☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kilroy Realty Corporation
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Maryland
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95-4598246
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Kilroy Realty, L.P.
|
Delaware
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95-4612685
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Registrant's telephone number, including area code)
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||
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N/A
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||
(Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
|
|||
Registrant
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Title of each class
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Name of each exchange on which registered
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Ticker Symbol
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Kilroy Realty Corporation
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Common Stock, $.01 par value
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New York Stock Exchange
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KRC
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Securities registered pursuant to Section 12(g) of the Act:
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Registrant
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Title of each class
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Kilroy Realty, L.P.
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Common Units Representing Limited Partnership Interests
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•
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Combined reports better reflect how management and the analyst community view the business as a single operating unit;
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•
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Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
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•
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Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
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•
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Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
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•
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consolidated financial statements;
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•
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the following notes to the consolidated financial statements:
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◦
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Note 4, Stockholders’ Equity of the Company;
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◦
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Note 6, Partners’ Capital of the Operating Partnership;
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◦
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Note 11, Net Income Available to Common Stockholders Per Share of the Company;
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◦
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Note 12, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
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◦
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Note 13, Supplemental Cash Flow Information of the Company; and
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◦
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Note 14, Supplemental Cash Flow Information of the Operating Partnership;
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•
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“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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◦
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—Liquidity and Capital Resources of the Company;” and
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◦
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—Liquidity and Capital Resources of the Operating Partnership.”
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II – OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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June 30, 2020
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December 31, 2019
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||||
ASSETS
|
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|
||||
REAL ESTATE ASSETS:
|
|
|
|
||||
Land and improvements
|
$
|
1,546,209
|
|
|
$
|
1,466,166
|
|
Buildings and improvements
|
6,289,816
|
|
|
5,866,477
|
|
||
Undeveloped land and construction in progress
|
2,109,196
|
|
|
2,296,130
|
|
||
Total real estate assets held for investment
|
9,945,221
|
|
|
9,628,773
|
|
||
Accumulated depreciation and amortization
|
(1,684,837
|
)
|
|
(1,561,361
|
)
|
||
Total real estate assets held for investment, net
|
8,260,384
|
|
|
8,067,412
|
|
||
CASH AND CASH EQUIVALENTS (Note 4)
|
605,012
|
|
|
60,044
|
|
||
RESTRICTED CASH
|
16,300
|
|
|
16,300
|
|
||
MARKETABLE SECURITIES (Note 10)
|
23,175
|
|
|
27,098
|
|
||
CURRENT RECEIVABLES, NET
|
20,925
|
|
|
26,489
|
|
||
DEFERRED RENT RECEIVABLES, NET
|
358,914
|
|
|
337,937
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET
|
209,637
|
|
|
212,805
|
|
||
RIGHT OF USE GROUND LEASE ASSETS (Note 9)
|
95,940
|
|
|
96,348
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 2)
|
68,378
|
|
|
55,661
|
|
||
TOTAL ASSETS
|
$
|
9,658,665
|
|
|
$
|
8,900,094
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt, net (Notes 3 and 10)
|
$
|
256,113
|
|
|
$
|
258,593
|
|
Unsecured debt, net (Notes 3, and 10)
|
3,399,105
|
|
|
3,049,185
|
|
||
Unsecured line of credit (Notes 3 and 10)
|
—
|
|
|
245,000
|
|
||
Accounts payable, accrued expenses and other liabilities
|
401,378
|
|
|
418,848
|
|
||
Ground lease liabilities (Note 9)
|
98,093
|
|
|
98,400
|
|
||
Accrued dividends and distributions (Note 15)
|
57,600
|
|
|
53,219
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net
|
129,264
|
|
|
139,488
|
|
||
Rents received in advance and tenant security deposits
|
63,523
|
|
|
66,503
|
|
||
Total liabilities
|
4,405,076
|
|
|
4,329,236
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 9)
|
|
|
|
||||
EQUITY:
|
|
|
|
||||
Stockholders’ Equity (Note 4):
|
|
|
|
||||
Common stock, $.01 par value, 280,000,000 and 150,000,000 shares authorized, respectively, 115,176,538 and 106,016,287 shares issued and outstanding, respectively
|
1,152
|
|
|
1,060
|
|
||
Additional paid-in capital
|
5,084,362
|
|
|
4,350,917
|
|
||
Distributions in excess of earnings
|
(113,223
|
)
|
|
(58,467
|
)
|
||
Total stockholders’ equity
|
4,972,291
|
|
|
4,293,510
|
|
||
Noncontrolling Interests (Notes 1 and 5):
|
|
|
|
||||
Common units of the Operating Partnership
|
83,502
|
|
|
81,917
|
|
||
Noncontrolling interests in consolidated property partnerships
|
197,796
|
|
|
195,431
|
|
||
Total noncontrolling interests
|
281,298
|
|
|
277,348
|
|
||
Total equity
|
5,253,589
|
|
|
4,570,858
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
9,658,665
|
|
|
$
|
8,900,094
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
REVENUES
|
|
|
|
|
|
|
|
||||||||
Rental income (Note 8)
|
$
|
218,356
|
|
|
$
|
197,629
|
|
|
$
|
436,989
|
|
|
$
|
397,011
|
|
Other property income
|
1,067
|
|
|
2,863
|
|
|
3,762
|
|
|
4,683
|
|
||||
Total revenues
|
219,423
|
|
|
200,492
|
|
|
440,751
|
|
|
401,694
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
37,829
|
|
|
38,536
|
|
|
76,812
|
|
|
76,685
|
|
||||
Real estate taxes
|
21,854
|
|
|
17,926
|
|
|
44,056
|
|
|
36,565
|
|
||||
Ground leases (Note 9)
|
2,330
|
|
|
2,114
|
|
|
4,647
|
|
|
4,086
|
|
||||
General and administrative expenses (Notes 7 and 10)
|
38,597
|
|
|
19,857
|
|
|
57,607
|
|
|
43,198
|
|
||||
Leasing costs
|
1,330
|
|
|
2,650
|
|
|
2,786
|
|
|
4,407
|
|
||||
Depreciation and amortization
|
80,085
|
|
|
68,252
|
|
|
154,455
|
|
|
134,387
|
|
||||
Total expenses
|
182,025
|
|
|
149,335
|
|
|
340,363
|
|
|
299,328
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gain (loss) (Note 10)
|
2,838
|
|
|
616
|
|
|
(290
|
)
|
|
2,444
|
|
||||
Interest expense (Note 3)
|
(15,884
|
)
|
|
(11,727
|
)
|
|
(30,328
|
)
|
|
(22,970
|
)
|
||||
Gains on sales of depreciable operating properties
|
—
|
|
|
7,169
|
|
|
—
|
|
|
7,169
|
|
||||
Total other (expenses) income
|
(13,046
|
)
|
|
(3,942
|
)
|
|
(30,618
|
)
|
|
(13,357
|
)
|
||||
NET INCOME
|
24,352
|
|
|
47,215
|
|
|
69,770
|
|
|
89,009
|
|
||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
(367
|
)
|
|
(871
|
)
|
|
(1,072
|
)
|
|
(1,571
|
)
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
(4,367
|
)
|
|
(4,150
|
)
|
|
(9,263
|
)
|
|
(8,341
|
)
|
||||
Total income attributable to noncontrolling interests
|
(4,734
|
)
|
|
(5,021
|
)
|
|
(10,335
|
)
|
|
(9,912
|
)
|
||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
19,618
|
|
|
$
|
42,194
|
|
|
$
|
59,435
|
|
|
$
|
79,097
|
|
Net income available to common stockholders per share – basic (Note 11)
|
$
|
0.17
|
|
|
$
|
0.41
|
|
|
$
|
0.53
|
|
|
$
|
0.77
|
|
Net income available to common stockholders per share – diluted (Note 11)
|
$
|
0.17
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
Weighted average common shares outstanding – basic (Note 11)
|
115,084,897
|
|
|
100,972,355
|
|
|
110,980,066
|
|
|
100,937,069
|
|
||||
Weighted average common shares outstanding – diluted (Note 11)
|
115,539,725
|
|
|
101,809,541
|
|
|
111,464,647
|
|
|
101,618,953
|
|
|
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, 2019
|
106,016,287
|
|
|
$
|
1,060
|
|
|
$
|
4,350,917
|
|
|
$
|
(58,467
|
)
|
|
$
|
4,293,510
|
|
|
$
|
277,348
|
|
|
$
|
4,570,858
|
|
Net income
|
|
|
|
|
|
|
39,817
|
|
|
39,817
|
|
|
5,601
|
|
|
45,418
|
|
|||||||||
Issuance of common stock (Note 4)
|
8,897,110
|
|
|
89
|
|
|
721,705
|
|
|
|
|
721,794
|
|
|
|
|
721,794
|
|
||||||||
Issuance of share-based compensation awards
|
|
|
|
|
1,720
|
|
|
|
|
1,720
|
|
|
|
|
1,720
|
|
||||||||||
Non-cash amortization of share-based compensation (Note 7)
|
|
|
|
|
8,653
|
|
|
|
|
8,653
|
|
|
|
|
8,653
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
269,972
|
|
|
3
|
|
|
(3
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase of common stock, stock options and restricted stock units
|
(117,445
|
)
|
|
(1
|
)
|
|
(9,798
|
)
|
|
|
|
(9,799
|
)
|
|
|
|
(9,799
|
)
|
||||||||
Exchange of common units of the Operating Partnership
|
2,000
|
|
|
—
|
|
|
81
|
|
|
|
|
81
|
|
|
(81
|
)
|
|
—
|
|
|||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(2,617
|
)
|
|
(2,617
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(6,094
|
)
|
|
|
|
(6,094
|
)
|
|
6,094
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.485 per share/unit)
|
|
|
|
|
|
|
(57,532
|
)
|
|
(57,532
|
)
|
|
(980
|
)
|
|
(58,512
|
)
|
|||||||||
BALANCE AS OF MARCH 31, 2020
|
115,067,924
|
|
|
1,151
|
|
|
5,067,181
|
|
|
(76,182
|
)
|
|
4,992,150
|
|
|
285,365
|
|
|
5,277,515
|
|
||||||
Net income
|
|
|
|
|
|
|
19,618
|
|
|
19,618
|
|
|
4,734
|
|
|
24,352
|
|
|||||||||
Issuance of common stock
