☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
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.)
|
(Registrant's telephone number, including area code)
|
||
|
|
|
N/A
|
||
(Former name, former address and former fiscal year, if changed since last report)
|
Securities registered pursuant to Section 12(b) of the Act:
|
|||
Registrant
|
Title of each class
|
Name of each exchange on which registered
|
Ticker Symbol
|
Kilroy Realty Corporation
|
Common Stock, $.01 par value
|
New York Stock Exchange
|
KRC
|
Securities registered pursuant to Section 12(g) of the Act:
|
|
Registrant
|
Title of each class
|
Kilroy Realty, L.P.
|
Common Units Representing Limited Partnership Interests
|
•
|
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 13, Net Income Available to Common Stockholders Per Share of the Company;
|
◦
|
Note 14, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
|
◦
|
Note 15, Supplemental Cash Flow Information of the Company; and
|
◦
|
Note 16, 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.
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
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 September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
REVENUES (Note 1)
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
212,321
|
|
|
$
|
162,288
|
|
|
$
|
609,332
|
|
|
$
|
489,674
|
|
Tenant reimbursements
|
—
|
|
|
21,754
|
|
|
—
|
|
|
60,471
|
|
||||
Other property income
|
3,204
|
|
|
2,520
|
|
|
7,887
|
|
|
6,311
|
|
||||
Total revenues
|
215,525
|
|
|
186,562
|
|
|
617,219
|
|
|
556,456
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses (Note 1)
|
41,308
|
|
|
35,163
|
|
|
117,993
|
|
|
99,401
|
|
||||
Real estate taxes
|
19,998
|
|
|
17,462
|
|
|
56,563
|
|
|
52,421
|
|
||||
Provision for bad debts (Note 1)
|
—
|
|
|
1,338
|
|
|
—
|
|
|
6,714
|
|
||||
Ground leases (Notes 1 and 11)
|
2,049
|
|
|
1,579
|
|
|
6,135
|
|
|
4,726
|
|
||||
General and administrative expenses
|
22,576
|
|
|
19,277
|
|
|
65,774
|
|
|
56,599
|
|
||||
Leasing costs (Note 1)
|
1,192
|
|
|
—
|
|
|
5,599
|
|
|
—
|
|
||||
Depreciation and amortization
|
69,230
|
|
|
62,700
|
|
|
203,617
|
|
|
189,421
|
|
||||
Total expenses
|
156,353
|
|
|
137,519
|
|
|
455,681
|
|
|
409,282
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gain (Note 12)
|
761
|
|
|
342
|
|
|
3,205
|
|
|
1,147
|
|
||||
Interest expense (Note 5)
|
(11,635
|
)
|
|
(11,075
|
)
|
|
(34,605
|
)
|
|
(37,285
|
)
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
—
|
|
|
—
|
|
|
7,169
|
|
|
—
|
|
||||
Total other (expenses) income
|
(10,874
|
)
|
|
(10,733
|
)
|
|
(24,231
|
)
|
|
(36,138
|
)
|
||||
NET INCOME
|
48,298
|
|
|
38,310
|
|
|
137,307
|
|
|
111,036
|
|
||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
(852
|
)
|
|
(691
|
)
|
|
(2,423
|
)
|
|
(2,008
|
)
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
(3,600
|
)
|
|
(3,219
|
)
|
|
(11,941
|
)
|
|
(10,833
|
)
|
||||
Total income attributable to noncontrolling interests
|
(4,452
|
)
|
|
(3,910
|
)
|
|
(14,364
|
)
|
|
(12,841
|
)
|
||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
43,846
|
|
|
$
|
34,400
|
|
|
$
|
122,943
|
|
|
$
|
98,195
|
|
Net income available to common stockholders per share – basic (Note 13)
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
1.19
|
|
|
$
|
0.97
|
|
Net income available to common stockholders per share – diluted (Note 13)
|
$
|
0.41
|
|
|
$
|
0.33
|
|
|
$
|
1.18
|
|
|
$
|
0.97
|
|
Weighted average common shares outstanding – basic (Note 13)
|
104,841,176
|
|
|
100,676,778
|
|
|
102,252,739
|
|
|
99,711,312
|
|
||||
Weighted average common shares outstanding – diluted (Note 13)
|
105,359,904
|
|
|
101,228,334
|
|
|
102,872,436
|
|
|
100,208,645
|
|
|
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, 2018
|
100,746,988
|
|
|
$
|
1,007
|
|
|
$
|
3,976,953
|
|
|
$
|
(48,053
|
)
|
|
$
|
3,929,907
|
|
|
$
|
271,354
|
|
|
$
|
4,201,261
|
|
Net income
|
|
|
|
|
|
|
36,903
|
|
|
36,903
|
|
|
4,891
|
|
|
41,794
|
|
|||||||||
Opening adjustment to Distributions in Excess of Earnings upon adoption of ASC 842 (Note 1)
|
|
|
|
|
|
|
(3,146
|
)
|
|
(3,146
|
)
|
|
|
|
(3,146
|
)
|
||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
2,210
|
|
|
|
|
2,210
|
|
|
|
|
2,210
|
|
||||||||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
|
|
8,817
|
|
|
|
|
8,817
|
|
|
|
|
8,817
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
393,240
|
|
|
4
|
|
|
(4
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase of common stock, stock options and restricted stock units
|
(175,204
|
)
|
|
(1
|
)
|
|
(12,129
|
)
|
|
|
|
(12,130
|
)
|
|
|
|
(12,130
|
)
|
||||||||
Exchange of common units of the Operating Partnership
|
2,000
|
|
|
—
|
|
|
78
|
|
|
|
|
78
|
|
|
(78
|
)
|
|
—
|
|
|||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(6,309
|
)
|
|
(6,309
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
279
|
|
|
|
|
279
|
|
|
(279
|
)
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.455 per share/unit)
|
|
|
|
|
|
|
(48,394
|
)
|
|
(48,394
|
)
|
|
(921
|
)
|
|
(49,315
|
)
|
|||||||||
BALANCE AS OF MARCH 31, 2019
|
100,967,024
|
|
|
1,010
|
|
|
3,976,204
|
|
|
(62,690
|
)
|
|
3,914,524
|
|
|
268,658
|
|
|
4,183,182
|
|
||||||
Net income
|
|
|
|
|
|
|
42,194
|
|
|
42,194
|
|
|
5,021
|
|
|
47,215
|
|
|||||||||
Issuance of share-based compensation awards
|
|
|
|
|
820
|
|
|
|
|
820
|
|
|
|
|
820
|
|
||||||||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
|
|
8,732
|
|
|
|
|
8,732
|
|
|
|
|
8,732
|
|
||||||||||
Exercise of stock options
|
1,500
|
|
|
—
|
|
|
64
|
|
|
|
|
64
|
|
|
|
|
64
|
|
||||||||
Settlement of restricted stock units for shares of common stock
|
16,270
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase and cancellation of common stock, stock options, and restricted stock units
|
(12,759
|
)
|
|
—
|
|
|
(793
|
)
|
|
|
|
(793
|
)
|
|
|
|
(793
|
)
|
||||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(1,487
|
)
|
|
(1,487
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(160
|
)
|
|
|
|
(160
|
)
|
|
160
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.485 per share/unit)
|
|
|
|
|
|
|
(49,849
|
)
|
|
(49,849
|
)
|
|
(981
|
)
|
|
(50,830
|
)
|
|||||||||
BALANCE AS OF JUNE 30, 2019
|
100,972,035
|
|
|
1,010
|
|
|
3,984,867
|
|
|
(70,345
|
)
|
|
3,915,532
|
|
|
271,371
|
|
|
4,186,903
|
|
||||||
Net income
|
|
|
|
|
|
|
43,846
|
|
|
43,846
|
|
|
4,452
|
|
|
48,298
|
|
|||||||||
Issuance of common stock (Note 6)
|
5,000,000
|
|
|
50
|
|
|
353,854
|
|
|
|
|
353,904
|
|
|
|
|
353,904
|
|
||||||||
Issuance of share-based compensation awards
|
|
|
|
|
839
|
|
|
|
|
839
|
|
|
|
|
839
|
|
||||||||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
|
|
6,808
|
|
|
|
|
6,808
|
|
|
|
|
6,808
|
|
||||||||||
Exercise of stock options
|
15,000
|
|
|
—
|
|
|
639
|
|
|
|
|
639
|
|
|
|
|
639
|
|
||||||||
Settlement of restricted stock units for shares of common stock
|
46,149
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase and cancellation of common stock, stock options, and restricted stock units
|
(21,268
|
)
|
|
(1
|
)
|
|
(1,651
|
)
|
|
|
|
(1,652
|
)
|
|
|
|
(1,652
|
)
|
||||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(3,041
|
)
|
|
(3,041
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(3,059
|
)
|
|
|
|
(3,059
|
)
|
|
3,059
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.485 per share/unit)
|
|
|
|
|
|
|
(52,208
|
)
|
|
(52,208
|
)
|
|
(981
|
)
|
|
(53,189
|
)
|
|||||||||
BALANCE AS OF SEPTEMBER 30, 2019
|
106,011,916
|
|
|
$
|
1,060
|
|
|
$
|
4,342,296
|
|
|
$
|
(78,707
|
)
|
|
$
|
4,264,649
|
|
|
$
|
274,860
|
|
|
$
|
4,539,509
|
|
|
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
|
|
||||||
Net income
|
|
|
|
|
|
|
27,549
|
|
|
27,549
|
|
|
4,206
|
|
|
31,755
|
|
|||||||||
Issuance of common stock
|
1,719,195
|
|
|
17
|
|
|
124,130
|
|
|
|
|
124,147
|
|
|
|
|
124,147
|
|
||||||||
Issuance of share-based compensation awards
|
|
|
|
|
589
|
|
|
|
|
589
|
|
|
|
|
589
|
|
||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
11,503
|
|
|
|
|
11,503
|
|
|
|
|
11,503
|
|
||||||||||
Exercise of stock options
|
1,000
|
|
|
—
|
|
|
41
|
|
|
|
|
41
|
|
|
|
|
41
|
|
||||||||
Exchange of common units of the Operating Partnership
|
—
|
|
|
1
|
|
|
—
|
|
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(4,288
|
)
|
|
(4,288
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(1,359
|
)
|
|
|
|
(1,359
|
)
|
|
1,359
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.455 per share/unit)
|
|
|
|
|
|
|
(46,403
|
)
|
|
(46,403
|
)
|
|
(943
|
)
|
|
(47,346
|
)
|
|||||||||
BALANCE AS OF JUNE 30, 2018
|
100,559,903
|
|
|
1,006
|
|
|
3,951,289
|
|
|
(149,368
|
)
|
|
3,802,927
|
|
|
260,946
|
|
|
4,063,873
|
|
||||||
Net income
|
|
|
|
|
|
|
34,400
|
|
|
34,400
|
|
|
3,910
|
|
|
38,310
|
|
|||||||||
Issuance of common stock
|
98,000
|
|
|
1
|
|
|
6,596
|
|
|
|
|
6,597
|
|
|
|
|
6,597
|
|
||||||||
Issuance of share-based compensation awards
|
|
|
|
|
845
|
|
|
|
|
845
|
|
|
|
|
845
|
|
||||||||||
Non-cash amortization of share-based compensation
|
|
|
|
|
8,081
|
|
|
|
|
8,081
|
|
|
|
|
8,081
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
83,287
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||||
Repurchase of common stock, stock options and restricted stock units
|
(39,605
|
)
|
|
|
|
(2,911
|
)
|
|
|
|
(2,911
|
)
|
|
|
|
(2,911
|
)
|
|||||||||
Exchange of common units of the Operating Partnership
|
45,403
|
|
|
|
|
1,717
|
|
|
|
|
1,717
|
|
|
(1,717
|
)
|
|
—
|
|
||||||||
Contributions from noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
8,273
|
|
|
8,273
|
|
||||||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(541
|
)
|
|
(541
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(212
|
)
|
|
|
|
(212
|
)
|
|
212
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.455 per share/unit)
|
|
|
|
|
|
|
(46,686
|
)
|
|
(46,686
|
)
|
|
(922
|
)
|
|
(47,608
|
)
|
|||||||||
BALANCE AS OF SEPTEMBER 30, 2018
|
100,746,988
|
|
|
$
|
1,007
|
|
|
$
|
3,965,405
|
|
|
$
|
(161,654
|
)
|
|
$
|
3,804,758
|
|
|
$
|
270,161
|
|
|
$
|
4,074,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
137,307
|
|
|
$
|
111,036
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
199,967
|
|
|
186,242
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
3,650
|
|
|
3,179
|
|
||
(Recoveries of) provision for bad debts and write-offs (Note 1)
|
(3,685
|
)
|
|
6,714
|
|
||
Non-cash amortization of share-based compensation awards
|
20,200
|
|
|
18,901
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
911
|
|
|
816
|
|
||
Non-cash amortization of net below market rents
|
(6,241
|
)
|
|
(7,647
|
)
|
||
Gain on sale of depreciable operating properties (Note 3)
|
(7,169
|
)
|
|
—
|
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(14,947
|
)
|
|
(13,680
|
)
|
||
Straight-line rents
|
(48,725
|
)
|
|
(16,293
|
)
|
||
Amortization of right of use ground lease assets
|
453
|
|
|
—
|
|
||
Net change in other operating assets
|
(24,752
|
)
|
|
(9,163
|
)
|
||
Net change in other operating liabilities
|
44,421
|
|
|
37,110
|
|
||
Net cash provided by operating activities
|
301,390
|
|
|
317,215
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(554,951
|
)
|
|
(311,347
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(40,027
|
)
|
|
(311,299
|
)
|
||
Expenditures for operating properties and other capital assets
|
(99,479
|
)
|
|
(107,825
|
)
|
||
Expenditures for acquisition of operating properties
|
—
|
|
|
(111,029
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
17,271
|
|
|
—
|
|
||
Net (increase) decrease in acquisition-related deposits (Note 4)
|
(49,998
|
)
|
|
21,000
|
|
||
Proceeds received from repayment of note receivable
|
—
|
|
|
15,100
|
|
||
Net cash used in investing activities
|
(727,184
|
)
|
|
(805,400
