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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2024
KILROY REALTY CORPORATION
KILROY REALTY, L.P.
(Exact name of registrant as specified in its charter)
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Kilroy Realty Corporation | Maryland | 001-12675 | 95-4598246 |
| (State or other jurisdiction of incorporation or organization) | (Commission File No.) | (I.R.S. Employer Identification No.) |
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Kilroy Realty, L.P. | Delaware | 000-54005 | 95-4612685 |
| (State or other jurisdiction of incorporation or organization) | (Commission File No.) | (I.R.S. Employer Identification No.) |
12200 W. Olympic Boulevard, Suite 200, Los Angeles, California, 90064
(Address of principal executive offices) (Zip Code)
(310) 481-8400
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(Registrant's telephone number, including area code) |
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N/A |
(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 | Title of each class | Name of each exchange on which registered | Ticker Symbol |
Kilroy Realty Corporation | Common Stock, $.01 par value | New York Stock Exchange | KRC |
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Securities registered pursuant to Section 12(g) of the Act: |
Registrant | Title of each class |
Kilroy Realty, L.P. | Common Units Representing Limited Partnership Interests |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
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☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Kilroy Realty Corporation:
Emerging growth company ☐
Kilroy Realty, L.P.:
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Kilroy Realty Corporation ☐ | Kilroy Realty, L.P. ☐ |
Item 2.02 Results of Operations and Financial Condition.
On July 31, 2024, Kilroy Realty Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended June 30, 2024 and distributed certain supplemental financial information. On July 31, 2024, the Company also posted the supplemental information on its website located at www.kilroyrealty.com. The text of the supplemental information and the related press release are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.
Exhibits 99.1 and 99.2 are being furnished pursuant to Item 2.02 and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Chief Financial Officer Appointment; Chief Financial Officer Employment Agreement
On July 30, 2024, the Board of Directors (the “Board”) of the Company appointed Jeffrey Kuehling to serve as Executive Vice President, Chief Financial Officer, effective on a date on or before September 3, 2024, to be mutually agreed between Mr. Kuehling and the Company (the “Transition Date”). In such capacity, Mr. Kuehling shall serve as the principal financial officer of the Company and Kilroy Realty, L.P. (the “Operating Partnership”), the Company’s operating partnership.
Jeffrey Kuehling, age 39, joins the Company from Brixmor Property Group (“Brixmor”), a publicly-traded real estate investment trust, where he has served as the Vice President, Corporate Strategy and then the Senior Vice President, Corporate Strategy since 2018. Prior to Brixmor, Mr. Kuehling served as the Director of Corporate Finance at RPT Realty and held several finance positions at Retail Properties of America, Inc. Mr. Kuehling received his bachelor’s degree from Indiana University, his master of science from the University of Florida, and his master of business administration from the University of Chicago. Mr. Kuehling is also a Certified Public Accountant and a Chartered Financial Analyst.
There are no arrangements or understandings between Mr. Kuehling and any other persons pursuant to which he was selected as an officer of the Company. There are also no family relationships between Mr. Kuehling and any director or executive officer of the Company, and Mr. Kuehling does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
On July 30, 2024, the Company, the Operating Partnership, and Mr. Kuehling entered into an Employment Agreement (the “Employment Agreement”) that provides for Mr. Kuehling’s employment with the Operating Partnership and to serve in the position of Executive Vice President, Chief Financial Officer of the Company beginning on the Transition Date. The Employment Agreement includes the following compensation and benefits for Mr. Kuehling while he serves in these positions:
•Mr. Kuehling will be entitled to an annual base salary of $475,000, which may be increased (but not decreased) by the Board (or a committee thereof) from time to time.
•Mr. Kuehling will be entitled to an annual incentive bonus opportunity based on the achievement of performance criteria to be established by the Board (or a committee thereof). Mr. Kuehling’s annual target and maximum bonus opportunities will be 100% and 150%, respectively, of his base salary for the corresponding fiscal year.
•On or promptly following the Transition Date, the Company will grant Mr. Kuehling a stock unit award under the Company’s Amended and Restated 2006 Incentive Award Plan, as amended. The award will cover a number of shares of Company common stock equal to $700,000 divided by the closing price for a share of the Company’s common stock (in regular trading) on the New York Stock Exchange on the Transition Date (or, if the Transition Date is not a trading day, the last trading day prior to such date). The award will vest in one installment on January 6, 2026, subject to Mr. Kuehling’s continued employment through that date.
•Additional equity awards for Mr. Kuehling, commencing with awards for fiscal year 2025, will be in the discretion of the Board (or a committee thereof), provided that Mr. Kuehling’s annual equity award for fiscal year 2025 will have a grant date fair value (as determined in accordance with the Company’s equity award valuation methodology used for its financial reporting purposes) of not less than $750,000.
•Mr. Kuehling will be entitled to certain employee benefits, such as participation in the Company’s retirement and welfare benefit plans and programs, and fringe benefit plans and programs, made available to the Company’s executive officers generally.
•In connection with his relocation to the Los Angeles area, Mr. Kuehling will also be entitled to reimbursement for up to $50,000 in the aggregate for relocation costs, plus reimbursement for any taxes he may incur in connection with such reimbursements, provided that Mr. Kuehling must complete his relocation by September 30, 2024.
The term of Mr. Kuehling’s employment under the Employment Agreement will be for an initial term commencing on the Transition Date and ending on March 1, 2027, with automatic one-year renewals unless one party has provided the other party with at least 60 days’ advance notice of non-renewal of the term and subject to earlier termination by either the Company (which term includes the Operating Partnership, as the context may require, for purposes of employment and severance benefit provisions) or Mr. Kuehling.
The Employment Agreement generally provides that if Mr. Kuehling’s employment with the Company is terminated by the Company without Cause or by Mr. Kuehling for Good Reason, Mr. Kuehling will be entitled to receive the following separation benefits: (1) a severance payment equal to one times the sum of his annual base salary and target annual incentive bonus, paid out in installments over the one-year period following his separation date; (2) payment of any bonus due for a fiscal year that ended prior to his separation date plus a pro-rata portion of his target bonus for the year in which his employment ends (pro-rata based on the number of days of employment during the year); and (3) payment or reimbursement of Mr. Kuehling’s premiums to continue healthcare coverage under COBRA for up to 18 months. If such a termination of Mr. Kuehling’s employment by the Company without Cause or by him for Good Reason occurs during the period within 60 days before a Change in Control (as defined in the Employment Agreement) of the Company or at any time after such a Change in Control, Mr. Kuehling will be entitled to (a) a severance payment equal to one times the sum of his annual base salary and his target annual incentive bonus (with such amount to be paid generally in a lump sum if the termination occurs on or within two years after the Change in Control); (b) payment of any bonus due for a fiscal year that ended prior to his separation date plus a pro-rata portion of his target bonus for the year in which his employment ends (pro-rata based on the number of days of employment during the year); (c) payment or reimbursement of Mr. Kuehling’s premiums to continue healthcare coverage under COBRA for up to 18 months; (d) as to each then-outstanding equity-based award granted by the Company to Mr. Kuehling that vests based solely on continued service with the Company, accelerated vesting of the entire outstanding and unvested portion of the award; and (e) as to each outstanding equity-based award granted by the Company to Mr. Kuehling that is subject to performance-based vesting requirements, any service-based vesting requirement under the award will be deemed satisfied in full but the performance-based vesting measurement will still apply and will be treated as provided in the applicable award agreement. Mr. Kuehling’s receipt of the separation benefits described above is conditioned on him delivering a release of claims in favor of the Company. Mr. Kuehling is not entitled to a tax gross-up payment if any of his benefits are subject to taxation under Sections 280G and 4999 of the Internal Revenue Code, but his benefits will be reduced to the extent necessary to avoid such taxes if such a reduction in benefits would put Mr. Kuehling in a better after-tax position than receiving the benefits in full.
If Mr. Kuehling’s employment terminates due to his death or disability, he would be entitled to payment of any bonus due for a fiscal year that ended prior to his separation date plus a pro-rata portion of his target bonus for the year in which his employment ends.
The foregoing description of the Employment Agreement is a summary, does not purport to be complete and is qualified in its entirety by reference to the Employment Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Chief Investment Officer Employment Agreement
In connection with Mr. Kuehling’s appointment as the Company’s Executive Vice President, Chief Financial Officer as of the Transition Date, Eliott Trencher, the Company’s current Executive Vice President, Chief Financial Officer and Chief Investment Officer, will no longer serve as the Company’s Chief Financial Officer, effective as of the Transition Date. Mr. Trencher will continue to serve as the Company’s Executive Vice President, Chief Investment Officer.
On July 30, 2024, the Company, the Operating Partnership and Mr. Trencher entered into an amendment (the “Amendment”) to Mr. Trencher’s employment agreement with the Company and the Operating Partnership dated March 3, 2023. The Amendment reflects such change in Mr. Trencher’s position effective as of the Transition Date.
The foregoing description of the Amendment is qualified in its entirety by reference to the text of the Amendment, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
As discussed in Item 2.02 above, the Company issued a press release announcing its earnings for the quarter ended June 30, 2024 and distributed certain supplemental information. On July 31, 2024, the Company also posted the supplemental information on its website located at www.kilroyrealty.com.
The information being furnished pursuant to Item 7.01 shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
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Exhibit | | Description |
10.1* | | |
10.2* | | |
99.1* | | |
99.2* | | |
104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | Kilroy Realty Corporation | |
| Date: July 31, 2024 | | | |
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| | | By: | | /s/ Merryl E. Werber | |
| | | | | Merryl E. Werber Senior Vice President, Chief Accounting Officer and Controller | |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | Kilroy Realty, L.P. | |
| Date: July 31, 2024 | | | |
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| | | By: | | Kilroy Realty Corporation, |
| | | | | Its general partner | |
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| | | By: | | /s/ Merryl E. Werber | |
| | | | | Merryl E. Werber Senior Vice President, Chief Accounting Officer and Controller | |
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 30th day of July, 2024, by and among Kilroy Realty Corporation, a Maryland corporation (“Kilroy”), Kilroy Realty, L.P., a Delaware limited partnership (“KRLP”), and Jeffrey Kuehling (the “Executive”). (For purposes of this Agreement, the term “Company” means Kilroy, KRLP, either of them, or both of them together, as the context may require.)
RECITALS
THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts, understandings and intentions:
A. KRLP desires to employ the Executive, and the Executive desires to accept such employment, on the terms and conditions set forth in this Agreement.
B. This Agreement shall be effective as set forth herein and shall govern the relationship between the Executive, on the one hand, and Kilroy and KRLP, on the other hand, from and after the Effective Date, and, as of the Effective Date, supersedes and negates all previous agreements and understandings between them with respect to such relationship.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:
1. Retention and Duties.
1.1 Retention. KRLP does hereby hire, engage and employ the Executive for the Period of Employment (as such term is defined in Section 2) on the terms and conditions expressly set forth in this Agreement. The Executive does hereby accept and agree to such hiring, engagement and employment, on the terms and conditions expressly set forth in this Agreement. Certain capitalized terms used herein are defined in Section 5.5 of this Agreement.
1.2 Duties. While the Executive shall be employed by KRLP during the Period of Employment, during such Period of Employment the Executive shall also serve as Kilroy’s Executive Vice President, Chief Financial Officer and shall have such powers, authorities, duties and obligations commensurate with such position as Kilroy’s Board of Directors (the “Board”) or its Chief Executive Officer (the “CEO”) may assign from time to time, all subject to the directives of the Board (or a committee thereof) or the CEO, and to the corporate policies of Kilroy, and the corporate and employment policies of KRLP, as they are in effect from time to time throughout the Period of Employment (including, without limitation, the Company’s Code of Business Conduct and Ethics, Insider Trading Compliance Policy, and Related Party Transactions Policy, as they may change from time to time). The Executive agrees to comply with such corporate and employment policies as they are in effect from time to time throughout the Period of Employment. During the Period of Employment, the Executive shall report to the CEO.
1.3 No Other Employment; Minimum Time Commitment. During the Period of Employment, the Executive shall (i) devote substantially all of the Executive’s business time, energy and skill to the performance of the Executive’s duties for Kilroy and KRLP, (ii) perform such duties in a faithful, effective and efficient manner to the best of the Executive’s abilities, and (iii) hold no other employment. The Executive’s service on the boards of directors (or similar body) of other business entities is subject to the prior written approval of the Board (or a committee thereof). The
Company shall have the right to require the Executive to resign from any board or similar body (including, without limitation, any association, corporate, civic or charitable board or similar body) which the Executive may then serve if the CEO or the Board (or a committee thereof) reasonably determines that the Executive’s service on such board or body interferes with the effective discharge of the Executive’s duties and responsibilities to the Company or that any business related to such service is then in direct or indirect competition with any business of the Company or any of its Affiliates, successors or assigns.
1.4 No Breach of Contract. The Executive hereby represents to each of Kilroy and KRLP and agrees that: (i) the execution and delivery of this Agreement by the Executive and the Company and the performance by the Executive of the Executive’s duties hereunder do not and shall not constitute a breach of, conflict with, or otherwise contravene or cause a default under, the terms of any other agreement or policy to which the Executive is a party or otherwise bound or any judgment, order or decree to which the Executive is subject; (ii) the Executive will not enter into any new agreement that would or reasonably could contravene or cause a default by the Executive under this Agreement; (iii) the Executive has no information (including, without limitation, confidential information and trade secrets) relating to any other Person which would prevent, or be violated by, the Executive entering into this Agreement or carrying out the Executive’s duties hereunder; (iv) the Executive is not bound by any consulting, non-compete, non-solicitation, confidentiality, trade secret or similar agreement (other than this Agreement and the Restrictive Covenants Agreement (as defined below)) with any other Person (other than ongoing, customary confidentiality obligations as to confidential information obtained from prior employers in the course of the Executive’s prior employment with them) which would prevent, or be violated by, the Executive entering into this Agreement or carrying out the Executive’s duties hereunder; (v) to the extent the Executive has any confidential or similar information that the Executive is not free to disclose to the Company, the Executive will not disclose or bring on to the Company’s premises, computer networks, communications or systems, computers or any other devices or accounts, any such information to the extent such disclosure or transmission would violate applicable law or any other agreement or policy to which the Executive is a party or by which the Executive is otherwise bound; and (vi) the Executive understands the Company will rely upon the accuracy and truth of the representations and warranties of the Executive set forth herein and the Executive consents to such reliance.
1.5 Location. The Executive’s principal place of employment shall be the Company’s principal executive office (currently located in Los Angeles, California) as it may be located from time to time. The Executive agrees that the Executive will be regularly present at that office during regular business hours (except for required business travel, holidays, vacation and other leaves consistent with this Agreement). The Executive acknowledges that the Executive will be required to travel from time to time in the course of performing the Executive’s duties for the Company.
2. Period of Employment. The “Period of Employment” shall be a period of time commencing on a date, no later than September 3, 2024, to be mutually agreed between the Executive and the CEO (the date the Executive actually commences employment with KRLP, the “Effective Date”) and ending at the close of business on March 1, 2027 (the “Termination Date”); provided, however, that this Agreement shall be automatically renewed, and the Period of Employment shall be automatically extended for one (1) additional year on the Termination Date and each anniversary of the Termination Date thereafter, unless the Executive or the Company gives written notice at least sixty (60) days prior to the expiration of the Period of Employment (including any renewal thereof) of such party’s desire to terminate the Period of Employment (such notice to be delivered in accordance with Section 18). The term “Period of Employment” shall include any extension thereof pursuant to the preceding sentence. Provision of notice that the Period of Employment shall not be extended or further extended, as the case may be, shall not constitute a breach of this Agreement and, in the case of a provision of such notice by the Company, shall not constitute either a termination of the Executive’s employment by the Company without “Cause” or grounds for a termination by the Executive for “Good Reason” for purposes of this Agreement.
Notwithstanding the foregoing, the Period of Employment is subject to earlier termination as provided below in this Agreement.
3. Compensation.
3.1 Base Salary. During the Period of Employment, the Company shall pay the Executive a base salary (“Base Salary”), which shall be paid in accordance with the Company’s regular payroll practices in effect from time to time but not less frequently than in monthly installments. The Executive’s Base Salary shall be at an annualized rate of Four Hundred Seventy Five Thousand Dollars ($475,000). The Board (or a committee thereof) may, in its sole discretion, increase (but not decrease) the Executive’s rate of Base Salary.
The allocation of the rights and obligations between Kilroy and KRLP shall be determined by separate agreement of those parties. (For clarity, as to any specific salary, award, benefit, severance or other compensation provided for in this Agreement, Executive shall be entitled to the amount specified in this Agreement from either Kilroy or KRLP, as Kilroy and KRLP may determine in their discretion unless otherwise expressly provided in this Agreement, and not from each of them.)
3.2 Incentive Bonus. The Executive shall be eligible to receive an incentive bonus for each fiscal year of the Company that occurs during the Period of Employment (“Incentive Bonus”). Notwithstanding the foregoing and except as otherwise expressly provided in this Agreement, the Executive must be employed by the Company at the time the Company pays incentive bonuses to employees generally with respect to a particular fiscal year in order to earn and be eligible for an Incentive Bonus for that year (and, if the Executive is not so employed at such time, in no event shall the Executive have been considered to have “earned” any Incentive Bonus with respect to the fiscal year). The Executive’s target Incentive Bonus amount for a particular fiscal year of the Company shall equal One Hundred Percent (100%) of the Executive’s Base Salary paid by the Company to the Executive for that fiscal year; provided that the Executive’s actual Incentive Bonus amount for a particular fiscal year (which may range from 0% of the target Incentive Bonus amount for that year up to a maximum percentage of the target Incentive Bonus amount for such year, with the maximum amount being One Hundred and Fifty Percent (150%) of the target annual Incentive Bonus amount) shall be determined by the Board (or a committee thereof) in its sole discretion, based on specific performance objectives (which may include corporate, business unit or division, financial, strategic, individual or other objectives) established with respect to that particular fiscal year by the Board (or a committee thereof) or such other factors it may consider relevant in the circumstances.
3.3 Initial Equity Award. On or promptly following the Effective Date, Kilroy will grant the Executive a restricted stock unit award covering a number of shares of Kilroy common stock equal to Seven Hundred Thousand Dollars ($700,000) divided by the closing price (in regular trading) of a share of Kilroy common stock on the New York Stock Exchange on the Effective Date (or, if the Effective Date is not a trading day on the New York Stock Exchange, on the last trading day prior to the Effective Date) and rounded to the nearest whole unit (such award, the “Initial Award”). The restricted stock units subject to the Initial Award will be scheduled to vest in full on January 5, 2026, subject to the Executive’s continued employment with the Company through such date (except as otherwise provided in Section 5.3(b)). The Initial Award will be granted under Kilroy’s Amended and Restated 2006 Incentive Award Plan, as amended (the “2006 Plan”). The Initial Award will be subject to the terms and conditions of the 2006 Plan as well as the terms and conditions of a written restricted stock unit award agreement (in substantially the form provided by the Company to the Executive) to be entered into by Kilroy and the Executive to evidence the Initial Award.
3.4 Annual Equity Awards. Additional equity awards for the Executive during the Period of Employment, commencing with awards for fiscal year 2025, will be in the sole discretion of the Board (or a committee thereof), except as provided below with respect to the annual equity awards for fiscal year 2025. Provided that the Executive is employed with the Company on the date Kilroy grants annual equity awards to its executive officers generally for that fiscal year, Kilroy will grant the Executive an annual equity award for fiscal year 2025 with a grant date fair value (as determined by Kilroy applying the equity award valuation methodology used by Kilroy for its financial reporting purposes) of an amount no less than Seven Hundred and Fifty Thousand Dollars ($750,000) (subject to rounding for whole share increments). The types of equity awards granted, the allocation of that value between those types of awards granted, specific vesting terms, and other terms and conditions of the awards will be determined by the Board (or a committee thereof).