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
|
|
(45
|
)
|
|
|
|
(45
|
)
|
||||||||
Issuance of share-based compensation awards
|
|
|
|
|
805
|
|
|
|
|
805
|
|
|
|
|
805
|
|
||||||||||
Non-cash amortization of share-based compensation (Note 7)
|
|
|
|
|
13,576
|
|
|
|
|
13,576
|
|
|
|
|
13,576
|
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
33,581
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Repurchase of common stock, stock options and restricted stock units
|
(11,668
|
)
|
|
—
|
|
|
(735
|
)
|
|
|
|
(735
|
)
|
|
|
|
(735
|
)
|
||||||||
Exchange of common units of the Operating Partnership
|
86,701
|
|
|
1
|
|
|
3,761
|
|
|
|
|
3,762
|
|
|
(3,762
|
)
|
|
—
|
|
|||||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
|
|
|
|
—
|
|
|
(4,281
|
)
|
|
(4,281
|
)
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
(181
|
)
|
|
|
|
(181
|
)
|
|
181
|
|
|
—
|
|
|||||||||
Dividends declared per common share and common unit ($0.485 per share/unit)
|
|
|
|
|
|
|
(56,659
|
)
|
|
(56,659
|
)
|
|
(939
|
)
|
|
(57,598
|
)
|
|||||||||
BALANCE AS OF JUNE 30, 2020
|
115,176,538
|
|
|
$
|
1,152
|
|
|
$
|
5,084,362
|
|
|
$
|
(113,223
|
)
|
|
$
|
4,972,291
|
|
|
$
|
281,298
|
|
|
$
|
5,253,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
(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
|
|
|
|
|
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
|
|
|
|
|
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
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
69,770
|
|
|
$
|
89,009
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
148,419
|
|
|
131,982
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
6,036
|
|
|
2,405
|
|
||
Revenue reversals (recoveries) for doubtful accounts (Note 8)
|
12,381
|
|
|
(3,091
|
)
|
||
Non-cash amortization of share-based compensation awards
|
18,311
|
|
|
14,082
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
1,076
|
|
|
717
|
|
||
Non-cash amortization of net below market rents
|
(4,500
|
)
|
|
(4,415
|
)
|
||
Gain on sale of depreciable operating properties
|
—
|
|
|
(7,169
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(8,793
|
)
|
|
(8,181
|
)
|
||
Straight-line rents
|
(33,514
|
)
|
|
(29,937
|
)
|
||
Amortization of right of use ground lease assets
|
408
|
|
|
291
|
|
||
Net change in other operating assets
|
13,991
|
|
|
(15,540
|
)
|
||
Net change in other operating liabilities
|
437
|
|
|
(4,493
|
)
|
||
Net cash provided by operating activities
|
224,022
|
|
|
165,660
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(293,711
|
)
|
|
(372,750
|
)
|
||
Expenditures for operating properties and other capital assets
|
(80,630
|
)
|
|
(61,557
|
)
|
||
Net proceeds received from dispositions
|
—
|
|
|
17,271
|
|
||
Net cash used in investing activities
|
(374,341
|
)
|
|
(417,036
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock (Note 4)
|
721,749
|
|
|
—
|
|
||
Proceeds from the issuance of unsecured debt (Note 3)
|
350,000
|
|
|
—
|
|
||
Borrowings on unsecured revolving credit facility (Note 3)
|
190,000
|
|
|
425,000
|
|
||
Repayments on unsecured revolving credit facility (Note 3)
|
(435,000
|
)
|
|
(95,000
|
)
|
||
Principal payments and repayments of secured debt (Note 3)
|
(2,543
|
)
|
|
(75,384
|
)
|
||
Financing costs
|
(2,283
|
)
|
|
(1,335
|
)
|
||
Repurchase of common stock and restricted stock units
|
(10,534
|
)
|
|
(12,618
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
64
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(6,915
|
)
|
|
(7,812
|
)
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(109,187
|
)
|
|
(93,858
|
)
|
||
Net cash provided by financing activities
|
695,287
|
|
|
139,057
|
|
||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
544,968
|
|
|
(112,319
|
)
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
76,344
|
|
|
171,034
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
621,312
|
|
|
$
|
58,715
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
REVENUES
|
|
|
|
|
|
|
|
||||||||
Rental income (Note 8)
|
$
|
218,356
|
|
|
$
|
197,629
|
|
|
$
|
436,989
|
|
|
$
|
397,011
|
|
Other property income
|
1,067
|
|
|
2,863
|
|
|
3,762
|
|
|
4,683
|
|
||||
Total revenues
|
219,423
|
|
|
200,492
|
|
|
440,751
|
|
|
401,694
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
37,829
|
|
|
38,536
|
|
|
76,812
|
|
|
76,685
|
|
||||
Real estate taxes
|
21,854
|
|
|
17,926
|
|
|
44,056
|
|
|
36,565
|
|
||||
Ground leases (Note 9)
|
2,330
|
|
|
2,114
|
|
|
4,647
|
|
|
4,086
|
|
||||
General and administrative expenses (Notes 7 and 10)
|
38,597
|
|
|
19,857
|
|
|
57,607
|
|
|
43,198
|
|
||||
Leasing costs
|
1,330
|
|
|
2,650
|
|
|
2,786
|
|
|
4,407
|
|
||||
Depreciation and amortization
|
80,085
|
|
|
68,252
|
|
|
154,455
|
|
|
134,387
|
|
||||
Total expenses
|
182,025
|
|
|
149,335
|
|
|
340,363
|
|
|
299,328
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gain (loss) (Note 10)
|
2,838
|
|
|
616
|
|
|
(290
|
)
|
|
2,444
|
|
||||
Interest expense (Note 3)
|
(15,884
|
)
|
|
(11,727
|
)
|
|
(30,328
|
)
|
|
(22,970
|
)
|
||||
Gains on sales of depreciable operating properties
|
—
|
|
|
7,169
|
|
|
—
|
|
|
7,169
|
|
||||
Total other (expenses) income
|
(13,046
|
)
|
|
(3,942
|
)
|
|
(30,618
|
)
|
|
(13,357
|
)
|
||||
NET INCOME
|
24,352
|
|
|
47,215
|
|
|
69,770
|
|
|
89,009
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries
|
(4,514
|
)
|
|
(4,314
|
)
|
|
(9,543
|
)
|
|
(8,600
|
)
|
||||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
19,838
|
|
|
$
|
42,901
|
|
|
$
|
60,227
|
|
|
$
|
80,409
|
|
Net income available to common unitholders per unit – basic (Note 12)
|
$
|
0.16
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
Net income available to common unitholders per unit – diluted (Note 12)
|
$
|
0.16
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
Weighted average common units outstanding – basic (Note 12)
|
117,098,562
|
|
|
102,995,642
|
|
|
112,997,795
|
|
|
102,960,599
|
|
||||
Weighted average common units outstanding – diluted (Note 12)
|
117,553,390
|
|
|
103,832,828
|
|
|
113,482,376
|
|
|
103,642,483
|
|
|
Partners’ Capital
|
|
Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries
|
|
|
|||||||||
|
Number of
Common Units |
|
Common
Units |
|
Total
Capital |
|||||||||
BALANCE AS OF DECEMBER 31, 2019
|
108,039,574
|
|
|
$
|
4,369,758
|
|
|
$
|
201,100
|
|
|
$
|
4,570,858
|
|
Net income
|
|
|
40,389
|
|
|
5,029
|
|
|
45,418
|
|
||||
Issuance of common units (Note 4)
|
8,897,110
|
|
|
721,794
|
|
|
|
|
721,794
|
|
||||
Issuance of share-based compensation awards
|
|
|
1,720
|
|
|
|
|
1,720
|
|
|||||
Non-cash amortization of share-based compensation (Note 7)
|
|
|
8,653
|
|
|
|
|
8,653
|
|
|||||
Settlement of restricted stock units
|
269,972
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase of common units, stock options and restricted stock units
|
(117,445
|
)
|
|
(9,799
|
)
|
|
|
|
(9,799
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(2,617
|
)
|
|
(2,617
|
)
|
|||||
Distributions declared per common unit ($0.485 per unit)
|
|
|
(58,512
|
)
|
|
|
|
(58,512
|
)
|
|||||
BALANCE AS OF MARCH 31, 2020
|
117,089,211
|
|
|
5,074,003
|
|
|
203,512
|
|
|
5,277,515
|
|
|||
Net income
|
|
|
19,838
|
|
|
4,514
|
|
|
24,352
|
|
||||
Issuance of common units
|
—
|
|
|
(45
|
)
|
|
|
|
(45
|
)
|
||||
Issuance of share-based compensation awards
|
|
|
805
|
|
|
|
|
805
|
|
|||||
Non-cash amortization of share-based compensation (Note 7)
|
|
|
13,576
|
|
|
|
|
13,576
|
|
|||||
Settlement of restricted stock units
|
33,581
|
|
|
—
|
|
|
|
|
—
|
|
||||
Repurchase of common units, stock options and restricted stock units
|
(11,668
|
)
|
|
(735
|
)
|
|
|
|
(735
|
)
|
||||
Distributions to noncontrolling interests in consolidated property partnerships
|
|
|
|
|
(4,281
|
)
|
|
(4,281
|
)
|
|||||
Distributions declared per common unit ($0.485 per unit)
|
|
|
(57,598
|
)
|
|
|
|
(57,598
|
)
|
|||||
BALANCE AS OF JUNE 30, 2020
|
117,111,124
|
|
|
$
|
5,049,844
|
|
|
$
|
203,745
|
|
|
$
|
5,253,589
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
(3,146
|
)
|
|
|
|
(3,146
|
)
|
|||||
Issuance of share-based compensation awards
|
|
|
2,210
|
|
|
|
|
2,210
|
|
|||||
Non-cash amortization of share-based compensation
|
|
|
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
|
|
|
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
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
69,770
|
|
|
$
|
89,009
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of real estate assets and leasing costs
|
148,419
|
|
|
131,982
|
|
||
Depreciation of non-real estate furniture, fixtures and equipment
|
6,036
|
|
|
2,405
|
|
||
Revenue reversals (recoveries) for doubtful accounts (Note 8)
|
12,381
|
|
|
(3,091
|
)
|
||
Non-cash amortization of share-based compensation awards
|
18,311
|
|
|
14,082
|
|
||
Non-cash amortization of deferred financing costs and debt discounts and premiums
|
1,076
|
|
|
717
|
|
||
Non-cash amortization of net below market rents
|
(4,500
|
)
|
|
(4,415
|
)
|
||
Gain on sale of depreciable operating properties
|
—
|
|
|
(7,169
|
)
|
||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements
|
(8,793
|
)
|
|
(8,181
|
)
|
||
Straight-line rents
|
(33,514
|
)
|
|
(29,937
|
)
|
||
Amortization of right of use ground lease assets
|
408
|
|
|
291
|
|
||
Net change in other operating assets
|
13,991
|
|
|
(15,540
|
)
|
||
Net change in other operating liabilities
|
437
|
|
|
(4,493
|
)
|
||
Net cash provided by operating activities
|
224,022
|
|
|
165,660
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(293,711
|
)
|
|
(372,750
|
)
|
||
Expenditures for operating properties and other capital assets
|
(80,630
|
)
|
|
(61,557
|
)
|
||
Net proceeds received from dispositions
|
—
|
|
|
17,271
|
|
||
Net cash used in investing activities
|
(374,341
|
)
|
|
(417,036
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common units (Note 4)
|
721,749
|
|
|
—
|
|
||
Proceeds from the issuance of unsecured debt (Note 3)
|
350,000
|
|
|
—
|
|
||
Borrowings on unsecured revolving credit facility (Note 3)
|
190,000
|
|
|
425,000
|
|
||
Repayments on unsecured revolving credit facility (Note 3)
|
(435,000
|
)
|
|
(95,000
|
)
|
||
Principal payments and repayments of secured debt (Note 3)
|
(2,543
|
)
|
|
(75,384
|
)
|
||
Financing costs
|
(2,283
|
)
|
|
(1,335
|
)
|
||
Repurchase of common units and restricted stock units
|
(10,534
|
)
|
|
(12,618
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
64
|
|
||
Distributions to noncontrolling interests in consolidated property partnerships
|
(6,915
|
)
|
|
(7,812
|
)
|
||
Distributions paid to common unitholders
|
(109,187
|
)
|
|
(93,858
|
)
|
||
Net cash provided by financing activities
|
695,287
|
|
|
139,057
|
|
||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
544,968
|
|
|
(112,319
|
)
|
||
Cash and cash equivalents and restricted cash, beginning of period
|
76,344
|
|
|
171,034
|
|
||
Cash and cash equivalents and restricted cash, end of period
|
$
|
621,312
|
|
|
$
|
58,715
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage
Occupied
|
|
Percentage Leased
|
|||||
Stabilized Office Properties (1)
|
114
|
|
|
14,327,872
|
|
|
473
|
|
|
92.3
|
%
|
|
96.0
|
%
|
(1)
|
Includes stabilized retail space.