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock
|
353,904
|
|
|
130,744
|
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
499,390
|
|
|
50,000
|
|
||
Borrowings on unsecured revolving credit facility (Note 5)
|
630,000
|
|
|
645,000
|
|
||
Repayments on unsecured revolving credit facility (Note 5)
|
(675,000
|
)
|
|
(285,000
|
)
|
||
Borrowings on unsecured debt
|
—
|
|
|
120,000
|
|
||
Principal payments and repayments of secured debt (Note 5)
|
(75,844
|
)
|
|
(2,670
|
)
|
||
Financing costs
|
(5,548
|
)
|
|
(2,278
|
)
|
||
Repurchase of common stock and restricted stock units
|
(14,269
|
)
|
|
(16,553
|
)
|
||
Proceeds from exercise of stock options
|
703
|
|
|
41
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(10,844
|
)
|
|
(7,014
|
)
|
||
Contributions from noncontrolling interests in consolidated property partnerships
|
—
|
|
|
8,273
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(143,812
|
)
|
|
(132,639
|
)
|
||
Net cash provided by financing activities
|
558,680
|
|
|
507,904
|
|
||
Net increase in cash and cash equivalents and restricted cash
|
132,886
|
|
|
19,719
|
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
171,034
|
|
|
66,798
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
303,920
|
|
|
$
|
86,517
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
REVENUES (Note 1)
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
212,321
|
|
|
$
|
162,288
|
|
|
$
|
609,332
|
|
|
$
|
489,674
|
|
Tenant reimbursements
|
—
|
|
|
21,754
|
|
|
—
|
|
|
60,471
|
|
||||
Other property income
|
3,204
|
|
|
2,520
|
|
|
7,887
|
|
|
6,311
|
|
||||
Total revenues
|
215,525
|
|
|
186,562
|
|
|
617,219
|
|
|
556,456
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses (Note 1)
|
41,308
|
|
|
35,163
|
|
|
117,993
|
|
|
99,401
|
|
||||
Real estate taxes
|
19,998
|
|
|
17,462
|
|
|
56,563
|
|
|
52,421
|
|
||||
Provision for bad debts (Note 1)
|
—
|
|
|
1,338
|
|
|
—
|
|
|
6,714
|
|
||||
Ground leases (Note 1 and 11)
|
2,049
|
|
|
1,579
|
|
|
6,135
|
|
|
4,726
|
|
||||
General and administrative expenses
|
22,576
|
|
|
19,277
|
|
|
65,774
|
|
|
56,599
|
|
||||
Leasing costs (Note 1)
|
1,192
|
|
|
—
|
|
|
5,599
|
|
|
—
|
|
||||
Depreciation and amortization
|
69,230
|
|
|
62,700
|
|
|
203,617
|
|
|
189,421
|
|
||||
Total expenses
|
156,353
|
|
|
137,519
|
|
|
455,681
|
|
|
409,282
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gain (Note 12)
|
761
|
|
|
342
|
|
|
3,205
|
|
|
1,147
|
|
||||
Interest expense (Note 5)
|
(11,635
|
)
|
|
(11,075
|
)
|
|
(34,605
|
)
|
|
(37,285
|
)
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
—
|
|
|
—
|
|
|
7,169
|
|
|
—
|
|
||||
Total other (expenses) income
|
(10,874
|
)
|
|
(10,733
|
)
|
|
(24,231
|
)
|
|
(36,138
|
)
|
||||
NET INCOME
|
48,298
|
|
|
38,310
|
|
|
137,307
|
|
|
111,036
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries
|
(3,709
|
)
|
|
(3,317
|
)
|
|
(12,309
|
)
|
|
(11,135
|
)
|
||||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
44,589
|
|
|
$
|
34,993
|
|
|
$
|
124,998
|
|
|
$
|
99,901
|
|
Net income available to common unitholders per unit – basic (Note 14)
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
1.18
|
|
|
$
|
0.97
|
|
Net income available to common unitholders per unit – diluted (Note 14)
|
$
|
0.41
|
|
|
$
|
0.33
|
|
|
$
|
1.18
|
|
|
$
|
0.96
|
|
Weighted average common units outstanding – basic (Note 14)
|
106,864,463
|
|
|
102,721,806
|
|
|
104,276,187
|
|
|
101,773,540
|
|
||||
Weighted average common units outstanding – diluted (Note 14)
|
107,383,191
|
|
|
103,273,362
|
|
|
104,895,884
|
|
|
102,270,873
|
|
|
Partners’ Capital
|
|
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
|
|
|
|||||||||
|
Number of
Common
Units
|
|
Common
Units
|
|
Total
Capital
|
|||||||||
BALANCE AS OF DECEMBER 31, 2018
|
102,772,275
|
|
|
$
|
4,003,700
|
|
|
$
|
197,561
|
|
|
$
|
4,201,261
|
|
Net income
|
|
|
37,508
|
|
|
4,286
|
|
|
41,794
|
|
||||
Opening adjustment to Partners’ Capital upon adoption of ASC 842 (Note 1)
|
|
|
(3,146
|
)
|
|
|
|
(3,146
|
)
|
|||||
Issuance of share-based compensation awards
|
|
|
2,210
|
|
|
|
|
2,210
|
|
|||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
8,817
|
|
|
|
|
8,817
|
|
|||||
Settlement of restricted stock units
|
393,240
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase of common units, stock options and restricted stock units
|
(175,204
|
)
|
|
(12,130
|
)
|
|
|
|
(12,130
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(6,309
|
)
|
|
(6,309
|
)
|
|||||
Distributions declared per common unit ($0.455 per unit)
|
|
|
(49,315
|
)
|
|
|
|
(49,315
|
)
|
|||||
BALANCE AS OF MARCH 31, 2019
|
102,990,311
|
|
|
3,987,644
|
|
|
195,538
|
|
|
4,183,182
|
|
|||
Net income
|
|
|
42,901
|
|
|
4,314
|
|
|
47,215
|
|
||||
Issuance of share-based compensation awards
|
|
|
820
|
|
|
|
|
820
|
|
|||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
8,732
|
|
|
|
|
8,732
|
|
|||||
Exercise of stock options
|
1,500
|
|
|
64
|
|
|
|
|
64
|
|
||||
Settlement of restricted stock units
|
16,270
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase and cancellation of common units, stock options, and restricted stock units
|
(12,759
|
)
|
|
(793
|
)
|
|
|
|
(793
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(1,487
|
)
|
|
(1,487
|
)
|
|||||
Distributions declared per common unit ($0.485 per unit)
|
|
|
(50,830
|
)
|
|
|
|
(50,830
|
)
|
|||||
BALANCE AS OF JUNE 30, 2019
|
102,995,322
|
|
|
3,988,538
|
|
|
198,365
|
|
|
4,186,903
|
|
|||
Net income
|
|
|
44,589
|
|
|
3,709
|
|
|
48,298
|
|
||||
Issuance of common units (Note 6)
|
5,000,000
|
|
|
353,904
|
|
|
|
|
353,904
|
|
||||
Issuance of share-based compensation awards
|
—
|
|
|
839
|
|
|
|
|
839
|
|
||||
Non-cash amortization of share-based compensation (Note 9)
|
|
|
6,808
|
|
|
|
|
6,808
|
|
|||||
Exercise of stock options
|
15,000
|
|
|
639
|
|
|
|
|
639
|
|
||||
Settlement of restricted stock units
|
46,149
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase and cancellation of common units, stock options, and restricted stock units
|
(21,268
|
)
|
|
(1,652
|
)
|
|
|
|
(1,652
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(3,041
|
)
|
|
(3,041
|
)
|
|||||
Distributions declared per common unit ($0.485 per unit)
|
|
|
(53,189
|
)
|
|
|
|
(53,189
|
)
|
|||||
BALANCE AS OF SEPTEMBER 30, 2019
|
108,035,203
|
|
|
$
|
4,340,476
|
|
|
$
|
199,033
|
|
|
$
|
4,539,509
|
|
|
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
|
|
|||
Net income
|
|
|
28,015
|
|
|
3,740
|
|
|
31,755
|
|
||||
Issuance of common units
|
1,719,195
|
|
|
124,147
|
|
|
|
|
124,147
|
|
||||
Issuance of share-based compensation awards
|
|
|
589
|
|
|
|
|
589
|
|
|||||
Non-cash amortization of share-based compensation
|
|
|
11,503
|
|
|
|
|
11,503
|
|
|||||
Exercise of stock options
|
1,000
|
|
|
41
|
|
|
|
|
41
|
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(4,288
|
)
|
|
(4,288
|
)
|
|||||
Distributions declared per common unit ($0.455 per unit)
|
|
|
(47,346
|
)
|
|
|
|
(47,346
|
)
|
|||||
BALANCE AS OF JUNE 30, 2018
|
102,630,593
|
|
|
3,876,145
|
|
|
187,728
|
|
|
4,063,873
|
|
|||
Net income
|
|
|
34,993
|
|
|
3,317
|
|
|
38,310
|
|
||||
Issuance of common units
|
98,000
|
|
|
6,597
|
|
|
|
|
6,597
|
|
||||
Issuance of share-based compensation awards
|
|
|
845
|
|
|
|
|
845
|
|
|||||
Non-cash amortization of share-based compensation
|
|
|
8,081
|
|
|
|
|
8,081
|
|
|||||
Settlement of restricted stock units
|
83,287
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase of common units, stock options and restricted stock units
|
(39,605
|
)
|
|
(2,911
|
)
|
|
|
|
(2,911
|
)
|
||||
Contributions from noncontrolling interests in consolidated property partnerships
|
|
|
|
|
8,273
|
|
|
8,273
|
|
|||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(541
|
)
|
|
(541
|
)
|
|||||
Distributions declared per common unit ($0.455 per unit)
|
|
|
(47,608
|
)
|
|
|
|
(47,608
|
)
|
|||||
BALANCE AS OF SEPTEMBER 30, 2018
|
102,772,275
|
|
|
$
|
3,876,142
|
|
|
$
|
198,777
|
|
|
$
|
4,074,919
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
137,307
|
|
|
$
|
111,036
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
199,967
|
|
|
186,242
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
3,650
|
|
|
3,179
|
|
||
(Recoveries of) provision for bad debts and write-offs (Note 1)
|
(3,685
|
)
|
|
6,714
|
|
||
Non-cash amortization of share-based compensation awards
|
20,200
|
|
|
18,901
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
911
|
|
|
816
|
|
||
Non-cash amortization of net below market rents
|
(6,241
|
)
|
|
(7,647
|
)
|
||
Gain on sale of depreciable operating properties (Note 3)
|
(7,169
|
)
|
|
—
|
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(14,947
|
)
|
|
(13,680
|
)
|
||
Straight-line rents
|
(48,725
|
)
|
|
(16,293
|
)
|
||
Amortization of right of use ground lease assets
|
453
|
|
|
—
|
|
||
Net change in other operating assets
|
(24,752
|
)
|
|
(9,163
|
)
|
||
Net change in other operating liabilities
|
44,421
|
|
|
37,110
|
|
||
Net cash provided by operating activities
|
301,390
|
|
|
317,215
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(554,951
|
)
|
|
(311,347
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(40,027
|
)
|
|
(311,299
|
)
|
||
Expenditures for operating properties and other capital assets
|
(99,479
|
)
|
|
(107,825
|
)
|
||
Expenditures for acquisition of operating properties
|
—
|
|
|
(111,029
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
17,271
|
|
|
—
|
|
||
Net decrease in acquisition-related deposits (Note 4)
|
(49,998
|
)
|
|
21,000
|
|
||
Proceeds received from repayment of note receivable
|
—
|
|
|
15,100
|
|
||
Net cash used in investing activities
|
(727,184
|
)
|
|
(805,400
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common units
|
353,904
|
|
|
130,744
|
|
||
Proceeds from the issuance of unsecured debt (Note 5)
|
499,390
|
|
|
50,000
|
|
||
Borrowings on unsecured revolving credit facility (Note 5)
|
630,000
|
|
|
645,000
|
|
||
Repayments on unsecured revolving credit facility (Note 5)
|
(675,000
|
)
|
|
(285,000
|
)
|
||
Borrowings on unsecured debt
|
—
|
|
|
120,000
|
|
||
Principal payments and repayments of secured debt (Note 5)
|
(75,844
|
)
|
|
(2,670
|
)
|
||
Financing costs
|
(5,548
|
)
|
|
(2,278
|
)
|
||
Repurchase of common units and restricted stock units
|
(14,269
|
)
|
|
(16,553
|
)
|
||
Proceeds from exercise of stock options
|
703
|
|
|
41
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(10,844
|
)
|
|
(7,014
|
)
|
||
Contributions from noncontrolling interests in consolidated property partnerships
|
—
|
|
|
8,273
|
|
||
Distributions paid to common unitholders
|
(143,812
|
)
|
|
(132,639
|
)
|
||
Net cash provided by financing activities
|
558,680
|
|
|
507,904
|
|
||
Net decrease in cash and cash equivalents and restricted cash
|
132,886
|
|
|
19,719
|
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
171,034
|
|
|
66,798
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
303,920
|
|
|
$
|
86,517
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage
Occupied
|
|
Percentage Leased
|
|||||
Stabilized Office Properties
|
93
|
|
|
13,322,212
|
|
|
438
|
|
|
92.1
|
%
|
|
97.3
|
%
|
|
Number of
Buildings |
|
Number of
Units
|
|
2019 Average Occupancy
|
|||
Stabilized Residential Property
|
1
|
|
|
200
|
|
|
78.5
|
%
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet (1) / Units
|
|
Properties held for sale (2)
|
1
|
|
271,556
|
|
Completed residential development project (3)
|
1
|
|
237 units
|
|
In-process development projects - tenant improvement (4)
|
2
|
|
846,000
|
|
In-process development projects - under construction (5)
|
6
|
|
2,295,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
See Note 3 “Dispositions and Real Estate Held for Sale” for additional information.
