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 7, Noncontrolling Interests on the Company’s Consolidated Financial Statements;
|
◦
|
Note 8, Noncontrolling Interests on the Operating Partnership’s Consolidated Financial Statements;
|
◦
|
Note 9, Stockholders’ Equity of the Company;
|
◦
|
Note 10, Partners’ Capital of the Operating Partnership;
|
◦
|
Note 15, Net Income Available to Common Stockholders Per Share of the Company;
|
◦
|
Note 16, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
|
◦
|
Note 17, Supplemental Cash Flow Information of the Company; and
|
◦
|
Note 18, Supplemental Cash Flow Information 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.”
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Page
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|
|
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.
|
|
||
|
September 30, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
(unaudited)
|
|
|
||||
REAL ESTATE ASSETS (Note 2):
|
|
|
|
||||
Land and improvements
|
$
|
1,017,591
|
|
|
$
|
875,794
|
|
Buildings and improvements
|
4,669,442
|
|
|
4,091,012
|
|
||
Undeveloped land and construction in progress
|
945,805
|
|
|
1,361,340
|
|
||
Total real estate assets held for investment
|
6,632,838
|
|
|
6,328,146
|
|
||
Accumulated depreciation and amortization
|
(1,095,562
|
)
|
|
(994,241
|
)
|
||
Total real estate assets held for investment, net
|
5,537,276
|
|
|
5,333,905
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 3)
|
9,440
|
|
|
117,666
|
|
||
CASH AND CASH EQUIVALENTS (Notes 3 and 7)
|
250,523
|
|
|
56,508
|
|
||
RESTRICTED CASH (Notes 1 and 3)
|
57,501
|
|
|
696
|
|
||
MARKETABLE SECURITIES (Note 13)
|
14,121
|
|
|
12,882
|
|
||
CURRENT RECEIVABLES, NET (Note 5)
|
9,709
|
|
|
11,153
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 5)
|
212,204
|
|
|
189,704
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Note 4)
|
180,613
|
|
|
176,683
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 1)
|
60,752
|
|
|
27,233
|
|
||
TOTAL ASSETS
|
$
|
6,332,139
|
|
|
$
|
5,926,430
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt, net (Notes 1, 6 and 13)
|
$
|
370,666
|
|
|
$
|
380,835
|
|
Unsecured debt, net (Notes 1, 6 and 13)
|
1,846,672
|
|
|
1,844,634
|
|
||
Accounts payable, accrued expenses and other liabilities
|
252,122
|
|
|
246,323
|
|
||
Accrued dividends and distributions (Note 19)
|
37,749
|
|
|
34,992
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Note 4)
|
134,436
|
|
|
128,156
|
|
||
Rents received in advance and tenant security deposits
|
48,518
|
|
|
49,361
|
|
||
Liabilities and deferred revenue of real estate assets held for sale (Note 3)
|
74
|
|
|
7,543
|
|
||
Total liabilities
|
2,690,237
|
|
|
2,691,844
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
||||
EQUITY:
|
|
|
|
||||
Stockholders’ Equity (Note 9):
|
|
|
|
||||
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, 92,272,492 and 92,258,690 shares issued and outstanding, respectively
|
923
|
|
|
923
|
|
||
Additional paid-in capital
|
3,191,718
|
|
|
3,047,894
|
|
||
Retained earnings/(distributions in excess of earnings)
|
78,107
|
|
|
(70,262
|
)
|
||
Total stockholders’ equity
|
3,463,159
|
|
|
3,170,966
|
|
||
Noncontrolling Interests:
|
|
|
|
||||
Common units of the Operating Partnership (Note 7)
|
93,270
|
|
|
57,100
|
|
||
Noncontrolling interests in consolidated property partnerships (Notes 1 and 7)
|
85,473
|
|
|
6,520
|
|
||
Total noncontrolling interests
|
178,743
|
|
|
63,620
|
|
||
Total equity
|
3,641,902
|
|
|
3,234,586
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
6,332,139
|
|
|
$
|
5,926,430
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
146,539
|
|
|
$
|
129,510
|
|
|
$
|
423,947
|
|
|
$
|
391,892
|
|
Tenant reimbursements
|
16,406
|
|
|
11,681
|
|
|
43,948
|
|
|
40,280
|
|
||||
Other property income (Note 14)
|
5,403
|
|
|
362
|
|
|
6,032
|
|
|
1,690
|
|
||||
Total revenues
|
168,348
|
|
|
141,553
|
|
|
473,927
|
|
|
433,862
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
30,050
|
|
|
26,684
|
|
|
85,236
|
|
|
78,264
|
|
||||
Real estate taxes
|
14,501
|
|
|
12,087
|
|
|
39,378
|
|
|
37,232
|
|
||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
289
|
|
||||
Ground leases
|
909
|
|
|
862
|
|
|
2,506
|
|
|
2,451
|
|
||||
General and administrative expenses
|
13,533
|
|
|
10,799
|
|
|
40,949
|
|
|
36,200
|
|
||||
Acquisition-related expenses
|
188
|
|
|
4
|
|
|
964
|
|
|
397
|
|
||||
Depreciation and amortization
|
56,666
|
|
|
49,422
|
|
|
160,452
|
|
|
152,567
|
|
||||
Total expenses
|
115,847
|
|
|
99,858
|
|
|
329,485
|
|
|
307,400
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (losses) (Note 13)
|
538
|
|
|
(694
|
)
|
|
1,120
|
|
|
177
|
|
||||
Interest expense (Note 6)
|
(14,976
|
)
|
|
(12,819
|
)
|
|
(41,189
|
)
|
|
(44,561
|
)
|
||||
Total other (expenses) income
|
(14,438
|
)
|
|
(13,513
|
)
|
|
(40,069
|
)
|
|
(44,384
|
)
|
||||
INCOME FROM OPERATIONS BEFORE GAINS (LOSSES) ON SALES OF REAL ESTATE
|
38,063
|
|
|
28,182
|
|
|
104,373
|
|
|
82,078
|
|
||||
Net (loss) gain on sales of land (Note 3)
|
—
|
|
|
—
|
|
|
(295
|
)
|
|
17,268
|
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
18,312
|
|
|
78,522
|
|
|
164,302
|
|
|
109,950
|
|
||||
NET INCOME
|
56,375
|
|
|
106,704
|
|
|
268,380
|
|
|
209,296
|
|
||||
Net income attributable to noncontrolling common units of the Operating Partnership (Note 7)
|
(1,453
|
)
|
|
(1,945
|
)
|
|
(5,892
|
)
|
|
(3,850
|
)
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships (Note 7)
|
(1,027
|
)
|
|
—
|
|
|
(1,438
|
)
|
|
—
|
|
||||
Total income attributable to noncontrolling interests
|
(2,480
|
)
|
|
(1,945
|
)
|
|
(7,330
|
)
|
|
(3,850
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
53,895
|
|
|
104,759
|
|
|
261,050
|
|
|
205,446
|
|
||||
PREFERRED DIVIDENDS
|
(3,313
|
)
|
|
(3,313
|
)
|
|
(9,938
|
)
|
|
(9,938
|
)
|
||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
50,582
|
|
|
$
|
101,446
|
|
|
$
|
251,112
|
|
|
$
|
195,508
|
|
Net income available to common stockholders per share – basic (Note 15)
|
$
|
0.54
|
|
|
$
|
1.10
|
|
|
$
|
2.71
|
|
|
$
|
2.18
|
|
Net income available to common stockholders per share – diluted (Note 15)
|
$
|
0.54
|
|
|
$
|
1.09
|
|
|
$
|
2.69
|
|
|
$
|
2.17
|
|
Weighted average common shares outstanding – basic (Note 15)
|
92,227,016
|
|
|
92,150,341
|
|
|
92,220,522
|
|
|
89,077,012
|
|
||||
Weighted average common shares outstanding – diluted (Note 15)
|
92,920,406
|
|
|
92,639,065
|
|
|
92,831,538
|
|
|
89,593,261
|
|
||||
Dividends declared per common share
|
$
|
0.375
|
|
|
$
|
0.350
|
|
|
$
|
1.100
|
|
|
$
|
1.050
|
|
|
|
|
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, 2014
|
$
|
192,411
|
|
|
86,259,684
|
|
|
$
|
863
|
|
|
$
|
2,635,900
|
|
|
$
|
(162,964
|
)
|
|
$
|
2,666,210
|
|
|
$
|
57,726
|
|
|
$
|
2,723,936
|
|
Net income
|
|
|
|
|
|
|
|
|
205,446
|
|
|
205,446
|
|
|
3,850
|
|
|
209,296
|
|
|||||||||||
Issuance of common stock
|
|
|
5,640,033
|
|
|
56
|
|
|
387,453
|
|
|
|
|
387,509
|
|
|
|
|
387,509
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
|
|
1,268
|
|
|
|
|
1,268
|
|
|
|
|
1,268
|
|
||||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
|
|
13,621
|
|
|
|
|
13,621
|
|
|
|
|
13,621
|
|
||||||||||||
Exercise of stock options
|
|
|
265,000
|
|
|
3
|
|
|
11,289
|
|
|
|
|
11,292
|
|
|
|
|
11,292
|
|
||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(39,317
|
)
|
|
|
|
(3,121
|
)
|
|
|
|
(3,121
|
)
|
|
|
|
(3,121
|
)
|
|||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
78,937
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||||||
Exchange of common units of the Operating Partnership
|
|
|
16,030
|
|
|
|
|
467
|
|
|
|
|
467
|
|
|
(467
|
)
|
|
—
|
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(4,547
|
)
|
|
|
|
(4,547
|
)
|
|
4,547
|
|
|
—
|
|
|||||||||||
Contribution from noncontrolling interest in consolidated property partnership
|
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
|
474
|
|
|||||||||||||
Preferred dividends
|
|
|
|
|
|
|
|
|
(9,938
|
)
|
|
(9,938
|
)
|
|
|
|
(9,938
|
)
|
||||||||||||
Dividends declared per common share and common unit ($1.05 per share/unit)
|
|
|
|
|
|
|
|
|
(95,394
|
)
|
|
(95,394
|
)
|
|
(1,881
|
)
|
|
(97,275
|
)
|
|||||||||||
BALANCE AS OF SEPTEMBER 30, 2015
|
$
|
192,411
|
|
|
92,220,367
|
|
|
$
|
922
|
|
|
$
|
3,042,330
|
|
|
$
|
(62,850
|
)
|
|
$
|
3,172,813
|
|
|
$
|
64,249
|
|
|
$
|
3,237,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained Earnings /(Distributions
in Excess of
Earnings)
|
|||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2015
|
$
|
192,411
|
|
|
92,258,690
|
|
|
$
|
923
|
|
|
$
|
3,047,894
|
|
|
$
|
(70,262
|
)
|
|
$
|
3,170,966
|
|
|
$
|
63,620
|
|
|
$
|
3,234,586
|
|
Net income
|
|
|
|
|
|
|
|
|
261,050
|
|
|
261,050
|
|
|
7,330
|
|
|
268,380
|
|
|||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
|
|
1,339
|
|
|
|
|
1,339
|
|
|
|
|
1,339
|
|
||||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
|
|
19,303
|
|
|
|
|
19,303
|
|
|
|
|
19,303
|
|
||||||||||||
Exercise of stock options
|
|
|
51,000
|
|
|
|
|
2,173
|
|
|
|
|
2,173
|
|
|
|
|
2,173
|
|
|||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(110,528
|
)
|
|
(1
|
)
|
|
(6,873
|
)
|
|
|
|
(6,874
|
)
|
|
|
|
(6,874
|
)
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
72,130
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||||
Issuance of common units in connection with acquisition (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
48,033
|
|
|
48,033
|
|
|||||||||||||
Exchange of common units of the Operating Partnership
|
|
|
1,200
|
|
|
|
|
39
|
|
|
|
|
39
|
|
|
(39
|
)
|
|
—
|
|
||||||||||
Initial contribution from noncontrolling interest in consolidated property partnership, net of transaction costs (Note 7)
|
|
|
|
|
|
|
113,022
|
|
|
|
|
113,022
|
|
|
78,654
|
|
|
191,676
|
|
|||||||||||
Distribution to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,139
|
)
|
|
(1,139
|
)
|
|||||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
14,822
|
|
|
|
|
14,822
|
|
|
(14,822
|
)
|
|
—
|
|
|||||||||||
Preferred dividends
|
|
|
|
|
|
|
|
|
(9,938
|
)
|
|
(9,938
|
)
|
|
|
|
(9,938
|
)
|
||||||||||||
Dividends declared per common share and common unit ($1.10 per share/unit)
|
|
|
|
|
|
|
|
|
(102,743
|
)
|
|
(102,743
|
)
|
|
(2,894
|
)
|
|
(105,637
|
)
|
|||||||||||
BALANCE AS OF SEPTEMBER 30, 2016
|
$
|
192,411
|
|
|
92,272,492
|
|
|
$
|
923
|
|
|
$
|
3,191,718
|
|
|
$
|
78,107
|
|
|
$
|
3,463,159
|
|
|
$
|
178,743
|
|
|
$
|
3,641,902
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
268,380
|
|
|
$
|
209,296
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
157,587
|
|
|
150,531
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
2,865
|
|
|
2,036
|
|
||
Increase in provision for bad debts
|
—
|
|
|
289
|
|
||
Non-cash amortization of share-based compensation awards
|
15,263
|
|
|
11,272
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