|
|
Number of
Buildings |
|
Number of
Units
|
|
2020 Average Occupancy
|
|||
Stabilized Residential Property
|
1
|
|
|
200
|
|
|
89.3
|
%
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet (1) / Units
|
|
In-process development projects - tenant improvement
|
3
|
|
1,275,000
|
|
In-process development projects - under construction (2)
|
5
|
|
1,016,000
|
|
Completed residential development project (3)
|
2
|
|
462 units
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
In addition to the estimated office and life science rentable square feet noted above, development projects under construction also include 339 residential units.
|
(3)
|
Represents recently completed residential phases I and II at our mixed-use development in San Diego, California that are not yet stabilized.
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
|
(in thousands)
|
||||||
Furniture, fixtures and other long-lived assets, net
|
$
|
53,060
|
|
|
$
|
35,286
|
|
Prepaid expenses
|
15,318
|
|
|
18,724
|
|
||
Note receivable (1)
|
—
|
|
|
1,651
|
|
||
Total prepaid expenses and other assets, net
|
$
|
68,378
|
|
|
$
|
55,661
|
|
(1)
|
During the six months ended June 30, 2020, the balance of the note receivable was written-off and the note receivable was placed on non-accrual status. We do not recognize interest income on non-accrual financing receivables. As of December 31, 2019 the note receivable was shown net of a valuation allowance of approximately $3.6 million.
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
245,000
|
|
Remaining borrowing capacity
|
750,000
|
|
|
505,000
|
|
||
Total borrowing capacity (1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate (2)
|
1.16
|
%
|
|
2.76
|
%
|
||
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 June 30, 2020 and December 31, 2019.
|
(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 June 30, 2020 and December 31, 2019, $2.7 million and $3.4 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
|
(1)
|
As of June 30, 2020 and December 31, 2019, $0.5 million and $0.7 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 June 30, 2020 and December 31, 2019.
|
Year
|
(in thousands)
|
||
Remaining 2020
|
$
|
2,594
|
|
2021
|
5,342
|
|
|
2022
|
155,554
|
|
|
2023
|
305,775
|
|
|
2024
|
431,006
|
|
|
2025
|
406,245
|
|
|
Thereafter
|
2,375,442
|
|
|
Total aggregate principal value (1)
|
$
|
3,681,958
|
|
(1)
|
Includes gross principal balance of outstanding debt before the effect of the following at June 30, 2020: $20.7 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt and $6.0 million of unamortized discounts for the unsecured senior notes.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
36,400
|
|
|
$
|
32,607
|
|
|
$
|
72,262
|
|
|
$
|
63,287
|
|
Capitalized interest and deferred financing costs
|
(20,516
|
)
|
|
(20,880
|
)
|
|
(41,934
|
)
|
|
(40,317
|
)
|
||||
Interest expense
|
$
|
15,884
|
|
|
$
|
11,727
|
|
|
$
|
30,328
|
|
|
$
|
22,970
|
|
|
Six Months Ended June 30, 2020
|
||
|
(in millions, except share and per share data)
|
||
Shares of common stock settled during the period
|
3,147,110
|
|
|
Weighted average price per share of common stock
|
$
|
80.08
|
|
Aggregate gross proceeds
|
$
|
252.0
|
|
Aggregate net proceeds after selling commissions
|
$
|
247.3
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
June 30, 2019
|
|||
Company owned common units in the Operating Partnership
|
115,176,538
|
|
|
106,016,287
|
|
|
100,972,035
|
|
Company owned general partnership interest
|
98.3
|
%
|
|
98.1
|
%
|
|
98.0
|
%
|
Noncontrolling common units of the Operating Partnership
|
1,934,586
|
|
|
2,023,287
|
|
|
2,023,287
|
|
Ownership interest of noncontrolling interest
|
1.7
|
%
|
|
1.9
|
%
|
|
2.0
|
%
|
|
Fair Value Assumptions
|
Valuation date
|
January 31, 2020
|
Expected share price volatility
|
17.0%
|
Risk-free interest rate
|
1.35%
|
Fair value per share on valuation date (1)
|
$84.54
|
(1)
|
Using the same Monte Carlo methodology and assumptions, the grant date fair value of one participant’s 2020 Performance-Based RSU grants was calculated as $85.52 per share.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in thousands)
|
||||||||||||||
Fixed lease payments
|
$
|
194,486
|
|
|
$
|
173,230
|
|
|
$
|
387,961
|
|
|
$
|
342,180
|
|
Variable lease payments
|
29,764
|
|
|
24,616
|
|
|
61,409
|
|
|
52,184
|
|
||||
Collectability (reversals) recoveries
|
(5,894
|
)
|
|
(217
|
)
|
|
(12,381
|
)
|
|
2,647
|
|
||||
Total rental income
|
$
|
218,356
|
|
|
$
|
197,629
|
|
|
$
|
436,989
|
|
|
$
|
397,011
|
|
(1)
|
Represents adjustments to rental income related to our assessment of the collectability of amounts due under leases with our tenants. For the three and six months ended June 30, 2020, includes a reduction in revenue of $5.9 million and $12.4 million, respectively, primarily as a result of the COVID-19 pandemic.
|
Year Ending
|
(in thousands)
|
||
Remaining 2020
|
$
|
348,479
|
|
2021
|
727,344
|
|
|
2022
|
802,787
|
|
|
2023
|
788,673
|
|
|
2024
|
746,047
|
|
|
2025
|
714,321
|
|
|
Thereafter
|
3,420,018
|
|
|
Total (1)
|
$
|
7,547,669
|
|
(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
|
3243 S. La Cienega Boulevard, Los Angeles, CA
|
October 2106
|
(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 extension 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 2020
|
$
|
2,821
|
|
2021
|
5,641
|
|
|
2022
|
5,642
|
|
|
2023
|
5,662
|
|
|
2024
|
5,662
|
|
|
2025
|
5,662
|
|
|
Thereafter
|
280,723
|
|
|
Total undiscounted cash flows (1)(2)(3)(4)(5)(6)
|
311,813
|
|
|
Present value discount
|
(213,720
|
)
|
|
Ground lease liabilities
|
$
|
98,093
|
|
(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 June 30, 2020.
|
(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 June 30, 2020 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 June 30, 2020 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 June 30, 2020 for the remainder of the lease term since we cannot predict future adjustments.
|
(6)
|
One of our ground lease obligations is subject to fixed 5% ground rent increases every five years, with the next increase occurring on December 1, 2022.
|
|
Fair Value (Level 1) (1)
|
||||||
|
June 30, 2020
|
|
December 31, 2019
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities (2)
|
$
|
23,175
|
|
|
$
|
27,098
|
|
(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 June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Description
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Net gain (loss) on marketable securities
|
$
|
2,662
|
|
|
$
|
544
|
|
|
$
|
(564
|
)
|
|
$
|
2,225
|
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||||||
|
Carrying
Value |
|
Fair
Value (1) |
|
Carrying
Value |
|
Fair
Value (1) |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt, net
|
$
|
256,113
|
|
|
$
|
269,707
|
|
|
$
|
258,593
|
|
|
$
|
272,997
|
|
Unsecured debt, net
|
$
|
3,399,105
|
|
|
$
|
3,591,247
|
|
|
$
|
3,049,185
|
|
|
$
|
3,252,217
|
|
Unsecured line of credit
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
245,000
|
|
|
$
|
245,195
|
|
(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 June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders
|
$
|
19,618
|
|
|
$
|
42,194
|
|
|
$
|
59,435
|
|
|
$
|
79,097
|
|
Allocation to participating securities (1)
|
(542
|
)
|
|
(543
|
)
|
|
(1,085
|
)
|
|
(1,052
|
)
|
||||
Numerator for basic and diluted net income available to common stockholders
|
$
|
19,076
|
|
|
$
|
41,651
|
|
|
$
|
58,350
|
|
|
$
|
78,045
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
115,084,897
|
|
|
100,972,355
|
|
|
110,980,066
|
|
|
100,937,069
|
|
||||
Effect of dilutive securities
|
454,828
|
|
|
837,186
|
|
|
484,581
|
|
|
681,884
|
|
||||
Diluted weighted average vested shares and common stock equivalents outstanding
|
115,539,725
|
|
|
101,809,541
|
|
|
111,464,647
|
|
|
101,618,953
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.17
|
|
|
$
|
0.41
|
|
|
$
|
0.53
|
|
|
$
|
0.77
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.17
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in thousands, except unit and per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders
|
$
|
19,838
|
|
|
$
|
42,901
|
|
|
$
|
60,227
|
|
|
$
|
80,409
|
|
Allocation to participating securities (1)
|
(542
|
)
|
|
(543
|
)
|
|
(1,085
|
)
|
|
(1,052
|
)
|
||||
Numerator for basic and diluted net income available to common unitholders
|
$
|
19,296
|
|
|
$
|
42,358
|
|
|
$
|
59,142
|
|
|
$
|
79,357
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
117,098,562
|
|
|
102,995,642
|
|
|
112,997,795
|
|
|
102,960,599
|
|||||
Effect of dilutive securities
|
454,828
|
|
|
837,186
|
|
|
484,581
|
|
|
681,884
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
117,553,390
|
|
|
103,832,828
|
|
|
113,482,376
|
|
|
103,642,483
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.16
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.16
|
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.77
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $39,952 and $38,780 as of June 30, 2020 and 2019, respectively
|
$
|
25,494
|
|
|
$
|
23,009
|
|
Cash paid for amounts included in the measurement of ground lease liabilities
|
$
|
2,905
|
|
|
$
|
2,699
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
131,892
|
|
|
$
|
129,500
|
|
Tenant improvements funded directly by tenants
|
$
|
7,210
|
|
|
$
|
7,017
|
|
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 (Note 15)
|
$
|
57,600
|
|
|
$
|
50,800
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
3,843
|
|
|
$
|
78
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
|
(in thousands)
|
||||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
60,044
|
|
|
$
|
51,604
|
|
Restricted cash at beginning of period
|
16,300
|
|
|
119,430
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
76,344
|
|
|
$
|
171,034
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
605,012
|
|
|
$
|
52,415
|
|
Restricted cash at end of period
|
16,300
|
|
|
6,300
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
621,312
|
|
|
$
|
58,715
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $39,952 and $38,780 as of June 30, 2020 and 2019, respectively
|
$
|
25,494
|
|
|
$
|
23,009
|
|
Cash paid for amounts included in the measurement of ground lease liabilities
|
$
|
2,905
|
|
|
$
|
2,699
|
|
NON-CASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
131,892
|
|
|
$
|
129,500
|
|
Tenant improvements funded directly by tenants
|
$
|
7,210
|
|
|
$
|
7,017
|
|
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 (Note 15)
|
$
|
57,600
|
|
|
$
|
50,800
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
|
(in thousands)
|
||||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
$
|
60,044
|
|
|
$
|
51,604
|
|
Restricted cash at beginning of period
|
16,300
|
|
|
119,430
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
$
|
76,344
|
|
|
$
|
171,034
|
|
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
605,012
|
|
|
$
|
52,415
|
|
Restricted cash at end of period
|
16,300
|
|
|
6,300
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
621,312
|
|
|
$
|
58,715
|
|
|
|
|
|
|
|
COVID-19 Modifications (3)
|
|
Non-COVID-19 Modifications (4)
|
|
|
||||||||||||
Property Type
|
|
Gross Rent Billings (1)
(in thousands)
|
|
Rent Collected (2)
|
|
Rent Forgiven (5)
|
|
Rent Deferred
|
|
Rent Deferred
|
|
Rent Outstanding (8)
|
||||||||||
|
Collected (6)
|
|
Outstanding (7)
|
|
Collected (6)
|
|
Outstanding (7)
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Office
|
|
$
|
190,245
|
|
|
97.7
|
%
|
|
—
|
|
|
—
|
|
0.4
|
%
|
|
—
|
|
—
|
|
1.9
|
%
|
Residential
|
|
4,226
|
|
|
88.0
|
%
|
|
—
|
|
|
—
|
|
7.6
|
%
|
|
—
|
|
—
|
|
4.4
|
%
|
|
Retail
|
|
7,521
|
|
|
32.3
|
%
|
|
3.5
|
%
|
|
—
|
|
34.5
|
%
|
|
—
|
|
—
|
|
29.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
201,992
|
|
|
95.1
|
%
|
|
0.1
|
%
|
|
—
|
|
1.8
|
%
|
|
—
|
|
—
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gross rent billings represents the total contractual base rent (including tenant direct-billed parking) and CAM billings before any COVID-19 related rent concessions for the three months ended June 30, 2020.
