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)
|
•
|
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 6, Stockholders’ Equity of the Company;
|
◦
|
Note 8, Partners’ Capital of the Operating Partnership;
|
◦
|
Note 12, Net Income Available to Common Stockholders Per Share of the Company;
|
◦
|
Note 13, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
|
◦
|
Note 14, Supplemental Cash Flow Information of the Company; and
|
◦
|
Note 15, 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.”
|
|
|
|
Page
|
|
|
PART I – FINANCIAL INFORMATION
|
|
Item 1.
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
Item 1.
|
|
||
|
|
||
|
|
||
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||
|
|
||
|
|
||
Item 2.
|
|
||
Item 3.
|
|
||
Item 4.
|
|
||
|
|
PART II – OTHER INFORMATION
|
|
Item 1.
|
|
||
Item 1A.
|
|
||
Item 2.
|
|
||
Item 3.
|
|
||
Item 4.
|
|
||
Item 5.
|
|
||
Item 6.
|
|
||
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
REVENUES
|
|
|
|
||||
Rental income
|
$
|
162,871
|
|
|
$
|
156,648
|
|
Tenant reimbursements
|
19,150
|
|
|
19,296
|
|
||
Other property income
|
801
|
|
|
3,364
|
|
||
Total revenues
|
182,822
|
|
|
179,308
|
|
||
EXPENSES
|
|
|
|
||||
Property expenses
|
31,671
|
|
|
31,241
|
|
||
Real estate taxes
|
17,146
|
|
|
17,964
|
|
||
Provision for bad debts
|
(265
|
)
|
|
1,298
|
|
||
Ground leases
|
1,561
|
|
|
1,642
|
|
||
General and administrative expenses
|
15,559
|
|
|
14,933
|
|
||
Depreciation and amortization
|
62,715
|
|
|
60,919
|
|
||
Total expenses
|
128,387
|
|
|
127,997
|
|
||
OTHER (EXPENSES) INCOME
|
|
|
|
||||
Interest income and other net investment gain/loss (Note 11)
|
34
|
|
|
1,065
|
|
||
Interest expense (Note 5)
|
(13,498
|
)
|
|
(17,352
|
)
|
||
Total other (expenses) income
|
(13,464
|
)
|
|
(16,287
|
)
|
||
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE
|
40,971
|
|
|
35,024
|
|
||
Gains on sales of depreciable operating properties
|
—
|
|
|
2,257
|
|
||
NET INCOME
|
40,971
|
|
|
37,281
|
|
||
Net income attributable to noncontrolling common units of the Operating Partnership
|
(751
|
)
|
|
(623
|
)
|
||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
(3,974
|
)
|
|
(3,133
|
)
|
||
Total income attributable to noncontrolling interests
|
(4,725
|
)
|
|
(3,756
|
)
|
||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
36,246
|
|
|
33,525
|
|
||
Preferred dividends
|
—
|
|
|
(3,351
|
)
|
||
Original issuance costs of redeemed preferred stock and preferred units
|
—
|
|
|
(3,845
|
)
|
||
Total preferred dividends
|
—
|
|
|
(7,196
|
)
|
||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
36,246
|
|
|
$
|
26,329
|
|
Net income available to common stockholders per share – basic (Note 12)
|
$
|
0.36
|
|
|
$
|
0.27
|
|
Net income available to common stockholders per share – diluted (Note 12)
|
$
|
0.36
|
|
|
$
|
0.26
|
|
Weighted average common shares outstanding – basic (Note 12)
|
98,744,220
|
|
|
97,388,137
|
|
||
Weighted average common shares outstanding – diluted (Note 12)
|
99,213,610
|
|
|
98,018,157
|
|
||
Dividends declared per common share
|
$
|
0.425
|
|
|
$
|
0.375
|
|
|
|
|
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, 2016
|
$
|
192,411
|
|
|
93,219,439
|
|
|
$
|
932
|
|
|
3,457,649
|
|
|
$
|
(107,997
|
)
|
|
$
|
3,542,995
|
|
|
$
|
216,322
|
|
|
$
|
3,759,317
|
|
|
Net income
|
|
|
|
|
|
|
|
|
33,525
|
|
|
33,525
|
|
|
3,756
|
|
|
37,281
|
|
|||||||||||
Redemption of Series G Preferred stock
|
(96,155
|
)
|
|
|
|
|
|
|
|
(3,845
|
)
|
|
(100,000
|
)
|
|
|
|
(100,000
|
)
|
|||||||||||
Issuance of common stock
|
|
|
4,427,500
|
|
|
44
|
|
|
308,805
|
|
|
|
|
308,849
|
|
|
|
|
308,849
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
|
|
4,164
|
|
|
|
|
4,164
|
|
|
|
|
4,164
|
|
||||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
|
|
6,169
|
|
|
|
|
6,169
|
|
|
|
|
6,169
|
|
||||||||||||
Exercise of stock options
|
|
|
200,000
|
|
|
2
|
|
|
8,520
|
|
|
|
|
8,522
|
|
|
|
|
8,522
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
257,824
|
|
|
3
|
|
|
(3
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(134,065
|
)
|
|
(1
|
)
|
|
(11,013
|
)
|
|
|
|
(11,014
|
)
|
|
|
|
(11,014
|
)
|
||||||||||
Exchange of common units of the Operating Partnership
|
|
|
304,350
|
|
|
3
|
|
|
10,936
|
|
|
|
|
10,939
|
|
|
(10,939
|
)
|
|
—
|
|
|||||||||
Contributions from noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
250
|
|
|
250
|
|
||||||||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(4,728
|
)
|
|
(4,728
|
)
|
||||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(2,936
|
)
|
|
|
|
(2,936
|
)
|
|
2,936
|
|
|
—
|
|
|||||||||||
Preferred dividends
|
|
|
|
|
|
|
|
|
(3,351
|
)
|
|
(3,351
|
)
|
|
|
|
(3,351
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.375 per share/unit)
|
|
|
|
|
|
|
|
|
(38,539
|
)
|
|
(38,539
|
)
|
|
(779
|
)
|
|
(39,318
|
)
|
|||||||||||
BALANCE AS OF MARCH 31, 2017
|
$
|
96,256
|
|
|
98,275,048
|
|
|
$
|
983
|
|
|
$
|
3,782,291
|
|
|
$
|
(120,207
|
)
|
|
$
|
3,759,323
|
|
|
$
|
206,818
|
|
|
$
|
3,966,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interests
|
|
Total
Equity
|
|||||||||||||||||||
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2017
|
98,620,333
|
|
|
$
|
986
|
|
|
$
|
3,822,492
|
|
|
$
|
(122,685
|
)
|
|
$
|
3,700,793
|
|
|
$
|
259,523
|
|
|
$
|
3,960,316
|
|
Net income
|
|
|
|
|
|
|
36,246
|
|
|
36,246
|
|
|
4,725
|
|
|
40,971
|
|
|||||||||
Issuance of share-based compensation awards
|
|
|
|
|
1,864
|
|
|
|
|
1,864
|
|
|
|
|
1,864
|
|
||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
5,094
|
|
|
|
|
5,094
|
|
|
|
|
5,094
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
405,067
|
|
|
4
|
|
|
(4
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase of common stock, stock options and restricted stock units
|
(192,195
|
)
|
|
(2
|
)
|
|
(13,640
|
)
|
|
|
|
(13,642
|
)
|
|
|
|
(13,642
|
)
|
||||||||
Exchange of common units of the Operating Partnership
|
6,503
|
|
|
—
|
|
|
244
|
|
|
|
|
244
|
|
|
(244
|
)
|
|
—
|
|
|||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(2,177
|
)
|
|
(2,177
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
335
|
|
|
|
|
335
|
|
|
(335
|
)
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.425 per share/unit)
|
|
|
|
|
|
|
(44,075
|
)
|
|
(44,075
|
)
|
|
(879
|
)
|
|
(44,954
|
)
|
|||||||||
BALANCE AS OF MARCH 31, 2018
|
98,839,708
|
|
|
$
|
988
|
|
|
$
|
3,816,385
|
|
|
$
|
(130,514
|
)
|
|
$
|
3,686,859
|
|
|
$
|
260,613
|
|
|
$
|
3,947,472
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
40,971
|
|
|
$
|
37,281
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