2,020
|
|
|
1,412
|
|
||
Non-cash amortization of net below market rents (Note 4)
|
(5,128
|
)
|
|
(6,769
|
)
|
||
Gains on sales of depreciable operating properties (Note 3)
|
(164,302
|
)
|
|
(109,950
|
)
|
||
Loss (gain) on sales of land (Note 3)
|
295
|
|
|
(17,268
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(9,700
|
)
|
|
(9,957
|
)
|
||
Straight-line rents
|
(22,856
|
)
|
|
(35,530
|
)
|
||
Net change in other operating assets
|
(7,263
|
)
|
|
(9,356
|
)
|
||
Net change in other operating liabilities
|
15,444
|
|
|
16,606
|
|
||
Net cash provided by operating activities
|
252,605
|
|
|
202,612
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(222,719
|
)
|
|
(311,916
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(33,513
|
)
|
|
(130,609
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(55,415
|
)
|
|
—
|
|
||
Expenditures for operating properties and other capital assets
|
(81,688
|
)
|
|
(71,756
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
325,031
|
|
|
319,639
|
|
||
(Increase) decrease in restricted cash (Note 3)
|
(56,805
|
)
|
|
57,776
|
|
||
Decrease in acquisition-related deposits
|
1,902
|
|
|
3,200
|
|
||
Increase in note receivable
|
(1,000
|
)
|
|
(3,000
|
)
|
||
Net cash used in investing activities
|
(124,207
|
)
|
|
(136,666
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Borrowings on unsecured revolving credit facility
|
305,000
|
|
|
250,000
|
|
||
Repayments on unsecured revolving credit facility
|
(305,000
|
)
|
|
(390,000
|
)
|
||
Principal payments on secured debt
|
(7,254
|
)
|
|
(67,335
|
)
|
||
Net proceeds from the issuance of unsecured debt (Note 6)
|
—
|
|
|
397,776
|
|
||
Financing costs
|
(1,485
|
)
|
|
(4,534
|
)
|
||
Net proceeds from issuance of common stock
|
—
|
|
|
387,509
|
|
||
Repurchase of common stock and restricted stock units
|
(6,874
|
)
|
|
(3,121
|
)
|
||
Proceeds from exercise of stock options
|
2,173
|
|
|
11,292
|
|
||
Contributions from noncontrolling interests in consolidated property partnerships (Note 7)
|
191,676
|
|
|
474
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(1,139
|
)
|
|
—
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(101,542
|
)
|
|
(93,910
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(9,938
|
)
|
|
(9,938
|
)
|
||
Net cash provided by financing activities
|
65,617
|
|
|
478,213
|
|
||
Net increase in cash and cash equivalents
|
194,015
|
|
|
544,159
|
|
||
Cash and cash equivalents, beginning of period
|
56,508
|
|
|
23,781
|
|
||
Cash and cash equivalents, end of period
|
$
|
250,523
|
|
|
$
|
567,940
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
(unaudited)
|
|
|
||||
REAL ESTATE ASSETS (Note 2):
|
|
|
|
||||
Land and improvements
|
$
|
1,017,591
|
|
|
$
|
875,794
|
|
Buildings and improvements
|
4,669,442
|
|
|
4,091,012
|
|
||
Undeveloped land and construction in progress
|
945,805
|
|
|
1,361,340
|
|
||
Total real estate assets held for investment
|
6,632,838
|
|
|
6,328,146
|
|
||
Accumulated depreciation and amortization
|
(1,095,562
|
)
|
|
(994,241
|
)
|
||
Total real estate assets held for investment, net
|
5,537,276
|
|
|
5,333,905
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 3)
|
9,440
|
|
|
117,666
|
|
||
CASH AND CASH EQUIVALENTS (Notes 3 and 8)
|
250,523
|
|
|
56,508
|
|
||
RESTRICTED CASH (Notes 1 and 3)
|
57,501
|
|
|
696
|
|
||
MARKETABLE SECURITIES (Note 13)
|
14,121
|
|
|
12,882
|
|
||
CURRENT RECEIVABLES, NET (Note 5)
|
9,709
|
|
|
11,153
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 5)
|
212,204
|
|
|
189,704
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Note 4)
|
180,613
|
|
|
176,683
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 1)
|
60,752
|
|
|
27,233
|
|
||
TOTAL ASSETS
|
$
|
6,332,139
|
|
|
$
|
5,926,430
|
|
LIABILITIES AND CAPITAL
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt, net (Notes 1, 6 and 13)
|
$
|
370,666
|
|
|
$
|
380,835
|
|
Unsecured debt, net (Notes 1, 6 and 13)
|
1,846,672
|
|
|
1,844,634
|
|
||
Accounts payable, accrued expenses and other liabilities
|
252,122
|
|
|
246,323
|
|
||
Accrued distributions (Note 19)
|
37,749
|
|
|
34,992
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Note 4)
|
134,436
|
|
|
128,156
|
|
||
Rents received in advance and tenant security deposits
|
48,518
|
|
|
49,361
|
|
||
Liabilities and deferred revenue of real estate assets held for sale (Note 3)
|
74
|
|
|
7,543
|
|
||
Total liabilities
|
2,690,237
|
|
|
2,691,844
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
||||
CAPITAL:
|
|
|
|
||||
Partners’ Capital (Note 10):
|
|
|
|
||||
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, 92,272,492 and 92,258,690 held by the general partner and 2,631,276 and 1,764,775
held by common limited partners issued and outstanding, respectively |
3,359,707
|
|
|
3,031,609
|
|
||
Total partners’ capital
|
3,552,118
|
|
|
3,224,020
|
|
||
Noncontrolling interests in consolidated property partnerships and subsidiaries (Notes 1 and 8)
|
89,784
|
|
|
10,566
|
|
||
Total capital
|
3,641,902
|
|
|
3,234,586
|
|
||
TOTAL LIABILITIES AND CAPITAL
|
$
|
6,332,139
|
|
|
$
|
5,926,430
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
146,539
|
|
|
$
|
129,510
|
|
|
$
|
423,947
|
|
|
$
|
391,892
|
|
Tenant reimbursements
|
16,406
|
|
|
11,681
|
|
|
43,948
|
|
|
40,280
|
|
||||
Other property income (Note 14)
|
5,403
|
|
|
362
|
|
|
6,032
|
|
|
1,690
|
|
||||
Total revenues
|
168,348
|
|
|
141,553
|
|
|
473,927
|
|
|
433,862
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
30,050
|
|
|
26,684
|
|
|
85,236
|
|
|
78,264
|
|
||||
Real estate taxes
|
14,501
|
|
|
12,087
|
|
|
39,378
|
|
|
37,232
|
|
||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
289
|
|
||||
Ground leases
|
909
|
|
|
862
|
|
|
2,506
|
|
|
2,451
|
|
||||
General and administrative expenses
|
13,533
|
|
|
10,799
|
|
|
40,949
|
|
|
36,200
|
|
||||
Acquisition-related expenses
|
188
|
|
|
4
|
|
|
964
|
|
|
397
|
|
||||
Depreciation and amortization
|
56,666
|
|
|
49,422
|
|
|
160,452
|
|
|
152,567
|
|
||||
Total expenses
|
115,847
|
|
|
99,858
|
|
|
329,485
|
|
|
307,400
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (losses) (Note 13)
|
538
|
|
|
(694
|
)
|
|
1,120
|
|
|
177
|
|
||||
Interest expense (Note 6)
|
(14,976
|
)
|
|
(12,819
|
)
|
|
(41,189
|
)
|
|
(44,561
|
)
|
||||
Total other (expenses) income
|
(14,438
|
)
|
|
(13,513
|
)
|
|
(40,069
|
)
|
|
(44,384
|
)
|
||||
INCOME FROM OPERATIONS BEFORE GAINS (LOSSES) ON SALES OF REAL ESTATE
|
38,063
|
|
|
28,182
|
|
|
104,373
|
|
|
82,078
|
|
||||
Net (loss) gain on sales of land (Note 3)
|
—
|
|
|
—
|
|
|
(295
|
)
|
|
17,268
|
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
18,312
|
|
|
78,522
|
|
|
164,302
|
|
|
109,950
|
|
||||
NET INCOME
|
56,375
|
|
|
106,704
|
|
|
268,380
|
|
|
209,296
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries (Notes 1 and 8)
|
(1,121
|
)
|
|
(64
|
)
|
|
(1,703
|
)
|
|
(211
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
55,254
|
|
|
106,640
|
|
|
266,677
|
|
|
209,085
|
|
||||
PREFERRED DISTRIBUTIONS
|
(3,313
|
)
|
|
(3,313
|
)
|
|
(9,938
|
)
|
|
(9,938
|
)
|
||||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
51,941
|
|
|
$
|
103,327
|
|
|
$
|
256,739
|
|
|
$
|
199,147
|
|
Net income available to common unitholders per unit – basic (Note 16)
|
$
|
0.54
|
|
|
$
|
1.10
|
|
|
$
|
2.70
|
|
|
$
|
2.18
|
|
Net income available to common unitholders per unit – diluted (Note 16)
|
$
|
0.54
|
|
|
$
|
1.09
|
|
|
$
|
2.68
|
|
|
$
|
2.17
|
|
Weighted average common units outstanding – basic (Note 16)
|
94,858,292
|
|
|
93,938,783
|
|
|
94,630,183
|
|
|
90,869,696
|
|
||||
Weighted average common units outstanding – diluted (Note 16)
|
95,551,682
|
|
|
94,427,507
|
|
|
95,241,199
|
|
|
91,385,945
|
|
||||
Dividends declared per common unit
|
$
|
0.375
|
|
|
$
|
0.350
|
|
|
$
|
1.100
|
|
|
$
|
1.050
|
|
|
Partners’ Capital
|
|
Total
Partners’
Capital
|
|
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
|
Total
Capital
|
|||||||||||||
BALANCE AS OF DECEMBER 31, 2014
|
$
|
192,411
|
|
|
88,063,884
|
|
|
$
|
2,521,900
|
|
|
$
|
2,714,311
|
|
|
$
|
9,625
|
|
|
$
|
2,723,936
|
|
Net income
|
|
|
|
|
209,085
|
|
|
209,085
|
|
|
211
|
|
|
209,296
|
|
|||||||
Issuance of common units
|
|
|
5,640,033
|
|
|
387,509
|
|
|
387,509
|
|
|
|
|
387,509
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
|
|
1,268
|
|
|
1,268
|
|
|
|
|
1,268
|
|
||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
13,621
|
|
|
13,621
|
|
|
|
|
13,621
|
|
||||||||
Exercise of stock options
|
|
|
265,000
|
|
|
11,292
|
|
|
11,292
|
|
|
|
|
11,292
|
|
|||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(39,317
|
)
|
|
(3,121
|
)
|
|
(3,121
|
)
|
|
|
|
(3,121
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
78,937
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Contribution from noncontrolling interest in consolidated property partnership
|
|
|
|
|
|
|
|
|
474
|
|
|
474
|
|
|||||||||
Preferred distributions
|
|
|
|
|
(9,938
|
)
|
|
(9,938
|
)
|
|
|
|
(9,938
|
)
|
||||||||
Distributions declared per common unit ($1.05 per unit)
|
|
|
|
|
(97,275
|
)
|
|
(97,275
|
)
|
|
|
|
(97,275
|
)
|
||||||||
BALANCE AS OF SEPTEMBER 30, 2015
|
$
|
192,411
|
|
|
94,008,537
|
|
|
$
|
3,034,341
|
|
|
$
|
3,226,752
|
|
|
$
|
10,310
|
|
|
$
|
3,237,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital
|
|
Total
Partners’
Capital
|
|
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
Total
Capital
|
||||||||||||||
BALANCE AS OF DECEMBER 31, 2015
|
$
|
192,411
|
|
|
94,023,465
|
|
|
$
|
3,031,609
|
|
|
$
|
3,224,020
|
|
|
$
|
10,566
|
|
|
$
|
3,234,586
|
|
Net income
|
|
|
|
|
266,677
|
|
|
266,677
|
|
|
1,703
|
|
|
268,380
|
|
|||||||
Issuance of common units in connection with acquisition (Note 2)
|
|
|
867,701
|
|
|
48,033
|
|
|
48,033
|
|
|
|
|
48,033
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
|
|
1,339
|
|
|
1,339
|
|
|
|
|
1,339
|
|
||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
19,303
|
|
|
19,303
|
|
|
|
|
19,303
|
|
||||||||
Exercise of stock options
|
|
|
51,000
|
|
|
2,173
|
|
|
2,173
|
|
|
|
|
2,173
|
|
|||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(110,528
|
)
|
|
(6,874
|
)
|
|
(6,874
|
)
|
|
|
|
(6,874
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
72,130
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Initial contribution from noncontrolling interest in consolidated property partnership, net of transaction costs (Note 8)
|
|
|
|
|
113,022
|
|
|
113,022
|
|
|
78,654
|
|
|
191,676
|
|
|||||||
Distribution to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
(1,139
|
)
|
|
(1,139
|
)
|
|||||||||
Preferred distributions
|
|
|
|
|
(9,938
|
)
|
|
(9,938
|
)
|
|
|
|
(9,938
|
)
|
||||||||
Distributions declared per common unit ($1.10 per unit)
|
|
|
|
|
(105,637
|
)
|
|
(105,637
|
)
|
|
|
|
(105,637
|
)
|
||||||||
BALANCE AS OF SEPTEMBER 30, 2016
|
$
|
192,411
|
|
|
94,903,768
|
|
|
$
|
3,359,707
|