|
(2)
|
Cash collections through June 30, 2020 as a percentage of gross rent billings.
|
(3)
|
Rent concessions that qualify for the accounting relief provided by the FASB (as described in Note 1 “Organization and Basis of Presentation” to our consolidated financial statements included in this report), as total amounts due under the lease agreement are substantially the same or less than those that existed in the contract before modification.
|
(4)
|
Rent concessions that do not qualify for the accounting relief provided by the FASB (as described in Note 1 “Organization and Basis of Presentation” to our consolidated financial statements included in this report), as total amounts due under the lease agreement are not substantially the same as those that existed in the contract before modification, or other modifications unrelated to the COVID-19 pandemic have been included.
|
(5)
|
Amounts permanently forgiven as a percentage of gross rent billings.
|
(6)
|
Collections of amounts deferred under repayment plans (as described above) and through lease term extensions as a percentage of gross rent billings.
|
(7)
|
Remaining amounts deferred under repayment plans and through lease term extensions as a percentage of gross rent billings.
|
(8)
|
Uncollected gross rent billings that have not been forgiven and are not subject to deferral arrangements as a percentage of gross rent billings. Such amounts are subject to the Company’s allowance for uncollectible accounts.
|
•
|
The Exchange on 16th, Mission Bay, San Francisco, California. We commenced construction on this project in June 2015. This project totals approximately 750,370 gross rentable square feet consisting of 738,081 square feet of office space and 12,289 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. We completed construction and commenced revenue recognition on the first two phases comprising approximately 82% of the project in 2019 and on the final phase of the project during the three months ended March 31, 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 95,871 square feet of retail space with a total estimated investment of $100.0 million. At June 30, 2020, the retail space of the project was 100% leased and 90% occupied.
|
•
|
One Paseo (Residential Phases I & II) - Del Mar, San Diego, California. We commenced construction on Phases I and II of the residential component of this mixed-use project in December 2016 which are comprised of 237 and 225 residential units, respectively. We completed the first phase during the third quarter of 2019 and the second phase during the first quarter of 2020. The total estimated investment for these phases of the residential component of the project is approximately $290.0 million. As of June 30, 2020, 68% of the Phase I units were leased and 21% of the Phase II units were leased.
|
•
|
Netflix // On Vine, Hollywood, 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 of this project is 100% leased to Netflix, Inc. We currently expect this project to stabilize in the first quarter of 2021.
|
•
|
333 Dexter, South Lake Union, Seattle, Washington. We commenced construction on this project in June 2017. This project encompasses approximately 635,000 square feet of office space at a total estimated investment of $410.0 million and 100% of the project is leased to a Fortune 50 publicly traded company. During the three months ended June 30, 2020, we completed construction and commenced revenue recognition on the first phase of the project, representing approximately 49% of the project. The remaining two phases are currently expected to stabilize in the second halves of 2021 and 2022.
|
•
|
One Paseo (Office) - Del Mar, San Diego, California. We commenced construction on the office component of this project in December 2018, which encompasses 285,000 square feet of office space at a total estimated investment of $205.0 million. At June 30, 2020, the office component of the project was 91% leased. During the three months ended June 30, 2020, we completed construction and commenced revenue recognition on 22,000 square feet, representing approximately 8% of the project. In July 2020, we commenced revenue recognition on an additional 36,000 square feet, bringing the total revenue commenced on this project to approximately 20% as of the date of his report. We currently expect the project to stabilize in the second quarter of 2021.
|
•
|
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 656,000 square feet of office space at a total estimated investment of $570.0 million and is 100% leased to two tenants. We currently expect this project to stabilize in the fourth quarter 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 office space at a total estimated investment of $110.0 million. The project is 100% leased to a Fortune 50 publicly traded company. We currently expect this project to stabilize in the first quarter of 2021.
|
•
|
Living // On Vine, Hollywood, California. We commenced construction on the residential component of this project in December 2018, which encompasses 193 residential units at a total estimated investment of $195.0 million. We currently expect the residential component to be completed in the first quarter of 2021.
|
•
|
One Paseo (Residential Phase III) - Del Mar, San Diego, California. We commenced construction on Phase III of the residential component of this mixed-use project in December 2016, which is comprised of 146 residential units. The total estimated investment for Phase III of the residential component of the project is approximately $100.0 million. Phase III was completed and delivered in July 2020.
|
•
|
2100 Kettner, Little Italy, San Diego, California. We commenced construction on this project in September 2019. This project is comprised of approximately 200,000 square feet of office space for a total estimated investment of $140.0 million.
|
Future Development Pipeline
|
|
Location
|
|
Approx. Developable Square Feet (1)
|
|
Total Costs
as of 6/30/2020
($ in millions) (2)
|
||
|
|
|
|
|
|
|
||
San Diego County
|
|
|
|
|
|
|
||
Santa Fe Summit – Phases II and III
|
|
56 Corridor
|
|
600,000 - 650,000
|
|
$
|
81.6
|
|
1335 Broadway & 901 Park Boulevard
|
|
East Village
|
|
TBD
|
|
46.6
|
|
|
San Francisco Bay Area
|
|
|
|
|
|
|
||
Kilroy Oyster Point - Phases II - IV
|
|
South San Francisco
|
|
1,750,000 - 1,900,000
|
|
331.3
|
|
|
Flower Mart
|
|
SOMA
|
|
2,300,000
|
|
418.7
|
|
|
Greater Seattle
|
|
|
|
|
|
|
||
SIX0 - Office & Residential
|
|
Seattle CBD
|
|
TBD
|
|
141.8
|
|
|
TOTAL:
|
|
|
|
|
|
$
|
1,020.0
|
|
(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 June 30, 2020.
|
|
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
June 30, 2020 |
13
|
|
|
9
|
|
|
111,968
|
|
|
233,263
|
|
|
50.1
|
%
|
|
$
|
61.16
|
|
|
$
|
10.05
|
|
|
37.2
|
%
|
|
15.4
|
%
|
|
73
|
|
Six Months Ended
June 30, 2020 |
23
|
|
|
18
|
|
|
159,894
|
|
|
323,330
|
|
|
40.4
|
%
|
|
$
|
54.49
|
|
|
$
|
8.38
|
|
|
36.4
|
%
|
|
16.6
|
%
|
|
78
|
|
|
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
June 30, 2020 |
5
|
|
|
9
|
|
|
53,214
|
|
|
233,263
|
|
|
$
|
54.10
|
|
|
$
|
9.02
|
|
|
30.0
|
%
|
|
10.7
|
%
|
|
72
|
|
Six Months Ended
June 30, 2020 |
12
|
|
|
18
|
|
|
184,875
|
|
|
323,330
|
|
|
$
|
56.72
|
|
|
$
|
8.62
|
|
|
36.9
|
%
|
|
18.6
|
%
|
|
79
|
|
(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 exclude tenant-funded tenant 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 leases of approximately 48,603 rentable square feet for the three months ended June 30, 2020 and commenced and executed leases of approximately 87,355 and 70,868 rentable square feet, respectively, for the six months ended June 30, 2020, 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 June 30, 2020, 4 new leases totaling 51,726 square feet were signed but not commenced as of June 30, 2020. For the six months ended June 30, 2020, 11 new leases totaling 178,626 square feet were signed but not commenced as of June 30, 2020.
|
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 2020
|
|
35
|
|
|
395,942
|
|
|
3.1
|
%
|
|
$
|
17,080
|
|
|
2.5
|
%
|
|
$
|
43.14
|
|
2021
|
|
78
|
|
|
764,334
|
|
|
5.8
|
%
|
|
32,319
|
|
|
4.6
|
%
|
|
42.28
|
|
||
2022
|
|
65
|
|
|
749,808
|
|
|
5.8
|
%
|
|
32,351
|
|
|
4.7
|
%
|
|
43.15
|
|
||
2023
|
|
81
|
|
|
1,299,381
|
|
|
10.0
|
%
|
|
68,853
|
|
|
9.9
|
%
|
|
52.99
|
|
||
2024
|
|
58
|
|
|
945,844
|
|
|
7.3
|
%
|
|
46,338
|
|
|
6.6
|
%
|
|
48.99
|
|
||
2025
|
|
53
|
|
|
663,871
|
|
|
5.1
|
%
|
|
32,304
|
|
|
4.6
|
%
|
|
48.66
|
|
||
Total
|
|
370
|
|
|
4,819,180
|
|
|
37.1
|
%
|
|
$
|
229,245
|
|
|
32.9
|
%
|
|
$
|
47.57
|
|
Year
|
|
Region
|
|
# of
Expiring Leases
|
|
Total
Square Feet
|
|
% of Total
Leased Sq. Ft.