61,677
|
|
|
59,734
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
1,038
|
|
|
1,185
|
|
||
(Decrease) increase in provision for bad debts
|
(265
|
)
|
|
1,298
|
|
||
Non-cash amortization of share-based compensation awards
|
3,598
|
|
|
4,134
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
315
|
|
|
738
|
|
||
Non-cash amortization of net below market rents
|
(2,543
|
)
|
|
(2,412
|
)
|
||
Gain on sale of depreciable operating properties
|
—
|
|
|
(2,257
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,281
|
)
|
|
(3,695
|
)
|
||
Straight-line rents
|
(5,359
|
)
|
|
(7,611
|
)
|
||
Net change in other operating assets
|
(4,640
|
)
|
|
(1,811
|
)
|
||
Net change in other operating liabilities
|
3,598
|
|
|
9,791
|
|
||
Net cash provided by operating activities
|
94,109
|
|
|
96,375
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(111,424
|
)
|
|
(67,957
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(111,029
|
)
|
|
—
|
|
||
Expenditures for operating properties
|
(35,302
|
)
|
|
(21,446
|
)
|
||
Net proceeds received from dispositions
|
—
|
|
|
11,865
|
|
||
Net increase in acquisition-related deposits
|
(5,000
|
)
|
|
(8,850
|
)
|
||
Proceeds received from repayment of note receivable (Note 3)
|
15,100
|
|
|
—
|
|
||
Net cash used in investing activities
|
(247,655
|
)
|
|
(86,388
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Borrowings on unsecured revolving credit facility (Note 5)
|
90,000
|
|
|
—
|
|
||
Repayments on unsecured revolving credit facility (Note 5)
|
(10,000
|
)
|
|
—
|
|
||
Borrowings on unsecured debt (Note 5)
|
120,000
|
|
|
—
|
|
||
Principal payments on secured debt
|
(878
|
)
|
|
(2,705
|
)
|
||
Proceeds from the issuance of unsecured debt
|
—
|
|
|
250,000
|
|
||
Financing costs
|
(460
|
)
|
|
(1,866
|
)
|
||
Net proceeds from issuance of common stock
|
—
|
|
|
308,849
|
|
||
Redemption of Series G Preferred stock
|
—
|
|
|
(100,000
|
)
|
||
Repurchase of common stock and restricted stock units
|
(13,642
|
)
|
|
(11,014
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
8,522
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(2,170
|
)
|
|
(4,728
|
)
|
||
Contributions from noncontrolling interests in consolidated property partnerships
|
—
|
|
|
250
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(43,033
|
)
|
|
(217,643
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
—
|
|
|
(4,191
|
)
|
||
Net cash provided by financing activities
|
139,817
|
|
|
225,474
|
|
||
Net (decrease) increase in cash and cash equivalents and restricted cash
|
(13,729
|
)
|
|
235,461
|
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
66,798
|
|
|
250,129
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
53,069
|
|
|
$
|
485,590
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
REVENUES
|
|
|
|
||||
Rental income
|
$
|
162,871
|
|
|
$
|
156,648
|
|
Tenant reimbursements
|
19,150
|
|
|
19,296
|
|
||
Other property income
|
801
|
|
|
3,364
|
|
||
Total revenues
|
182,822
|
|
|
179,308
|
|
||
EXPENSES
|
|
|
|
||||
Property expenses
|
31,671
|
|
|
31,241
|
|
||
Real estate taxes
|
17,146
|
|
|
17,964
|
|
||
Provision for bad debts
|
(265
|
)
|
|
1,298
|
|
||
Ground leases
|
1,561
|
|
|
1,642
|
|
||
General and administrative expenses
|
15,559
|
|
|
14,933
|
|
||
Depreciation and amortization
|
62,715
|
|
|
60,919
|
|
||
Total expenses
|
128,387
|
|
|
127,997
|
|
||
OTHER (EXPENSES) INCOME
|
|
|
|
||||
Interest income and other net investment gain/loss (Note 11)
|
34
|
|
|
1,065
|
|
||
Interest expense (Note 5)
|
(13,498
|
)
|
|
(17,352
|
)
|
||
Total other (expenses) income
|
(13,464
|
)
|
|
(16,287
|
)
|
||
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE
|
40,971
|
|
|
35,024
|
|
||
Gains on sales of depreciable operating properties
|
—
|
|
|
2,257
|
|
||
NET INCOME
|
40,971
|
|
|
37,281
|
|
||
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries
|
(4,078
|
)
|
|
(3,227
|
)
|
||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
36,893
|
|
|
34,054
|
|
||
Preferred distributions
|
—
|
|
|
(3,351
|
)
|
||
Original issuance costs of redeemed preferred units
|
—
|
|
|
(3,845
|
)
|
||
Total preferred distributions
|
—
|
|
|
(7,196
|
)
|
||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
36,893
|
|
|
$
|
26,858
|
|
Net income available to common unitholders per unit – basic (Note 13)
|
$
|
0.36
|
|
|
$
|
0.26
|
|
Net income available to common unitholders per unit – diluted (Note 13)
|
$
|
0.36
|
|
|
$
|
0.26
|
|
Weighted average common units outstanding – basic (Note 13)
|
100,815,477
|
|
|
99,691,684
|
|
||
Weighted average common units outstanding – diluted (Note 13)
|
101,284,867
|
|
|
100,321,704
|
|
||
Dividends declared per common unit
|
$
|
0.425
|
|
|
$
|
0.375
|
|
|
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, 2016
|
$
|
192,411
|
|
|
95,600,982
|
|
|
$
|
3,431,768
|
|
|
$
|
3,624,179
|
|
|
$
|
135,138
|
|
|
$
|
3,759,317
|
|
Net income
|
|
|
|
|
34,054
|
|
|
34,054
|
|
|
3,227
|
|
|
37,281
|
|
|||||||
Redemption of Series G Preferred units
|
(96,155
|
)
|
|
|
|
(3,845
|
)
|
|
(100,000
|
)
|
|
|
|
(100,000
|
)
|
|||||||
Issuance of common units
|
|
|
4,427,500
|
|
|
308,849
|
|
|
308,849
|
|
|
|
|
308,849
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
|
|
4,164
|
|
|
4,164
|
|
|
|
|
4,164
|
|
||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
6,169
|
|
|
6,169
|
|
|
|
|
6,169
|
|
||||||||
Exercise of stock options
|
|
|
200,000
|
|
|
8,522
|
|
|
8,522
|
|
|
|
|
8,522
|
|
|||||||
Settlement of restricted stock units
|
|
|
257,824
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(134,065
|
)
|
|
(11,014
|
)
|
|
(11,014
|
)
|
|
|
|
(11,014
|
)
|
|||||||
Contributions from noncontrolling interests in consolidated property partnerships
|
|
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
250
|
|
|||||||
Distributions to noncontrolling interests in consolidated
property partnerships
|
|
|
|
|
|
|
|
|
|
(4,728
|
)
|
|
(4,728
|
)
|
||||||||
Preferred distributions
|
|
|
|
|
(3,351
|
)
|
|
(3,351
|
)
|
|
|
|
(3,351
|
)
|
||||||||
Distributions declared per common unit ($0.375 per unit)
|
|
|
|
|
(39,318
|
)
|
|
(39,318
|
)
|
|
|
|
(39,318
|
)
|
||||||||
BALANCE AS OF MARCH 31, 2017
|
$
|
96,256
|
|
|
100,352,241
|
|
|
$
|
3,735,998
|
|
|
$
|
3,832,254
|
|
|
$
|
133,887
|
|
|
$
|
3,966,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital
|
|
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
|
|
|
|||||||||
|
Number of
Common
Units
|
|
Common
Units
|
|
Total
Capital
|
|||||||||
BALANCE AS OF DECEMBER 31, 2017
|
100,697,526
|
|
|
$
|
3,773,941
