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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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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•
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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, Stockholders' Equity of the Company;
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◦
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Note 8, Partners' Capital of the Operating Partnership;
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◦
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Note 12, Net Income (Loss) Available to Common Stockholders Per Share of the Company; and
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◦
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Note 13, Net Income (Loss) Available to Common Unitholders Per Unit 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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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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Item 6.
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June 30, 2013
|
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December 31, 2012
|
||||
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(unaudited)
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|
||||
ASSETS
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|
||||
REAL ESTATE ASSETS:
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|
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|
||||
Land and improvements (Note 2)
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$
|
635,874
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$
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612,714
|
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Buildings and improvements (Note 2)
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3,652,102
|
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|
3,335,026
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|
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Undeveloped land and construction in progress (Note 2)
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808,934
|
|
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809,654
|
|
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Total real estate held for investment
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5,096,910
|
|
|
4,757,394
|
|
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Accumulated depreciation and amortization
|
(815,961
|
)
|
|
(756,515
|
)
|
||
Total real estate assets held for investment, net ($12,007 and $319,770 of VIE, respectively, Note 1)
|
4,280,949
|
|
|
4,000,879
|
|
||
CASH AND CASH EQUIVALENTS
|
107,823
|
|
|
16,700
|
|
||
RESTRICTED CASH (Note 1)
|
19,241
|
|
|
247,544
|
|
||
MARKETABLE SECURITIES (Note 11)
|
8,286
|
|
|
7,435
|
|
||
CURRENT RECEIVABLES, NET (Note 4)
|
10,515
|
|
|
9,220
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 4)
|
124,815
|
|
|
115,418
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Notes 2 and 3)
|
188,702
|
|
|
189,968
|
|
||
DEFERRED FINANCING COSTS, NET
|
19,115
|
|
|
18,971
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET
|
16,076
|
|
|
9,949
|
|
||
TOTAL ASSETS
|
$
|
4,775,522
|
|
|
$
|
4,616,084
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt (Notes 2, 5 and 11)
|
$
|
569,042
|
|
|
$
|
561,096
|
|
Exchangeable senior notes, net (Notes 5 and 11)
|
166,119
|
|
|
163,944
|
|
||
Unsecured debt, net (Notes 5 and 11)
|
1,430,964
|
|
|
1,130,895
|
|
||
Unsecured line of credit (Notes 5 and 11)
|
—
|
|
|
185,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
184,821
|
|
|
154,734
|
|
||
Accrued distributions (Note 14)
|
29,236
|
|
|
28,924
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Notes 2 and 3)
|
117,301
|
|
|
117,904
|
|
||
Rents received in advance and tenant security deposits
|
39,660
|
|
|
37,654
|
|
||
Total liabilities
|
2,537,143
|
|
|
2,380,151
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 10)
|
|
|
|
||||
EQUITY:
|
|
|
|
||||
Stockholders' Equity (Note 7):
|
|
|
|
||||
Preferred stock, $.01 par value, 30,000,000 shares authorized:
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock, $.01 par value,
4,600,000 shares authorized, 4,000,000 shares issued and outstanding ($100,000 liquidation preference) |
96,155
|
|
|
96,155
|
|
||
6.375% Series H Cumulative Redeemable Preferred stock, $.01 par value,
4,000,000 shares authorized, issued and outstanding ($100,000 liquidation preference) |
96,256
|
|
|
96,256
|
|
||
Common stock, $.01 par value, 150,000,000 shares authorized, 75,710,907 and 74,926,981 shares issued and outstanding, respectively
|
757
|
|
|
749
|
|
||
Additional paid-in capital
|
2,170,667
|
|
|
2,126,005
|
|
||
Distributions in excess of earnings
|
(177,484
|
)
|
|
(129,535
|
)
|
||
Total stockholders' equity
|
2,186,351
|
|
|
2,189,630
|
|
||
Noncontrolling interests:
|
|
|
|
||||
Common units of the Operating Partnership (Note 6)
|
47,143
|
|
|
46,303
|
|
||
Noncontrolling interest in consolidated subsidiary (Note 2)
|
4,885
|
|
|
—
|
|
||
Total noncontrolling interests
|
52,028
|
|
|
46,303
|
|
||
Total equity
|
2,238,379
|
|
|
2,235,933
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
4,775,522
|
|
|
$
|
4,616,084
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
108,342
|
|
|
$
|
88,474
|
|
|
$
|
215,722
|
|
|
$
|
172,823
|
|
Tenant reimbursements
|
10,399
|
|
|
8,102
|
|
|
20,286
|
|
|
15,282
|
|
||||
Other property income (Note 10)
|
5,737
|
|
|
535
|
|
|
5,967
|
|
|
1,403
|
|
||||
Total revenues
|
124,478
|
|
|
97,111
|
|
|
241,975
|
|
|
189,508
|
|
||||
EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
24,732
|
|
|
19,906
|
|
|
48,505
|
|
|
36,038
|
|
||||
Real estate taxes
|
10,439
|
|
|
8,160
|
|
|
20,776
|
|
|
15,825
|
|
||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
95
|
|
|
2
|
|
||||
Ground leases
|
889
|
|
|
615
|
|
|
1,736
|
|
|
1,422
|
|
||||
General and administrative expenses
|
9,855
|
|
|
9,251
|
|
|
19,524
|
|
|
18,018
|
|
||||
Acquisition-related expenses
|
164
|
|
|
1,813
|
|
|
819
|
|
|
3,341
|
|
||||
Depreciation and amortization
|
49,304
|
|
|
38,065
|
|
|
99,695
|
|
|
72,717
|
|
||||
Total expenses
|
95,383
|
|
|
77,810
|
|
|
191,150
|
|
|
147,363
|
|
||||
OTHER (EXPENSES) INCOME:
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (losses) (Note 11)
|
19
|
|
|
(110
|
)
|
|
411
|
|
|
374
|
|
||||
Interest expense (Note 5)
|
(19,434
|
)
|
|
(19,155
|
)
|
|
(39,168
|
)
|
|
(40,318
|
)
|
||||
Total other (expenses) income
|
(19,415
|
)
|
|
(19,265
|
)
|
|
(38,757
|
)
|
|
(39,944
|
)
|
||||
INCOME FROM CONTINUING OPERATIONS
|
9,680
|
|
|
36
|
|
|
12,068
|
|
|
2,201
|
|
||||
DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations
|
—
|
|
|
2,241
|
|
|
—
|
|
|
5,938
|
|
||||
Net gain on dispositions of discontinued operations (Note 2)
|
423
|
|
|
—
|
|
|
423
|
|
|
72,809
|
|
||||
Total income from discontinued operations
|
423
|
|
|
2,241
|
|
|
423
|
|
|
78,747
|
|
||||
NET INCOME
|
10,103
|
|
|
2,277
|
|
|
12,491
|
|
|
80,948
|
|
||||
Net (income) loss attributable to noncontrolling common units of the Operating Partnership
|
(157
|
)
|
|
20
|
|
|
(135
|
)
|
|
(1,775
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
9,946
|
|
|
2,297
|
|
|
12,356
|
|
|
79,173
|
|
||||
PREFERRED DISTRIBUTIONS AND DIVIDENDS:
|
|
|
|
|
|
|
|
||||||||
Distributions to noncontrolling cumulative redeemable preferred units of the Operating Partnership
|
—
|
|
|
(1,397
|
)
|
|
—
|
|
|
(2,794
|
)
|
||||
Preferred dividends
|
(3,313
|
)
|
|
(1,700
|
)
|
|
(6,626
|
)
|
|
(4,721
|
)
|
||||
Original issuance costs of redeemed preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,918
|
)
|
||||
Total preferred distributions and dividends
|
(3,313
|
)
|
|
(3,097
|
)
|
|
(6,626
|
)
|
|
(12,433
|
)
|
||||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
6,633
|
|
|
$
|
(800
|
)
|
|
$
|
5,730
|
|
|
$
|
66,740
|
|
Income (loss) from continuing operations available to common stockholders per common share - basic (Note 12)
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income (loss) from continuing operations available to common stockholders per common share - diluted (Note 12)
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Net income (loss) available to common stockholders per share - basic (Note 12)
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Net income (loss) available to common stockholders per share - diluted (Note 12)
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Weighted average common shares outstanding - basic (Note 12)
|
75,486,380
|
|
|
68,344,734
|
|
|
75,233,350
|
|
|
65,996,719
|
|
||||
Weighted average common shares outstanding - diluted (Note 12)
|
77,453,689
|
|
|
68,344,734
|
|
|
77,058,944
|
|
|
65,996,719
|
|
||||
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, 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
|
96,155
|
|
|
|
|
|
|
|
|
|
|
96,155
|
|
|
|
|
96,155
|
|
||||||||||||
Redemption of Series E and Series F Preferred stock
|
(121,582
|
)
|
|
|
|
|
|
|
|
(4,918
|
)
|
|
(126,500
|
)
|
|
|
|
(126,500
|
)
|
|||||||||||
Issuance of common stock
|
|
|
10,063,189
|
|
|
101
|
|
|
408,374
|
|
|
|
|
408,475
|
|
|
|
|
408,475
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
62,137
|
|
|
—
|
|
|
657
|
|
|
|
|
657
|
|
|
|
|
657
|
|
||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
3,827
|
|
|
|
|
3,827
|
|
|
|
|
3,827
|
|
||||||||||||
Repurchase of common stock and restricted stock units
|
|
|
(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 dividends and distributions
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders'
Equity
|
|
Non-Controlling Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2012
|
$
|
192,411
|
|
|
74,926,981
|
|
|
$
|
749
|
|
|
$
|
2,126,005
|
|
|
$
|
(129,535
|
)
|
|
$
|
2,189,630
|
|
|
$
|
46,303
|
|
|
$
|
2,235,933
|
|
Net income
|
|
|
|
|
|
|
|
|
12,356
|
|
|
12,356
|
|
|
135
|
|
|
12,491
|
|
|||||||||||
Issuance of common stock (Note 7)
|
|
|
814,408
|
|
|
8
|
|
|
42,781
|
|
|
|
|
42,789
|
|
|
|
|
42,789
|
|
||||||||||
Issuance of share-based compensation awards (Note 9)
|
|
|
—
|
|
|
|
|
702
|
|
|
|
|
702
|
|
|
|
|
702
|
|
|||||||||||
Noncash amortization of share-based compensation (Note 9)
|
|
|
|
|
|
|
4,711
|
|
|
|
|
4,711
|
|
|
|
|
4,711
|
|
||||||||||||
Repurchase of common stock and restricted stock units (Note 9)
|
|
|
(33,534
|
)
|
|
|
|
(1,668
|
)
|
|
|
|
(1,668
|
)
|
|
|
|
(1,668
|
)
|
|||||||||||
Settlement of restricted stock units for shares of common stock (Note 9)
|
|
|
2,579
|
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|||||||||||
Exercise of stock options, net
|
|
|
473
|
|
|
|
|
128
|
|
|
|
|
128
|
|
|
|
|
128
|
|
|||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(1,982
|
)
|
|
|
|
(1,982
|
)
|
|
1,982
|
|
|
—
|
|
|||||||||||
Contribution by noncontrolling interest in consolidated subsidiary (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
4,885
|
|
|
4,885
|
|
|||||||||||||
Preferred dividends and distributions
|
|
|
|
|
|
|
|
|
(6,626
|
)
|
|
(6,626
|
)
|
|
|
|
(6,626
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.70 per share/unit)
|
|
|
|
|
|
|
|
|
(53,679
|
)
|
|
(53,679
|
)
|
|
(1,277
|
)
|
|
(54,956
|
)
|
|||||||||||
BALANCE AS OF JUNE 30, 2013
|
$
|
192,411
|
|
|
75,710,907
|
|
|
$
|
757
|
|
|
$
|
2,170,667
|
|
|
$
|
(177,484
|
)
|
|
$
|
2,186,351
|
|
|
$
|
52,028
|
|
|
$
|
2,238,379
|
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
12,491
|
|
|
$
|
80,948
|
|
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
|
98,798
|
|
|
76,792
|
|
||
Increase in provision for bad debts