|
(3)
|
Represents our recently completed residential units that are not yet stabilized.
|
(4)
|
Includes 96,000 square feet of retail space.
|
(5)
|
In addition to the estimated office rentable square feet noted above, development projects under construction also include 564 residential units.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
September 30, 2019
|
|
September 30, 2019
|
||||
|
(in thousands)
|
||||||
Fixed lease payments
|
$
|
181,851
|
|
|
$
|
526,678
|
|
Variable lease payments
|
30,470
|
|
|
82,654
|
|
||
Total rental income
|
$
|
212,321
|
|
|
$
|
609,332
|
|
Property
|
|
Date of Acquisition
|
|
Submarket
|
|
Type
|
|
Purchase Price (in millions) (1)
|
||
1335 Broadway & 901 Park Boulevard, San Diego, CA
|
|
August 19, 2019
|
|
East Village
|
|
Land
|
|
$
|
40.0
|
|
(1)
|
Excludes acquisition-related costs.
|
Property
|
|
Month of Disposition
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
Sales Price
(in millions) (1)
|
|||
2829 Townsgate Road, Thousand Oaks, CA
|
|
May
|
|
1
|
|
84,098
|
|
|
$
|
18.3
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gross sales price before the impact of broker commissions and closing costs.
|
Property
|
|
Submarket
|
|
Property Type
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
2211 Michelson Drive, Irvine, CA
|
|
Orange County
|
|
Office
|
|
1
|
|
271,556
|
|
|
|
|
|
|
|
|
|
|
Real estate assets and other assets held for sale
|
(in thousands)
|
||
Land and improvements
|
$
|
9,319
|
|
Buildings and improvements
|
90,147
|
|
|
Total real estate held for sale
|
99,466
|
|
|
Accumulated depreciation and amortization
|
(29,420
|
)
|
|
Total real estate held for sale, net
|
70,046
|
|
|
Current receivables, net
|
79
|
|
|
Deferred rent receivables, net
|
1,288
|
|
|
Deferred leasing costs and acquisition-related intangibles, net
|
1,733
|
|
|
Prepaid expenses and other assets, net
|
4,605
|
|
|
Total real estate held for sale, net
|
$
|
77,751
|
|
|
|
||
Liabilities and deferred revenue of real estate assets held for sale
|
|
||
Accounts payable and accrued expenses and other
|
$
|
3,658
|
|
Deferred revenue and acquisition-related intangible liabilities, net
|
122
|
|
|
Rents received in advance and tenant security deposits
|
1,131
|
|
|
Liabilities and deferred revenue of real estate assets held for sale
|
$
|
4,911
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Furniture, fixtures and other long-lived assets, net (1)
|
$
|
36,192
|
|
|
$
|
36,833
|
|
Notes receivable, net (2)
|
1,598
|
|
|
2,113
|
|
||
Prepaid expenses & acquisition deposits (1)(3)
|
71,917
|
|
|
13,927
|
|
||
Total prepaid expenses and other assets, net
|
$
|
109,707
|
|
|
$
|
52,873
|
|
(1)
|
Excludes amounts related to properties held for sale as of September 30, 2019.
|
(2)
|
Notes receivable are shown net of a valuation allowance of approximately $3.6 million and $2.9 million as of September 30, 2019 and December 31, 2018, respectively.
|
(3)
|
Includes $50.0 million of non-refundable acquisition deposits related to an acquisition which closed on October 15, 2019. Refer to Note 17 “Subsequent Events” for additional information.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
45,000
|
|
Remaining borrowing capacity
|
750,000
|
|
|
705,000
|
|
||
Total borrowing capacity (1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate (2)
|
3.02
|
%
|
|
3.48
|
%
|
||
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 the contractual rate of LIBOR plus 1.000% as of September 30, 2019 and December 31, 2018.
|
(3)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of September 30, 2019 and December 31, 2018, $3.7 million and $4.7 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.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Remaining borrowing capacity
|
—
|
|
|
—
|
|
||
Total borrowing capacity (1)
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Interest rate (2)
|
3.13
|
%
|
|
3.49
|
%
|
||
Undrawn facility fee-annual rate (3)
|
0.200%
|
||||||
Maturity date
|
July 2022
|
(1)
|
As of September 30, 2019 and December 31, 2018, $0.7 million and $0.9 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(2)
|
Our unsecured term loan facility interest rate was calculated based on the contractual rate of LIBOR plus 1.100% as of September 30, 2019 and December 31, 2018.
|
(3)
|
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 2019
|
$
|
465
|
|
2020
|
5,137
|
|
|
2021
|
5,342
|
|
|
2022
|
155,554
|
|
|
2023
|
305,775
|
|
|
2024
|
431,006
|
|
|
Thereafter
|
2,431,688
|
|
|
Total aggregate principal value (1)
|
$
|
3,334,967
|
|
(1)
|
Includes gross principal balance of outstanding debt before the effect of the following at September 30, 2019: $21.1 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt and $6.7 million of unamortized discounts for the unsecured senior notes.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
32,220
|
|
|
$
|
30,231
|
|
|
$
|
95,507
|
|
|
$
|
85,834
|
|
Capitalized interest and deferred financing costs
|
(20,585
|
)
|
|
(19,156
|
)
|
|
(60,902
|
)
|
|
(48,549
|
)
|
||||
Interest expense
|
$
|
11,635
|
|
|
$
|
11,075
|
|
|
$
|
34,605
|
|
|
$
|
37,285
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|||
Company owned common units in the Operating Partnership
|
106,011,916
|
|
|
100,746,988
|
|
|
100,746,988
|
|
Company owned general partnership interest
|
98.1
|
%
|
|
98.0
|
%
|
|
98.0
|
%
|
Noncontrolling common units of the Operating Partnership
|
2,023,287
|
|
|
2,025,287
|
|
|
2,025,287
|
|
Ownership interest of noncontrolling interest
|
1.9
|
%
|
|
2.0
|
%
|
|
2.0
|
%
|
|
Fair Value Assumptions
|
Valuation date
|
February 1, 2019
|
Expected share price volatility
|
19.0%
|
Risk-free interest rate
|
2.48%
|
Fair value per share on valuation date
|
72.57
|
Year Ending
|
(in thousands)
|
||
Remaining 2019
|
$
|
145,027
|
|
2020
|
665,314
|
|
|
2021
|
703,649
|
|
|
2022
|
735,969
|
|
|
2023
|
717,898
|
|
|
2024
|
681,026
|
|
|
Thereafter
|
3,607,437
|
|
|
Total (1)
|
$
|
7,256,320
|
|
(1)
|
Excludes residential leases and leases with a term of one year or less.
|
Year Ending
|
(in thousands)
|
||
2019
|
$
|
566,783
|
|
2020
|
632,875
|
|
|
2021
|
631,835
|
|
|
2022
|
620,684
|
|
|
2023
|
586,371
|
|
|
Thereafter
|
3,240,143
|
|
|
Total (1)
|
$
|
6,278,691
|
|
(1)
|
Excludes residential leases and leases with a term of one year or less.
|
Property
|
Contractual Expiration Date (1)
|
601 108th Ave NE, Bellevue, WA
|
November 2093
|
701, 801 and 837 N. 34th Street, Seattle, WA (2)
|
December 2041
|
1701 Page Mill Road and 3150 Porter Drive, Palo Alto, CA
|
December 2067
|
Kilroy Airport Center Phases I, II, and III, Long Beach, CA
|
July 2084
|
(1)
|
Reflects the contractual expiration date prior to the impact of any extension or purchase options held by the Company.
|
(2)
|
The Company has three 10-year and one 45-year extension options for this ground lease, which if exercised would extend the expiration date to December 2116. These extensions options are not assumed to be exercised in our calculation of the present value of the future minimum lease payments for this lease.
|
Year Ending
|
(in thousands)
|
||
Remaining 2019
|
$
|
1,301
|
|
2020
|
5,205
|
|
|
2021
|
5,205
|
|
|
2022
|
5,205
|
|
|
2023
|
5,205
|
|
|
2024
|
5,205
|
|
|
Thereafter
|
229,339
|
|
|
Total undiscounted cash flows (1)(2)(3)(4)(5)
|
256,665
|
|
|
Present value discount
|
(169,048
|
)
|
|
Ground lease liabilities
|
$
|
87,617
|
|
(1)
|
Excludes contingent future rent payments based on gross income or adjusted gross income and reflects the minimum ground lease obligations before the impact of ground lease extension options.
|
(2)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years; however, the lease includes ground rent subprotection and infrastructure rent credits which currently limit our annual rental obligations to $1.0 million. The contractual obligations for that ground lease included above assumes the lesser of $1.0 million or annual lease rental obligation in effect as of September 30, 2019.
|
(3)
|
One of our ground lease obligations includes a component which is based on the percentage of gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every five years based on 50% of the average annual percentage rent for the previous five years. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at September 30, 2019 for the remainder of the lease term since we cannot predict future adjustments.
|
(4)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years based on a combination of CPI adjustments and third-party appraisals limited to maximum increases annually. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at September 30, 2019 for the remainder of the lease term since we cannot predict future adjustments.
|
(5)
|
One of our ground lease obligations includes a component which is based on the percentage of adjusted gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every ten years by an amount equal to 60% of the average annual percentage rent for the previous three years. The contractual obligations for this lease included above assume the current annual ground lease obligation in effect at September 30, 2019 for the remainder of the lease term since we cannot predict future adjustments.