|
|
|
$
|
186,375
|
|
|
$
|
3,960,316
|
|
Net income
|
|
|
36,893
|
|
|
4,078
|
|
|
40,971
|
|
||||
Issuance of share-based compensation awards
|
|
|
1,864
|
|
|
|
|
1,864
|
|
|||||
Non-cash amortization of share-based compensation
|
|
|
5,094
|
|
|
|
|
5,094
|
|
|||||
Settlement of restricted stock units
|
405,067
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase of common units, stock options and restricted stock units
|
(192,195
|
)
|
|
(13,642
|
)
|
|
|
|
(13,642
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(2,177
|
)
|
|
(2,177
|
)
|
|||||
Distributions declared per common unit ($0.425 per unit)
|
|
|
(44,954
|
)
|
|
|
|
(44,954
|
)
|
|||||
BALANCE AS OF MARCH 31, 2018
|
100,910,398
|
|
|
$
|
3,759,196
|
|
|
$
|
188,276
|
|
|
$
|
3,947,472
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
40,971
|
|
|
$
|
37,281
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
61,677
|
|
|
59,734
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
1,038
|
|
|
1,185
|
|
||
(Decrease) increase in provision for bad debts
|
(265
|
)
|
|
1,298
|
|
||
Non-cash amortization of share-based compensation awards
|
3,598
|
|
|
4,134
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
315
|
|
|
738
|
|
||
Non-cash amortization of net below market rents
|
(2,543
|
)
|
|
(2,412
|
)
|
||
Gain on sale of depreciable operating properties
|
—
|
|
|
(2,257
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(4,281
|
)
|
|
(3,695
|
)
|
||
Straight-line rents
|
(5,359
|
)
|
|
(7,611
|
)
|
||
Net change in other operating assets
|
(4,640
|
)
|
|
(1,811
|
)
|
||
Net change in other operating liabilities
|
3,598
|
|
|
9,791
|
|
||
Net cash provided by operating activities
|
94,109
|
|
|
96,375
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(111,424
|
)
|
|
(67,957
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(111,029
|
)
|
|
—
|
|
||
Expenditures for operating properties
|
(35,302
|
)
|
|
(21,446
|
)
|
||
Net proceeds received from dispositions
|
—
|
|
|
11,865
|
|
||
Net increase in acquisition-related deposits
|
(5,000
|
)
|
|
(8,850
|
)
|
||
Proceeds received from repayment of note receivable (Note 3)
|
15,100
|
|
|
—
|
|
||
Net cash used in investing activities
|
(247,655
|
)
|
|
(86,388
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Borrowings on unsecured revolving credit facility (Note 5)
|
90,000
|
|
|
—
|
|
||
Repayments on unsecured revolving credit facility (Note 5)
|
(10,000
|
)
|
|
—
|
|
||
Borrowings on unsecured debt (Note 5)
|
120,000
|
|
|
—
|
|
||
Principal payments on secured debt
|
(878
|
)
|
|
(2,705
|
)
|
||
Proceeds from the issuance of unsecured debt
|
—
|
|
|
250,000
|
|
||
Financing costs
|
(460
|
)
|
|
(1,866
|
)
|
||
Net proceeds from issuance of common units
|
—
|
|
|
308,849
|
|
||
Redemption of Series G Preferred units
|
—
|
|
|
(100,000
|
)
|
||
Repurchase of common units and restricted stock units
|
(13,642
|
)
|
|
(11,014
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
8,522
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(2,170
|
)
|
|
(4,728
|
)
|
||
Contributions from noncontrolling interests in consolidated property partnerships
|
—
|
|
|
250
|
|
||
Distributions paid to common unitholders
|
(43,033
|
)
|
|
(217,643
|
)
|
||
Distributions paid to preferred unitholders
|
—
|
|
|
(4,191
|
)
|
||
Net cash provided by financing activities
|
139,817
|
|
|
225,474
|
|
||
Net (decrease) increase in cash and cash equivalents and restricted cash
|
(13,729
|
)
|
|
235,461
|
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
66,798
|
|
|
250,129
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
53,069
|
|
|
$
|
485,590
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
(unaudited)
|
|
Number of
Tenants
|
|
Percentage
Occupied (unaudited)
|
|
Percentage Leased (unaudited)
|
|||||
Stabilized Office Properties
|
104
|
|
|
13,866,127
|
|
|
515
|
|
|
94.3
|
%
|
|
96.7
|
%
|
|
Number of
Buildings |
|
Number of
Units
|
|
2018 Average Occupancy
(unaudited)
|
|||
Stabilized Residential Property
|
1
|
|
|
200
|
|
|
83.0
|
%
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Development projects under construction
(2)
|
5
|
|
2,106,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
Includes
86,000
square feet of Production, Distribution, and Repair (“PDR”) space. In addition to the estimated office rentable square feet noted above, development projects under construction also include
120,000
square feet of retail space and
237
residential units.
|
Property
|
|
Date of Acquisition
|
|
Number of Buildings
|
|
Rentable Square Feet (unaudited)
|
|
Purchase Price (in millions)
(1)
|
|||
345, 347 & 349 Oyster Point Boulevard, South San Francisco, CA
|
|
January 31, 2018
|
|
3
|
|
145,530
|
|
|
$
|
111.0
|
|
(1)
|
Excludes acquisition-related costs.
|
|
Total 2018 Operating Property Acquisitions
|
||
|
|
||
Assets
|
|
||
Land and improvements
|
$
|
50,928
|
|
Buildings and improvements
(1)
|
59,123
|
|
|
Deferred leasing costs and acquisition-related intangible assets
(2)
|
4,470
|
|
|
Total assets acquired
|
114,521
|
|
|
Liabilities
|
|
||
Deferred revenue and acquisition-related intangible liabilities
(3)
|
3,521
|
|
|
Total liabilities assumed
|
3,521
|
|
|
Net assets and liabilities acquired
|
$
|
111,000
|
|
(1)
|
Represents buildings, building improvements and tenant improvements.
|
(2)
|
Represents in-place leases (approximately
$3.8 million
with a weighted average amortization period of
2.6
years) and leasing commissions (approximately
$0.7 million
with a weighted average amortization period of
3.5
years).
|
(3)
|
Represents below-market leases (approximately
$3.5 million
with a weighted average amortization period of
9.8
years).
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
19,630
|
|
|
$
|
19,235
|
|
Allowance for uncollectible tenant receivables
|
(2,028
|
)
|
|
(2,309
|
)
|
||
Current receivables, net
|
$
|
17,602
|
|
|
$
|
16,926
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
254,969
|
|
|
$
|
249,629
|
|
Allowance for deferred rent receivables
|
(3,225
|
)
|
|
(3,238
|
)
|
||
Deferred rent receivables, net
|
$
|
251,744
|
|
|
$
|
246,391
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Furniture, fixtures and other long-lived assets, net
|
$
|
38,541
|
|
|
$
|
39,686
|
|
Note receivable
(1)
|
4,867
|
|
|
19,912
|
|
||
Prepaid expenses & acquisition deposits
|
63,916
|
|
|
55,108
|
|
||
Total prepaid expenses and other assets, net
|
$
|
107,324
|
|
|
$
|
114,706
|
|
(1)
|
During the
three
months ended
March 31, 2018
, a note receivable with a balance of
$15.1 million
was repaid to the Company.