|
95
|
|
|
2
|
|
||
Depreciation of furniture, fixtures and equipment
|
897
|
|
|
584
|
|
||
Noncash amortization of share-based compensation awards
|
4,280
|
|
|
3,419
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
2,665
|
|
|
5,310
|
|
||
Noncash amortization of net below market rents (Note 3)
|
(4,077
|
)
|
|
(2,589
|
)
|
||
Net gain on dispositions of discontinued operations (Note 2)
|
(423
|
)
|
|
(72,809
|
)
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,959
|
)
|
|
(4,465
|
)
|
||
Straight-line rents
|
(12,085
|
)
|
|
(10,575
|
)
|
||
Net change in other operating assets
|
(6,128
|
)
|
|
(4,318
|
)
|
||
Net change in other operating liabilities
|
15,898
|
|
|
7,285
|
|
||
Insurance proceeds received for property damage
|
(448
|
)
|
|
(951
|
)
|
||
Net cash provided by operating activities
|
107,004
|
|
|
78,633
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties (Note 2)
|
(85,692
|
)
|
|
(272,256
|
)
|
||
Expenditures for acquisition of development and redevelopment properties
|
(2,653
|
)
|
|
(79,157
|
)
|
||
Expenditures for operating properties
|
(50,207
|
)
|
|
(40,218
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(125,230
|
)
|
|
(26,084
|
)
|
||
Net proceeds received from dispositions of operating properties
|
14,409
|
|
|
143,161
|
|
||
Insurance proceeds received for property damage
|
448
|
|
|
951
|
|
||
Increase in acquisition-related deposits
|
—
|
|
|
(28,250
|
)
|
||
Decrease in restricted cash (Note 1)
|
228,303
|
|
|
261
|
|
||
Net cash used in investing activities
|
(20,622
|
)
|
|
(301,592
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock (Note 7)
|
42,789
|
|
|
408,475
|
|
||
Net proceeds from issuance of Series G preferred stock
|
—
|
|
|
96,155
|
|
||
Redemption of Series E and Series F preferred stock
|
—
|
|
|
(126,500
|
)
|
||
Borrowings on unsecured line of credit
|
—
|
|
|
253,000
|
|
||
Repayments on unsecured line of credit
|
(185,000
|
)
|
|
(333,000
|
)
|
||
Proceeds from issuance of secured debt
|
—
|
|
|
97,000
|
|
||
Principal payments on secured debt
|
(87,228
|
)
|
|
(103,254
|
)
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
299,901
|
|
|
150,000
|
|
||
Repayments of exchangeable senior notes
|
—
|
|
|
(148,000
|
)
|
||
Financing costs
|
(3,547
|
)
|
|
(3,644
|
)
|
||
Repurchase of common stock and restricted stock units (Note 9)
|
(1,678
|
)
|
|
(603
|
)
|
||
Proceeds from exercise of stock options
|
128
|
|
|
129
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(53,998
|
)
|
|
(45,713
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(6,626
|
)
|
|
(7,752
|
)
|
||
Net cash provided by financing activities
|
4,741
|
|
|
236,293
|
|
||
Net increase in cash and cash equivalents
|
91,123
|
|
|
13,334
|
|
||
Cash and cash equivalents, beginning of period
|
16,700
|
|
|
4,777
|
|
||
Cash and cash equivalents, end of period
|
$
|
107,823
|
|
|
$
|
18,111
|
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $14,986 and $7,021 as of June 30, 2013 and 2012, respectively
|
$
|
31,592
|
|
|
$
|
36,935
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
58,502
|
|
|
$
|
13,062
|
|
Tenant improvements funded directly by tenants
|
$
|
7,073
|
|
|
$
|
9,838
|
|
Assumption of secured debt in connection with property acquisitions (Notes 2 and 5)
|
$
|
95,496
|
|
|
$
|
35,690
|
|
Assumption of other assets and liabilities in connection with operating and development property acquisitions, net (Note 2)
|
$
|
422
|
|
|
$
|
4,940
|
|
Contribution of land, net of related liabilities, by noncontrolling interest to consolidated subsidiary (Note 2)
|
$
|
4,885
|
|
|
$
|
—
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
27,137
|
|
|
$
|
24,726
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,692
|
|
|
$
|
1,577
|
|
Issuance of share-based compensation awards, net (Note 9)
|
$
|
9,833
|
|
|
$
|
30,762
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
|
(unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
REAL ESTATE ASSETS:
|
|
|
|
||||
Land and improvements (Note 2)
|
$
|
635,874
|
|
|
$
|
612,714
|
|
Buildings and improvements (Note 2)
|
3,652,102
|
|
|
3,335,026
|
|
||
Undeveloped land and construction in progress (Note 2)
|
808,934
|
|
|
809,654
|
|
||
Total real estate held for investment
|
5,096,910
|
|
|
4,757,394
|
|
||
Accumulated depreciation and amortization
|
(815,961
|
)
|
|
(756,515
|
)
|
||
Total real estate assets held for investment, net ($12,007 and $319,770 of VIE, respectively, Note 1)
|
4,280,949
|
|
|
4,000,879
|
|
||
CASH AND CASH EQUIVALENTS
|
107,823
|
|
|
16,700
|
|
||
RESTRICTED CASH (Note 1)
|
19,241
|
|
|
247,544
|
|
||
MARKETABLE SECURITIES (Note 11)
|
8,286
|
|
|
7,435
|
|
||
CURRENT RECEIVABLES, NET (Note 4)
|
10,515
|
|
|
9,220
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 4)
|
124,815
|
|
|
115,418
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Notes 2 and 3)
|
188,702
|
|
|
189,968
|
|
||
DEFERRED FINANCING COSTS, NET
|
19,115
|
|
|
18,971
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET
|
16,076
|
|
|
9,949
|
|
||
TOTAL ASSETS
|
$
|
4,775,522
|
|
|
$
|
4,616,084
|
|
LIABILITIES AND CAPITAL
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt (Notes 2, 5 and 11)
|
$
|
569,042
|
|
|
$
|
561,096
|
|
Exchangeable senior notes, net (Notes 5 and 11)
|
166,119
|
|
|
163,944
|
|
||
Unsecured debt, net (Notes 5 and 11)
|
1,430,964
|
|
|
1,130,895
|
|
||
Unsecured line of credit (Notes 5 and 11)
|
—
|
|
|
185,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
184,821
|
|
|
154,734
|
|
||
Accrued distributions (Note 14)
|
29,236
|
|
|
28,924
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Notes 2 and 3)
|
117,301
|
|
|
117,904
|
|
||
Rents received in advance and tenant security deposits
|
39,660
|
|
|
37,654
|
|
||
Total liabilities
|
2,537,143
|
|
|
2,380,151
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 10)
|
|
|
|
||||
CAPITAL:
|
|
|
|
||||
Partners' Capital (Note 8):
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred units,
4,000,000 units issued and outstanding ($100,000 liquidation preference)
|
96,155
|
|
|
96,155
|
|
||
6.375% Series H Cumulative Redeemable Preferred units,
4,000,000 units issued and outstanding ($100,000 liquidation preference)
|
96,256
|
|
|
96,256
|
|
||
Common units, 75,710,907 and 74,926,981 held by the general partner and 1,821,503 and 1,826,503 held by common limited partners issued and outstanding, respectively
|
2,037,673
|
|
|
2,040,243
|
|
||
Total partners' capital
|
2,230,084
|
|
|
2,232,654
|
|
||
Noncontrolling interests in consolidated subsidiaries (Note 2)
|
8,295
|
|
|
3,279
|
|
||
Total capital
|
2,238,379
|
|
|
2,235,933
|
|
||
TOTAL LIABILITIES AND CAPITAL
|
$
|
4,775,522
|
|
|
$
|
4,616,084
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
108,342
|
|
|
88,474
|
|
|
$
|
215,722
|
|
|
$
|
172,823
|
|
|
Tenant reimbursements
|
10,399
|
|
|
8,102
|
|
|
20,286
|
|
|
15,282
|
|
||||
Other property income (Note 10)
|
5,737
|
|
|
535
|
|
|
5,967
|
|
|
1,403
|
|
||||
Total revenues
|
124,478
|
|
|
97,111
|
|
|
241,975
|
|
|
189,508
|
|
||||
EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
24,732
|
|
|
19,906
|
|
|
48,505
|
|
|
36,038
|
|
||||
Real estate taxes
|
10,439
|
|
|
8,160
|
|
|
20,776
|
|
|
15,825
|
|
||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
95
|
|
|
2
|
|
||||
Ground leases
|
889
|
|
|
615
|
|
|
1,736
|
|
|
1,422
|
|
||||
General and administrative expenses
|
9,855
|
|
|
9,251
|
|
|
19,524
|
|
|
18,018
|
|
||||
Acquisition-related expenses
|
164
|
|
|
1,813
|
|
|
819
|
|
|
3,341
|
|
||||
Depreciation and amortization
|
49,304
|
|
|
38,065
|
|
|
99,695
|
|
|
72,717
|
|
||||
Total expenses
|
95,383
|
|
|
77,810
|
|
|
191,150
|
|
|
147,363
|
|
||||
OTHER (EXPENSES) INCOME:
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (losses) (Note 11)
|
19
|
|
|
(110
|
)
|
|
411
|
|
|
374
|
|
||||
Interest expense (Note 5)
|
(19,434
|
)
|
|
(19,155
|
)
|
|
(39,168
|
)
|
|
(40,318
|
)
|
||||
Total other (expenses) income
|
(19,415
|
)
|
|
(19,265
|
)
|
|
(38,757
|
)
|
|
(39,944
|
)
|
||||
INCOME FROM CONTINUING OPERATIONS
|
9,680
|
|
|
36
|
|
|
12,068
|
|
|
2,201
|
|
||||
DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations
|
—
|
|
|
2,241
|
|
|
—
|
|
|
5,938
|
|
||||
Net gain on dispositions of discontinued operations (Note 2)
|
423
|
|
|
—
|
|
|
423
|
|
|
72,809
|
|
||||
Total income from discontinued operations
|
423
|
|
|
2,241
|
|
|
423
|
|
|
78,747
|
|
||||
NET INCOME
|
10,103
|
|
|
2,277
|
|
|
12,491
|
|
|
80,948
|
|
||||
Net income attributable to noncontrolling interests in consolidated subsidiaries
|
(62
|
)
|
|
(43
|
)
|
|
(131
|
)
|
|
(96
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
10,041
|
|
|
2,234
|
|
|
12,360
|
|
|
80,852
|
|
||||
Preferred distributions
|
(3,313
|
)
|
|
(3,097
|
)
|
|
(6,626
|
)
|
|
(7,515
|
)
|
||||
Original issuance costs of redeemed preferred units
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,918
|
)
|
||||
Total preferred distributions
|
(3,313
|
)
|
|
(3,097
|
)
|
|
(6,626
|
)
|
|
(12,433
|
)
|
||||
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS
|
$
|
6,728
|
|
|
$
|
(863
|
)
|
|
$
|
5,734
|
|
|
$
|
68,419
|
|
Income (loss) from continuing operations available to common unitholders per common unit - basic (Note 13)
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income (loss) from continuing operations available to common unitholders per common unit - diluted (Note 13)
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Net income (loss) available to common unitholders per unit - basic (Note 13)
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Net income (loss) available to common unitholders per unit - diluted (Note 13)
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Weighted average common units outstanding - basic (Note 13)
|
77,310,685
|
|
|
70,062,865
|
|
|
77,058,748
|
|
|
67,714,850
|
|
||||
Weighted average common units outstanding - diluted (Note 13)
|
79,277,994
|
|
|
70,062,865
|
|
|
78,884,342
|
|
|
67,714,850
|
|
||||
Dividends 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, 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
|
96,155
|
|
|
|
|
|
|
96,155
|
|
|
|
|
96,155
|
|
||||||||
Redemption of Series E and Series F Preferred units
|
(121,582
|
)
|
|
|
|
(4,918
|
)
|
|
(126,500
|
)
|
|
|
|
(126,500
|
)
|
|||||||
Issuance of common units
|
|
|
10,063,189
|
|
|
408,475
|
|
|
408,475
|
|
|
|
|
408,475
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
62,137
|
|
|
657
|
|
|
657
|
|
|
|
|
657
|
|
|||||||
Noncash amortization of share-based compensation
|
|
|
|
|
3,827
|
|
|
3,827
|
|
|
|
|
3,827
|
|
||||||||
Repurchase/redemption of common units and restricted stock units
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2012
|
$
|
192,411
|
|
|
76,753,484
|
|
|
$
|
2,040,243
|
|
|
$
|
2,232,654
|
|
|
$
|
3,279
|
|
|
$
|
2,235,933
|
|
Net income
|
|
|
|
|
12,360
|
|
|
12,360
|
|
|
131
|
|
|
12,491
|
|
|||||||
Issuance of common units (Note 8)
|
|
|
809,408
|
|
|
42,789
|
|
|
42,789
|
|
|
|
|
42,789
|
|
|||||||
Issuance of share-based compensation awards (Note 9)
|
|
|
—
|
|
|
702
|
|
|
702
|
|
|
|
|
702
|
|
|||||||
Noncash amortization of share-based compensation (Note 9)
|
|
|
|
|
4,711
|
|
|
4,711
|
|
|
|
|
4,711
|
|
||||||||
Repurchase of common units and restricted stock units (Note 9)
|
|
|
(33,534
|
)
|
|
(1,668
|
)
|
|
(1,668
|
)
|
|
|
|
(1,668
|
)
|
|||||||
Settlement of restricted stock units (Note 9)
|
|
|
2,579
|
|
|
(10
|
)
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|||||||
Exercise of stock options, net
|
|
|
473
|
|
|
128
|
|
|
128
|
|
|
|
|
128
|
|
|||||||
Contribution by noncontrolling interest in consolidated subsidiary (Note 2)
|
|
|
|