4. Benefits.
4.1 Retirement, Welfare and Fringe Benefits. During the Period of Employment, the Executive shall be entitled to participate in all employee retirement and welfare benefit plans and programs, and fringe benefit plans and programs, made available by the Company to Kilroy’s then-current executive officers generally, in accordance with the eligibility and participation provisions of such plans and as such plans or programs may be in effect from time to time.
4.2 Reimbursement of Business Expenses. The Executive is authorized to incur reasonable expenses in carrying out the Executive’s duties for the Company under this Agreement and shall be entitled to reimbursement for all reasonable business expenses the Executive incurs during the Period of Employment in connection with carrying out the Executive’s duties for the Company, subject to the Company’s expense reimbursement policies and any pre-approval policies in effect from time to time. The Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.
4.3 Paid Time Office and Other Leave. During the Period of Employment, the Executive’s annual rate of vacation accrual shall be twenty (20) business days per year, with such vacation to accrue and be subject to the Company’s vacation policies in effect from time to time, including any policy which may limit vacation accruals and/or limit the amount of accrued but unused vacation to carry over from year to year. The Executive shall also be entitled to all other holiday and leave pay generally available to other executives of the Company.
4.4 Relocation. The Executive agrees to relocate, promptly following the Effective Date, to a residence that is proximate to the Company’s principal executive office in Los Angeles, California. The Company agrees that it will pay or reimburse the Executive up to $50,000 in the aggregate for the Executive’s reasonable and customary costs incurred in the Executive’s relocation from the Executive’s current principal residence to a location that is proximate to the Company’s principal executive office; provided that (i) the Company shall not be obligated to pay or reimburse any expense incurred after the Period of Employment ends, (ii) the Executive provides the Company with customary supporting documentation for such expenses, (iii) the Executive reasonably cooperates with the Company and its third party providers regarding the Executive’s relocation and reimbursement (including, without limitation, in reviewing and selecting vendors), and (iv) such relocation is completed promptly after the Effective Date and in all events no later than September 30, 2024. The Executive understands and acknowledges that the expenses contemplated by this Section 4.4 should generally be coordinated through and paid directly by the Company so that, to the extent feasible and practicable, they should be non-taxable. In the event that any payment or reimbursement provided by the Company pursuant to this Section 4.4 should be taxable to the Executive, the Company shall provide a tax gross-up payment to the Executive to cover any income, FICA, Medicare or other payroll taxes on any relocation benefits
(including any income, FICA, Medicare or other payroll taxes on the gross-up payment) and all such payments and reimbursements and gross-up payments shall be made no later than the end of the calendar year in which the Effective Date occurs. The Executive agrees to promptly submit such expenses, together with customary supporting documentation, to facilitate such payment timing. Should the Executive’s employment with the Company end before the first anniversary of the date such relocation is completed or should the Executive fail to complete such relocation (in each case, other than due to a termination of employment described in Section 5.3(b) or 5.3(c) or on account of the Executive’s death or Disability), the Executive agrees to promptly repay to the Company the Company’s costs incurred in providing such relocation benefits (including any related tax gross-up payment as provided above).
5. Termination.
5.1 Termination by the Company. During the Period of Employment, the Executive’s employment by the Company, and the Period of Employment, may be terminated at any time by the Company: (i) with Cause, or (ii) with no less than sixty (60) days advance written notice to the Executive (such notice to be delivered in accordance with Section 18), without Cause, or (iii) in the event of the Executive’s death, or (iv) in the event that the Board (or a committee thereof) determines in good faith that the Executive has a Disability.
5.2 Termination by the Executive. During the Period of Employment, the Executive’s employment by the Company, and the Period of Employment, may be terminated by the Executive with no less than sixty (60) days advance written notice to the Company (such notice to be delivered in accordance with Section 18); provided, however, that in the case of a termination for Good Reason, the Executive may provide immediate written notice of termination once the applicable cure period (as contemplated by the definition of Good Reason) has lapsed.
5.3 Benefits upon Termination. If the Executive’s employment by the Company is terminated for any reason by the Company or by the Executive (whether or not during or following the expiration of the Period of Employment) (the date that the Executive’s employment by the Company terminates is referred to as the “Severance Date”), the Company shall have no further obligation to make or provide to the Executive, and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits except as follows:
(a) The Company shall pay the Executive (or, in the event of the Executive’s death, the Executive’s estate) any Accrued Obligations;
(b) If the Executive’s employment with the Company terminates during the Period of Employment as a result of a termination by the Company without Cause (other than due to the Executive’s death or Disability) or a resignation by the Executive for Good Reason, and in either case Section 5.3(c) does not apply, the Executive shall be entitled to the following benefits:
(i) The Company shall pay the Executive (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to one (1) times the Executive’s Base Salary at the annualized rate in effect on the Severance Date plus one (1) times the Executive’s target level of annual Incentive Bonus as in effect on the Severance Date. Subject to Section 22(b), the Company shall pay such severance benefit to the Executive in equal monthly installments (each representing the applicable fraction of such total benefit amount, rounded down to the nearest whole cent) over a period of twelve (12) consecutive months commencing with the month following the month in which the Executive’s Separation from Service occurs, with the first installment payable on (or within ten (10) days following) the sixtieth (60th) day following the Executive’s Separation from Service and to include each such installment that was
otherwise (but for such 60-day delay) scheduled to be paid following the Executive’s Separation from Service and prior to the date of such payment.
(ii) The Company will pay or reimburse the Executive for the Executive’s premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the Severance Date, to the extent that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this clause (ii) shall, subject to Section 22(b), commence with continuation coverage for the month following the month in which the Executive’s Separation from Service occurs and shall cease with continuation coverage for the eighteenth (18th) month following the month in which the Executive’s Separation from Service occurs (or, if earlier, shall cease upon the date the Executive becomes eligible for coverage under the health plan of a future employer, or the date the Company ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive). To the extent the Executive elects COBRA coverage, the Executive shall complete any continuation coverage enrollment procedures the Company may then have in place. The Company’s obligations pursuant to this Section 5.3(b)(ii) are subject to the Company’s ability to comply with applicable law and provide such benefit without resulting in material adverse tax consequences (such as, without limitation, rendering participation in a Company health and welfare plan taxable to participants or resulting in unintended material (relative to the amount of the benefit) tax penalties for the Company).
(iii) The Company shall promptly pay to the Executive any Incentive Bonus that would otherwise be paid to the Executive had the Executive’s employment with the Company not terminated with respect to any fiscal year that ended before the Severance Date, to the extent not theretofore paid.
(iv) The Company shall pay, on (or within ten (10) days following) the sixtieth (60th) day following the Executive’s Separation from Service, an amount in cash equal to (x) the Executive’s target Incentive Bonus for the fiscal year in which the Severance Date occurs, multiplied by (y) a fraction, the numerator of which is the total number of days in such fiscal year in which the Executive was employed by the Company and the denominator of which is the total number of days in such fiscal year.
(v) The Initial Award provided in Section 3.3, to the extent then outstanding and unvested, shall be fully vested as of the Severance Date.
(c) If the Executive’s employment with the Company terminates during the Period of Employment as a result of a termination by the Company without Cause (other than due to the Executive’s death or Disability) or a resignation by the Executive for Good Reason, and in either case such termination occurs within sixty (60) days prior to, upon, or at any time following a Change in Control of the Company, the Executive shall be entitled to the following benefits:
(i) The Company shall pay the Executive (in addition to the Accrued Obligations), subject to tax withholding and other authorized deductions, an amount equal to one (1) times the Executive’s Base Salary at the annualized rate in effect on the Severance Date plus one (1) times the Executive’s target level of annual Incentive Bonus as in effect on the Severance Date. Subject to Section 22(b), the Company shall pay such severance benefit to the Executive in equal monthly installments (each representing the applicable fraction of such total benefit amount, rounded down to the nearest whole cent) over a period of twelve (12) consecutive months commencing with the month following the
month in which the Executive’s Separation from Service occurs, with the first installment payable on (or within ten (10) days following) the sixtieth (60th) day following the Executive’s Separation from Service and to include each such installment that was otherwise (but for such 60-day delay) scheduled to be paid following the Executive’s Separation from Service and prior to the date of such payment; provided, however, that if such Separation from Service occurs on or within two (2) years following a Change in Control that constitutes a change in the ownership or effective control of Kilroy, or in the ownership of a substantial portion of the assets of Kilroy (in each case, such a change in ownership, in effective control or of a substantial portion of assets to be determined within the meaning of Code Section 409A (as defined below)), then (subject to Section 22(b)) the Company shall pay such severance benefit to the Executive in a lump sum on (or within ten (10) days following) the sixtieth (60th) day following the Executive’s Separation from Service.
(ii) The Company will pay or reimburse the Executive for the Executive’s premiums charged to continue medical coverage pursuant to COBRA, at the same or reasonably equivalent medical coverage for the Executive (and, if applicable, the Executive’s eligible dependents) as in effect immediately prior to the Severance Date, to the extent that the Executive elects such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this clause (ii) shall, subject to Section 22(b), commence with continuation coverage for the month following the month in which the Executive’s Separation from Service occurs and shall cease with continuation coverage for the eighteenth (18th) month following the month in which the Executive’s Separation from Service occurs (or, if earlier, shall cease upon the date the Executive becomes eligible for coverage under the health plan of a future employer, or the date the Company ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to the Executive). To the extent the Executive elects COBRA coverage, the Executive shall complete any continuation coverage enrollment procedures the Company may then have in place. The Company’s obligations pursuant to this Section 5.3(c)(ii) are subject to the Company’s ability to comply with applicable law and provide such benefit without resulting in material adverse tax consequences (such as, without limitation, rendering participation in a Company health and welfare plan taxable to participants or resulting in unintended material (relative to the amount of the benefit) tax penalties for the Company).
(iii) The Company shall promptly pay to the Executive any Incentive Bonus that would otherwise be paid to the Executive had the Executive’s employment with the Company not terminated with respect to any fiscal year that ended before the Severance Date, to the extent not theretofore paid.
(iv) The Company shall pay, on (or within ten (10) days following) the sixtieth (60th) day following the Executive’s Separation from Service, an amount in cash equal to (x) the Executive’s target Incentive Bonus for the fiscal year in which the Severance Date occurs, multiplied by (y) a fraction, the numerator of which is the total number of days in such fiscal year in which the Executive was employed by the Company and the denominator of which is the total number of days in such fiscal year.
(v) Each equity award granted by the Company to the Executive that vests based solely on the Executive’s continued service with the Company, to the extent then outstanding and unvested, shall be fully vested as of the Severance Date. As to any equity award granted by the Company to the Executive that is then (on the Executive’s Severance Date) outstanding and subject to performance-based vesting requirements, the vesting of such award will continue to be governed by its terms, provided that any
service-based vesting requirement under such outstanding equity-based award shall be deemed satisfied in full as of the Severance Date.
(d) If the Executive’s employment with the Company terminates during the Period of Employment as a result of the Executive’s death or Disability, the Company shall pay the Executive the amounts contemplated by Section 5.3(b)(iii) and (iv).
(e) Notwithstanding the foregoing provisions of this Section 5.3, if the Executive materially breaches the Executive’s obligations under the Restrictive Covenants Agreement or this Agreement at any time, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to the Company, the Executive will no longer be entitled to, and the Company will no longer be obligated to pay, any remaining unpaid amount contemplated by Section 5.3(b) or 5.3(c); provided that, if the Executive provides the Release contemplated by Section 5.4, in no event shall the Executive be entitled to benefits pursuant to Section 5.3(b)(i) or 5.3(c)(i), as applicable, of less than $5,000 (or the amount of such benefits, if less than $5,000), which amount the parties agree is good and adequate consideration, in and of itself, for the Executive’s Release contemplated by Section 5.4.
(f) The foregoing provisions of this Section 5.3 shall not affect: (i) the Executive’s receipt of benefits otherwise due to terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan; (ii) the Executive’s rights under COBRA to continue health coverage; or (iii) the Executive’s receipt of benefits otherwise due in accordance with the terms of the Company’s 401(k) plan (if any).
5.4 Release; Resignations; No Other Severance; Leave.
(a) This Section 5.4 shall apply notwithstanding anything else contained in this Agreement or any stock option or other equity award agreement to the contrary. As a condition precedent to any Company obligation to the Executive pursuant to Section 5.3(b) or 5.3(c), or any other obligation to accelerate vesting of any equity award in connection with the termination of the Executive’s employment, the Executive shall timely provide each of Kilroy and KRLP with a valid, executed general release agreement in substantially the form attached hereto as Exhibit A (with such changes thereto as the Company may make, consistent with the intent of such release, to address changes in the law or to otherwise help ensure the validity and enforceability of the agreement) provided by the Company (the “Release”), and such Release shall have not been revoked by the Executive pursuant to any revocation rights afforded by applicable law. The Company shall provide the form of Release to the Executive not later than seven (7) days following the Severance Date, and the Executive shall be required to execute and return the Release to both Kilroy and KRLP within twenty-one (21) days (or forty-five (45) days if such longer period of time is required to make the Release maximally enforceable under applicable law) after the Company provides the form of Release to the Executive.
(b) The Company and the Executive acknowledge and agree that there is no duty of the Executive to mitigate damages under this Agreement. All amounts paid to the Executive pursuant to Section 5.3 shall be paid without regard to whether the Executive has taken or takes actions to mitigate damages. The Executive agrees to resign (and hereby does so resign), effective on the Severance Date, as an officer and director of each of Kilroy and KRLP, as well as any Affiliate of either of them, and as a fiduciary of any benefit plan of the Company or any Affiliate of the Company. The Executive further agrees to promptly execute and provide to the Company any further documentation, as reasonably requested by the Company, to confirm such resignations, and to remove the Executive as a signatory on any accounts maintained by Kilroy, KRLP, or any Affiliates of either of them (or any of their respective benefit plans).
(c) The Executive shall not be entitled to severance benefits pursuant to any other severance plan, policy or arrangement of Kilroy, KRLP, or any Affiliates of either of them.
(d) In the event that the Company provides the Executive notice of termination without Cause pursuant to Section 5.1 or the Executive provides the Company notice of termination pursuant to Section 5.2, the Company will have the option to place the Executive on paid administrative leave during the notice period.
5.5 Certain Defined Terms.
(a) As used herein, “Accrued Obligations” means:
(i) any Base Salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the Severance Date; and
(ii) any reimbursement due to the Executive pursuant to Section 4.2 or Section 4.4 (for clarity, no reimbursement will be due to the Executive pursuant to Section 4.4 for a termination of employment other than a termination of employment (x) described in Section 5.3(b) or 5.3(c) or (y) on account of the Executive’s death or Disability) for expenses reasonably incurred by the Executive on or before the Severance Date and documented and pre-approved, to the extent applicable, in accordance with the Company’s expense reimbursement policies in effect at the applicable time.
(b) As used herein, “Affiliate” of Kilroy, KRLP, or the Company means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Kilroy, KRLP, or either of them. As used in this definition, the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.
(c) As used herein, “Cause” shall mean, as reasonably determined by the Board (or a committee thereof) based on the information then known to it, that one or more of the following has occurred:
(i) the Executive is convicted of, pled guilty or pled nolo contendere to a felony or any crime involving fraud or dishonesty (in each case, under the laws of the United States or any relevant state, or a similar crime or offense under the applicable laws of any relevant foreign jurisdiction);
(ii) the Executive has engaged in acts of fraud, dishonesty or other acts of willful misconduct in the course of the Executive’s duties hereunder;
(iii) the Executive willfully fails to perform or uphold the Executive’s duties under this Agreement and/or willfully fails to comply with reasonable directives of the Board (or a committee thereof) or the CEO; or
(iv) a breach in any material respect by the Executive of this Agreement, the Restrictive Covenants Agreement, or any other contract the Executive is a party to with Kilroy, KRLP, or any Affiliate of either of them, or any written policy of Kilroy, KRLP, or any Affiliate of either of them that is applicable to Company executives or employees generally;
provided, however, that any condition or conditions, as applicable, referenced in clause (iii) or clause (iv) above shall not (if a cure is reasonably possible in the circumstances) constitute Cause unless both (x) the Company provides written notice to the Executive of such condition(s) claimed to constitute Cause (such notice to be delivered in accordance with Section 18), and (y) the Executive fails to remedy such condition(s) within thirty (30) days of receiving such written notice thereof (or, if a cure is reasonably possible in the circumstances but more than thirty (30) days is required to cure such circumstances, the Executive fails to commence taking reasonable steps to cure such condition(s) if it is not reasonably possible to remedy such condition within such thirty (30) day period, or the Executive fails to cure such condition(s) as promptly as reasonably possible and in all cases not more than ninety (90) days of receiving such written notice thereof). For purposes of the foregoing definition of Cause, no act or failure to act, on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company.
(d) As used herein, “Change in Control” shall mean:
(i) A transaction or series of transactions (other than an offering of Kilroy’s common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other than Kilroy, any of its subsidiaries, an employee benefit plan maintained by the Kilroy, KRLP, or any of its or their subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Kilroy) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Kilroy and immediately after such acquisition possesses more than 50% of the total combined voting power of Kilroy’s securities outstanding immediately after such acquisition; or
(ii) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with Kilroy to effect a transaction described in Section 5.5(d)(i) hereof or Section 5.5(d)(iii) hereof) whose election by the Board or nomination for election by Kilroy’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(iii) The consummation by Kilroy (whether directly involving Kilroy or indirectly involving Kilroy through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Kilroy’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(x) Which results in Kilroy’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Kilroy or the person that, as a result of the transaction, controls, directly or indirectly, Kilroy or owns, directly or indirectly, all or substantially all of Kilroy’s assets or otherwise succeeds to the business of Kilroy (Kilroy or such person, the “Successor Entity”)) directly or
indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; and
(y) After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 5.5(d)(iii)(y) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in Kilroy prior to the consummation of the transaction; or
(iv) Kilroy’s stockholders approve a liquidation or dissolution of Kilroy and all material contingencies to such liquidation or dissolution have been satisfied or waived.
(e) As used herein, “Disability” shall mean a physical or mental impairment which, as reasonably determined by the Board (or a committee thereof), renders the Executive unable to perform the essential functions of the Executive’s employment with KRLP, even with reasonable accommodation, for more than 90 days in any 180-day period, unless a longer period is required by federal or state law, in which case that longer period would apply. The Executive agrees to reasonably cooperate with the Board (and any committee thereof) in making any such determination as to the existence of Disability.
(f) As used herein, “Good Reason” shall mean the occurrence (without the Executive’s consent) of any one or more of the following conditions:
(i) a material diminution by the Company in the Executive’s rate of Base Salary or target level of annual Incentive Bonus opportunity pursuant to Section 3.2, or (as to fiscal year 2025) the failure by the Company to grant any annual equity award required to be awarded by the Company pursuant to Section 3.4;
(ii) a material diminution by the Company in the Executive’s authority, duties, or responsibilities;
(iii) a material change by the Company in the geographic location of the Executive’s principal office with the Company (for this purpose, in no event shall a relocation of such office to a new location that is not more than fifty (50) miles from the current location of the Company’s executive offices constitute a “material change”); or
(iv) a material breach by the Company of this Agreement;
provided, however, that any such condition or conditions, as applicable, shall not constitute Good Reason unless both (x) the Executive provides written notice to the Company of the condition claimed to constitute Good Reason within sixty (60) days of the initial existence of such condition(s) (such notice to be delivered in accordance with Section 18), and (y) the Company fails to remedy such condition(s) within thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination of the Executive’s employment with the Company shall not constitute a termination for Good Reason unless such termination occurs not more than one hundred and twenty (120) days following the initial existence of the condition claimed to constitute Good Reason.