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
50,000
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
700,000
|
|
|
750,000
|
|
||
Total borrowing capacity
(1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate
(2)
|
2.72
|
%
|
|
2.56
|
%
|
||
Facility fee-annual rate
(3)
|
0.200%
|
||||||
Maturity date
|
July 2022
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$600.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
|
(2)
|
Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus
1.000%
as of
March 31, 2018
and
December 31, 2017
.
|
(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
March 31, 2018
and
December 31, 2017
,
$5.7 million
and
$6.0 million
of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
|
(1)
|
In July 2017, the Facility was amended to include a 12-month delayed draw option on the unsecured term loan facility. The Company may repay amounts under the unsecured term loan facility through July 2018, however, no additional draws may be made.
|
(2)
|
As of
March 31, 2018
and
December 31, 2017
,
$1.1 million
and
$1.2 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(3)
|
Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus
1.100%
as of
March 31, 2018
and
December 31, 2017
.
|
(4)
|
Prior to borrowing the full capacity of our unsecured term loan facility, the undrawn facility fee was calculated based on any unused borrowing capacity and was paid on a quarterly basis.
|
Year
|
(in thousands)
|
||
Remaining 2018
|
$
|
2,706
|
|
2019
|
76,309
|
|
|
2020
|
255,137
|
|
|
2021
|
5,342
|
|
|
2022
|
205,554
|
|
|
Thereafter
|
2,018,469
|
|
|
Total
(1)
|
$
|
2,563,517
|
|
(1)
|
Includes gross principal balance of outstanding debt before the effect of the following at
March 31, 2018
:
$14.3 million
of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt,
$6.1 million
of unamortized discounts for the unsecured senior notes and
$2.1 million
of unamortized premiums for the secured debt.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Gross interest expense
|
$
|
27,080
|
|
|
$
|
27,515
|
|
Capitalized interest and deferred financing costs
|
(13,582
|
)
|
|
(10,163
|
)
|
||
Interest expense
|
$
|
13,498
|
|
|
$
|
17,352
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2017
|
|||
Company owned common units in the Operating Partnership
|
98,839,708
|
|
|
98,620,333
|
|
|
98,275,048
|
|
Company owned general partnership interest
|
97.9
|
%
|
|
97.9
|
%
|
|
97.9
|
%
|
Noncontrolling common units of the Operating Partnership
|
2,070,690
|
|
|
2,077,193
|
|
|
2,077,193
|
|
Ownership interest of noncontrolling interest
|
2.1
|
%
|
|
2.1
|
%
|
|
2.1
|
%
|
|
Fair Value Assumptions
|
Expected share price volatility
|
20.00%
|
Risk-free interest rate
|
2.37%
|
Expected life
|
2.9 years
|
|
Fair Value (Level 1)
(1)
|
||||||
|
March 31, 2018
|
|
December 31, 2017
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
21,572
|
|
|
$
|
20,674
|
|
(1)
|
Based on quoted prices in active markets for identical securities.
|
(2)
|
The marketable securities are held in a limited rabbi trust.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Description
|
(in thousands)
|
||||||
Net (loss) gain on marketable securities
|
$
|
(404
|
)
|
|
$
|
671
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying
Value |
|
Fair
Value (1) |
|
Carrying
Value |
|
Fair
Value (1) |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt, net
|
$
|
339,501
|
|
|
$
|
339,618
|
|
|
$
|
340,800
|
|
|
$
|
346,858
|
|
Unsecured debt, net
|
2,155,794
|
|
|
2,162,552
|
|
|
2,006,263
|
|
|
2,077,199
|
|
||||
Unsecured line of credit
|
50,000
|
|
|
50,058
|
|
|
—
|
|
|
—
|
|
(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 March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands, except share and per share amounts)
|
||||||
Numerator:
|
|
|
|
||||
Net income attributable to Kilroy Realty Corporation
|
$
|
36,246
|
|
|
$
|
33,525
|
|
Total preferred dividends
|
—
|
|
|
(7,196
|
)
|
||
Allocation to participating securities
(1)
|
(471
|
)
|
|
(448
|
)
|
||
Numerator for basic and diluted net income available to common stockholders
|
$
|
35,775
|
|
|
$
|
25,881
|
|
Denominator:
|
|
|
|
||||
Basic weighted average vested shares outstanding
|
98,744,220
|
|
|
97,388,137
|
|
||
Effect of dilutive securities
|
469,390
|
|
|
630,020
|
|
||
Diluted weighted average vested shares and common share equivalents outstanding
|
99,213,610
|
|
|
98,018,157
|
|
||
Basic earnings per share:
|
|
|
|
||||
Net income available to common stockholders per share
|
$
|
0.36
|
|
|
$
|
0.27
|
|
Diluted earnings per share:
|
|
|
|
||||
Net income available to common stockholders per share
|
$
|
0.36
|
|
|
$
|
0.26
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands, except unit and per unit amounts)
|
||||||
Numerator:
|
|
|
|
||||
Net income attributable to Kilroy Realty, L.P.
|
$
|
36,893
|
|
|
$
|
34,054
|
|
Total preferred distributions
|
—
|
|
|
(7,196
|
)
|
||
Allocation to participating securities
(1)
|
(471
|
)
|
|
(448
|
)
|
||
Numerator for basic and diluted net income available to common unitholders
|
$
|
36,422
|
|
|
$
|
26,410
|
|
Denominator:
|
|
|
|
||||
Basic weighted average vested units outstanding
|
100,815,477
|
|
|
99,691,684
|
|
||
Effect of dilutive securities
|
469,390
|
|
|
630,020
|
|
||
Diluted weighted average vested units and common unit equivalents outstanding
|
101,284,867
|
|
|
100,321,704
|
|
||
Basic earnings per unit:
|
|
|
|
||||
Net income available to common unitholders per unit
|
$
|
0.36
|
|
|
$
|
0.26
|
|
Diluted earnings per unit:
|
|
|
|
||||
Net income available to common unitholders per unit
|
$
|
0.36
|
|
|
$
|
0.26
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $13,051 and $9,829 as of March 31, 2018 and 2017, respectively
|
$
|
9,699
|
|
|
$
|
18,206
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
57,155
|
|
|
$
|
50,056
|
|
Tenant improvements funded directly by tenants
|
$
|
2,014
|
|
|
$
|
7,416
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
43,512
|
|
|
$
|
38,176
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
—
|
|
|
$
|
797
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
244
|
|
|
$
|
10,939
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
57,649
|
|
|
$
|
193,418
|
|
Restricted cash at beginning of period
|
9,149
|
|
|
56,711
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
66,798
|
|
|
$
|
250,129
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
53,069
|
|
|
$
|
478,391
|
|
Restricted cash at end of period
|
—
|
|
|
7,199
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
53,069
|
|
|
$
|
485,590
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $13,051 and $9,829 as of March 31, 2018 and 2017, respectively
|
$
|
9,699
|
|
|
$
|
18,206
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
57,155
|
|
|
$
|
50,056
|
|
Tenant improvements funded directly by tenants
|
$
|
2,014
|
|
|
$
|
7,416
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of distributions payable to common unitholders
|
$
|
43,512
|
|
|
$
|
38,176
|
|
Accrual of distributions payable to preferred unitholders
|
$
|
—
|
|
|
$
|
797
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
57,649
|
|
|
$
|
193,418
|
|
Restricted cash at beginning of period
|
9,149
|
|
|
56,711
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
66,798
|
|
|
$
|
250,129
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
53,069
|
|
|
$
|
478,391
|
|
Restricted cash at end of period
|
—
|
|
|
7,199
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
53,069
|
|
|
$
|
485,590
|
|
•
|
Academy on Vine - Phase I (Office and Retail) in Hollywood, California, which we acquired in 2013 and commenced construction on in January 2018. Phase I of this mixed-use project includes the project’s overall infrastructure and site work, approximately
306,000
square feet of office space and approximately
24,000
square feet of retail space for a total estimated investment of
$260.0 million
. Construction is currently in progress and is currently expected to be completed in the first half of 2020.
|
•
|
The Exchange on 16th, Mission Bay, San Francisco, California, which we acquired in May 2014 and commenced construction on in June 2015. This project is currently anticipated to encompass approximately
750,000
gross rentable square feet consisting of 736,000 square feet of office space and 14,000 square feet of retail space at a total estimated investment of
$570.0 million
. Construction is currently in progress and the building and core shell are currently estimated to be completed in the first half of 2018. The office space in the project is 100% leased to Dropbox, Inc. The lease with Dropbox, Inc. will commence in phases beginning in the fourth quarter of 2018 through the fourth quarter of 2019 with cash rents commencing in the third quarter of 2019 through the first quarter of 2020.
|
•
|
333 Dexter, South Lake Union, Washington, which we acquired in February 2015 and commenced construction in June 2017. This project encompasses approximately
650,000
gross rentable square feet of office space at a total estimated investment of
$380.0 million
. Construction is currently in progress and the building core and shell are currently estimated to be completed in the second half of 2019.