|
|
$
|
3,552,118
|
|
|
$
|
89,784
|
|
|
$
|
3,641,902
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
268,380
|
|
|
$
|
209,296
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
157,587
|
|
|
150,531
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
2,865
|
|
|
2,036
|
|
||
Increase in provision for bad debts
|
—
|
|
|
289
|
|
||
Non-cash amortization of share-based compensation awards
|
15,263
|
|
|
11,272
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
2,020
|
|
|
1,412
|
|
||
Non-cash amortization of net below market rents (Note 4)
|
(5,128
|
)
|
|
(6,769
|
)
|
||
Gains on sales of depreciable operating properties (Note 3)
|
(164,302
|
)
|
|
(109,950
|
)
|
||
Loss (gain) on sales of land (Note 3)
|
295
|
|
|
(17,268
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(9,700
|
)
|
|
(9,957
|
)
|
||
Straight-line rents
|
(22,856
|
)
|
|
(35,530
|
)
|
||
Net change in other operating assets
|
(7,263
|
)
|
|
(9,356
|
)
|
||
Net change in other operating liabilities
|
15,444
|
|
|
16,606
|
|
||
Net cash provided by operating activities
|
252,605
|
|
|
202,612
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(222,719
|
)
|
|
(311,916
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(33,513
|
)
|
|
(130,609
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(55,415
|
)
|
|
—
|
|
||
Expenditures for operating properties and other capital assets
|
(81,688
|
)
|
|
(71,756
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
325,031
|
|
|
319,639
|
|
||
(Increase) decrease in restricted cash (Note 3)
|
(56,805
|
)
|
|
57,776
|
|
||
Decrease in acquisition-related deposits
|
1,902
|
|
|
3,200
|
|
||
Increase in note receivable
|
(1,000
|
)
|
|
(3,000
|
)
|
||
Net cash used in investing activities
|
(124,207
|
)
|
|
(136,666
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Borrowings on unsecured revolving credit facility
|
305,000
|
|
|
250,000
|
|
||
Repayments on unsecured revolving credit facility
|
(305,000
|
)
|
|
(390,000
|
)
|
||
Principal payments on secured debt
|
(7,254
|
)
|
|
(67,335
|
)
|
||
Net proceeds from the issuance of unsecured debt (Note 6)
|
—
|
|
|
397,776
|
|
||
Financing costs
|
(1,485
|
)
|
|
(4,534
|
)
|
||
Net proceeds from issuance of common stock
|
—
|
|
|
387,509
|
|
||
Repurchase of common stock and restricted stock units
|
(6,874
|
)
|
|
(3,121
|
)
|
||
Proceeds from exercise of stock options
|
2,173
|
|
|
11,292
|
|
||
Contributions from noncontrolling interests in consolidated property partnerships (Note 8)
|
191,676
|
|
|
474
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(1,139
|
)
|
|
—
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(101,542
|
)
|
|
(93,910
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(9,938
|
)
|
|
(9,938
|
)
|
||
Net cash provided by financing activities
|
65,617
|
|
|
478,213
|
|
||
Net increase in cash and cash equivalents
|
194,015
|
|
|
544,159
|
|
||
Cash and cash equivalents, beginning of period
|
56,508
|
|
|
23,781
|
|
||
Cash and cash equivalents, end of period
|
$
|
250,523
|
|
|
$
|
567,940
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage
Occupied
|
||||
Stabilized Office Properties
|
101
|
|
|
13,605,597
|
|
|
530
|
|
|
96.6
|
%
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Properties held for sale
(2)
|
1
|
|
67,995
|
|
Development projects in
“
lease-up
”
|
2
|
|
450,000
|
|
Development projects under construction
|
1
|
|
700,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
Property
|
|
Date of Acquisition
|
|
Number of Buildings
|
|
Rentable Square Feet (unaudited)
|
|
Purchase Price (in millions)
(1)
|
|||
1290-1300 Terra Bella Avenue, Mountain View, CA
|
|
June 8, 2016
|
|
1
|
|
114,175
|
|
|
$
|
55.4
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In connection with this acquisition, we assumed
$0.2 million
in accrued liabilities that are not included in the purchase price above.
|
|
Total 2016 Operating Property Acquisitions
(1)
|
||
|
|
||
Assets
|
|
||
Land and improvements
|
$
|
28,730
|
|
Buildings and improvements
(2)
|
27,555
|
|
|
Deferred leasing costs and acquisition-related intangible assets
(3)
|
4,180
|
|
|
Total assets acquired
|
60,465
|
|
|
Liabilities
|
|
||
Accounts payable, accrued expenses and other liabilities
|
170
|
|
|
Deferred revenue and acquisition-related intangible liabilities
(4)
|
4,880
|
|
|
Total liabilities assumed
|
5,050
|
|
|
Net assets and liabilities acquired
|
$
|
55,415
|
|
(1)
|
The purchase price of the acquisition completed during the
nine
months ended
September 30, 2016
was less than 5% of the Company’s total assets as of
September 30, 2016
.
|
(2)
|
Represents buildings, building improvements and tenant improvements.
|
(3)
|
Represents in-place leases (approximately
$2.5 million
with a weighted average amortization period of
3.6
years) and leasing commissions (approximately
$1.7 million
with a weighted average amortization period of
3.7
years).
|
(4)
|
Represents below-market leases (approximately
$4.9 million
with a weighted average amortization period of
3.4
years).
|
Location
|
|
Property Type
|
|
Month of Disposition
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
Sales Price
(1)
(in millions)
|
|||
Torrey Santa Fe Properties
(2)
|
|
Office
|
|
January
|
|
4
|
|
465,812
|
|
|
$
|
262.3
|
|
4930, 4939 & 4955 Directors Place, San Diego, CA
(3)
|
|
Office
|
|
July
|
|
2
|
|
136,908
|
|
|
49.0
|
|
|
Total Dispositions
|
|
|
|
|
|
6
|
|
602,720
|
|
|
$
|
311.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gross sales price before the impact of broker commissions and closing costs.
|
(2)
|
The Torrey Santa Fe Properties include the following: 7525 Torrey Santa Fe, 7535 Torrey Santa Fe, 7545 Torrey Santa Fe, and 7555 Torrey Santa Fe. These properties were classified as held for sale at
December 31, 2015
.
|
(3)
|
These properties include
two
operating properties totaling
136,908
rentable square feet and a
7.0
acre undeveloped land parcel.
|
Property
|
|
Submarket
|
|
Month of Disposition
|
|
Gross Site Acreage (unaudited)
|
|
Sales Price
(1)
(in millions)
|
||
Carlsbad Oaks - Lot 7
(2)
|
|
Carlsbad
|
|
January
|
|
7.6
|
|
$
|
4.5
|
|
Carlsbad Oaks - Lots 4 & 5
|
|
Carlsbad
|
|
June
|
|
11.2
|
|
6.0
|
|
|
Carlsbad Oaks - Lot 8
|
|
Carlsbad
|
|
June
|
|
13.2
|
|
8.9
|
|
|
Total Land Dispositions
(3)(4)
|
|
|
|
|
|
32.0
|
|
$
|
19.4
|
|
(1)
|
Represents gross sales price before the impact of broker commissions and closing costs.
|
(2)
|
This land parcel was classified as held for sale as of December 31, 2015.
|
(3)
|
In connection with these land dispositions,
$2.3 million
of secured debt was assumed by the buyers. See Note 6 “Secured and Unsecured Debt of the Operating Partnership” for additional information.
|
(4)
|
The Company also disposed of a
7.0
acre undeveloped land parcel in connection with the disposition of 4930, 4939 & 4955 Directors Place, San Diego, CA included in the operating property dispositions above.
|
Location
|
|
Submarket
|
|
Property Type
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
5717 Pacific Center Boulevard, San Diego, CA
|
|
Sorrento Mesa
|
|
Office
|
|
1
|
|
67,995
|
|
|
|
|
|
|
|
|
|
|
Real estate assets and other assets held for sale
|
|
(in thousands)
|
||
Land and improvements
|
|
$
|
2,693
|
|
Buildings and improvements
|
|
10,500
|
|
|
Total real estate held for sale
|
|
13,193
|
|
|
Accumulated depreciation and amortization
|
|
(3,829
|
)
|
|
Total real estate held for sale, net
|
|
9,364
|
|
|
Prepaid expenses and other assets, net
|
|
76
|
|
|
Real estate and other assets held for sale, net
|
|
$
|
9,440
|
|
Liabilities of real estate assets held for sale
|
|
|
||
Accounts payable, accrued expenses and other liabilities
|
|
$
|
74
|
|
Liabilities of real estate assets held for sale
|
|
$
|
74
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Deferred Leasing Costs and Acquisition-Related Intangible Assets, net:
(1)
|
|
|
|
||||
Deferred leasing costs
|
$
|
229,252
|
|
|
$
|
205,888
|
|
Accumulated amortization
|
(85,154
|
)
|
|
(72,745
|
)
|
||
Deferred leasing costs, net
|
144,098
|
|
|
133,143
|
|
||
Above-market operating leases
|
10,209
|
|
|
10,989
|
|
||
Accumulated amortization
|
(7,111
|
)
|
|
(6,739
|
)
|
||
Above-market operating leases, net
|
3,098
|
|
|
4,250
|
|
||
In-place leases
|
72,084
|
|
|
72,639
|
|
||
Accumulated amortization
|
(39,121
|
)
|
|
(33,810
|
)
|
||
In-place leases, net
|
32,963
|
|
|
38,829
|
|
||
Below-market ground lease obligation
|
490
|
|
|
490
|
|
||
Accumulated amortization
|
(36
|
)
|
|
(29
|
)
|
||
Below-market ground lease obligation, net
|
454
|
|
|
461
|
|
||
Total deferred leasing costs and acquisition-related intangible assets, net
|
$
|
180,613
|
|
|
$
|
176,683
|
|
Acquisition-Related Intangible Liabilities, net:
(2)
|
|
|
|
||||
Below-market operating leases
|
$
|
56,885
|
|
|
$
|
53,502
|
|
Accumulated amortization
|
(31,877
|
)
|
|
(27,074
|
)
|
||
Below-market operating leases, net
|
25,008
|
|
|
26,428
|
|
||
Above-market ground lease obligation
|
6,320
|
|
|
6,320
|
|
||
Accumulated amortization
|
(500
|
)
|
|
(424
|
)
|
||
Above-market ground lease obligation, net
|
5,820
|
|
|
5,896
|
|
||
Total acquisition-related intangible liabilities, net
|
$
|
30,828
|
|
|
$
|
32,324
|
|
(1)
|
Excludes deferred leasing costs and acquisition-related intangible assets, net related to properties held for sale as of
December 31, 2015
.
|
(2)
|
Included in deferred revenue and acquisition-related intangible liabilities, net in the consolidated balance sheets.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Deferred leasing costs
(1)
|
$
|
7,599
|
|
|
$
|
6,932
|
|
|
$
|
21,343
|
|
|
$
|
20,847
|
|
Above-market operating leases
(2)
|
376
|
|
|
487
|
|
|
1,152
|
|
|
2,135
|
|
||||
In-place leases
(1)
|
2,753
|
|
|
3,073
|
|
|
8,310
|
|
|
11,710
|
|
||||
Below-market ground lease obligation
(3)
|
2
|
|
|
2
|
|
|
6
|
|
|
6
|
|
||||
Below-market operating leases
(4)
|
(2,261
|
)
|
|
(2,228
|
)
|
|
(6,280
|
)
|
|
(8,905
|
)
|
||||
Above-market ground lease obligation
(5)
|
(26
|
)
|
|
(26
|
)
|
|
(76
|
)
|
|
(76
|
)
|
||||
Total
|
$
|
8,443
|
|
|
$
|
8,240
|
|
|
$
|
24,455
|
|
|
$
|
25,717
|
|
(1)
|
The amortization of deferred leasing costs and in-place leases is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.
|
(2)
|
The amortization of above-market operating leases is recorded as a decrease to rental income in the consolidated statements of operations for the periods presented.
|
(3)
|
The amortization of the below-market ground lease obligation is recorded as an increase to ground lease expense in the consolidated statements of operations for the periods presented.
|
(4)
|
The amortization of below-market operating leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.
|
(5)
|
The amortization of the above-market ground lease obligation is recorded as a decrease to ground lease expense in the consolidated statements of operations for the periods presented.