|
Year Ending
|
(in thousands)
|
||
2019
|
$
|
5,154
|
|
2020
|
5,154
|
|
|
2021
|
5,154
|
|
|
2022
|
5,154
|
|
|
2023
|
5,154
|
|
|
Thereafter
|
233,619
|
|
|
Total (1)(2)(3)(4)(5)
|
$
|
259,389
|
|
(1)
|
Excludes contingent future rent payments based on gross income or adjusted gross income and reflects the minimum ground lease obligations before the impact of ground lease extension options.
|
(2)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years; however, the lease includes ground rent subprotection and infrastructure rent credits which currently limit our annual rental obligations to $1.0 million. The contractual obligations for that ground lease included above assumes the lesser of $1.0 million or annual lease rental obligation in effect as of December 31, 2018.
|
(3)
|
One of our ground lease obligations includes a component which is based on the percentage of gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every five years based on 50% of the average annual percentage rent for the previous five years. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at December 31, 2018 for the remainder of the lease term since we cannot predict future adjustments.
|
(4)
|
One of our ground lease obligations is subject to a fair market value adjustment every five years based on a combination of CPI adjustments and third-party appraisals limited to maximum increases annually. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at December 31, 2018 for the remainder of the lease term since we cannot predict future adjustments.
|
(5)
|
One of our ground lease obligations includes a component which is based on the percentage of adjusted gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every ten years by an amount equal to 60% of the average annual percentage rent for the previous three years. The contractual obligations for this lease included above assume the current annual ground lease obligation in effect at December 31, 2018 for the remainder of the lease term since we cannot predict future adjustments.
|
|
Fair Value (Level 1) (1)
|
||||||
|
September 30, 2019
|
|
December 31, 2018
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities (2)
|
$
|
26,188
|
|
|
$
|
21,779
|
|
(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 September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Description
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Net gain on marketable securities
|
$
|
673
|
|
|
$
|
271
|
|
|
$
|
2,898
|
|
|
$
|
289
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying
Value |
|
Fair
Value (1) |
|
Carrying
Value |
|
Fair
Value (1) |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt, net
|
$
|
259,027
|
|
|
$
|
271,224
|
|
|
$
|
335,531
|
|
|
$
|
335,885
|
|
Unsecured debt, net
|
$
|
3,048,209
|
|
|
$
|
3,245,743
|
|
|
$
|
2,552,070
|
|
|
$
|
2,546,386
|
|
Unsecured line of credit
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,000
|
|
|
$
|
45,058
|
|
(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 September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty Corporation
|
$
|
43,846
|
|
|
$
|
34,400
|
|
|
$
|
122,943
|
|
|
$
|
98,195
|
|
Allocation to participating securities (1)
|
(530
|
)
|
|
(507
|
)
|
|
(1,582
|
)
|
|
(1,492
|
)
|
||||
Numerator for basic and diluted net income available to common stockholders
|
$
|
43,316
|
|
|
$
|
33,893
|
|
|
$
|
121,361
|
|
|
$
|
96,703
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
104,841,176
|
|
|
100,676,778
|
|
|
102,252,739
|
|
|
99,711,312
|
|
||||
Effect of dilutive securities
|
518,728
|
|
|
551,556
|
|
|
619,697
|
|
|
497,333
|
|
||||
Diluted weighted average vested shares and common share equivalents outstanding
|
105,359,904
|
|
|
101,228,334
|
|
|
102,872,436
|
|
|
100,208,645
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
1.19
|
|
|
$
|
0.97
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.41
|
|
|
$
|
0.33
|
|
|
$
|
1.18
|
|
|
$
|
0.97
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands, except unit and per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty, L.P.
|
$
|
44,589
|
|
|
$
|
34,993
|
|
|
$
|
124,998
|
|
|
$
|
99,901
|
|
Allocation to participating securities (1)
|
(530
|
)
|
|
(507
|
)
|
|
(1,582
|
)
|
|
(1,492
|
)
|
||||
Numerator for basic and diluted net income available to common unitholders
|
$
|
44,059
|
|
|
$
|
34,486
|
|
|
$
|
123,416
|
|
|
$
|
98,409
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
106,864,463
|
|
|
102,721,806
|
|
|
104,276,187
|
|
|
101,773,540
|
|||||
Effect of dilutive securities
|
518,728
|
|
|
551,556
|
|
|
619,697
|
|
|
497,333
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
107,383,191
|
|
|
103,273,362
|
|
|
104,895,884
|
|
|
102,270,873
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
1.18
|
|
|
$
|
0.97
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.41
|
|
|
$
|
0.33
|
|
|
$
|
1.18
|
|
|
$
|
0.96
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $58,337 and $46,761 as of September 30, 2019 and 2018, respectively
|
$
|
28,139
|
|
|
$
|
32,175
|
|
Cash paid for amounts included in the measurement of ground lease liabilities
|
$
|
3,917
|
|
|
$
|
3,598
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
148,468
|
|
|
$
|
142,133
|
|
Assumption of accrued liabilities in connection with acquisitions
|
$
|
3,967
|
|
|
$
|
40,624
|
|
Tenant improvements funded directly by tenants
|
$
|
10,254
|
|
|
$
|
7,211
|
|
Initial measurement of operating right of use ground lease assets
|
$
|
82,938
|
|
|
$
|
—
|
|
Initial measurement of operating ground lease liabilities
|
$
|
87,409
|
|
|
$
|
—
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
53,205
|
|
|
$
|
47,411
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
78
|
|
|
$
|
1,962
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
51,604
|
|
|
$
|
57,649
|
|
Restricted cash at beginning of period
|
119,430
|
|
|
9,149
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
171,034
|
|
|
$
|
66,798
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
297,620
|
|
|
$
|
86,517
|
|
Restricted cash at end of period
|
6,300
|
|
|
—
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
303,920
|
|
|
$
|
86,517
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $58,337 and $46,761 as of September 30, 2019 and 2018, respectively
|
$
|
28,139
|
|
|
$
|
32,175
|
|
Cash paid for amounts included in the measurement of ground lease liabilities
|
$
|
3,917
|
|
|
$
|
3,598
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
148,468
|
|
|
$
|
142,133
|
|
Assumption of accrued liabilities in connection with acquisitions
|
$
|
3,967
|
|
|
$
|
40,624
|
|
Tenant improvements funded directly by tenants
|
$
|
10,254
|
|
|
$
|
7,211
|
|
Initial measurement of operating right of use ground lease assets
|
$
|
82,938
|
|
|
$
|
—
|
|
Initial measurement of operating ground lease liabilities
|
$
|
87,409
|
|
|
$
|
—
|
|
NON-CASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Accrual of distributions payable to common unitholders
|
$
|
53,205
|
|
|
$
|
47,411
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
51,604
|
|
|
$
|
57,649
|
|
Restricted cash at beginning of period
|
119,430
|
|
|
9,149
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
171,034
|
|
|
$
|
66,798
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
297,620
|
|
|
$
|
86,517
|
|
Restricted cash at end of period
|
6,300
|
|
|
—
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
303,920
|
|
|
$
|
86,517
|
|
•
|
100 Hooper, SOMA, San Francisco, California, which we commenced construction on in November 2016. This project encompasses 311,859 square feet of office and 82,481 square feet of production, distribution and repair (“PDR”) space spanning two buildings with a total estimated investment of approximately $275.0 million. The office portion of the project is 100% leased and occupied by Adobe Systems Inc. and the PDR space is 86% leased as of the date of this report. We commenced revenue recognition on the lease with Adobe Systems Inc. on October 1, 2018. Cash rents on Phase I of the lease commenced in March 2019 and the remaining phases will commence through the second quarter of 2020.
|
•
|
One Paseo (Residential Phase I) - Del Mar, San Diego, California. We commenced construction on the first phase of the residential component of this mixed-use project in December 2016 which includes 237 residential units. The total estimated investment for this phase of the residential component of the project is approximately $145.0 million. As of the date of this report, 33% of the units have been leased.
|
•
|
The Exchange on 16th, Mission Bay, San Francisco, California, which we commenced construction on in June 2015. This project totals 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 $585.0 million. The office space in the project is 100% leased to Dropbox, Inc. During the nine months ended September 30, 2019, we completed construction and commenced revenue recognition on the first phase of the project, representing approximately 52% of the project. The remaining space is currently expected to stabilize in the first quarter of 2020 and the third quarter of 2020. Cash rents on the remaining space will commence through the first quarter of 2020.
|
•
|
One Paseo (Retail) - Del Mar, San Diego, California. We commenced construction on the retail component of this mixed-use project in December 2016, which is comprised of approximately 96,000 square feet of retail space with a total estimated investment of $100.0 million. As of the date of this report, the retail space of the project was 100% leased and 81% occupied.
|
•
|
Kilroy Oyster Point (Phase I), South San Francisco, California. In March 2019, we commenced construction on Phase I of this 39-acre life science campus situated on the waterfront in South San Francisco. This first phase encompasses approximately 660,000 square feet of office space at a total estimated investment of $600.0 million. We currently expect the project to be delivered for tenant improvements in the second half of 2021.
|
•
|
9455 Towne Centre Drive, University Towne Center, San Diego, California. In March 2019, we commenced construction on this project which totals approximately 160,000 square feet of life science space at a total estimated investment of $125.0 million. We currently estimate the project to be delivered for tenant improvements mid-2020.
|
•
|
Netflix and Living // On Vine, Hollywood, Los Angeles, California. We commenced construction on the office component of this mixed-use project in January 2018, which includes the project’s overall infrastructure and site work and approximately 355,000 square feet of office space for a total estimated investment of $300.0 million. The office space is 100% leased to Netflix, Inc. We commenced construction on the residential component of the project in December 2018, which totals 193 residential units at a total estimated investment of $195.0 million. The office component is currently expected to be delivered and ready for tenant improvements in the first quarter of 2020 and the residential component is currently expected to be completed in the fourth quarter of 2020.
|
•
|
333 Dexter, South Lake Union, Seattle, Washington, which we commenced construction on in June 2017. This project totals approximately 635,000 square feet of office space at a total estimated investment of $410.0 million. During the nine months ended September 30, 2019, we executed a lease for 100% of the project with a Fortune 50 publicly traded company. Construction is currently in progress and the project is currently estimated to be stabilized in the second half of 2022.
|
•
|
One Paseo (Residential Phases II and III and Office) - Del Mar, San Diego, California. We commenced construction on the residential component of this mixed-use project in December 2016 of which Phases II and III comprise 371 residential units. The total estimated investment for Phases II and III of the residential component of the project is approximately $230.0 million. Phases II and III are expected to be completed and delivered in phases starting late in the fourth quarter of 2019 through the third quarter of 2020. We commenced construction on the office component of the project in December 2018, which encompasses 285,000 square feet of office space at a total estimated investment of $205.0 million. The office component of the project is currently expected to be delivered and ready for tenant improvements in the second quarter of 2020. As of the date of this report, the office component of the project is 76% leased.
|
•
|
2100 Kettner, Little Italy, San Diego, California, which we commenced construction on in September 2019. This project is comprised of approximately 200,000 square feet of office space for a total estimated investment of $140.0 million.
|
Future Development Pipeline
|
|
Location
|
|
Approx. Developable Square Feet (1)
|
|
Total Costs
as of 9/30/2019
($ in millions)(2)
|
||
|
|
|
|
|
|
|
||
San Diego County
|
|
|
|
|
|
|
||
Santa Fe Summit – Phases II and III
|
|
56 Corridor
|
|
600,000 - 650,000
|
|
$
|
80.0
|
|
1335 Broadway & 901 Park Boulevard
|
|
East Village
|
|
TBD
|
|
44.4
|
|
|
San Francisco Bay Area
|
|
|
|
|
|
|
||
Kilroy Oyster Point - Phase II - IV
|
|
South San Francisco
|
|
1,750,000 - 1,900,000
|
|
323.1
|
|
|
Flower Mart (3)
|
|
SOMA
|
|
2,300,000
|
|
276.4
|
|
|
TOTAL:
|
|
|
|
|
|
$
|
723.9
|
|
(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, including accrued liabilities in accordance with GAAP, as of September 30, 2019.
|
(3)
|
On July 18, 2019, the San Francisco Planning Commission approved an initial office allocation of approximately 1.4 million square feet under Proposition M, as well as priority for a future phase allocation of approximately 350,000 square feet in 2021, with the remainder of the more than two million square feet of office space allocated after 2021. The Flower Mart Project’s development agreement must still be approved by the San Francisco Board of Supervisors and signed by the Mayor. The Flower Mart project is an approximately 2.3 million square feet of office and retail mixed-use project located in Central SOMA.