|
•
|
100 Hooper, SOMA, San Francisco, California, which we acquired in July 2015 and commenced construction on in November 2016. This project will encompass approximately
314,000
square feet of office and approximately
86,000
square feet of production, distribution and repair (“PDR”) space configured in two buildings. The total estimated cost for this project is approximately
$270.0 million
. Construction is currently in process and the core and shell of the project are currently expected to be completed in the second quarter of 2018. The office portion of the project is
100%
pre-leased to Adobe Systems Inc. and the PDR space is 39% leased as of the date of this report. The lease with Adobe Systems Inc. will commence in phases beginning in the third quarter of 2018 through the second quarter of 2020 with cash rents commencing in the first quarter of 2019 through the second quarter of 2020.
|
•
|
One Paseo - Phase I (Retail and Residential), Del Mar Heights, San Diego, California, which we acquired in November 2007 and commenced construction on in December 2016. Phase I of this mixed-use project includes site work and related infrastructure for the entire project, as well as
237
residential units and approximately
96,000
square feet of retail space. The total estimated investment for this phase of the project is approximately
$235.0 million
. Construction is currently in process and is expected to be completed in phases beginning in the third quarter of 2018 for the retail space and the first quarter of 2019 for the residential units.
|
Future Development Pipeline
(1)
|
|
Location
|
|
Approx. Developable Square Feet / Resi Units
|
|
Total Costs
as of 3/31/2018
($ in millions)
(2)
|
||
|
|
|
|
|
|
|
||
San Francisco Bay Area
|
|
|
|
|
|
|
||
Flower Mart
|
|
San Francisco
|
|
TBD
|
|
$
|
228.7
|
|
Greater Los Angeles
|
|
|
|
|
|
|
||
Academy on Vine - Phase II (Residential)
|
|
Hollywood
|
|
200 Resi Units
|
|
30.7
|
|
|
San Diego County
|
|
|
|
|
|
|
||
One Paseo - Phases II and III
(3)
|
|
Del Mar
|
|
640,000
|
|
185.5
|
|
|
2100 Kettner
|
|
Little Italy
|
|
175,000
|
|
23.1
|
|
|
9455 Towne Centre Drive
|
|
San Diego
|
|
150,000
|
|
14.2
|
|
|
Santa Fe Summit – Phases II and III
|
|
56 Corridor
|
|
600,000
|
|
78.9
|
|
|
TOTAL:
|
|
|
|
|
|
$
|
561.1
|
|
(1)
|
The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design.
|
(2)
|
Represents cash paid and costs incurred as of
March 31, 2018
.
|
(3)
|
Development for this project will occur in phases. Phases II and III, comprised of residential and office, respectively, will commence subject to market conditions and economic factors.
|
|
1st & 2nd Generation
(1)(2)
|
|
2nd Generation
(1)(2)
|
||||||||||||||||||||||||||||
|
Number of Leases
(3)
|
|
Rentable Square Feet
(3)
|
|
Retention Rates
(8)
|
|
TI/LC per
Sq. Ft.
(4)
|
|
TI/LC Per Sq. Ft. / Year
|
|
Changes in
Rents
(5)(6)
|
|
Changes in
Cash Rents
(7)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
||||||||||||||||||||||
Three Months Ended
March 31, 2018
|
17
|
|
|
15
|
|
|
119,393
|
|
|
121,676
|
|
|
34.3
|
%
|
|
$
|
44.40
|
|
|
$
|
8.33
|
|
|
29.6
|
%
|
|
13.5
|
%
|
|
64
|
|
|
1st & 2nd Generation
(1)(2)
|
|
2nd Generation
(1)(2)
|
|||||||||||||||||||||||||
|
Number of Leases
(3)
|
|
Rentable Square Feet
(3)
|
|
TI/LC per Sq. Ft.
(4)
|
|
TI/LC Per Sq. Ft. / Year
|
|
Changes in
Rents
(5)(6)
|
|
Changes in
Cash Rents
(7)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
|
|||||||||||||||||
Three Months Ended
March 31, 2018 |
20
|
|
|
15
|
|
|
179,696
|
|
|
121,676
|
|
|
$
|
47.50
|
|
|
$
|
8.14
|
|
|
26.0
|
%
|
|
14.7
|
%
|
|
70
|
|
(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 were 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 14,329 and 128,259 square feet, respectively, for the
three
months ended
March 31, 2018
, 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 more 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
March 31, 2018
,
17
leases totaling
166,200
rentable square feet were signed but not commenced as of
March 31, 2018
.
|
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 2018
|
|
50
|
|
|
839,654
|
|
|
6.5
|
%
|
|
$
|
38,703
|
|
|
6.7
|
%
|
|
$
|
46.09
|
|
2019
|
|
104
|
|
|
1,517,424
|
|
|
11.8
|
%
|
|
59,252
|
|
|
10.4
|
%
|
|
39.05
|
|
||
2020
|
|
110
|
|
|
1,882,534
|
|
|
14.7
|
%
|
|
73,932
|
|
|
12.9
|
%
|
|
39.27
|
|
||
2021
|
|
90
|
|
|
1,044,882
|
|
|
8.1
|
%
|
|
45,629
|
|
|
7.9
|
%
|
|
43.67
|
|
||
2022
|
|
59
|
|
|
618,222
|
|
|
4.9
|
%
|
|
26,042
|
|
|
4.5
|
%
|
|
42.12
|
|
||
2023
|
|
66
|
|
|
1,101,501
|
|
|
8.6
|
%
|
|
54,892
|
|
|
9.5
|
%
|
|
49.83
|
|
||
Total
|
|
479
|
|
|
7,004,217
|
|
|
54.6
|
%
|
|
$
|
298,450
|
|
|
51.9
|
%
|
|
$
|
42.61
|
|
Year
|
|
Region
|
|
# of
Expiring Leases
|
|
Total
Square Feet
|
|
% of Total
Leased Sq. Ft.
|
|
Annualized
Base Rent
(2)(3)
|
|
% of Total
Annualized
Base Rent
(2)
|
|
Annualized Rent
per Sq. Ft.
(2)
|
||||||||
2018
|
|
Greater Los Angeles
|
|
32
|
|
|
133,033
|
|
|
1.1
|
%
|
|
$
|
5,268
|
|
|
0.9
|
%
|
|
$
|
39.60
|
|
|
Orange County
|
|
1
|
|
|
1,090
|
|
|
—
|
%
|
|
31
|
|
|
—
|
%
|
|
28.44
|
|
|||
|
San Diego
|
|
9
|
|
|
440,302
|
|
|
3.4
|
%
|
|
20,041
|
|
|
3.5
|
%
|
|
45.52
|
|
|||
|
San Francisco Bay Area
|
|
4
|
|
|
234,162
|
|
|
1.8
|
%
|
|
12,523
|
|
|
2.2
|
%
|
|
53.48
|
|
|||
|
Greater Seattle
|
|
4
|
|
|
31,067
|
|
|
0.2
|
%
|
|
840
|
|
|
0.1
|
%
|
|
27.04
|
|
|||
|
Total
|
|
50
|
|
|
839,654
|
|
|
6.5
|
%
|
|
$
|
38,703
|
|
|
6.7
|
%
|
|
$
|
46.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
2019
|
|
Greater Los Angeles
|
|
44
|
|
|
311,608
|
|
|
2.5
|
%
|
|
$
|
10,067
|
|
|
1.8
|
%
|
|
$
|
32.31
|
|
|
Orange County
|
|
6
|
|
|
77,875
|
|
|
0.6
|
%
|
|
3,234
|
|
|
0.6
|
%
|
|
41.53
|
|
|||
|
San Diego
|
|
15
|
|
|
195,661
|
|
|
1.5
|
%
|
|
7,209
|
|
|
1.3
|
%
|
|
36.84
|
|
|||
|
San Francisco Bay Area
|
|
23
|
|
|
737,243
|
|
|
5.7
|
%
|
|
32,250
|
|
|
5.6
|
%
|
|
43.74
|
|
|||
|
Greater Seattle
|
|
16
|
|
|
195,037
|
|
|
1.5
|
%
|
|
6,492
|
|
|
1.1
|
%
|
|
33.29
|
|
|||
|
Total
|
|
104
|
|
|
1,517,424
|
|
|
11.8
|
%
|
|
$
|
59,252
|
|
|
10.4
|
%
|
|
$
|
39.05
|
|
(1)
|
For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of
March 31, 2018
, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of
March 31, 2018
.
|
(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 of consolidated property partnerships.