|
Year
|
Deferred Leasing Costs
|
|
Above-Market Operating Leases
(1)
|
|
In-Place Leases
|
|
Below-Market Ground Lease Obligation
(2)
|
|
Below-Market Operating Leases
(3)
|
|
Above-Market Ground Lease Obligation
(4)
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Remaining 2016
|
$
|
7,258
|
|
|
$
|
349
|
|
|
$
|
2,697
|
|
|
$
|
2
|
|
|
$
|
(2,236
|
)
|
|
$
|
(25
|
)
|
2017
|
26,971
|
|
|
1,241
|
|
|
9,739
|
|
|
8
|
|
|
(8,438
|
)
|
|
(101
|
)
|
||||||
2018
|
23,649
|
|
|
831
|
|
|
6,998
|
|
|
8
|
|
|
(7,159
|
)
|
|
(101
|
)
|
||||||
2019
|
19,468
|
|
|
643
|
|
|
5,148
|
|
|
8
|
|
|
(4,581
|
)
|
|
(101
|
)
|
||||||
2020
|
15,174
|
|
|
16
|
|
|
2,923
|
|
|
8
|
|
|
(2,169
|
)
|
|
(101
|
)
|
||||||
Thereafter
|
51,578
|
|
|
18
|
|
|
5,458
|
|
|
420
|
|
|
(425
|
)
|
|
(5,391
|
)
|
||||||
Total
|
$
|
144,098
|
|
|
$
|
3,098
|
|
|
$
|
32,963
|
|
|
$
|
454
|
|
|
$
|
(25,008
|
)
|
|
$
|
(5,820
|
)
|
(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.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
11,434
|
|
|
$
|
13,233
|
|
Allowance for uncollectible tenant receivables
|
(1,725
|
)
|
|
(2,080
|
)
|
||
Current receivables, net
(1)
|
$
|
9,709
|
|
|
$
|
11,153
|
|
(1)
|
Excludes current receivables, net related to real estate held for sale at
December 31, 2015
.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
213,730
|
|
|
$
|
191,586
|
|
Allowance for deferred rent receivables
|
(1,526
|
)
|
|
(1,882
|
)
|
||
Deferred rent receivables, net
(1)
|
$
|
212,204
|
|
|
$
|
189,704
|
|
(1)
|
Excludes deferred rent receivables related to real estate held for sale at
December 31, 2015
.
|
Type of Debt
|
Annual Stated Interest Rate
(1)
|
|
Effective Interest Rate
(1)(2)
|
|
Maturity Date
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
|
|
|
|
|
|
(in thousands)
|
||||||
Mortgage note payable
(3)
|
4.27%
|
|
4.27%
|
|
February 2018
|
|
$
|
126,405
|
|
|
$
|
128,315
|
|
Mortgage note payable
(3)
|
4.48%
|
|
4.48%
|
|
July 2027
|
|
95,161
|
|
|
96,354
|
|
||
Mortgage note payable
(3)
(4)
|
6.05%
|
|
3.50%
|
|
June 2019
|
|
83,314
|
|
|
85,890
|
|
||
Mortgage note payable
|
6.51%
|
|
6.51%
|
|
February 2017
|
|
64,703
|
|
|
65,563
|
|
||
Mortgage note payable
|
7.15%
|
|
7.15%
|
|
May 2017
|
|
1,926
|
|
|
3,987
|
|
||
Other
(5)
|
Various
|
|
Various
|
|
Various
|
|
—
|
|
|
1,809
|
|
||
Total secured debt
|
|
|
|
|
|
|
$
|
371,509
|
|
|
$
|
381,918
|
|
Unamortized deferred financing costs
|
|
|
|
|
|
|
(843
|
)
|
|
(1,083
|
)
|
||
Total secured debt, net
|
|
|
|
|
|
|
$
|
370,666
|
|
|
$
|
380,835
|
|
(1)
|
All interest rates presented are fixed-rate interest rates.
|
(2)
|
Represents the effective interest rate including the amortization of initial issuance discounts/premiums excluding the amortization of deferred financing costs.
|
(3)
|
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)
|
Amounts reported include the amounts of unamortized debt premiums of
$4.9 million
and
$6.2 million
as of
September 30, 2016
and
December 31, 2015
, respectively.
|
(5)
|
Balance of
$1.8 million
as of
December 31, 2015
included public facility bonds that were assumed by the buyers in connection with sales of land during the
nine
months ended
September 30, 2016
.
|
|
|
|
|
|
|
|
|
|
Principal Amount as of
|
||||||
|
Issuance date
|
|
Maturity date
|
|
Stated
coupon rate
|
|
Effective interest rate
(1)
|
|
September 30,
2016 |
|
December 31, 2015
|
||||
|
|
|
|
|
|
|
|
|
(in thousands)
|
||||||
4.375% Unsecured Senior Notes
(2)
|
September 2015
|
|
October 2025
|
|
4.375%
|
|
4.440%
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(4,985
|
)
|
|
(5,400
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
395,015
|
|
|
$
|
394,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4.250% Unsecured Senior Notes
(3)
|
July 2014
|
|
August 2029
|
|
4.250%
|
|
4.350%
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(6,829
|
)
|
|
(7,228
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
393,171
|
|
|
$
|
392,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
3.800% Unsecured Senior Notes
(4)
|
January 2013
|
|
January 2023
|
|
3.800%
|
|
3.804%
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(1,725
|
)
|
|
(1,931
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
298,275
|
|
|
$
|
298,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4.800% Unsecured Senior Notes
(4) (5)
|
July 2011
|
|
July 2018
|
|
4.800%
|
|
4.827%
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(888
|
)
|
|
(1,251
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
324,112
|
|
|
$
|
323,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
6.625% Unsecured Senior Notes
(6)
|
May 2010
|
|
June 2020
|
|
6.625%
|
|
6.743%
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(2,005
|
)
|
|
(2,414
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
247,995
|
|
|
$
|
247,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Unsecured Senior Notes, Net
|
|
|
|
|
|
|
|
|
$
|
1,658,568
|
|
|
$
|
1,656,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the effective interest rate including the amortization of initial issuance discounts/premiums, excluding the amortization of deferred financing costs.
|
(2)
|
Interest on these notes is payable semi-annually in arrears on April 1st and October 1st of each year.
|
(3)
|
Interest on these notes is payable semi-annually in arrears on February 15th and August 15th of each year.
|
(4)
|
Interest on these notes is payable semi-annually in arrears on January 15th and July 15th of each year.
|
(5)
|
In October 2015, certain common limited partners in the Operating Partnership that previously contributed their interests in the property at 6255 W. Sunset Blvd., Los Angeles, California to the Operating Partnership entered into an agreement with the Company. Pursuant to this agreement, such common limited partners will reimburse the Company for a portion of any amounts the Company may be required to pay pursuant to its guarantee of the Operating Partnership’s
4.800%
Senior Notes due 2018 or that the Company may otherwise become required to pay under applicable law with respect to such notes.
|
(6)
|
Interest on these notes is payable semi-annually in arrears on June 1st and December 1st of each year.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
600,000
|
|
|
600,000
|
|
||
Total borrowing capacity
(1)
|
$
|
600,000
|
|
|
$
|
600,000
|
|
Interest rate
(2)
|
1.58
|
%
|
|
1.48
|
%
|
||
Facility fee-annual rate
(3)
|
0.200%
|
||||||
Maturity date
|
July 2019
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$311.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and term loan facility.
|
(2)
|
The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus
1.050%
.
|
(3)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of
September 30, 2016
and
December 31, 2015
,
$3.6 million
and
$4.6 million
, of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
(1)
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Interest rate
(2)
|
1.67
|
%
|
|
1.40
|
%
|
||
Maturity date
|
July 2019
|
(1)
|
As of
September 30, 2016
and
December 31, 2015
,
$0.7 million
and
$0.9 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(2)
|
Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus
1.150%
as of
September 30, 2016
and
December 31, 2015
.
|
Year
|
(in thousands)
|
||
Remaining 2016
|
$
|
2,480
|
|
2017
|
71,692
|
|
|
2018
|
451,669
|
|
|
2019
|
265,309
|
|
|
2020
|
251,913
|
|
|
Thereafter
|
1,187,589
|
|
|
Total
(1) (2)
|
$
|
2,230,652
|
|
(1)
|
Includes gross principal balance of outstanding debt before the effect of the following at
September 30, 2016
:
$11.4 million
of unamortized deferred financing costs,
$6.8 million
of unamortized discounts for the unsecured senior notes and
$4.9 million
of unamortized premiums for the secured debt.
|
(2)
|
Excludes the Series A and B Notes issuable pursuant to the Note Purchase Agreement entered into in September 2016 as no Series A or B Notes were issued and outstanding under these notes as of
September 30, 2016
.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
26,184
|
|
|
$
|
27,386
|
|
|
$
|
79,027
|
|
|
$
|
82,322
|
|
Capitalized interest and deferred financing costs
|
(11,208
|
)
|
|
(14,567
|
)
|
|
(37,838
|
)
|
|
(37,761
|
)
|
||||
Interest expense
|
$
|
14,976
|
|
|
$
|
12,819
|
|
|
$
|
41,189
|
|
|
$
|
44,561
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
September 30, 2015
|
|||
Company owned common units in the Operating Partnership
|
92,272,492
|
|
|
92,258,690
|
|
|
92,220,367
|
|
Company owned general partnership interest
|
97.2
|
%
|
|
98.1
|
%
|
|
98.1
|
%
|
Noncontrolling common units of the Operating Partnership
|
2,631,276
|
|
|
1,764,775
|
|
|
1,788,170
|
|
Ownership interest of noncontrolling interest
|
2.8
|
%
|
|
1.9
|
%
|
|
1.9
|
%
|
|
Fair Value Assumptions
|
Fair value per share at January 28, 2016
|
$57.08
|
Expected share price volatility
|
26.00%
|
Risk-free interest rate
|
1.13%
|
Remaining expected life
|
2.9 years
|
|
Fair Value (Level 1)
(1)
|
||||||
|
September 30, 2016
|
|
December 31, 2015
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
14,121
|
|
|
$
|
12,882
|
|
(1)
|
Based on quoted prices in active markets for identical securities.
|
(2)
|
The marketable securities are held in a limited rabbi trust.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying
Value |
|
Fair
Value (1) |
|
Carrying
Value |
|
Fair
Value (1) |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt, net
|
$
|
370,666
|
|
|
$
|
383,781
|
|
|
$
|
380,835
|
|
|
$
|
391,611
|
|
Unsecured debt, net
|
1,846,672
|
|
|
1,982,720
|
|
|
1,844,634
|
|
|
1,898,863
|
|
(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.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty Corporation
|
$
|
53,895
|
|
|
$
|
104,759
|
|
|
$
|
261,050
|
|
|
$
|
205,446
|
|
Preferred dividends
|
(3,313
|
)
|
|
(3,313
|
)
|
|
(9,938
|
)
|
|
(9,938
|
)
|
||||
Allocation to participating securities
(1)
|
(426
|
)
|
|
(367
|
)
|
|
(1,244
|
)
|
|
(1,200
|
)
|
||||
Numerator for basic and diluted net income available to common stockholders
|
$
|
50,156
|
|
|
$
|
101,079
|
|
|
$
|
249,868
|
|
|
$
|
194,308
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
92,227,016
|
|
|
92,150,341
|
|
|
92,220,522
|
|
|
89,077,012
|
|
||||
Effect of dilutive securities
|
693,390
|
|
|
488,724
|
|
|
611,016
|
|
|
516,249
|
|
||||
Diluted weighted average vested shares and common share equivalents outstanding
|
92,920,406
|
|
|
92,639,065
|
|
|
92,831,538
|
|
|
89,593,261
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.54
|
|
|
$
|
1.10
|
|
|
$
|
2.71
|
|
|
$
|
2.18
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.54
|
|
|
$
|
1.09
|
|
|
$
|
2.69
|
|
|
$
|
2.17
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands, except unit and per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty, L.P.
