þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
Kilroy Realty Corporation
|
Maryland
|
95-4598246
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
Kilroy Realty, L.P.
|
Delaware
|
95-4612685
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064
|
||
(Address of principal executive offices) (Zip Code)
|
||
|
||
(310) 481-8400
|
||
(Registrant's telephone number, including area code)
|
||
|
|
|
N/A
|
||
(Former name, former address and former fiscal year, if changed since last report)
|
Kilroy Realty Corporation
|
|
|
|
Large accelerated filer
þ
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
|||
|
|
|
|
Kilroy Realty, L.P.
|
|
|
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
þ
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
•
|
Combined reports better reflect how management and the analyst community view the business as a single operating unit;
|
•
|
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;
|
•
|
Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
|
•
|
Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
|
•
|
consolidated financial statements;
|
•
|
the following notes to the consolidated financial statements:
|
◦
|
Note 5, Secured and Unsecured Debt of the Operating Partnership;
|
◦
|
Note 6, Noncontrolling Interests on the Company’s Consolidated Financial Statements;
|
◦
|
Note 7, Stockholders’ Equity of the Company;
|
◦
|
Note 8, Partners’ Capital of the Operating Partnership;
|
◦
|
Note 14, Net Income (Loss) Available to Common Stockholders Per Share of the Company; and
|
◦
|
Note 15, Net Income (Loss) Available to Common Unitholders Per Unit of the Operating Partnership;
|
•
|
“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
◦
|
—Liquidity and Capital Resources of the Company;” and
|
◦
|
—Liquidity and Capital Resources of the Operating Partnership.”
|
|
|
|
Page
|
|
|
PART I – FINANCIAL INFORMATION
|
|
Item 1.
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
Item 1.
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
Item 2.
|
|
||
Item 3.
|
|
||
Item 4.
|
|
||
|
|
PART II – OTHER INFORMATION
|
|
Item 1.
|
|
||
Item 1A.
|
|
||
Item 2.
|
|
||
Item 3.
|
|
||
Item 4.
|
|
||
Item 5.
|
|
||
Item 6.
|
|
||
|
March 31, 2014
|
|
December 31, 2013
|
||||
ASSETS
|
(unaudited)
|
|
|
||||
REAL ESTATE ASSETS:
|
|
|
|
||||
Land and improvements (Note 2)
|
$
|
679,991
|
|
|
$
|
657,491
|
|
Buildings and improvements (Note 2)
|
3,706,662
|
|
|
3,590,699
|
|
||
Undeveloped land and construction in progress
|
1,047,371
|
|
|
1,016,757
|
|
||
Total real estate held for investment
|
5,434,024
|
|
|
5,264,947
|
|
||
Accumulated depreciation and amortization
|
(854,977
|
)
|
|
(818,957
|
)
|
||
Total real estate assets held for investment, net ($60,575 and $234,532 of VIE, respectively, Note 1)
|
4,579,047
|
|
|
4,445,990
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 13)
|
28,272
|
|
|
213,100
|
|
||
CASH AND CASH EQUIVALENTS
|
95,534
|
|
|
35,377
|
|
||
RESTRICTED CASH (Notes 1 and 13)
|
33,717
|
|
|
49,780
|
|
||
MARKETABLE SECURITIES (Note 11)
|
11,001
|
|
|
10,008
|
|
||
CURRENT RECEIVABLES, NET (Note 4)
|
11,092
|
|
|
10,743
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 4)
|
130,750
|
|
|
127,123
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Notes 2 and 3)
|
188,466
|
|
|
186,622
|
|
||
DEFERRED FINANCING COSTS, NET
|
15,195
|
|
|
16,502
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET
|
21,469
|
|
|
15,783
|
|
||
TOTAL ASSETS
|
$
|
5,114,543
|
|
|
$
|
5,111,028
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt (Notes 5 and 11)
|
$
|
556,946
|
|
|
$
|
560,434
|
|
Exchangeable senior notes, net (Notes 5 and 11)
|
169,528
|
|
|
168,372
|
|
||
Unsecured debt, net (Notes 5 and 11)
|
1,431,217
|
|
|
1,431,132
|
|
||
Unsecured line of credit (Notes 5 and 11)
|
—
|
|
|
45,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
187,631
|
|
|
198,467
|
|
||
Accrued distributions (Note 16)
|
31,456
|
|
|
31,490
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Notes 2 and 3)
|
107,569
|
|
|
101,286
|
|
||
Rents received in advance and tenant security deposits
|
43,952
|
|
|
44,240
|
|
||
Liabilities of real estate assets held for sale (Note 13)
|
634
|
|
|
14,447
|
|
||
Total liabilities
|
2,528,933
|
|
|
2,594,868
|
|
||
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, 82,218,332 and 82,153,944 shares issued and outstanding, respectively
|
822
|
|
|
822
|
|
||
Additional paid-in capital
|
2,479,740
|
|
|
2,478,975
|
|
||
Distributions in excess of earnings
|
(143,636
|
)
|
|
(210,896
|
)
|
||
Total stockholders’ equity
|
2,529,337
|
|
|
2,461,312
|
|
||
Noncontrolling interests:
|
|
|
|
||||
Common units of the Operating Partnership (Note 6)
|
51,388
|
|
|
49,963
|
|
||
Noncontrolling interest in consolidated subsidiary (Notes 1 and 6)
|
4,885
|
|
|
4,885
|
|
||
Total noncontrolling interests
|
56,273
|
|
|
54,848
|
|
||
Total equity
|
2,585,610
|
|
|
2,516,160
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
5,114,543
|
|
|
$
|
5,111,028
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
REVENUES:
|
|
|
|
||||
Rental income
|
$
|
112,056
|
|
|
$
|
101,607
|
|
Tenant reimbursements
|
11,572
|
|
|
9,130
|
|
||
Other property income (Note 12)
|
2,157
|
|
|
227
|
|
||
Total revenues
|
125,785
|
|
|
110,964
|
|
||
EXPENSES:
|
|
|
|
||||
Property expenses
|
25,094
|
|
|
22,805
|
|
||
Real estate taxes
|
11,173
|
|
|
9,664
|
|
||
Provision for bad debts
|
—
|
|
|
95
|
|
||
Ground leases
|
762
|
|
|
847
|
|
||
General and administrative expenses
|
10,811
|
|
|
9,669
|
|
||
Acquisition-related expenses
|
228
|
|
|
655
|
|
||
Depreciation and amortization
|
49,202
|
|
|
47,701
|
|
||
Total expenses
|
97,270
|
|
|
91,436
|
|
||
OTHER (EXPENSES) INCOME:
|
|
|
|
||||
Interest income and other net investment gains (Note 11)
|
177
|
|
|
392
|
|
||
Interest expense (Note 5)
|
(17,252
|
)
|
|
(19,734
|
)
|
||
Total other (expenses) income
|
(17,075
|
)
|
|
(19,342
|
)
|
||
INCOME FROM CONTINUING OPERATIONS
|
11,440
|
|
|
186
|
|
||
DISCONTINUED OPERATIONS (Note 13)
|
|
|
|
||||
Income from discontinued operations
|
377
|
|
|
2,202
|
|
||
Net gain on dispositions of discontinued operations
|
90,115
|
|
|
—
|
|
||
Total income from discontinued operations
|
90,492
|
|
|
2,202
|
|
||
NET INCOME
|
101,932
|
|
|
2,388
|
|
||
Net (income) loss attributable to noncontrolling common units of the Operating Partnership
|
(2,087
|
)
|
|
22
|
|
||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
99,845
|
|
|
2,410
|
|
||
PREFERRED DIVIDENDS
|
(3,313
|
)
|
|
(3,313
|
)
|
||
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
96,532
|
|
|
$
|
(903
|
)
|
Income (loss) from continuing operations available to common stockholders per common share – basic (Note 14)
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income (loss) from continuing operations available to common stockholders per common share – diluted (Note 14)
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Net income (loss) available to common stockholders per share – basic (Note 14)
|
$
|
1.17
|
|
|
$
|
(0.02
|
)
|
Net income (loss) available to common stockholders per share – diluted (Note 14)
|
$
|
1.14
|
|
|
$
|
(0.02
|
)
|
Weighted average common shares outstanding – basic (Note 14)
|
82,124,538
|
|
|
74,977,240
|
|
||
Weighted average common shares outstanding – diluted (Note 14)
|
84,140,070
|
|
|
74,977,240
|
|
||
Dividends declared per common share
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interest
|
|
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 (loss)
|
|
|
|
|
|
|
|
|
2,410
|
|
|
2,410
|
|
|
(22
|
)
|
|
2,388
|
|
|||||||||||
Issuance of common stock
|
|
|
453,679
|
|
|
4
|
|
|
23,391
|
|
|
|
|
23,395
|
|
|
|
|
23,395
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
—
|
|
|
|
|
336
|
|
|
|
|
336
|
|
|
|
|
336
|
|
|||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
2,422
|
|
|
|
|
2,422
|
|
|
|
|
2,422
|
|
||||||||||||
Repurchase of common stock and restricted stock units
|
|
|
(33,534
|
)
|
|
|
|
(1,199
|
)
|
|
|
|
(1,199
|
)
|
|
|
|
(1,199
|
)
|
|||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
2,579
|
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(1,893
|
)
|
|
|
|
(1,893
|
)
|
|
1,893
|
|
|
—
|
|
|||||||||||
Preferred dividends and distributions
|
|
|
|
|
|
|
|
|
(3,313
|
)
|
|
(3,313
|
)
|
|
|
|
(3,313
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.35 per share/unit)
|
|
|
|
|
|
|
|
|
(26,773
|
)
|
|
(26,773
|
)
|
|
(639
|
)
|
|
(27,412
|
)
|
|||||||||||
BALANCE AS OF MARCH 31, 2013
|
$
|
192,411
|
|
|
75,349,705
|
|
|
$
|
753
|
|
|
$
|
2,149,052
|
|
|
$
|
(157,211
|
)
|
|
$
|
2,185,005
|
|
|
$
|
47,535
|
|
|
$
|
2,232,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2013
|
$
|
192,411
|
|
|
82,153,944
|
|
|
$
|
822
|
|
|
$
|
2,478,975
|
|
|
$
|
(210,896
|
)
|
|
$
|
2,461,312
|
|
|
$
|
54,848
|
|
|
$
|
2,516,160
|
|
Net income
|
|
|
|
|
|
|
|
|
99,845
|
|
|
99,845
|
|
|
2,087
|
|
|
101,932
|
|