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Development projects under construction
(2)
|
5
|
|
2,106,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
Includes
86,000
square feet of Production, Distribution, and Repair (“PDR”) space. In addition to the estimated office rentable square feet noted above, development projects under construction also include
120,000
square feet of retail space and
237
residential units.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of March 31, 2017
|
111
|
|
|
14,394,806
|
|
Acquisitions
|
3
|
|
|
145,530
|
|
Dispositions
|
(10
|
)
|
|
(675,143
|
)
|
Remeasurement
|
—
|
|
|
934
|
|
Total as of March 31, 2018
(1)
|
104
|
|
|
13,866,127
|
|
(1)
|
Includes
four
properties owned by consolidated property partnerships.
|
Region
|
|
Number of
Buildings |
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
3/31/2018
|
|
12/31/2017
|
|
9/30/2017
|
||||||||||
Greater Los Angeles
|
|
36
|
|
|
4,181,733
|
|
|
93.9
|
%
|
|
93.3
|
%
|
|
91.0
|
%
|
Orange County
|
|
1
|
|
|
271,556
|
|
|
89.6
|
%
|
|
86.6
|
%
|
|
94.4
|
%
|
San Diego County
|
|
21
|
|
|
2,043,645
|
|
|
98.0
|
%
|
|
97.4
|
%
|
|
93.9
|
%
|
San Francisco Bay Area
|
|
34
|
|
|
5,303,054
|
|
|
95.1
|
%
|
|
96.1
|
%
|
|
95.9
|
%
|
Greater Seattle
|
|
12
|
|
|
2,066,139
|
|
|
90.2
|
%
|
|
95.4
|
%
|
|
95.2
|
%
|
Total Stabilized Portfolio
|
|
104
|
|
|
13,866,127
|
|
|
94.3
|
%
|
|
95.2
|
%
|
|
94.0
|
%
|
|
Average Occupancy
|
||||
|
Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
||
Stabilized Portfolio
(1)
|
94.8
|
%
|
|
94.3
|
%
|
Same Store Portfolio
(2)
|
94.9
|
%
|
|
95.1
|
%
|
Residential Portfolio
(3)
|
83.0
|
%
|
|
64.9
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1,
2017
and still owned and stabilized as of
March 31, 2018
. See discussion under “Results of Operations” for additional information.
|
(3)
|
Our residential portfolio consists of our 200-unit residential tower located in Hollywood, California. For the three months ended
March 31, 2017
, represents actual occupancy at
March 31, 2017
.
|
•
|
Same Store Properties – includes the consolidated results of all of the 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,
2017
and still owned and included in the stabilized portfolio as of
March 31, 2018
, including our residential tower in Hollywood, California;
|
•
|
Stabilized Development Properties – includes the results generated by the one office development project that was added to the stabilized portfolio in the first quarter of 2017;
|
•
|
Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the
three
office buildings we acquired in January 2018; and
|
•
|
Dispositions and Other Properties – includes the results of the
ten
properties disposed of in the third quarter of 2017, the one property disposed of during the first quarter of 2017 and expenses for certain of our in-process and future development projects.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
98
|
|
|
13,355,238
|
|
Stabilized Development Properties
|
|
3
|
|
|
365,359
|
|
Acquisition Properties
|
|
3
|
|
|
145,530
|
|
Total Stabilized Office Portfolio
|
|
104
|
|
|
13,866,127
|
|
|
Three Months Ended March 31,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2018
|
|
2017
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
|
|
|
|
|
|
|
|
|
||||||
Net Income Available to Common Stockholders
|
$
|
36,246
|
|
|
$
|
26,329
|
|
|
$
|
9,917
|
|
|
37.7
|
%
|
Preferred dividends
|
—
|
|
|
3,351
|
|
|
(3,351
|
)
|
|
(100.0
|
)%
|
|||
Original issuance costs of redeemed preferred stock and preferred units
|
—
|
|
|
3,845
|
|
|
(3,845
|
)
|
|
(100.0
|
)%
|
|||
Net income attributable to Kilroy Realty Corporation
|
$
|
36,246
|
|
|
$
|
33,525
|
|
|
$
|
2,721
|
|
|
8.1
|
%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
751
|
|
|
623
|
|
|
128
|
|
|
20.5
|
%
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
3,974
|
|
|
3,133
|
|
|
841
|
|
|
26.8
|
%
|
|||
Net income
|
$
|
40,971
|
|
|
$
|
37,281
|
|
|
$
|
3,690
|
|
|
9.9
|
%
|
Unallocated expense (income):
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
15,559
|
|
|
14,933
|
|
|
626
|
|
|
4.2
|
%
|
|||
Depreciation and amortization
|
62,715
|
|
|
60,919
|
|
|
1,796
|
|
|
2.9
|
%
|
|||
Interest income and other net investment gain/loss
|
(34
|
)
|
|
(1,065
|
)
|
|
1,031
|
|
|
(96.8
|
)%
|
|||
Interest expense
|
13,498
|
|
|
17,352
|
|
|
(3,854
|
)
|
|
(22.2
|
)%
|
|||
Gains on sales of depreciable operating properties
|
—
|
|
|
(2,257
|
)
|
|
2,257
|
|
|
(100.0
|
)%
|
|||
Net Operating Income, as defined
|
$
|
132,709
|
|
|
$
|
127,163
|
|
|
$
|
5,546
|
|
|
4.4
|
%
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Properties
|
|
Disposi-tions & Other
|
|
Total
|
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Properties
|
|
Disposi-tions & Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
155,355
|
|
|
$
|
6,358
|
|
|
$
|
1,158
|
|
|
$
|
—
|
|
|
$
|
162,871
|
|
|
$
|
147,906
|
|
|
$
|
4,817
|
|
|
$
|
—
|
|
|
$
|
3,925
|
|
|
$
|
156,648
|
|
Tenant reimbursements
|
18,969
|
|
|
96
|
|
|
240
|
|
|
(155
|
)
|
|
19,150
|
|
|
18,866
|
|
|
—
|
|
|
—
|
|
|
430
|
|
|
19,296
|
|
||||||||||
Other property income
|
801
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
801
|
|
|
3,283
|
|
|
8
|
|
|
—
|
|
|
73
|
|
|
3,364
|
|
||||||||||
Total
|
175,125
|
|
|
6,454
|
|
|
1,398
|
|
|
(155
|
)
|
|
182,822
|
|
|
170,055
|
|
|
4,825
|
|
|
—
|
|
|
4,428
|
|
|
179,308
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
30,350
|
|
|
1,176
|
|
|
116
|
|
|
29
|
|
|
31,671
|
|
|
29,662
|
|
|
772
|
|
|
—
|
|
|
807
|
|
|
31,241
|
|
||||||||||
Real estate taxes
|
16,071
|
|
|
729
|
|
|
176
|
|
|
170
|
|
|
17,146
|
|
|
16,689
|
|
|
698
|
|
|
—
|
|
|
577
|
|
|
17,964
|
|
||||||||||
Provision for bad debts
|
(290
|
)
|
|
—
|
|
|
—
|
|
|
25
|
|
|
(265
|
)
|
|
1,180
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
1,298
|
|
||||||||||
Ground leases
|
1,561
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,561
|
|
|
1,642
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,642
|
|
||||||||||
Total
|
47,692
|
|
|
1,905
|
|
|
292
|
|
|
224
|
|
|
50,113
|
|
|
49,173
|
|
|
1,470
|
|
|
—
|
|
|
1,502
|
|
|
52,145
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
127,433
|
|
|
$
|
4,549
|
|
|
$
|
1,106
|
|
|
$
|
(379
|
)
|
|
$
|
132,709
|
|
|
$
|
120,882
|
|
|
$
|
3,355
|
|
|
$
|
—
|
|
|
$
|
2,926
|
|
|
$
|
127,163
|
|
|