|
|
Annualized
Base Rent (2)(3)
|
|
% of Total
Annualized
Base Rent (2)
|
|
Annualized Rent
per Sq. Ft. (2)
|
||||||||
2020
|
|
Greater Los Angeles
|
|
22
|
|
|
243,813
|
|
|
1.9
|
%
|
|
$
|
9,465
|
|
|
1.4
|
%
|
|
$
|
38.82
|
|
|
San Diego
|
|
7
|
|
|
61,044
|
|
|
0.5
|
%
|
|
2,340
|
|
|
0.3
|
%
|
|
38.33
|
|
|||
|
San Francisco Bay Area
|
|
5
|
|
|
68,651
|
|
|
0.5
|
%
|
|
4,545
|
|
|
0.7
|
%
|
|
66.20
|
|
|||
|
Greater Seattle
|
|
1
|
|
|
22,434
|
|
|
0.2
|
%
|
|
730
|
|
|
0.1
|
%
|
|
32.54
|
|
|||
|
Total
|
|
35
|
|
|
395,942
|
|
|
3.1
|
%
|
|
$
|
17,080
|
|
|
2.5
|
%
|
|
$
|
43.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
2021
|
|
Greater Los Angeles
|
|
49
|
|
|
330,964
|
|
|
2.5
|
%
|
|
$
|
13,084
|
|
|
1.8
|
%
|
|
$
|
39.53
|
|
|
San Diego
|
|
15
|
|
|
187,468
|
|
|
1.4
|
%
|
|
6,795
|
|
|
1.0
|
%
|
|
36.25
|
|
|||
|
San Francisco Bay Area
|
|
10
|
|
|
234,125
|
|
|
1.8
|
%
|
|
11,947
|
|
|
1.7
|
%
|
|
51.03
|
|
|||
|
Greater Seattle
|
|
4
|
|
|
11,777
|
|
|
0.1
|
%
|
|
493
|
|
|
0.1
|
%
|
|
41.86
|
|
|||
|
Total
|
|
78
|
|
|
764,334
|
|
|
5.8
|
%
|
|
$
|
32,319
|
|
|
4.6
|
%
|
|
$
|
42.28
|
|
(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 June 30, 2020, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of June 30, 2020.
|
(2)
|
Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”
|
(3)
|
Includes 100% of annualized base rent of consolidated property partnerships.
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet (1) / Units
|
|
In-process development projects - tenant improvement
|
3
|
|
1,275,000
|
|
In-process development projects - under construction (2)
|
5
|
|
1,016,000
|
|
Completed residential development project (3)
|
2
|
|
462 units
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
In addition to the estimated office and life science rentable square feet noted above, development projects under construction also include 339 residential units.
|
(3)
|
Represents recently completed residential phases I and II at our mixed-use development in San Diego, California that are not yet stabilized.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of June 30, 2019
|
94
|
|
|
13,546,615
|
|
Acquisitions
|
19
|
|
|
151,908
|
|
Completed development properties placed in-service
|
2
|
|
|
846,241
|
|
Dispositions
|
(1
|
)
|
|
(271,556
|
)
|
Remeasurement
|
—
|
|
|
54,664
|
|
Total as of June 30, 2020 (1)
|
114
|
|
|
14,327,872
|
|
(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)
|
|||||||||
|
6/30/2020
|
|
3/31/2020
|
|
12/31/2019
|
||||||||||
Greater Los Angeles
|
|
51
|
|
|
4,029,919
|
|
|
91.2
|
%
|
|
94.0
|
%
|
|
95.2
|
%
|
San Diego County
|
|
22
|
|
|
2,146,253
|
|
|
87.4
|
%
|
|
88.3
|
%
|
|
89.7
|
%
|
San Francisco Bay Area
|
|
33
|
|
|
6,349,910
|
|
|
93.7
|
%
|
|
94.3
|
%
|
|
95.0
|
%
|
Greater Seattle
|
|
8
|
|
|
1,801,790
|
|
|
95.9
|
%
|
|
95.5
|
%
|
|
97.7
|
%
|
Total Stabilized Office Portfolio
|
|
114
|
|
|
14,327,872
|
|
|
92.3
|
%
|
|
93.5
|
%
|
|
94.6
|
%
|
|
Average Occupancy
|
||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||
Stabilized Office Portfolio (1)
|
92.8
|
%
|
|
93.5
|
%
|
|
93.2
|
%
|
|
93.3
|
%
|
Same Store Portfolio (2)
|
92.5
|
%
|
|
93.9
|
%
|
|
93.1
|
%
|
|
93.6
|
%
|
Residential Portfolio (3)
|
85.0
|
%
|
|
76.5
|
%
|
|
89.3
|
%
|
|
73.4
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and exclude occupancy percentages of properties held for sale.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2019 and still owned and stabilized as of June 30, 2020 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 462 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
|
|
Percentage of Total Rentable Square Feet
|
|
Year(s) of Lease Expiration
|
|||||
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|||||
Dropbox, Inc.
|
|
San Francisco Bay Area
|
|
$
|
55,998
|
|
|
738,081
|
|
|
7.9
|
%
|
|
5.0
|
%
|
|
2033
|
GM Cruise, LLC
|
|
San Francisco Bay Area
|
|
36,337
|
|
|
374,618
|
|
|
5.1
|
%
|
|
2.6
|
%
|
|
2031
|
|
LinkedIn Corporation / Microsoft Corporation
|
|
San Francisco Bay Area
|
|
29,752
|
|
|
663,460
|
|
|
4.2
|
%
|
|
4.5
|
%
|
|
2024 / 2026
|
|
Adobe Systems, Inc.
|
|
San Francisco Bay Area / Greater Seattle
|
|
27,897
|
|
|
513,111
|
|
|
3.9
|
%
|
|
3.5
|
%
|
|
2027 / 2031
|
|
salesforce.com, inc.
|
|
San Francisco Bay Area
|
|
24,076
|
|
|
451,763
|
|
|
3.4
|
%
|
|
3.1
|
%
|
|
2031 / 2032
|
|
DIRECTV, LLC
|
|
Greater Los Angeles
|
|
23,152
|
|
|
684,411
|
|
|
3.3
|
%
|
|
4.7
|
%
|
|
2027
|
|
Box, Inc.
|
|
San Francisco Bay Area
|
|
22,441
|
|
|
371,792
|
|
|
3.2
|
%
|
|
2.5
|
%
|
|
2021 / 2028
|
|
Okta, Inc.
|
|
San Francisco Bay Area
|
|
18,263
|
|
|
218,100
|
|
|
2.6
|
%
|
|
1.5
|
%
|
|
2028
|
|
Riot Games, Inc.
|
|
Greater Los Angeles
|
|
15,554
|
|
|
251,509
|
|
|
2.2
|
%
|
|
1.7
|
%
|
|
2020 / 2023 / 2024
|
|
Synopsys, Inc.
|
|
San Francisco Bay Area
|
|
15,492
|
|
|
340,913
|
|
|
2.2
|
%
|
|
2.3
|
%
|
|
2030
|
|
Fortune 50 Publicly-Traded Company (3)
|
|
Greater Seattle
|
|
15,355
|
|
|
311,983
|
|
|
2.2
|
%
|
|
2.1
|
%
|
|
2033
|
|
Viacom International, Inc.
|
|
Greater Los Angeles
|
|
13,718
|
|
|
211,343
|
|
|
1.9
|
%
|
|
1.4
|
%
|
|
2028
|
|
DoorDash, Inc.
|
|
San Francisco Bay Area
|
|
13,531
|
|
|
135,137
|
|
|
1.9
|
%
|
|
0.9
|
%
|
|
2032
|
|
Amazon.com
|
|
Greater Seattle
|
|
12,397
|
|
|
277,399
|
|
|
1.7
|
%
|
|
1.9
|
%
|
|
2030
|
|
Nektar Therapeutics, Inc.
|
|
San Francisco Bay Area
|
|
12,297
|
|
|
135,350
|
|
|
1.7
|
%
|
|
0.9
|
%
|
|
2030
|
|
Total
|
|
|
|
$
|
336,260
|
|
|
5,678,970
|
|
|
47.4
|
%
|
|
38.6
|
%
|
|
|
(1)
|
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 June 30, 2020.
|
(2)
|
Includes 100% of the annualized base rental revenues of consolidated property partnerships.
|
(3)
|
In June, the Company commenced GAAP revenue recognition on Phase I of this tenant’s lease at 333 Dexter, which represents approximately 49% of the 635,000 square foot project located in the South Lake Union submarket of Seattle.