|||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
2,233
|
|
|
|
|
2,233
|
|
|
|
|
2,233
|
|
||||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(26,074
|
)
|
|
|
|
(1,517
|
)
|
|
|
|
(1,517
|
)
|
|
|
|
(1,517
|
)
|
|||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
88,962
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||||||
Exercise of stock options
|
|
|
500
|
|
|
|
|
21
|
|
|
|
|
21
|
|
|
|
|
21
|
|
|||||||||||
Exchange of common units of the Operating Partnership
|
|
|
1,000
|
|
|
|
|
28
|
|
|
|
|
28
|
|
|
(28
|
)
|
|
—
|
|
||||||||||
Preferred dividends and distributions
|
|
|
|
|
|
|
|
|
(3,313
|
)
|
|
(3,313
|
)
|
|
|
|
(3,313
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.35 per share/unit)
|
|
|
|
|
|
|
|
|
(29,272
|
)
|
|
(29,272
|
)
|
|
(634
|
)
|
|
(29,906
|
)
|
|||||||||||
BALANCE AS OF MARCH 31, 2014
|
$
|
192,411
|
|
|
82,218,332
|
|
|
$
|
822
|
|
|
$
|
2,479,740
|
|
|
$
|
(143,636
|
)
|
|
$
|
2,529,337
|
|
|
$
|
56,273
|
|
|
$
|
2,585,610
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
101,932
|
|
|
$
|
2,388
|
|
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
|
48,717
|
|
|
50,011
|
|
||
Increase in provision for bad debts
|
—
|
|
|
95
|
|
||
Depreciation of furniture, fixtures and equipment
|
485
|
|
|
380
|
|
||
Noncash amortization of share-based compensation awards
|
2,502
|
|
|
2,234
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
1,256
|
|
|
1,413
|
|
||
Noncash amortization of net below market rents (Note 3)
|
(1,734
|
)
|
|
(2,047
|
)
|
||
Net gain on dispositions of discontinued operations (Note 13)
|
(90,115
|
)
|
|
—
|
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(2,353
|
)
|
|
(2,442
|
)
|
||
Straight-line rents
|
(3,959
|
)
|
|
(6,724
|
)
|
||
Net change in other operating assets
|
(5,949
|
)
|
|
(7,390
|
)
|
||
Net change in other operating liabilities
|
(5,701
|
)
|
|
18,581
|
|
||
Net cash provided by operating activities
|
45,081
|
|
|
56,499
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties (Note 2)
|
(106,125
|
)
|
|
(85,692
|
)
|
||
Expenditures for operating properties
|
(32,016
|
)
|
|
(25,571
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(73,626
|
)
|
|
(73,369
|
)
|
||
Net proceeds received from dispositions of operating properties (Note 13)
|
309,824
|
|
|
—
|
|
||
(Increase) decrease in restricted cash (Notes 1 and 13)
|
(779
|
)
|
|
228,079
|
|
||
Net cash provided by investing activities
|
97,278
|
|
|
43,447
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock
|
—
|
|
|
23,395
|
|
||
Borrowings on unsecured line of credit
|
90,000
|
|
|
—
|
|
||
Repayments on unsecured line of credit
|
(135,000
|
)
|
|
(185,000
|
)
|
||
Principal payments on secured debt
|
(2,414
|
)
|
|
(84,918
|
)
|
||
Proceeds from the issuance of unsecured debt
|
—
|
|
|
299,901
|
|
||
Financing costs
|
(418
|
)
|
|
(2,870
|
)
|
||
Repurchase of common stock and restricted stock units
|
(1,517
|
)
|
|
(1,209
|
)
|
||
Proceeds from exercise of stock options
|
21
|
|
|
—
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(29,561
|
)
|
|
(26,956
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(3,313
|
)
|
|
(3,313
|
)
|
||
Net cash (used in) provided by financing activities
|
(82,202
|
)
|
|
19,030
|
|
||
Net increase in cash and cash equivalents
|
60,157
|
|
|
118,976
|
|
||
Cash and cash equivalents, beginning of period
|
35,377
|
|
|
16,700
|
|
||
Cash and cash equivalents, end of period
|
$
|
95,534
|
|
|
$
|
135,676
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $10,042 and $7,175 as of March 31, 2014 and 2013, respectively
|
$
|
14,106
|
|
|
$
|
11,303
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
64,709
|
|
|
$
|
42,140
|
|
Tenant improvements funded directly by tenants
|
$
|
4,470
|
|
|
$
|
1,426
|
|
Assumption of secured debt in connection with property acquisitions
|
$
|
—
|
|
|
$
|
95,496
|
|
Assumption of other assets and liabilities in connection with operating and development property acquisitions, net
|
$
|
—
|
|
|
$
|
422
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
29,906
|
|
|
$
|
27,011
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,694
|
|
Grant date fair value of share-based compensation awards
|
$
|
—
|
|
|
$
|
8,451
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
28
|
|
|
$
|
—
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
|
(unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
REAL ESTATE ASSETS:
|
|
|
|
||||
Land and improvements (Note 2)
|
$
|
679,991
|
|
|
$
|
657,491
|
|
Buildings and improvements (Note 2)
|
3,706,662
|
|
|
3,590,699
|
|
||
Undeveloped land and construction in progress
|
1,047,371
|
|
|
1,016,757
|
|
||
Total real estate held for investment
|
5,434,024
|
|
|
5,264,947
|
|
||
Accumulated depreciation and amortization
|
(854,977
|
)
|
|
(818,957
|
)
|
||
Total real estate assets held for investment, net ($60,575 and $234,532 of VIE, respectively, Note 1)
|
4,579,047
|
|
|
4,445,990
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 13)
|
28,272
|
|
|
213,100
|
|
||
CASH AND CASH EQUIVALENTS
|
95,534
|
|
|
35,377
|
|
||
RESTRICTED CASH (Notes 1 and 13)
|
33,717
|
|
|
49,780
|
|
||
MARKETABLE SECURITIES (Note 11)
|
11,001
|
|
|
10,008
|
|
||
CURRENT RECEIVABLES, NET (Note 4)
|
11,092
|
|
|
10,743
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 4)
|
130,750
|
|
|
127,123
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Notes 2 and 3)
|
188,466
|
|
|
186,622
|
|
||
DEFERRED FINANCING COSTS, NET
|
15,195
|
|
|
16,502
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET
|
21,469
|
|
|
15,783
|
|
||
TOTAL ASSETS
|
$
|
5,114,543
|
|
|
$
|
5,111,028
|
|
LIABILITIES AND CAPITAL
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt (Notes 5 and 11)
|
$
|
556,946
|
|
|
$
|
560,434
|
|
Exchangeable senior notes, net (Notes 5 and 11)
|
169,528
|
|
|
168,372
|
|
||
Unsecured debt, net (Notes 5 and 11)
|
1,431,217
|
|
|
1,431,132
|
|
||
Unsecured line of credit (Notes 5 and 11)
|
—
|
|
|
45,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
187,631
|
|
|
198,467
|
|
||
Accrued distributions (Note 16)
|
31,456
|
|
|
31,490
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Notes 2 and 3)
|
107,569
|
|
|
101,286
|
|
||
Rents received in advance and tenant security deposits
|
43,952
|
|
|
44,240
|
|
||
Liabilities of real estate assets held for sale (Note 13)
|
634
|
|
|
14,447
|
|
||
Total liabilities
|
2,528,933
|
|
|
2,594,868
|
|
||
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, 82,218,332 and 82,153,944 held by the general partner and 1,804,200 and 1,805,200
held by common limited partners issued and outstanding, respectively
|
2,384,746
|
|
|
2,315,361
|
|
||
Total partners’ capital
|
2,577,157
|
|
|
2,507,772
|
|
||
Noncontrolling interests in consolidated subsidiaries (Notes 1 and 6)
|
8,453
|
|
|
8,388
|
|
||
Total capital
|
2,585,610
|
|
|
2,516,160
|
|
||
TOTAL LIABILITIES AND CAPITAL
|
$
|
5,114,543
|
|
|
$
|
5,111,028
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
REVENUES:
|
|
|
|
||||
Rental income
|
$
|
112,056
|
|
|
101,607
|
|
|
Tenant reimbursements
|
11,572
|
|
|
9,130
|
|
||
Other property income (Note 12)
|
2,157
|
|
|
227
|
|
||
Total revenues
|
125,785
|
|
|
110,964
|
|
||
EXPENSES:
|
|
|
|
||||
Property expenses
|
25,094
|
|
|
22,805
|
|
||
Real estate taxes
|
11,173
|
|
|
9,664
|
|
||
Provision for bad debts
|
—
|
|
|
95
|
|
||
Ground leases
|
762
|
|
|
847
|
|
||
General and administrative expenses
|
10,811
|
|
|
9,669
|
|
||
Acquisition-related expenses
|
228
|
|
|
655
|
|
||
Depreciation and amortization
|
49,202
|
|
|
47,701
|
|
||
Total expenses
|
97,270
|
|
|
91,436
|
|
||
OTHER (EXPENSES) INCOME:
|
|
|
|
||||
Interest income and other net investment gains (Note 11)
|
177
|
|
|
392
|
|
||
Interest expense (Note 5)
|
(17,252
|
)
|
|
(19,734
|
)
|
||
Total other (expenses) income
|
(17,075
|
)
|
|
(19,342
|
)
|
||
INCOME FROM CONTINUING OPERATIONS
|
11,440
|
|
|
186
|
|
||
DISCONTINUED OPERATIONS (Note 13)
|
|
|
|
||||
Income from discontinued operations
|
377
|
|
|
2,202
|
|
||
Net gain on dispositions of discontinued operations
|
90,115
|
|
|
—
|
|
||
Total income from discontinued operations
|
90,492
|
|
|
2,202
|
|
||
NET INCOME
|
101,932
|
|
|
2,388
|
|
||
Net income attributable to noncontrolling interests in consolidated subsidiaries
|
(65
|
)
|
|
(69
|
)
|
||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
101,867
|
|
|
2,319
|
|
||
PREFERRED DISTRIBUTIONS
|
(3,313
|
)
|
|
(3,313
|
)
|
||
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS
|
$
|
98,554
|
|
|
$
|
(994
|
)
|
Income (loss) from continuing operations available to common unitholders per common unit - basic (Note 15)
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income (loss) from continuing operations available to common unitholders per common unit - diluted (Note 15)
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Net income (loss) available to common unitholders per unit – basic (Note 15)