(g) As used herein, the term “Person” shall be construed broadly and shall include, without limitation, an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
(h) As used herein, a “Separation from Service” occurs when the Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.
5.6. Notice of Termination; Employment Following Expiration of Period of Employment. Any termination of the Executive’s employment, and the Period of Employment, under this Agreement shall be communicated by written notice of termination from the Executive to the Company, or from the Company to the Executive, as the case may be. This notice of termination must be delivered in accordance with Section 18 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination. If the Company or the Executive delivers notice of non-renewal of the Period of Employment pursuant to Section 2 and the Executive continues to be employed by the Company following the expiration of the Period of Employment, the Executive’s employment by the Company following the expiration of the Period of Employment shall be on an at-will basis and may be terminated by the Company or by the Executive at any time, for any reason (or for no reason), with or without advance notice.
5.7 Limitation on Benefits.
(a) Notwithstanding anything contained in this Agreement to the contrary, to the extent that the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the “Benefits”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the Benefits would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received all of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”). Unless the Executive elects a different order of reduction, any such election to be consistent with the requirements of Section 409A of the Code, to the extent that a reduction in payments or benefits is required pursuant to this Section 5.7(a), the Company shall reduce or eliminate amounts which are payable first from any cash severance and cash bonuses, then from any payment in respect of an equity award that is not covered by Treas. Reg. Section 1.280G-1 Q/A-24(b) or (c), then from any payment in respect of an equity award that is covered by Treas. Reg. Section 1.280G-1 Q/A-24(c), in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined below). Any election given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive’s rights and entitlements to any benefits or compensation. Nothing in this Section 5.7(a) shall require the Company or any of its affiliates to be responsible for, or have any liability or obligation with respect to, the Executive’s excise tax liabilities under Section 4999 of the Code so long as this Section 5.7(a) is correctly applied by the Company.
(b) A determination as to whether the Benefits shall be reduced to the Limited Benefit Amount pursuant to this Agreement and the amount of such Limited Benefit Amount shall be made by the Company’s independent public accountants or another certified public accounting firm or executive compensation consulting firm of national reputation designated by the Company (the “Firm”) at the Company’s expense. The Firm shall provide its determination (the “Determination”), together with detailed supporting calculations (including the value of any post-termination non-compete and other obligations of the Executive taken into account for purposes of the Determination) and documentation to the Company and the Executive within ten (10) business days of the date of termination of the Executive’s employment, if applicable, or such other time as reasonably requested by the Company or the Executive (provided the Executive reasonably believes that any of the Benefits may be subject to the Excise Tax), and if the Firm determines that
no Excise Tax is payable by the Executive with respect to any Benefits, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Benefits. Unless the Executive provides written notice to the Company within ten (10) business days of the delivery of the Determination to the Executive that the Executive disputes such Determination, the Determination shall be binding, final and conclusive upon the Company and the Executive.
6. Confidentiality and Indemnification Agreements; Liability Insurance. Concurrently herewith, the Executive shall execute and deliver to each of Kilroy and KRLP a Non-Competition, Non-Solicitation and Non-Disclosure Agreement in the form previously provided by the Company to the Executive (the “Restrictive Covenants Agreement”). No later than on the Effective Date, the Company shall execute and deliver to the Executive an Indemnification Agreement in the form previously provided by the Company to the Executive (the “Indemnification Agreement”).
The Company shall cover the Executive under directors and officers liability insurance both during and after the Period of Employment in the same amount and to the same extent as the Company covers its other active officers and directors (except that, in no event shall the Company be required to maintain such coverage for a period of more than six years after the later of the last day on which the Executive served as an employee of the Company).
7. Withholding Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation. Except for such withholding rights, the Executive is solely responsible for any and all tax liability that may arise with respect to the compensation provided under or pursuant to this Agreement.
8. Successors and Assigns.
(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Without limiting the generality of the preceding sentence, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor or assignee, as applicable, which assumes and agrees to perform this Agreement by operation of law or otherwise.
9. Number and Gender; Examples. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.
10. Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.
11. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the state of California, without giving effect to any choice of law or conflicting provision or rule (whether of
the state of California or any other jurisdiction) that would cause the laws of any jurisdiction other than the state of California to be applied.
12. Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction or determined by an arbitrator pursuant to Section 16 to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction, and to this end the provisions of this Agreement are declared to be severable; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
13. Entire Agreement. This Agreement, the Restrictive Covenants Agreement and the Indemnification Agreement (together, the “Integrated Agreement”) embody the entire agreement of the parties hereto respecting the matters within its scope. The Integrated Agreement supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into the Integrated Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth in the Integrated Agreement.
14. Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.
15. Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16. Arbitration. Except as provided in Section 17 and Section 7 of the Restrictive Covenants Agreement, any non-time barred, legally actionable controversy or claim arising out of or relating to this Agreement, its enforcement, arbitrability or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other non-time barred, legally actionable controversy or claim arising out of or relating to the Executive’s employment or association with the Company or termination of the same, including, without limiting the generality of the foregoing, any alleged violation of state or federal statute, common law or constitution, shall be submitted to individual, final and binding arbitration, to be held in Los Angeles County, California, before a single arbitrator selected from Judicial Arbitration and Mediation Services, Inc. (“JAMS”), in accordance with the then-current JAMS Arbitration Rules and Procedures for employment disputes, as modified by the terms and conditions in this Section (which may be found at www.jamsadr.com under the Rules/Clauses tab). The parties will select the arbitrator by mutual agreement or, if the parties cannot agree, then by obtaining a list of nine qualified arbitrators
supplied by JAMS from their labor and employment law panel, with each party confidentially submitting a “rank and strike” list that ranks in order of priority six arbitrators and strikes three arbitrators, and the most favored arbitrator based on the cumulative rankings who was not struck by either party shall be appointed arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief that is provided for through any applicable state or federal statutes, or common law. Statutes of limitations shall be the same as would be applicable were the action to be brought in court. The arbitrator selected pursuant to this Agreement may order such discovery as is necessary for a full and fair exploration of the issues and dispute, consistent with the expedited nature of arbitration. At the conclusion of the arbitration, the arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is based. Any award or relief granted by the arbitrator under this Agreement shall be final and binding on the parties to this Agreement and may be enforced by any court of competent jurisdiction. The Company will pay those arbitration costs that are unique to arbitration, including the arbitrator’s fee (recognizing that each side bears its own deposition, witness, expert and attorneys’ fees and other expenses to the same extent as if the matter were being heard in court). If, however, any party prevails on a statutory claim, which affords the prevailing party attorneys’ fees and costs, then the arbitrator may (to the extent required by law in order for this arbitration provision to be enforceable) award reasonable fees and costs to the prevailing party. The arbitrator may not award attorneys’ fees to a party that would not otherwise be entitled to such an award under the applicable statute (for clarity, the arbitrator may not award attorneys’ fees for contractual claims). The arbitrator shall resolve any dispute as to the reasonableness of any fee or cost. Except as provided in Section 7 of the Restrictive Covenants Agreement, the parties acknowledge and agree that they are hereby waiving any rights to trial by jury or a court in any action or proceeding brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or the Executive’s employment.
17. Remedies. Each of the parties to this Agreement and any Person granted rights hereunder whether or not such person or entity is a signatory hereto shall be entitled to enforce its rights under this Agreement specifically to recover damages and costs for any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that monetary damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each party (as well as each other Person granted rights hereunder) may in its sole discretion obtain permanent injunctive or equitable relief in any arbitration filed pursuant to Section 16 and enforce any such relief awarded by the arbitrator in any court of competent jurisdiction. In addition, each party may also apply to any court of law or equity of competent jurisdiction for provisional injunctive or equitable relief, including a temporary restraining or preliminary injunction (without any requirement to post any bond or deposit), to ensure that the relief sought in arbitration is not rendered ineffectual by interim harm. Each party shall be responsible for paying its own attorneys’ fees, costs and other expenses pertaining to any such legal proceeding and enforcement regardless of whether an award or finding or any judgment or verdict thereon is entered against either party.
18. Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, transmitted via telecopier, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if transmitted via telecopier, five days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service.
if to Kilroy and/or KRLP:
Kilroy Realty Corporation
12200 West Olympic Boulevard, Suite 200
Los Angeles, CA 90064
Attention: Senior Vice President, Corporate Counsel
if to the Executive, to the address most recently on file in the payroll records of KRLP.
19. Counterparts; Electronic Signature. This Agreement may be signed and/or transmitted in one or more counterparts by facsimile, e-mail of a .PDF, .TIF, .GIF, .JPG or similar attachment or using electronic signature technology (e.g., via DocuSign or similar electronic signature technology), all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart, and that any such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing such party’s hand-written signature. The parties further consent and agree that (1) to the extent a party signs this Agreement using electronic signature technology, by clicking “sign” (or similar acknowledgement of acceptance), such party is signing this Agreement electronically, and (2) that electronic signatures appearing on this Agreement shall be treated, for purposes of validity, enforceability and admissibility, the same as hand-written signatures.
20. Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that the Executive has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.
21. Clawback Policy. Any amounts awarded or payable pursuant to this Agreement are subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or other compensation (or cash, shares or other property received pursuant to awards, or value received from a disposition or such shares or other property). The Executive agrees to comply with, and promptly repay to the Company any amounts that are required to be repaid pursuant to, such policy.
22. Section 409A.
(a) It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) (“Code Section 409A”) so as not to subject the Executive to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive. Any installment payments provided for in this Agreement shall be treated as a series of separate payments for purposes of Code Section 409A.
(b) If the Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s Separation from Service, the Executive shall not be entitled to any payment or benefit pursuant to Section 5.3(b), 5.3(c), or 5.3(d) until the earlier of (i) the date which is six (6) months after the Executive’s Separation from Service for any reason other than death, or (ii) the date of the Executive’s death. The provisions of this Section 22(b) shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A. Any amounts otherwise payable to the Executive upon or in the six (6) month period following the Executive’s Separation from Service that are not so paid by reason of this Section 22(b) shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the Executive’s Separation from Service (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of the Executive’s death).
(c) To the extent that any benefits pursuant to Section 5.3(b)(ii), 5.3(c)(ii) or reimbursements pursuant to Section 4.2 or Section 4.4 are taxable to the Executive, any reimbursement payment due to the Executive pursuant to any such provision shall be paid to the Executive on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred (except as to any different payment timeframe provided for in Section 4.4 as to amounts subject thereto). The benefits and reimbursements pursuant to such provisions are not subject to liquidation or exchange for another benefit and the amount of such benefits and reimbursements that the Executive receives in one taxable year shall not affect the amount of such benefits or reimbursements that the Executive receives in any other taxable year.
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IN WITNESS WHEREOF, the Executive, Kilroy and KRLP have executed this Agreement as of the date first set forth above.
| | | | | | | | | | | |
| | “Executive” |
| | | |
| | /s/ Jeffrey Kuehling |
| | Jeffrey Kuehling |
| | | |
| | | |
| | “Kilroy” |
| | Kilroy Realty Corporation |
| | a Maryland corporation |
| | | |
| | | |
| | By: | /s/ Heidi R. Roth |
| | | Heidi R. Roth |
| | | Executive Vice President, Chief Administrative Officer |
| | | |
| | | |
| | By: | /s/ Lauren N. Stadler |
| | | Lauren N. Stadler |
| | | Senior Vice President, Corporate Counsel |
| | | |
| | “KRLP” |
| | Kilroy Realty, L.P. |
| | a Delaware limited partnership |
| | | |
| | By: | KILROY REALTY CORPORATION |
| | | a Maryland corporation, |
| | | its General Partner |
| | | |
| | By: | /s/ Heidi R. Roth |
| | | Heidi R. Roth |
| | | Executive Vice President, Chief Administrative Officer |
| | | |
| | | |
| | By: | /s/ Lauren N. Stadler |
| | | Lauren N. Stadler |
| | | Senior Vice President, Corporate Counsel |
EXHIBIT A
FORM OF RELEASE
1. Release. Jeffrey Kuehling (“Executive”), on Executive’s own behalf and on behalf of Executive’s descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue Kilroy Realty Corporation (“Kilroy”), Kilroy Realty, L.P. (“KRLP”), each of their respective divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as its and their assignees, successors, directors, officers, stockholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “Releasees”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in Kilroy, KRLP, or either of them, or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this General Release Agreement (this “Agreement”) set forth below, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, California Labor Code Section 132a, the California Family Rights Act, or any other federal, state or local law, regulation, ordinance, constitution or common law (collectively, the “Claims”); provided, however, that the foregoing release does not apply to any obligation of the Company (as defined in the Employment Agreement (as such term is defined below)) to Executive pursuant to any of the following:
(1) Section 5.3 of the Employment Agreement dated as of July 30th, 2024 by and among Kilroy, KRLP and Executive (the “Employment Agreement”);
(2) any equity-based awards previously granted by Kilroy to Executive, to the extent that such awards continue after the termination of Executive’s employment with the Company in accordance with the applicable terms of such awards;
(3) any right to indemnification that Executive may have pursuant to the Company’s bylaws, its corporate charter or under any written indemnification agreement with the Company (or any corresponding provision of any subsidiary or affiliate of the Company) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to Executive’s service as an employee, officer or director of the Company or any of its subsidiaries or affiliates;
(4) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Company (or subsidiary or affiliate) directors and officers liability insurance policy;
(5) any rights to continued medical and dental coverage that Executive may have under COBRA;
(6) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Company that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended; or
(7) any deferred compensation that Executive may be entitled to under a nonqualified deferred compensation plan of the Company.
In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Notwithstanding anything to the contrary herein, nothing in this Agreement prohibits Executive from filing a charge
with or participating in an investigation conducted by any state or federal government agencies. However, Executive does waive, to the maximum extent permitted by law, the right to receive any monetary or other recovery, should any agency or any other person pursue any claims on Executive’s behalf arising out of any claim released pursuant to this Agreement. For clarity, and as required by law, such waiver does not prevent Executive from accepting a whistleblower award from the Securities and Exchange Commission pursuant to Section 21F of the Securities Exchange Act of 1934, as amended. Executive acknowledges and agrees that Executive has received any and all leave and other benefits that Executive has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.
2. Acknowledgement of Payment of Wages. Executive acknowledges that the Executive has received all amounts owed for Executive’s regular and usual salary (including, but not limited to, any bonus, incentive or other wages), and usual benefits through the date of this Agreement.
3. Waiver of Unknown Claims. This Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Executive hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code and any similar provision of any other applicable state law as to the Claims. Section 1542 of the California Civil Code provides:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
Executive acknowledges that the Executive later may discover claims, demands, causes of action or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.
4. ADEA Waiver. Executive expressly acknowledges and agrees that by entering into this Agreement, Executive is waiving any and all rights or claims that Executive may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date Executive signs this Agreement. Executive further expressly acknowledges and agrees that:
(a) In return for this Agreement, Executive will receive consideration beyond that which Executive was already entitled to receive before executing this Agreement;
(b) Executive is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement;
(c) Executive was given a copy of this Agreement on [_________, 202__], and informed that Executive had [twenty-one (21)] days within which to consider this Agreement and that if Executive wished to execute this Agreement prior to the expiration of such [21]-day period Executive will have done so voluntarily and with full knowledge that Executive is waiving Executive’s right to have [twenty-one (21)] days to consider this Agreement; and that such [twenty-one (21)] day period to consider this Agreement would not and will not be re-started or extended based on any changes, whether material or immaterial, that are or were made to this Agreement in such [twenty-one (21)] day period after Executive received it;
(d) Executive was informed that Executive had seven (7) days following the date of execution of this Agreement in which to revoke this Agreement, and this Agreement will become null and void if Executive
elects revocation during that time. Any revocation must be in writing and must be received by the Company during the seven-day revocation period. In the event that Executive exercises this revocation right, neither the Company nor Executive will have any obligation under this Agreement. Any notice of revocation should be sent by Executive in writing to the Company (attention [_____________]), [Address], so that it is received within the seven-day period following execution of this Agreement by Executive.
(e) Nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.
5. No Transferred Claims. Executive represents and warrants to the Company that Executive has not heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof.
6. Miscellaneous. The following provisions shall apply for purposes of this Agreement:
(a) Number and Gender. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.
(b) Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.
(c) Governing Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, as well as the legal relations hereby created between the parties hereto, shall be governed by and construed under, and interpreted and enforced in accordance with, the laws of the State of California, notwithstanding any California or other conflict of law provision to the contrary.
(d) Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.
(e) Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.
(f) Waiver. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.
(g) Arbitration. Any controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provisions of the Employment Agreement.
(h) Counterparts. This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.
[Remainder of page intentionally left blank]
The undersigned have read and understand the consequences of this Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
EXECUTED this ________ day of ________ 20___, at ______________________ County, __________.
| | | | | | | | | | | |
| | “Executive” |
| | | |
| | |
| | Jeffrey Kuehling |
EXECUTED this ________ day of ________ 20___, at ______________________ County, __________.
| | | | | | | | | | | |
| | “Kilroy” |
| | Kilroy Realty Corporation |
| | a Maryland corporation |
| | | |
| | | |
| | By: | |
| | | [Name] |
| | | [Title] |
| | | |
| | | |
| | By: | |
| | | [Name] |
| | | [Title] |
| | | |
| | “KRLP” |
| | Kilroy Realty, L.P. |
| | a Delaware limited partnership |
| | | |
| | By: | KILROY REALTY CORPORATION |
| | | a Maryland corporation, |
| | | its General Partner |
| | | |
| | By: | |
| | | [Name] |
| | | [Title] |
| | | |
| | | |
| | By: | |
| | | [Name] |
| | | [Title] |
July 30, 2024
Eliott Trencher
Kilroy Realty Corporation
12200 West Olympic Boulevard, Suite 200
Los Angeles, CA 90064
Re: Amendment of Employment Agreement
Dear Eliott:
Reference is made to that certain employment agreement between you, Kilroy Realty Corporation, a Maryland corporation, and Kilroy Realty, L.P., a Delaware limited partnership, dated March 3, 2023 (the “Employment Agreement”). This letter agreement (this “Amendment”) is to confirm our agreement regarding the amendment of the Employment Agreement as set forth below. Capitalized terms used in this Amendment are used as defined in the Employment Agreement if not otherwise defined in this Amendment.
The Employment Agreement currently provides that you will be employed as “Executive Vice President, Chief Financial Officer and Chief Investment Officer,” and that you will have duties and authorities consistent with your position as Chief Financial Officer. The Employment Agreement also provides that the Company and the Operating Partnership have the ability to reassign the title of Chief Investment Officer. Effective immediately, Section 1 (Position/Title) of the Employment Agreement is amended in its entirety to read as follows:
“During the Term (as defined below), you will be employed as Executive Vice President, Chief Financial Officer and Chief Investment Officer, and you will have duties and authorities consistent with such positions. You acknowledge and agree, however, that from time to time and at any time the Company and the Operating Partnership may reassign the title and duties and authorities of Chief Financial Officer to another executive; provided that any such reassignment shall not reduce your then-current Base Salary or target level of Annual Cash Award. In the event of such reassignment, you will be employed solely as the Executive Vice President, Chief Investment Officer and have duties and authorities consistent with such position.”