|
|
|
|
|
4,885
|
|
|
4,885
|
|
|||||||||
Preferred distributions
|
|
|
|
|
(6,626
|
)
|
|
(6,626
|
)
|
|
|
|
(6,626
|
)
|
||||||||
Distributions declared per common unit ($0.70 per unit)
|
|
|
|
|
(54,956
|
)
|
|
(54,956
|
)
|
|
|
|
(54,956
|
)
|
||||||||
BALANCE AS OF JUNE 30, 2013
|
$
|
192,411
|
|
|
77,532,410
|
|
|
$
|
2,037,673
|
|
|
$
|
2,230,084
|
|
|
$
|
8,295
|
|
|
$
|
2,238,379
|
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
12,491
|
|
|
$
|
80,948
|
|
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
|
98,798
|
|
|
76,792
|
|
||
Increase in provision for bad debts
|
95
|
|
|
2
|
|
||
Depreciation of furniture, fixtures and equipment
|
897
|
|
|
584
|
|
||
Noncash amortization of share-based compensation awards
|
4,280
|
|
|
3,419
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
2,665
|
|
|
5,310
|
|
||
Noncash amortization of net below market rents (Note 3)
|
(4,077
|
)
|
|
(2,589
|
)
|
||
Net gain on dispositions of discontinued operations (Note 2)
|
(423
|
)
|
|
(72,809
|
)
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,959
|
)
|
|
(4,465
|
)
|
||
Straight-line rents
|
(12,085
|
)
|
|
(10,575
|
)
|
||
Net change in other operating assets
|
(6,128
|
)
|
|
(4,318
|
)
|
||
Net change in other operating liabilities
|
15,898
|
|
|
7,285
|
|
||
Insurance proceeds received for property damage
|
(448
|
)
|
|
(951
|
)
|
||
Net cash provided by operating activities
|
107,004
|
|
|
78,633
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties (Note 2)
|
(85,692
|
)
|
|
(272,256
|
)
|
||
Expenditures for acquisition of development and redevelopment properties
|
(2,653
|
)
|
|
(79,157
|
)
|
||
Expenditures for operating properties
|
(50,207
|
)
|
|
(40,218
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(125,230
|
)
|
|
(26,084
|
)
|
||
Net proceeds received from dispositions of operating properties
|
14,409
|
|
|
143,161
|
|
||
Insurance proceeds received for property damage
|
448
|
|
|
951
|
|
||
Increase in acquisition-related deposits
|
—
|
|
|
(28,250
|
)
|
||
Decrease in restricted cash (Note 1)
|
228,303
|
|
|
261
|
|
||
Net cash used in investing activities
|
(20,622
|
)
|
|
(301,592
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common units (Note 8)
|
42,789
|
|
|
408,475
|
|
||
Net proceeds from issuance of Series G preferred units
|
—
|
|
|
96,155
|
|
||
Redemption of Series E and Series F preferred units
|
—
|
|
|
(126,500
|
)
|
||
Borrowings on unsecured line of credit
|
—
|
|
|
253,000
|
|
||
Repayments on unsecured line of credit
|
(185,000
|
)
|
|
(333,000
|
)
|
||
Proceeds from issuance of secured debt
|
—
|
|
|
97,000
|
|
||
Principal payments on secured debt
|
(87,228
|
)
|
|
(103,254
|
)
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
299,901
|
|
|
150,000
|
|
||
Repayments of exchangeable senior notes
|
—
|
|
|
(148,000
|
)
|
||
Financing costs
|
(3,547
|
)
|
|
(3,644
|
)
|
||
Repurchase of common units and restricted stock units (Note 9)
|
(1,678
|
)
|
|
(603
|
)
|
||
Proceeds from exercise of stock options
|
128
|
|
|
129
|
|
||
Distributions paid to common unitholders
|
(53,998
|
)
|
|
(45,713
|
)
|
||
Distributions paid to preferred unitholders
|
(6,626
|
)
|
|
(7,752
|
)
|
||
Net cash provided by financing activities
|
4,741
|
|
|
236,293
|
|
||
Net increase in cash and cash equivalents
|
91,123
|
|
|
13,334
|
|
||
Cash and cash equivalents, beginning of period
|
16,700
|
|
|
4,777
|
|
||
Cash and cash equivalents, end of period
|
$
|
107,823
|
|
|
$
|
18,111
|
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $14,986 and $7,021 as of June 30, 2013 and 2012, respectively
|
$
|
31,592
|
|
|
$
|
36,935
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
58,502
|
|
|
$
|
13,062
|
|
Tenant improvements funded directly by tenants
|
$
|
7,073
|
|
|
$
|
9,838
|
|
Assumption of secured debt in connection with property acquisitions (Notes 2 and 5)
|
$
|
95,496
|
|
|
$
|
35,690
|
|
Assumption of other assets and liabilities in connection with operating and development property acquisitions, net (Note 2)
|
$
|
422
|
|
|
$
|
4,940
|
|
Contribution of land, net of related liabilities, by noncontrolling interest to consolidated subsidiary (Note 2)
|
$
|
4,885
|
|
|
$
|
—
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of distributions payable to common unitholders
|
$
|
27,137
|
|
|
$
|
24,726
|
|
Accrual of distributions payable to preferred unitholders
|
$
|
1,692
|
|
|
$
|
1,577
|
|
Issuance of share-based compensation awards, net (Note 9)
|
$
|
9,833
|
|
|
$
|
30,762
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage Occupied
|
||||
Office Properties
|
115
|
|
|
13,478,791
|
|
|
545
|
|
|
90.7
|
%
|
|
Number of Properties
|
|
Estimated Rentable Square Feet
|
|
Development properties under construction
(1)
|
5
|
|
1,516,000
|
|
Lease-up properties
|
2
|
|
508,000
|
|
Property
|
|
Date of Acquisition
|
|
Number of
Buildings
|
|
Rentable Square
Feet
|
|
Occupancy as of June 30, 2013
|
|
Purchase
Price
(in millions)
(1)
|
|||
320 Westlake Ave. N. and 321 Terry Ave. N.
(2) (3)
|
|
|
|
|
|
|
|
|
|
|
|||
Seattle, WA
|
|
January 16, 2013
|
|
2
|
|
320,398
|
|
|
100.0%
|
|
$
|
170.0
|
|
Total
|
|
|
|
2
|
|
320,398
|
|
|
|
|
$
|
170.0
|
|
(1)
|
Excludes acquisition-related costs and includes assumed tenant improvements.
|
(2)
|
We acquired these properties through a new special purpose entity wholly owned by the Finance Partnership.
|
(3)
|
In connection with this acquisition, we assumed secured debt with an outstanding principal balance of
$83.9 million
that was recorded at fair value on the acquisition date, resulting in a premium of approximately
$11.6 million
(see Note 5).
|
(1)
|
Represents buildings, building improvements and tenant improvements.
|
(2)
|
Represents in-place leases (approximately
$13.0 million
with a weighted average amortization period of
3.9 years
), above-market leases (approximately
$0.3 million
with a weighted average amortization period of
4.6 years
), and leasing commissions (approximately
$2.7 million
with a weighted average amortization period of
3.0 years
).
|
(3)
|
Represents below-market leases (approximately
$1.6 million
with a weighted average amortization period of
9.2 years
).
|
(4)
|
Represents the mortgage loan, which includes an unamortized premium of approximately
$11.6 million
at the date of acquisition, assumed in connection with the properties acquired in January 2013 (see Note 5).
|
(5)
|
Reflects the purchase price net of assumed secured debt and other lease-related obligations.
|
|
(in thousands)
|
||
Assets
|
|
||
Undeveloped land and construction in progress
|
$
|
11,222
|
|
Total assets
|
11,222
|
|
|
|
|
||
Liabilities
|
|
||
Secured debt
|
1,750
|
|
|
Accounts payable, accrued expenses and other liabilities
|
1,952
|
|
|
Total liabilities
|
3,702
|
|
|
|
|
||
Noncontrolling interest in consolidated subsidiary
|
4,885
|
|
|
|
|
||
Net assets and liabilities acquired
|
$
|
2,635
|
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
|
(in thousands)
|
||||||
Deferred Leasing Costs and Acquisition-related Intangible Assets, net:
|
|
|
|
||||
Deferred leasing costs
|
$
|
168,622
|
|
|
$
|
168,087
|
|
Accumulated amortization
|
(58,835
|
)
|
|
(61,443
|
)
|
||
Deferred leasing costs, net
|
109,787
|
|
|
106,644
|
|
||
Above-market operating leases
|
26,601
|
|
|
27,977
|
|
||
Accumulated amortization
|
(13,340
|
)
|
|
(12,180
|
)
|
||
Above-market operating leases, net
|
13,261
|
|
|
15,797
|
|
||
In-place leases
|
106,100
|
|
|
101,061
|
|
||
Accumulated amortization
|
(40,927
|
)
|
|
(34,019
|
)
|
||
In-place leases, net
|
65,173
|
|
|
67,042
|
|
||
Below-market ground lease obligation
|
490
|
|
|
690
|
|
||
Accumulated amortization
|
(9
|
)
|
|
(205
|
)
|
||
Below-market ground lease obligation, net
|
481
|
|
|
485
|
|
||
Total deferred leasing costs and acquisition-related intangible assets, net
|
$
|
188,702
|
|
|
$
|
189,968
|
|
Acquisition-related Intangible Liabilities, net
(1)
:
|
|
|
|
||||
Below-market operating leases
|
$
|
70,480
|
|
|
$
|
70,486
|
|
Accumulated amortization
|
(22,853
|
)
|
|
(17,555
|
)
|
||
Below-market operating leases, net
|
47,627
|
|
|
52,931
|
|
||
Above-market ground lease obligation
|
6,320
|
|
|
6,320
|
|
||
Accumulated amortization
|
(172
|
)
|
|
(122
|
)
|
||
Above-market ground lease obligation, net
|
6,148
|
|
|
6,198
|
|
||
Total acquisition-related intangible liabilities, net
|
$
|
53,775
|
|
|
$
|
59,129
|
|
(1)
|
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,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Deferred leasing costs
(1)
|
$
|
6,093
|
|
|
$
|
5,293
|
|
|
$
|
13,937
|
|
|
$
|
9,791
|
|
Above-market operating leases
(2)
|
1,358
|
|
|
1,375
|
|
|
2,796
|
|
|
2,746
|
|
||||
In-place leases
(1)
|
7,412
|
|
|
4,598
|
|
|
14,870
|
|
|
8,379
|
|
||||
Below-market ground lease obligation
(3)
|
2
|
|
|
51
|
|
|
4
|
|
|
101
|
|
||||
Below-market operating leases
(4)
|
(3,388
|
)
|
|
(3,439
|
)
|
|
(6,873
|
)
|
|
(5,335
|
)
|
||||
Above-market ground lease obligation
(5)
|
(25
|
)
|
|
(19
|
)
|
|
(50
|
)
|
|
(35
|
)
|
||||
Total
|
$
|
11,452
|
|
|
$
|
7,859
|
|
|
$
|
24,684
|
|
|
$
|
15,647
|
|
(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
|
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 2013
|
$
|
12,837
|
|
|
$
|
2,581
|
|
|
$
|
13,462
|
|
|
$
|
4
|
|
|
$
|
(6,458
|
)
|
|
$
|
(50
|
)
|
2014
|
23,051
|
|
|
4,389
|
|
|
18,012
|
|
|
8
|
|
|
(11,512
|
)
|
|
(101
|
)
|
||||||
2015
|
19,084
|
|
|
2,586
|
|
|
11,729
|
|
|
8
|
|
|
(8,998
|
)
|
|
(101
|
)
|
||||||
2016
|
16,403
|
|
|
1,559
|
|
|
8,613
|
|
|
8
|
|
|
(6,814
|
)
|
|
(101
|
)
|
||||||
2017
|
13,856
|
|
|
1,225
|
|
|
6,818
|
|
|
8
|
|
|
(5,747
|
)
|
|
(101
|
)
|
||||||
Thereafter
|
24,556
|
|
|
921
|
|
|
6,539
|
|
|
445
|
|
|
(8,098
|
)
|
|
(5,694
|
)
|
||||||
Total
|
$
|
109,787
|
|
|
$
|
13,261
|
|
|
$
|
65,173
|
|
|
$
|
481
|
|
|
$
|
(47,627
|
)
|
|
$
|
(6,148
|
)
|
(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,
2013 |
|
December 31,
2012 |
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
13,038
|
|
|
$
|
11,801
|
|
Allowance for uncollectible tenant receivables
|
(2,523
|
)
|
|
(2,581
|
)
|
||
Current receivables, net
|
$
|
10,515
|
|
|
$
|
9,220
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
126,942
|
|
|
$
|
118,025
|
|
Allowance for deferred rent receivables
|
(2,127
|
)
|
|
(2,607
|
)
|
||
Deferred rent receivables, net
|
$
|
124,815
|
|
|
$
|
115,418
|
|
|
Annual Stated
|
|
GAAP
|
|
|
|
|
|
|
||||
Type of Debt
|
Interest Rate
(1)
|
|
Effective Rate
(1)(2)
|
|
Maturity Date
|
|
June 30, 2013
(3)
|
|
December 31, 2012
(3)
|
||||
|
|
|
|
|
|
|
(in thousands)
|
||||||
Mortgage note payable
|
4.27%
|
|
4.27%
|
|
February 2018
|
|
$
|
134,255
|
|
|
$
|
135,000
|
|
Mortgage note payable
(4)
|
4.48%
|
|
4.48%
|
|
July 2027
|
|
97,000
|
|
|
97,000
|
|
||
Mortgage note payable
(4)(5)
|
6.05%
|
|
3.50%
|
|
June 2019
|
|
94,103
|
|
|
—
|
|
||
Mortgage note payable
(6)
|
6.37%
|
|
3.55%
|
|
April 2013
|
|
—
|
|
|
83,116
|
|
||
Mortgage note payable
|
6.51%
|
|
6.51%
|
|
February 2017
|
|
68,147
|
|
|
68,615
|
|
||
Mortgage note payable
(4)
|
5.23%
|
|
3.50%
|
|
January 2016
|
|
55,437
|
|
|
56,302
|
|
||
Mortgage note payable
(4)
|
5.57%
|
|
3.25%
|
|
February 2016
|
|
42,336
|
|
|
43,016
|
|
||
Mortgage note payable
(4)
|
5.09%
|
|
3.50%
|
|
August 2015
|
|
35,112
|
|
|
35,379
|
|
||
Mortgage note payable
(4)
|
4.94%
|
|
4.00%
|
|
April 2015
|
|
28,297
|
|
|
28,941
|
|
||
Mortgage note payable
|
7.15%
|
|
7.15%
|
|
May 2017
|
|
10,111
|
|
|
11,210
|
|
||
Other
|
Various
|
|
Various
|
|
Various
|
|
4,244
|
|
|
2,517
|
|
||
Total
|
|
|
|
|
|
|
$
|
569,042
|
|
|
$
|
561,096
|
|
(1)
|
All interest rates presented are fixed-rate interest rates.