|
$
|
1.17
|
|
|
$
|
(0.02
|
)
|
Net income (loss) available to common unitholders per unit – diluted (Note 15)
|
$
|
1.14
|
|
|
$
|
(0.02
|
)
|
Weighted average common units outstanding – basic (Note 15)
|
83,928,993
|
|
|
76,803,743
|
|
||
Weighted average common units outstanding – diluted (Note 15)
|
85,944,525
|
|
|
76,803,743
|
|
||
Dividends declared per common unit
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
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
|
|
|
|
|
2,319
|
|
|
2,319
|
|
|
69
|
|
|
2,388
|
|
|||||||
Issuance of common units
|
|
|
453,679
|
|
|
23,395
|
|
|
23,395
|
|
|
|
|
23,395
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
—
|
|
|
336
|
|
|
336
|
|
|
|
|
336
|
|
|||||||
Noncash amortization of share-based compensation
|
|
|
|
|
2,422
|
|
|
2,422
|
|
|
|
|
2,422
|
|
||||||||
Repurchase of common units and restricted stock units
|
|
|
(33,534
|
)
|
|
(1,199
|
)
|
|
(1,199
|
)
|
|
|
|
(1,199
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
2,579
|
|
|
(10
|
)
|
|
(10
|
)
|
|
|
|
(10
|
)
|
|||||||
Preferred distributions
|
|
|
|
|
(3,313
|
)
|
|
(3,313
|
)
|
|
|
|
(3,313
|
)
|
||||||||
Distributions declared per common unit ($0.35 per unit)
|
|
|
|
|
(27,412
|
)
|
|
(27,412
|
)
|
|
|
|
(27,412
|
)
|
||||||||
BALANCE AS OF MARCH 31, 2013
|
$
|
192,411
|
|
|
77,176,208
|
|
|
$
|
2,036,781
|
|
|
$
|
2,229,192
|
|
|
$
|
3,348
|
|
|
$
|
2,232,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2013
|
$
|
192,411
|
|
|
83,959,144
|
|
|
$
|
2,315,361
|
|
|
$
|
2,507,772
|
|
|
$
|
8,388
|
|
|
$
|
2,516,160
|
|
Net income
|
|
|
|
|
101,867
|
|
|
101,867
|
|
|
65
|
|
|
101,932
|
|
|||||||
Noncash amortization of share-based compensation
|
|
|
|
|
2,233
|
|
|
2,233
|
|
|
|
|
2,233
|
|
||||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(26,074
|
)
|
|
(1,517
|
)
|
|
(1,517
|
)
|
|
|
|
(1,517
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
88,962
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Exercise of stock options
|
|
|
500
|
|
|
21
|
|
|
21
|
|
|
|
|
21
|
|
|||||||
Preferred distributions
|
|
|
|
|
(3,313
|
)
|
|
(3,313
|
)
|
|
|
|
(3,313
|
)
|
||||||||
Distributions declared per common unit ($0.35 per unit)
|
|
|
|
|
(29,906
|
)
|
|
(29,906
|
)
|
|
|
|
(29,906
|
)
|
||||||||
BALANCE AS OF MARCH 31, 2014
|
$
|
192,411
|
|
|
84,022,532
|
|
|
$
|
2,384,746
|
|
|
$
|
2,577,157
|
|
|
$
|
8,453
|
|
|
$
|
2,585,610
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
101,932
|
|
|
$
|
2,388
|
|
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
|
48,717
|
|
|
50,011
|
|
||
Increase in provision for bad debts
|
—
|
|
|
95
|
|
||
Depreciation of furniture, fixtures and equipment
|
485
|
|
|
380
|
|
||
Noncash amortization of share-based compensation awards
|
2,502
|
|
|
2,234
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
1,256
|
|
|
1,413
|
|
||
Noncash amortization of net below market rents (Note 3)
|
(1,734
|
)
|
|
(2,047
|
)
|
||
Net gain on dispositions of discontinued operations (Note 13)
|
(90,115
|
)
|
|
—
|
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(2,353
|
)
|
|
(2,442
|
)
|
||
Straight-line rents
|
(3,959
|
)
|
|
(6,724
|
)
|
||
Net change in other operating assets
|
(5,949
|
)
|
|
(7,390
|
)
|
||
Net change in other operating liabilities
|
(5,701
|
)
|
|
18,581
|
|
||
Net cash provided by operating activities
|
45,081
|
|
|
56,499
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for acquisition of operating properties (Note 2)
|
(106,125
|
)
|
|
(85,692
|
)
|
||
Expenditures for operating properties
|
(32,016
|
)
|
|
(25,571
|
)
|
||
Expenditures for development and redevelopment properties and undeveloped land
|
(73,626
|
)
|
|
(73,369
|
)
|
||
Net proceeds received from dispositions of operating properties (Note 13)
|
309,824
|
|
|
—
|
|
||
(Increase) decrease in restricted cash (Notes 1 and 13)
|
(779
|
)
|
|
228,079
|
|
||
Net cash provided by investing activities
|
97,278
|
|
|
43,447
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common units
|
—
|
|
|
23,395
|
|
||
Borrowings on unsecured line of credit
|
90,000
|
|
|
—
|
|
||
Repayments on unsecured line of credit
|
(135,000
|
)
|
|
(185,000
|
)
|
||
Principal payments on secured debt
|
(2,414
|
)
|
|
(84,918
|
)
|
||
Proceeds from the issuance of unsecured debt
|
—
|
|
|
299,901
|
|
||
Financing costs
|
(418
|
)
|
|
(2,870
|
)
|
||
Repurchase of common units and restricted stock units
|
(1,517
|
)
|
|
(1,209
|
)
|
||
Proceeds from exercise of stock options
|
21
|
|
|
—
|
|
||
Distributions paid to common unitholders
|
(29,561
|
)
|
|
(26,956
|
)
|
||
Distributions paid to preferred unitholders
|
(3,313
|
)
|
|
(3,313
|
)
|
||
Net cash (used in) provided by financing activities
|
(82,202
|
)
|
|
19,030
|
|
||
Net increase in cash and cash equivalents
|
60,157
|
|
|
118,976
|
|
||
Cash and cash equivalents, beginning of period
|
35,377
|
|
|
16,700
|
|
||
Cash and cash equivalents, end of period
|
$
|
95,534
|
|
|
$
|
135,676
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $10,042 and $7,175 as of March 31, 2014 and 2013, respectively
|
$
|
14,106
|
|
|
$
|
11,303
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development and redevelopment properties
|
$
|
64,709
|
|
|
$
|
42,140
|
|
Tenant improvements funded directly by tenants
|
$
|
4,470
|
|
|
$
|
1,426
|
|
Assumption of secured debt in connection with property acquisitions
|
$
|
—
|
|
|
$
|
95,496
|
|
Assumption of other assets and liabilities in connection with operating and development property acquisitions, net
|
$
|
—
|
|
|
$
|
422
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of distributions payable to common unitholders
|
$
|
29,906
|
|
|
$
|
27,011
|
|
Accrual of distributions payable to preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,694
|
|
Grant date fair value of share-based compensation awards
|
$
|
—
|
|
|
$
|
8,451
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage
Occupied
|
||||
Stabilized Office Properties
|
107
|
|
|
13,305,145
|
|
|
527
|
|
|
92.4
|
%
|
|
Number of Properties
|
|
Estimated Rentable
Square Feet
|
|
Development properties under construction
(1)
|
6
|
|
2,538,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
Property
|
|
Date of Acquisition
|
|
Number of
Buildings
|
|
Rentable Square
Feet
|
|
Occupancy as of March 31, 2014
|
|
Purchase
Price
(in millions)
|
|||
401 Terry Avenue North, Seattle, WA
|
|
March 13, 2014
|
|
1
|
|
140,605
|
|
|
100.0%
|
|
$
|
106.1
|
|
|
Total 2014
Acquisitions
|
||
|
(in thousands)
|
||
Assets
|
|
||
Land and improvements
|
$
|
22,500
|
|
Buildings and improvements
(1)
|
77,046
|
|
|
Deferred leasing costs and acquisition-related intangible assets
(2)
|
11,199
|
|
|
Total assets acquired
|
110,745
|
|
|
Liabilities
|
|
||
Deferred revenue and acquisition-related intangible liabilities
(3)
|
4,620
|
|
|
Total liabilities assumed
|
4,620
|
|
|
Net assets and liabilities acquired
|
$
|
106,125
|
|
(1)
|
Represents buildings, building improvements and tenant improvements.
|
(2)
|
Represents in-place leases of approximately
$9.3 million
(with a weighted average amortization period of
seven
years) and leasing commissions of approximately
$1.9 million
(with a weighted average amortization period of
seven
years).
|
(3)
|
Represents below-market leases of approximately
$4.6 million
(with a weighted average amortization period of
seven
years).
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Deferred Leasing Costs and Acquisition-Related Intangible Assets, net:
|
|
|
|
||||
Deferred leasing costs
|
$
|
183,813
|
|
|
$
|
178,720
|
|
Accumulated amortization
|
(68,152
|
)
|
|
(63,246
|
)
|
||
Deferred leasing costs, net
|
115,661
|
|
|
115,474
|
|
||
Above-market operating leases
|
27,351
|
|
|
27,635
|
|
||
Accumulated amortization
|
(15,489
|
)
|
|
(14,283
|
)
|
||
Above-market operating leases, net
|
11,862
|
|
|
13,352
|
|
||
In-place leases
|
104,643
|
|
|
100,318
|
|
||
Accumulated amortization
|
(44,175
|
)
|
|
(42,999
|
)
|
||
In-place leases, net
|
60,468
|
|
|
57,319
|
|
||
Below-market ground lease obligation
|
490
|
|
|
490
|
|
||
Accumulated amortization
|
(15
|
)
|
|
(13
|
)
|
||
Below-market ground lease obligation, net
|
475
|
|
|
477
|
|
||
Total deferred leasing costs and acquisition-related intangible assets, net
|
$
|
188,466
|
|
|
$
|
186,622
|
|
Acquisition-Related Intangible Liabilities, net:
(1)
|
|
|
|
||||
Below-market operating leases
|
$
|
73,522
|
|
|
$
|
69,385
|
|
Accumulated amortization
|
(28,316
|
)
|
|
(25,706
|
)
|
||
Below-market operating leases, net
|
45,206
|
|
|
43,679
|
|
||
Above-market ground lease obligation
|
6,320
|
|
|
6,320
|
|
||
Accumulated amortization
|
(248
|
)
|
|
(223
|
)
|
||
Above-market ground lease obligation, net
|
6,072
|
|
|
6,097
|
|
||
Total acquisition-related intangible liabilities, net
|
$
|
51,278
|
|
|
$
|
49,776
|
|
(1)
|
Included in deferred revenue and acquisition-related intangible liabilities, net in the consolidated balance sheets.