Further, the second clause of the definition of “Good Reason” in the Employment Agreement is amended in its entirety to read as follows:
“a material diminution of your position with the Company as Executive Vice President, Chief Investment Officer (for clarity, you no longer serving as Chief Financial Officer shall not constitute Good Reason);”
You hereby waive any claim that “Good Reason” exists under the Employment Agreement (including, without limitation, for purposes of determining whether a “Qualifying Termination” occurs for purposes of your restricted stock unit awards granted by the Company) in connection with any change in your title, position, duties, authorities, or responsibilities should the Company and the Operating Partnership appoint another executive as Chief Financial Officer of the Company and the Operating Partnership (with such other executive to have the customary duties, authorities and responsibilities associated with such position).
Except as expressly set forth above, the Employment Agreement remains in full force and effect in accordance with its terms.
This Amendment will be governed by and construed in accordance with the laws of the state of California, without giving effect to any choice of law or conflicting provision or rule (whether of the state of California or any other jurisdiction) that would cause the laws of any jurisdiction other than the state of California to be applied. This Amendment (together with the Employment Agreement) embodies the entire agreement of the parties hereto
respecting the amendment of the Employment Agreement and supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon such subject matter. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to such subject matter except as expressly set forth in this Amendment and in the Employment Agreement. This Amendment may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Amendment or the Employment Agreement, which agreement is executed by all of the parties hereto.
This Amendment may be signed and/or transmitted in one or more counterparts by facsimile, e-mail of a .PDF, .TIF, .GIF, .JPG or similar attachment or using electronic signature technology (e.g., via DocuSign or similar electronic signature technology), all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart, and that any such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing such party’s hand-written signature. The parties further consent and agree that (1) to the extent a party signs this Amendment using electronic signature technology, by clicking “sign” (or similar acknowledgement of acceptance), such party is signing this Amendment electronically, and (2) that electronic signatures appearing on this Amendment shall be treated, for purposes of validity, enforceability and admissibility, the same as hand-written signatures.
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If this Amendment sets forth our agreement with respect to the foregoing matters, please sign this Amendment where indicated below.
| | | | | | | | | | | |
| | KILROY REALTY CORPORATION |
| | | |
| | | |
| | By: | /s/ Heidi R. Roth |
| | | Name: Heidi R. Roth |
| | | Title: Executive Vice President, Chief Administrative Officer |
| | | |
| | | |
| | By: | /s/ Lauren N. Stadler |
| | | Name: Lauren N. Stadler |
| | | Title: Senior Vice President, Corporate Counsel |
| | | |
| | | |
| | KILROY REALTY, L.P. |
| | By: | KILROY REALTY CORPORATION |
| | | Its: General Partner |
| | | |
| | By: | /s/ Heidi R. Roth |
| | | Name: Heidi R. Roth |
| | | Title: Executive Vice President, Chief Administrative Officer |
| | | |
| | | |
| | By: | /s/ Lauren N. Stadler |
| | | Name: Lauren N. Stadler |
| | | Title: Senior Vice President, Corporate Counsel |
| | | |
| | | |
Accepted and Agreed: | | | |
| | | |
| | | |
/s/ Eliott Trencher | | | |
Eliott Trencher | | | |
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
KILROY REALTY CORPORATION REPORTS
SECOND QUARTER FINANCIAL RESULTS
---------------
LOS ANGELES, July 31, 2024 - Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its second quarter ended June 30, 2024.
Second Quarter Highlights
Financial Results
•Revenues of $280.7 million
•Net income available to common stockholders of $0.41 per diluted share
•Funds from operations available to common stockholders and unitholders (“FFO”) of $132.6 million, or $1.10 per diluted share
Leasing and Occupancy
•Stabilized portfolio was 83.7% occupied and 85.4% leased at June 30, 2024
•Signed approximately 235,000 square feet of leases, comprised of 122,000 square feet of new leasing on previously vacant space, 55,000 square feet of new leasing on currently occupied space, and 58,000 square feet of renewal leasing
◦Includes 16,000 square feet of short-term leasing, comprised of 11,000 square feet of short-term new leasing and 5,000 square feet of short-term renewal leasing
◦GAAP rents increased 7.2% and cash rents decreased 4.6% from prior levels on second generation leasing, excluding short-term leasing
Balance Sheet / Liquidity
•As of June 30, 2024, the Company had approximately $1.9 billion of total liquidity comprised of approximately $0.8 billion of cash and approximately $1.1 billion available under the unsecured revolving credit facility
Dividend
•The Board declared and paid a regular quarterly cash dividend on its common stock of $0.54 per share, equivalent to an annual rate of $2.16
Recent Developments
•In July, signed approximately 184,000 square feet of leases, inclusive of 46,000 square feet of short-term renewal leases
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Net Income Available to Common Stockholders / FFO Guidance and Outlook
The Company is providing an updated Nareit-defined FFO per diluted share guidance for the full year 2024 of $4.21 to $4.31 per share, with a midpoint of $4.26 per share.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Full Year 2024 Range as of May 2024 | | Full Year 2024 Range as of July 2024 | |
| | Low End | | High End | | Low End | | High End | |
| | $ and shares/units in thousands, except per share/unit amounts | |
| Net income available to common stockholders per share - diluted | $ | 1.46 | | | $ | 1.61 | | | $ | 1.50 | | | $ | 1.59 | | |
| | | | | | | | | |
| Weighted average common shares outstanding - diluted (1) | 118,000 | | | 118,000 | | | 118,000 | | | 118,000 | | |
| | | | | | | | | |
| Net income available to common stockholders | $ | 172,500 | | | $ | 190,000 | | | $ | 177,000 | | | $ | 188,000 | | |
| Adjustments: | | | | | | | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | 1,900 | | | 2,000 | | | 1,800 | | | 1,900 | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | 20,500 | | | 21,000 | | | 20,500 | | | 21,000 | | |
| Depreciation and amortization of real estate assets | 335,000 | | | 336,000 | | | 338,000 | | | 339,000 | | |
| Gains on sales of depreciable real estate | — | | | — | | | — | | | — | | |
| Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (31,000) | | | (32,000) | | | (31,500) | | | (32,000) | | |
| Funds From Operations (2) | $ | 498,900 | | | $ | 517,000 | | | $ | 505,800 | | | $ | 517,900 | | |
| | | | | | | | | |
| Weighted average common shares/units outstanding – diluted (3) | 120,250 | | | 120,250 | | | 120,200 | | | 120,200 | | |
| | | | | | | | | |
| Funds From Operations per common share/unit – diluted (3) | $ | 4.15 | | | $ | 4.30 | | | $ | 4.21 | | | $ | 4.31 | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Key Assumptions | | May 2024 Assumptions | | July 2024 Assumptions | |
| Change in same store cash NOI (2) | | (3.5%) to (5.5%) | | (3.0%) to (4.0%) | |
| Average full year occupancy | | 82.50% to 84.00% | | 82.75% to 83.75% | |
| General and administrative expenses | | $72 million to $80 million | | $72 million to $80 million | |
| Total development spending (4) | | $200 million to $300 million | | $225 million to $275 million | |
| Weighted average common shares/units outstanding – diluted (in thousands) (3) | | 120,250 | | 120,200 | |
| | | | | | |
| | | | | | |
________________________
(1)Calculated based on estimated weighted average shares outstanding, including non-participating share-based awards.
(2)See pages 32-33 for Management Statements on Funds From Operations and Same Store Cash Net Operating Income.
(3)Calculated based on weighted average shares outstanding, including participating and non-participating share-based awards, and the dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(4)Remaining 2024 development spending is $100 million to $150 million.
The Company’s guidance estimates for the full year 2024, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this press release, reflect management’s views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this press release. These guidance estimates do not include the impact on the Company’s operating results from potential future acquisitions, dispositions (including any associated gains or
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
losses), capital markets activity, impairment charges, or any events outside of the Company’s control, as the timing and magnitude of any such events are not known at the time the Company provides guidance. There can be no assurance that the Company’s actual results will not differ materially from these estimates.
Conference Call and Audio Webcast
The Company’s management will discuss second quarter results and the current business environment during the Company’s August 1, 2024 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. To participate and obtain conference call dial-in details, register by using the following link, https://www.netroadshow.com/events/login?show=f15f60b2&confId=58185. Those interested in listening via the Internet can access the conference call at https://events.q4inc.com/attendee/326412379. It may be necessary to download audio software to hear the conference call.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Table of Contents
This Supplemental Financial Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, information concerning lease expirations, debt maturities, potential investments, development and redevelopment activity, projected construction costs, dispositions, and other forward-looking financial data. In some instances, forward-looking statements can be identified by the use of forward-looking terminology such as “expect,” “future,” “will,” “would,” “pursue,” or “project”, and variations of such words and similar expressions that do not relate to historical matters. Forward-looking statements are based on Kilroy Realty Corporation’s current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict, many of which are outside of Kilroy Realty Corporation’s control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including periods of heightened inflation, and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California, Texas, and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses, including bankruptcy, lack of liquidity or lack of funding, and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer's office premises; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service, and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment, and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices, or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed, and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement, and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations, or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition, and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect Kilroy Realty Corporation’s business and financial performance, see the factors included under the caption “Risk Factors” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2023, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report that becomes untrue because of subsequent events, new information, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
Pictured on cover page, in order of appearance: 2100 Kettner, San Diego, CA | 100 Hooper, San Francisco, CA | Kilroy Sabre Springs, San Diego, CA
01
Corporate Data and Financial Highlights
–Company Background
–Financial Highlights
–Consolidated Balance Sheets
–Consolidated Statements of Operations
–Funds From Operations and Funds Available for Distribution
–Net Operating Income
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Company Background
Kilroy Realty Corporation (NYSE: KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is a leading U.S. landlord and developer, with operations in San Diego, Los Angeles, the San Francisco Bay Area, Seattle, and Austin. The Company has over seven decades of experience developing, acquiring and managing office, life science, and mixed-use real estate assets. At June 30, 2024, the Company’s stabilized portfolio comprised of 121 buildings encompassing an aggregate of approximately 17.0 million square feet of primarily office and life science space that was 83.7% occupied and 85.4% leased. The Company also has 1,001 residential units in the Los Angeles and San Diego regions, which had an average occupancy of 92.8% for the quarter ended June 30, 2024.
| | | | | | | | | | | | | | | | | | | | | | | |
Board of Directors | | Executive and Senior Management Team | | Investor Relations |
Edward F. Brennan, PhD | Chair | | Angela M. Aman | Chief Executive Officer | | 12200 W. Olympic Blvd., Suite 200 Los Angeles, CA 90064 (310) 481-8400 Web: www.kilroyrealty.com E-mail: investorrelations@kilroyrealty.com |
Angela M. Aman | | | Justin W. Smart | President | |
Daryl J. Carter | | | Eliott Trencher | EVP, Chief Financial Officer and Chief Investment Officer | |
Jolie Hunt | | | Robert Paratte | EVP, Chief Leasing Officer | |
Scott S. Ingraham | | | Heidi R. Roth | EVP, Chief Administrative Officer | |
Louisa G. Ritter | | | Lauren N. Stadler | EVP, General Counsel and Secretary | | Taylor Friend | SVP, Capital Markets and Treasurer |
Gary R. Stevenson | | | John Osmond | EVP, Head of Asset Management | | |
Peter B. Stoneberg | | | Merryl Werber | SVP, Chief Accounting Officer and Controller | | | |
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Equity Research Coverage |
| | | | |
Barclays | | | Jefferies LLC | |
Brendan Lynch | (212) 526-9428 | | Peter Abramowitz | (212) 336-7241 |
BofA Securities | | | J.P. Morgan | |
Camille Bonnel | (646) 855-5042 | | Anthony Paolone | (212) 622-6682 |
BMO Capital Markets Corp. | | | Keybanc Capital Markets | |
John P. Kim | (212) 885-4115 | | Upal Rana | (917) 368-2316 |
BTIG | | | Mizuho Securities USA LLC | |
Thomas Catherwood | (212) 738-6140 | | Vikram Malhotra | (212) 282-3827 |
Citigroup Investment Research | | | RBC Capital Markets | |
Michael Griffin | (212) 816-5871 | | Mike Carroll | (440) 715-2649 |
Deutsche Bank Securities, Inc. | | | Scotiabank | |
Omotayo Okusanya | (212) 250-9284 | | Nicholas Yulico | (212) 225-6904 |
Evercore ISI | | | Wells Fargo | |
Steve Sakwa | (212) 446-9462 | | Blaine Heck | (410) 662-2556 |
Goldman Sachs & Co. LLC | | | Wolfe Research | |
Caitlin Burrows | (212) 902-4736 | | Andrew Rosivach | (646) 582-9250 |
Green Street Advisors | | | | |
Dylan Burzinski | (949) 640-8780 | | | |
Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates, or forecasts regarding Kilroy Realty Corporation’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Kilroy Realty Corporation or its management. Kilroy Realty Corporation does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Financial Highlights
(unaudited, $ in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | |
| | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | |
| | | | | | | | | | | |
| INCOME ITEMS: | | | | | | | | | | |
| Revenues | $ | 280,731 | | | $ | 278,581 | | | $ | 269,016 | | | $ | 283,594 | | | $ | 284,282 | | |
| Capitalized Interest and Debt Costs | 20,515 | | | 19,807 | | | 21,510 | | | 20,056 | | | 19,470 | | |
| Cash Lease Termination Fees (1) | 2,465 | | | 3,851 | | | 3,437 | | | 1,682 | | | 225 | | |
| EARNINGS METRICS: | | | | | | | | | | |
| Net Income Available to Common Stockholders | $ | 49,211 | | | $ | 49,920 | | | $ | 47,284 | | | $ | 52,762 | | | $ | 55,587 | | |
| Net Operating Income (2) | 189,447 | | | 189,270 | | | 184,725 | | | 193,396 | | | 198,584 | | |
| EBITDA, as adjusted (3) | 178,461 | | | 182,602 | | | 171,387 | | | 173,798 | | | 178,020 | | |
| Company's Share of EBITDA, as adjusted (3) | 170,860 | | | 173,942 | | | 163,059 | | | 165,408 | | | 169,858 | | |
| Company's Share of EBITDA, as adjusted less interest income (3) | 160,776 | | | 160,752 | | | 152,363 | | | 158,393 | | | 166,437 | | |
| Funds From Operations (4) | 132,587 | | | 133,723 | | | 129,257 | | | 134,047 | | | 141,853 | | |
| Funds Available for Distribution (4) | 114,834 | | | 125,328 | | | 109,528 | | | 118,698 | | | 119,546 | | |
| PER SHARE INFORMATION (5): | | | | | | | | | | |
| Net Income Available to Common Stockholders per common share – diluted | $ | 0.41 | | | $ | 0.42 | | | $ | 0.40 | | | $ | 0.45 | | | $ | 0.47 | | |
| Funds From Operations per common share – diluted (4) | 1.10 | | | 1.11 | | | 1.08 | | | 1.12 | | | 1.19 | | |
| Dividends declared per common share | 0.54 | | | 0.54 | | | 0.54 | | | 0.54 | | | 0.54 | | |
| RATIOS (6): | | | | | | | | | | |
| Net Operating Income Margin (2) | 67.5 | % | | 67.9 | % | | 68.7 | % | | 68.2 | % | | 69.9 | % | |
| Net Debt to Company's Share of EBITDA, as adjusted Ratio (3)(7) | 6.4x | | 6.3x | | 6.2x | | 6.1x | | 6.1x | |
| Net Debt to Company's Share of EBITDA, as adjusted less interest income Ratio (3)(7) | 6.8x | | 6.6x | | 6.5x | | 6.2x | | 6.2x | |
| Fixed Charge Coverage Ratio - Net Income | 1.0x | | 1.0x | | 1.0x | | 1.2x | | 1.4x | |
| Fixed Charge Coverage Ratio - EBITDA, as adjusted (3) | 3.3x | | 3.3x | | 3.4x | | 3.7x | | 4.1x | |
| Net Income Payout Ratio | 117.3 | % | | 114.9 | % | | 120.5 | % | | 108.8 | % | | 104.3 | % | |
| FFO / FAD Payout Ratio (4) | 48.3% / 55.7% | | 47.9% / 51.1% | | 49.5% / 58.4% | | 47.7% / 53.9% | | 45.0% / 53.4% | |
| | | | | | | | | | | |
| STABILIZED PORTFOLIO INFORMATION: | | | | | | | | | | |
| Change in Same Store Net Operating Income (8) | (5.7) | % | | (9.4) | % | | (10.6) | % | | (5.0) | % | | (2.3) | % | |
| Change in Same Store Cash Net Operating Income (8) | 0.2 | % | | (7.2) | % | | (1.2) | % | | 0.2 | % | | 2.7 | % | |
| Period End Occupancy Percentage | 83.7 | % | | 84.2 | % | | 85.0 | % | | 86.2 | % | | 86.6 | % | |
| Period End Leased Percentage | 85.4 | % | | 85.7 | % | | 86.4 | % | | 87.5 | % | | 88.6 | % | |
| Lease Composition (Net / Gross) (9) | 51% / 49% | | 51% / 49% | | 51% / 49% | | 49% / 51% | | 49% / 51% | |
|
________________________
Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 35-37 “Definitions Included in Supplemental.” Refer to pages 31-33 for Management Statements on non-GAAP supplemental measures.
(1)Represents cash receipts of lease termination fees in the period they are received, which may not correspond to the timing of GAAP revenue recognition of the lease termination fee over the remaining term of the lease.
(2)Please refer to page 38 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.
(3)Please refer to page 40 for a reconciliation of GAAP Net Income Available to Common Stockholders to the Company's EBITDA metrics.
(4)Please refer to page 6 for reconciliations of GAAP Net Income Available to Common Stockholders to Funds From Operations available to common stockholders and unitholders and Funds Available for Distribution to common stockholders and unitholders and page 41 for a reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution to common stockholders and unitholders.
(5)Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(6)Ratios are calculated based on current quarter annualized amounts unless otherwise noted.
(7)Calculated on a trailing-12 month basis. Please refer to page 29 for the calculation of this ratio.
(8)Calculated as the change over the same prior year period. For all quarterly periods in 2024, the Same Store Portfolio was comprised of 119 properties. For all quarterly periods in 2023, the Same Store Portfolio was comprised of 115 properties.