|
(2)
|
This represents the rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of discounts/premiums, excluding debt issuance costs.
|
(3)
|
Amounts reported include the amounts of unamortized debt premiums and discounts for the periods presented.
|
(4)
|
The secured debt and the related properties that secure the debt are held in a special purpose entity and the properties are not available to satisfy the debts and other obligations of the Company or the Operating Partnership.
|
(5)
|
In January 2013, in connection with the acquisition of two office buildings in Seattle, Washington, we assumed a mortgage loan that is secured by the project. The assumed mortgage had a principal balance of
$83.9 million
at the acquisition date and was recorded at fair value on the date of the acquisition resulting in a premium of approximately
$11.6 million
. The loan requires monthly principal and interest payments based on a
6.4
year amortization period.
|
(6)
|
In January 2013, we repaid this loan prior to the stated maturity.
|
|
4.25% Exchangeable Notes
|
||||||
|
June 30,
2013 |
|
December 31,
2012 |
||||
|
(in thousands)
|
||||||
Principal amount
|
$
|
172,500
|
|
|
$
|
172,500
|
|
Unamortized discount
|
(6,381
|
)
|
|
(8,556
|
)
|
||
Net carrying amount of liability component
|
$
|
166,119
|
|
|
$
|
163,944
|
|
Carrying amount of equity component
|
$19,835
|
||||||
Issuance date
|
November 2009
|
||||||
Maturity date
|
November 2014
|
||||||
Stated coupon rate
(1)
|
4.25%
|
||||||
Effective interest rate
(2)
|
7.13%
|
||||||
Exchange rate per $1,000 principal value of the 4.25% 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 4.25% 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.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Per share average trading price of the Company's common stock
|
$54.49
|
|
$46.75
|
|
$52.86
|
|
$44.82
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands)
|
||||||||||||||
Approximate fair value of shares upon conversion
|
$
|
259,200
|
|
|
$
|
226,300
|
|
|
$
|
254,000
|
|
|
$
|
218,600
|
|
Principal amount of the 4.25% Exchangeable Notes
|
172,500
|
|
|
172,500
|
|
|
172,500
|
|
|
172,500
|
|
||||
Approximate fair value in excess amount of principal amount
|
$
|
86,700
|
|
|
$
|
53,800
|
|
|
$
|
81,500
|
|
|
$
|
46,100
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
(1)
|
||||||||
|
(in thousands)
|
||||||||||||||
Contractual interest payments
|
$
|
1,833
|
|
|
$
|
2,020
|
|
|
$
|
3,666
|
|
|
$
|
5,055
|
|
Amortization of discount
|
1,097
|
|
|
1,155
|
|
|
2,175
|
|
|
2,952
|
|
||||
Interest expense attributable to the Exchangeable Notes
|
$
|
2,930
|
|
|
$
|
3,175
|
|
|
$
|
5,841
|
|
|
$
|
8,007
|
|
(1)
|
The Company repaid the 3.25% Exchangeable Notes in April 2012. Interest payments and discount amortization for the three and six months ended June 30, 2013 are solely attributable to the 4.25% Exchangeable Notes.
|
|
4.25% Exchangeable Notes
|
||
Referenced shares of common stock
|
4,800,796
|
|
|
Exchange price including effect of capped calls
|
$
|
42.81
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
185,000
|
|
Remaining borrowing capacity
|
500,000
|
|
|
315,000
|
|
||
Total borrowing capacity
(1)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Interest rate
(2)
|
|
|
|
1.66
|
%
|
||
Facility fee-annual rate
(3)
|
0.300%
|
||||||
Maturity date
(4)
|
April 2017
|
(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 revolving credit facility.
|
(2)
|
The revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus
1.450%
as of both
June 30, 2013
and
December 31, 2012
. No interest rate is shown as of June 30, 2013 because no borrowings were outstanding.
|
(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, from 2010 to 2012 we incurred debt origination and legal costs totaling approximately
$10.2 million
that are currently being amortized through the maturity date of the revolving credit facility.
|
(4)
|
Under the terms of the revolving credit facility, we may exercise an option to extend the maturity date by one year.
|
Year
|
(in thousands)
|
|
||
Remaining 2013
|
$
|
6,458
|
|
(1)
|
2014
|
265,346
|
|
|
|
2015
|
395,104
|
|
|
|
2016
|
249,431
|
|
|
|
2017
|
71,748
|
|
|
|
Thereafter
|
1,169,741
|
|
|
|
Total
|
$
|
2,157,828
|
|
(2)
|
(1)
|
Includes the
$1.8 million
note payable assumed in June 2013 in connection with the formation of new consolidated subsidiary (see Note 2). The Company currently expects to pay off the note prior to its maturity in the third quarter of 2013.
|
(2)
|
Includes gross principal balance of outstanding debt before impact of net unamortized premiums totaling approximately
$8.3 million
.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
27,914
|
|
|
$
|
23,489
|
|
|
$
|
55,380
|
|
|
$
|
48,483
|
|
Capitalized interest
|
(8,480
|
)
|
|
(4,334
|
)
|
|
(16,212
|
)
|
|
(8,165
|
)
|
||||
Interest expense
|
$
|
19,434
|
|
|
$
|
19,155
|
|
|
$
|
39,168
|
|
|
$
|
40,318
|
|
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||
|
(in millions, except share and per share data)
|
||||||
Common shares sold during the period
|
360,729
|
|
|
814,408
|
|
||
Weighted average price per common share
|
$
|
54.93
|
|
|
$
|
53.66
|
|
Aggregate gross proceeds
|
$
|
19.8
|
|
|
$
|
43.7
|
|
Aggregate net proceeds after sales agent compensation
|
$
|
19.4
|
|
|
$
|
42.8
|
|
|
April 2013 Market Measure-based RSU Grant
|
Grant date fair value per share
|
$44.55
|
Expected share price volatility
|
27.00%
|
Risk-free interest rate
|
0.90%
|
Dividend yield
|
3.60%
|
Expected life
|
6 years
|
|
Nonvested RSUs
|
|
Vested RSUs
|
|
Total RSUs
|
|||||||
|
Amount
|
|
Weighted-Average
Grant Date Fair Value Per Share
|
|
||||||||
Outstanding at January 1, 2013
|
88,491
|
|
|
$
|
41.20
|
|
|
14,748
|
|
|
103,239
|
|
Granted
|
9,542
|
|
|
44.55
|
|
|
—
|
|
|
9,542
|
|
|
Vested
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Settled
|
—
|
|
|
|
|
—
|
|
|
—
|
|
||
Issuance of dividend equivalents
|
—
|
|
|
|
|
—
|
|
|
—
|
|
||
Modified from time based
(1)
|
61,327
|
|
|
53.05
|
|
|
—
|
|
|
61,327
|
|
|
Canceled
|
|
|
|
|
—
|
|
|
—
|
|
|||
Outstanding as of June 30, 2013
|
159,360
|
|
|
$
|
45.96
|
|
|
14,748
|
|
|
174,108
|
|
(1)
|
During the three months ended June 30, 2013 the terms of time-based RSU's granted to certain officers of the Company in January were modified to include market-measure and performance-based vesting requirements.
|
|
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
(in thousands)
|
|||||||
2013
|
9,542
|
|
|
$
|
44.55
|
|
|
—
|
|
|
$
|
—
|
|
|
2012
|
103,239
|
|
|
41.20
|
|
0.0412
|
|
—
|
|
|
—
|
|
|
Nonvested RSUs
|
|
Vested RSUs
|
|
Total RSUs
|
|||||||
|
Amount
|
|
Weighted-Average
Grant Date Fair Value Per Share
|
|
||||||||
Outstanding at January 1, 2013
|
279,102
|
|
|
$
|
41.30
|
|
|
769,761
|
|
|
1,048,863
|
|
Granted
|
173,758
|
|
|
49.45
|
|
|
—
|
|
|
173,758
|
|
|
Vested
|
(73,574
|
)
|
|
38.80
|
|
|
73,574
|
|
|
—
|
|
|
Settled
(1)
|
|
|
|
|
(8,559
|
)
|
|
(8,559
|
)
|
|||
Issuance of dividend equivalents
(2)
|
|
|
|
|
13,683
|
|
|
13,683
|
|
|||
Modified to market-measure based
(3)
|
(61,327
|
)
|
|
53.05
|
|
|
—
|
|
|
(61,327
|
)
|
|
Canceled
(1)(4)
|
|
|
|
|
(3,800
|
)
|
|
(3,800
|
)
|
|||
Outstanding as of June 30, 2013
|
317,959
|
|
|
$
|
46.13
|
|
|
844,659
|
|
|
1,162,618
|
|
(1)
|
Represents vested RSUs that are settled in cash or shares of the Company's common stock.
|
(2)
|
RSUs issued as dividend equivalents are vested upon issuance.
|
(3)
|
During the second quarter the terms of time-based RSU's granted to certain officers of the Company in January were modified to include market-measure based vesting requirements.
|
(4)
|
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 the issuance, vesting or settlement of RSUs 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)
|
||||||
2013
|
173,758
|
|
|
$
|
49.45
|
|
|
(73,574
|
)
|
|
$
|
3,677
|
|
2012
|
204,829
|
|
|
44.34
|
|
|
(58,940
|
)
|
|
2,420
|
|
(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, 2013
|
95,241
|
|
|
$
|
40.42
|
|
Granted
|
—
|
|
|
—
|
|
|
Vested
(1)
|
(47,291
|
)
|
|
39.12
|
|
|
Outstanding as of June 30, 2013
|
47,950
|
|
|
$
|
41.71
|
|
(1)
|
The total shares vested include
20,880
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)
|
||||||
2013
|
—
|
|
|
$
|
—
|
|
|
(47,291
|
)
|
|
$
|
2,290
|
|
2012
|
62,137
|
|
|
41.84
|
|
|
(35,623
|
)
|
|
1,388
|
|
(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.
|
|
Number of Options
|
|
Exercise Price
|
|
Remaining Contractual Term (years)
|
|
Outstanding at January 1, 2013
|
1,540,000
|
|
|
$42.61
|
|
|
Granted
|
—
|
|
|
—
|
|
|
Exercised
|
(3,000
|
)
|
|
42.61
|
|
|
Forfeited
|
(12,000
|
)
|
|
42.61
|
|
|
Outstanding at June 30, 2013
(1)(2)
|
1,525,000
|
|
|
$42.61
|
|
8.7
|
(1)
|
As of June 30, 2013,
305,000
of the outstanding stock options were exercisable.
|
(2)
|
The total intrinsic value of options outstanding at June 30, 2013 was
$15.9 million
.
|
|
Fair Value (Level 1)
(1)
|
||||||
Description
|
June 30, 2013
|
|
December 31, 2012
|
||||
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
8,286
|
|
|
$
|
7,435
|
|
(1)
|
Based on quoted prices in active markets for identical securities.