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Deferred leasing costs
(1)
|
$
|
6,780
|
|
|
$
|
7,844
|
|
Above-market operating leases
(2)
|
1,490
|
|
|
1,438
|
|
||
In-place leases
(1)
|
6,136
|
|
|
7,458
|
|
||
Below-market ground lease obligation
(3)
|
—
|
|
|
2
|
|
||
Below-market operating leases
(4)
|
(3,093
|
)
|
|
(3,485
|
)
|
||
Above-market ground lease obligation
(5)
|
(25
|
)
|
|
(25
|
)
|
||
Total
|
$
|
11,288
|
|
|
$
|
13,232
|
|
(1)
|
The amortization of deferred leasing costs related to lease incentives is recorded to rental income and other 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 2014
|
$
|
20,006
|
|
|
$
|
3,830
|
|
|
$
|
15,274
|
|
|
$
|
6
|
|
|
$
|
(9,802
|
)
|
|
$
|
(76
|
)
|
2015
|
22,162
|
|
|
2,918
|
|
|
13,562
|
|
|
8
|
|
|
(9,577
|
)
|
|
(101
|
)
|
||||||
2016
|
19,351
|
|
|
1,891
|
|
|
10,475
|
|
|
8
|
|
|
(7,847
|
)
|
|
(101
|
)
|
||||||
2017
|
16,742
|
|
|
1,573
|
|
|
8,774
|
|
|
8
|
|
|
(6,780
|
)
|
|
(101
|
)
|
||||||
2018
|
13,416
|
|
|
973
|
|
|
5,689
|
|
|
8
|
|
|
(5,177
|
)
|
|
(101
|
)
|
||||||
Thereafter
|
23,984
|
|
|
677
|
|
|
6,694
|
|
|
437
|
|
|
(6,023
|
)
|
|
(5,592
|
)
|
||||||
Total
|
$
|
115,661
|
|
|
$
|
11,862
|
|
|
$
|
60,468
|
|
|
$
|
475
|
|
|
$
|
(45,206
|
)
|
|
$
|
(6,072
|
)
|
(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.
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
13,226
|
|
|
$
|
12,866
|
|
Allowance for uncollectible tenant receivables
|
(2,134
|
)
|
|
(2,123
|
)
|
||
Current receivables, net
|
$
|
11,092
|
|
|
$
|
10,743
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
132,740
|
|
|
$
|
129,198
|
|
Allowance for deferred rent receivables
|
(1,990
|
)
|
|
(2,075
|
)
|
||
Deferred rent receivables, net
|
$
|
130,750
|
|
|
$
|
127,123
|
|
Type of Debt
|
Annual Stated Interest Rate
(1)
|
|
GAAP
Effective Rate
(1)(2)
|
|
Maturity Date
|
|
March 31, 2014
(3)
|
|
December 31, 2013
(3)
|
||||
|
|
|
|
|
|
|
(in thousands)
|
||||||
Mortgage note payable
|
4.27%
|
|
4.27%
|
|
February 2018
|
|
$
|
132,539
|
|
|
$
|
133,117
|
|
Mortgage note payable
(4)
|
4.48%
|
|
4.48%
|
|
July 2027
|
|
97,000
|
|
|
97,000
|
|
||
Mortgage note payable
(4)
|
6.05%
|
|
3.50%
|
|
June 2019
|
|
91,696
|
|
|
92,502
|
|
||
Mortgage note payable
|
6.51%
|
|
6.51%
|
|
February 2017
|
|
67,415
|
|
|
67,663
|
|
||
Mortgage note payable
(4)
|
5.23%
|
|
3.50%
|
|
January 2016
|
|
54,120
|
|
|
54,570
|
|
||
Mortgage note payable
(4)
|
5.57%
|
|
3.25%
|
|
February 2016
|
|
41,300
|
|
|
41,654
|
|
||
Mortgage note payable
(4)
|
5.09%
|
|
3.50%
|
|
August 2015
|
|
34,712
|
|
|
34,845
|
|
||
Mortgage note payable
(4)
|
4.94%
|
|
4.00%
|
|
April 2015
|
|
27,307
|
|
|
27,641
|
|
||
Mortgage note payable
|
7.15%
|
|
7.15%
|
|
May 2017
|
|
8,387
|
|
|
8,972
|
|
||
Other
|
Various
|
|
Various
|
|
Various
|
|
2,470
|
|
|
2,470
|
|
||
Total
|
|
|
|
|
|
|
$
|
556,946
|
|
|
$
|
560,434
|
|
(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.
|
|
4.25% Exchangeable Notes
|
||||||
|
March 31,
2014 |
|
December 31,
2013 |
||||
|
(in thousands)
|
||||||
Principal amount
|
$
|
172,500
|
|
|
$
|
172,500
|
|
Unamortized discount
|
(2,972
|
)
|
|
(4,128
|
)
|
||
Net carrying amount of liability component
|
$
|
169,528
|
|
|
$
|
168,372
|
|
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 March 31,
|
||
|
2014
|
|
2013
|
Per share average trading price of the Company’s common stock
|
$55.18
|
|
$51.14
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Approximate fair value of shares upon exchange
|
$
|
270,602
|
|
|
$
|
247,300
|
|
Principal amount of the 4.25% Exchangeable Notes
|
172,500
|
|
|
172,500
|
|
||
Approximate fair value in excess amount of principal amount
|
$
|
98,102
|
|
|
$
|
74,800
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Contractual interest payments
|
$
|
1,833
|
|
|
$
|
1,833
|
|
Amortization of discount
|
1,156
|
|
|
1,078
|
|
||
Interest expense attributable to the Exchangeable Notes
|
$
|
2,989
|
|
|
$
|
2,911
|
|
|
4.25% Exchangeable Notes
|
||
Referenced shares of common stock
|
4,800,796
|
|
|
Exchange price including effect of capped calls
|
$
|
42.81
|
|
|
|
|
|
|
|
|
|
|
Principal Amount as of
|
||||||
|
Issuance date
|
|
Maturity date
|
|
Stated
coupon rate
|
|
Effective interest rate
(1)
|
|
March 31,
2014 |
|
December 31,
2013 |
||||
|
|
|
|
|
|
|
|
|
(in thousands)
|
||||||
3.800% Unsecured Senior Notes
(2)
|
January 2013
|
|
January 2023
|
|
3.800%
|
|
3.804%
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Unamortized discount
|
|
|
|
|
|
|
|
|
(87
|
)
|
|
(90
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
299,913
|
|
|
$
|
299,910
|
|
|
|||||||||||||||
4.800% Unsecured Senior Notes
(3)
|
July 2011
|
|
July 2018
|
|
4.800%
|
|
4.827%
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Unamortized discount
|
|
|
|
|
|
|
|
|
(320
|
)
|
|
(339
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
324,680
|
|
|
$
|
324,661
|
|
|
|||||||||||||||
6.625% Unsecured Senior Notes
(4)
|
May 2010
|
|
June 2020
|
|
6.625%
|
|
6.743%
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Unamortized discount
|
|
|
|
|
|
|
|
|
(1,313
|
)
|
|
(1,367
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
248,687
|
|
|
$
|
248,633
|
|
|
|||||||||||||||
5.000% Unsecured Senior Notes
(5)
|
November 2010
|
|
November 2015
|
|
5.000%
|
|
5.014%
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Unamortized discount
|
|
|
|
|
|
|
|
|
(63
|
)
|
|
(73
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
324,937
|
|
|
$
|
324,927
|
|
(1)
|
This represents the rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of initial issuance discounts, excluding debt issuance costs.
|
(2)
|
Interest on the 3.800% unsecured senior notes is payable semi-annually in arrears on January 15th and July 15th of each year.
|
(3)
|
Interest on the 4.800% unsecured senior notes is payable semi-annually in arrears on January 15th and July 15th of each year.
|
(4)
|
Interest on the 6.625% unsecured senior notes is payable semi-annually in arrears on June 1st and December 1st of each year.
|
(5)
|
Interest on the 5.000% unsecured senior notes is payable semi-annually in arrears on May 3rd and November 3rd of each year.
|
|
March 31,
2014 |
|
December 31,
2013 |
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
45,000
|
|
Remaining borrowing capacity
|
500,000
|
|
|
455,000
|
|
||
Total borrowing capacity
(1)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Interest rate
(2)
|
—
|
%
|
|
1.62
|
%
|
||
Facility fee-annual rate
(3)
|
0.300%
|
||||||
Maturity date
(4)
|
April 2017
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, 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
March 31, 2014
and
December 31, 2013
.
|
(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 of which, as of
March 31, 2014
, approximately
$4.5 million
remains to be 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 2014
|
$
|
262,932
|
|
2015
|
395,104
|
|
|
2016
|
249,431
|
|
|
2017
|
71,748
|
|
|
2018
|
451,728
|
|
|
Thereafter
|
718,011
|
|
|
Total
(1)
|
$
|
2,148,954
|
|
(1)
|
Includes gross principal balance of outstanding debt before impact of net unamortized premiums totaling approximately
$8.7 million
.