|
$
|
55,254
|
|
|
$
|
106,640
|
|
|
$
|
266,677
|
|
|
$
|
209,085
|
|
Preferred distributions
|
(3,313
|
)
|
|
(3,313
|
)
|
|
(9,938
|
)
|
|
(9,938
|
)
|
||||
Allocation to participating securities
(1)
|
(426
|
)
|
|
(367
|
)
|
|
(1,244
|
)
|
|
(1,200
|
)
|
||||
Numerator for basic and diluted net income available to common unitholders
|
$
|
51,515
|
|
|
$
|
102,960
|
|
|
$
|
255,495
|
|
|
$
|
197,947
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
94,858,292
|
|
|
93,938,783
|
|
|
94,630,183
|
|
|
90,869,696
|
|
||||
Effect of dilutive securities
|
693,390
|
|
|
488,724
|
|
|
611,016
|
|
|
516,249
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
95,551,682
|
|
|
94,427,507
|
|
|
95,241,199
|
|
|
91,385,945
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.54
|
|
|
$
|
1.10
|
|
|
$
|
2.70
|
|
|
$
|
2.18
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.54
|
|
|
$
|
1.09
|
|
|
$
|
2.68
|
|
|
$
|
2.17
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $36,468 and $37,010 as of September 30, 2016 and 2015, respectively
|
$
|
42,858
|
|
|
$
|
45,678
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
77,161
|
|
|
$
|
89,009
|
|
Tenant improvements funded directly by tenants
|
$
|
16,803
|
|
|
$
|
12,944
|
|
Assumption of accrued liabilities in connection with acquisitions (Note 2)
|
$
|
4,911
|
|
|
$
|
5,070
|
|
Release of holdback funds to third party
|
$
|
—
|
|
|
$
|
9,279
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Issuance of common units of the Operating Partnership in connection with an acquisition (Note 2)
|
$
|
48,033
|
|
|
$
|
—
|
|
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
36,109
|
|
|
$
|
33,353
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,656
|
|
Secured debt assumed by buyers in connection with land dispositions (Note 3)
|
$
|
2,322
|
|
|
$
|
—
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
39
|
|
|
$
|
467
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $36,468 and $37,010 as of September 30, 2016 and 2015, respectively
|
$
|
42,858
|
|
|
$
|
45,678
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
77,161
|
|
|
$
|
89,009
|
|
Tenant improvements funded directly by tenants
|
$
|
16,803
|
|
|
$
|
12,944
|
|
Assumption of accrued liabilities in connection with acquisitions (Note 2)
|
$
|
4,911
|
|
|
$
|
5,070
|
|
Release of holdback funds to third party
|
$
|
—
|
|
|
$
|
9,279
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Issuance of common units of the Operating Partnership in connection with an acquisition (Note 2)
|
$
|
48,033
|
|
|
$
|
—
|
|
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
36,109
|
|
|
$
|
33,353
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,656
|
|
Secured debt assumed by buyers in connection with land dispositions (Note 3)
|
$
|
2,322
|
|
|
$
|
—
|
|
•
|
350 Mission Street, SOMA, San Francisco, California, which we acquired in October 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately
$277.8 million
and encompasses approximately
455,340
rentable square feet. The office component of this project is
100%
leased to salesforce.com, inc.
|
•
|
333 Brannan Street, SOMA, San Francisco, California, which we acquired in July 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately
$101.5 million
and encompasses approximately
185,602
rentable square feet. The office component of the project is
100%
leased to Dropbox, Inc.
|
•
|
Columbia Square - Residential, Hollywood, California, the 21-story residential component of the Columbia Square project, which is comprised of
200
units, is a mix of high-end long-term rentals and extended stay apartment homes and has a total estimated investment of approximately
$160 million
. As of
September 30, 2016
, the project was
22%
leased. Construction on the project was completed in the second quarter of 2016.
|
•
|
Columbia Square Office Phase 2, Hollywood, California, located in the heart of Hollywood, California, two blocks from the corner of Sunset Boulevard and Vine Street. This project is comprised of three buildings totaling approximately
377,000
rentable square feet with a total estimated investment of
$230 million
. The building core and shell of the project were completed in the first quarter of 2016. The project is currently
84%
committed and
9%
occupied and is expected to be stabilized in the first quarter of 2017.
|
•
|
The Heights at Del Mar, Del Mar, California, a
73,000
square foot office project that has a total estimated investment of approximately
$45 million
. The building core and shell of the project were completed in the fourth quarter of 2015. The project is currently
65%
committed and is expected to be added to the stabilized portfolio in the fourth quarter of 2016.
|
•
|
The Exchange on 16th, Mission Bay, San Francisco, California, was acquired in May 2014 and we commenced construction in June 2015. This project encompasses approximately
700,000
gross rentable square feet in four buildings and represents a total estimated investment of
$485.0 million
. Construction is currently in progress and the building and core shell are currently estimated to be completed in the second half of 2017. The timing, estimated gross rentable square feet and total estimated investment are for a multi-tenant office project.
|
Near-Term Development Pipeline
(1)
|
|
Location
|
|
Potential Start Date
(2)
|
|
Approx. Developable Square Feet
|
|
Total Estimated Investment
|
|
Total Costs as of 9/30/2016
(3)
($ in millions)
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
100 Hooper
|
|
San Francisco
|
|
2016
|
|
400,000
|
|
$
|
270
|
|
|
$
|
97.6
|
|
One Paseo
(4)
|
|
Del Mar
|
|
2016
|
|
1,100,000
|
|
650
|
|
|
197.3
|
|
||
333 Dexter
(5)
|
|
South Lake Union
|
|
2017
|
|
700,000
|
|
385
|
|
|
71.4
|
|
||
Academy Project
|
|
Hollywood
|
|
2017
|
|
545,000
|
|
390
|
|
|
70.5
|
|
||
Total Near-Term Development Pipeline
|
|
|
|
|
|
2,745,000
|
|
$
|
1,695
|
|
|
$
|
436.8
|
|
(1)
|
Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one of more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new office supply, regulatory and entitlement processes, and project design.
|
(2)
|
Potential start dates assume successfully obtaining all entitlements and approvals necessary to commence construction. Actual commencement is subject to extensive consideration of market conditions and economic factors.
|
(3)
|
Represents cash paid and costs incurred as of
September 30, 2016
.
|
(4)
|
In July 2016, the Company received final entitlement approval for this project. Development for this project will occur in phases with the first phase estimated to commence in the fourth quarter of 2016 with an estimated Phase I investment amount of approximately $150 million to $200 million.
|
(5)
|
Consists of four adjacent parcels in the South Lake Union submarket of Seattle.
|
|
1st & 2nd Generation
(2)
|
|
2nd Generation
(2)
|
||||||||||||||||||||||||
|
Number of Leases
(3)
|
|
Rentable Square Feet
(3)
|
|
TI/LC per
Sq. Ft.
(4)
|
|
Changes in
Rents
(5)(6)
|
|
Changes in
Cash Rents
(7)
|
|
Retention Rates
(8)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|||||||||||||||||||
Three Months Ended
September 30, 2016
|
23
|
|
|
14
|
|
|
173,549
|
|
|
149,625
|
|
|
$
|
31.21
|
|
|
12.1
|
%
|
|
0.9
|
%
|
|
61.5
|
%
|
|
63
|
|
Nine Months Ended
September 30, 2016
|
68
|
|
|
48
|
|
|
449,527
|
|
|
384,077
|
|
|
$
|
35.98
|
|
|
23.7
|
%
|
|
10.3
|
%
|
|
50.7
|
%
|
|
69
|
|
|
1st & 2nd Generation
(2)
|
|
2nd Generation
(2)
|
|||||||||||||||||||||
|
Number of Leases
(3)
|
|
Rentable Square Feet
(3)
|
|
TI/LC per Sq. Ft.
(4)
|
|
Changes in
Rents
(5)(6)
|
|
Changes in
Cash Rents
(7)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
||||||||||||||
Three Months Ended
September 30, 2016 |
18
|
|
|
14
|
|
|
164,401
|
|
|
149,625
|
|
|
$
|
34.55
|
|
|
24.1
|
%
|
|
11.8
|
%
|
|
56
|
|
Nine Months Ended
September 30, 2016 |
65
|
|
|
48
|
|
|
435,375
|
|
|
384,077
|
|
|
$
|
38.97
|
|
|
28.2
|
%
|
|
14.2
|
%
|
|
67
|
|
(1)
|
Includes 100% of consolidated property partnerships.
|
(2)
|
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.
|
(3)
|
Represents leasing activity for leases that commenced or signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
|
(4)
|
Tenant improvements and leasing commissions per square foot exclude tenant-funded tenant improvements.
|
(5)
|
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.
|
(6)
|
Excludes commenced and executed leases of approximately 12,022 and 51,333 square feet, respectively, for the
three
months ended
September 30, 2016
, and 108,499 and 123,105 rentable square feet, respectively, for the
nine
months ended
September 30, 2016
, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a meaningful market comparison.
|
(7)
|
Calculated as the 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.
|
(8)
|
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
|
(9)
|
For the
three
months ended
September 30, 2016
,
11
leases totaling
130,712
rentable square feet were signed but not commenced as of
September 30, 2016
. F
or the
nine
months ended
September 30, 2016
,
21
new leases totaling
208,101
rentable square feet were signed but not commenced as of
September 30, 2016
.
|
Year of Lease Expiration
|
|
Number of
Expiring
Leases
|
|
Total Square Feet
|
|
% of Total Leased Sq. Ft.
|
|
Annualized Base Rent
(2) (3)
|
|
% of Total Annualized Base Rent
(2)
|
|
Annualized Base Rent per Sq. Ft.
(2)
|
||||||||
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
||||||||
Remainder of 2016
|
|
25
|
|
|
164,368
|
|
|
1.3
|
%
|
|
$
|
6,263
|
|
|
1.2
|
%
|
|
$
|
38.10
|
|
2017
|
|
106
|
|
|
1,106,849
|
|
|
8.6
|
%
|
|
41,771
|
|
|
7.9
|
%
|
|
37.74
|
|
||
2018
|
|
78
|
|
|
1,356,935
|
|
|
10.5
|
%
|
|
54,647
|
|
|
10.3
|
%
|
|
40.27
|
|
||
2019
|
|
105
|
|
|
1,719,780
|
|
|
13.3
|
%
|
|
62,371
|
|
|
11.7
|
%
|
|
36.27
|
|
||
2020
|
|
94
|
|
|
1,924,588
|
|
|
14.9
|
%
|
|
72,034
|
|
|
13.6
|
%
|
|
37.43
|
|
||
2021
|
|
81
|
|
|
1,103,312
|
|
|
8.5
|
%
|
|
46,729
|
|
|
8.8
|
%
|
|
42.35
|
|
||
Total
|
|
489
|
|
|
7,375,832
|
|
|
57.1
|
%
|
|
$
|
283,815
|
|
|
53.5
|
%
|
|
$
|
38.48
|
|
(1)
|
The information presented for all lease expiration activity reflects leasing activity through
September 30, 2016
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
September 30, 2016
.
|
(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.”
|
(3)
|
Includes 100% of annualized base rent from consolidated property partnerships.
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Properties held for sale
(2)
|
1
|
|
67,995
|
|
Development projects in
“
lease-up
”
|
2
|
|
450,000
|
|
Development projects under construction
|
1
|
|
700,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of September 30, 2015
|
101
|
|
|
13,050,947
|
|
Acquisitions
(1)
|
1
|
|
|
114,175
|
|
Completed development properties placed in-service
|
6
|
|
|
1,089,446
|
|
Dispositions and properties held for sale
|
(7
|
)
|
|
(670,715
|
)
|
Remeasurement
|
—
|
|
|
21,744
|
|
Total as of September 30, 2016
(1) (2)
|
101
|
|
|
13,605,597
|
|
(1)
|
Excludes development property acquisitions.
|
(2)
|
Includes
three
properties owned by consolidated property partnerships.
|
Region
|
|
Number of
Buildings |
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
9/30/2016
|
|
6/30/2016
|
|
12/31/2015
|
||||||||||
Los Angeles and Ventura Counties
|
|
29
|
|
|
3,632,683
|
|
|
94.8
|
%
|
|
94.2
|
%
|
|
95.1
|
%
|
Orange County
|
|
1
|
|
|
271,556
|
|
|
97.8
|
%
|
|
97.8
|
%
|
|
94.0
|
%
|
San Diego
|
|
30
|
|
|
2,643,281
|
|
|
94.5
|
%
|
|
89.0
|
%
|
|
89.6
|
%
|
San Francisco Bay Area
|
|
29
|
|
|
4,991,939
|
|
|
98.3
|
%
|
|
98.7
|
%
|
|
98.1
|
%
|
Greater Seattle
|
|
12
|
|
|
2,066,138
|
|
|
98.2
|
%
|
|
98.1
|
%
|
|
95.1
|
%
|
Total Stabilized Portfolio
|
|
101
|
|
|
13,605,597
|
|
|
96.6
|
%
|
|
95.5
|
%
|
|
94.8
|
%
|
|
Average Occupancy
|
||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Stabilized Portfolio
(1)
|
96.1
|
%
|
|
95.8
|
%
|
|
95.3
|
%
|
|
95.9
|
%
|
Same Store Portfolio
(2)
|
96.2
|
%
|
|
95.6
|
%
|
|
95.8
|
%
|
|
95.9
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and excludes occupancy percentages of properties held for sale.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1,
2015
and still owned and stabilized as of
September 30, 2016
and excludes occupancy percentages of properties held for sale at
September 30, 2016
. See discussion under “Results of Operations” for additional information.
|
Tenant Name
|
|
Annualized Base Rental Revenue
(2)
($ in thousands)
|
|
Rentable
Square Feet
|
|
Percentage of Total Annualized Base Rental Revenue
|
|
Percentage of
Total Rentable
Square Feet
|
||||||
LinkedIn Corporation
|
|
$
|
28,344
|
|
|
663,239
|
|
|
5.3
|
%
|
|
4.9
|
%
|
|
salesforce.com, inc.