|
(2)
|
The marketable securities are held in a limited rabbi trust.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Description
|
June 30, 2013
|
|
June 30, 2012
|
|
June 30, 2013
|
|
June 30, 2012
|
||||||||
|
(in thousands)
|
||||||||||||||
Net (loss) gain on marketable securities
|
$
|
(30
|
)
|
|
$
|
(155
|
)
|
|
$
|
326
|
|
|
$
|
280
|
|
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
|
June 30, 2013
|
|
December 31, 2012
|
||||||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt
(1)
|
$
|
569,042
|
|
|
$
|
582,815
|
|
|
$
|
561,096
|
|
|
$
|
591,993
|
|
Exchangeable senior notes, net
(1)
|
166,119
|
|
|
178,116
|
|
|
163,944
|
|
|
181,223
|
|
||||
Unsecured debt, net
(2)
|
1,430,964
|
|
|
1,509,622
|
|
|
1,130,895
|
|
|
1,254,047
|
|
||||
Unsecured line of credit
(1)
|
—
|
|
|
—
|
|
|
185,000
|
|
|
185,049
|
|
(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 using Level I and Level II inputs. Level I inputs are based on quoted prices for identical instruments in active markets. The carrying value and fair value of the Level I instruments was
$872.6 million
and
$918.6 million
, respectively, as of
June 30, 2013
. The carrying value and fair value of the Level I instruments at December 31,2012, was
$573.3 million
and
$653.0 million
, respectively. The carrying value and fair value of the Level II instruments was
$558.4 million
and
$591.0 million
, respectively, as of
June 30, 2013
. The carrying value and fair value of the Level II instruments at December 31, 2012, was
$557.6 million
and
$601.0 million
, respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands, except share and
per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
9,680
|
|
|
$
|
36
|
|
|
$
|
12,068
|
|
|
$
|
2,201
|
|
(Income) loss from continuing operations attributable to noncontrolling common units of the Operating Partnership
|
(147
|
)
|
|
78
|
|
|
(125
|
)
|
|
265
|
|
||||
Preferred distributions and dividends
|
(3,313
|
)
|
|
(3,097
|
)
|
|
(6,626
|
)
|
|
(12,433
|
)
|
||||
Allocation to participating securities (nonvested shares and time-based RSUs)
|
(424
|
)
|
|
(432
|
)
|
|
(847
|
)
|
|
(818
|
)
|
||||
Numerator for basic and diluted income (loss) from continuing operations available to common stockholders
|
5,796
|
|
|
(3,415
|
)
|
|
4,470
|
|
|
(10,785
|
)
|
||||
Income from discontinued operations
|
423
|
|
|
2,241
|
|
|
423
|
|
|
78,747
|
|
||||
Income from discontinued operations attributable to noncontrolling common units of the Operating Partnership
|
(10
|
)
|
|
(58
|
)
|
|
(10
|
)
|
|
(2,040
|
)
|
||||
Numerator for basic and diluted net income (loss) available to common stockholders
|
$
|
6,209
|
|
|
$
|
(1,232
|
)
|
|
$
|
4,883
|
|
|
$
|
65,922
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
75,486,380
|
|
|
68,344,734
|
|
|
75,233,350
|
|
|
65,996,719
|
|
||||
Effect of dilutive securities - contingently issuable shares and stock options
|
1,967,309
|
|
|
—
|
|
|
1,825,594
|
|
|
—
|
|
||||
Diluted weighted average vested shares and common share equivalents outstanding
|
77,453,689
|
|
|
68,344,734
|
|
|
77,058,944
|
|
|
65,996,719
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations available to common stockholders per share
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income from discontinued operations per common share
|
0.00
|
|
|
0.03
|
|
|
0.00
|
|
|
1.16
|
|
||||
Net income (loss) available to common stockholders per share
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations available to common stockholders per share
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income from discontinued operations per common share
|
0.00
|
|
|
0.03
|
|
|
0.00
|
|
|
1.16
|
|
||||
Net income (loss) available to common stockholders per share
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands, except unit and
per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
9,680
|
|
|
$
|
36
|
|
|
$
|
12,068
|
|
|
$
|
2,201
|
|
Income from continuing operations attributable to noncontrolling interests in consolidated subsidiaries
|
(62
|
)
|
|
(43
|
)
|
|
(131
|
)
|
|
(96
|
)
|
||||
Preferred distributions
|
(3,313
|
)
|
|
(3,097
|
)
|
|
(6,626
|
)
|
|
(12,433
|
)
|
||||
Allocation to participating securities (nonvested units and time-based RSUs)
|
(424
|
)
|
|
(432
|
)
|
|
(847
|
)
|
|
(818
|
)
|
||||
Numerator for basic and diluted income (loss) from continuing operations available to common unitholders
|
5,881
|
|
|
(3,536
|
)
|
|
4,464
|
|
|
(11,146
|
)
|
||||
Income from discontinued operations
|
423
|
|
|
2,241
|
|
|
423
|
|
|
78,747
|
|
||||
Numerator for basic and diluted net income (loss) available to common unitholders
|
$
|
6,304
|
|
|
$
|
(1,295
|
)
|
|
$
|
4,887
|
|
|
$
|
67,601
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
77,310,685
|
|
|
70,062,865
|
|
|
77,058,748
|
|
|
67,714,850
|
|
||||
Effect of dilutive securities - contingently issuable shares and stock options
|
1,967,309
|
|
|
—
|
|
|
1,825,594
|
|
|
—
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
79,277,994
|
|
|
70,062,865
|
|
|
78,884,342
|
|
|
67,714,850
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations available to common unitholders per unit
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income from discontinued operations per common unit
|
0.00
|
|
|
0.03
|
|
|
0.00
|
|
|
1.16
|
|
||||
Net income (loss) available to common unitholders per unit
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations available to common unitholders per unit
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
Income from discontinued operations per common unit
|
0.00
|
|
|
0.03
|
|
|
0.00
|
|
|
1.16
|
|
||||
Net income (loss) available to common unitholders per unit
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
$
|
1.00
|
|
|
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)(5)
|
|
Changes in
Cash Rents
(6)
|
|
Retention Rates
(7)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|||||||||||||||||||
Three Months Ended
June 30, 2013
|
23
|
|
|
23
|
|
|
254,029
|
|
|
419,236
|
|
|
$
|
31.37
|
|
|
17.3
|
%
|
|
10.9
|
%
|
|
76.3
|
%
|
|
65
|
|
Six Months Ended June 30, 2013
|
42
|
|
|
39
|
|
|
378,567
|
|
|
586,242
|
|
|
28.69
|
|
|
16.9
|
%
|
|
11
|
%
|
|
49.1
|
%
|
|
64
|
|
|
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)(5)
|
|
Changes in
Cash Rents
(6)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
||||||||||||||
Three Months Ended
June 30, 2013
|
23
|
|
|
23
|
|
|
138,438
|
|
|
419,236
|
|
|
$
|
24.87
|
|
|
16.8
|
%
|
|
11.8
|
%
|
|
56
|
|
Six Months Ended June 30, 2013
|
53
|
|
|
33
|
|
|
435,256
|
|
|
524,548
|
|
|
23.92
|
|
|
16.4
|
%
|
|
11.5
|
%
|
|
55
|
|
(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)
|
Excludes commenced and executed leases of approximately 144,000 and 133,000 rentable square feet, respectively, for the
six
months ended
June 30, 2013
, for which the
|
(6)
|
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.
|
(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, 2013
, 16 leases totaling approximately 107,000 rentable square feet were signed but had not commenced as of
June 30, 2013
. For the six months ended
June 30, 2013
, 21 leases totaling approximately 267,000 rentable square feet were signed but had not commenced as of
June 30, 2013
.
|
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)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Remainder of 2013
|
|
38
|
|
|
297,142
|
|
|
2.6
|
%
|
|
$
|
7,079
|
|
|
1.8
|
%
|
|
$
|
23.82
|
|
2014
|
|
107
|
|
|
1,239,703
|
|
|
10.4
|
%
|
|
35,144
|
|
|
9.2
|
%
|
|
28.35
|
|
||
2015
|
|
103
|
|
|
1,674,497
|
|
|
14.1
|
%
|
|
48,656
|
|
|
12.8
|
%
|
|
29.06
|
|
||
2016
|
|
80
|
|
|
929,278
|
|
|
7.8
|
%
|
|
25,757
|
|
|
6.7
|
%
|
|
27.72
|
|
||
2017
|
|
88
|
|
|
2,084,102
|
|
|
17.5
|
%
|
|
63,848
|
|
|
16.6
|
%
|
|
30.64
|
|
||
2018
|
|
56
|
|
|
1,664,913
|
|
|
14.0
|
%
|
|
63,943
|
|
|
16.7
|
%
|
|
38.41
|
|
||
Total
|
|
472
|
|
|
7,889,635
|
|
|
66.4
|
%
|
|
$
|
244,427
|
|
|
63.8
|
%
|
|
$
|
30.98
|
|
(1)
|
The information presented for all lease expiration activity reflects leasing activity through
June 30, 2013
for our stabilized portfolio. 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, intercompany leases, vacant space, and lease renewal options not executed as of
June 30, 2013
.
|
(2)
|
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
|
•
|
3880 Airport Way, Long Beach, submarket of Los Angeles, on which we commenced redevelopment in the third quarter of 2011. This lease-up property, encompassing approximately 98,000 rentable square feet, was 50% leased prior to the commencement of redevelopment which was done in two phases. Redevelopment on the first half, which was leased, was completed during the second quarter of 2012, and redevelopment on the second half was completed in the fourth quarter of 2012. The lease-up project will have a total estimated investment of approximately
$19.9 million
upon completion, including the $6.3 million net carrying value of the project at the commencement of redevelopment.
|
•
|
360 Third Street, South of Market Area, submarket of San Francisco, on which we commenced redevelopment in the fourth quarter of 2011. Redevelopment for this project was completed in the first quarter of 2013. The lease-up project, which encompasses approximately 410,000 rentable square feet, will have a total estimated investment of approximately
$185.0 million
at completion, including the $88.5 million net carrying value of the project at the commencement of redevelopment plus $27.5 million that we expect to pay in 2013 to acquire the land that is currently subject to a ground lease. As of June 30, 2013, the project is 85% leased and 55% occupied.
|
•
|
690 E. Middlefield Road, Mountain View, California, which we acquired in May 2012. We acquired the project for $84.0 million, comprised of a cash purchase price of $74.5 million plus $9.5 million of assumed leasing commissions and other net accrued liabilities. The development project, which is 100% pre-leased to Synopsys, Inc., has a total estimated investment of approximately
$196.9 million
and is expected to encompass approximately
341,000
rentable square feet upon completion. Construction is currently in process and is expected to be completed in the first quarter of 2015.
|
•
|
331 Fairchild Drive, Mountain View, California, which we acquired in December 2012 and is 100% pre-leased. We acquired the project for $18.9 million plus $2.9 million of development costs reimbursed to the seller and are developing an approximately 88,000 square foot building for Audience, Inc. The development project has a total estimated investment of approximately
$45.1 million
. Construction is currently in process and is expected to be completed in the fourth quarter of 2013.
|
•
|
350 Mission Street, South of Market Financial District, San Francisco, California, which we acquired in October 2012. Shortly after acquisition, we pre-leased the entire project to salesforce.com, inc. and are currently planning to develop an approximately 400,000 square foot, 27 story office tower that adapts our open-plan workspace concepts to a high-rise office environment. The property is expected to be LEED platinum certified and the first ground up development property in the city expected to receive this designation. The development project has a total estimated investment of approximately
$254.7 million
. We are currently pursuing entitlements to increase this project to a 30-story office tower, which would increase the estimated rentable square feet and total estimated investment. Construction is currently in process and is expected to be completed in the first quarter of 2015.
|
•
|
555-599 N. Mathilda Avenue, Sunnyvale, California, which we acquired in December 2012. The project, which is comprised of one operating property and a future development site, is 100% pre-leased. Our plan at this project is to continue operating the existing building and develop an approximately 587,000 square foot office complex for LinkedIn, Inc., the tenant in the current existing building. The development project has a total estimated investment of approximately
$312.9 million
. Construction is currently in process and is expected to be completed in the third quarter of 2014.
|
•
|
Columbia Square, in Hollywood, California, which we acquired in September 2012. This project is a historical media campus located in the heart of Hollywood, two blocks from the corner of Sunset Boulevard and Vine Street. The site is fully entitled for the development of an 875,000 rentable square foot office, retail and multi-family mixed use project under a 15-year development agreement that includes three existing buildings. During the second quarter we commenced redevelopment of the three existing historical buildings, which encompass approximately 100,000 rentable square feet. Additionally, we are planning to develop approximately 575,000 square feet of office, retail and residential space in multiple phases. We currently expect to invest an additional $306.5 - $316.5 million for a total estimated investment of approximately $380 - $390 million. Our plan is to create a mixed-use campus that preserves the historical character while establishing a new center for entertainment and media companies.
|
•
|
333 Brannan Street, South of Market Area, San Francisco, California, which we acquired in July 2012. We continue to make good progress on the entitlements for this project and could be ready to begin construction in the fourth quarter of 2013. We currently expect to develop an approximately 170,000 rentable square foot office building on this site that will include all the features, amenities and systems that tech and media tenants need. We currently expect to invest an additional $74.1 - $79.1 million for a total estimated investment of approximately $95 - $100 million.
|
•
|
Redwood Towers, in Redwood City, California. In June 2013 we entered into an agreement with a local partner and acquired a 0.35 acre land site, completing the first phase of the land assemblage for our plans to develop an approximate 300,000 square foot office project. We currently expect a total estimated investment for the project of $175 - $180 million.