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Gross interest expense
|
$
|
28,034
|
|
|
$
|
27,466
|
|
Capitalized interest
|
(10,782
|
)
|
|
(7,732
|
)
|
||
Interest expense
|
$
|
17,252
|
|
|
$
|
19,734
|
|
|
March 31, 2014
|
|
December 31, 2013
|
|
March 31, 2013
|
|||
Company owned common units in the Operating Partnership
|
82,218,332
|
|
|
82,153,944
|
|
|
75,349,705
|
|
Company owned general partnership interest
|
97.9
|
%
|
|
97.8
|
%
|
|
97.6
|
%
|
Noncontrolling common units of the Operating Partnership
|
1,804,200
|
|
|
1,805,200
|
|
|
1,826,503
|
|
Ownership interest of noncontrolling interest
|
2.1
|
%
|
|
2.2
|
%
|
|
2.4
|
%
|
|
Fair Value Assumptions as of March 31, 2014
|
Fair value per share at March 31, 2014
|
$63.44
|
Expected share price volatility
|
32.00%
|
Risk-free interest rate
|
0.79%
|
Remaining expected life
|
2.75 years
|
|
Fair Value (Level 1)
(1)
|
||||||
|
March 31, 2014
|
|
December 31, 2013
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
11,001
|
|
|
$
|
10,008
|
|
(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 March 31,
|
||||||
|
2014
|
|
2013
|
||||
Description
|
(in thousands)
|
||||||
Net gain on marketable securities
|
$
|
154
|
|
|
$
|
356
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt
(1)
|
$
|
556,946
|
|
|
$
|
567,107
|
|
|
$
|
560,434
|
|
|
$
|
568,760
|
|
Exchangeable senior notes, net
(1)
|
169,528
|
|
|
175,403
|
|
|
168,372
|
|
|
178,190
|
|
||||
Unsecured debt, net
(2)
|
1,431,217
|
|
|
1,506,815
|
|
|
1,431,132
|
|
|
1,523,052
|
|
||||
Unsecured line of credit
(1)
|
—
|
|
|
—
|
|
|
45,000
|
|
|
45,012
|
|
(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
$873.5 million
and
$921.2 million
, respectively, as of
March 31, 2014
. The carrying value and fair value of the Level I instruments as of
December 31, 2013
, was
$873.5 million
and
$929.3 million
, respectively. The carrying value and fair value of the Level II instruments was
$557.7 million
and
$585.6 million
, respectively, as of
March 31, 2014
. The carrying value and fair value of the Level II instruments as of
December 31, 2013
, was
$557.7 million
and
$593.7 million
, respectively.
|
Location
|
|
City/Submarket
|
|
Property Type
|
10850 Via Frontera, San Diego, CA
|
|
I-15 Corridor/Rancho Bernardo
|
|
Undeveloped Land
|
Real estate assets and other assets held for sale
|
(in thousands)
|
||
Undeveloped land and construction in progress
|
$
|
28,030
|
|
Prepaid expenses and other assets, net
|
242
|
|
|
Real estate and other assets held for sale, net
|
$
|
28,272
|
|
|
|
||
Liabilities of real estate assets held for sale
|
|
||
Accounts payable, accrued expenses and other liabilities
|
$
|
634
|
|
Liabilities of real estate assets held for sale
|
$
|
634
|
|
Location
|
|
City/Submarket
|
|
Property Type
|
|
Month of Disposition
|
|
Number of Buildings
|
|
Rentable Square Feet
|
||
San Diego Properties, San Diego, CA
(1)(2)
|
|
I-15 Corridor/Sorrento Mesa
|
|
Office
|
|
January
|
|
12
|
|
|
1,049,035
|
|
(1)
|
The San Diego Properties included the following: 10020 Pacific Mesa Boulevard, 6055 Lusk Avenue, 5010 and 5005 Wateridge Vista Drive, 15435 and 15445 Innovation Drive, and 15051, 15073, 15231, 15253, 15333 and 15378 Avenue of Science.
|
(2)
|
These properties were held for sale as of December 31, 2013.
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Revenues:
|
|
|
|
||||
Rental income
|
$
|
458
|
|
|
$
|
5,773
|
|
Tenant reimbursements
|
66
|
|
|
757
|
|
||
Other property income
|
9
|
|
|
3
|
|
||
Total revenues
|
533
|
|
|
6,533
|
|
||
Expenses:
|
|
|
|
||||
Property expenses
|
87
|
|
|
968
|
|
||
Real estate taxes
|
69
|
|
|
673
|
|
||
Depreciation and amortization
|
—
|
|
|
2,690
|
|
||
Total expenses
|
156
|
|
|
4,331
|
|
||
Income from discontinued operations before net gain on dispositions of discontinued operations
|
377
|
|
|
2,202
|
|
||
Net gain on dispositions of discontinued operations
|
90,115
|
|
|
—
|
|
||
Total income from discontinued operations
|
$
|
90,492
|
|
|
$
|
2,202
|
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands, except share and
per share amounts)
|
||||||
Numerator:
|
|
|
|
||||
Income from continuing operations
|
$
|
11,440
|
|
|
$
|
186
|
|
(Income) loss from continuing operations attributable to noncontrolling common units of the Operating Partnership
|
(172
|
)
|
|
72
|
|
||
Preferred dividends
|
(3,313
|
)
|
|
(3,313
|
)
|
||
Allocation to participating securities
(1)
|
(427
|
)
|
|
(418
|
)
|
||
Numerator for basic and diluted income (loss) from continuing operations available to common stockholders
|
7,528
|
|
|
(3,473
|
)
|
||
Income from discontinued operations
|
90,492
|
|
|
2,202
|
|
||
Income from discontinued operations attributable to noncontrolling common units of the Operating Partnership
|
(1,915
|
)
|
|
(50
|
)
|
||
Numerator for basic and diluted net income (loss) available to common stockholders
|
$
|
96,105
|
|
|
$
|
(1,321
|
)
|
Denominator:
|
|
|
|
||||
Basic weighted average vested shares outstanding
|
82,124,538
|
|
|
74,977,240
|
|
||
Effect of dilutive securities
|
2,015,532
|
|
|
—
|
|
||
Diluted weighted average vested shares and common share equivalents outstanding
|
84,140,070
|
|
|
74,977,240
|
|
||
Basic earnings per share:
|
|
|
|
||||
Income (loss) from continuing operations available to common stockholders per share
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income from discontinued operations per common share
|
1.08
|
|
|
0.03
|
|
||
Net income (loss) available to common stockholders per share
|
$
|
1.17
|
|
|
$
|
(0.02
|
)
|
Diluted earnings per share:
|
|
|
|
||||
Income (loss) from continuing operations available to common stockholders per share
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income from discontinued operations per common share
|
1.05
|
|
|
0.03
|
|
||
Net income (loss) available to common stockholders per share
|
$
|
1.14
|
|
|
$
|
(0.02
|
)
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market-measure RSUs.
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands, except unit and
per unit amounts)
|
||||||
Numerator:
|
|
|
|
||||
Income from continuing operations
|
$
|
11,440
|
|
|
$
|
186
|
|
Income from continuing operations attributable to noncontrolling interests in consolidated subsidiaries
|
(65
|
)
|
|
(69
|
)
|
||
Preferred distributions
|
(3,313
|
)
|
|
(3,313
|
)
|
||
Allocation to participating securities
(1)
|
(427
|
)
|
|
(418
|
)
|
||
Numerator for basic and diluted income (loss) from continuing operations available to common unitholders
|
7,635
|
|
|
(3,614
|
)
|
||
Income from discontinued operations
|
90,492
|
|
|
2,202
|
|
||
Numerator for basic and diluted net income (loss) available to common unitholders
|
$
|
98,127
|
|
|
$
|
(1,412
|
)
|
Denominator:
|
|
|
|
||||
Basic weighted average vested units outstanding
|
83,928,993
|
|
|
76,803,743
|
|
||
Effect of dilutive securities
|
2,015,532
|
|
|
—
|
|
||
Diluted weighted average vested units and common unit equivalents outstanding
|
85,944,525
|
|
|
76,803,743
|
|
||
Basic earnings per unit:
|
|
|
|
||||
Income (loss) from continuing operations available to common unitholders per unit
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income from discontinued operations per common unit
|
1.08
|
|
|
0.03
|
|
||
Net income (loss) available to common unitholders per unit
|
$
|
1.17
|
|
|
$
|
(0.02
|
)
|
Diluted earnings per unit:
|
|
|
|
||||
Income (loss) from continuing operations available to common unitholders per unit
|
$
|
0.09
|
|
|
$
|
(0.05
|
)
|
Income from discontinued operations per common unit
|
1.05
|
|
|
0.03
|
|
||
Net income (loss) available to common unitholders per unit
|
$
|
1.14
|
|
|
$
|
(0.02
|
)
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market-measure RSUs.
|
|
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
March 31, 2014
|
18
|
|
|
19
|
|
|
111,330
|
|
|
167,025
|
|
|
$
|
12.53
|
|
|
6.6
|
%
|
|
3.3
|
%
|
|
44.5
|
%
|
|
34
|
|
|
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
March 31, 2014
|
26
|
|
|
19
|
|
|
179,193
|
|
|
167,025
|
|
|
$
|
23.92
|
|
|
6.6
|
%
|
|
3.0
|
%
|
|
59
|
|
(1)
|
First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream.
|
(2)
|
Represents leasing activity for leases that commenced or signed at properties in the stabilized portfolio 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 61,000 and 122,000 rentable square feet, respectively, for the
three
months ended
March 31, 2014
, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a meaningful market comparison.
|
(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
March 31, 2014
,
20
new leases totaling
152,415
rentable square feet were signed but not commenced as of
March 31, 2014
.
|
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 2014
|
|
85
|
|
|
943,282
|
|
|
7.8
|
%
|
|
$
|
26,713
|
|
|
6.4
|
%
|
|
$
|
28.32
|
|
2015
|
|
117
|
|
|
1,553,654
|
|
|
12.9
|
%
|
|
45,443
|
|
|
11.0
|
%
|
|
29.25
|
|
||
2016
|
|
85
|
|
|
953,350
|
|
|
7.9
|
%
|
|
25,678
|
|
|
6.2
|
%
|
|
26.93
|
|
||
2017
|
|
101
|
|
|
1,800,739
|
|
|
14.9
|
%
|
|
59,379
|
|
|
14.3
|
%
|
|
32.97
|
|
||
2018
|
|
58
|
|
|
1,583,798
|
|
|
13.1
|
%
|
|
64,291
|
|
|
15.5
|
%
|
|
40.59
|
|
||
2019
|
|
55
|
|
|
1,275,029
|
|
|
10.6
|
%
|
|
48,158
|
|
|
11.6
|
%
|
|
37.77
|
|
||
Total
|
|
501
|
|
|
8,109,852
|
|
|
67.2
|
%
|
|
$
|
269,662
|
|
|
65.0
|
%
|
|
$
|
33.25
|
|
(1)
|
The information presented for all lease expiration activity reflects leasing activity through
March 31, 2014
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
March 31, 2014
.
