated financial statements, through the contractual lease expiration date before the impact of extension options. This table also assumes that for one of our ground leases the Company exercises the purchase option at the end of 2012 for an estimated purchase price not to exceed $27.5 million. (See Note 11 to our consolidated financial statements included in this report for additional information).
|
(7)
|
Amounts represent commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements. The timing of these expenditures may fluctuate.
|
(8)
|
Amounts represent contractual commitments for redevelopment and development projects under construction at
June 30, 2012
. The timing of these expenditures may fluctuate based on the ultimate progress of construction.
|
•
|
Decreases in our cash flows from operations, which could create further dependence on our Credit Facility;
|
•
|
An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
|
•
|
A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership's ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.
|
Credit Facility and Unsecured Term Loan Facility (as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance at
June 30, 2012
(1)
|
Total debt to total asset value
|
|
less than 60%
|
|
34%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
2.3x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
2.53x
|
Unencumbered asset pool debt service coverage
|
|
greater than 2.0x
|
|
3.3x
|
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes due 2015, 2018 and 2020 (as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
40%
|
Interest coverage
|
|
greater than 1.5x
|
|
3.1x
|
Secured debt to total asset value
|
|
less than 40%
|
|
8%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
259%
|
(1)
|
In March 2012, we amended the Credit Facility to reduce the FMV Cap Rate (as defined in the Credit Facility), which is used to calculate the fair value of our assets for certain covenants under the Credit Facility, from 7.50% to 6.75%.
|
|
Six Months Ended June 30,
|
|||||||||||||
|
2012
|
|
2011
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net cash provided by operating activities
|
$
|
78,633
|
|
|
$
|
56,465
|
|
|
$
|
22,168
|
|
|
39.3
|
%
|
Net cash used in investing activities
|
(301,592
|
)
|
|
(435,519
|
)
|
|
133,927
|
|
|
(30.8
|
)%
|
|||
Net cash provided by financing activities
|
236,293
|
|
|
389,626
|
|
|
(153,333
|
)
|
|
(39.4
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in thousands)
|
||||||||||||||
Net (loss) income available to common stockholders
|
$
|
(800
|
)
|
|
$
|
(317
|
)
|
|
$
|
66,740
|
|
|
$
|
717
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to noncontrolling common units of the Operating Partnership
|
(20
|
)
|
|
(10
|
)
|
|
1,775
|
|
|
24
|
|
||||
Depreciation and amortization of real estate assets
|
40,328
|
|
|
31,970
|
|
|
76,792
|
|
|
61,029
|
|
||||
Net gain on dispositions of discontinued operations
|
—
|
|
|
—
|
|
|
(72,809
|
)
|
|
—
|
|
||||
Funds From Operations
(1)
|
$
|
39,508
|
|
|
$
|
31,643
|
|
|
$
|
72,498
|
|
|
$
|
61,770
|
|
(1)
|
Reported amounts are attributable to common stockholders and common unitholders.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS-None
|
|
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES-None
|
ITEM 4.
|
MINE SAFETY DISCLOSURES-None
|
ITEM 5.
|
OTHER INFORMATION-None
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
|
|
|
3.(i)1*
|
|
Kilroy Realty Corporation Articles of Restatement
|
|
|
|
3.(i)2
|
|
Certificate of Limited Partnership of Kilroy Realty, L.P.
(1)
|
|
|
|
3.(i)3
|
|
Amendment to the Certificate of Limited Partnership of Kilroy Realty, L.P.
(1)
|
|
|
|
3.(ii)1
|
|
Second Amended and Restated Bylaws of Kilroy Realty Corporation
(2)
|
|
|
|
3.(ii)2
|
|
Amendment No. 1 to Second Amended and Restated Bylaws of Kilroy Realty Corporation
(3)
|
|
|
|
3.(ii)3
|
|
Sixth Amendment and Restated Agreement of Limited Partnership of Kilroy Realty, L.P., dated March 27, 2012
(4)
|
|
|
|
4.1*
|
|
Registration Rights Agreement dated July 31, 2012
|
|
|
|
10.1
|
|
Promissory Note, dated June 28, 2012
(5)
|
|
|
|
10.2
|
|
Loan Agreement dated June 28, 2012, by and between KR MML 12701, LLC and Massachusetts Mutual Life Insurance Company
(5)
|
|
|
|
10.3
|
|
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing (Irvine) for 2211 Michelson Drive, Irvine, California, dated June 28, 2012
(5)
|
|
|
|
10.4
|
|
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing (Santa Monica) for 2100-2110 Colorado Avenue, Santa Monica, California, dated June 28, 2012
(5)
|
|
|
|
10.5
|
|
Recourse Guaranty Agreement, dated June 28, 2012
(5)
|
|
|
|
10.6
|
|
Environmental Indemnification Agreement, dated June 28, 2012
(5)
|
|
|
|
31.1*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
31.2*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
31.3*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
31.4*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
32.1*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
32.2*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
32.3*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
32.4*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
101.1
|
|
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited).
(6)
|
*
|
Filed herewith
|
†
|
Management contract or compensatory plan or arrangement
|
(1)
|
Previously filed by Kilroy Realty, L.P. as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010.
|
(2)
|
Previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 12, 2008.
|
(3)
|
Previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 27, 2009.
|
(4)
|
Previously filed by Kilroy Realty Corporation on Form 8-K as filed with the Securities and Exchange Commission on April 2, 2012.
|
(5)
|
Previously filed by Kilroy Realty Corporation on Form 8-K as filed with the Securities and Exchange Commission on July 5, 2012.
|
(6)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
|
KILROY REALTY CORPORATION
|
||
|
|
|
|
By:
|
/s/ John B. Kilroy, Jr.
|
|
|
John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
KILROY REALTY, L.P.
|
||
|
|
|
BY:
|
KILROY REALTY CORPORATION
|
|
|
Its general partner
|
|
|
|
|
|
By:
|
/s/ John B. Kilroy, Jr.
|
|
|
John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ John B. Kilroy, Jr.
|
John B. Kilroy, Jr.
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and
Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P. ;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ John B. Kilroy, Jr.
|
John B. Kilroy, Jr.
|
President and Chief Executive Officer
|
Kilroy Realty Corporation, sole general partner of
|
Kilroy Realty, L.P.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P. ;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and
Chief Financial Officer
|
Kilroy Realty Corporation, sole general partner of
|
Kilroy Realty, L.P.
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
June 30, 2012
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ John B. Kilroy, Jr.
|
John B. Kilroy, Jr.
|
President and Chief Executive Officer
|
|
Date: August 2, 2012
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
June 30, 2012
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and
Chief Financial Officer
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Date: August 2, 2012
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
June 30, 2012
(the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ John B. Kilroy, Jr.
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John B. Kilroy, Jr.
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President and Chief Executive Officer
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Kilroy Realty Corporation, sole general partner of
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Kilroy Realty, L.P.
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Date: August 2, 2012
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
June 30, 2012
(the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and
Chief Financial Officer
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Kilroy Realty Corporation, sole general partner of
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Kilroy Realty, L.P.
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Date: August 2, 2012
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