|
|
Office Properties
|
|
Industrial Properties
(1)
|
|
Total
|
||||||||||||
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||||||
Total as of June 30, 2012
|
114
|
|
|
12,227,267
|
|
|
39
|
|
|
3,413,354
|
|
|
153
|
|
|
15,640,621
|
|
Acquisitions
(2)
|
6
|
|
|
1,285,875
|
|
|
|
|
|
|
6
|
|
|
1,285,875
|
|
||
Completed redevelopment properties placed in-service
|
2
|
|
|
410,046
|
|
|
|
|
|
|
2
|
|
|
410,046
|
|
||
Property moved to the development
pipeline
|
(1
|
)
|
|
(45,195
|
)
|
|
|
|
|
|
(1
|
)
|
|
(45,195
|
)
|
||
Dispositions
|
(6
|
)
|
|
(398,791
|
)
|
|
(39
|
)
|
|
(3,413,354
|
)
|
|
(45
|
)
|
|
(3,812,145
|
)
|
Remeasurement
|
|
|
(411
|
)
|
|
|
|
|
|
—
|
|
|
(411
|
)
|
|||
Total as of June 30, 2013
|
115
|
|
|
13,478,791
|
|
|
—
|
|
|
—
|
|
|
115
|
|
|
13,478,791
|
|
(1)
|
In the fourth quarter of 2012, the Company sold its entire industrial portfolio.
|
(2)
|
Excludes redevelopment and development property acquisitions.
|
Region
|
Number of
Buildings
|
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
6/30/2013
|
|
3/31/2013
|
|
12/31/2012
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||
Los Angeles and Ventura Counties
|
26
|
|
|
3,397,673
|
|
|
91.9
|
%
|
|
93.4
|
%
|
|
94.0
|
%
|
Orange County
|
4
|
|
|
497,393
|
|
|
89.3
|
|
|
90.0
|
|
|
92.0
|
|
San Diego
|
59
|
|
|
5,249,094
|
|
|
87.6
|
|
|
87.2
|
|
|
90.7
|
|
San Francisco Bay Area
|
14
|
|
|
2,286,994
|
|
|
91.8
|
|
|
94.5
|
|
|
95.5
|
|
Greater Seattle
|
12
|
|
|
2,047,637
|
|
|
95.7
|
|
|
88.7
|
|
|
93.3
|
|
Total Stabilized Portfolio
|
115
|
|
|
13,478,791
|
|
|
90.7
|
|
|
90.3
|
|
|
92.8
|
|
|
Average Occupancy
|
||||||||||
|
For the Three Months ended June 30,
|
|
For the Six Months ended June 30,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Stabilized Portfolio
(1)
|
90.3
|
%
|
|
90.7
|
%
|
|
90.7
|
%
|
|
91.1
|
%
|
Same Store Portfolio
(2)
|
89.8
|
|
|
91.5
|
|
|
90.2
|
|
|
92.0
|
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1,
2012
and still owned and stabilized as of
June 30, 2013
. See discussion under "Results of Operations" for additional information.
|
|
Tenant Name
|
|
Annualized Base Rental Revenue
($ in thousands)
|
|
Rentable
Square Feet
|
|
Percentage of
Total Annualized Base Rental Revenue
|
|
Percentage of
Total Rentable
Square Feet
|
|
|||||
|
DIRECTV, LLC
|
|
$
|
23,290
|
|
|
660,579
|
|
|
6.1
|
%
|
|
4.9
|
%
|
|
|
Bridgepoint Education, Inc
|
|
15,066
|
|
|
322,994
|
|
|
4.0
|
%
|
|
2.4
|
%
|
|
|
|
Intuit, Inc.
|
|
13,489
|
|
|
465,812
|
|
|
3.5
|
%
|
|
3.5
|
%
|
|
|
|
Delta Dental of California
(2)
|
|
10,557
|
|
|
227,013
|
|
|
2.8
|
%
|
|
1.7
|
%
|
|
|
|
CareFusion Corporation
(1)
|
|
9,237
|
|
|
411,000
|
|
|
2.4
|
%
|
|
3.0
|
%
|
|
|
|
AMN Healthcare, Inc.
|
|
8,341
|
|
|
175,672
|
|
|
2.2
|
%
|
|
1.3
|
%
|
|
|
|
Group Health Cooperative
|
|
6,372
|
|
|
183,422
|
|
|
1.7
|
%
|
|
1.4
|
%
|
|
|
|
Microsoft Corporation
|
|
6,280
|
|
|
215,997
|
|
|
1.7
|
%
|
|
1.6
|
%
|
|
|
|
Fish & Richardson P.C.
|
|
6,071
|
|
|
139,538
|
|
|
1.6
|
%
|
|
1.0
|
%
|
|
|
|
Wells Fargo
(1)
|
|
5,647
|
|
|
144,360
|
|
|
1.5
|
%
|
|
1.1
|
%
|
|
|
|
Scripps Health
|
|
5,199
|
|
|
112,067
|
|
|
1.4
|
%
|
|
0.8
|
%
|
|
|
|
BP Biofuels
|
|
5,158
|
|
|
136,908
|
|
|
1.4
|
%
|
|
1.0
|
%
|
|
|
|
Lucile Salter Packard Children's Hospital at Stanford
|
|
5,111
|
|
|
137,807
|
|
|
1.3
|
%
|
|
1.0
|
%
|
|
|
|
Adobe Systems, Inc.
|
|
4,989
|
|
|
189,131
|
|
|
1.3
|
%
|
|
1.4
|
%
|
|
|
|
Epson America, Inc.
|
|
4,915
|
|
|
136,026
|
|
|
1.3
|
%
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total Top Fifteen Tenants
|
|
$
|
129,722
|
|
|
3,658,326
|
|
|
34.2
|
%
|
|
27.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company has entered into leases with various affiliates of the tenant
.
|
(2)
|
In the second quarter of 2013, Delta Dental of California amended and extended its lease with the Company. The amended lease provides for a reduction of rentable square feet by approximately 10,000 square feet in the third quarter of 2013 and approximately 29,000 square feet in the second quarter of 2015.
|
•
|
Same Store Properties - which includes the results of all of the office properties that were owned and included in our stabilized portfolio as of January 1,
2012
and still owned and included in the stabilized portfolio as of
June 30, 2013
;
|
•
|
Acquisition Properties - which includes the results, from the dates of acquisition through the periods presented, for the fourteen office buildings we acquired during 2012 and the
two
office buildings we acquired during the
six months ended June 30, 2013
;
|
•
|
Stabilized Redevelopment Properties - which includes the results generated by two office buildings that were moved into the stabilized portfolio upon completion of redevelopment in the fourth quarter of 2012; and
|
•
|
Other Properties - which includes the results of properties not included in our stabilized portfolio. These properties consist of two office buildings in "lease-up" and one office building that was moved from the stabilized portfolio during 2012 to development because the property is being repositioned.
|
Group
|
|
# of Buildings
|
|
Rentable Square Feet
|
||
Same Store Properties
|
|
97
|
|
|
10,988,744
|
|
Acquisition Properties
|
|
16
|
|
2,080,001
|
|
|
Stabilized Redevelopment Properties
|
|
2
|
|
|
410,046
|
|
|
|
|
|
|
||
Total Stabilized Portfolio
|
|
115
|
|
13,478,791
|
|
|
Three Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2013
|
|
2012
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
88,418
|
|
|
$
|
68,430
|
|
|
$
|
19,988
|
|
|
29.2
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
(9,855
|
)
|
|
(9,251
|
)
|
|
(604
|
)
|
|
6.5
|
|
|||
Acquisition-related expenses
|
(164
|
)
|
|
(1,813
|
)
|
|
1,649
|
|
|
(91.0
|
)
|
|||
Depreciation and amortization
|
(49,304
|
)
|
|
(38,065
|
)
|
|
(11,239
|
)
|
|
29.5
|
|
|||
Interest income and other net investment gains (losses)
|
19
|
|
|
(110
|
)
|
|
129
|
|
|
117.3
|
|
|||
Interest expense
|
(19,434
|
)
|
|
(19,155
|
)
|
|
(279
|
)
|
|
1.5
|
|
|||
Income from continuing operations
|
9,680
|
|
|
36
|
|
|
9,644
|
|
|
26,788.9
|
|
|||
Income from discontinued operations
|
423
|
|
|
2,241
|
|
|
(1,818
|
)
|
|
(81.1
|
)
|
|||
Net income
|
$
|
10,103
|
|
|
$
|
2,277
|
|
|
$
|
7,826
|
|
|
343.7
|
%
|
|
Three months ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2013
|
|
2012
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisitions Properties
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
|
Same Store
|
|
Acquisitions Properties
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
83,311
|
|
|
$
|
18,011
|
|
|
$
|
3,464
|
|
|
$
|
3,556
|
|
|
$
|
108,342
|
|
|
$
|
83,370
|
|
|
$
|
3,832
|
|
|
$
|
4
|
|
|
$
|
1,268
|
|
|
$
|
88,474
|
|
Tenant reimbursements
|
7,578
|
|
|
2,385
|
|
|
281
|
|
|
155
|
|
|
10,399
|
|
|
7,219
|
|
|
822
|
|
|
—
|
|
|
61
|
|
|
8,102
|
|
||||||||||
Other property income
|
5,558
|
|
|
179
|
|
|
—
|
|
|
—
|
|
|
5,737
|
|
|
302
|
|
|
233
|
|
|
—
|
|
|
|
|
535
|
|
|||||||||||
Total
|
96,447
|
|
|
20,575
|
|
|
3,745
|
|
|
3,711
|
|
|
124,478
|
|
|
90,891
|
|
|
4,887
|
|
|
4
|
|
|
1,329
|
|
|
97,111
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
19,308
|
|
|
3,923
|
|
|
607
|
|
|
894
|
|
|
24,732
|
|
|
18,488
|
|
|
717
|
|
|
152
|
|
|
549
|
|
|
19,906
|
|
||||||||||
Real estate taxes
|
7,758
|
|
|
1,808
|
|
|
367
|
|
|
506
|
|
|
10,439
|
|
|
7,435
|
|
|
364
|
|
|
—
|
|
|
361
|
|
|
8,160
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Ground leases
|
418
|
|
|
313
|
|
|
4
|
|
|
154
|
|
|
889
|
|
|
417
|
|
|
103
|
|
|
2
|
|
|
93
|
|
|
615
|
|
||||||||||
Total
|
27,484
|
|
|
6,044
|
|
|
978
|
|
|
1,554
|
|
|
36,060
|
|
|
26,340
|
|
|
1,184
|
|
|
154
|
|
|
1,003
|
|
|
28,681
|
|
||||||||||
Net Operating Income (Loss), as defined
|
$
|
68,963
|
|
|
$
|
14,531
|
|
|
$
|
2,767
|
|
|
$
|
2,157
|
|
|
$
|
88,418
|
|
|
$
|
64,551
|
|
|
$
|
3,703
|
|
|
$
|
(150
|
)
|
|
$
|
326
|
|
|
$
|
68,430
|
|
|
Three Months Ended June 30, 2013 as compared to the Three Months Ended June 30, 2012
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisition Properties
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
|||||||||||||||||||||||||
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Rental income
|
$
|
(59
|
)
|
|
(0.1
|
)%
|
|
$
|
14,179
|
|
|
370.0
|
%
|
|
$
|
3,460
|
|
|
86,500.0
|
%
|
|
$
|
2,288
|
|
|
180.4
|
%
|
|
$
|
19,868
|
|
|
22.5
|
%
|
Tenant reimbursements
|
359
|
|
|
5.0
|
|
|
1,563
|
|
|
190.1
|
|
|
281
|
|
|
100.0
|
|
|
94
|
|
|
154.1
|
|
|
2,297
|
|
|
28.4
|
|
|||||
Other property income
|
5,256
|
|
|
1,740.4
|
|
|
(54
|
)
|
|
100.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,202
|
|
|
972.3
|
|
|||||
Total
|
5,556
|
|
|
6.1
|
|
|
15,688
|
|
|
321.0
|
|
|
3,741
|
|
|
93,525.0
|
|
|
2,382
|
|
|
179.2
|
|
|
27,367
|
|
|
28.2
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
820
|
|
|
4.4
|
|
|
3,206
|
|
|
447.1
|
|
|
455
|
|
|
299.3
|
%
|
|
345
|
|
|
62.8
|
|
|
4,826
|
|
|
24.2
|
|
|||||
Real estate taxes
|
323
|
|
|
4.3
|
|
|
1,444
|
|
|
396.7
|
|
|
367
|
|
|
100.0
|
|
|
145
|
|
|
40.2
|
|
|
2,279
|
|
|
27.9
|
|
|||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Ground leases
|
1
|
|
|
0.2
|
|
|
210
|
|
|
203.9
|
|
|
2
|
|
|
100.0
|
|
|
61
|
|
|
65.6
|
|
|
274
|
|
|
44.6
|
|
|||||
Total
|
1,144
|
|
|
4.3
|
|
|
4,860
|
|
|
410.5
|
|
|
824
|
|
|
535.1
|
|
|
551
|
|
|
54.9
|
|
|
7,379
|
|
|
25.7
|
|
|||||
Net Operating Income, as defined
|
$
|
4,412
|
|
|
6.8
|
%
|
|
$
|
10,828
|
|
|
292.4
|
%
|
|
$
|
2,917
|
|
|
(1,944.7
|
)%
|
|
$
|
1,831
|
|
|
561.7
|
%
|
|
$
|
19,988
|
|
|
29.2
|
%
|
•
|
An increase of
$10.8 million
attributable to the Acquisition Properties;
|
•
|
An increase of
$4.4 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in other property income of
$5.3 million
primarily due to a receipt of a settlement payment related to property damage at one of our properties. Other property income for both periods consist primarily of lease termination fees and other miscellaneous income;
|
•
|
A partially offsetting increase in property and related expenses of
$1.1 million
primarily resulting from:
|
•
|
An increase of
$0.8 million
in property expenses primarily as a result of:
|
◦
|
an increase in certain recurring operating costs of approximately $1.3 million primarily related to property management expenses, insurance, other service-related costs and $0.2 million of non-recurring legal fees; partially offset by
|
◦
|
a receipt of approximately $0.4 million in insurance proceeds during the three months ended June 30, 2013, which were recorded as reduction of property expenses because the charge for the related property damage was recorded as property expenses in prior periods; and
|
◦
|
a reduction of repairs and maintenance expense of $0.3 million related to non-recurring expenses incurred in the three months ended June 30, 2012;
|
•
|
An increase in real estate taxes of
$0.3 million
primarily as a result of higher taxes at several properties and property tax refunds received in in 2012 that related to prior periods; and
|
•
|
Rental income remained flat due to additional revenue resulting from an increase in tenant renewals and new leases at higher rental rates, offset by a decrease in average occupancy of 1.7%, from 91.5% for the three months ended June 30, 2012, to 89.8% for the three months ended June 30, 2013;