|
(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 deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”
|
•
|
360 Third Street, South of Market Area ("SOMA"), submarket of San Francisco, California on which we commenced redevelopment in the fourth quarter of 2011. This project, encompassing approximately
427,700
rentable square feet, had a total investment of approximately
$187.8 million
at completion. As of
March 31, 2014
, the project was
96%
leased and
90.1%
occupied.
|
•
|
690 E. Middlefield Road, Mountain View, California, which we acquired in May 2012. The development project, which is 100% pre-leased to Synopsys, Inc., has a total estimated investment of approximately
$196.0 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.
|
•
|
350 Mission Street, SOMA, San Francisco, California, which we acquired in October 2012. The development project, which is 100% pre-leased to salesforce.com, inc., has a total estimated investment of
$276.9 million
and is expected to encompass approximately
450,000
rentable square feet upon completion. In the fourth quarter of 2013, we obtained full entitlements to increase this project from a 27-story building to a 30-story building. The property is expected to be LEED platinum certified, the first ground up development property in the city expected to receive this designation. 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. We are currently developing 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
$314.7 million
. Construction is currently in process and is expected to be completed in the third quarter of 2014.
|
•
|
Columbia Square, Hollywood, California, which we acquired in September 2012. The project is a historical media campus located in the heart of Hollywood, two blocks from the corner of Sunset Boulevard and Vine Street. During 2013, we commenced development on approximately
675,000
rentable square feet of a mixed-use project, which encompasses office, multi-family and retail components that we plan on completing in multiple phases. The project has a total estimated investment of approximately
$392.2 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. Construction is currently in process and is expected to be completed in three phases between the third quarter of 2014 and the second quarter of 2016.
|
•
|
333 Brannan Street, SOMA, San Francisco, California, which we acquired in July 2012. In January 2014, six weeks after our ground breaking in the fourth quarter of 2013, we signed a 182,000 square foot, twelve-year lease with Dropbox for the entirety of this project. Dropbox is expected to take occupancy of the LEED platinum ground up development property at the completion of construction in the third quarter of 2015. The project has a total estimated investment of approximately
$97.9 million
. Construction is currently in process and is expected to be completed in the third quarter of 2015.
|
•
|
Crossing/900, Redwood City, California, which we entered into an agreement in June 2013 with a local partner. The project has a total estimated investment of approximately
$183.5 million
and is expected to encompass approximately
300,000
rentable square feet upon completion. Construction on the building is currently in process and is expected to be completed in the third quarter of 2015.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of March 31, 2013
|
116
|
|
|
13,570,059
|
|
Acquisitions
(1)
|
3
|
|
|
359,545
|
|
Completed redevelopment properties placed in-service
|
3
|
|
|
613,519
|
|
Dispositions
|
(15
|
)
|
|
(1,249,341
|
)
|
Remeasurement
|
—
|
|
|
11,363
|
|
Total as of March 31, 2014
|
107
|
|
|
13,305,145
|
|
(1)
|
Excludes redevelopment and development property acquisitions.
|
Region
|
Number of
Buildings
|
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
3/31/2014
|
|
12/31/2013
|
|
9/30/2013
|
|||||||||
Los Angeles and Ventura Counties
|
27
|
|
|
3,502,779
|
|
|
93.7
|
%
|
|
93.7
|
%
|
|
93.2
|
%
|
Orange County
|
3
|
|
|
437,603
|
|
|
91.1
|
%
|
|
92.8
|
%
|
|
93.3
|
%
|
San Diego
|
48
|
|
|
4,367,403
|
|
|
88.1
|
%
|
|
90.8
|
%
|
|
89.6
|
%
|
San Francisco Bay Area
|
16
|
|
|
2,809,118
|
|
|
94.1
|
%
|
|
94.8
|
%
|
|
92.7
|
%
|
Greater Seattle
|
13
|
|
|
2,188,242
|
|
|
96.9
|
%
|
|
96.7
|
%
|
|
95.2
|
%
|
Total Stabilized Portfolio
|
107
|
|
|
13,305,145
|
|
|
92.4
|
%
|
|
93.4
|
%
|
|
92.2
|
%
|
|
Average Occupancy
|
||||
|
Three Months Ended March 31,
|
||||
|
2014
|
|
2013
|
||
Stabilized Portfolio
(1)
|
93.1
|
%
|
|
91.0
|
%
|
Same Store Portfolio
(2)
|
92.6
|
%
|
|
92.1
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1,
2013
and still owned and stabilized as of
March 31, 2014
. See discussion under “Results of Operations” for additional information.
|
|
Tenant Name
|
|
Annualized Base Rental Revenue
($ in thousands)
|
|
Rentable
Square Feet
|
|
Percentage of
Total Annualized Base Rental Revenue
|
|
Percentage of
Total Rentable
Square Feet
|
|
|||||
|
DIRECTV, LLC
|
|
$
|
23,760
|
|
|
667,852
|
|
|
5.7
|
%
|
|
5.0
|
%
|
|
|
Bridgepoint Education, Inc.
|
|
15,066
|
|
|
322,342
|
|
|
3.6
|
%
|
|
2.4
|
%
|
|
|
|
Intuit, Inc.
|
|
13,489
|
|
|
465,812
|
|
|
3.3
|
%
|
|
3.5
|
%
|
|
|
|
Delta Dental of California
|
|
10,413
|
|
|
218,348
|
|
|
2.5
|
%
|
|
1.6
|
%
|
|
|
|
AMN Healthcare, Inc.
|
|
8,341
|
|
|
175,672
|
|
|
2.0
|
%
|
|
1.3
|
%
|
|
|
|
Scan Group
(1)(2)
|
|
6,830
|
|
|
218,742
|
|
|
1.7
|
%
|
|
1.6
|
%
|
|
|
|
Group Health Cooperative
|
|
6,372
|
|
|
183,422
|
|
|
1.5
|
%
|
|
1.4
|
%
|
|
|
|
Neurocrine Biosciences, Inc.
|
|
6,366
|
|
|
140,591
|
|
|
1.5
|
%
|
|
1.1
|
%
|
|
|
|
Microsoft Corporation
|
|
6,256
|
|
|
215,997
|
|
|
1.5
|
%
|
|
1.6
|
%
|
|
|
|
Fish & Richardson P.C.
|
|
6,071
|
|
|
139,538
|
|
|
1.5
|
%
|
|
1.0
|
%
|
|
|
|
Institute for Systems Biology
|
|
6,207
|
|
|
140,605
|
|
|
1.5
|
%
|
|
1.1
|
%
|
|
|
|
Splunk, Inc.
|
|
5,413
|
|
|
95,008
|
|
|
1.3
|
%
|
|
0.7
|
%
|
|
|
|
Wells Fargo
(1)
|
|
5,280
|
|
|
127,085
|
|
|
1.3
|
%
|
|
1.0
|
%
|
|
|
|
Scripps Health
|
|
5,199
|
|
|
112,067
|
|
|
1.3
|
%
|
|
0.8
|
%
|
|
|
|
BP Biofuels
|
|
5,158
|
|
|
136,908
|
|
|
1.2
|
%
|
|
1.0
|
%
|
|
|
|
Total Top Fifteen Tenants
|
|
$
|
130,221
|
|
|
3,359,989
|
|
|
31.4
|
%
|
|
25.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company has entered into leases with various affiliates of the tenant
.
|
(2)
|
In December 2013, Scan Group renewed and expanded their lease at Kilroy Airport Center in Long Beach, CA. As of March 31, 2014 revenue recognition had not commenced for the expansion premises. The annualized base rental revenue and rentable square feet presented in this table include the projected annualized base rental revenue of approximately $1.5 million and rentable square feet of approximately 50,000 for the expansion premises.