|
•
|
Same Store Properties – includes the consolidated results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2019 and still owned and included in the stabilized portfolio as of June 30, 2020, including our residential tower in Hollywood, California;
|
•
|
Development Properties – includes the results generated by certain of our in-process development projects, expenses for certain of our future development project and the results generated by our 462 completed residential units that are not yet stabilized and the following stabilized development properties:
|
•
|
Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the 19-building creative office campus we acquired during 2019; and
|
•
|
Disposition Properties– includes the results of the one property disposed of in the second quarter of 2019 and the one property disposed of in the fourth quarter of 2019.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
92
|
|
|
12,935,383
|
|
Stabilized Development Properties
|
|
3
|
|
|
1,240,581
|
|
Acquisition Properties
|
|
19
|
|
|
151,908
|
|
Total Stabilized Portfolio
|
|
114
|
|
|
14,327,872
|
|
|
Three Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2020
|
|
2019
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
|
|
|
|
|
|
|
|
|
||||||
Net Income Available to Common Stockholders
|
$
|
19,618
|
|
|
$
|
42,194
|
|
|
$
|
(22,576
|
)
|
|
(53.5
|
)%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
367
|
|
|
871
|
|
|
(504
|
)
|
|
(57.9
|
)%
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
4,367
|
|
|
4,150
|
|
|
217
|
|
|
5.2
|
%
|
|||
Net income
|
$
|
24,352
|
|
|
$
|
47,215
|
|
|
$
|
(22,863
|
)
|
|
(48.4
|
)%
|
Unallocated expense (income):
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
38,597
|
|
|
19,857
|
|
|
18,740
|
|
|
94.4
|
%
|
|||
Leasing costs
|
1,330
|
|
|
2,650
|
|
|
(1,320
|
)
|
|
(49.8
|
)%
|
|||
Depreciation and amortization
|
80,085
|
|
|
68,252
|
|
|
11,833
|
|
|
17.3
|
%
|
|||
Interest income and other net investment gain
|
(2,838
|
)
|
|
(616
|
)
|
|
(2,222
|
)
|
|
360.7
|
%
|
|||
Interest expense
|
15,884
|
|
|
11,727
|
|
|
4,157
|
|
|
35.4
|
%
|
|||
Gains on sales of depreciable operating properties
|
—
|
|
|
(7,169
|
)
|
|
7,169
|
|
|
(100.0
|
)%
|
|||
Net Operating Income, as defined
|
$
|
157,410
|
|
|
$
|
141,916
|
|
|
$
|
15,494
|
|
|
10.9
|
%
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2020
|
|
2019
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion
|
|
Total
|
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
182,323
|
|
|
$
|
32,962
|
|
|
$
|
3,071
|
|
|
$
|
—
|
|
|
$
|
218,356
|
|
|
$
|
185,711
|
|
|
$
|
9,169
|
|
|
$
|
—
|
|
|
$
|
2,749
|
|
|
$
|
197,629
|
|
Other property income
|
922
|
|
|
149
|
|
|
(4
|
)
|
|
—
|
|
|
1,067
|
|
|
2,291
|
|
|
253
|
|
|
—
|
|
|
319
|
|
|
2,863
|
|
||||||||||
Total
|
183,245
|
|
|
33,111
|
|
|
3,067
|
|
|
—
|
|
|
219,423
|
|
|
188,002
|
|
|
9,422
|
|
|
—
|
|
|
3,068
|
|
|
200,492
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
32,936
|
|
|
4,649
|
|
|
244
|
|
|
—
|
|
|
37,829
|
|
|
36,154
|
|
|
1,609
|
|
|
—
|
|
|
773
|
|
|
38,536
|
|
||||||||||
Real estate taxes
|
17,214
|
|
|
4,120
|
|
|
520
|
|
|
—
|
|
|
21,854
|
|
|
17,067
|
|
|
554
|
|
|
—
|
|
|
305
|
|
|
17,926
|
|
||||||||||
Ground leases
|
2,121
|
|
|
—
|
|
|
209
|
|
|
—
|
|
|
2,330
|
|
|
2,114
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,114
|
|
||||||||||
Total
|
52,271
|
|
|
8,769
|
|
|
973
|
|
|
—
|
|
|
62,013
|
|
|
55,335
|
|
|
2,163
|
|
|
—
|
|
|
1,078
|
|
|
58,576
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
130,974
|
|
|
$
|
24,342
|
|
|
$
|
2,094
|
|
|
$
|
—
|
|
|
$
|
157,410
|
|
|
$
|
132,667
|
|
|
$
|
7,259
|
|
|
$
|
—
|
|
|
$
|
1,990
|
|
|
$
|
141,916
|
|
|
Three Months Ended June 30, 2020 as compared to the Three Months Ended June 30, 2019
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Development
|
|
Acquisition
|
|
Disposition
|
|
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
|
$
|
(3,388
|
)
|
|
(1.8
|
)%
|
|
$
|
23,793
|
|
|
259.5
|
%
|
|
$
|
3,071
|
|
|
100.0
|
%
|
|
$
|
(2,749
|
)
|
|
(100.0
|
)%
|
|
$
|
20,727
|
|
|
10.5
|
%
|
Other property income
|
(1,369
|
)
|
|
(59.8
|
)%
|
|
(104
|
)
|
|
(41.1
|
)%
|
|
(4
|
)
|
|
(100.0
|
)%
|
|
(319
|
)
|
|
(100.0
|
)%
|
|
(1,796
|
)
|
|
(62.7
|
)%
|
|||||
Total
|
(4,757
|
)
|
|
(2.5
|
)%
|
|
23,689
|
|
|
251.4
|
%
|
|
3,067
|
|
|
100.0
|
%
|
|
(3,068
|
)
|
|
(100.0
|
)%
|
|
18,931
|
|
|
9.4
|
%
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
(3,218
|
)
|
|
(8.9
|
)%
|
|
3,040
|
|
|
188.9
|
%
|
|
244
|
|
|
100.0
|
%
|
|
(773
|
)
|
|
(100.0
|
)%
|
|
(707
|
)
|
|
(1.8
|
)%
|
|||||
Real estate taxes
|
147
|
|
|
0.9
|
%
|
|
3,566
|
|
|
643.7
|
%
|
|
520
|
|
|
100.0
|
%
|
|
(305
|
)
|
|
(100.0
|
)%
|
|
3,928
|
|
|
21.9
|
%
|
|||||
Ground leases
|
7
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
|
209
|
|
|
100.0
|
%
|
|
—
|
|
|
—
|
%
|
|
216
|
|
|
10.2
|
%
|
|||||
Total
|
(3,064
|
)
|
|
(5.5
|
)%
|
|
6,606
|
|
|
305.4
|
%
|
|
973
|
|
|
100.0
|
%
|
|
(1,078
|
)
|
|
(100.0
|
)%
|
|
3,437
|
|
|
5.9
|
%
|
|||||
Net Operating Income,
as defined
|
$
|
(1,693
|
)
|
|
(1.3
|
)%
|
|
$
|
17,083
|
|
|
235.3
|
%
|
|
$
|
2,094
|
|
|
100.0
|
%
|
|
$
|
(1,990
|
)
|
|
(100.0
|
)%
|
|
$
|
15,494
|
|
|
10.9
|
%
|
•
|
A decrease in Net Operating Income of $1.7 million attributable to the Same Store Properties was driven by the following activity:
|
•
|
A decrease in rental income of $3.4 million primarily due to:
|
•
|
$3.7 million of reversals of revenue related to the creditworthiness of certain tenants primarily as a result of the COVID-19 pandemic;
|
•
|
$3.0 million decrease due to an early lease termination fee received in 2019 for a tenant in the San Francisco Bay Area;
|
•
|
$2.0 million decrease due to lower occupancy primarily in the Greater Los Angeles, San Francisco Bay Area, and San Diego County regions;
|
•
|
$1.6 million decrease in recoveries of recurring expenses related to property taxes, repairs and maintenance, security, janitorial, utilities, parking and various other recurring expenses primarily due to the following:
|
•
|
$0.8 million decrease due to tenants on a cash basis of revenue recognition and abatements given due to the COVID-19 pandemic;
|
•
|
$0.5 million decrease due to lower operating expenses resulting from COVID-19 stay-at-home orders; and
|
•
|
$0.6 million decrease primarily due to new tenants with 2020 base years;
|
•
|
$1.1 million decrease due to lower parking income resulting from a reduction in the number of monthly parking spaces rented as a result of COVID-19 stay-at-home orders; partially offset by
|
•
|
$8.1 million increase from new leases and renewals at higher rates primarily in the San Francisco Bay Area, San Diego County, and Greater Seattle regions;
|
•
|
A decrease in other property income of $1.4 million primarily due to lower transient and special event parking income at a number of properties in the San Francisco Bay Area, Greater Seattle and Greater Los Angeles regions. We expect daily, special event and transient parking to be impacted while restrictions intended to prevent the spread of COVID-19 remain in effect;
|
•
|
A decrease in property and related expenses of $3.1 million primarily due to the following:
|
•
|
$2.8 million decrease in reimbursable property expenses including janitorial, utilities, engineering, parking, and various other recurring expenses due to several tenants implementing work from home policies due to the COVID-19 pandemic. We anticipate lower reimbursable property expenses and corresponding tenant recoveries as a result of lower usage of our buildings by tenants while restrictions intended to prevent the spread of COVID-19 are in effect; and
|
•
|
$0.4 million decrease due to insurance reimbursements received in 2020 for expenses incurred in 2019;
|
•
|
An increase in Net Operating Income of $17.1 million attributable to the Development Properties driven by the following activity:
|
•
|
$23.8 million increase in rental income primarily related to one office development project that was added to the stabilized portfolio in the first quarter of 2020; partially offset by
|
•
|
$6.6 million increase in property and related expenses primarily due to higher property expenses and real estate taxes related to one office development project that was added to the stabilized portfolio in the first quarter of 2020 and ceased capitalization of real estate taxes;
|
•
|
An increase in Net Operating Income of $2.1 million attributable to the Acquisition Properties; and
|
•
|
A decrease in Net Operating Income of $2.0 million attributable to the Disposition Properties.
|
•
|
An increase of $18.4 million in severance costs related to the previously announced departure of an executive officer and the departure of certain other employees;
|
•
|
A increase of $1.2 million related to the mark-to-market adjustment of the Company’s deferred compensation plan and the resultant impact of reducing compensation expense, which is offset by the losses on the underlying marketable securities which are included in interest income and other net investment gain (loss) in the consolidated statements of operations; partially offset by
|
•
|
A decrease of $1.0 million primarily due to lower incentive compensation accruals and other related cost cutting measures as a result of COVID-19.