|
•
|
An increase in tenant reimbursements of
$0.4 million
primarily resulting from an increase in reimbursable property expenses and real estate taxes;
|
•
|
An increase of
$2.9 million
attributable to the Stabilized Redevelopment Properties; and
|
•
|
An increase of
$1.8 million
attributable to the Other Properties primarily resulting from income generated in 2013 from:
|
•
|
one redevelopment property in lease-up that was 50% occupied at June 30, 2013. The tenant took occupancy of this space in June 2012; and
|
•
|
one redevelopment property in lease-up that was 55% occupied at June 30, 2013. The tenant took occupancy of this space in July 2012.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2013
|
|
2012
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Gross interest expense
|
$
|
27,914
|
|
|
$
|
23,489
|
|
|
$
|
4,425
|
|
|
18.8
|
%
|
Capitalized interest
|
(8,480
|
)
|
|
(4,334
|
)
|
|
(4,146
|
)
|
|
95.7
|
%
|
|||
Interest expense
|
$
|
19,434
|
|
|
$
|
19,155
|
|
|
$
|
279
|
|
|
1.5
|
%
|
|
Six Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2013
|
|
2012
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
170,863
|
|
|
$
|
136,221
|
|
|
$
|
34,642
|
|
|
25.4
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses
|
(19,524
|
)
|
|
(18,018
|
)
|
|
(1,506
|
)
|
|
8.4
|
|
|||
Acquisition-related expenses
|
(819
|
)
|
|
(3,341
|
)
|
|
2,522
|
|
|
(75.5
|
)
|
|||
Depreciation and amortization
|
(99,695
|
)
|
|
(72,717
|
)
|
|
(26,978
|
)
|
|
37.1
|
|
|||
Interest income and other net investment gains
|
411
|
|
|
374
|
|
|
37
|
|
|
9.9
|
|
|||
Interest expense
|
(39,168
|
)
|
|
(40,318
|
)
|
|
1,150
|
|
|
(2.9
|
)
|
|||
Income from continuing operations
|
12,068
|
|
|
2,201
|
|
|
9,867
|
|
|
448.3
|
|
|||
Income from discontinued operations
|
423
|
|
|
78,747
|
|
|
(78,324
|
)
|
|
(99.5
|
)
|
|||
Net income
|
$
|
12,491
|
|
|
$
|
80,948
|
|
|
$
|
(68,457
|
)
|
|
(84.6
|
)%
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2013
|
|
2012
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisitions Properties
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
|
Same Store
|
|
Acquisitions Properties
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
166,994
|
|
|
$
|
36,238
|
|
|
$
|
5,979
|
|
|
$
|
6,511
|
|
|
$
|
215,722
|
|
|
$
|
165,568
|
|
|
$
|
4,789
|
|
|
$
|
9
|
|
|
$
|
2,457
|
|
|
$
|
172,823
|
|
Tenant reimbursements
|
14,797
|
|
|
4,690
|
|
|
528
|
|
|
271
|
|
|
20,286
|
|
|
14,076
|
|
|
1,043
|
|
|
—
|
|
|
163
|
|
|
15,282
|
|
||||||||||
Other property income
|
5,648
|
|
|
318
|
|
|
—
|
|
|
1
|
|
|
5,967
|
|
|
1,168
|
|
|
233
|
|
|
—
|
|
|
2
|
|
|
1,403
|
|
||||||||||
Total
|
187,439
|
|
|
41,246
|
|
|
6,507
|
|
|
6,783
|
|
|
241,975
|
|
|
180,812
|
|
|
6,065
|
|
|
9
|
|
|
2,622
|
|
|
189,508
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
37,853
|
|
|
7,948
|
|
|
974
|
|
|
1,730
|
|
|
48,505
|
|
|
34,130
|
|
|
861
|
|
|
236
|
|
|
811
|
|
|
36,038
|
|
||||||||||
Real estate taxes
|
15,714
|
|
|
3,429
|
|
|
639
|
|
|
994
|
|
|
20,776
|
|
|
14,654
|
|
|
494
|
|
|
—
|
|
|
677
|
|
|
15,825
|
|
||||||||||
Provision for bad debts
|
95
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||||||
Ground leases
|
835
|
|
|
622
|
|
|
6
|
|
|
273
|
|
|
1,736
|
|
|
835
|
|
|
106
|
|
|
6
|
|
|
475
|
|
|
1,422
|
|
||||||||||
Total
|
54,497
|
|
|
11,999
|
|
|
1,619
|
|
|
2,997
|
|
|
71,112
|
|
|
49,621
|
|
|
1,461
|
|
|
242
|
|
|
1,963
|
|
|
53,287
|
|
||||||||||
Net Operating Income (Loss), as defined
|
$
|
132,942
|
|
|
$
|
29,247
|
|
|
$
|
4,888
|
|
|
$
|
3,786
|
|
|
$
|
170,863
|
|
|
$
|
131,191
|
|
|
$
|
4,604
|
|
|
$
|
(233
|
)
|
|
$
|
659
|
|
|
$
|
136,221
|
|
|
Six Months Ended June 30, 2013 as compared to the Six Months Ended June 30, 2012
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisitions
|
|
Stabilized Redevelopment
|
|
Other
|
|
Total
|
|||||||||||||||||||||||||
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|
Dollar Change
|
|
% Change
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
|
|||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Rental income
|
$
|
1,426
|
|
|
0.9
|
%
|
|
$
|
31,449
|
|
|
656.7
|
%
|
|
$
|
5,970
|
|
|
66,333.3
|
%
|
|
$
|
4,054
|
|
|
165.0
|
%
|
|
$
|
42,899
|
|
|
24.8
|
%
|
Tenant reimbursements
|
721
|
|
|
5.1
|
|
|
3,647
|
|
|
349.7
|
|
|
528
|
|
|
100.0
|
|
|
108
|
|
|
66.3
|
|
|
5,004
|
|
|
32.7
|
|
|||||
Other property income
|
4,480
|
|
|
383.6
|
|
|
85
|
|
|
36.5
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
100.0
|
|
|
4,564
|
|
|
325.3
|
|
|||||
Total
|
6,627
|
|
|
3.7
|
|
|
35,181
|
|
|
580.1
|
|
|
6,498
|
|
|
72,200.0
|
|
|
4,161
|
|
|
158.7
|
|
|
52,467
|
|
|
27.7
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
3,723
|
|
|
10.9
|
|
|
7,087
|
|
|
823.1
|
|
|
738
|
|
|
312.7
|
|
|
919
|
|
|
113.3
|
|
|
12,467
|
|
|
34.6
|
|
|||||
Real estate taxes
|
1,060
|
|
|
7.2
|
|
|
2,935
|
|
|
594.1
|
|
|
639
|
|
|
100.0
|
|
|
317
|
|
|
46.8
|
|
|
4,951
|
|
|
31.3
|
|
|||||
Provision for bad debts
|
93
|
|
|
4,650.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
4,650.0
|
|
|||||
Ground leases
|
—
|
|
|
—
|
|
|
516
|
|
|
486.8
|
|
|
—
|
|
|
—
|
|
|
(202
|
)
|
|
(42.5
|
)
|
|
314
|
|
|
22.1
|
|
|||||
Total
|
4,876
|
|
|
9.8
|
|
|
10,538
|
|
|
721.3
|
|
|
1,377
|
|
|
569.0
|
|
|
1,034
|
|
|
52.7
|
|
|
17,825
|
|
|
33.5
|
|
|||||
Net Operating Income, as defined
|
$
|
1,751
|
|
|
1.3
|
%
|
|
$
|
24,643
|
|
|
535.3
|
%
|
|
$
|
5,121
|
|
|
2,197.9
|
%
|
|
$
|
3,127
|
|
|
(474.5
|
)%
|
|
$
|
34,642
|
|
|
25.4
|
%
|
•
|
An increase of
$24.6 million
attributable to the Acquisition Properties;
|
•
|
An increase of
$1.8 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in other property income of
$4.5 million
primarily due to the receipt of a $5.2 million property damage settlement payment at one of our properties offset by a $0.7 million property damage settlement payment received for the six months ended June 30, 2012 for two of our properties. Other property income for both periods consist primarily of lease termination fees and other miscellaneous income;
|
•
|
A partially offsetting increase in property and related expenses of
$4.9 million
primarily resulting from:
|
•
|
An increase of
$3.7 million
in property expenses primarily as a result of an increase in certain recurring operating costs primarily related to property management expenses, insurance, other service-related costs and $0.5 million of non-recurring real estate taxes; and
|
•
|
An increase in real estate taxes of
$1.1 million
primarily as a result of a net decrease of $0.5 million of property tax refunds received that related to prior periods and customary real estate tax increases;
|
•
|
An increase in rental income of
$1.4 million
due to additional rental revenue resulting from an increase in tenant renewals and new leases at higher rental rates, partially offset by a decrease in average occupancy of 1.8%, from 92.0% for the six months ended June 30, 2012, to 90.2% for the six months ended June 30, 2013;
|
•
|
An increase in tenant reimbursements of
$0.7 million
primarily resulting from an increase in reimbursable property expenses and real estate taxes;
|
•
|
An increase of
$5.1 million
attributable to the Stabilized Redevelopment Properties; and
|
•
|
An increase of
$3.1 million
attributable to the Other Properties primarily resulting from income generated in 2013 from:
|
•
|
one redevelopment property in lease-up that was 50% occupied at June 30, 2013. The tenant took occupancy of this space in June 2012; and
|
•
|
one redevelopment property in lease-up that was 55% occupied at June 30, 2013. The tenant took occupancy of this space in July 2012.
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2013
|
|
2012
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Gross interest expense
|
$
|
55,380
|
|
|
$
|
48,483
|
|
|
$
|
6,897
|
|
|
14.2
|
%
|
Capitalized interest
|
(16,212
|
)
|
|
(8,165
|
)
|
|
(8,047
|
)
|
|
98.6
|
%
|
|||
Interest expense
|
$
|
39,168
|
|
|
$
|
40,318
|
|
|
$
|
(1,150
|
)
|
|
(2.9
|
)%
|
|
Shares/Units at
June 30, 2013
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
||||
|
($ in thousands)
|
||||||||
Debt:
|
|
|
|
|
|
||||
Unsecured Revolving Credit Facility
|
|
|
$
|
—
|
|
|
—
|
%
|
|
Unsecured Term Loan Facility
|
|
|
150,000
|
|
|
2.3
|
|
||
4.25% Unsecured Exchangeable Notes due 2014
(1)
|
|
|
172,500
|
|
|
2.7
|
|
||
Unsecured Senior Notes due 2014
|
|
|
83,000
|
|
|
1.3
|
|
||
Unsecured Senior Notes due 2015
(1)
|
|
|
325,000
|
|
|
5.0
|
|
||
Unsecured Senior Notes due 2018
(1)
|
|
|
325,000
|
|
|
5.0
|
|
||
Unsecured Senior Notes due 2020
(1)
|
|
|
250,000
|
|
|
3.9
|
|
||
Unsecured Senior Notes due 2023
(1)
|
|
|
300,000
|
|
|
4.6
|
|
||
Secured debt
(1)
|
|
|
552,328
|
|
|
8.5
|
|
||
Total debt
|
|
|
2,157,828
|
|
|
33.3
|
|
||
Equity and Noncontrolling Interests:
|
|
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock
(2)
|
4,000,000
|
|
|
100,000
|
|
|
1.5
|
|
|
6.375% Series H Cumulative Redeemable Preferred stock
(2)
|
4,000,000
|
|
|
100,000
|
|
|
1.5
|
|
|
Common limited partnership units outstanding
(3)(4)
|
1,821,503
|
|
|
96,558
|
|
|
1.5
|
|
|
Common shares outstanding
(4)
|
75,710,907
|
|
|
4,013,435
|
|
|
62.2
|
|
|
Total equity and noncontrolling interests
|
|
|
4,309,993
|
|
|
66.7
|
|
||
Total Market Capitalization
|
|
|
$
|
6,467,821
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of net unamortized premiums as of
June 30, 2013
.
|
(2)
|
Value based on $25.00 per share liquidation preference.
|
(3)
|
Represents common units not owned by the Company.
|
(4)
|
Value based on closing price per share of our common stock of
$53.01
as of
June 30, 2013
.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Operating Partnership's revolving credit facility and term loan 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 six months ended June 30, 2013 we issued and sold a total of
814,408
of our common stock shares under our at−the−market stock offering program at a weighted average price of
$53.66
per share before selling commissions. The net offering proceeds, after deducting sales agent compensation, of approximately
$42.8 million
were contributed to the Operating Partnership (see "— Liquidity Sources" below for additional information).
|
•
|
In January 2013, the Operating Partnership issued unsecured senior notes in a public offering with an aggregate principal balance of $300.0 million that are scheduled to mature on January 15, 2023. The unsecured senior notes require semi-annual interest payments each January and July based on a stated annual interest rate of 3.800%.
|
•
|
During the three months ended March 31, 2013, the Operating Partnership assumed a secured mortgage loan with a principal balance of $83.9 million that was recorded at fair value resulting in a premium of $11.6 million in connection with an acquisition. We also repaid a secured mortgage loan with an outstanding principal balance of $83.1 million that was scheduled to mature in April 2013 (see Notes 2 and 5 to our consolidated financial statements included in this report for additional information).