|
|
1st & 2nd Generation (1)(2)
|
|
2nd Generation (1)(2)
|
||||||||||||||||||||||||||||
|
Number of Leases (3)
|
|
Rentable Square Feet (3)
|
|
Retention Rates (4)
|
|
TI/LC per
Sq. Ft. (5)
|
|
TI/LC per Sq. Ft. / Year
|
|
Changes in
Rents (6)(7)
|
|
Changes in
Cash Rents (8)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
||||||||||||||||||||||
Three Months Ended
September 30, 2019
|
15
|
|
|
17
|
|
|
218,096
|
|
|
226,212
|
|
|
31.7
|
%
|
|
$
|
28.14
|
|
|
$
|
4.76
|
|
|
49.9
|
%
|
|
18.9
|
%
|
|
71
|
|
Nine Months Ended
September 30, 2019
|
50
|
|
|
47
|
|
|
879,855
|
|
|
796,690
|
|
|
37.9
|
%
|
|
$
|
44.98
|
|
|
$
|
6.43
|
|
|
44.0
|
%
|
|
17.7
|
%
|
|
84
|
|
|
1st & 2nd Generation (1)(2)
|
|
2nd Generation (1)(2)
|
|||||||||||||||||||||||||
|
Number of Leases (3)
|
|
Rentable Square Feet (3)
|
|
TI/LC per Sq. Ft. (5)
|
|
TI/LC per Sq. Ft. / Year
|
|
Changes in
Rents (6)(7)
|
|
Changes in
Cash Rents (8)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
|
|||||||||||||||||
Three Months Ended
September 30, 2019
|
13
|
|
|
17
|
|
|
258,118
|
|
|
226,212
|
|
|
$
|
55.02
|
|
|
$
|
8.46
|
|
|
38.8
|
%
|
|
17.6
|
%
|
|
78
|
|
Nine Months Ended
September 30, 2019
|
50
|
|
|
47
|
|
|
790,427
|
|
|
795,637
|
|
|
$
|
59.30
|
|
|
$
|
8.57
|
|
|
55.3
|
%
|
|
31.6
|
%
|
|
83
|
|
(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)
|
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
|
(5)
|
Tenant improvements and leasing commissions per square foot excluding tenant-funded tenant improvements and certain tenant improvements used to fund base building improvements.
|
(6)
|
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.
|
(7)
|
Excludes commenced and executed leases of approximately 21,642 and 15,374 rentable square feet, respectively, for the three months ended September 30, 2019, and 232,946 and 182,416 rentable square feet, respectively, for the nine months ended September 30, 2019, 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.
|
(8)
|
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.
|
(9)
|
During the three months ended September 30, 2019, 12 new leases totaling 255,429 square feet were signed but not commenced as of September 30, 2019. For the nine months ended September 30, 2019, 29 leases totaling 649,255 rentable square feet were signed but not commenced as of September 30, 2019.
|
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 2019 (4)
|
|
16
|
|
|
191,125
|
|
|
1.6
|
%
|
|
$
|
9,566
|
|
|
1.6
|
%
|
|
$
|
50.05
|
|
2020
|
|
86
|
|
|
987,588
|
|
|
8.2
|
%
|
|
43,559
|
|
|
7.3
|
%
|
|
44.11
|
|
||
2021
|
|
80
|
|
|
859,799
|
|
|
7.1
|
%
|
|
36,649
|
|
|
6.1
|
%
|
|
42.63
|
|
||
2022
|
|
53
|
|
|
665,181
|
|
|
5.6
|
%
|
|
28,747
|
|
|
4.8
|
%
|
|
43.22
|
|
||
2023
|
|
68
|
|
|
1,182,699
|
|
|
9.8
|
%
|
|
62,853
|
|
|
10.5
|
%
|
|
53.14
|
|
||
2024
|
|
54
|
|
|
1,009,069
|
|
|
8.4
|
%
|
|
47,980
|
|
|
8.0
|
%
|
|
47.55
|
|
||
Total
|
|
357
|
|
|
4,895,461
|
|
|
40.7
|
%
|
|
$
|
229,354
|
|
|
38.3
|
%
|
|
$
|
46.85
|
|
Year (4)
|
|
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)
|
||||||||
2019
|
|
Greater Los Angeles
|
|
5
|
|
|
16,614
|
|
|
0.2
|
%
|
|
$
|
705
|
|
|
0.1
|
%
|
|
$
|
42.43
|
|
|
San Diego
|
|
2
|
|
|
26,359
|
|
|
0.2
|
%
|
|
1,045
|
|
|
0.2
|
%
|
|
39.64
|
|
|||
|
San Francisco Bay Area
|
|
7
|
|
|
143,605
|
|
|
1.2
|
%
|
|
7,720
|
|
|
1.3
|
%
|
|
53.76
|
|
|||
|
Greater Seattle
|
|
2
|
|
|
4,547
|
|
|
—
|
%
|
|
96
|
|
|
—
|
%
|
|
21.11
|
|
|||
|
Total
|
|
16
|
|
|
191,125
|
|
|
1.6
|
%
|
|
$
|
9,566
|
|
|
1.6
|
%
|
|
$
|
50.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
2020
|
|
Greater Los Angeles
|
|
53
|
|
|
457,905
|
|
|
3.8
|
%
|
|
$
|
19,273
|
|
|
3.2
|
%
|
|
$
|
42.09
|
|
|
San Diego
|
|
15
|
|
|
199,864
|
|
|
1.7
|
%
|
|
8,063
|
|
|
1.4
|
%
|
|
40.34
|
|
|||
|
San Francisco Bay Area
|
|
14
|
|
|
241,096
|
|
|
2.0
|
%
|
|
13,662
|
|
|
2.3
|
%
|
|
56.67
|
|
|||
|
Greater Seattle
|
|
4
|
|
|
88,723
|
|
|
0.7
|
%
|
|
2,561
|
|
|
0.4
|
%
|
|
28.87
|
|
|||
|
Total
|
|
86
|
|
|
987,588
|
|
|
8.2
|
%
|
|
$
|
43,559
|
|
|
7.3
|
%
|
|
$
|
44.11
|
|
(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 September 30, 2019, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of September 30, 2019.
|
(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.
|
(4)
|
Adjusting for leases executed as of September 30, 2019 but not yet commenced, the remaining 2019 and 2020 expirations would be reduced by 127,213 and 213,238 square feet, respectively.
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet (1)
|
|
Properties held for sale (2)
|
1
|
|
271,556
|
|
Completed residential development project (3)
|
1
|
|
237 units
|
|
In-process development projects - tenant improvement (4)
|
2
|
|
846,000
|
|
In-process development projects - under construction (5)
|
6
|
|
2,295,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
See Note 3 “Dispositions and Real Estate Held for Sale” to our consolidated financial statements included in this report for additional information.
|
(3)
|
Represents our recently completed residential units that are not yet stabilized.
|
(4)
|
Includes 96,000 square feet of retail space.
|
(5)
|
In addition to the estimated office rentable square feet noted above, development projects under construction also include 564 residential units.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of September 30, 2018
|
104
|
|
|
13,891,493
|
|
Acquisitions
|
1
|
|
|
110,030
|
|
Completed development properties placed in-service
|
1
|
|
|
377,152
|
|
Dispositions and properties held for sale at September 30, 2019
|
(13
|
)
|
|
(1,127,900
|
)
|
Remeasurement
|
—
|
|
|
71,437
|
|
Total as of September 30, 2019 (1)
|
93
|
|
|
13,322,212
|
|
(1)
|
Includes four properties owned by consolidated property partnerships (see Note 1 “Organization, Ownership and Basis of Presentation” to our consolidated financial statements included in this report for additional information)
|
Region
|
|
Number of
Buildings |
|
Rentable Square Feet
|
|
Occupancy at (1)
|
|||||||||
|
9/30/2019
|
|
6/30/2019
|
|
12/31/2018
|
||||||||||
Greater Los Angeles
|
|
32
|
|
|
3,872,399
|
|
|
95.1
|
%
|
|
94.8
|
%
|
|
95.1
|
%
|
San Diego County
|
|
21
|
|
|
2,048,483
|
|
|
90.4
|
%
|
|
90.2
|
%
|
|
89.3
|
%
|
San Francisco Bay Area
|
|
32
|
|
|
5,599,540
|
|
|
89.1
|
%
|
|
94.5
|
%
|
|
96.4
|
%
|
Greater Seattle
|
|
8
|
|
|
1,801,790
|
|
|
97.2
|
%
|
|
97.6
|
%
|
|
93.6
|
%
|
Total Stabilized Portfolio
|
|
93
|
|
|
13,322,212
|
|
|
92.1
|
%
|
|
93.8
|
%
|
|
94.4
|
%
|
|
Average Occupancy
|
||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Stabilized Portfolio(1)
|
93.2
|
%
|
|
92.9
|
%
|
|
93.3
|
%
|
|
94.1
|
%
|
Same Store Portfolio(2)
|
94.0
|
%
|
|
93.0
|
%
|
|
93.7
|
%
|
|
94.3
|
%
|
Stabilized Residential Portfolio(3)
|
87.8
|
%
|
|
83.1
|
%
|
|
78.5
|
%
|
|
83.3
|
%
|
(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, 2018 and still owned and stabilized as of September 30, 2019 and exclude our residential tower. See discussion under “Results of Operations” for additional information.
|
(3)
|
Our residential portfolio consists of our 200-unit residential tower located in Hollywood, California and excludes 237 recently completed residential units that are not yet stabilized.
|
Tenant Name
|
|
Region
|
|
Annualized Base Rental Revenue(1)(2)
|
|
Rentable
Square Feet |
|
Percentage of
Total Annualized Base Rental Revenue(2) |
|
Percentage of
Total Rentable Square Feet |
|||||
LinkedIn Corporation / Microsoft Corporation
|
|
San Francisco Bay Area
|
|
$
|
29,752
|
|
|
663,460
|
|
|
4.9
|
%
|
|
5.0
|
%
|
Dropbox, Inc.(3)
|
|
San Francisco Bay Area
|
|
29,088
|
|
|
393,091
|
|
|
4.8
|
%
|
|
3.0
|
%
|
|
Adobe Systems Inc.
|
|
San Francisco Bay Area / Greater Seattle
|
|
27,897
|
|
|
513,111
|
|
|
4.6
|
%
|
|
3.9
|
%
|
|
salesforce.com, inc.
|
|
San Francisco Bay Area
|
|
24,076
|
|
|
451,763
|
|
|
4.0
|
%
|
|
3.4
|
%
|
|
DIRECTV, LLC
|
|
Greater Los Angeles
|
|
23,152
|
|
|
684,411
|
|
|
3.8
|
%
|
|
5.1
|
%
|
|
Box, Inc.
|
|
San Francisco Bay Area
|
|
22,441
|
|
|
371,792
|
|
|
3.7
|
%
|
|
2.8
|
%
|
|
Okta, Inc.
|
|
San Francisco Bay Area
|
|
17,122
|
|
|
207,066
|
|
|
2.8
|
%
|
|
1.6
|
%
|
|
Riot Games, Inc.
|
|
Greater Los Angeles
|
|
15,514
|
|
|
251,509
|
|
|
2.6
|
%
|
|
1.9
|
%
|
|
Synopsys, Inc.
|
|
San Francisco Bay Area
|
|
15,492
|
|
|
340,913
|
|
|
2.6
|
%
|
|
2.6
|
%
|
|
Viacom International, Inc.
|
|
Greater Los Angeles
|
|
13,718
|
|
|
211,343
|
|
|
2.3
|
%
|
|
1.6
|
%
|
|
Amazon.com
|
|
Greater Seattle
|
|
12,492
|
|
|
277,399
|
|
|
2.1
|
%
|
|
2.1
|
%
|
|
Nektar Therapeutics, Inc.
|
|
San Francisco Bay Area
|
|
12,297
|
|
|
135,350
|
|
|
2.0
|
%
|
|
1.0
|
%
|
|
Concur Technologies
|
|
Greater Seattle
|
|
10,643
|
|
|
288,322
|
|
|
1.8
|
%
|
|
2.2
|
%
|
|
Splunk, Inc.
|
|
San Francisco Bay Area
|
|
10,323
|
|
|
100,850
|
|
|
1.7
|
%
|
|
0.8
|
%
|
|
Cisco Systems, Inc.