(3)
|
|
24,183
|
|
|
468,445
|
|
|
4.6
|
%
|
|
3.4
|
%
|
||
DIRECTV, LLC
|
|
22,467
|
|
|
667,852
|
|
|
4.2
|
%
|
|
4.9
|
%
|
||
Box, Inc.
|
|
22,441
|
|
|
371,792
|
|
|
4.2
|
%
|
|
2.7
|
%
|
||
Synopsys, Inc.
|
|
15,492
|
|
|
340,913
|
|
|
2.9
|
%
|
|
2.5
|
%
|
||
Bridgepoint Education, Inc.
|
|
15,066
|
|
|
322,342
|
|
|
2.8
|
%
|
|
2.4
|
%
|
||
Dropbox, Inc.
|
|
14,827
|
|
|
182,054
|
|
|
2.8
|
%
|
|
1.3
|
%
|
||
Delta Dental of California
|
|
10,313
|
|
|
188,143
|
|
|
1.9
|
%
|
|
1.4
|
%
|
||
AMN Healthcare, Inc.
|
|
9,001
|
|
|
176,075
|
|
|
1.7
|
%
|
|
1.3
|
%
|
||
Concur Technologies
|
|
8,852
|
|
|
243,429
|
|
|
1.7
|
%
|
|
1.8
|
%
|
||
Zenefits Insurance Service
|
|
7,314
|
|
|
96,305
|
|
|
1.4
|
%
|
|
0.7
|
%
|
||
Riot Games, Inc.
|
|
6,817
|
|
|
123,143
|
|
|
1.3
|
%
|
|
0.9
|
%
|
||
Adobe Systems, Inc.
|
|
6,596
|
|
|
204,757
|
|
|
1.2
|
%
|
|
1.5
|
%
|
||
Group Health Cooperative
|
|
6,372
|
|
|
183,422
|
|
|
1.2
|
%
|
|
1.3
|
%
|
||
Neurocrine Biosciences, Inc.
|
|
6,366
|
|
|
140,591
|
|
|
1.2
|
%
|
|
1.0
|
%
|
||
Total Top Fifteen Tenants
|
|
$
|
204,451
|
|
|
4,372,502
|
|
|
38.4
|
%
|
|
32.0
|
%
|
(1)
|
The information presented is as of
September 30, 2016
and excludes properties held for sale at
September 30, 2016
. See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
(2)
|
Includes 100% of annualized base rental revenues of consolidated property partnerships.
|
(3)
|
The Company has entered into leases with various affiliates of the tenant
.
|
•
|
Same Store Properties – which includes the consolidated 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,
2015
and still owned and included in the stabilized portfolio as of
September 30, 2016
;
|
•
|
Stabilized Development Properties – which includes the results generated by the following:
|
◦
|
Two office development projects that were completed and stabilized in March 2016;
|
◦
|
Two office development projects comprising four office buildings that were completed and stabilized in the fourth quarter of 2015;
|
•
|
Acquisition Property – which includes the results, from the dates of acquisition through the periods presented, for the one office building we acquired in June 2016; and
|
•
|
2016 Held for Sale, Dispositions and Other – which includes the results of the
six
properties disposed of in 2016, the
ten
properties disposed of in 2015,
one
property held for sale at
September 30, 2016
, two office projects in “lease-up” at
September 30, 2016
, the recently completed residential property, and expenses for certain of our in-process, near-term and future development projects.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
94
|
|
|
12,385,933
|
|
Stabilized Development Properties
|
|
6
|
|
|
1,105,489
|
|
Acquisition Property
|
|
1
|
|
114,175
|
|
|
Total Stabilized Office Portfolio
|
|
101
|
|
13,605,597
|
|
|
Three Months Ended September 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2016
|
|
2015
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income Available to Common Stockholders:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
122,888
|
|
|
$
|
101,920
|
|
|
$
|
20,968
|
|
|
20.6
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
(13,533
|
)
|
|
(10,799
|
)
|
|
(2,734
|
)
|
|
25.3
|
|
|||
Acquisition-related expenses
|
(188
|
)
|
|
(4
|
)
|
|
(184
|
)
|
|
4,600.0
|
|
|||
Depreciation and amortization
|
(56,666
|
)
|
|
(49,422
|
)
|
|
(7,244
|
)
|
|
14.7
|
|
|||
Interest income and other net investment gains (losses)
|
538
|
|
|
(694
|
)
|
|
1,232
|
|
|
(177.5
|
)
|
|||
Interest expense
|
(14,976
|
)
|
|
(12,819
|
)
|
|
(2,157
|
)
|
|
16.8
|
|
|||
Gains on sales of depreciable operating properties
|
18,312
|
|
|
78,522
|
|
|
(60,210
|
)
|
|
(76.7
|
)
|
|||
Net income
|
$
|
56,375
|
|
|
$
|
106,704
|
|
|
$
|
(50,329
|
)
|
|
(47.2
|
)%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
(1,453
|
)
|
|
(1,945
|
)
|
|
492
|
|
|
(25.3
|
)
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
(1,027
|
)
|
|
—
|
|
|
(1,027
|
)
|
|
100.0
|
|
|||
Net income attributable to Kilroy Realty Corporation
|
$
|
53,895
|
|
|
$
|
104,759
|
|
|
$
|
(50,864
|
)
|
|
(48.6
|
)%
|
Preferred dividends
|
(3,313
|
)
|
|
(3,313
|
)
|
|
—
|
|
|
—
|
|
|||
Net Income Available to Common Stockholders
|
$
|
50,582
|
|
|
$
|
101,446
|
|
|
$
|
(50,864
|
)
|
|
(50.1
|
)%
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Property
|
|
2016 Held for Sale, Disposi-tions & Other
|
|
Total
|
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Property
|
|
2016 Held for Sale, Disposi-tions & Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
126,590
|
|
|
$
|
16,987
|
|
|
$
|
1,340
|
|
|
$
|
1,622
|
|
|
$
|
146,539
|
|
|
$
|
122,436
|
|
|
$
|
1,016
|
|
|
$
|
—
|
|
|
$
|
6,058
|
|
|
$
|
129,510
|
|
Tenant reimbursements
|
13,005
|
|
|
3,104
|
|
|
263
|
|
|
34
|
|
|
16,406
|
|
|
10,157
|
|
|
227
|
|
|
—
|
|
|
1,297
|
|
|
11,681
|
|
||||||||||
Other property income
|
383
|
|
|
5
|
|
|
—
|
|
|
5,015
|
|
|
5,403
|
|
|
358
|
|
|
3
|
|
|
—
|
|
|
1
|
|
|
362
|
|
||||||||||
Total
|
139,978
|
|
|
20,096
|
|
|
1,603
|
|
|
6,671
|
|
|
168,348
|
|
|
132,951
|
|
|
1,246
|
|
|
—
|
|
|
7,356
|
|
|
141,553
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
25,504
|
|
|
1,813
|
|
|
106
|
|
|
2,627
|
|
|
30,050
|
|
|
25,884
|
|
|
143
|
|
|
—
|
|
|
657
|
|
|
26,684
|
|
||||||||||
Real estate taxes
|
11,900
|
|
|
1,601
|
|
|
163
|
|
|
837
|
|
|
14,501
|
|
|
10,978
|
|
|
198
|
|
|
—
|
|
|
911
|
|
|
12,087
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Ground leases
|
909
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
909
|
|
|
862
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
862
|
|
||||||||||
Total
|
38,313
|
|
|
3,414
|
|
|
269
|
|
|
3,464
|
|
|
45,460
|
|
|
37,724
|
|
|
341
|
|
|
—
|
|
|
1,568
|
|
|
39,633
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
101,665
|
|
|
$
|
16,682
|
|
|
$
|
1,334
|
|
|
$
|
3,207
|
|
|
$
|
122,888
|
|
|
$
|
95,227
|
|
|
$
|
905
|
|
|
$
|
—
|
|
|
$
|
5,788
|
|
|
$
|
101,920
|
|
|
Three Months Ended September 30, 2016 as compared to the Three Months Ended September 30, 2015
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized Development
|
|
Acquisition Property
|
|
2016 Held for Sale, Dispositions & 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
|
$
|
4,154
|
|
|
3.4
|
%
|
|
$
|
15,971
|
|
|
1,571.9
|
%
|
|
$
|
1,340
|
|
|
100.0
|
%
|
|
$
|
(4,436
|
)
|
|
(73.2
|
)%
|
|
$
|
17,029
|
|
|
13.1
|
%
|
Tenant reimbursements
|
2,848
|
|
|
28.0
|
|
|
2,877
|
|
|
1,267.4
|
|
|
263
|
|
|
100.0
|
|
|
(1,263
|
)
|
|
(97.4
|
)
|
|
4,725
|
|
|
40.5
|
|
|||||
Other property income
|
25
|
|
|
7.0
|
|
|
2
|
|
|
66.7
|
|
|
—
|
|
|
—
|
|
|
5,014
|
|
|
NM*
|
|
|
5,041
|
|
|
1,392.5
|
|
|||||
Total
|
7,027
|
|
|
5.3
|
|
|
18,850
|
|
|
1,512.8
|
|
|
1,603
|
|
|
100.0
|
|
|
(685
|
)
|
|
(9.3
|
)
|
|
26,795
|
|
|
18.9
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
(380
|
)
|
|
(1.5
|
)
|
|
1,670
|
|
|
1,167.8
|
|
|
106
|
|
|
100.0
|
|
|
1,970
|
|
|
299.8
|
|
|
3,366
|
|
|
12.6
|
|
|||||
Real estate taxes
|
922
|
|
|
8.4
|
|
|
1,403
|
|
|
708.6
|
|
|
163
|
|
|
100.0
|
|
|
(74
|
)
|
|
(8.1
|
)
|
|
2,414
|
|
|
20.0
|
|
|||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Ground leases
|
47
|
|
|
5.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
5.5
|
|
|||||
Total
|
589
|
|
|
1.6
|
|
|
3,073
|
|
|
901.2
|
|
|
269
|
|
|
100.0
|
|
|
1,896
|
|
|
120.9
|
|
|
5,827
|
|
|
14.7
|
|
|||||
Net Operating Income,
as defined
|
$
|
6,438
|
|
|
6.8
|
%
|
|
$
|
15,777
|
|
|
1,743.3
|
%
|
|
$
|
1,334
|
|
|
100.0
|
%
|
|
$
|
(2,581
|
)
|
|
(44.6
|
)%
|
|
$
|
20,968
|
|
|
20.6
|
%
|
•
|
An increase in Net Operating Income of
$6.4 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in rental income of
$4.2 million
primarily due to new leases and renewals at higher rates primarily in the San Francisco Bay Area and Los Angeles regions;
|
•
|
An increase in tenant reimbursements of
$2.8 million
primarily due to an increase in occupancy and expenses at certain properties in the San Francisco Bay Area, Greater Seattle and Los Angeles regions as well as lower revenues in 2015 due to base year resets and adjustments, abatements, and property tax refunds;
|
•
|
A partially offsetting increase in property and related expenses of
$0.6 million
primarily due to property tax refunds received for two properties in 2015 offset by lower electricity and repairs and maintenance expenses in 2016;
|
•
|
An increase in Net Operating Income of
$15.8 million
attributable to the Stabilized Development Properties;
|
•
|
An increase in Net Operating Income of
$1.3 million
attributable to the Acquisition Property; and
|
•
|
A decrease in Net Operating Income of
$2.6 million
attributable to the 2016 Held for Sale, Disposition and Other Properties mainly due to the following:
|
•
|
$6.0 million decrease from the sale of
six
buildings during the nine months ended
September 30, 2016
and the one held for sale property as of
September 30, 2016
; and
|
•
|
$2.0 million decrease attributable to the residential property that was completed during June 2016 and is in the very early stages of operations; partially offset by
|
•
|
$5.0 million
of cash proceeds received relating to a property damage settlement.