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
(1)
|
$
|
—
|
|
|
$
|
185,000
|
|
Remaining borrowing capacity
|
500,000
|
|
|
315,000
|
|
||
Total borrowing capacity
(2)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Interest rate
(3)
|
|
|
|
1.66
|
%
|
||
Facility fee - annual rate
(4)
|
0.300%
|
||||||
Maturity date
(5)
|
April 2017
|
(1)
|
As of
June 30, 2013
, there were no outstanding borrowings on the revolving credit facility
|
(3)
|
The revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.450% as of both
June 30, 2013
and
December 31, 2012
. No interest rate is shown as of
June 30, 2013
because no borrowings were outstanding.
|
(4)
|
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 debt origination and legal costs of approximately $10.2 million that are currently being amortized through the maturity date of the revolving credit facility.
|
(5)
|
Under the terms of the revolving credit facility, we may exercise an option to extend the maturity date by one year.
|
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||
|
(in millions, except share and per share data)
|
||||||
Common shares sold during the period
|
360,729
|
|
|
814,408
|
|
||
Weighted average price per common share
|
$
|
54.93
|
|
|
$
|
53.66
|
|
Aggregate gross proceeds
|
$
|
19.8
|
|
|
$
|
43.7
|
|
Aggregate net proceeds after sales agent compensation
|
$
|
19.4
|
|
|
$
|
42.8
|
|
|
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
|
|
|
Unsecured Senior Notes due 2023
(1)
|
300,000
|
|
|
Secured Debt
(1)
|
552,328
|
|
|
Total Exchangeable Notes, Unsecured Debt, and Secured Debt
|
$
|
2,157,828
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized discounts and premiums as of
June 30, 2013
.
|
|
Percentage of Total Debt
|
|
Weighted Average Interest Rate
|
||||||||
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2013 |
|
December 31,
2012 |
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured
(1)
|
74.4
|
%
|
|
72.9
|
%
|
|
4.7
|
%
|
|
4.5
|
%
|
Secured
|
25.6
|
|
|
27.1
|
|
|
5.2
|
|
|
5.2
|
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
7.0
|
|
|
16.4
|
|
|
2.0
|
|
|
1.8
|
|
Fixed-rate
(1)
|
93.0
|
|
|
83.6
|
|
|
5.0
|
|
|
5.3
|
|
Stated rate
(1)
|
|
|
|
|
4.8
|
|
|
4.7
|
|
||
GAAP effective rate
(2)
|
|
|
|
|
4.8
|
|
|
4.7
|
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
5.1
|
%
|
|
5.1
|
%
|
(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 2013)
|
|
1–3 Years
(2014-2015)
|
|
4–5 Years
(2016-2017)
|
|
More than
5 Years
(After 2017)
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal payments—secured debt
(1)
|
$
|
6,458
|
|
|
$
|
79,950
|
|
|
$
|
171,179
|
|
|
$
|
294,741
|
|
|
$
|
552,328
|
|
Principal payments—4.25% Exchangeable Notes
(2)
|
—
|
|
|
172,500
|
|
|
—
|
|
|
—
|
|
|
172,500
|
|
|||||
Principal payments—unsecured debt
(3)
|
—
|
|
|
408,000
|
|
|
150,000
|
|
|
875,000
|
|
|
1,433,000
|
|
|||||
Interest payments—fixed-rate debt
(4)
|
57,253
|
|
|
182,655
|
|
|
121,802
|
|
|
151,875
|
|
|
513,585
|
|
|||||
Interest payments—variable-rate debt
(5)
|
1,475
|
|
|
5,850
|
|
|
705
|
|
|
—
|
|
|
8,030
|
|
|||||
Ground lease obligations
(6)
|
2,138
|
|
|
6,190
|
|
|
6,190
|
|
|
160,007
|
|
|
174,525
|
|
|||||
Lease and contractual commitments
(7)
|
76,212
|
|
|
3,891
|
|
|
—
|
|
|
—
|
|
|
80,103
|
|
|||||
Redevelopment and development commitments
(8)
|
156,000
|
|
|
278,000
|
|
|
—
|
|
|
—
|
|
|
434,000
|
|
|||||
Total
|
$
|
299,536
|
|
|
$
|
1,137,036
|
|
|
$
|
449,876
|
|
|
$
|
1,481,623
|
|
|
$
|
3,368,071
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized premium of approximately
$16.7 million
as of
June 30, 2013
.
|
(2)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately
$6.4 million
as of
June 30, 2013
.
|
(3)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately
$2.0 million
as of
June 30, 2013
.
|
(4)
|
As of
June 30, 2013
,
93.0%
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, 2013
,
7.0%
of our debt bore interest at variable rates which was incurred under the term loan facility. The variable interest rate payments are based on LIBOR plus a spread of 1.750% as of
June 30, 2013
. 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, 2013
, the scheduled interest payment dates, and the contractual maturity dates.
|
(6)
|
Reflects minimum lease payments through the contractual lease expiration date before the impact of extension options.
|
(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 commitments under signed leases for pre-leased development projects and contractual commitments for lease-up projects and projects under construction as of June 30, 2013. The timing of these expenditures may fluctuate based on the ultimate progress of construction. This table also reflects the November 2012 exercise of the purchase option to acquire the land under a ground lease at one of our redevelopment properties before the end of 2013 for a purchase price of $27.5 million to be paid upon closing.
|
•
|
Decreases in our cash flows from operations, which could create further dependence on the revolving credit facility;
|
•
|
An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
|
•
|
A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership's ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.
|
Revolving Credit Facility and Term Loan Facility (as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance at
June 30, 2013
|
Total debt to total asset value
|
|
less than 60%
|
|
37%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
2.3x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
2.40x
|
Unencumbered asset pool debt service coverage
|
|
greater than 2.0x
|
|
3.4x
|
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes due 2015, 2018, 2020 and 2023 (as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
42%
|
Interest coverage
|
|
greater than 1.5x
|
|
3.9x
|
Secured debt to total asset value
|
|
less than 40%
|
|
11%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
251%
|
|
Six Months Ended June 30,
|
|||||||||||||
|
2013
|
|
2012
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net cash provided by operating activities
|
$
|
107,004
|
|
|
$
|
78,633
|
|
|
$
|
28,371
|
|
|
36.1
|
%
|
Net cash used in investing activities
|
(20,622
|
)
|
|
(301,592
|
)
|
|
280,970
|
|
|
(93.2
|
)%
|
|||
Net cash provided by financing activities
|
4,741
|
|
|
236,293
|
|
|
(231,552
|
)
|
|
(98.0
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income (loss) available to common stockholders
|
$
|
6,633
|
|
|
$
|
(800
|
)
|
|
$
|
5,730
|
|
|
$
|
66,740
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to noncontrolling common units of the Operating Partnership
|
157
|
|
|
(20
|
)
|
|
135
|
|
|
1,775
|
|
||||
Depreciation and amortization of real estate assets
|
48,787
|
|
|
40,328
|
|
|
98,798
|
|
|
76,792
|
|
||||
Net gain on dispositions of discontinued operations
|
(423
|
)
|
|
—
|
|
|
(423
|
)
|
|
(72,809
|
)
|
||||
Funds From Operations
(1)(2)
|
$
|
55,154
|
|
|
$
|
39,508
|
|
|
$
|
104,240
|
|
|
$
|
72,498
|
|
(1)
|
Reported amounts are attributable to common stockholders and common unitholders.
|
(2)
|
FFO includes amortization of deferred revenue related to tenant-funded tenant improvements of $2.5 million and $2.2 million for the three months ended June 30, 2013 and 2012 respectively, and $5.0 million and $4.5 million for the six months ended June 30, 2013 and 2012 respectively.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1A.
|
RISK FACTORS
|
•
|
We would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity's ability to transfer or sell its assets.
|
•
|
Partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, which could delay construction or development of a property or increase our financial commitment to the joint venture.
|
•
|
Partners or co-venturers may pursue economic or other business interests, policies or objectives that are competitive or inconsistent with ours.
|
•
|
If we become a limited partner or non-managing member in any partnership or limited liability company, and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity.
|
•
|
Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business.
|
•
|
We may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
|
•
|
Joint venture debt is the liability of the joint venture, may be secured by a mortgage on the joint venture property, and a default by the joint venture under its debt obligations may expose us to liability under a guaranty or letter of credit.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
(a)
Total number of shares (or units) purchased
|
(b)
Average price paid per share (or unit)
|
(c)
Total number of shares (or units) purchased as part of publicly announced plans or programs
|
(d)
Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
|
|||||
April 1 - April 30, 2013
|
—
|
|
—
|
|
—
|
|
—
|
|
|
May 1 - May 31, 2013
(1)
|
2,527
|
|
$
|
42.61
|
|
—
|
|
—
|
|
June 1 - June 30, 2013
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
2,527
|
|
$
|
42.61
|
|
—
|
|
—
|
|
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 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2012)
|
|
|
|
3.(i)2
|
|
Certificate of Limited Partnership of Kilroy Realty, L.P. (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)
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3.(i)3
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Amendment to the Certificate of Limited Partnership of Kilroy Realty, L.P. (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)
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3.(i)4
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Articles Supplementary designating Kilroy Realty Corporation's 6.375% Series H Cumulative Redeemable Preferred Stock (previously filed by Kilroy Realty Corporation on Form 8-A as filed with the Securities and Exchange Commission on August 10, 2012)
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3.(ii).1
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Second Amended and Restated Bylaws of Kilroy Realty Corporation (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)
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3.(ii).2
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Amendment No. 1 to Second Amended and Restated Bylaws of Kilroy Realty Corporation (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)
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3.(ii).3
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Seventh Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P. dated as of August 15, 2012 (previously filed by Kilroy Realty Corporation on Form 8-K as filed with the Securities and Exchange Commission on August 17, 2012)
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10.1*†
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Kilroy Realty Corporation 2006 Incentive Award Plan Restricted Stock Unit Agreement by and between Kilroy Corporation and Jeffrey C. Hawken, dated April 4, 2013
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10.2*†
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Kilroy Realty Corporation 2006 Incentive Award Plan Restricted Stock Unit Agreement by and between Kilroy Corporation and John Kilroy, Jr., dated March 30, 2012
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10.3*†
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Form of Restricted Stock Unit Agreement
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10.4*†
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Form of Stock Award Deferral Program Restricted Stock Unit Agreement
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31.1*
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Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
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31.2*
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Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
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31.3*
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Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
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31.4*
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Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
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32.1*
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Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
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32.2*
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Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
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32.3*
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Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
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32.4*
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Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
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101.1
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The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended June 30, 2013, 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).
(1)
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*
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Filed herewith
|
(1)
|
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.
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KILROY REALTY CORPORATION
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||
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By:
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/s/ John B. Kilroy, Jr.
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John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
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By:
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/s/ Tyler H. Rose
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Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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By:
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/s/ Heidi R. Roth
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Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
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KILROY REALTY, L.P.
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||
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BY:
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KILROY REALTY CORPORATION
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Its general partner
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By:
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/s/ John B. Kilroy, Jr.
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John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
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By:
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/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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|
By:
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/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
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Number of RSUs
:
|
19,084
|
Grant Date
:
|
April 4, 2013 (the “
Grant Date
”)
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By: Tyler H. Rose,
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Jeffrey C. Hawken
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Dated: _______________, _____
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_____________________________________
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By: Tyler H. Rose
|
John B. Kilroy, Jr.
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KILROY REALTY CORPORATION,
a Maryland corporation
________________________________
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PARTICIPANT:
_________________________________
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KILROY REALTY CORPORATION,
a Maryland corporation
________________________________
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KILROY REALTY CORPORATION,
a Maryland corporation
________________________________
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PARTICIPANT:
_________________________________
|
KILROY REALTY CORPORATION,
a Maryland corporation
________________________________
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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;
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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;
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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:
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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
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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
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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, 2013
(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: July 31, 2013
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
June 30, 2013
(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/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and
Chief Financial Officer
|
|
Date: July 31, 2013
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
June 30, 2013
(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 Operating Partnership.
|
/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.
|
|
Date: July 31, 2013
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
June 30, 2013
(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 Operating Partnership.
|
/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.
|
|
Date: July 31, 2013
|