|
|
San Francisco Bay Area
|
|
9,830
|
|
|
144,306
|
|
|
1.6
|
%
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Top Fifteen Tenants
|
|
|
|
$
|
273,837
|
|
|
5,034,686
|
|
|
45.3
|
%
|
|
38.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes 100% of annualized base rental revenues of consolidated property partnerships.
|
(2)
|
Annualized base rental revenue 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. Excludes month-to-month leases and vacant space as of September 30, 2019.
|
(3)
|
During the nine months ended September 30, 2019, the Company completed construction and commenced revenue recognition on its lease with Dropbox, Inc. for the first phase of The Exchange on 16th, which represents approximately 52% of the 750,000 square foot development project located in San Francisco’s Mission Bay district. As revenue recognition commences on the remaining phases, Dropbox, Inc. will become the Company’s largest tenant based on current leases.
|
•
|
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, 2018 and still owned and included in the stabilized portfolio as of September 30, 2019, including our residential tower in Hollywood, California;
|
•
|
Development Properties – includes the results generated by our in-process development projects, future development projects and stabilized development projects, including one office and one retail property in the tenant improvement phase that commenced revenue recognition in the second quarter of 2019, one office development project that was added to the stabilized portfolio in the second quarter of 2019, and the first phase of our residential development project that was completed in the third quarter of 2019;
|
•
|
Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the four office buildings we acquired during 2018; and
|
•
|
Disposition & Held for Sale Properties – includes the results of the 11 properties disposed of in the fourth quarter of 2018, the one property disposed of in the second quarter of 2019, and the one property held for sale as of September 30, 2019.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
88
|
|
|
12,672,292
|
|
Development Properties - Stabilized (1)
|
|
1
|
|
|
394,340
|
|
Acquisition Properties
|
|
4
|
|
|
255,580
|
|
Total Stabilized Office Portfolio
|
|
93
|
|
|
13,322,212
|
|
(1)
|
Excludes development projects in the tenant improvement phase, our in-process development projects and future development projects.
|
|
Three Months Ended September 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2019
|
|
2018
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
|
|
|
|
|
|
|
|
|
||||||
Net Income Available to Common Stockholders
|
$
|
43,846
|
|
|
$
|
34,400
|
|
|
$
|
9,446
|
|
|
27.5
|
%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
852
|
|
|
691
|
|
|
161
|
|
|
23.3
|
%
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
3,600
|
|
|
3,219
|
|
|
381
|
|
|
11.8
|
%
|
|||
Net income
|
$
|
48,298
|
|
|
$
|
38,310
|
|
|
$
|
9,988
|
|
|
26.1
|
%
|
Unallocated expense (income):
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
22,576
|
|
|
19,277
|
|
|
3,299
|
|
|
17.1
|
%
|
|||
Leasing costs
|
1,192
|
|
|
—
|
|
|
1,192
|
|
|
100.0
|
%
|
|||
Depreciation and amortization
|
69,230
|
|
|
62,700
|
|
|
6,530
|
|
|
10.4
|
%
|
|||
Interest income and other net investment gain
|
(761
|
)
|
|
(342
|
)
|
|
(419
|
)
|
|
122.5
|
%
|
|||
Interest expense
|
11,635
|
|
|
11,075
|
|
|
560
|
|
|
5.1
|
%
|
|||
Net Operating Income, as defined
|
$
|
152,170
|
|
|
$
|
131,020
|
|
|
$
|
21,150
|
|
|
16.1
|
%
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion & Held for Sale
|
|
Total
|
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion & Held for Sale
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
184,614
|
|
|
$
|
19,488
|
|
|
$
|
6,384
|
|
|
$
|
1,835
|
|
|
$
|
212,321
|
|
|
$
|
151,352
|
|
|
$
|
—
|
|
|
$
|
1,660
|
|
|
$
|
9,276
|
|
|
$
|
162,288
|
|
Tenant reimbursements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,655
|
|
|
—
|
|
|
326
|
|
|
1,773
|
|
|
21,754
|
|
||||||||||
Other property income
|
2,705
|
|
|
377
|
|
|
—
|
|
|
122
|
|
|
3,204
|
|
|
2,397
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
2,520
|
|
||||||||||
Total
|
187,319
|
|
|
19,865
|
|
|
6,384
|
|
|
1,957
|
|
|
215,525
|
|
|
173,404
|
|
|
—
|
|
|
1,986
|
|
|
11,172
|
|
|
186,562
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
36,750
|
|
|
3,298
|
|
|
652
|
|
|
608
|
|
|
41,308
|
|
|
32,386
|
|
|
170
|
|
|
136
|
|
|
2,471
|
|
|
35,163
|
|
||||||||||
Real estate taxes
|
16,309
|
|
|
2,647
|
|
|
751
|
|
|
291
|
|
|
19,998
|
|
|
15,874
|
|
|
128
|
|
|
309
|
|
|
1,151
|
|
|
17,462
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,452
|
|
|
—
|
|
|
—
|
|
|
(114
|
)
|
|
1,338
|
|
||||||||||
Ground leases
|
2,049
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,049
|
|
|
1,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,579
|
|
||||||||||
Total
|
55,108
|
|
|
5,945
|
|
|
1,403
|
|
|
899
|
|
|
63,355
|
|
|
51,291
|
|
|
298
|
|
|
445
|
|
|
3,508
|
|
|
55,542
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
132,211
|
|
|
$
|
13,920
|
|
|
$
|
4,981
|
|
|
$
|
1,058
|
|
|
$
|
152,170
|
|
|
$
|
122,113
|
|
|
$
|
(298
|
)
|
|
$
|
1,541
|
|
|
$
|
7,664
|
|
|
$
|
131,020
|
|
|
Three Months Ended September 30, 2019 as compared to the Three Months Ended September 30, 2018
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Development
|
|
Acquisition
|
|
Disposition & Held for Sale
|
|
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
|
$
|
33,262
|
|
|
22.0
|
%
|
|
$
|
19,488
|
|
|
100.0
|
%
|
|
$
|
4,724
|
|
|
284.6
|
%
|
|
$
|
(7,441
|
)
|
|
(80.2
|
)%
|
|
$
|
50,033
|
|
|
30.8
|
%
|
Tenant reimbursements
|
(19,655
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
—
|
%
|
|
(326
|
)
|
|
(100.0
|
)%
|
|
(1,773
|
)
|
|
(100.0
|
)%
|
|
(21,754
|
)
|
|
(100.0
|
)%
|
|||||
Other property income
|
308
|
|
|
12.8
|
%
|
|
377
|
|
|
100.0
|
%
|
|
—
|
|
|
—
|
%
|
|
(1
|
)
|
|
(0.8
|
)%
|
|
684
|
|
|
27.1
|
%
|
|||||
Total
|
13,915
|
|
|
8.0
|
%
|
|
19,865
|
|
|
100.0
|
%
|
|
4,398
|
|
|
221.5
|
%
|
|
(9,215
|
)
|
|
(82.5
|
)%
|
|
28,963
|
|
|
15.5
|
%
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
4,364
|
|
|
13.5
|
%
|
|
3,128
|
|
|
NM*
|
|
|
516
|
|
|
379.4
|
%
|
|
(1,863
|
)
|
|
(75.4
|
)%
|
|
6,145
|
|
|
17.5
|
%
|
|||||
Real estate taxes
|
435
|
|
|
2.7
|
%
|
|
2,519
|
|
|
NM*
|
|
|
442
|
|
|
143.0
|
%
|
|
(860
|
)
|
|
(74.7
|
)%
|
|
2,536
|
|
|
14.5
|
%
|
|||||
Provision for bad debts
|
(1,452
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
114
|
|
|
(100.0
|
)%
|
|
(1,338
|
)
|
|
(100.0
|
)%
|
|||||
Ground leases
|
470
|
|
|
29.8
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
470
|
|
|
29.8
|
%
|
|||||
Total
|
3,817
|
|
|
7.4
|
%
|
|
5,647
|
|
|
NM*
|
|
|
958
|
|
|
215.3
|
%
|
|
(2,609
|
)
|
|
(74.4
|
)%
|
|
7,813
|
|
|
14.1
|
%
|
|||||
Net Operating Income,
as defined
|
$
|
10,098
|
|
|
8.3
|
%
|
|
$
|
14,218
|
|
|
NM*
|
|
|
$
|
3,440
|
|
|
223.2
|
%
|
|
$
|
(6,606
|
)
|
|
(86.2
|
)%
|
|
$
|
21,150
|
|
|
16.1
|
%
|
*
|
Percentage not meaningful.
|
•
|
An increase of $10.1 million attributable to the Same Store Properties driven by the following activity:
|
•
|
An increase in total operating revenues of $13.9 million primarily due to:
|
•
|
$8.0 million increase from new leases and renewals at higher rates primarily in the San Francisco Bay Area, Greater Los Angeles and Greater Seattle regions;
|
•
|
$4.9 million increase in the tenant reimbursement component of rental income primarily due to the following:
|
•
|
$3.5 million increase due to the adoption of Topic 842 on January 1, 2019, resulting in the gross-up of tenant direct billbacks, which were previously presented net in property expenses. These billbacks are also included in property expenses and have no net impact on net operating income; and
|
•
|
$1.3 million increase due to tenant recoveries of the new Proposition C gross receipts tax for San Francisco effective January 1, 2019; and
|
•
|
$1.1 million increase in parking revenue primarily due to higher monthly tenant parking revenue at three properties and higher non-tenant and transient parking income primarily at three other properties;
|
•
|
An increase in property and related expenses of $3.8 million primarily due to the following:
|
•
|
$4.4 million increase in property expenses primarily due to the following:
|
•
|
$3.5 million increase due to the adoption of Topic 842 on January 1, 2019, resulting in the gross-up of tenant direct billbacks, which were previously presented net in property expenses. These billbacks are also included in operating revenues and have no net impact on net operating income;
|
•
|
$1.3 million increase due to the new Proposition C gross receipts tax in the San Francisco Bay Area passed through to tenants which became effective on January 1, 2019; partially offset by
|
•
|
$0.3 million net decrease due to a $0.6 million decrease in reimbursable expenses such as janitorial, engineering, repairs and maintenance, and various other recurring expenses partially offset by $0.3 million increase in non-reimbursable expenses due to higher property management costs;
|
•
|
$0.4 million increase in property taxes primarily due to the following:
|
•
|
$0.7 million increase due to higher supplemental taxes for one property in Greater Los Angeles;
|
•
|
$0.2 million increase in annual property taxes across the portfolio except in the Greater Seattle region; partially offset by
|
•
|
$0.5 million decrease in property taxes due to the adoption of Topic 842 on January 1, 2019 which resulted in property taxes related to properties where the Company is the lessee under a ground lease to be presented in ground lease expense;
|
•
|
$0.5 million increase in ground leases primarily due to the adoption of Topic 842 on January 1, 2019, which resulted in property taxes related to properties where the Company is the lessee under a ground lease to be presented in ground lease expense; partially offset by
|
•
|
$1.5 million decrease in provision for bad debts due to a provision recorded in 2018 related primarily to one tenant. The provision for bad debts was included in operating expenses prior to the adoption of ASC 842 on January 1, 2019;
|
•
|
An increase in Net Operating Income of $14.2 million attributable to the Development Properties;
|
•
|
An increase in Net Operating Income of $3.4 million attributable to the Acquisition Properties; and
|
•
|
A decrease in Net Operating Income of $6.6 million attributable to the Disposition Properties.