|
•
|
An increase of $4.6 million attributable to the Stabilized Development Properties; and
|
•
|
An increase of $2.8 million attributable to the Same Store Properties.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
26,184
|
|
|
$
|
27,386
|
|
|
$
|
(1,202
|
)
|
|
(4.4
|
)%
|
Capitalized interest and deferred financing costs
|
(11,208
|
)
|
|
(14,567
|
)
|
|
3,359
|
|
|
(23.1
|
)%
|
|||
Interest expense
|
$
|
14,976
|
|
|
$
|
12,819
|
|
|
$
|
2,157
|
|
|
16.8
|
%
|
|
Nine Months Ended September 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2016
|
|
2015
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income Available to Common Stockholders:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
346,807
|
|
|
$
|
315,626
|
|
|
$
|
31,181
|
|
|
9.9
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
(40,949
|
)
|
|
(36,200
|
)
|
|
(4,749
|
)
|
|
13.1
|
|
|||
Acquisition-related expenses
|
(964
|
)
|
|
(397
|
)
|
|
(567
|
)
|
|
142.8
|
|
|||
Depreciation and amortization
|
(160,452
|
)
|
|
(152,567
|
)
|
|
(7,885
|
)
|
|
5.2
|
|
|||
Interest income and other net investment gains
|
1,120
|
|
|
177
|
|
|
943
|
|
|
532.8
|
|
|||
Interest expense
|
(41,189
|
)
|
|
(44,561
|
)
|
|
3,372
|
|
|
(7.6
|
)
|
|||
Net (loss) gain on sales of land
|
(295
|
)
|
|
17,268
|
|
|
(17,563
|
)
|
|
(101.7
|
)
|
|||
Gains on sales of depreciable operating properties
|
164,302
|
|
|
109,950
|
|
|
54,352
|
|
|
49.4
|
|
|||
Net income
|
$
|
268,380
|
|
|
$
|
209,296
|
|
|
$
|
59,084
|
|
|
28.2
|
%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
(5,892
|
)
|
|
(3,850
|
)
|
|
(2,042
|
)
|
|
53.0
|
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
(1,438
|
)
|
|
—
|
|
|
(1,438
|
)
|
|
100.0
|
|
|||
Net income attributable to Kilroy Realty Corporation
|
$
|
261,050
|
|
|
$
|
205,446
|
|
|
$
|
55,604
|
|
|
27.1
|
%
|
Preferred dividends
|
(9,938
|
)
|
|
(9,938
|
)
|
|
—
|
|
|
—
|
|
|||
Net Income Available to Common Stockholders
|
$
|
251,112
|
|
|
$
|
195,508
|
|
|
$
|
55,604
|
|
|
28.4
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisition Property
|
|
2016 Held for Sale, Dispositi-ons & Other
|
|
Total
|
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisition Property
|
|
2016 Held for Sale, Dispositi-ons & Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
376,103
|
|
|
$
|
42,488
|
|
|
$
|
1,711
|
|
|
$
|
3,645
|
|
|
$
|
423,947
|
|
|
$
|
364,813
|
|
|
$
|
1,017
|
|
|
$
|
—
|
|
|
$
|
26,062
|
|
|
$
|
391,892
|
|
Tenant reimbursements
|
35,789
|
|
|
7,422
|
|
|
317
|
|
|
420
|
|
|
43,948
|
|
|
35,444
|
|
|
227
|
|
|
—
|
|
|
4,609
|
|
|
40,280
|
|
||||||||||
Other property income
|
988
|
|
|
14
|
|
|
—
|
|
|
5,030
|
|
|
6,032
|
|
|
1,684
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
1,690
|
|
||||||||||
Total
|
412,880
|
|
|
49,924
|
|
|
2,028
|
|
|
9,095
|
|
|
473,927
|
|
|
401,941
|
|
|
1,247
|
|
|
—
|
|
|
30,674
|
|
|
433,862
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
74,816
|
|
|
4,953
|
|
|
117
|
|
|
5,350
|
|
|
85,236
|
|
|
74,507
|
|
|
245
|
|
|
—
|
|
|
3,512
|
|
|
78,264
|
|
||||||||||
Real estate taxes
|
32,974
|
|
|
4,508
|
|
|
181
|
|
|
1,715
|
|
|
39,378
|
|
|
33,605
|
|
|
198
|
|
|
—
|
|
|
3,429
|
|
|
37,232
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
342
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
289
|
|
||||||||||
Ground leases
|
2,506
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,506
|
|
|
2,451
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
||||||||||
Total
|
110,296
|
|
|
9,461
|
|
|
298
|
|
|
7,065
|
|
|
127,120
|
|
|
110,905
|
|
|
443
|
|
|
—
|
|
|
6,888
|
|
|
118,236
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
302,584
|
|
|
$
|
40,463
|
|
|
$
|
1,730
|
|
|
$
|
2,030
|
|
|
$
|
346,807
|
|
|
$
|
291,036
|
|
|
$
|
804
|
|
|
$
|
—
|
|
|
$
|
23,786
|
|
|
$
|
315,626
|
|
|
Nine Months Ended September 30, 2016 as compared to the Nine Months Ended September 30, 2015
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized Development
|
|
Acquisition Property
|
|
2016 Held for Sale, Dispositions & 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
|
$
|
11,290
|
|
|
3.1
|
%
|
|
$
|
41,471
|
|
|
4,077.8
|
%
|
|
$
|
1,711
|
|
|
100.0
|
%
|
|
$
|
(22,417
|
)
|
|
(86.0
|
)%
|
|
$
|
32,055
|
|
|
8.2
|
%
|
Tenant reimbursements
|
345
|
|
|
1.0
|
|
|
7,195
|
|
|
3,169.6
|
|
|
317
|
|
|
100.0
|
|
|
(4,189
|
)
|
|
(90.9
|
)
|
|
3,668
|
|
|
9.1
|
|
|||||
Other property income
|
(696
|
)
|
|
(41.3
|
)
|
|
11
|
|
|
366.7
|
|
|
—
|
|
|
—
|
|
|
5,027
|
|
|
NM*
|
|
|
4,342
|
|
|
256.9
|
|
|||||
Total
|
10,939
|
|
|
2.7
|
|
|
48,677
|
|
|
3,903.5
|
|
|
2,028
|
|
|
100.0
|
|
|
(21,579
|
)
|
|
(70.3
|
)
|
|
40,065
|
|
|
9.2
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
309
|
|
|
0.4
|
|
|
4,708
|
|
|
1,921.6
|
%
|
|
117
|
|
|
100.0
|
|
|
1,838
|
|
|
52.3
|
|
|
6,972
|
|
|
8.9
|
|
|||||
Real estate taxes
|
(631
|
)
|
|
(1.9
|
)
|
|
4,310
|
|
|
2,176.8
|
|
|
181
|
|
|
100.0
|
|
|
(1,714
|
)
|
|
(50.0
|
)
|
|
2,146
|
|
|
5.8
|
|
|||||
Provision for bad debts
|
(342
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
(100.0
|
)
|
|
(289
|
)
|
|
(100.0
|
)
|
|||||
Ground leases
|
55
|
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
2.2
|
|
|||||
Total
|
(609
|
)
|
|
(0.5
|
)
|
|
9,018
|
|
|
2,035.7
|
|
|
298
|
|
|
100.0
|
|
|
177
|
|
|
2.6
|
|
|
8,884
|
|
|
7.5
|
|
|||||
Net Operating Income,
as defined
|
$
|
11,548
|
|
|
4.0
|
%
|
|
$
|
39,659
|
|
|
4,932.7
|
%
|
|
$
|
1,730
|
|
|
100.0
|
%
|
|
$
|
(21,756
|
)
|
|
(91.5
|
)%
|
|
$
|
31,181
|
|
|
9.9
|
%
|
•
|
An increase of
$11.5 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in rental income of
$11.3 million
primarily due to the following:
|
•
|
$10.2 million increase due to new leases and renewals at higher rates primarily in the San Francisco Bay Area, Greater Seattle and Los Angeles regions;
|
•
|
$0.5 million increase due to amortization of tenant-funded tenant improvements; and
|
•
|
$0.6 million increase in parking income resulting from increased rates, increased tenant usage, and the expiration of parking abatements at certain of our buildings;
|
•
|
A decrease in other property income of
$0.7 million
primarily due to lease termination fees recognized in 2015;
|
•
|
A decrease in property and related expenses of
$0.6 million
primarily due to the following:
|
•
|
A decrease of
$0.6 million
in real estate taxes primarily due to a $1.9 million reduction in supplemental taxes at two of our properties we developed and stabilized in 2014, partially offset by lower refunds of $1.0 million in 2016 and a $0.3 million increase in annual property taxes at other properties; and
|
•
|
A decrease of
$0.3 million
due to bad debt expense recorded in 2015 related to a specific tenant; partially offset by
|
•
|
An increase of
$0.3 million
in property expenses primarily resulting from an increase in certain recurring operating costs related to security, janitorial, engineers, contract services, and various other reimbursable expenses as a result of higher rates from third-party vendors;
|
•
|
An increase of
$39.7 million
attributable to the Stabilized Development Properties;
|
•
|
An increase of
$1.7 million
attributable to the Acquisition Property; and
|
•
|
A decrease of
$21.8 million
attributable to the 2016 Held for Sale, Dispositions & Other Properties primarily due to the following:
|
•
|
A decrease of $23.7 million from the sale of
six
buildings during the nine months ended
September 30, 2016
and the one held for sale property as of
September 30, 2016
; and
|
•
|
A decrease of $3.1 million attributable to the residential property that was completed during June 2016 and is in the very early stages of operations; partially offset by
|
•
|
$5.0 million
of cash proceeds received relating to a property damage settlement.
|
•
|
An increase of $12.1 million attributable to the Stabilized Development Properties; and
|
•
|
An increase of $1.3 million attributable to the Same Store Properties; partially offset by
|
•
|
A decrease of $6.4 million attributable to the 2016 Held for Sale, Dispositions and Other Properties.
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
79,027
|
|
|
$
|
82,322
|
|
|
$
|
(3,295
|
)
|
|
(4.0
|
)%
|
Capitalized interest and deferred financing costs
|
(37,838
|
)
|
|
(37,761
|
)
|
|
(77
|
)
|
|
0.2
|
%
|
|||
Interest expense
|
$
|
41,189
|
|
|
$
|
44,561
|
|
|
$
|
(3,372
|
)
|
|
(7.6
|
)%
|
|
Shares/Units at
September 30, 2016
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
||||
|
($ in thousands)
|
||||||||
Debt:
(1) (2) (3)
|
|
|
|
|
|
||||
Unsecured Term Loan Facility
|
|
|
150,000
|
|
|
1.7
|
%
|
||
Unsecured Term Loan
|
|
|
39,000
|
|
|
0.5
|
%
|
||
Unsecured Senior Notes due 2018
|
|
|
325,000
|
|
|
3.6
|
%
|
||
Unsecured Senior Notes due 2020
|
|
|
250,000
|
|
|
2.8
|
%
|
||
Unsecured Senior Notes due 2023
|
|
|
300,000
|
|
|
3.3
|
%
|
||
Unsecured Senior Notes due 2025
|
|
|
400,000
|
|
|
4.4
|
%
|
||
Unsecured Senior Notes due 2029
|
|
|
400,000
|
|
|
4.4
|
%
|
||
Secured debt
(3)
|
|
|
366,652
|
|
|
4.1
|
%
|
||
Total debt
|
|
|
$
|
2,230,652
|
|
|
24.8
|
%
|
|
Equity and Noncontrolling Interest in the Operating Partnership:
(4)
|
|
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock
(5)
|
4,000,000
|
|
|
$
|
100,000
|
|
|
1.1
|
%
|
6.375% Series H Cumulative Redeemable Preferred stock
(5)
|
4,000,000
|
|
|
100,000
|
|
|
1.1
|
%
|
|
Common limited partnership units outstanding
(6)
|
2,631,276
|
|
|
182,479
|
|
|
2.0
|
%
|
|
Common shares outstanding
(6)
|
92,272,492
|
|
|
6,399,097
|
|
|
71.0
|
%
|
|
Total equity and noncontrolling interest in the Operating Partnership
|
|
|
$
|
6,781,576
|
|
|
75.2
|
%
|
|
Total Market Capitalization
|
|
|
$
|
9,012,228
|
|
|
100.0
|
%
|
(1)
|
In September, the Company completed a private placement of
$175.0 million
of ten-year,
3.35%
unsecured senior notes and
$75.0 million
of twelve-year,
3.45%
unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of
September 30, 2016
.
|
(2)
|
There was no outstanding balance on the unsecured line of credit as of
September 30, 2016
.
|
(3)
|
Represents gross aggregate principal amount due at maturity before the effect of the following at
September 30, 2016
:
$11.4 million
of unamortized deferred financing costs,
$6.8 million
of unamortized discounts for the unsecured senior notes and
$4.9 million
of unamortized premiums for the secured debt.
|
(4)
|
Includes common units of the Operating Partnership; does not include noncontrolling interests in consolidated property partnerships.
|
(5)
|
Value based on $25.00 per share liquidation preference.
|
(6)
|
Value based on closing price per share of our common stock of
$69.35
as of
September 30, 2016
.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Operating Partnership’s unsecured revolving credit facility, term loan facility, and unsecured senior notes;
|
•
|
Proceeds from the disposition of assets through our capital recycling program or the formation of strategic ventures;
|
•
|
Proceeds from additional secured or unsecured debt financings; and
|
•
|
Proceeds from public or private issuance of debt or equity securities.
|
•
|
Development and redevelopment costs;
|
•
|
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;
|
•
|
Repurchases of outstanding common stock of the Company; and
|
•
|
Outstanding debt repurchases and repayments.