|
•
|
An increase of $4.4 million attributable to the Same Store Properties;
|
•
|
An increase of $6.3 million attributable to the Development Properties; and
|
•
|
An increase of $2.2 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $1.1 million attributable to the Disposition Properties.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
36,400
|
|
|
$
|
32,607
|
|
|
$
|
3,793
|
|
|
11.6
|
%
|
Capitalized interest and deferred financing costs
|
(20,516
|
)
|
|
(20,880
|
)
|
|
364
|
|
|
(1.7
|
)%
|
|||
Interest expense
|
$
|
15,884
|
|
|
$
|
11,727
|
|
|
$
|
4,157
|
|
|
35.4
|
%
|
|
Six Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2020
|
|
2019
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
|
|
|
|
|
|
|
|
|||||||
Net Income Available to Common Stockholders
|
$
|
59,435
|
|
|
$
|
79,097
|
|
|
$
|
(19,662
|
)
|
|
(24.9
|
)%
|
Net income attributable to noncontrolling common units of the Operating Partnership
|
1,072
|
|
|
1,571
|
|
|
(499
|
)
|
|
(31.8
|
)%
|
|||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
9,263
|
|
|
8,341
|
|
|
922
|
|
|
11.1
|
%
|
|||
Net income
|
$
|
69,770
|
|
|
$
|
89,009
|
|
|
$
|
(19,239
|
)
|
|
(21.6
|
)%
|
Unallocated expense (income):
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
57,607
|
|
|
43,198
|
|
|
14,409
|
|
|
33.4
|
%
|
|||
Leasing Costs
|
2,786
|
|
|
4,407
|
|
|
(1,621
|
)
|
|
(36.8
|
)%
|
|||
Depreciation and amortization
|
154,455
|
|
|
134,387
|
|
|
20,068
|
|
|
14.9
|
%
|
|||
Interest income and other net investment loss (gain)
|
290
|
|
|
(2,444
|
)
|
|
2,734
|
|
|
(111.9
|
)%
|
|||
Interest expense
|
30,328
|
|
|
22,970
|
|
|
7,358
|
|
|
32.0
|
%
|
|||
Gains on sales of depreciable operating properties
|
—
|
|
|
(7,169
|
)
|
|
7,169
|
|
|
(100.0
|
)%
|
|||
Net Operating Income, as defined
|
$
|
315,236
|
|
|
$
|
284,358
|
|
|
$
|
30,878
|
|
|
10.9
|
%
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2020
|
|
2019
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion
|
|
Total
|
|
Same Store
|
|
Develop-ment
|
|
Acquisi-tion
|
|
Disposi-tion
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
368,737
|
|
|
$
|
61,390
|
|
|
$
|
6,862
|
|
|
$
|
—
|
|
|
$
|
436,989
|
|
|
$
|
374,153
|
|
|
$
|
17,194
|
|
|
$
|
—
|
|
|
$
|
5,664
|
|
|
$
|
397,011
|
|
Other property income
|
3,102
|
|
|
581
|
|
|
79
|
|
|
—
|
|
|
3,762
|
|
|
4,002
|
|
|
320
|
|
|
—
|
|
|
361
|
|
|
4,683
|
|
||||||||||
Total
|
371,839
|
|
|
61,971
|
|
|
6,941
|
|
|
—
|
|
|
440,751
|
|
|
378,155
|
|
|
17,514
|
|
|
—
|
|
|
6,025
|
|
|
401,694
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
67,693
|
|
|
8,492
|
|
|
627
|
|
|
—
|
|
|
76,812
|
|
|
72,449
|
|
|
2,671
|
|
|
—
|
|
|
1,565
|
|
|
76,685
|
|
||||||||||
Real estate taxes
|
34,460
|
|
|
8,538
|
|
|
1,058
|
|
|
—
|
|
|
44,056
|
|
|
34,177
|
|
|
1,766
|
|
|
—
|
|
|
622
|
|
|
36,565
|
|
||||||||||
Ground leases
|
4,230
|
|
|
—
|
|
|
417
|
|
|
—
|
|
|
4,647
|
|
|
4,086
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,086
|
|
||||||||||
Total
|
106,383
|
|
|
17,030
|
|
|
2,102
|
|
|
—
|
|
|
125,515
|
|
|
110,712
|
|
|
4,437
|
|
|
—
|
|
|
2,187
|
|
|
117,336
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
265,456
|
|
|
$
|
44,941
|
|
|
$
|
4,839
|
|
|
$
|
—
|
|
|
$
|
315,236
|
|
|
$
|
267,443
|
|
|
$
|
13,077
|
|
|
$
|
—
|
|
|
$
|
3,838
|
|
|
$
|
284,358
|
|
|
Six Months Ended June 30, 2020 as compared to the Six Months Ended June 30, 2019
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Development
|
|
Acquisition
|
|
Disposition
|
|
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
|
$
|
(5,416
|
)
|
|
(1.4
|
)%
|
|
$
|
44,196
|
|
|
257.0
|
%
|
|
$
|
6,862
|
|
|
100.0
|
%
|
|
$
|
(5,664
|
)
|
|
(100.0
|
)%
|
|
$
|
39,978
|
|
|
10.1
|
%
|
Other property income
|
(900
|
)
|
|
(22.5
|
)%
|
|
261
|
|
|
81.6
|
%
|
|
79
|
|
|
100.0
|
%
|
|
(361
|
)
|
|
(100.0
|
)%
|
|
(921
|
)
|
|
(19.7
|
)%
|
|||||
Total
|
(6,316
|
)
|
|
(1.7
|
)%
|
|
44,457
|
|
|
253.8
|
%
|
|
6,941
|
|
|
100.0
|
%
|
|
(6,025
|
)
|
|
(100.0
|
)%
|
|
39,057
|
|
|
9.7
|
%
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
(4,756
|
)
|
|
(6.6
|
)%
|
|
5,821
|
|
|
217.9
|
%
|
|
627
|
|
|
100.0
|
%
|
|
(1,565
|
)
|
|
(100.0
|
)%
|
|
127
|
|
|
0.2
|
%
|
|||||
Real estate taxes
|
283
|
|
|
0.8
|
%
|
|
6,772
|
|
|
383.5
|
%
|
|
1,058
|
|
|
100.0
|
%
|
|
(622
|
)
|
|
(100.0
|
)%
|
|
7,491
|
|
|
20.5
|
%
|
|||||
Ground leases
|
144
|
|
|
3.5
|
%
|
|
—
|
|
|
—
|
%
|
|
417
|
|
|
100.0
|
%
|
|
—
|
|
|
—
|
%
|
|
561
|
|
|
13.7
|
%
|
|||||
Total
|
(4,329
|
)
|
|
(3.9
|
)%
|
|
12,593
|
|
|
283.8
|
%
|
|
2,102
|
|
|
100.0
|
%
|
|
(2,187
|
)
|
|
(100.0
|
)%
|
|
8,179
|
|
|
7.0
|
%
|
|||||
Net Operating Income,
as defined
|
$
|
(1,987
|
)
|
|
(0.7
|
)%
|
|
$
|
31,864
|
|
|
243.7
|
%
|
|
$
|
4,839
|
|
|
100.0
|
%
|
|
$
|
(3,838
|
)
|
|
(100.0
|
)%
|
|
$
|
30,878
|
|
|
10.9
|
%
|
•
|
A decrease of $2.0 million attributable to the Same Store Properties primarily resulting from:
|
•
|
A decrease in rental income of $5.4 million primarily due to:
|
•
|
$8.6 million of reversals of revenue related to the creditworthiness of certain tenants primarily as a result of the COVID-19 pandemic;
|
•
|
$4.2 million net decrease primarily related to the improved credit quality of a tenant in 2019 for which the Company recorded a bad debt reserve in 2018;
|
•
|
$6.2 million decrease primarily due to an early lease termination fee received in 2019 for a tenant in the San Francisco Bay Area;
|
•
|
$0.9 million decrease due to lower parking income resulting from a reduction in the number of monthly parking spaces rented as a result of COVID-19 stay-at-home orders;
|
•
|
$3.1 million decrease in the tenant reimbursement component of rental income due to the following:
|
•
|
$2.5 million decrease due to a tenant in the San Francisco Bay Area’s change from a triple net lease to a modified net lease, resulting in payment of expenses directly to vendors, and new tenants with 2020 base years; and
|
•
|
$0.6 million decrease due to abatements provided to tenants and lower operating expenses as a result of the COVID-19 pandemic; partially offset by
|
•
|
$17.6 million increase from new leases and renewals at higher rates at various properties across the portfolio;
|
•
|
A decrease in other property income of $0.9 million primarily due to lower transient and special event parking income at a number of properties in the San Francisco Bay Area, Greater Seattle and Greater Los Angeles regions. We expect daily, special event and transient parking to be impacted while restrictions intended to prevent the spread of COVID-19 are in effect;
|
•
|
A decrease in property and related expenses of $4.3 million primarily due to the following:
|
•
|
$4.8 million decrease in property expenses primarily due to the following:
|
•
|
$4.4 million decrease in reimbursable expenses such as utilities, parking, janitorial, security, and various other recurring expenses due to several tenants implementing work from home policies due to the COVID-19 pandemic. We anticipate lower reimbursable property expenses and corresponding tenant recoveries as a result of lower usage of our buildings by tenants in while restrictions intended to prevent the spread of COVID-19 are in effect;
|
•
|
$0.4 million decrease primarily due to insurance reimbursements received in 2020 for expenses incurred in 2019;
|
•
|
An increase of $31.9 million attributable to the Development Properties; and
|
•
|
An increase of $4.8 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $3.8 million attributable to the Disposition Properties.
|
•
|
An increase of $18.9 million in severance costs related to the previously announced departure of an executive officer and the departure of certain other employees; partially offset by
|
•
|
A decrease of $3.4 million due to lower compensation accruals and other related cost-cutting measures as a result of COVID-19; and
|
•
|
A decrease of $1.4 million related to the mark-to-market adjustment of the Company’s deferred compensation plan and the resultant impact of reducing compensation expense, which is offset by the losses on the underlying marketable securities which are included in interest income and other net investment gain (loss) in the consolidated statements of operations.
|
•
|
An increase of $0.6 million attributable to the Same Store Properties;
|
•
|
An increase of $16.8 million attributable to the Development Properties; and
|
•
|
An increase of $4.9 million attributable to the Acquisition Properties; partially offset by
|
•
|
A decrease of $2.2 million attributable to the Disposition Properties.
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
72,262
|
|
|
$
|
63,287
|
|
|
$
|
8,975
|
|
|
14.2
|
%
|
Capitalized interest and deferred financing costs
|
(41,934
|
)
|
|
(40,317
|
)
|
|
(1,617
|
)
|
|
4.0
|
%
|
|||
Interest expense
|
$
|
30,328
|
|
|
$
|
22,970
|
|
|
$
|
7,358
|
|
|
32.0
|
%
|
|
Shares/Units at
June 30, 2020
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
|||
|
($ in thousands)
|
|||||||
Debt: (1)(2)
|
|
|
|
|
|
|||
Unsecured Term Loan Facility
|
|
|
$
|
150,000
|
|
|
1.4
|
%
|
Unsecured Senior Notes due 2023
|
|
|
300,000
|
|
|
2.8
|
%
|
|
Unsecured Senior Notes due 2024
|
|
|
425,000
|
|
|
4.0
|
%
|
|
Unsecured Senior Notes due 2025
|
|
|
400,000
|
|
|
3.8
|
%
|
|
Unsecured Senior Notes Series A & B due 2026
|
|
|
250,000
|
|
|
2.4
|
%
|
|
Unsecured Senior Notes due 2028
|
|
|
400,000
|
|
|
3.8
|
%
|
|
Unsecured Senior Notes due 2029
|
|
|
400,000
|
|
|
3.8
|
%
|
|
Unsecured Senior Notes Series A & B due 2027 & 2029
|
|
|
250,000
|
|
|
2.4
|
%
|
|
Unsecured Senior Notes due 2030
|
|
|
500,000
|
|
|
4.8
|
%
|
|
Unsecured Senior Notes due 2031
|
|
|
350,000
|
|
|
3.3
|
%
|
|
Secured debt
|
|
|
256,958
|
|
|
2.4
|
%
|
|
Total debt
|
|
|
$
|
3,681,958
|
|
|
34.9
|
%
|
Equity and Noncontrolling Interests in the Operating Partnership: (3)
|
|
|
|
|
|
|||
Common limited partnership units outstanding (4)
|
1,934,586
|
|
$
|
113,560
|
|
|
1.1
|
%
|
Shares of common stock outstanding
|
115,176,538
|
|
6,760,863
|
|
|
64.0
|
%
|
|
Total Equity and Noncontrolling Interests in the Operating Partnership
|
|
|
$
|
6,874,423
|
|
|
65.1
|
%
|
Total Market Capitalization
|
|
|
$
|
10,556,381
|
|
|
100.0
|
%
|
(1)
|
Represents gross aggregate principal amount due at maturity before the effect of the following at June 30, 2020: $20.7 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $6.0 million of unamortized discounts for the unsecured senior notes.
|
(2)
|
As of June 30, 2020, there was no outstanding balance on the unsecured revolving credit facility.
|
(3)
|
Value based on closing price per share of our common stock of $58.70 as of June 30, 2020.
|
(4)
|
Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Operating Partnership’s unsecured revolving credit facility and term loan facility;
|
•
|
Proceeds from our capital recycling program, including the disposition of 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 security holders;
|
•
|
Repurchases and redemptions of outstanding common stock of the Company; and
|
•
|
Outstanding debt repurchases, redemptions and repayments.