(9)Based upon annualized base rent, including 100% of consolidated property partnerships, as of the period end. Excludes leases at our three residential properties.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Consolidated Balance Sheets
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | |
| | | | | | | | | | | |
| ASSETS: | | | | | | | | | | |
| Land and improvements | $ | 1,743,170 | | | $ | 1,743,170 | | | $ | 1,743,170 | | | $ | 1,743,170 | | | $ | 1,738,242 | | |
| Buildings and improvements | 8,501,976 | | | 8,479,359 | | | 8,463,674 | | | 8,431,499 | | | 8,353,596 | | |
| Undeveloped land and construction in progress | 2,207,180 | | | 2,114,242 | | | 2,034,804 | | | 1,950,424 | | | 1,894,545 | | |
| Total real estate assets held for investment | 12,452,326 | | | 12,336,771 | | | 12,241,648 | | | 12,125,093 | | | 11,986,383 | | |
| Accumulated depreciation and amortization | (2,671,141) | | | (2,594,996) | | | (2,518,304) | | | (2,443,659) | | | (2,369,515) | | |
| Total real estate assets held for investment, net | 9,781,185 | | | 9,741,775 | | | 9,723,344 | | | 9,681,434 | | | 9,616,868 | | |
| | | | | | | | | | | |
| Cash and cash equivalents | 835,893 | | | 855,007 | | | 510,163 | | | 618,794 | | | 361,885 | | |
| | | | | | | | | | | |
| Marketable securities | 32,648 | | | 109,513 | | | 284,670 | | | 278,789 | | | 25,786 | | |
| Current receivables, net | 10,229 | | | 13,291 | | | 13,609 | | | 11,383 | | | 10,686 | | |
| Deferred rent receivables, net | 458,177 | | | 457,494 | | | 460,979 | | | 466,073 | | | 463,640 | | |
| Deferred leasing costs and acquisition-related intangible assets, net | 220,485 | | | 226,506 | | | 229,705 | | | 228,742 | | | 230,559 | | |
| Right of use ground lease assets | 129,760 | | | 130,026 | | | 125,506 | | | 125,765 | | | 126,022 | | |
| Prepaid expenses and other assets, net | 75,379 | | | 65,588 | | | 53,069 | | | 60,141 | | | 75,588 | | |
| | | | | | | | | | | |
| TOTAL ASSETS | $ | 11,543,756 | | | $ | 11,599,200 | | | $ | 11,401,045 | | | $ | 11,471,121 | | | $ | 10,911,034 | | |
| | | | | | | | | | | |
| LIABILITIES AND EQUITY: | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Secured debt, net | $ | 600,741 | | | $ | 601,990 | | | $ | 603,225 | | | $ | 604,480 | | | $ | 240,142 | | |
| Unsecured debt, net | 4,519,796 | | | 4,518,297 | | | 4,325,153 | | | 4,330,326 | | | 4,172,833 | | |
| | | | | | | | | | | |
| Accounts payable, accrued expenses and other liabilities | 361,759 | | | 401,892 | | | 371,179 | | | 426,662 | | | 377,733 | | |
| Ground lease liabilities | 128,787 | | | 128,966 | | | 124,353 | | | 124,517 | | | 124,678 | | |
| Accrued dividends and distributions | 65,118 | | | 65,111 | | | 64,440 | | | 64,423 | | | 64,438 | | |
| Deferred revenue and acquisition-related intangible liabilities, net | 160,284 | | | 166,436 | | | 173,638 | | | 178,542 | | | 185,429 | | |
| Rents received in advance and tenant security deposits | 73,013 | | | 73,777 | | | 79,364 | | | 74,646 | | | 78,187 | | |
| Total liabilities | 5,909,498 | | | 5,956,469 | | | 5,741,352 | | | 5,803,596 | | | 5,243,440 | | |
| Equity: | | | | | | | | | | |
| Stockholders’ Equity | | | | | | | | | | |
| Common stock | 1,174 | | | 1,174 | | | 1,173 | | | 1,173 | | | 1,172 | | |
| Additional paid-in capital | 5,216,699 | | | 5,208,753 | | | 5,205,839 | | | 5,195,106 | | | 5,184,227 | | |
| Retained earnings | 187,796 | | | 203,080 | | | 221,149 | | | 237,665 | | | 248,695 | | |
| Total stockholders’ equity | 5,405,669 | | | 5,413,007 | | | 5,428,161 | | | 5,433,944 | | | 5,434,094 | | |
| Noncontrolling Interests | | | | | | | | | | |
| Common units of the Operating Partnership | 52,985 | | | 53,087 | | | 53,275 | | | 53,328 | | | 53,358 | | |
| Noncontrolling interests in consolidated property partnerships | 175,604 | | | 176,637 | | | 178,257 | | | 180,253 | | | 180,142 | | |
| Total noncontrolling interests | 228,589 | | | 229,724 | | | 231,532 | | | 233,581 | | | 233,500 | | |
| Total equity | 5,634,258 | | | 5,642,731 | | | 5,659,693 | | | 5,667,525 | | | 5,667,594 | | |
| TOTAL LIABILITIES AND EQUITY | $ | 11,543,756 | | | $ | 11,599,200 | | | $ | 11,401,045 | | | $ | 11,471,121 | | | $ | 10,911,034 | | |
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Consolidated Statements of Operations
(unaudited, $ and shares in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | | | 6/30/2024 | | 6/30/2023 | |
| REVENUES | | | | | | | | | | | | | | | | |
| Rental income | | $ | 275,919 | | | $ | 274,890 | | | $ | 265,643 | | | $ | 280,681 | | | $ | 281,309 | | | | $ | 550,809 | | | $ | 571,413 | | |
| Other property income | | 4,812 | | | 3,691 | | | 3,373 | | | 2,913 | | | 2,973 | | | | 8,503 | | | 5,671 | | |
| Total revenues | | 280,731 | | | 278,581 | | | 269,016 | | | 283,594 | | | 284,282 | | | | 559,312 | | | 577,084 | | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Property expenses | | 59,279 | | | 57,320 | | | 60,731 | | | 59,445 | | | 55,008 | | | | 116,599 | | | 108,788 | | |
| Real estate taxes | | 29,009 | | | 29,239 | | | 21,000 | | | 28,363 | | | 28,277 | | | | 58,248 | | | 56,505 | | |
| Ground leases | | 2,996 | | | 2,752 | | | 2,560 | | | 2,390 | | | 2,413 | | | | 5,748 | | | 4,782 | | |
| General and administrative expenses (1) | | 18,951 | | | 17,579 | | | 22,078 | | | 24,761 | | | 22,659 | | | | 36,530 | | | 46,595 | | |
| Leasing costs | | 2,119 | | | 2,279 | | | 1,956 | | | 1,852 | | | 1,326 | | | | 4,398 | | | 2,698 | | |
| Depreciation and amortization | | 87,151 | | | 88,031 | | | 86,016 | | | 85,224 | | | 90,362 | | | | 175,182 | | | 184,038 | | |
| Total expenses | | 199,505 | | | 197,200 | | | 194,341 | | | 202,035 | | | 200,045 | | | | 396,705 | | | 403,406 | | |
| OTHER INCOME (EXPENSES) | | | | | | | | | | | | | | | | |
| Interest income | | 10,084 | | | 13,190 | | | 10,696 | | | 7,015 | | | 3,421 | | | | 23,274 | | | 4,881 | | |
| Interest expense | | (36,763) | | | (38,871) | | | (32,325) | | | (29,837) | | | (26,383) | | | | (75,634) | | | (52,054) | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total other expenses | | (26,679) | | | (25,681) | | | (21,629) | | | (22,822) | | | (22,962) | | | | (52,360) | | | (47,173) | | |
| NET INCOME | | 54,547 | | | 55,700 | | | 53,046 | | | 58,737 | | | 61,275 | | | | 110,247 | | | 126,505 | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | | (458) | | | (502) | | | (471) | | | (515) | | | (537) | | | | (960) | | | (1,097) | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | | (4,878) | | | (5,278) | | | (5,291) | | | (5,460) | | | (5,151) | | | | (10,156) | | | (13,213) | | |
| Total income attributable to noncontrolling interests | | (5,336) | | | (5,780) | | | (5,762) | | | (5,975) | | | (5,688) | | | | (11,116) | | | (14,310) | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | | $ | 49,211 | | | $ | 49,920 | | | $ | 47,284 | | | $ | 52,762 | | | $ | 55,587 | | | | $ | 99,131 | | | $ | 112,195 | | |
| Weighted average common shares outstanding – basic | | 117,375 | | | 117,338 | | | 117,240 | | | 117,185 | | | 117,155 | | | | 117,356 | | | 117,107 | | |
| Weighted average common shares outstanding – diluted | | 117,663 | | | 117,961 | | | 117,816 | | | 117,495 | | | 117,360 | | | | 117,810 | | | 117,383 | | |
| NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE | | | | | | | | | | | | | | | | |
| Net income available to common stockholders per share – basic | | $ | 0.41 | | | $ | 0.42 | | | $ | 0.40 | | | $ | 0.45 | | | $ | 0.47 | | | | $ | 0.83 | | | $ | 0.95 | | |
| Net income available to common stockholders per share – diluted | | $ | 0.41 | | | $ | 0.42 | | | $ | 0.40 | | | $ | 0.45 | | | $ | 0.47 | | | | $ | 0.83 | | | $ | 0.95 | | |
| | | | | | | | | | | | | | | | | |
_______________________
(1)The three months ended December 31, 2023, September 30, 2023, and June 30, 2023 includes $4.9 million, $5.8 million, and $3.1 million, respectively, of retirement costs for our former CEO, primarily comprised of accelerated stock compensation expense. The six months ended June 30, 2023 includes $6.3 million of retirement costs for our former CEO and former President, primarily comprised of accelerated stock compensation expense.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | | | 6/30/2024 | | 6/30/2023 | |
| | | | | | | | | | | | | | | | | |
| FUNDS FROM OPERATIONS (1): | | | | | | | | | | | | | | | | |
| Net income available to common stockholders | | $ | 49,211 | | | $ | 49,920 | | | $ | 47,284 | | | $ | 52,762 | | | $ | 55,587 | | | | $ | 99,131 | | | $ | 112,195 | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | | 458 | | | 502 | | | 471 | | | 515 | | | 537 | | | | 960 | | | 1,097 | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | | 4,878 | | | 5,278 | | | 5,291 | | | 5,460 | | | 5,151 | | | | 10,156 | | | 13,213 | | |
| Depreciation and amortization of real estate assets | | 85,589 | | | 86,460 | | | 84,402 | | | 83,518 | | | 88,473 | | | | 172,049 | | | 180,144 | | |
| Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | | (7,549) | | | (8,437) | | | (8,191) | | | (8,208) | | | (7,895) | | | | (15,986) | | | (18,837) | | |
| Funds From Operations (1) | | $ | 132,587 | | | $ | 133,723 | | | $ | 129,257 | | | $ | 134,047 | | | $ | 141,853 | | | | $ | 266,310 | | | $ | 287,812 | | |
| Weighted average common shares/units outstanding – basic (2) | | 120,034 | | | 119,660 | | | 118,896 | | | 118,934 | | | 118,930 | | | | 119,847 | | | 118,874 | | |
| Weighted average common shares/units outstanding – diluted (3) | | 120,322 | | | 120,283 | | | 119,473 | | | 119,245 | | | 119,134 | | | | 120,301 | | | 119,149 | | |
| FFO per common share/unit – basic (1) | | $ | 1.10 | | | $ | 1.12 | | | $ | 1.09 | | | $ | 1.13 | | | $ | 1.19 | | | | $ | 2.22 | | | $ | 2.42 | | |
| FFO per common share/unit – diluted (1) | | $ | 1.10 | | | $ | 1.11 | | | $ | 1.08 | | | $ | 1.12 | | | $ | 1.19 | | | | $ | 2.21 | | | $ | 2.42 | | |
| | | | | | | | | | | | | | | | | |
| FUNDS AVAILABLE FOR DISTRIBUTION (1): | | | | | | | | | | | | | | | | |
| Funds From Operations (1) | | $ | 132,587 | | | $ | 133,723 | | | $ | 129,257 | | | $ | 134,047 | | | $ | 141,853 | | | | $ | 266,310 | | | $ | 287,812 | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Recurring tenant improvements, leasing commissions and capital expenditures | | (22,069) | | | (11,763) | | | (31,411) | | | (20,519) | | | (17,850) | | | | (33,832) | | | (35,616) | | |
| Amortization of deferred revenue related to tenant-funded tenant improvements (4) | | (4,358) | | | (6,502) | | | (5,717) | | | (4,883) | | | (4,912) | | | | (10,860) | | | (10,097) | | |
| Net effect of straight-line rents | | (634) | | | 3,536 | | | 5,143 | | | (2,382) | | | (5,720) | | | | 2,902 | | | (11,339) | | |
| Amortization of net below market rents (5) | | (886) | | | (904) | | | (973) | | | (1,034) | | | (1,608) | | | | (1,790) | | | (4,641) | | |
| Amortization of deferred financing costs and net debt discount/premium | | 1,560 | | | 1,757 | | | 1,279 | | | 1,312 | | | 1,254 | | | | 3,317 | | | 2,609 | | |
| Non-cash amortization of share-based compensation awards | | 5,889 | | | 3,381 | | | 8,498 | | | 10,596 | | | 7,721 | | | | 9,270 | | | 17,764 | | |
| Lease related adjustments, leasing costs and other (6) | | 830 | | | 1,216 | | | 1,966 | | | (401) | | | (2,106) | | | | 2,046 | | | 3,356 | | |
| Adjustments attributable to noncontrolling interests in consolidated property partnerships | | 1,915 | | | 884 | | | 1,486 | | | 1,962 | | | 914 | | | | 2,799 | | | 2,231 | | |
| Funds Available for Distribution (1) | | $ | 114,834 | | | $ | 125,328 | | | $ | 109,528 | | | $ | 118,698 | | | $ | 119,546 | | | | $ | 240,162 | | | $ | 252,079 | | |
| | | | | | | | | | | | | | | | | |
________________________
(1)Please refer to pages 31-33 for Management Statements on non-GAAP supplemental measures. Reported per common share/unit amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(2)Calculated based on weighted average shares outstanding including participating share-based awards and assuming the exchange of all common limited partnership units outstanding.
(3)Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
(4)Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements.
(5)Represents the non-cash adjustment related to the acquisition of buildings with above and/or below market rents.
(6)Includes other cash and non-cash adjustments attributable to lease-related matters including GAAP revenue recognition timing differences, leasing costs, and other.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Net Operating Income
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | 2024 | | 2023 | | % Change | | 2024 | | 2023 | | % Change | |
| Operating Revenues: | | | | | | | | | | | | | |
| Rental income (1) | | $ | 226,492 | | | $ | 234,571 | | | (3.4) | % | | $ | 453,078 | | | $ | 478,078 | | | (5.2) | % | |
| Tenant reimbursements (1) | | 49,427 | | | 46,738 | | | 5.8 | % | | 97,731 | | | 93,335 | | | 4.7 | % | |
| Other property income | | 4,812 | | | 2,973 | | | 61.9 | % | | 8,503 | | | 5,671 | | | 49.9 | % | |
| Total operating revenues | | 280,731 | | | 284,282 | | | (1.2) | % | | 559,312 | | | 577,084 | | | (3.1) | % | |
| Operating Expenses: | | | | | | | | | | | | | |
| Property expenses | | 59,279 | | | 55,008 | | | 7.8 | % | | 116,599 | | | 108,788 | | | 7.2 | % | |
| Real estate taxes | | 29,009 | | | 28,277 | | | 2.6 | % | | 58,248 | | | 56,505 | | | 3.1 | % | |
| | | | | | | | | | | | | | |
| Ground leases | | 2,996 | | | 2,413 | | | 24.2 | % | | 5,748 | | | 4,782 | | | 20.2 | % | |
| Total operating expenses | | 91,284 | | | 85,698 | | | 6.5 | % | | 180,595 | | | 170,075 | | | 6.2 | % | |
| Net Operating Income (2) | | $ | 189,447 | | | $ | 198,584 | | | (4.6) | % | | $ | 378,717 | | | $ | 407,009 | | | (7.0) | % | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
________________________
(1)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
(2)Please refer to page 31-33 for Management Statements on non-GAAP supplemental measures and page 38 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.
02
Portfolio Data
–Same Store Analysis
–Stabilized Portfolio Occupancy Overview by Region
–Information on Leases Commenced & Leases Executed
–Stabilized Portfolio Capital Expenditures
–Stabilized Portfolio Lease Expirations
–Top 20 Tenants
–Tenant Industry Diversification
–Consolidated Ventures (Noncontrolling Property Partnerships)
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Same Store Analysis
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | 2024 | | 2023 | | | | % Change | | % Contribution | | 2024 | | 2023 | | | | % Change | | % Contribution | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total Same Store Portfolio (1) | |
| Number of properties | | 119 | | | 119 | | | | | | | | | 119 | | | 119 | | | | | | | | |
| Square Feet | | 16,210,648 | | | 16,210,648 | | | | | | | | | 16,210,648 | | | 16,210,648 | | | | | | | | |
| Average Occupancy | | 84.2 | % | | 87.4 | % | | | | | | | | 84.7 | % | | 88.6 | % | | | | | | | |
| Percent of Stabilized Portfolio (2) | | 95.1 | % | | | | | | | | | | 95.1 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Operating Revenues: | | | | | | | | | | | | | | | | | | | | | |
| Rental income (3) | | $ | 216,421 | | | $ | 227,579 | | | | | (4.9) | % | | (5.8) | % | | $ | 434,197 | | | $ | 464,050 | | | | | (6.4) | % | | (7.6) | % | |
| Tenant reimbursements (3) | | 45,374 | | | 42,809 | | | | | 6.0 | % | | 1.3 | % | | 90,183 | | | 86,209 | | | | | 4.6 | % | | 1.0 | % | |
| Other property income | | 4,197 | | | 2,686 | | | | | 56.3 | % | | 0.8 | % | | 7,330 | | | 5,112 | | | | | 43.4 | % | | 0.6 | % | |
| Total operating revenues | | 265,992 | | | 273,074 | | | | | (2.6) | % | | (3.7) | % | | 531,710 | | | 555,371 | | | | | (4.3) | % | | (6.0) | % | |
| Operating Expenses: | | | | | | | | | | | | | | | | | | | | | |
| Property expenses | | 56,960 | | | 53,172 | | | | | 7.1 | % | | (2.0) | % | | 112,339 | | | 105,730 | | | | | 6.3 | % | | (1.7) | % | |
| Real estate taxes | | 26,035 | | | 26,155 | | | | | (0.5) | % | | 0.1 | % | | 51,738 | | | 52,481 | | | | | (1.4) | % | | 0.2 | % | |
| Ground leases | | 2,036 | | | 1,923 | | | | | 5.9 | % | | (0.1) | % | | 3,980 | | | 3,778 | | | | | 5.3 | % | | (0.1) | % | |
| Total operating expenses | | 85,031 | | | 81,250 | | | | | 4.7 | % | | (2.0) | % | | 168,057 | | | 161,989 | | | | | 3.7 | % | | (1.6) | % | |
| Net Operating Income | | $ | 180,961 | | | $ | 191,824 | | | | | (5.7) | % | | (5.7) | % | | $ | 363,653 | | | $ | 393,382 | | | | | (7.6) | % | | (7.6) | % | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Same Store Analysis (Cash Basis) |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | 2024 | | 2023 | | | | % Change | | % Contribution | | 2024 | | 2023 | | | | % Change | | % Contribution | |
| Total operating revenues (4) | | $ | 263,296 | | | $ | 259,185 | | | | | 1.6 | % | | 2.3 | % | | $ | 526,477 | | | $ | 534,124 | | | | | (1.4) | % | | (2.1) | % | |
| Total operating expenses | | 84,955 | | | 81,150 | | | | | 4.7 | % | | (2.1) | % | | 167,885 | | | 161,788 | | | | | 3.8 | % | | (1.6) | % | |
| Cash Net Operating Income (5) | | $ | 178,341 | | | $ | 178,035 | | | | | 0.2 | % | | 0.2 | % | | $ | 358,592 | | | $ | 372,336 | | | | | (3.7) | % | | (3.7) | % | |
| | | | | | | | | | | | | | | | | | | | | | |
________________________
(1)Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2023 and still owned and included in the stabilized portfolio as of June 30, 2024. Same Store includes 100% of consolidated property partnerships as well as our three residential properties.
(2)Based on rentable square feet at the end of the period.