Three Months Ended March 31, 2018 as compared to the Three Months Ended March 31, 2017
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized Development
|
|
Acquisition Properties
|
|
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
|
$
|
7,449
|
|
|
5.0
|
%
|
|
$
|
1,541
|
|
|
32.0
|
%
|
|
$
|
1,158
|
|
|
100.0
|
%
|
|
$
|
(3,925
|
)
|
|
(100.0
|
)%
|
|
$
|
6,223
|
|
|
4.0
|
%
|
Tenant reimbursements
|
103
|
|
|
0.5
|
%
|
|
96
|
|
|
100.0
|
%
|
|
240
|
|
|
100.0
|
%
|
|
(585
|
)
|
|
(136.0
|
)%
|
|
(146
|
)
|
|
(0.8
|
)%
|
|||||
Other property income
|
(2,482
|
)
|
|
(75.6
|
)%
|
|
(8
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
—
|
%
|
|
(73
|
)
|
|
(100.0
|
)%
|
|
(2,563
|
)
|
|
(76.2
|
)%
|
|||||
Total
|
5,070
|
|
|
3.0
|
%
|
|
1,629
|
|
|
33.8
|
%
|
|
1,398
|
|
|
100.0
|
%
|
|
(4,583
|
)
|
|
(103.5
|
)%
|
|
3,514
|
|
|
2.0
|
%
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
688
|
|
|
2.3
|
%
|
|
404
|
|
|
52.3
|
%
|
|
116
|
|
|
100.0
|
%
|
|
(778
|
)
|
|
(96.4
|
)%
|
|
430
|
|
|
1.4
|
%
|
|||||
Real estate taxes
|
(618
|
)
|
|
(3.7
|
)%
|
|
31
|
|
|
4.4
|
%
|
|
176
|
|
|
100.0
|
%
|
|
(407
|
)
|
|
(70.5
|
)%
|
|
(818
|
)
|
|
(4.6
|
)%
|
|||||
Provision for bad debts
|
(1,470
|
)
|
|
(124.6
|
)%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(93
|
)
|
|
78.8
|
%
|
|
(1,563
|
)
|
|
(120.4
|
)%
|
|||||
Ground leases
|
(81
|
)
|
|
(4.9
|
)%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(81
|
)
|
|
(4.9
|
)%
|
|||||
Total
|
(1,481
|
)
|
|
(3.0
|
)%
|
|
435
|
|
|
29.6
|
%
|
|
292
|
|
|
100.0
|
%
|
|
(1,278
|
)
|
|
(85.1
|
)%
|
|
(2,032
|
)
|
|
(3.9
|
)%
|
|||||
Net Operating Income,
as defined
|
$
|
6,551
|
|
|
5.4
|
%
|
|
$
|
1,194
|
|
|
35.6
|
%
|
|
$
|
1,106
|
|
|
100.0
|
%
|
|
$
|
(3,305
|
)
|
|
(113.0
|
)%
|
|
$
|
5,546
|
|
|
4.4
|
%
|
•
|
An increase of
$6.6 million
attributable to the Same Store Properties driven by the following activity:
|
•
|
An increase in rental income of
$7.4 million
primarily due to:
|
•
|
$6.3 million increase from new leases and renewals at higher rates across all regions;
|
•
|
$1.3 million increase due to an increase in occupancy primarily related to three properties, each in different submarkets; partially offset by
|
•
|
A decrease in other property income of
$2.5 million
primarily due to income received in 2017 resulting from the early termination of one tenant at one property in the San Francisco region; and
|
•
|
A decrease in property and related expenses of
$1.5 million
primarily due to the following:
|
•
|
$1.5 million
decrease in the provision for bad debts due to a $1.2 million provision recorded in 2017 primarily related to two tenants and a $0.3 million reversal of provision in 2018 primarily related to three tenants;
|
•
|
$0.6 million
decrease in real estate taxes primarily due to higher supplemental taxes in 2017 for one property acquired in 2016; partially offset by
|
•
|
$0.7 million
increase in property expenses due to a $0.9 million increase in certain recurring operating costs resulting from increased demand and higher rates related to reimbursable expenses such as contract services, security and parking, as well as higher repairs and maintenance and various other reimbursable expenses, offset by a $0.2 million decrease in non-recurring non-reimbursable expenses due to higher non-recurring non-reimbursable repairs and maintenance costs incurred in 2017;
|
•
|
An increase in Net Operating Income of
$1.2 million
attributable to the Stabilized Development Properties;
|
•
|
An increase in Net Operating Income of
$1.1 million
attributable to the Acquisition Properties; and
|
•
|
A decrease in Net Operating Income of
$3.3 million
attributable to the Dispositions and Other Properties
.
|
•
|
An increase of $1.3 million attributable to the Same Store Properties;
|
•
|
An increase of $0.8 million attributable to the Stabilized Development Properties;
|
•
|
An increase of $1.6 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $1.9 million attributable to Dispositions & Other Properties.
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
27,080
|
|
|
$
|
27,515
|
|
|
$
|
(435
|
)
|
|
(1.6
|
)%
|
Capitalized interest and deferred financing costs
|
(13,582
|
)
|
|
(10,163
|
)
|
|
(3,419
|
)
|
|
33.6
|
%
|
|||
Interest expense
|
$
|
13,498
|
|
|
$
|
17,352
|
|
|
$
|
(3,854
|
)
|
|
(22.2
|
)%
|
|
Shares/Units at
March 31, 2018
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
|||
|
($ in thousands)
|
|||||||
Debt:
(1)
|
|
|
|
|
|
|||
Unsecured Line of Credit
|
|
|
$
|
50,000
|
|
|
0.5
|
%
|
Unsecured Term Loan Facility
|
|
|
150,000
|
|
|
1.5
|
%
|
|
Unsecured Senior Notes due 2020
|
|
|
250,000
|
|
|
2.6
|
%
|
|
Unsecured Senior Notes due 2023
|
|
|
300,000
|
|
|
3.1
|
%
|
|
Unsecured Senior Notes due 2024
|
|
|
425,000
|
|
|
4.4
|
%
|
|
Unsecured Senior Notes due 2025
|
|
|
400,000
|
|
|
4.1
|
%
|
|
Unsecured Senior Notes due 2029
|
|
|
400,000
|
|
|
4.1
|
%
|
|
Unsecured Senior Notes Series A & B due 2027 & 2029
|
|
|
250,000
|
|
|
2.6
|
%
|
|
Secured debt
|
|
|
338,517
|
|
|
3.5
|
%
|
|
Total debt
|
|
|
$
|
2,563,517
|
|
|
26.4
|
%
|
Equity and Noncontrolling Interest in the Operating Partnership:
(2)
|
|
|
|
|
|
|||
Common limited partnership units outstanding
(3)
|
2,070,690
|
|
$
|
146,936
|
|
|
1.5
|
%
|
Common shares outstanding
(2)
|
98,839,708
|
|
7,013,666
|
|
|
72.1
|
%
|
|
Total equity and noncontrolling interest in the Operating Partnership
|
|
|
$
|
7,160,602
|
|
|
73.6
|
%
|
Total Market Capitalization
|
|
|
$
|
9,724,119
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of the following at
March 31, 2018
:
$14.3 million
of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt,
$6.1 million
of unamortized discounts for the unsecured senior notes and
$2.1 million
of unamortized premiums for the secured debt.
|
(2)
|
Value based on closing price per share of our common stock of
$70.96
as of
March 31, 2018
.
|
(3)
|
Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Operating Partnership’s unsecured revolving credit facility and term loan facility;
|
•
|
Proceeds from our capital recycling program, including the disposition of less strategic or core assets and 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;
|
•
|
Operating 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 and redemptions of outstanding common or preferred stock of the Company; and
|
•
|
Outstanding debt repurchases, redemptions and repayments.