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
600,000
|
|
|
600,000
|
|
||
Total borrowing capacity
(1)
|
$
|
600,000
|
|
|
$
|
600,000
|
|
Interest rate
(2)
|
1.58
|
%
|
|
1.48
|
%
|
||
Facility fee-annual rate
(3)
|
0.200%
|
||||||
Maturity date
|
July 2019
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$311.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
|
(2)
|
The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus
1.050%
.
|
(3)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of
September 30, 2016
and
December 31, 2015
,
$3.6 million
and
$4.6 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.
|
|
Aggregate Principal
Amount Outstanding
(1)(2)
|
||
|
(in thousands)
|
||
Unsecured Term Loan Facility
|
$
|
150,000
|
|
Unsecured Term Loan
|
39,000
|
|
|
Unsecured Senior Notes due 2018
|
325,000
|
|
|
Unsecured Senior Notes due 2020
|
250,000
|
|
|
Unsecured Senior Notes due 2023
|
300,000
|
|
|
Unsecured Senior Notes due 2025
|
400,000
|
|
|
Unsecured Senior Notes due 2029
|
400,000
|
|
|
Secured Debt
|
366,652
|
|
|
Total Unsecured and Secured Debt
|
$
|
2,230,652
|
|
Less: Unamortized Net Discounts and Deferred Financing Costs
|
(13,314
|
)
|
|
Total Debt, Net
|
$
|
2,217,338
|
|
(1)
|
In September, the Company completed a private placement of
$175.0 million
of ten-year,
3.35%
unsecured senior notes and
$75.0 million
of twelve-year,
3.45%
unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of
September 30, 2016
.
|
(2)
|
There was no outstanding balance on the unsecured line of credit as of
September 30, 2016
.
|
|
Percentage of Total Debt
(1)
|
|
Weighted Average Interest Rate
(1)
|
||||||||
|
September 30, 2016
|
|
December 31, 2015
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Secured vs. unsecured
(2)
:
|
|
|
|
|
|
|
|
||||
Unsecured
|
83.6
|
%
|
|
83.2
|
%
|
|
4.4
|
%
|
|
4.3
|
%
|
Secured
|
16.4
|
%
|
|
16.8
|
%
|
|
5.1
|
%
|
|
5.1
|
%
|
Variable-rate vs. fixed-rate
(2)
:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
8.5
|
%
|
|
8.4
|
%
|
|
1.7
|
%
|
|
1.4
|
%
|
Fixed-rate
|
91.5
|
%
|
|
91.6
|
%
|
|
4.7
|
%
|
|
4.7
|
%
|
Stated rate
(2)
|
|
|
|
|
4.5
|
%
|
|
4.5
|
%
|
||
GAAP effective rate
(3)
|
|
|
|
|
4.4
|
%
|
|
4.4
|
%
|
||
GAAP effective rate including deferred financing costs
|
|
|
|
|
4.7
|
%
|
|
4.6
|
%
|
(1)
|
In September, the Company completed a private placement of
$175.0 million
of ten-year,
3.35%
unsecured senior notes and
$75.0 million
of twelve-year,
3.45%
unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of
September 30, 2016
. The table above also does not reflect any amounts pertaining to the unsecured line of credit as there were no amounts outstanding as of
September 30, 2016
.
|
(2)
|
Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs.
|
(3)
|
Includes the impact of the amortization of any debt discounts/premiums, excluding deferred financing costs.
|
|
Payment Due by Period
|
|
|
||||||||||||||||
|
Less than
1 Year (Remainder of 2016) |
|
2-3 Years
(2017-2018) |
|
4-5 Years
(2019-2020) |
|
More than
5 years (After 2020) |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal payments: secured debt
(1)
|
$
|
2,480
|
|
|
$
|
198,361
|
|
|
$
|
78,222
|
|
|
$
|
87,589
|
|
|
$
|
366,652
|
|
Principal payments: unsecured debt
(2)
|
—
|
|
|
325,000
|
|
|
439,000
|
|
|
1,350,000
|
|
|
2,114,000
|
|
|||||
Interest payments: fixed-rate debt
(3)
|
23,682
|
|
|
182,446
|
|
|
142,042
|
|
|
336,543
|
|
|
684,713
|
|
|||||
Interest payments: variable-rate debt
(4)
|
796
|
|
|
6,313
|
|
|
1,565
|
|
|
—
|
|
|
8,674
|
|
|||||
Ground lease obligations
(5)
|
786
|
|
|
6,288
|
|
|
6,288
|
|
|
151,738
|
|
|
165,100
|
|
|||||
Lease and contractual commitments
(6)
|
77,399
|
|
|
7,015
|
|
|
—
|
|
|
—
|
|
|
84,414
|
|
|||||
Development commitments
(7)
|
111,000
|
|
|
184,000
|
|
|
—
|
|
|
—
|
|
|
295,000
|
|
|||||
Total
|
$
|
216,143
|
|
|
$
|
909,423
|
|
|
$
|
667,117
|
|
|
$
|
1,925,870
|
|
|
$
|
3,718,553
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized premium and deferred financing costs of approximately
$4.9 million
and
$0.8 million
, respectively, as of
September 30, 2016
.
|
(2)
|
Represents gross aggregate principal amount before the effect of the unamortized discount and deferred financing costs of approximately
$6.8 million
and
$10.5 million
, respectively, as of
September 30, 2016
. Includes
$175.0 million
of Series A Notes and
$75.0 million
of Series B Notes issuable pursuant to the Note Purchase Agreement for which no Series A or B Notes were issued and outstanding as of
September 30, 2016
but the Company is committed to issuing by February 17, 2017.
|
(3)
|
As of
September 30, 2016
,
91.5%
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 on an accrual basis and scheduled maturity dates. Amounts include interest rate obligations for the Series A and B Notes issuable pursuant to the Note Purchase Agreement for which no Series A or B Notes were issued and outstanding as of
September 30, 2016
but the Company is committed to issuing by February 17, 2017.
|
(4)
|
As of
September 30, 2016
,
8.5%
of our debt bore interest at variable rates that was incurred under the unsecured term loan facility and unsecured term loan. The variable interest rate payments are based on LIBOR plus a spread of
1.150%
as of
September 30, 2016
. The information in the table above reflects our projected interest rate obligations for these variable-rate payments based on outstanding principal balances as of
September 30, 2016
, the scheduled interest payment dates and the contractual maturity dates.
|
(5)
|
Reflects minimum lease payments through the contractual lease expiration date before the impact of extension options.
|
(6)
|
Amounts represent commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements and for other contractual commitments. The timing of these expenditures may fluctuate.
|
(7)
|
Amounts represent commitments under signed leases for pre-leased development projects, contractual commitments for projects under construction, in “lease-up” as of
September 30, 2016
, and also includes $58.0 million for two recently completed office projects and the recently completed residential project.
The timing of these expenditures may fluctuate based on the ultimate progress of construction. We may start additional construction during the remainder of
2016
and
2017
(see “—Development Activities” for additional information).
|
•
|
Decreases in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;
|
•
|
An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
|
•
|
A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.
|
Unsecured Credit Facility, Unsecured Term Loan Facility and Unsecured Term Loan
(as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance
as of September 30, 2016
|
Total debt to total asset value
|
|
less than 60%
|
|
25%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
3.0x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
3.46x
|
Unencumbered asset pool debt service coverage
|
|
greater than 1.75x
|
|
3.88x
|
|
|
|
|
|
Unsecured Senior Notes due 2018, 2020, 2023, 2025 and 2029
(as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
32%
|
Interest coverage
|
|
greater than 1.5x
|
|
7.7x
|
Secured debt to total asset value
|
|
less than 40%
|
|
5%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
331%
|
|
Nine Months Ended September 30,
|
|||||||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net cash provided by operating activities
|
$
|
252,605
|
|
|
$
|
202,612
|
|
|
$
|
49,993
|
|
|
24.7
|
%
|
Net cash used in investing activities
|
(124,207
|
)
|
|
(136,666
|
)
|
|
12,459
|
|
|
(9.1
|
)%
|
|||
Net cash provided by financing activities
|
65,617
|
|
|
478,213
|
|
|
(412,596
|
)
|
|
(86.3
|
)%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income available to common stockholders
|
$
|
50,582
|
|
|
$
|
101,446
|
|
|
$
|
251,112
|
|
|
$
|
195,508
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to noncontrolling common units of Operating Partnership
|
1,453
|
|
|
1,945
|
|
|
5,892
|
|
|
3,850
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
1,027
|
|
|
—
|
|
|
1,438
|
|
|
—
|
|
||||
Depreciation and amortization of real estate assets
|
55,460
|
|
|
48,719
|
|
|
157,587
|
|
|
150,531
|
|
||||
Gains on sales of depreciable real estate
|
(18,312
|
)
|
|
(78,522
|
)
|
|
(164,302
|
)
|
|
(109,950
|
)
|
||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
|
(1,675
|
)
|
|
—
|
|
|
(2,277
|
)
|
|
—
|
|
||||
Funds From Operations
(1)(2)
|
$
|
88,535
|
|
|
$
|
73,588
|
|
|
$
|
249,450
|
|
|
$
|
239,939
|
|
(1)
|
Reported amounts are attributable to common stockholders and common unitholders.
|
(2)
|
FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of
$3.5 million
and
$3.7 million
for the
three
months ended
September 30, 2016
and
2015
, respectively, and
$9.6 million
and
$10.0 million
for the
nine
months ended
September 30, 2016
and
2015
, respectively.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number of Shares of Stock Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs
|
|
|||||
July 1, 2016 - July 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
August 1, 2016 - August 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
September 1, 2016 - September 30, 2016
|
|
793
|
|
(1)
|
$
|
68.60
|
|
(1)
|
—
|
|
|
—
|
|
|
Total
|
|
793
|
|
|
$
|
68.60
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.
|
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
|
|
Fourth 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 February 23, 2016)
|
|
|
|
3.(ii)2
|
|
Seventh Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P. dated as of August 15, 2012, as amended (previously filed by Kilroy Realty Corporation on Form 10-Q for the quarter ended June 30, 2014)
|
|
|
|
10.1*
|
|
Form of Time Sharing Agreement of Kilroy Realty, L.P.
|
|
|
|
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 September 30, 2016, 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
|
†
|
Management contract or compensatory plan or arrangement.
|
(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 Kilroy
|
|
|
John Kilroy
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
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
KILROY REALTY, L.P.
|
||
|
|
|
BY:
|
KILROY REALTY CORPORATION
|
|
|
Its general partner
|
|
|
|
|
|
By:
|
/s/ John Kilroy
|
|
|
John Kilroy
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
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
(1)
|
Fuel, oil, lubricants, and other additives;
|
(2)
|
Travel expenses of the crew, including food, lodging, and ground transportation;
|
(3)
|
Hangar and tie-down costs away from the Aircraft’s base of operations;
|
(4)
|
Insurance obtained for the specific flight;
|
(5)
|
Landing fees, airport taxes, and similar assessments (including, without limitation and to the extent permitted by law, reimbursement of the taxes referred to in
Section 1.6
);
|
(6)
|
Customs, foreign permit, and similar fees directly related to the flight;
|
(7)
|
In flight food and beverages:
|
(8)
|
Passenger ground transportation;
|
(9)
|
Flight planning and weather contract services; and
|
(10)
|
An additional charge equal to one hundred percent (100
%
) of the expenses listed in paragraph (1) of this
Section 1.4
.
|
•
|
The basic principle shall be that Variable Costs shall be calculated for all flight legs of such trip and shall be compared to the hypothetical Variable Costs that would have been incurred had the trip itinerary been conducted solely as a business purpose flight. The excess, if any, of such Variable Costs shall be the amount of Rent imposed upon Lessee for such trip consisting of mixed purpose flight segments
;
provided
,
however
, that in no case shall the Rent for a flight exceed the FAA Maximum. Any personal use attributable to a specific flight leg of a trip comprising multi-leg flights shall render that specific flight leg, in its entirety, a personal use flight leg of the trip.
|
•
|
For purposes of clarity, assume that Lessee is traveling on the Aircraft from San Francisco to New York for business reasons and is scheduled to return from New York to San Francisco as part of the same business trip. If, instead of returning to San Francisco from New York, Lessee adds a new leg to the flight from New York to Miami for personal reasons and then travels back to San Francisco from Miami, Lessee shall pay Rent on the New York-to-Miami and the Miami to-San Francisco legs of the trip, but the amount of such Rent shall not exceed the positive difference (if any) between the Variable Costs of such flight legs less hypothetical Variable Costs that would have been incurred had the return trip been completed via a nonstop flight from New York-to-San Francisco as a business purpose flight. Accordingly, in such example, if the Variable Costs of the New York-to-San Francisco return flight segment for business purposes would have been $10,000 and the Variable Costs with respect to the New York-toMiami and the Miami-to-San Francisco flight legs totaled $15,000, the Rent for the two personal legs of the flight would be $5,000 (but subject to the FAA Maximum limitation).
|
•
|
As another example, assume that a flight is necessary from San Francisco to New York for business reasons and would otherwise be scheduled to return from New York to San Francisco as part of the same business trip. If, for personal reasons, Lessee makes a stop in Chicago on the way to New York from San Francisco and, on the return flight, stops in Denver for personal reasons, Lessee shall pay Rent on the entire trip (all four flight legs), but the amount of such Rent shall be equal to the positive difference (if any) between the Variable Costs of all four flight legs of such trip less the hypothetical Variable Costs that would have been incurred had the two business-intended flight legs of the trip (San Francisco-to-New York and New York-to-San Francisco) been completed for business purposes (subject in all events to the FAA Maximum limitation).
|
|
|
LESSEE:
|
||
|
|
|
||
Date: __________ ___, 20__
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Kilroy
|
John Kilroy
|
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 Kilroy
|
John Kilroy
|
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
September 30, 2016
(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 Kilroy
|
|
John Kilroy
|
|
President and Chief Executive Officer
|
|
|
|
Date:
|
October 28, 2016
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2016
(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:
|
October 28, 2016
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
September 30, 2016
(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 Kilroy
|
|
John Kilroy
|
|
President and Chief Executive Officer
|
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
|
|
|
Date:
|
October 28, 2016
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
September 30, 2016
(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:
|
October 28, 2016
|