(3)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
(4)For same store cash basis, lease termination and restoration fees are recognized in the period they are received, which may not correspond to the timing of GAAP revenue recognition. Tenant prepayments are recognized in the applicable lease billing period.
(5)Please refer to pages 31-33 for Management Statements on non-GAAP supplemental measures. Please refer to page 38 for a reconciliation of GAAP Net Income Available to Common Stockholders to Same Store Net Operating Income and Same Store Cash Net Operating Income. Adjustments to GAAP operating revenues include the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles, and revenue reversals (recoveries) related to tenant creditworthiness.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Occupancy Overview by Region
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Portfolio Breakdown | | Total Rentable Square Feet (3) | | Occupied at | | Leased at (4) | |
| STABILIZED PORTFOLIO (1)(2) | | | | YTD NOI % | | Rentable Square Feet % | | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | | 3/31/2024 | |
| | | | | | | | | | | | | | | | | | |
| Los Angeles | | | | | | | | | | | | | | | | | |
| Hollywood / West Hollywood | | | | 8.7 | % | | 8.1 | % | | 1,383,563 | | | 84.9 | % | | 85.9 | % | | 86.1 | % | | 87.1 | % | |
| El Segundo | | | | 3.4 | % | | 6.5 | % | | 1,103,595 | | | 74.4 | % | | 76.0 | % | | 74.4 | % | | 76.0 | % | |
| Long Beach | | | | 2.3 | % | | 5.6 | % | | 957,706 | | | 79.3 | % | | 80.5 | % | | 83.8 | % | | 83.8 | % | |
| West Los Angeles | | | | 2.4 | % | | 4.3 | % | | 726,975 | | | 58.8 | % | | 58.8 | % | | 58.8 | % | | 58.8 | % | |
| Culver City | | | | 0.0 | % | | 1.0 | % | | 166,207 | | | 13.4 | % | | 55.6 | % | | 18.6 | % | | 55.6 | % | |
| Total Los Angeles | | | | 16.8 | % | | 25.5 | % | | 4,338,046 | | | 73.9 | % | | 76.5 | % | | 75.5 | % | | 77.6 | % | |
| San Diego | | | | | | | | | | | | | | | | | |
| Del Mar | | | | 11.4 | % | | 10.5 | % | | 1,791,486 | | | 96.8 | % | | 96.5 | % | | 97.7 | % | | 98.1 | % | |
| I-15 Corridor | | | | 1.5 | % | | 2.5 | % | | 433,851 | | | 81.8 | % | | 79.9 | % | | 81.8 | % | | 83.8 | % | |
| Little Italy / Point Loma | | | | 0.3 | % | | 1.9 | % | | 319,879 | | | 42.6 | % | | 41.7 | % | | 50.0 | % | | 43.7 | % | |
| University Towne Center | | | | 1.8 | % | | 1.4 | % | | 231,060 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| Total San Diego | | | | 15.0 | % | | 16.3 | % | | 2,776,276 | | | 88.5 | % | | 87.9 | % | | 89.9 | % | | 89.7 | % | |
| San Francisco Bay Area | | | | | | | | | | | | | | | | | |
| San Francisco CBD | | | | 26.3 | % | | 20.0 | % | | 3,400,600 | | | 84.8 | % | | 84.7 | % | | 85.5 | % | | 84.8 | % | |
| Silicon Valley | | | | 8.9 | % | | 7.5 | % | | 1,286,100 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| South San Francisco | | | | 8.8 | % | | 4.7 | % | | 806,109 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| Other Peninsula | | | | 4.5 | % | | 4.0 | % | | 677,786 | | | 86.6 | % | | 85.3 | % | | 98.0 | % | | 96.6 | % | |
| Total San Francisco Bay Area | | | | 48.5 | % | | 36.2 | % | | 6,170,595 | | | 90.1 | % | | 89.9 | % | | 91.8 | % | | 91.3 | % | |
| Seattle | | | | | | | | | | | | | | | | | |
| Lake Union / Denny Regrade | | | | 10.3 | % | | 12.1 | % | | 2,077,052 | | | 78.0 | % | | 78.8 | % | | 78.7 | % | | 79.2 | % | |
| Bellevue | | | | 5.9 | % | | 5.4 | % | | 919,295 | | | 94.4 | % | | 94.5 | % | | 95.0 | % | | 95.1 | % | |
| Total Seattle | | | | 16.2 | % | | 17.5 | % | | 2,996,347 | | | 83.1 | % | | 83.6 | % | | 83.7 | % | | 84.1 | % | |
| Austin | | | | | | | | | | | | | | | | | |
| Austin CBD | | | | 3.5 | % | | 4.5 | % | | 758,975 | | | 72.3 | % | | 71.5 | % | | 79.9 | % | | 78.2 | % | |
| Total Austin | | | | 3.5 | % | | 4.5 | % | | 758,975 | | | 72.3 | % | | 71.5 | % | | 79.9 | % | | 78.2 | % | |
| TOTAL STABILIZED PORTFOLIO | | | | 100.0 | % | | 100.0 | % | | 17,040,239 | | | 83.7 | % | | 84.2 | % | | 85.4 | % | | 85.7 | % | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Average Occupancy |
Quarter-to-Date | | Year-to-Date |
83.8% | | 84.1% |
________________________
(1)Excludes residential properties.
(2)Buildings within a complex of properties are analyzed at the complex level.
(3)Occupied and leased percentage calculations presented throughout this report are based on rentable square feet at the end of the period, inclusive of all remeasurements that occurred during the period.
(4)Leases with a lease term less of than one year are included in the leased percentage upon lease commencement.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Occupancy Overview by Region, continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Rentable Square Feet | | Occupied at | | Leased at | |
| | | Submarket | | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | | 3/31/2024 | |
| | | | | | | | | | | | | | |
| Los Angeles, California | | | | | | | | | | | | | |
| 1350 Ivar Avenue | | Hollywood / West Hollywood | | 16,448 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1355 Vine Street | | Hollywood / West Hollywood | | 183,129 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1375 Vine Street | | Hollywood / West Hollywood | | 159,236 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1395 Vine Street | | Hollywood / West Hollywood | | 2,575 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1500 N. El Centro Avenue | | Hollywood / West Hollywood | | 113,447 | | | 63.6 | % | | 63.6 | % | | 63.6 | % | | 63.6 | % | |
| 1525 N. Gower Street | | Hollywood / West Hollywood | | 9,610 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1575 N. Gower Street | | Hollywood / West Hollywood | | 264,430 | | | 98.3 | % | | 100.0 | % | | 98.3 | % | | 100.0 | % | |
| 6115 W. Sunset Boulevard | | Hollywood / West Hollywood | | 26,238 | | | 23.8 | % | | 23.8 | % | | 23.8 | % | | 23.8 | % | |
| 6121 W. Sunset Boulevard | | Hollywood / West Hollywood | | 93,418 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 6255 W. Sunset Boulevard | | Hollywood / West Hollywood | | 325,772 | | | 63.6 | % | | 66.5 | % | | 65.0 | % | | 67.0 | % | |
| 8560 W. Sunset Boulevard | | Hollywood / West Hollywood | | 76,359 | | | 83.4 | % | | 77.4 | % | | 93.6 | % | | 91.7 | % | |
| 8570 W. Sunset Boulevard | | Hollywood / West Hollywood | | 49,276 | | | 94.5 | % | | 94.5 | % | | 99.0 | % | | 99.0 | % | |
| 8580 W. Sunset Boulevard | | Hollywood / West Hollywood | | 6,875 | | | 0.0 | % | | 59.0 | % | | 0.0 | % | | 59.0 | % | |
| 8590 W. Sunset Boulevard | | Hollywood / West Hollywood | | 56,750 | | | 97.4 | % | | 97.4 | % | | 99.7 | % | | 99.7 | % | |
| 2240 E. Imperial Highway | | El Segundo | | 122,870 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 2250 E. Imperial Highway | | El Segundo | | 298,728 | | | 46.2 | % | | 46.2 | % | | 46.2 | % | | 46.2 | % | |
| 2260 E. Imperial Highway | | El Segundo | | 298,728 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 909 N. Pacific Coast Highway | | El Segundo | | 244,880 | | | 79.3 | % | | 79.3 | % | | 79.3 | % | | 79.3 | % | |
| 999 N. Pacific Coast Highway | | El Segundo | | 138,389 | | | 48.4 | % | | 61.3 | % | | 48.4 | % | | 61.3 | % | |
| 3750 Kilroy Airport Way | | Long Beach | | 10,718 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 3760 Kilroy Airport Way | | Long Beach | | 166,761 | | | 78.3 | % | | 77.0 | % | | 80.4 | % | | 77.0 | % | |
| 3780 Kilroy Airport Way | | Long Beach | | 221,452 | | | 89.4 | % | | 89.9 | % | | 94.1 | % | | 91.8 | % | |
| 3800 Kilroy Airport Way | | Long Beach | | 192,476 | | | 89.3 | % | | 89.3 | % | | 89.3 | % | | 89.3 | % | |
| 3840 Kilroy Airport Way | | Long Beach | | 138,441 | | | 77.6 | % | | 77.6 | % | | 77.6 | % | | 77.6 | % | |
| 3880 Kilroy Airport Way | | Long Beach | | 96,923 | | | 51.9 | % | | 51.9 | % | | 51.9 | % | | 51.9 | % | |
| 3900 Kilroy Airport Way | | Long Beach | | 130,935 | | | 69.3 | % | | 78.7 | % | | 91.4 | % | | 100.0 | % | |
| 12100 W. Olympic Boulevard | | West Los Angeles | | 155,679 | | | 74.1 | % | | 74.1 | % | | 74.1 | % | | 74.1 | % | |
| 12200 W. Olympic Boulevard | | West Los Angeles | | 154,544 | | | 32.0 | % | | 32.0 | % | | 32.0 | % | | 32.0 | % | |
| 12233 W. Olympic Boulevard | | West Los Angeles | | 156,746 | | | 48.4 | % | | 48.5 | % | | 48.4 | % | | 48.5 | % | |
| 12312 W. Olympic Boulevard | | West Los Angeles | | 76,644 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 2100/2110 Colorado Avenue | | West Los Angeles | | 104,853 | | | 55.4 | % | | 55.4 | % | | 55.4 | % | | 55.4 | % | |
| 501 Santa Monica Boulevard | | West Los Angeles | | 78,509 | | | 66.5 | % | | 66.5 | % | | 66.5 | % | | 66.5 | % | |
| 3101-3243 La Cienega Boulevard | | Culver City | | 166,207 | | | 13.4 | % | | 55.6 | % | | 18.6 | % | | 55.6 | % | |
| Total Los Angeles | | | | 4,338,046 | | | 73.9 | % | | 76.5 | % | | 75.5 | % | | 77.6 | % | |
| | | | | | | | | | | | | | |
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Occupancy Overview by Region, continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Rentable Square Feet | | Occupied at | | Leased at | |
| | | Submarket | | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | | 3/31/2024 | |
| | | | | | | | | | | | | | |
| San Diego, California | | | | | | | | | | | | | |
| 12225 El Camino Real | | Del Mar | | 58,401 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12235 El Camino Real | | Del Mar | | 53,751 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12340 El Camino Real | | Del Mar | | 109,307 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12390 El Camino Real | | Del Mar | | 73,238 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12770 El Camino Real | | Del Mar | | 75,035 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12780 El Camino Real | | Del Mar | | 140,591 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12790 El Camino Real | | Del Mar | | 87,944 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12830 El Camino Real | | Del Mar | | 196,444 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12860 El Camino Real | | Del Mar | | 92,042 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 12348 High Bluff Drive | | Del Mar | | 39,192 | | | 51.5 | % | | 100.0 | % | | 51.5 | % | | 100.0 | % | |
| 12400 High Bluff Drive | | Del Mar | | 216,518 | | | 100.0 | % | | 91.7 | % | | 100.0 | % | | 100.0 | % | |
| 3579 Valley Centre Drive | | Del Mar | | 54,960 | | | 94.7 | % | | 94.7 | % | | 94.7 | % | | 94.7 | % | |
| 3611 Valley Centre Drive | | Del Mar | | 132,425 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 3661 Valley Centre Drive | | Del Mar | | 131,662 | | | 100.0 | % | | 95.3 | % | | 100.0 | % | | 100.0 | % | |
| 3721 Valley Centre Drive | | Del Mar | | 115,193 | | | 78.4 | % | | 78.4 | % | | 90.0 | % | | 78.4 | % | |
| 3811 Valley Centre Drive | | Del Mar | | 118,912 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 3745 Paseo Place | | Del Mar | | 95,871 | | | 89.6 | % | | 89.6 | % | | 91.2 | % | | 93.2 | % | |
| 13480 Evening Creek Drive North | | I-15 Corridor | | 143,401 | | | 57.1 | % | | 63.1 | % | | 57.1 | % | | 63.1 | % | |
| 13500 Evening Creek Drive North | | I-15 Corridor | | 143,749 | | | 92.9 | % | | 81.0 | % | | 92.9 | % | | 92.9 | % | |
| 13520 Evening Creek Drive North | | I-15 Corridor | | 146,701 | | | 95.2 | % | | 95.2 | % | | 95.2 | % | | 95.2 | % | |
| 2100 Kettner Boulevard | | Little Italy / Point Loma | | 212,423 | | | 22.6 | % | | 21.2 | % | | 30.6 | % | | 24.2 | % | |
| 2305 Historic Decatur Road | | Little Italy / Point Loma | | 107,456 | | | 82.1 | % | | 82.1 | % | | 88.3 | % | | 82.1 | % | |
| 9455 Towne Centre Drive | | University Towne Center | | 160,444 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 9514 Towne Centre Drive * | | University Towne Center | | 70,616 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| Total San Diego | | | | 2,776,276 | | | 88.5 | % | | 87.9 | % | | 89.9 | % | | 89.7 | % | |
| | | | | | | | | | | | | | |
________________________
* Excluded from our Same Store portfolio.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Occupancy Overview by Region, continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Rentable Square Feet | | Occupied at | | Leased at | |
| | | Submarket | | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | | 3/31/2024 | |
| | | | | | | | | | | | | | |
| San Francisco Bay Area, California | | | | | | | | | | | | | |
| 100 Hooper Street | | San Francisco CBD | | 417,914 | | | 95.5 | % | | 95.5 | % | | 100.0 | % | | 95.5 | % | |
| 100 First Street | | San Francisco CBD | | 480,457 | | | 93.4 | % | | 92.8 | % | | 94.2 | % | | 93.6 | % | |
| 303 Second Street | | San Francisco CBD | | 784,658 | | | 73.2 | % | | 73.2 | % | | 73.5 | % | | 73.2 | % | |
| 201 Third Street | | San Francisco CBD | | 346,538 | | | 68.2 | % | | 68.2 | % | | 68.2 | % | | 68.2 | % | |
| 360 Third Street | | San Francisco CBD | | 436,357 | | | 66.6 | % | | 66.6 | % | | 66.6 | % | | 66.6 | % | |
| 250 Brannan Street | | San Francisco CBD | | 100,850 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 301 Brannan Street | | San Francisco CBD | | 82,834 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 333 Brannan Street | | San Francisco CBD | | 185,602 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 345 Brannan Street | | San Francisco CBD | | 110,050 | | | 99.7 | % | | 99.7 | % | | 99.7 | % | | 99.7 | % | |
| 350 Mission Street | | San Francisco CBD | | 455,340 | | | 99.7 | % | | 99.7 | % | | 99.7 | % | | 99.7 | % | |
| 1290-1300 Terra Bella Avenue | | Silicon Valley | | 114,175 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 680 E. Middlefield Road | | Silicon Valley | | 171,676 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 690 E. Middlefield Road | | Silicon Valley | | 171,215 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 1701 Page Mill Road | | Silicon Valley | | 128,688 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 3150 Porter Drive | | Silicon Valley | | 36,886 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 505 Mathilda Avenue | | Silicon Valley | | 212,322 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 555 Mathilda Avenue | | Silicon Valley | | 212,322 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 599 Mathilda Avenue | | Silicon Valley | | 76,031 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 605 Mathilda Avenue | | Silicon Valley | | 162,785 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 345 Oyster Point Boulevard | | South San Francisco | | 40,410 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 347 Oyster Point Boulevard | | South San Francisco | | 39,780 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 349 Oyster Point Boulevard | | South San Francisco | | 65,340 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 350 Oyster Point Boulevard | | South San Francisco | | 234,892 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 352 Oyster Point Boulevard | | South San Francisco | | 232,215 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 354 Oyster Point Boulevard | | South San Francisco | | 193,472 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 4100 Bohannon Drive | | Other Peninsula | | 47,643 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 4200 Bohannon Drive | | Other Peninsula | | 43,600 | | | 69.4 | % | | 69.4 | % | | 69.4 | % | | 69.4 | % | |
| 4300 Bohannon Drive | | Other Peninsula | | 63,430 | | | 63.5 | % | | 48.8 | % | | 100.0 | % | | 85.1 | % | |
| | | | | | | | | | | | | | |
| 4500 Bohannon Drive | | Other Peninsula | | 63,429 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 4600 Bohannon Drive | | Other Peninsula | | 48,413 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 4700 Bohannon Drive | | Other Peninsula | | 63,429 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 900 Jefferson Avenue | | Other Peninsula | | 228,226 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 900 Middlefield Road | | Other Peninsula | | 119,616 | | | 54.6 | % | | 54.7 | % | | 100.0 | % | | 100.0 | % | |
| Total San Francisco Bay Area | | | | 6,170,595 | | | 90.1 | % | | 89.9 | % | | 91.8 | % | | 91.3 | % | |
| | | | | | | | | | | | | | |
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Occupancy Overview by Region, continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Rentable Square Feet | | Occupied at | | Leased at | |
| | | Submarket | | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | | 3/31/2024 | |
| | | | | | | | | | | | | | |
| Seattle, Washington | | | | | | | | | | | | | |
| 333 Dexter Avenue North | | Lake Union / Denny Regrade | | 618,766 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 701 N. 34th Street | | Lake Union / Denny Regrade | | 141,860 | | | 95.1 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 801 N. 34th Street | | Lake Union / Denny Regrade | | 173,615 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 837 N. 34th Street | | Lake Union / Denny Regrade | | 112,487 | | | 94.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 320 Westlake Avenue North | | Lake Union / Denny Regrade | | 184,644 | | | 94.3 | % | | 94.3 | % | | 94.3 | % | | 94.3 | % | |
| 321 Terry Avenue North | | Lake Union / Denny Regrade | | 135,755 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 401 Terry Avenue North | | Lake Union / Denny Regrade | | 174,530 | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| 2001 8th Avenue | | Lake Union / Denny Regrade | | 535,395 | | | 19.3 | % | | 20.0 | % | | 19.3 | % | | 21.6 | % | |
| 601 108th Avenue NE | | Bellevue | | 490,738 | | | 99.0 | % | | 98.6 | % | | 99.0 | % | | 98.6 | % | |
| 10900 NE 4th Street | | Bellevue | | 428,557 | | | 89.1 | % | | 89.7 | % | | 90.5 | % | | 91.1 | % | |
| Total Seattle | | | | 2,996,347 | | | 83.1 | % | | 83.6 | % | | 83.7 | % | | 84.1 | % | |
| Austin, Texas | | | | | | | | | | | | | |
| 200 W. 6th Street * | | Austin CBD | | 758,975 | | | 72.3 | % | | 71.5 | % | | 79.9 | % | | 78.2 | % | |
| Total Austin | | | | 758,975 | | | 72.3 | % | | 71.5 | % | | 79.9 | % | | 78.2 | % | |
| TOTAL STABILIZED PORTFOLIO | | 17,040,239 | | | 83.7 | % | | 84.2 | % | | 85.4 | % | | 85.7 | % | |
| | | | | | | | | | | | | | |
________________________* Excluded from our Same Store portfolio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Average Residential Occupancy | |
| | | | | | | Quarter-to-Date | | Year-to-Date | |
| RESIDENTIAL PROPERTIES | | Submarket | | Total No. of Units | | 6/30/2024 | | 3/31/2024 | | 6/30/2024 | |
| | | | | | | | | | | | |
| Los Angeles, California | | | | | | | | | | | |
| 1550 N. El Centro Avenue | | Hollywood | | 200 | | 91.0% | | 90.6% | | 90.8% | |
| 6390 De Longpre Avenue | | Hollywood | | 193 | | 91.3% | | 92.4% | | 91.9% | |
| San Diego, California | | | | | | | | | | | |
| 3200 Paseo Village Way | | Del Mar | | 608 | | 93.8% | | 94.1% | | 94.0% | |
| TOTAL RESIDENTIAL PROPERTIES | | | | 1,001 | | 92.8% | | 93.1% | | 92.9% | |
| | | | | | | | | | | | |
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Information on Leases Commenced (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter to Date | # of Leases | | Square Feet | | Weighted Average Lease Term (Mo.) | | TI/LC Per Sq.Ft. (2) | | TI/LC Per Sq.Ft. /Year (2) | | Changes in GAAP Rents (3) | | Changes in Cash Rents (3) | |
| | New | | Renewal | | New | | Renewal | | Total | | | | | | |
| 2nd Gen Leasing (4) | 15 | | | 11 | | | 88,973 | | | 53,258 | | | 142,231 | | | 42 | | | $ | 22.68 | | | $ | 6.48 | | | 9.0 | % | | 2.7 | % | |
| | | | | | | | | | | | | | | | | | | | | |
| 1st Gen / Major Repositioning / In-Process Development & Redevelopment Leasing (4) | 3 | | | — | | | 17,397 | | | — | | | 17,397 | | | 71 | | | $ | 67.93 | | | $ | 11.48 | | | | | | |
| TOTAL | 18 | | | 11 | | | 106,370 | | | 53,258 | | | 159,628 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year to Date | # of Leases | | Square Feet | | Weighted Average Lease Term (Mo.) | | TI/LC Per Sq.Ft. (2) | | TI/LC Per Sq.Ft. /Year (2) | | Changes in GAAP Rents (3) | | Changes in Cash Rents (3) | |
| | New | | Renewal | | New | | Renewal | | Total | | | | | | |
| 2nd Gen Leasing (4) | 25 | | | 23 | | | 198,463 | | | 183,034 | | | 381,497 | | | 49 | | | $ | 32.58 | | | $ | 7.98 | | | 6.0 | % | | (3.6) | % | |
| | | | | | | | | | | | | | | | | | | | | |
| 1st Gen / Major Repositioning / In-Process Development & Redevelopment Leasing (4) | 5 | | | — | | | 70,866 | | | — | | | 70,866 | | | 154 | | | $ | 166.78 | | | $ | 13.00 | | | | | | |
| TOTAL: | 30 | | | 23 | | | 269,329 | | | 183,034 | | | 452,363 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
________________________
(1)Includes 100% of consolidated property partnerships. Excludes leases with a lease term of less than one year. During the three and six months ended June 30, 2024, 14,236 and 51,002 square feet of leases commenced with a lease term less than one year, respectively.