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
—
|
|
|
$
|
245,000
|
|
Remaining borrowing capacity
|
750,000
|
|
|
505,000
|
|
||
Total borrowing capacity (1)
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Interest rate (2)
|
1.16
|
%
|
|
2.76
|
%
|
||
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 June 30, 2020 and December 31, 2019.
|
(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 June 30, 2020 and December 31, 2019, $2.7 million and $3.4 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
|
(1)
|
As of June 30, 2020 and December 31, 2019, $0.5 million and $0.7 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 June 30, 2020 and December 31, 2019.
|
|
Six Months Ended June 30, 2020
|
||
|
(in millions, except share and per share data)
|
||
Shares of common stock settled during the period
|
3,147,110
|
|
|
Weighted average price per share of common stock
|
$
|
80.08
|
|
Aggregate gross proceeds
|
$
|
252.0
|
|
Aggregate net proceeds after selling commissions
|
$
|
247.3
|
|
|
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
|
|
|
Unsecured Senior Notes due 2031
|
350,000
|
|
|
Secured Debt
|
256,958
|
|
|
Total Unsecured and Secured Debt
|
3,681,958
|
|
|
Less: Unamortized Net Discounts and Deferred Financing Costs (2)
|
(26,740
|
)
|
|
Total Debt, Net
|
$
|
3,655,218
|
|
(1)
|
As of June 30, 2020, there was no outstanding balance on the unsecured revolving credit facility.
|
(2)
|
Includes $20.7 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $6.0 million of unamortized discounts for the unsecured senior notes. Excludes unamortized deferred financing costs on the unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.
|
|
Percentage of Total Debt (1)
|
|
Weighted Average Interest Rate (1)
|
||||||||
|
June 30, 2020
|
|
December 31, 2019
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
Secured vs. unsecured:
|
|
|
|
|
|
|
|
||||
Unsecured
|
93.0
|
%
|
|
92.8
|
%
|
|
3.8
|
%
|
|
3.8
|
%
|
Secured
|
7.0
|
%
|
|
7.2
|
%
|
|
3.9
|
%
|
|
3.9
|
%
|
Variable-rate vs. fixed-rate:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
4.1
|
%
|
|
11.0
|
%
|
|
1.3
|
%
|
|
2.8
|
%
|
Fixed-rate (2)
|
95.9
|
%
|
|
89.0
|
%
|
|
3.9
|
%
|
|
3.9
|
%
|
Stated rate (2)
|
|
|
|
|
3.8
|
%
|
|
3.8
|
%
|
||
GAAP effective rate (3)
|
|
|
|
|
3.9
|
%
|
|
3.8
|
%
|
||
GAAP effective rate including debt issuance costs
|
|
|
|
|
4.0
|
%
|
|
4.0
|
%
|
(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 June 30, 2020
|
Total debt to total asset value
|
|
less than 60%
|
|
28%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
3.4x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
3.32x
|
Unencumbered asset pool debt service coverage
|
|
greater than 1.75x
|
|
4.14x
|
|
|
|
|
|
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%
|
|
34%
|
Interest coverage
|
|
greater than 1.5x
|
|
9.8x
|
Secured debt to total asset value
|
|
less than 40%
|
|
2%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
307%
|
|
Six Months Ended June 30,
|
|||||||||||||
|
2020
|
|
2019
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|
|
|||||||||||
Net cash provided by operating activities
|
$
|
224,022
|
|
|
$
|
165,660
|
|
|
$
|
58,362
|
|
|
35.2
|
%
|
Net cash used in investing activities
|
(374,341
|
)
|
|
(417,036
|
)
|
|
42,695
|
|
|
10.2
|
%
|
|||
Net cash provided by financing activities
|
695,287
|
|
|
139,057
|
|
|
556,230
|
|
|
400.0
|
%
|
|||
Net increase (decrease) in cash and cash equivalents
|
$
|
544,968
|
|
|
$
|
(112,319
|
)
|
|
$
|
657,287
|
|
|
585.2
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income available to common stockholders
|
$
|
19,618
|
|
|
$
|
42,194
|
|
|
$
|
59,435
|
|
|
$
|
79,097
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
367
|
|
|
871
|
|
|
1,072
|
|
|
1,571
|
|
||||
Net income attributable to noncontrolling interests in consolidated property partnerships
|
4,367
|
|
|
4,150
|
|
|
9,263
|
|
|
8,341
|
|
||||
Depreciation and amortization of real estate assets
|
75,981
|
|
|
67,011
|
|
|
148,419
|
|
|
131,982
|
|
||||
Gains on sales of depreciable real estate
|
—
|
|
|
(7,169
|
)
|
|
—
|
|
|
(7,169
|
)
|
||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
|
(7,244
|
)
|
|
(7,152
|
)
|
|
(14,927
|
)
|
|
(14,105
|
)
|
||||
Funds From Operations (1)(2)
|
$
|
93,089
|
|
|
$
|
99,905
|
|
|
$
|
203,262
|
|
|
$
|
199,717
|
|
(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 $8.0 million and $4.4 million for the three months ended June 30, 2020 and 2019, respectively, and $13.0 million and $8.2 million for the six months ended June 30, 2020 and 2019, respectively.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the financial condition of our tenants - many of which are in the technology, media, healthcare, life sciences, entertainment and professional services industries - and their ability or willingness to pay rent in full on a timely basis;
|
•
|
state, local, federal and industry-initiated efforts that may adversely affect landlords, including us, and their ability to collect rent and/or enforce remedies for the failure to pay rent;
|
•
|
our need to defer or forgive rent and restructure leases with our tenants and our ability to do so on favorable terms or at all;
|
•
|
significant job losses in the industries of our tenants, which may decrease demand for our office and retail space, causing market rental rates and property values to be negatively impacted;
|
•
|
our ability to stabilize our development projects, renew leases or re-lease available space in our proprieties on favorable terms or at all, including as a result of a general decrease in demand for our office and retail space, deterioration in the economic and market conditions in the markets in which we own properties or due to restrictions intended to prevent the spread of COVID-19 that frustrate our leasing activities;
|
•
|
a severe and prolonged disruption and instability in the global financial markets, including the debt and equity capital markets, all of which have already experienced and may continue to experience significant volatility, or deteriorations in credit and financing conditions, may affect our or our tenants’ ability to access capital necessary to fund our respective business operations or replace or renew maturing liabilities on a timely basis, on attractive terms or at all and may adversely affect the valuation of financial assets and liabilities, any of which could affect our and our tenants’ ability to meet liquidity and capital expenditure requirements;
|
•
|
a refusal or failure of one or more lenders under our revolving credit facility to fund their respective financing commitments to us may affect our ability to access capital necessary to fund our business operations and to meet our liquidity and capital expenditure requirements;
|
•
|
the ability of potential buyers of properties identified for potential future capital recycling transactions to obtain debt financing, which has been and may continue to be constrained for some potential buyers;
|
•
|
a reduction in the values of our properties that could result in impairments or limit our ability to dispose of them at attractive prices or obtain debt financing secured by our properties;
|
•
|
complete or partial shutdowns of one or more of our tenants’ manufacturing facilities or distribution centers, temporary or long-term disruptions in our tenants’ supply chains from local, national and international suppliers or delays in the delivery of products, services or other materials necessary for our tenants’ operations, which could force our tenants to reduce, delay or eliminate offerings of their products and services, reduce or eliminate their revenues and liquidity and/or result in their bankruptcy or insolvency;
|
•
|
our ability to avoid delays or cost increases associated with building materials or construction services necessary for construction that could adversely impact our ability to continue or complete construction as planned, on budget or at all;
|
•
|
our and our tenants’ ability to manage our respective businesses to the extent our and their management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not willing, available or allowed to conduct work; and
|
•
|
our and our tenants’ ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during the COVID-19 pandemic.
|
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
|
|||||
April 1. 2020 - April 30, 2020
|
|
2,871
|
|
|
$
|
61.86
|
|
|
—
|
|
|
—
|
|
May 1, 2020 - May 31, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
June 1, 2020 - June 30, 2020
|
|
8,797
|
|
|
63.34
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
11,668
|
|
|
$
|
62.97
|
|
|
—
|
|
|
—
|
|
(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 June 30, 2020, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited).(1)
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104.1*
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Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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*
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Filed herewith.
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†
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Management contract or compensatory plan or arrangement.
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(1)
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Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
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KILROY REALTY CORPORATION
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By:
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/s/ John Kilroy
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John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
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By:
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/s/ Tyler H. Rose
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Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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By:
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/s/ Merryl E. Werber
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Merryl E. Werber
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
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KILROY REALTY, L.P.
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BY:
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KILROY REALTY CORPORATION
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Its general partner
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By:
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/s/ John Kilroy
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John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
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By:
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/s/ Tyler H. Rose
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Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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By:
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/s/ Merryl E. Werber
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Merryl E. Werber
Senior Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
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/s/ Jeffrey C. Hawken
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JEFFREY C. HAWKEN
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KILROY REALTY CORPORATION
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a Maryland Corporation
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By:
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/s/ Tyler H. Rose
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Name: Tyler H. Rose
Title: Executive Vice President and Chief
Financial Officer
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By:
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/s/ Heidi R. Roth
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Name: Heidi R. Roth
Title: Executive Vice President, Chief
Administrative Officer
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KILROY REALTY, L.P.,
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a Delaware limited partership
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By:
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KILROY REALTY CORPORATION,
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a Maryland Corporation,
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Its:
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General Partner
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By:
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/s/ Tyler H. Rose
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Name: Tyler H. Rose
Title: Executive Vice President and Chief Financial Officer |
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By:
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/s/ Heidi R. Roth
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Name: Heidi R. Roth
Title: Executive Vice President, Chief Administrative Officer |
1
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GENERAL RELEASE OF CLAIMS
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JEFFREY C. HAWKEN
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KILROY REALTY CORPORATION
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a Maryland Corporation
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By:
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Name: Tyler H. Rose
Title: Executive Vice President and Chief
Financial Officer
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By:
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Name: Heidi R. Roth
Title: Executive Vice President, Chief
Administrative Officer
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KILROY REALTY, L.P.,
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a Delaware limited partership
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By:
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KILROY REALTY CORPORATION,
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a Maryland Corporation,
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Its:
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General Partner
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By:
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Name: Tyler H. Rose
Title: Executive Vice President and Chief Financial Officer |
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By:
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Name: Heidi R. Roth
Title: Executive Vice President, Chief Administrative Officer |
1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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1.
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I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Date:
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July 30, 2020
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Date:
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July 30, 2020
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ John Kilroy
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John Kilroy
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President and Chief Executive Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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Date:
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July 30, 2020
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(i)
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the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.
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/s/ Tyler H. Rose
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Tyler H. Rose
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Executive Vice President and Chief Financial Officer
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Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
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Date:
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July 30, 2020
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