|
•
|
Same Store Properties – which includes the results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1,
2013
and still owned and included in the stabilized portfolio as of
March 31, 2014
;
|
•
|
Acquisition Properties – which includes the results, from the dates of acquisition through the periods presented, for the four office buildings we acquired during 2013 and the
one
office building we acquired during the
three months ended March 31, 2014
;
|
•
|
Stabilized Development and Redevelopment Properties – which includes the results generated by two office redevelopment buildings and one office development building that were stabilized in 2013 and one redevelopment property that was stabilized in 2014 following its one year lease-up period; and
|
•
|
Other Properties – which includes the results of properties not included in our stabilized portfolio.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
98
|
|
|
11,715,581
|
|
Acquisition Properties
|
|
5
|
|
|
679,943
|
|
Stabilized Development and Redevelopment Properties
|
|
4
|
|
|
909,621
|
|
Total Stabilized Portfolio
|
|
107
|
|
13,305,145
|
|
|
Three Months Ended March 31,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2014
|
|
2013
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
88,756
|
|
|
$
|
77,553
|
|
|
$
|
11,203
|
|
|
14.4
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
(10,811
|
)
|
|
(9,669
|
)
|
|
(1,142
|
)
|
|
11.8
|
|
|||
Acquisition-related expenses
|
(228
|
)
|
|
(655
|
)
|
|
427
|
|
|
(65.2
|
)
|
|||
Depreciation and amortization
|
(49,202
|
)
|
|
(47,701
|
)
|
|
(1,501
|
)
|
|
3.1
|
|
|||
Interest income and other net investment gains
|
177
|
|
|
392
|
|
|
(215
|
)
|
|
(54.8
|
)
|
|||
Interest expense
|
(17,252
|
)
|
|
(19,734
|
)
|
|
2,482
|
|
|
(12.6
|
)
|
|||
Income from continuing operations
|
11,440
|
|
|
186
|
|
|
11,254
|
|
|
6,050.5
|
|
|||
Income from discontinued operations
|
90,492
|
|
|
2,202
|
|
|
88,290
|
|
|
4,009.5
|
|
|||
Net income
|
$
|
101,932
|
|
|
$
|
2,388
|
|
|
$
|
99,544
|
|
|
4,168.5
|
%
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisition Properties
|
|
Stabilized
Develop-ment &
Redevel-opment
|
|
Other
|
|
Total
|
|
Same Store
|
|
Acquisition Properties
|
|
Stabilized
Develop-ment & Redevel-opment |
|
Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
97,087
|
|
|
$
|
5,969
|
|
|
$
|
8,994
|
|
|
$
|
6
|
|
|
$
|
112,056
|
|
|
$
|
94,531
|
|
|
$
|
2,716
|
|
|
$
|
3,869
|
|
|
$
|
491
|
|
|
$
|
101,607
|
|
Tenant reimbursements
|
9,832
|
|
|
1,229
|
|
|
511
|
|
|
—
|
|
|
11,572
|
|
|
8,404
|
|
|
509
|
|
|
177
|
|
|
40
|
|
|
9,130
|
|
||||||||||
Other property income
|
2,145
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
2,157
|
|
|
227
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
227
|
|
||||||||||
Total
|
109,064
|
|
|
7,198
|
|
|
9,517
|
|
|
6
|
|
|
125,785
|
|
|
103,162
|
|
|
3,225
|
|
|
4,046
|
|
|
531
|
|
|
110,964
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
22,879
|
|
|
494
|
|
|
1,597
|
|
|
124
|
|
|
25,094
|
|
|
21,270
|
|
|
401
|
|
|
772
|
|
|
362
|
|
|
22,805
|
|
||||||||||
Real estate taxes
|
9,368
|
|
|
663
|
|
|
902
|
|
|
240
|
|
|
11,173
|
|
|
8,741
|
|
|
232
|
|
|
347
|
|
|
344
|
|
|
9,664
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
||||||||||
Ground leases
|
727
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
762
|
|
|
727
|
|
|
—
|
|
|
120
|
|
|
—
|
|
|
847
|
|
||||||||||
Total
|
32,974
|
|
|
1,157
|
|
|
2,534
|
|
|
364
|
|
|
37,029
|
|
|
30,833
|
|
|
633
|
|
|
1,239
|
|
|
706
|
|
|
33,411
|
|
||||||||||
Net Operating Income (Loss),
as defined
|
$
|
76,090
|
|
|
$
|
6,041
|
|
|
$
|
6,983
|
|
|
$
|
(358
|
)
|
|
$
|
88,756
|
|
|
$
|
72,329
|
|
|
$
|
2,592
|
|
|
$
|
2,807
|
|
|
$
|
(175
|
)
|
|
$
|
77,553
|
|
|
Three Months Ended March 31, 2014 as compared to the Three Months Ended March 31, 2013
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Acquisition Properties
|
|
Stabilized Development & Redevelopment
|
|
Other
|
|
Total
|
|||||||||||||||||||||||||
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Rental income
|
$
|
2,556
|
|
|
2.7
|
%
|
|
$
|
3,253
|
|
|
119.8
|
%
|
|
$
|
5,125
|
|
|
132.5
|
%
|
|
$
|
(485
|
)
|
|
(98.8
|
)%
|
|
$
|
10,449
|
|
|
10.3
|
%
|
Tenant reimbursements
|
1,428
|
|
|
17.0
|
|
|
720
|
|
|
141.5
|
|
|
334
|
|
|
188.7
|
|
|
(40
|
)
|
|
(100.0
|
)
|
|
2,442
|
|
|
26.7
|
|
|||||
Other property income
|
1,918
|
|
|
844.9
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,930
|
|
|
850.2
|
|
|||||
Total
|
5,902
|
|
|
5.7
|
|
|
3,973
|
|
|
123.2
|
|
|
5,471
|
|
|
135.2
|
|
|
(525
|
)
|
|
(98.9
|
)
|
|
14,821
|
|
|
13.4
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
1,609
|
|
|
7.6
|
|
|
93
|
|
|
23.2
|
|
|
825
|
|
|
106.9
|
%
|
|
(238
|
)
|
|
(65.7
|
)
|
|
2,289
|
|
|
10.0
|
|
|||||
Real estate taxes
|
627
|
|
|
7.2
|
|
|
431
|
|
|
185.8
|
|
|
555
|
|
|
159.9
|
|
|
(104
|
)
|
|
(30.2
|
)
|
|
1,509
|
|
|
15.6
|
|
|||||
Provision for bad debts
|
(95
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
(100.0
|
)
|
|||||
Ground leases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
|
(70.8
|
)
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
|
(10.0
|
)
|
|||||
Total
|
2,141
|
|
|
6.9
|
|
|
524
|
|
|
82.8
|
|
|
1,295
|
|
|
104.5
|
|
|
(342
|
)
|
|
(48.4
|
)
|
|
3,618
|
|
|
10.8
|
|
|||||
Net Operating Income,
as defined
|
$
|
3,761
|
|
|
5.2
|
%
|
|
$
|
3,449
|
|
|
133.1
|
%
|
|
$
|
4,176
|
|
|
148.8
|
%
|
|
$
|
(183
|
)
|
|
104.6
|
%
|
|
$
|
11,203
|
|
|
14.4
|
%
|
•
|
An increase of
$3.4 million
attributable to the Acquisition Properties;
|
•
|
An increase of
$3.8 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in rental income of
$2.6 million
primarily due to increased occupancy, new leases at higher rates and increased parking income at a number of properties;
|
•
|
An increase in tenant reimbursements of
$1.4 million
primarily due to higher reimbursable property expenses and real estate taxes;
|
•
|
An increase in other property income of
$1.9 million
primarily due to lease termination revenue;
|
•
|
A partially offsetting increase in property and related expenses of
$2.1 million
primarily resulting from:
|
•
|
An increase of
$1.6 million
in property expenses primarily resulting from an increase in certain recurring operating costs of approximately $0.6 million related to utilities, property management expenses, janitorial, insurance, other service-related costs and $1.0 million of non-recurring legal fees;
|
•
|
An increase of
$0.6 million
in real estate taxes primarily as a result of higher value assessments at several properties; and
|
•
|
An increase of
$4.2 million
attributable to the Stabilized Development and Redevelopment Properties.
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2014
|
|
2013
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
28,034
|
|
|
$
|
27,466
|
|
|
$
|
568
|
|
|
2.1
|
%
|
Capitalized interest and loan fees
|
(10,782
|
)
|
|
(7,732
|
)
|
|
(3,050
|
)
|
|
39.4
|
%
|
|||
Interest expense
|
$
|
17,252
|
|
|
$
|
19,734
|
|
|
$
|
(2,482
|
)
|
|
(12.6
|
)%
|
|
Shares/Units at
March 31, 2014
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
||||
|
($ in thousands)
|
||||||||
Debt:
|
|
|
|
|
|
||||
Unsecured Term Loan Facility
|
|
|
$
|
150,000
|
|
|
2.1
|
|
|
4.25% Unsecured Exchangeable Notes due 2014
(1)
|
|
|
172,500
|
|
|
2.4
|
|
||
Unsecured Senior Notes due 2014
|
|
|
83,000
|
|
|
1.0
|
|
||
Unsecured Senior Notes due 2015
(1)
|
|
|
325,000
|
|
|
4.5
|
|
||
Unsecured Senior Notes due 2018
(1)
|
|
|
325,000
|
|
|
4.5
|
|
||
Unsecured Senior Notes due 2020
(1)
|
|
|
250,000
|
|
|
3.4
|
|
||
Unsecured Senior Notes due 2023
(1)
|
|
|
300,000
|
|
|
4.1
|
|
||
Secured debt
(1)
|
|
|
543,454
|
|
|
7.5
|
|
||
Total debt
|
|
|
2,148,954
|
|
|
29.5
|
|
||
Equity and Noncontrolling Interests:
|
|
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock
(2)
|
4,000,000
|
|
|
100,000
|
|
|
1.4
|
|
|
6.375% Series H Cumulative Redeemable Preferred stock
(2)
|
4,000,000
|
|
|
100,000
|
|
|
1.4
|
|
|
Common limited partnership units outstanding
(3)(4)
|
1,804,200
|
|
|
105,690
|
|
|
1.5
|
|
|
Common shares outstanding
(4)
|
82,218,332
|
|
|
4,816,350
|
|
|
66.2
|
|
|
Total equity and noncontrolling interests
|
|
|
5,122,040
|
|
|
70.5
|
|
||
Total Market Capitalization
|
|
|
$
|
7,270,994
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of net unamortized premiums as of
March 31, 2014
. The aggregate net unamortized premiums totaled approximately
$8.7 million
as of
March 31, 2014
.
|
(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
$58.58
as of
March 31, 2014
.
|
•
|
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 selective 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.
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
45,000
|
|
Remaining borrowing capacity
|
500,000
|
|
|
455,000
|
|
||
Total borrowing capacity
(1)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Interest rate
(2)
|
—
|
%
|
|
1.62
|
%
|
||
Facility fee-annual rate
(3)
|
0.300%
|
||||||
Maturity date
(4)
|
April 2017
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, 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
March 31, 2014
and
December 31, 2013
. No interest rate is shown as of
March 31, 2014
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 of which approximately, as of
March 31, 2014
,
$4.5 million
remains to be 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.
|
|
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)
|
543,454
|
|
|
Total Exchangeable Notes, Unsecured Debt, and Secured Debt
|
$
|
2,148,954
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized discounts and premiums as of
March 31, 2014
. The aggregate net unamortized premiums totaled approximately
$8.7 million
as of
March 31, 2014
.
|
|
Percentage of Total Debt
|
|
Weighted Average Interest Rate
|
||||||||
|
March 31,
2014 |
|
December 31,
2013 |
|
March 31,
2014 |
|
December 31,
2013 |
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured
(1)
|
74.7
|
%
|
|
75.1
|
%
|
|
4.7
|
%
|
|
4.6
|
%
|
Secured
|
25.3
|
|
|
24.9
|
|
|
5.2
|
%
|
|
5.2
|
%
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
7.0
|
|
|
8.9
|
|
|
1.9
|
%
|
|
1.9
|
%
|
Fixed-rate
(1)
|
93.0
|
|
|
91.1
|
|
|
5.0
|
%
|
|
5.0
|
%
|
Stated rate
(1)
|
|
|
|
|
4.8
|
%
|
|
4.8
|
%
|
||
GAAP effective rate
(2)
|
|
|
|
|
4.8
|
%
|
|
4.8
|
%
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
5.2
|
%
|
|
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 2014)
|
|
1–3 Years
(2015-2016)
|
|
4–5 Years
(2017-2018)
|
|
More than
5 Years
(After 2019)
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal payments: secured debt
(1)
|
$
|
7,432
|
|
|
$
|
169,535
|
|
|
$
|
198,476
|
|
|
$
|
168,011
|
|
|
$
|
543,454
|
|
Principal payments: 4.25% Exchangeable Notes
(2)
|
172,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
172,500
|
|
|||||
Principal payments: unsecured debt
(3)
|
83,000
|
|
|
475,000
|
|
|
325,000
|
|
|
550,000
|
|
|
1,433,000
|
|
|||||
Interest payments: fixed-rate debt
(4)
|
72,296
|
|
|
147,747
|
|
|
104,291
|
|
|
106,191
|
|
|
430,525
|
|
|||||
Interest payments: variable-rate debt
(5)
|
2,170
|
|
|
3,574
|
|
|
—
|
|
|
—
|
|
|
5,744
|
|
|||||
Ground lease obligations
(6)
|
2,322
|
|
|
6,190
|
|
|
6,190
|
|
|
156,912
|
|
|
171,614
|
|
|||||
Lease and contractual commitments
(7)
|
83,931
|
|
|
1,678
|
|
|
—
|
|
|
—
|
|
|
85,609
|
|
|||||
Redevelopment and development commitments
(8)
|
290,000
|
|
|
358,000
|
|
|
—
|
|
|
—
|
|
|
648,000
|
|
|||||
Total
|
$
|
713,651
|
|
|
$
|
1,161,724
|
|
|
$
|
633,957
|
|
|
$
|
981,114
|
|
|
$
|
3,490,446
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized premium of approximately
$13.5 million
as of
March 31, 2014
.