(2)Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
(3)Calculated as the change between GAAP rents / stated rents for new / renewed leases and the expiring GAAP rents for the same space. Space that was vacant when the property was acquired is excluded from our change in rents calculations to provide a more meaningful market comparison.
(4)Refer to pages 35-37 “Definitions Included in Supplemental.”
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Information on Leases Executed (1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter to Date (2) | # of Leases | | Square Feet | | Weighted Average Lease Term (Mo.) | | TI/LC Per Sq.Ft. (3) | | TI/LC Per Sq.Ft. /Year (3) | | Changes in GAAP Rents (4) | | Changes in Cash Rents (4) | | Retention Rates | |
| | New | | Renewal | | New | | Renewal | | Total | | | | | | | |
| 2nd Gen Leasing (5) | 21 | | | 11 | | | 139,586 | | | 53,258 | | | 192,844 | | | 67 | | | $ | 42.72 | | | $ | 7.65 | | | 7.2 | % | | (4.6) | % | | 21.6 | % | |
| 1st Gen / Major Repositioning / In-Process Development & Redevelopment Leasing (5) | 2 | | | — | | | 26,371 | | | — | | | 26,371 | | | 99 | | | $ | 132.16 | | | $ | 16.02 | | | | | | | | |
| TOTAL | 23 | | | 11 | | | 165,957 | | | 53,258 | | | 219,215 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year to Date (6) | # of Leases | | Square Feet | | Weighted Average Lease Term (Mo.) | | TI/LC Per Sq.Ft. (3) | | TI/LC Per Sq.Ft. /Year (3) | | Changes in GAAP Rents (4) | | Changes in Cash Rents (4) | | Retention Rates | |
| | New | | Renewal | | New | | Renewal | | Total | | | | | | | |
| 2nd Gen Leasing (5) | 37 | | | 23 | | | 279,987 | | | 183,034 | | | 463,021 | | | 60 | | | $ | 42.83 | | | $ | 8.57 | | | 8.1 | % | | (3.6) | % | | 27.5 | % | |
| 1st Gen / Major Repositioning / In-Process Development & Redevelopment Leasing (5) | 6 | | | — | | | 40,088 | | | — | | | 40,088 | | | 89 | | | $ | 104.13 | | | $ | 14.04 | | | | | | | | |
| TOTAL: | 43 | | | 23 | | | 320,075 | | | 183,034 | | | 503,109 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
________________________
(1)Includes 100% of consolidated property partnerships. Excludes leases with a lease term of less than one year. During the three and six months ended June 30, 2024, we signed 15,848 and 131,712 square feet of leases with a lease term less than one year, respectively.
(2)During the three months ended June 30, 2024, 16 new leases totaling 138,219 square feet were signed but not commenced as of June 30, 2024.
(3)Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
(4)Calculated as the change between GAAP rents / stated rents for new / renewed leases and the expiring GAAP rents for the same space. Space that was vacant when the property was acquired is excluded from our change in rents calculations to provide a more meaningful market comparison.
(5)Refer to pages 35-37 “Definitions Included in Supplemental.”
(6)During the six months ended June 30, 2024, 25 new leases totaling 211,440 square feet were signed but not commenced as of June 30, 2024.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Capital Expenditures
($ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Q2 2024 | | Q1 2024 | | Q4 2023 | | Q3 2023 | | Q2 2023 | |
| | | | | | | | | | | |
| 2nd Gen Capital Expenditures: (1) (2) | | | | | | | | | | |
| Capital Improvements | $ | 10,029 | | | $ | 4,962 | | | $ | 12,872 | | | $ | 6,361 | | | $ | 7,263 | | |
| Tenant Improvements & Leasing Commissions | 12,040 | | | 6,801 | | | 18,539 | | | 14,158 | | | 10,587 | | |
| | | | | | | | | | | |
| Total | $ | 22,069 | | | $ | 11,763 | | | $ | 31,411 | | | $ | 20,519 | | | $ | 17,850 | | |
| | | | | | | | | | | |
| Average Capital Expenditures to Average NOI Ratio - Trailing Five Quarters | 10.8 | % | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | Q2 2024 | | Q1 2024 | | Q4 2023 | | Q3 2023 | | Q2 2023 | |
| | | | | | | | | | | |
| Major Repositioning Capital Expenditures: (1) (3) | | | | | | | | | | |
| Capital Improvements | $ | 9,940 | | | $ | 7,130 | | | $ | 1,411 | | | $ | 2,092 | | | $ | 1,298 | | |
| Tenant Improvements & Leasing Commissions | — | | | 89 | | | (329) | | | — | | | — | | |
| | | | | | | | | | | |
| Total | $ | 9,940 | | | $ | 7,219 | | | $ | 1,082 | | | $ | 2,092 | | | $ | 1,298 | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | Q2 2024 | | Q1 2024 | | Q4 2023 | | Q3 2023 | | Q2 2023 | |
| | | | | | | | | | | |
| 1st Gen Capital Expenditures: (1) (4) | | | | | | | | | | |
| Tenant Improvements & Leasing Commissions | $ | 3,773 | | | $ | 10,063 | | | N/A | | N/A | | N/A | |
| | | | | | | | | | | |
| Total | $ | 3,773 | | | $ | 10,063 | | | N/A | | N/A | | N/A | |
| | | | | | | | | | | |
________________________
(1)Refer to pages 35-37 “Definitions Included in Supplemental.”
(2)Includes 100% of capital expenditures of consolidated property partnerships.
(3)Prior to Q1 2024, this category was titled “1st Generation (Nonrecurring) Capital Expenditures.” This category represents significant non-recurring capital expenditures for repositioning space that is expected to result in additional revenue generated when the space is re-leased.
(4)New category of capital expenditures beginning in Q1 2024.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Lease Expiration Summary (1)(2)
($ in thousands, except for annualized rent per sq. ft.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
# of Expiring Leases | | 29 | 73 | 65 | 72 | 54 | 42 | 45 | 42 | 16 | 13 | 22 |
% of Total Leased Sq. Ft. | | 3.8 | % | 5.5 | % | 14.2 | % | 7.6 | % | 8.0 | % | 8.1 | % | 11.5 | % | 14.9 | % | 7.9 | % | 8.2 | % | 10.3 | % |
Annualized Base Rent (“ABR”) | | $27,903 | $33,372 | $94,971 | $43,800 | $70,037 | $62,175 | $95,775 | $138,098 | $74,023 | $69,184 | $89,827 |
% of Total ABR (3) | | 3.5 | % | 4.2 | % | 11.9 | % | 5.5 | % | 8.8 | % | 7.7 | % | 12.0 | % | 17.3 | % | 9.2 | % | 8.7 | % | 11.2 | % |
Annualized Rent per Sq. Ft. | | $51.70 | $43.71 | $47.58 | $40.92 | $61.91 | $54.93 | $59.37 | $65.91 | $66.29 | $59.81 | $62.15 |
________________________
(1)For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of June 30, 2024, space leased under month-to-month leases, storage leases, vacant space, leases with a lease term of less than one year, and future lease renewal options not executed as of June 30, 2024.
(2)Adjusting for leasing transactions executed as of June 30, 2024 but not yet commenced, the 2024, 2025, and 2026 expirations would be reduced by 63,439, 66,321, and 156,785 square feet, respectively.
(3)Includes 100% of annualized base rent of consolidated property partnerships.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Stabilized Portfolio Lease Expiration Schedule by Region
($ in thousands, except for annualized rent per sq. ft.)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Region | | # of Expiring Leases | | Total Square Feet | | % of Total Leased Sq. Ft. | | Annualized Base Rent (1) | | % of Total Annualized Base Rent | | Annualized Rent per Sq. Ft. | |
| | | | | | | | | | | | | | | | |
| 2024 | | Los Angeles | | 15 | | | 138,919 | | | 1.0 | % | | $ | 6,146 | | | 0.8 | % | | $ | 44.24 | | |
| | San Diego | | 5 | | | 35,967 | | | 0.3 | % | | 1,260 | | | 0.2 | % | | 35.03 | | |
| | San Francisco Bay Area | | 5 | | | 227,845 | | | 1.5 | % | | 15,328 | | | 1.9 | % | | 67.27 | | |
| | Seattle | | 4 | | | 136,986 | | | 1.0 | % | | 5,169 | | | 0.6 | % | | 37.73 | | |
| | Austin | | — | | | — | | | — | % | | — | | | — | % | | — | | |
| | Total | | 29 | | | 539,717 | | | 3.8 | % | | $ | 27,903 | | | 3.5 | % | | $ | 51.70 | | |
| | | | | | | | | | | | | | | | |
| 2025 | | Los Angeles | | 36 | | | 218,478 | | | 1.6 | % | | $ | 9,117 | | | 1.1 | % | | $ | 41.73 | | |
| | San Diego | | 18 | | | 233,461 | | | 1.6 | % | | 9,429 | | | 1.2 | % | | 40.39 | | |
| | San Francisco Bay Area | | 8 | | | 120,729 | | | 0.9 | % | | 8,604 | | | 1.1 | % | | 71.27 | | |
| | Seattle | | 11 | | | 190,769 | | | 1.4 | % | | 6,222 | | | 0.8 | % | | 32.62 | | |
| | Austin | | — | | | — | | | — | % | | — | | | — | % | | — | | |
| | Total | | 73 | | | 763,437 | | | 5.5 | % | | $ | 33,372 | | | 4.2 | % | | $ | 43.71 | | |
| | | | | | | | | | | | | | | | |
| 2026 | | Los Angeles | | 27 | | | 489,626 | | | 3.5 | % | | $ | 20,247 | | | 2.5 | % | | $ | 41.35 | | |
| | San Diego | | 8 | | | 153,559 | | | 1.1 | % | | 8,479 | | | 1.1 | % | | 55.22 | | |
| | San Francisco Bay Area | | 17 | | | 944,325 | | | 6.7 | % | | 49,522 | | | 6.2 | % | | 52.44 | | |
| | Seattle | | 13 | | | 408,454 | | | 2.9 | % | | 16,723 | | | 2.1 | % | | 40.94 | | |
| | Austin | | — | | | — | | | — | % | | — | | | — | % | | — | | |
| | Total | | 65 | | | 1,995,964 | | | 14.2 | % | | $ | 94,971 | | | 11.9 | % | | $ | 47.58 | | |
| | | | | | | | | | | | | | | | |
| 2027 | | Los Angeles | | 40 | | | 741,606 | | | 5.3 | % | | $ | 27,711 | | | 3.5 | % | | $ | 37.37 | | |
| | San Diego | | 18 | | | 158,530 | | | 1.1 | % | | 7,666 | | | 1.0 | % | | 48.36 | | |
| | San Francisco Bay Area | | 5 | | | 84,355 | | | 0.6 | % | | 5,179 | | | 0.6 | % | | 61.40 | | |
| | Seattle | | 9 | | | 85,888 | | | 0.6 | % | | 3,244 | | | 0.4 | % | | 37.77 | | |
| | Austin | | — | | | — | | | — | % | | — | | | — | % | | — | | |
| | Total | | 72 | | | 1,070,379 | | | 7.6 | % | | $ | 43,800 | | | 5.5 | % | | $ | 40.92 | | |
| | | | | | | | | | | | | | | | |
| 2028 | | Los Angeles | | 23 | | | 125,479 | | | 0.9 | % | | $ | 6,693 | | | 0.8 | % | | $ | 53.34 | | |
| | San Diego | | 12 | | | 214,134 | | | 1.5 | % | | 12,173 | | | 1.5 | % | | 56.85 | | |
| | San Francisco Bay Area | | 11 | | | 730,462 | | | 5.2 | % | | 49,244 | | | 6.3 | % | | 67.41 | | |
| | Seattle | | 8 | | | 61,231 | | | 0.4 | % | | 1,927 | | | 0.2 | % | | 31.47 | | |
| | Austin | | — | | | — | | | — | % | | — | | | — | % | | — | | |
| | Total | | 54 | | | 1,131,306 | | | 8.0 | % | | $ | 70,037 | | | 8.8 | % | | $ | 61.91 | | |
| | | | | | | | | | | | | | | | |
| 2029 and Beyond | | Los Angeles | | 46 | | | 1,400,197 | | | 10.0 | % | | $ | 80,199 | | | 10.0 | % | | $ | 57.28 | | |
| | San Diego | | 60 | | | 1,650,202 | | | 11.7 | % | | 102,058 | | | 12.8 | % | | 61.85 | | |
| | San Francisco Bay Area | | 37 | | | 3,393,213 | | | 24.1 | % | | 250,115 | | | 31.2 | % | | 73.71 | | |
| | Seattle | | 26 | | | 1,573,740 | | | 11.2 | % | | 72,383 | | | 9.1 | % | | 45.99 | | |
| | Austin | | 11 | | | 541,795 | | | 3.9 | % | | 24,327 | | | 3.0 | % | | 44.90 | | |
| | Total | | 180 | | | 8,559,147 | | | 60.9 | % | | $ | 529,082 | | | 66.1 | % | | $ | 61.81 | | |
| | | | | | | | | | | | | | | | |
________________________(1)Includes 100% of annualized base rent of consolidated property partnerships.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Top 20 Tenants
($ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tenant Name (1) | | Region | | Annualized Base Rental Revenue (2) | | Rentable Square Feet | | Percentage of Total Annualized Base Rental Revenue | | Percentage of Total Rentable Square Feet | | Year(s) of Significant Lease Expiration(s) (3) | | Weighted Average Remaining Lease Term (Years) | |
| Global technology company | | Seattle / San Diego | | $ | 44,851 | | | 849,826 | | | 5.6 | % | | 5.0 | % | | 2032 - 2033 / 2037 | | 9.1 | |
| Cruise LLC | | San Francisco Bay Area | | 35,449 | | | 374,618 | | | 4.4 | % | | 2.2 | % | | 2031 | | 7.4 | |
| Stripe, Inc. | | San Francisco Bay Area | | 33,110 | | | 425,687 | | | 4.1 | % | | 2.5 | % | | 2034 | | 10.0 | |
| LinkedIn Corporation / Microsoft Corporation (4) | | San Francisco Bay Area | | 29,752 | | | 663,460 | | | 3.7 | % | | 3.9 | % | | 2024 / 2026 | | 2.0 | |
| Salesforce, Inc. (5) | | San Francisco Bay Area / Seattle | | 29,460 | | | 599,836 | | | 3.7 | % | | 3.5 | % | | 2024 / 2029 - 2030 / 2032 | | 4.7 | |
| Adobe Systems, Inc. | | San Francisco Bay Area / Seattle | | 27,897 | | | 522,879 | | | 3.5 | % | | 3.1 | % | | 2027 / 2031 | | 6.9 | |
| Okta, Inc. | | San Francisco Bay Area | | 24,206 | | | 293,001 | | | 3.0 | % | | 1.7 | % | | 2028 | | 4.3 | |
| DoorDash, Inc. | | San Francisco Bay Area | | 23,842 | | | 236,759 | | | 3.0 | % | | 1.4 | % | | 2032 | | 7.6 | |
| Netflix, Inc. | | Los Angeles | | 21,854 | | | 361,388 | | | 2.7 | % | | 2.1 | % | | 2032 | | 8.1 | |
| Cytokinetics, Inc. | | San Francisco Bay Area | | 18,167 | | | 234,892 | | | 2.3 | % | | 1.4 | % | | 2033 | | 9.3 | |
| Box, Inc. | | San Francisco Bay Area | | 16,853 | | | 287,680 | | | 2.1 | % | | 1.7 | % | | 2028 | | 4.0 | |
| DIRECTV, LLC | | Los Angeles | | 16,085 | | | 532,956 | | | 2.0 | % | | 3.1 | % | | 2026 - 2027 | | 3.2 | |
| Synopsys, Inc. | | San Francisco Bay Area | | 15,492 | | | 342,891 | | | 1.9 | % | | 2.0 | % | | 2030 | | 6.2 | |
| Neurocrine Biosciences, Inc. | | San Diego | | 14,046 | | | 254,578 | | | 1.8 | % | | 1.5 | % | | 2025 / 2031 | | 6.5 | |
| Amazon.com | | Seattle | | 13,926 | | | 340,705 | | | 1.7 | % | | 2.0 | % | | 2025 / 2030 | | 4.9 | |
| Riot Games, Inc. (6) | | Los Angeles | | 13,829 | | | 210,133 | | | 1.7 | % | | 1.2 | % | | 2024 / 2026 / 2031 | | 3.6 | |
| Viacom International, Inc. | | Los Angeles | | 13,718 | | | 220,330 | | | 1.7 | % | | 1.3 | % | | 2028 | | 4.5 | |
| Indeed, Inc. | | Austin | | 13,430 | | | 330,394 | | | 1.7 | % | | 1.9 | % | | 2034 | | 10.5 | |
| Sony Interactive Entertainment, LLC | | San Francisco Bay Area | | 13,059 | | | 127,760 | | | 1.6 | % | | 0.7 | % | | 2030 | | 5.8 | |
| Tandem Diabetes Care, Inc. | | San Diego | | 12,409 | | | 143,850 | | | 1.6 | % | | 0.8 | % | | 2035 | | 10.8 | |
| Total Top 20 Tenants | | | | $ | 431,435 | | | 7,353,623 | | | 53.8 | % | | 43.0 | % | | | | 6.3 | |
| | | | | | | | | | | | | | | | |
________________________
(1)Includes subsidiaries of the tenant listed.