|
•
|
An increase of $2.4 million attributable to the Same Store Properties;
|
•
|
An increase of $4.5 million attributable to the Development Properties; and
|
•
|
An increase of $2.9 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $3.3 million attributable to the Disposition & Held for Sale Properties.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
32,220
|
|
|
$
|
30,231
|
|
|
$
|
1,989
|
|
|
6.6
|
%
|
Capitalized interest and deferred financing costs
|
(20,585
|
)
|
|
(19,156
|
)
|
|
(1,429
|
)
|
|
7.5
|
%
|
|||
Interest expense
|
$
|
11,635
|
|
|
$
|
11,075
|
|
|
$
|
560
|
|
|
5.1
|
%
|
|
Nine Months Ended September 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2019
|
|
2018
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
|
|
|
|
|
|
|
|
|||||||
Net Income Available to Common Stockholders
|
$
|
122,943
|
|
|
$
|
98,195
|
|
|
$
|
24,748
|
|
|
25.2
|
%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
2,423
|
|
|
2,008
|
|
|
415
|
|
|
20.7
|
%
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
11,941
|
|
|
10,833
|
|
|
1,108
|
|
|
10.2
|
%
|
|||
Net income
|
$
|
137,307
|
|
|
$
|
111,036
|
|
|
$
|
26,271
|
|
|
23.7
|
%
|
Unallocated expense (income):
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
65,774
|
|
|
56,599
|
|
|
9,175
|
|
|
16.2
|
%
|
|||
Leasing Costs
|
5,599
|
|
|
—
|
|
|
5,599
|
|
|
100.0
|
%
|
|||
Depreciation and amortization
|
203,617
|
|
|
189,421
|
|
|
14,196
|
|
|
7.5
|
%
|
|||
Interest income and other net investment gains
|
(3,205
|
)
|
|
(1,147
|
)
|
|
(2,058
|
)
|
|
179.4
|
%
|
|||
Interest expense
|
34,605
|
|
|
37,285
|
|
|
(2,680
|
)
|
|
(7.2
|
)%
|
|||
Gains on sales of depreciable operating properties
|
(7,169
|
)
|
|
—
|
|
|
(7,169
|
)
|
|
(100.0
|
)%
|
|||
Net Operating Income, as defined
|
$
|
436,528
|
|
|
$
|
393,194
|
|
|
$
|
43,334
|
|
|
11.0
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion & Held for Sale
|
|
Total
|
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion & Held for Sale
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
544,300
|
|
|
$
|
36,683
|
|
|
$
|
20,839
|
|
|
$
|
7,510
|
|
|
$
|
609,332
|
|
|
$
|
458,013
|
|
|
$
|
—
|
|
|
$
|
4,496
|
|
|
$
|
27,165
|
|
|
$
|
489,674
|
|
Tenant reimbursements
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,751
|
|
|
—
|
|
|
911
|
|
|
4,809
|
|
|
60,471
|
|
||||||||||
Other property income
|
6,707
|
|
|
697
|
|
|
—
|
|
|
483
|
|
|
7,887
|
|
|
6,078
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|
6,311
|
|
||||||||||
Total
|
551,007
|
|
|
37,380
|
|
|
20,839
|
|
|
7,993
|
|
|
617,219
|
|
|
518,842
|
|
|
—
|
|
|
5,407
|
|
|
32,207
|
|
|
556,456
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
107,765
|
|
|
5,968
|
|
|
2,087
|
|
|
2,173
|
|
|
117,993
|
|
|
91,806
|
|
|
242
|
|
|
387
|
|
|
6,966
|
|
|
99,401
|
|
||||||||||
Real estate taxes
|
48,950
|
|
|
4,412
|
|
|
2,287
|
|
|
914
|
|
|
56,563
|
|
|
47,745
|
|
|
598
|
|
|
751
|
|
|
3,327
|
|
|
52,421
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,550
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|
6,714
|
|
||||||||||
Ground leases
|
6,135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,135
|
|
|
4,726
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,726
|
|
||||||||||
Total
|
162,850
|
|
|
10,380
|
|
|
4,374
|
|
|
3,087
|
|
|
180,691
|
|
|
150,827
|
|
|
840
|
|
|
1,138
|
|
|
10,457
|
|
|
163,262
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
388,157
|
|
|
$
|
27,000
|
|
|
$
|
16,465
|
|
|
$
|
4,906
|
|
|
$
|
436,528
|
|
|
$
|
368,015
|
|
|
$
|
(840
|
)
|
|
$
|
4,269
|
|
|
$
|
21,750
|
|
|
$
|
393,194
|
|
|
Nine Months Ended September 30, 2019 as compared to the Nine Months Ended September 30, 2018
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Development
|
|
Acquisition
|
|
Disposition & Held for Sale
|
|
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
|
$
|
86,287
|
|
|
18.8
|
%
|
|
$
|
36,683
|
|
|
100.0
|
%
|
|
$
|
16,343
|
|
|
363.5
|
%
|
|
$
|
(19,655
|
)
|
|
(72.4
|
)%
|
|
$
|
119,658
|
|
|
24.4
|
%
|
Tenant reimbursements
|
(54,751
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
—
|
%
|
|
(911
|
)
|
|
(100.0
|
)%
|
|
(4,809
|
)
|
|
(100.0
|
)%
|
|
(60,471
|
)
|
|
(100.0
|
)%
|
|||||
Other property income
|
629
|
|
|
10.3
|
%
|
|
697
|
|
|
100.0
|
%
|
|
—
|
|
|
—
|
%
|
|
250
|
|
|
107.3
|
%
|
|
1,576
|
|
|
25.0
|
%
|
|||||
Total
|
32,165
|
|
|
6.2
|
%
|
|
37,380
|
|
|
100.0
|
%
|
|
15,432
|
|
|
285.4
|
%
|
|
(24,214
|
)
|
|
(75.2
|
)%
|
|
60,763
|
|
|
10.9
|
%
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
15,959
|
|
|
17.4
|
%
|
|
5,726
|
|
|
NM*
|
|
|
1,700
|
|
|
439.3
|
%
|
|
(4,793
|
)
|
|
(68.8
|
)%
|
|
18,592
|
|
|
18.7
|
%
|
|||||
Real estate taxes
|
1,205
|
|
|
2.5
|
%
|
|
3,814
|
|
|
637.8
|
%
|
|
1,536
|
|
|
204.5
|
%
|
|
(2,413
|
)
|
|
(72.5
|
)%
|
|
4,142
|
|
|
7.9
|
%
|
|||||
Provision for bad debts
|
(6,550
|
)
|
|
(100.0
|
)%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(164
|
)
|
|
(100.0
|
)%
|
|
(6,714
|
)
|
|
(100.0
|
)%
|
|||||
Ground leases
|
1,409
|
|
|
29.8
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
1,409
|
|
|
29.8
|
%
|
|||||
Total
|
12,023
|
|
|
8.0
|
%
|
|
9,540
|
|
|
NM*
|
|
|
3,236
|
|
|
284.4
|
%
|
|
(7,370
|
)
|
|
(70.5
|
)%
|
|
17,429
|
|
|
10.7
|
%
|
|||||
Net Operating Income,
as defined
|
$
|
20,142
|
|
|
5.5
|
%
|
|
$
|
27,840
|
|
|
NM*
|
|
|
$
|
12,196
|
|
|
285.7
|
%
|
|
$
|
(16,844
|
)
|
|
(77.4
|
)%
|
|
$
|
43,334
|
|
|
11.0
|
%
|
*
|
Percentage not meaningful.
|
•
|
An increase of $20.1 million attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in total operating revenues of $32.2 million primarily due to:
|
•
|
$11.9 million increase from new leases and renewals at higher rates primarily in the San Francisco Bay Area and Greater Los Angeles regions;
|
•
|
$15.7 million increase in the tenant reimbursement component of rental income due to the following:
|
•
|
$9.0 million increase due to the adoption of Topic 842 on January 1, 2019, resulting in the gross-up of tenant direct billbacks, which were previously presented net in property expenses. These billbacks are also included in property expenses and have no net impact on net operating income;
|
•
|
$4.0 million increase due to tenant recoveries of the new Proposition C gross receipts tax for San Francisco effective January 1, 2019;
|
•
|
$1.5 million increase due to higher recoveries of recurring expenses related to property taxes, security, repairs and maintenance, and various other recurring expenses at certain properties;
|
•
|
$0.9 million increase due to new triple net tenants in the Greater Seattle region which replaced prior year base year tenants, offset by a decrease due to one tenant in the San Francisco Bay Area paying for expenses directly; and
|
•
|
$0.3 million increase due to lower abated tenant reimbursements and various other adjustments;
|
•
|
$2.9 million net increase primarily due to a $4.2 million reversal of provision for bad debts related to the improved credit quality of a tenant for which the Company recorded a bad debt reserve in 2018, partially offset by $1.3 million of provision for bad debts recorded for other tenants during the nine months ended September 30, 2019. The provision for bad debts is included in rental income beginning January 1, 2019 in connection with the adoption of ASC 842; and
|
•
|
$1.6 million increase due to higher parking income resulting from higher tenant parking primarily at five properties;
|
•
|
An increase in property and related expenses of $12.0 million primarily due to the following:
|
•
|
$16.0 million increase in property expenses primarily due to the following:
|
•
|
$9.0 million increase due to the adoption of Topic 842 on January 1, 2019, resulting in the gross-up of tenant direct billbacks, which were previously presented net in property expenses. These billbacks are also included in operating revenues and have no net impact on net operating income;
|
•
|
$4.0 million increase due to the new Proposition C gross receipts tax in San Francisco passed through to tenants which became effective on January 1, 2019; and
|
•
|
$2.0 million increase in reimbursable expenses such as utilities, security, contract services, repairs and maintenance, and various other recurring expenses and a $0.5 million increase in non-reimbursable expenses primarily due to higher property management costs;
|
•
|
$1.2 million increase in real estate taxes primarily comprised of:
|
•
|
$1.8 million increase due to higher supplemental taxes assessed in 2019 for the 2016 to 2019 tax years at two properties in the Greater Los Angeles area; and
|
•
|
$0.5 million increase due to regular annual increases at various properties across the portfolio; partially offset by
|
•
|
$1.4 million decrease due to the adoption of Topic 842 on January 1, 2019, which resulted in property taxes related to our four ground leases where the Company is the lessee to be presented in ground lease expense;
|
•
|
$1.4 million increase in ground leases primarily due to the adoption of Topic 842 on January 1, 2019, which resulted in property taxes related to properties where the Company is the lessee under a ground lease to be presented in ground lease expense; partially offset by
|
•
|
$6.6 million decrease in provision for bad debts due to 2018 reserves primarily related to one tenant. The provision for bad debts was included in operating expenses prior to the adoption of ASC 842 on January 1, 2019;
|
•
|
An increase of $27.8 million attributable to the Development Properties; and
|
•
|
An increase of $12.2 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $16.8 million attributable to the Disposition & Held for Sale Properties.
|
•
|
An increase of approximately $9.1 million primarily related to severance and other compensation and benefit related costs;
|
•
|
An increase of $1.9 million attributable to compensation expense related to the mark-to-market adjustment for the Company’s deferred compensation plan; partially offset by
|
•
|
A net decrease of $1.8 million due to lower legal costs incurred in 2019 compared to 2018, partially offset by an increase in other general and administrative expenses.
|
•
|
An increase of $5.3 million attributable to the Same Store Properties;
|
•
|
An increase of $8.3 million attributable to the Development Properties; and
|
•
|
An increase of $9.4 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $8.8 million attributable to the Disposition & Held for Sale Properties.
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
95,507
|
|
|
$
|
85,834
|
|
|
$
|
9,673
|
|
|
11.3
|
%
|
Capitalized interest and deferred financing costs
|
(60,902
|
)
|
|
(48,549
|
)
|
|
(12,353
|
)
|
|
25.4
|
%
|
|||
Interest expense
|
$
|
34,605
|
|
|
$
|
37,285
|
|
|
$
|
(2,680
|
)
|
|
(7.2
|
)%
|
|
Shares/Units at
September 30, 2019
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
|||
|
($ in thousands)
|
|||||||
Debt: (1)(2)
|
|
|
|
|
|
|||
Unsecured Term Loan Facility
|
|
|
$
|
150,000
|
|
|
1.3
|
%
|
Unsecured Senior Notes due 2023
|
|
|
300,000
|
|
|
2.6
|
%
|
|
Unsecured Senior Notes due 2024
|
|
|
425,000
|
|
|
3.6
|
%
|
|
Unsecured Senior Notes due 2025
|
|
|
400,000
|
|
|
3.4
|
%
|
|
Unsecured Senior Notes Series A & B due 2026
|
|
|
250,000
|
|
|
2.1
|
%
|
|
Unsecured Senior Notes due 2028
|
|
|
400,000
|
|
|
3.4
|
%
|
|
Unsecured Senior Notes due 2029
|
|
|
400,000
|
|
|
3.4
|
%
|
|
Unsecured Senior Notes Series A & B due 2027 & 2029
|
|
|
250,000
|
|
|
2.1
|
%
|
|
Unsecured Senior Notes due 2030
|
|
|
500,000
|
|
|
4.3
|
%
|
|
Secured debt
|
|
|
259,967
|
|
|
2.2
|
%
|
|
Total debt
|
|
|
$
|
3,334,967
|
|
|
28.4
|
%
|
Equity and Noncontrolling Interest in the Operating Partnership: (3)
|
|
|
|
|
|
|||
Common limited partnership units outstanding (4)
|
2,023,287
|
|
$
|
157,594
|
|
|
1.3
|
%
|
Common shares outstanding (5)
|
106,011,916
|
|
8,257,268
|
|
|
70.3
|
%
|
|
Total equity and noncontrolling interest in the Operating Partnership
|
|
|
$
|
8,414,862
|
|
|
71.6
|
%
|
Total Market Capitalization
|
|
|
$
|
11,749,829
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of the following at September 30, 2019: $21.1 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $6.7 million of unamortized discounts for the unsecured senior notes.