|
(2)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately
$3.0 million
as of
March 31, 2014
.
|
(3)
|
Represents gross aggregate principal amount before the effect of the unamortized discount of approximately
$1.8 million
as of
March 31, 2014
.
|
(4)
|
As of
March 31, 2014
,
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
March 31, 2014
,
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
March 31, 2014
. The information in the table above reflects our projected interest rate obligations for these variable-rate payments based on outstanding principal balances as of
March 31, 2014
, 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
March 31, 2014
. The timing of these expenditures may fluctuate based on the ultimate progress of construction.
|
•
|
Decreases in our cash flows from operations, which could create further dependence on 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.
|
Unsecured Credit Facility and Term Loan Facility
(as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance
as of March 31, 2014
|
Total debt to total asset value
|
|
less than 60%
|
|
34%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
2.4x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
2.63x
|
Unencumbered asset pool debt service coverage
|
|
greater than 2.0x
|
|
3.3x
|
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes due 2015, 2018, 2020 and 2023
(as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
38%
|
Interest coverage
|
|
greater than 1.5x
|
|
4.4x
|
Secured debt to total asset value
|
|
less than 40%
|
|
10%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
282%
|
|
Three Months Ended March 31,
|
|||||||||||||
|
2014
|
|
2013
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net cash provided by operating activities
|
$
|
45,081
|
|
|
$
|
56,499
|
|
|
$
|
(11,418
|
)
|
|
(20.2
|
)%
|
Net cash provided by investing activities
|
97,278
|
|
|
43,447
|
|
|
53,831
|
|
|
123.9
|
%
|
|||
Net cash (used in) provided by financing activities
|
(82,202
|
)
|
|
19,030
|
|
|
(101,232
|
)
|
|
(532.0
|
)%
|
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Net income (loss) available to common stockholders
|
$
|
96,532
|
|
|
$
|
(903
|
)
|
Adjustments:
|
|
|
|
||||
Net income (loss) attributable to noncontrolling
common units of the Operating Partnership
|
2,087
|
|
|
(22
|
)
|
||
Depreciation and amortization of real estate assets
|
48,717
|
|
|
50,011
|
|
||
Net gain on dispositions of discontinued operations
|
(90,115
|
)
|
|
—
|
|
||
Funds From Operations
(1)(2)
|
$
|
57,221
|
|
|
$
|
49,086
|
|
(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
$2.4 million
and
$2.4 million
for the three months ended
March 31, 2014
and
2013
, respectively.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
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)
|
|
|
|
3.(i)3
|
|
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)
|
|
|
|
3.(i)4
|
|
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)
|
|
|
|
3.(ii).1
|
|
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)
|
|
|
|
3.(ii).2
|
|
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)
|
|
|
|
3.(ii).3
|
|
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)
|
|
|
|
10.1*
|
|
Form of Performance-Vest Restricted Stock Unit Agreement
|
|
|
|
10.2*
|
|
Form of Restricted Stock Unit Agreement
|
|
|
|
10.3*
|
|
Form of Restricted Stock Unit Agreement for Non-Employee Members of the Board of Directors
|
|
|
|
31.1*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
31.2*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
31.3*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
31.4*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
32.1*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
32.2*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
32.3*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
32.4*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
101.1
|
|
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended March 31, 2014, 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)
|
*
|
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.
|
KILROY REALTY CORPORATION
|
||
|
|
|
|
By:
|
/s/ John B. Kilroy, Jr.
|
|
|
John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
KILROY REALTY, L.P.
|
||
|
|
|
BY:
|
KILROY REALTY CORPORATION
|
|
|
Its general partner
|
|
|
|
|
|
By:
|
/s/ John B. Kilroy, Jr.
|
|
|
John B. Kilroy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
(i)
|
Time-Vest RSUs
. The Time-Vest RSUs shall vest in four substantially equal installments (rounded down to the nearest whole RSU until the last installment) on each applicable Vesting Date.
|
(ii)
|
Performance-Vest RSUs
. The Performance-Vest RSUs are subject to performance- and time-based vesting requirements. The performance-based vesting requirements are set forth on
Appendix B
hereto, and to the extent such performance requirements are satisfied, the Eligible Performance-Vest RSUs (as defined in
Appendix B
) shall vest in one lump sum (rounded down to the nearest whole RSU) on the applicable Vesting Date.
|
(iii)
|
Accelerated Vesting in Connection With Qualifying Terminations
. Notwithstanding the foregoing or anything contained herein to the contrary, the RSUs shall be subject to accelerated vesting as provided below in this Grant Notice.
|
•
|
The unvested Time-Vest RSUs that are outstanding immediately prior to such Qualifying Termination shall fully vest and become nonforfeitable immediately prior to such Qualifying Termination, and, as to the time-based vesting requirements applicable to the unvested Performance-Vest RSUs that are outstanding immediately prior to such Qualifying Termination, such time-based vesting requirements shall be considered fully satisfied immediately prior to such Qualifying Termination.
|
•
|
In the event of a Qualifying Termination before December 31, 2016 and prior to a “change of control event” (within the meaning of Code Section 409A) with respect to the Company, the performance period applicable to the Performance-Vest RSUs shall end in connection with such Qualifying Termination and the number of Eligible Performance-Vest RSUs shall be determined in accordance with
Appendix B
hereto, as modified by this paragraph. (Capitalized terms used in this paragraph and not otherwise defined are used as defined in
Appendix B
.) If the Qualifying Termination occurs on or before June 30, 2014, the applicable percentage based on the Company’s FFO Per Share performance shall be deemed to be 100%. If the Qualifying Termination occurs after June 30, 2014, and before December 31, 2014, the FFO Per Share measurement/target levels set forth in
Appendix B
shall be pro-rated for a short performance period ending with the
|
•
|
The benefits provided by the preceding two paragraphs are subject to the condition that the Participant (or, in the event of the Participant’s death or disability, the Participant’s estate or personal representative, as the case may be) provide the Company with, and the Participant (or his estate or personal representative, as the case may be) does not revoke, a general release in substantially the form attached to the Participant’s Employment Agreement (or, if no such form is attached to the Employment Agreement, in a form prescribed by the Company). Such general release shall be provided to the Participant (or his estate or personal representative, as the case may be) within five (5) days of the Qualifying Termination date and the Participant (or his estate or personal representative, as the case may be) shall execute and deliver to the Company the general release within thirty (30) days after the Company provides the release to the Participant. In the event this paragraph applies and the general release (and the expiration of any revocation rights provided therein or pursuant to applicable law) could become effective in one of two taxable years depending on when the Participant (or his estate or personal representative, as the case may be) executes and delivers the release, any payment conditioned on the release shall not be earlier than the first business day of the later of such two tax years. (For purposes of this Agreement, “
business day
” means a calendar day other than a Saturday, Sunday or Federal holiday.)
|
KILROY REALTY CORPORATION
,
a Maryland corporation
________________________________
|
PARTICIPANT
:
_________________________________
|
(1)
|
the number of Performance-Vest RSUs (as set forth in or determined under the Grant Notice) will be multiplied by the applicable percentage determined in accordance with the following table based on the Company’s FFO Per Share for its 2014 year:
|
(2)
|
the number of RSUs determined as provided in
clause (1)
above will be multiplied by the applicable percentage determined in accordance with the following table based on the Company’s TSR Percentile Ranking (for the period 2014-2016):
|
(3)
|
the number of RSUs determined as provided in
clause (2)
above will be rounded down to the nearest whole RSU.
|
•
|
exclude expenses associated with variable accounting for equity-based awards to the extent that such expenses exceed the expense that would have been produced had such awards originally been granted as equity awards accounted for under FASB ASC Topic 718;
|
•
|
exclude unbudgeted compensation expenses;
|
•
|
exclude non-cash charges;
|
•
|
exclude acquisition-related expenses;
|
•
|
include revenue that would have been included in earnings but is not recognized due to tenant delays;
|
•
|
exclude the impact of mergers and similar corporate transactions; and
|
•
|
exclude the impact of similar extraordinary items not contemplated by the Committee on the Grant Date.
|
(1)
|
Include as to a Participant who is eligible and makes a deferral election.
|
(2)
|
In the event the Participant is eligible to make a deferral election and makes a deferral election in the 30-day period following the Grant Date, this date to be no earlier than one year following the end of that 30-day period.
|
KILROY REALTY CORPORATION
,
a Maryland corporation
________________________________
|
PARTICIPANT
:
_________________________________
|
(3)
|
Include if payment of the RSUs is not deferred.
|
(1)
|
Include as to a Participant who is eligible and makes a deferral election within 30 days after the Grant Date.
|
KILROY REALTY CORPORATION
,
a Maryland corporation
________________________________
|
PARTICIPANT
:
_________________________________
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ John B. Kilroy, Jr.
|
John B. Kilroy, Jr.
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and
Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P. ;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ John B. Kilroy, Jr.
|
John B. Kilroy, Jr.
|
President and Chief Executive Officer
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P. ;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and
Chief Financial Officer
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 2014
(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:
|
May 1, 2014
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 2014
(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:
|
May 1, 2014
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
March 31, 2014
(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:
|
May 1, 2014
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
March 31, 2014
(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:
|
May 1, 2014
|