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
50,000
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
700,000
|
|
|
750,000
|
|
||
Total borrowing capacity
(1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate
(2)
|
2.72
|
%
|
|
2.56
|
%
|
||
Facility fee-annual rate
(3)
|
0.200%
|
||||||
Maturity date
|
July 2022
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$600.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
|
(2)
|
Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus
1.000%
as of
March 31, 2018
and
December 31, 2017
.
|
(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
March 31, 2018
and
December 31, 2017
,
$5.7 million
and
$6.0 million
of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
|
(1)
|
In July 2017, the Facility was amended to include a 12-month delayed draw option on the unsecured term loan facility. The Company may repay amounts under the unsecured term loan facility through July 2018, however, no additional draws may be made.
|
(2)
|
As of
March 31, 2018
and
December 31, 2017
,
$1.1 million
and
$1.2 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(3)
|
Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus
1.100%
as of
March 31, 2018
and
December 31, 2017
.
|
(4)
|
Prior to borrowing the full capacity of our unsecured term loan facility, the undrawn facility fee was calculated based on any unused borrowing capacity and was paid on a quarterly basis.
|
|
Aggregate Principal
Amount Outstanding
|
||
|
(in thousands)
|
||
Unsecured Line of Credit
|
$
|
50,000
|
|
Unsecured Term Loan Facility
|
150,000
|
|
|
Unsecured Senior Notes due 2020
|
250,000
|
|
|
Unsecured Senior Notes due 2023
|
300,000
|
|
|
Unsecured Senior Notes due 2024
|
425,000
|
|
|
Unsecured Senior Notes due 2025
|
400,000
|
|
|
Unsecured Senior Notes due 2029
|
400,000
|
|
|
Unsecured Senior Notes Series A & B due 2027 & 2029
|
250,000
|
|
|
Secured Debt
|
338,517
|
|
|
Total Unsecured and Secured Debt
|
$
|
2,563,517
|
|
Less: Unamortized Net Discounts and Deferred Financing Costs
(1)
|
(18,222
|
)
|
|
Total Debt, Net
|
$
|
2,545,295
|
|
(1)
|
Includes
$14.3 million
of unamortized deferred financing costs,
$6.1 million
of unamortized discounts for the unsecured senior notes and
$2.1 million
of unamortized premiums for the secured debt. Excludes unamortized deferred financing costs on the unsecured revolving credit facility.
|
|
Percentage of Total Debt
(1)
|
|
Weighted Average Interest Rate
(1)
|
||||||||
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured
(2)
|
86.8
|
%
|
|
85.6
|
%
|
|
4.1
|
%
|
|
4.2
|
%
|
Secured
|
13.2
|
%
|
|
14.4
|
%
|
|
4.4
|
%
|
|
4.4
|
%
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
7.8
|
%
|
|
—
|
%
|
|
2.9
|
%
|
|
—
|
%
|
Fixed-rate
(2)
|
92.2
|
%
|
|
100.0
|
%
|
|
4.2
|
%
|
|
4.2
|
%
|
Stated rate
(2)
|
|
|
|
|
4.1
|
%
|
|
4.2
|
%
|
||
GAAP effective rate
(3)
|
|
|
|
|
4.1
|
%
|
|
4.2
|
%
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
4.3
|
%
|
|
4.4
|
%
|
(1)
|
As of the end of the period presented.
|
(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.
|
•
|
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 and Term Loan Facility (as defined in the applicable Credit Agreements)
(1)
:
|
|
Covenant Level
|
|
Actual Performance
as of March 31, 2018
|
Total debt to total asset value
|
|
less than 60%
|
|
27%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
3.6x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
3.53x
|
Unencumbered asset pool debt service coverage
|
|
greater than 1.75x
|
|
4.99x
|
|
|
|
|
|
Unsecured Senior Notes due 2020, 2023, 2024, 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%
|
|
4%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
315%
|
(1)
|
As of
March 31, 2018
, the covenant performance under the Unsecured Senior Notes Series A and B due 2027 and 2029 (“private placement notes”), was substantially similar to the Facility; however, the unsecured debt ratio under the private placement notes was
3.15x
reflecting definitional differences on unencumbered value. The Operating Partnership was in compliance under the credit agreement of the private placement notes as of
March 31, 2018
.
|
|
Three Months Ended March 31,
|
|||||||||||||
|
2018
|
|
2017
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|
|
|||||||||||
Net cash provided by operating activities
|
$
|
94,109
|
|
|
$
|
96,375
|
|
|
$
|
(2,266
|
)
|
|
(2.4
|
)%
|
Net cash used in investing activities
|
(247,655
|
)
|
|
(86,388
|
)
|
|
(161,267
|
)
|
|
186.7
|
%
|
|||
Net cash provided by financing activities
|
139,817
|
|
|
225,474
|
|
|
(85,657
|
)
|
|
(38.0
|
)%
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Net income available to common stockholders
|
$
|
36,246
|
|
|
$
|
26,329
|
|
Adjustments:
|
|
|
|
||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
751
|
|
|
623
|
|
||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
3,974
|
|
|
3,133
|
|
||
Depreciation and amortization of real estate assets
|
61,677
|
|
|
59,734
|
|
||
Gains on sales of depreciable real estate
|
—
|
|
|
(2,257
|
)
|
||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
|
(6,363
|
)
|
|
(5,628
|
)
|
||
Funds From Operations
(1)(2)
|
$
|
96,285
|
|
|
$
|
81,934
|
|
(1)
|
Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
|
(2)
|
FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of
$4.3 million
and
$3.7 million
for the
three
months ended
March 31, 2018
and
2017
, 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
(1)
|
|
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
|
|||||
January 1, 2018 - January 31, 2018
|
|
80,722
|
|
|
$
|
71.75
|
|
|
—
|
|
|
—
|
|
February 1, 2018 - February 28, 2018
|
|
111,473
|
|
|
68.25
|
|
|
—
|
|
|
—
|
|
|
March 1, 2018 - March 31, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
192,195
|
|
|
$
|
69.72
|
|
|
—
|
|
|
—
|
|
(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
|
|
|
|
|
|
3.(i)2
|
|
|
|
|
|
3.(i)3
|
|
|
|
|
|
3.(i)(4)
|
|
|
|
|
|
3.(i)(5)
|
|
|
|
|
|
3.(ii)1
|
|
|
|
|
|
3.(ii)2
|
|
|
|
|
|
10.1†*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
31.3*
|
|
|
|
|
|
31.4*
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
32.2*
|
|
|
|
|
|
32.3*
|
|
|
|
|
|
32.4*
|
|
|
|
|
|
101.1
|
|
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended March 31, 2018, 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 and Chief Accounting Officer
(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 and Chief Accounting Officer
(Principal Accounting Officer)
|
Cash Compensation
|
|
||
Annual Retainer
|
$
|
55,000
|
|
Additional Lead Independent Director Retainer
|
$
|
50,000
|
|
Additional Committee Member Retainers
|
|
||
Audit Committee
|
$
|
10,000
|
|
Executive Compensation Committee
|
$
|
10,000
|
|
Nominating/Corporate Governance Committee
|
$
|
5,000
|
|
Corporate Social Responsibility and Sustainability Committee
|
$
|
5,000
|
|
Succession Planning Committee
|
$
|
5,000
|
|
Additional Committee Chair Retainers
|
|
||
Audit Committee Chair
|
$
|
20,000
|
|
Executive Compensation Committee Chair
|
$
|
20,000
|
|
Nominating/Corporate Governance Committee Chair
|
$
|
10,000
|
|
Corporate Social Responsibility and Sustainability Committee
|
$
|
10,000
|
|
Succession Planning Committee
|
$
|
10,000
|
|
|
|
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Equity Compensation
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Annual Equity Award Value
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$
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100,000
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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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):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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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.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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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):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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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.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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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):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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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.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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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):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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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.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 2018
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Date:
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April 26, 2018
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 2018
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Date:
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April 26, 2018
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
March 31, 2018
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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Date:
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April 26, 2018
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended
March 31, 2018
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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Date:
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April 26, 2018
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