|
(2)
|
As of September 30, 2019, there was no outstanding balance on the unsecured revolving credit facility.
|
(3)
|
Value based on closing price per share of our common stock of $77.89 as of September 30, 2019.
|
(4)
|
Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
|
(5)
|
Shares of common stock outstanding exclude 1,201,204 shares of common stock sold under forward equity sale agreements that remain to be settled as of September 30, 2019.
|
•
|
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, equity or preferred 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 stock of the Company; and
|
•
|
Outstanding debt repurchases, redemptions and repayments.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
45,000
|
|
Remaining borrowing capacity
|
750,000
|
|
|
705,000
|
|
||
Total borrowing capacity (1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate (2)
|
3.02
|
%
|
|
3.48
|
%
|
||
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 the contractual rate of LIBOR plus 1.000% as of September 30, 2019 and December 31, 2018.
|
(3)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of September 30, 2019 and December 31, 2018, $3.7 million and $4.7 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.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Remaining borrowing capacity
|
—
|
|
|
—
|
|
||
Total borrowing capacity (1)
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Interest rate (2)
|
3.13
|
%
|
|
3.49
|
%
|
||
Undrawn facility fee-annual rate (3)
|
0.200%
|
||||||
Maturity date
|
July 2022
|
(1)
|
As of September 30, 2019 and December 31, 2018, $0.7 million and $0.9 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(2)
|
Our unsecured term loan facility interest rate was calculated based on the contractual rate of LIBOR plus 1.100% as of September 30, 2019 and December 31, 2018.
|
(3)
|
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 Term Loan Facility (1)
|
$
|
150,000
|
|
Unsecured Senior Notes due 2023
|
300,000
|
|
|
Unsecured Senior Notes due 2024
|
425,000
|
|
|
Unsecured Senior Notes due 2025
|
400,000
|
|
|
Unsecured Senior Notes Series A & B due 2026
|
250,000
|
|
|
Unsecured Senior Notes due 2028
|
400,000
|
|
|
Unsecured Senior Notes due 2029
|
400,000
|
|
|
Unsecured Senior Notes Series A & B due 2027 & 2029
|
250,000
|
|
|
Unsecured Senior Notes due 2030
|
500,000
|
|
|
Secured Debt
|
259,967
|
|
|
Total Unsecured and Secured Debt
|
$
|
3,334,967
|
|
Less: Unamortized Net Discounts and Deferred Financing Costs (2)
|
(27,731
|
)
|
|
Total Debt, Net
|
$
|
3,307,236
|
|
(1)
|
As of September 30, 2019, there was no outstanding balance on the unsecured revolving credit facility.
|
(2)
|
Includes $21.1 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $6.7 million of unamortized discounts for the unsecured senior notes. Excludes unamortized deferred financing costs on the unsecured revolving credit facility.
|
|
Percentage of Total Debt (1)
|
|
Weighted Average Interest Rate(1)
|
||||||||
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured (2)
|
92.2
|
%
|
|
88.6
|
%
|
|
3.9
|
%
|
|
4.0
|
%
|
Secured
|
7.8
|
%
|
|
11.4
|
%
|
|
3.9
|
%
|
|
4.4
|
%
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
4.5
|
%
|
|
6.6
|
%
|
|
3.1
|
%
|
|
3.5
|
%
|
Fixed-rate (2)
|
95.5
|
%
|
|
93.4
|
%
|
|
3.9
|
%
|
|
4.1
|
%
|
Stated rate (2)
|
|
|
|
|
3.9
|
%
|
|
4.1
|
%
|
||
GAAP effective rate (3)
|
|
|
|
|
3.9
|
%
|
|
4.0
|
%
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
4.1
|
%
|
|
4.2
|
%
|
(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 and Term Loan Facility and Private Placement Notes (as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance
as of September 30, 2019
|
Total debt to total asset value
|
|
less than 60%
|
|
29%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
3.3x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
2.96x
|
Unencumbered asset pool debt service coverage
|
|
greater than 1.75x
|
|
3.99x
|
|
|
|
|
|
Unsecured Senior Notes due 2023, 2024, 2025, 2028, 2029 and 2030
(as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
35%
|
Interest coverage
|
|
greater than 1.5x
|
|
10.9x
|
Secured debt to total asset value
|
|
less than 40%
|
|
3%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
284%
|
|
Nine Months Ended September 30,
|
|||||||||||||
|
2019
|
|
2018
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|
|
|||||||||||
Net cash provided by operating activities
|
$
|
301,390
|
|
|
$
|
317,215
|
|
|
$
|
(15,825
|
)
|
|
(5.0
|
)%
|
Net cash used in investing activities
|
$
|
(727,184
|
)
|
|
$
|
(805,400
|
)
|
|
$
|
78,216
|
|
|
9.7
|
%
|
Net cash provided by financing activities
|
$
|
558,680
|
|
|
$
|
507,904
|
|
|
$
|
50,776
|
|
|
10.0
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income available to common stockholders
|
$
|
43,846
|
|
|
$
|
34,400
|
|
|
$
|
122,943
|
|
|
$
|
98,195
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
852
|
|
|
691
|
|
|
2,423
|
|
|
2,008
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
3,600
|
|
|
3,219
|
|
|
11,941
|
|
|
10,833
|
|
||||
Depreciation and amortization of real estate assets
|
67,985
|
|
|
61,609
|
|
|
199,967
|
|
|
186,242
|
|
||||
Gains on sales of depreciable real estate
|
—
|
|
|
—
|
|
|
(7,169
|
)
|
|
—
|
|
||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
|
(7,040
|
)
|
|
(5,672
|
)
|
|
(21,145
|
)
|
|
(18,117
|
)
|
||||
Funds From Operations (1)(2)
|
$
|
109,243
|
|
|
$
|
94,247
|
|
|
$
|
308,960
|
|
|
$
|
279,161
|
|
(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 $6.8 million and $4.8 million for the three months ended September 30, 2019 and 2018, respectively, and $14.9 million and $13.7 million for the nine months ended September 30, 2019 and 2018, 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
|
|||||
July 1, 2019 - July 31, 2019
|
|
5,457
|
|
|
$
|
76.75
|
|
|
—
|
|
|
—
|
|
August 1, 2019 - August 31, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
September 1, 2019 - September 30, 2019
|
|
15,811
|
|
|
77.90
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
21,268
|
|
|
$
|
77.60
|
|
|
—
|
|
|
—
|
|
(1)
|
Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
|
|
|
3.(i)1
|
|
|
|
|
|
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 September 30, 2019, 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/ Merryl E. Werber
|
|
|
Merryl E. Werber
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
KILROY REALTY, L.P.
|
||
|
|
|
BY:
|
KILROY REALTY CORPORATION
|
|
|
Its general partner
|
|
|
|
|
|
By:
|
/s/ John 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/ Merryl E. Werber
|
|
|
Merryl E. Werber
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
1
|
SEPARATION FROM EMPLOYMENT
|
2
|
CONSIDERATION FOR MR. ROSETTA’S RELEASES AND COVENANTS
|
2.1.1.1
|
KRC shall pay to Mr. Rosetta the sum of Eight Hundred Thousand Dollars ($800,000.00), less applicable state and federal tax withholdings, to be paid within fifteen (15) business days after the execution of this Agreement by Mr. Rosetta, provided that Mr. Rosetta has not revoked the Agreement within the Revocation Period pursuant to Section 6, below.
|
2.1.1.2
|
KRC shall pay to Mr. Rosetta the sum of Eight Hundred Thousand Dollars ($800,000.00) in twelve (12) equal monthly installments of Sixty-Six Thousand Six Hundred Sixty Six Dollars and Sixty Seven Cents ($66,666.67), less applicable state and federal tax withholdings, with the first payment to be delivered to Mr. Rosetta’s home address on file on October 1, 2019, with monthly payments to be made thereafter on the first of each month until the last payment is delivered on September 1, 2020.
|
2.1.1.3
|
Mr. Rosetta represents and warrants that as of the date of signing the Agreement, he has not violated the terms of the Confidentiality Agreement, nor will he violate the post-employment restrictions regarding non-solicitation and confidential information in the Confidentiality Agreement or in the Agreement. For the avoidance of doubt, Mr. Rosetta represents and warrants that he has not had, and will not have through the Effective Date of the Agreement, for himself or for the benefit of any third party, discussions with any current employees, customers, vendors, suppliers, joint venturers or public REITs with product in Class A office, mixed-use or Life Science or private equity firms who are also operators with product in Class A office, mixed-use or Life Science. Mr. Rosetta acknowledges and agrees that he is bound by the Confidentiality Agreement and the Agreement with regard to the protections of Confidential Information set forth respectively in such agreements, and nothing stated herein shall in any way amend or diminish the protections of Confidential Information set forth in the Confidentiality Agreement and in Section 10, below.
|
3
|
NO REPRESENTATIONS AS TO TAXABILITY OF ANY PAYMENTS
|
4
|
GENERAL RELEASE OF CLAIMS
|
5
|
WAIVER OF SECTION 1542 RIGHTS
|
6
|
SPECIAL ADEA WAIVER
|
MR. ROSETTA'S INITIALS
|
SAR
|
7
|
NO PENDING CLAIMS OR OTHER CHARGES
|
8
|
NO ADMISSION OF LIABILITY
|
9
|
NON-DISPARAGEMENT
|
10
|
COMPLIANCE WITH CONFIDENTIALITY AGREEMENT AND CONFIDENTIALITY OF AGREEMENT
|
11
|
REMEDY FOR BREACH OF AGREEMENT
|
12
|
INTEGRATED AGREEMENT
|
13
|
SEVERABILITY
|
14
|
WAIVER
|
15
|
GOVERNING LAW; CONSTRUCTION
|
16
|
MISCELLANEOUS TERMS
|
17
|
EFFECTIVE DATE OF AGREEMENT
|
Dated: August 26, 2019
|
|
/s/ STEVEN A. ROSETTA
|
|
|
STEVEN A . ROSETTA
|
|
KILROY REALTY CORPORATION
|
|
|
a Maryland Corporation
|
|
|
|
|
Dated: August 26, 2019
|
By:
|
/s/ Jeffrey C. Hawken
|
|
|
Name: Jeffrey C. Hawken
Title: Executive Vice President and Chief Operating Officer |
|
|
|
Dated: August 26, 2019
|
By:
|
/s/ Heidi R. Roth
|
|
|
Name: Heidi R. Roth
Title: Executive Vice President and Chief Administrative Officer |
|
KILROY REALTY, L.P.,
|
|
|
a Delaware limited partnership
|
|
|
|
|
|
By:
|
KILROY REALTY CORPORATION,
|
|
|
a Maryland Corporation,
|
|
Its:
|
General Partner
|
|
|
|
Dated: August 26, 2019
|
By:
|
/s/ Jeffrey C. Hawken
|
|
|
Name: Jeffrey C. Hawken
Title: Executive Vice President and Chief Operating Officer |
|
|
|
Dated: August 26, 2019
|
By:
|
/s/ Heidi R. Roth
|
|
|
Name: Heidi R. Roth
Title: Executive Vice President and Chief Administrative Officer |
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ John Kilroy
|
John Kilroy
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ John Kilroy
|
John Kilroy
|
President and Chief Executive Officer
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tyler H. Rose
|
Tyler H. Rose
|
Executive Vice President and Chief Financial Officer
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ John Kilroy
|
|
John Kilroy
|
|
President and Chief Executive Officer
|
|
|
|
Date:
|
October 24, 2019
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Tyler H. Rose
|
|
Tyler H. Rose
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
Date:
|
October 24, 2019
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
|
/s/ John Kilroy
|
|
John Kilroy
|
|
President and Chief Executive Officer
|
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
|
|
|
Date:
|
October 24, 2019
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
|
/s/ Tyler H. Rose
|
|
Tyler H. Rose
|
|
Executive Vice President and Chief Financial Officer
|
|
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
|
|
|
|
Date:
|
October 24, 2019
|