(2)The information presented is based upon annualized base rental revenues as of June 30, 2024 and includes 100% of annualized base rental revenues of consolidated property partnerships.
(3)We define significant lease expirations as those with space expiring greater than 25,000 rentable square feet.
(4)The 2024 lease expiration represents 76,031 rentable square feet expiring on October 31, 2024.
(5)The 2024 lease expiration represents 126,848 rentable square feet expiring on August 31, 2024.
(6)The 2024 lease expiration represents 6,411 rentable square feet that expired on July 31, 2024 and 40,236 rentable square feet expiring on November 30, 2024.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Tenant Industry Diversification (1)
| | | | | |
Annualized Base Rent (2) | Square Feet (3) |
________________________
(1)Based on the North American Industry Classification System as of June 30, 2024.
(2)Includes 100% of annualized base rent of consolidated property partnerships.
(3)Based on occupied square footage as of June 30, 2024.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Consolidated Ventures (Noncontrolling Property Partnerships)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Property | | Venture Partner | | Submarket | | Rentable Square Feet | | KRC Ownership % | |
| 100 First Street, San Francisco, CA | | Norges Bank Real Estate Management | | San Francisco | | 480,457 | | 56% | |
| 303 Second Street, San Francisco, CA | | Norges Bank Real Estate Management | | San Francisco | | 784,658 | | 56% | |
| 900 Jefferson Avenue and 900 Middlefield Road, Redwood City, CA (1) | | Local developer | | Redwood City | | 347,842 | | 93% | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | Quarter-to-Date | | Year-to-Date | |
| Total operating revenues | | $ | 30,087 | | | $ | 60,534 | | |
| Total operating expenses | | 8,855 | | | 17,093 | | |
| Net Operating Income - Consolidated Ventures (2)(3) | | $ | 21,232 | | | $ | 43,441 | | |
| Adjustments: | | | | | |
| Amortization of deferred revenue related to tenant-funded tenant improvements | | (433) | | | (1,367) | | |
| Net effect of straight-line rents | | (127) | | | (499) | | |
| Lease related adjustments, leasing costs and other | | (598) | | | 1,272 | | |
| Other (4) | | — | | | 81 | | |
| Cash Net Operating Income - Consolidated Ventures (3) | | $ | 20,074 | | | $ | 42,928 | | |
| | | | | | |
| Company's Share of Cash Net Operating Income - Consolidated Ventures (3) | | $ | 13,000 | | | $ | 28,685 | | |
| | | | | | |
____________________
(1)Reflects the KRC ownership percentage at time of agreement. Actual percentage may vary depending on cash flows or promote structure.
(2)For breakout of Net Operating Income by partnership, refer to page 38, Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income.
(3)Please refer to pages 31-33 for Management Statements on non-GAAP supplemental measures.
(4)Includes revenue reversals (recoveries) related to tenant creditworthiness.
03
Development
–In-Process Development & Redevelopment
–Future Development Pipeline
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
In-Process Development & Redevelopment
($ in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| UNDER CONSTRUCTION | | Location | | Construction Start Date | | Estimated Stabilization Date (1) | | Estimated Rentable Square Feet | | Total Estimated Investment | | Total Cash Costs Incurred as of 6/30/2024 (2)(3) | | % Leased | |
| | | | | | | | | | | | | | | | |
| Office / Life Science | | | | | | | | | | | | | | | |
| San Francisco Bay Area | | | | | | | | | | | | | | | |
| Kilroy Oyster Point - Phase 2 | | South San Francisco | | 2Q 2021 | | 4Q 2025 | | 875,000 | | | $ | 1,000 | | | $ | 695 | | | —% | |
| 4400 Bohannon Drive (4) | | Other Peninsula | | 4Q 2022 | | 3Q 2025 | | 48,000 | | | 55 | | | 32 | | | —% | |
| San Diego County | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| 4690 Executive Drive (4) | | University Towne Center | | 1Q 2022 | | 2Q 2025 | | 52,000 | | | 25 | | | 21 | | | —% | |
| | | | | | | | | | | | | | | | |
| TOTAL: | | | | | | | | 975,000 | | | $ | 1,080 | | | $ | 748 | | | —% | |
| | | | | | | | | | | | | | | | |
________________________
(1)For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. For projects being redeveloped, redevelopment will occur in phases based on existing lease expiration dates and timing of the tenant improvement build-out.
(2)Represents costs incurred as of June 30, 2024, excluding accrued liabilities recorded in accordance with GAAP.
(3)For redevelopment properties, includes the existing depreciated basis for the buildings to be redeveloped.
(4)Redevelopment property.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Future Development Pipeline
($ in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FUTURE DEVELOPMENT PIPELINE | | Location | | Approx. Developable Square Feet / Resi Units (1) | | Total Cash Costs Incurred as of 6/30/2024 (2) | |
| | | | | | | | | | |
| Los Angeles | | | | | | | | | |
| 1633 26th Street | | West Los Angeles | | 190,000 | | $ | 15 | | |
| San Diego | | | | | | | | | |
| Santa Fe Summit South / North | | 56 Corridor | | 600,000 - 650,000 | | 116 | | |
| 2045 Pacific Highway | | Little Italy | | 275,000 | | 56 | | |
| Kilroy East Village | | East Village | | 1,100 units | | 68 | | |
| San Francisco Bay Area | | | | | | | | | |
| Kilroy Oyster Point - Phases 3 and 4 | | South San Francisco | | 875,000 - 1,000,000 | | 227 | | |
| Flower Mart | | SOMA | | 2,300,000 | | 590 | | |
| Seattle | | | | | | | | | |
| SIX0 | | Denny Regrade | | 925,000 and 650 units | | 187 | | |
| Austin | | | | | | | | | |
| Stadium Tower | | Stadium District / Domain | | 493,000 | | 73 | | |
| | | | | | | | | | |
| TOTAL: | | | | | | | | $ | 1,332 | | |
| | | | | | | | | | |
________________________
(1)Represents developable office/life science square feet and/or residential units. The developable square feet, residential units, 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 costs incurred as of June 30, 2024, excluding accrued liabilities recorded in accordance with GAAP.
04
Debt and
Capitalization Data
–Capital Structure
–Debt Analysis
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Capital Structure
As of June 30, 2024 ($ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | Shares/Units | | Aggregate Principal Amount (1) or $ Value Equivalent | | % of Total Market Capitalization | | Stated Rate (2) | | Maturity Date | | | |
| | | | | | | | | | | | | | |
| Unsecured Debt | |
| Revolving Credit Facility | | | | $ | — | | | — | % | | 6.33 | % | | 7/31/2028 (3) | | | |
| Term Loan Facility | | | | 120,000 | | | 1.4 | % | | 6.39 | % | | 10/3/2026 (4) | | | |
| Term Loan Facility | | | | 200,000 | | | 2.3 | % | | 6.38 | % | | 10/3/2027 (4) | | | |
| Private Placement Senior Notes Series A due 2026 | | | | 50,000 | | | 0.5 | % | | 4.30 | % | | 7/18/2026 | | | |
| Private Placement Senior Notes Series B due 2026 | | | | 200,000 | | | 2.3 | % | | 4.35 | % | | 10/18/2026 | | | |
| Private Placement Senior Notes Series A due 2027 | | | | 175,000 | | | 2.0 | % | | 3.35 | % | | 2/17/2027 | | | |
| Private Placement Senior Notes Series B due 2029 | | | | 75,000 | | | 0.8 | % | | 3.45 | % | | 2/17/2029 | | | |
| Private Placement Senior Notes due 2031 | | | | 350,000 | | | 4.0 | % | | 4.27 | % | | 1/31/2031 | | | |
| Senior Notes due 2024 | | | | 403,712 | | | 4.6 | % | | 3.45 | % | | 12/15/2024 | | | |
| Senior Notes due 2025 | | | | 400,000 | | | 4.5 | % | | 4.38 | % | | 10/1/2025 | | | |
| Senior Notes due 2028 (5) | | | | 400,000 | | | 4.5 | % | | 4.75 | % | | 12/15/2028 | | | |
| Senior Notes due 2029 | | | | 400,000 | | | 4.5 | % | | 4.25 | % | | 8/15/2029 | | | |
| Senior Notes due 2030 | | | | 500,000 | | | 5.6 | % | | 3.05 | % | | 2/15/2030 | | | |
| Senior Notes due 2032 (5) | | | | 425,000 | | | 4.8 | % | | 2.50 | % | | 11/15/2032 | | | |
| Senior Notes due 2033 (5) | | | | 450,000 | | | 5.1 | % | | 2.65 | % | | 11/15/2033 | | | |
| Senior Notes due 2036 | | | | 400,000 | | | 4.5 | % | | 6.25 | % | | 1/15/2036 | | | |
| | | | | $ | 4,548,712 | | | 51.4 | % | | 4.06 | % | | | | | |
| Secured Debt (6) | |
| 12100,12200, and 12312 W. Olympic Blvd., Los Angeles | | | | $ | 154,543 | | | 1.8 | % | | 3.57 | % | | 12/1/2026 | | | |
| 320 Westlake Ave. N. and 321 Terry Ave. N., Seattle | | | | 80,177 | | | 0.9 | % | | 4.48 | % | | 7/1/2027 | | | |
| One Paseo Mixed-Use Campus, San Diego | | | | 375,000 | | | 4.2 | % | | 5.90 | % | | 8/10/2034 | | | |
| | | | | $ | 609,720 | | | 6.9 | % | | 5.12 | % | | | | | |
| | | | | | | | | | | | | | |
| Total Debt | | | | $ | 5,158,432 | | | 58.3 | % | | 4.19 | % | | | | | |
| | | | | | | | | | | | | | |
| Equity and Noncontrolling Interest in the Operating Partnership (7) | |
| Common limited partnership units outstanding (8) | | 1,150,574 | | $ | 35,863 | | | 0.4 | % | | | | | | | |
| Shares of common stock outstanding | | 117,385,231 | | 3,658,898 | | | 41.3 | % | | | | | | | |
| Total Equity and Noncontrolling Interest in the Operating Partnership | | | | $ | 3,694,761 | | | 41.7 | % | | | | | | | |
| | | | | | | | | | | | | | |
| Total Market Capitalization | | | | $ | 8,853,193 | | | 100.0 | % | | | | | | | |
| | | | | | | | | | | | | | |
________________________
(1)Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
(2)Our unsecured revolving credit facility and unsecured term loan facilities' interest rates were calculated using the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% and a margin of 0.900% and 0.950%, respectively, based on our credit rating as of June 30, 2024. All other stated rates are fixed interest rates.
(3)Does not assume the exercise of the Company's two six-month extension options.
(4)The maturity dates of the each of the unsecured term loans assumes the exercise of the two twelve-month extensions, at the Company’s election.
(5)Green bond.
(6)The mortgage notes are secured by the properties listed.
(7)Value based on closing share price of $31.17 as of June 30, 2024.
(8)Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Debt Analysis
As of June 30, 2024 ($ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Debt | $406,744 | $406,246 | $521,317 | $449,125 | $400,000 | $475,000 | $500,000 | $350,000 | $425,000 | $450,000 | $375,000 | — | $400,000 |
Weighted Average Stated Rate | 3.45% | 4.37% | 4.59% | 4.88% | 4.75% | 4.12% | 3.05% | 4.27% | 2.50% | 2.65% | 5.90% | —% | 6.25% |
% of Total | 8% | 8% | 10% | 8% | 8% | 9% | 10% | 7% | 8% | 9% | 7% | —% | 8% |
________________________
(1)The maturity dates of the unsecured term loans assume the exercise of the two twelve-month extensions, at the Company's election.
(2)As of June 30, 2024, there was no outstanding balance on our unsecured revolving credit facility maturing on July 31, 2028, before two six-month extensions, at the Company's election.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Debt Analysis, continued
As of June 30, 2024 ($ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| NET DEBT TO COMPANY'S SHARE OF EBITDA, AS ADJUSTED RATIOS (1) | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | |
| | | | | | | | | | | | |
| Total principal amount of debt | | $ | 5,158,432 | | | $ | 5,159,926 | | | $ | 4,961,406 | | | $ | 4,969,869 | | | $ | 4,440,610 | | |
| Cash and cash equivalents | | (835,893) | | | (855,007) | | | (510,163) | | | (618,794) | | | (361,885) | | |
| Certificates of deposit | | — | | | (78,256) | | | (256,581) | | | (252,830) | | | — | | |
| Net debt | | $ | 4,322,539 | | | $ | 4,226,663 | | | $ | 4,194,662 | | | $ | 4,098,245 | | | $ | 4,078,725 | | |
| | | | | | | | | | | | |
| Trailing 12-months Company's share of EBITDA, as adjusted (2) | | $ | 673,269 | | | $ | 672,267 | | | $ | 671,343 | | | $ | 673,324 | | | $ | 668,950 | | |
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| Trailing 12-months Company's share of EBITDA, as adjusted less interest income (2) | | $ | 632,284 | | | $ | 637,945 | | | $ | 648,751 | | | $ | 656,196 | | | $ | 658,543 | | |
| | | | | | | | | | | | |
| Net debt to Company's share of EBITDA, as adjusted Ratio | | 6.4x | | 6.3x | | 6.2x | | 6.1x | | 6.1x | |
| | | | | | | | | | | | |
| Net debt to Company's share of EBITDA, as adjusted less interest income Ratio | | 6.8x | | 6.6x | | 6.5x | | 6.2x | | 6.2x | |
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| KEY DEBT COVENANTS (3) | |
| | | Covenant | | Actual Performance as of June 30, 2024 | |
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| Unsecured Credit and Term Loan Facilities and Private Placement Notes: | | | | | |
| Total debt to total asset value | | less than 60% | | 33% | |
| Fixed charge coverage ratio | | greater than 1.5x | | 3.3x | |
| Unsecured debt ratio | | greater than 1.67x | | 3.16x | |
| Unencumbered asset pool debt service coverage | | greater than 1.75x | | 3.64x | |
| | | | | | |
| Unsecured Senior Notes due 2024, 2025, 2028, 2029, 2030, 2032, 2033, and 2036: | | | | | |
| Total debt to total asset value | | less than 60% | | 38% | |
| Interest coverage | | greater than 1.5x | | 5.3x | |
| Secured debt to total asset value | | less than 40% | | 4% | |
| Unencumbered asset pool value to unsecured debt | | greater than 150% | | 277% | |
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________________________
(1)Please refer to pages 31-33 for Management Statements on non-GAAP supplemental measures.
(2)Calculated as the sum of the Company's share of EBITDA, as adjusted for the trailing four quarters. Please refer to page 40 for a reconciliation of GAAP Net Income Available to Common Stockholders to the Company's Share of EBITDA, as adjusted and the Company's Share of EBITDA, as adjusted less interest income.
(3)All covenant ratio titles utilize terms and are calculated as defined in the respective debt and credit agreements.
05
Non-GAAP Supplemental
Measures
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Management Statements on Non-GAAP Supplemental Measures
Included in this section are management’s statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations available to common stockholders and common unitholders (“FFO”), in the Company’s earnings release on July 31, 2024 and the reasons why management believes that these measures provide useful information to investors about the Company’s financial condition and results of operations.
Net Operating Income:
Management believes that Net Operating Income (“NOI”) is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as follows: consolidated operating revenues (rental income and other property income) less consolidated property and related expenses (property expenses, real estate taxes and ground leases). Other real estate investment trusts (“REITs”) may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.
Because NOI excludes leasing costs, general and administrative expenses, interest expense, depreciation and amortization, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the consolidated revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a portfolio basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base have on the Company’s results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company’s financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.
However, NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.
Same Store Net Operating Income:
Management believes that Same Store NOI is a useful supplemental measure of the Company’s operating performance. Same Store NOI represents the consolidated NOI for all of the properties that were owned and included in the Company's stabilized portfolio for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company’s Same Store NOI may not be comparable to other REITs.
However, Same Store NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect the operations of the Company’s entire portfolio, nor does it reflect the impact of general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Management Statements on Non-GAAP Supplemental Measures, continued
Same Store Cash Net Operating Income:
Management believes that Same Store Cash NOI is a useful supplemental measure of the Company’s operating performance. Same Store Cash NOI represents the consolidated NOI for all of the properties that were owned and included in the Company’s stabilized portfolio for two comparable reporting periods, adjusted for the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles, and the provision for bad debts. Because Same Store Cash NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends on a cash basis such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store Cash NOI, and accordingly, our Same Store Cash NOI may not be comparable to other REITs.
However, Same Store Cash NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results from operations.
EBITDA, as adjusted, Company's Share of EBITDA, as adjusted, and Company's Share of EBITDA, as adjusted less interest income:
Management believes that consolidated earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, gains and losses on depreciable real estate, net income attributable to noncontrolling interests, preferred dividends and distributions, original issuance costs of redeemed preferred stock and preferred units, and impairment losses (“EBITDA, as adjusted”) is a useful supplemental measure of the Company’s operating performance. When considered with other GAAP measures and FFO, management believes EBITDA, as adjusted, gives the investment community a more complete understanding of the Company’s consolidated operating results, including the impact of general and administrative expenses and acquisition-related expenses, before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA, as adjusted, as it is used in several of the Company’s financial covenants for both its secured and unsecured debt. However, EBITDA, as adjusted, should not be viewed as an alternative measure of the Company’s operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Company’s results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA, as adjusted, and, accordingly, the Company’s EBITDA, as adjusted, may not be comparable to other REITs. The Company’s calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by Nareit, as the Company does not have any unconsolidated joint ventures. The Company’s Share of EBITDA, as adjusted, is EBITDA, as adjusted less amounts attributable to noncontrolling interests in consolidated property partnerships. The Company’s Share of EBITDA, as adjusted less interest income also deducts interest income.
Net Debt to Company's Share of EBITDA, as adjusted Ratio and Net Debt to Company's Share of EBITDA, as adjusted less interest income Ratio:
Management believes that the ratios of our principal balance of debt, less cash and cash equivalents and certificates of deposit, divided by the Company’s share of EBITDA, as adjusted, as well as the Company's share of EBITDA, as adjusted less interest income are useful supplemental measures of the level of borrowed capital being used to increase the potential return of our real estate investments and proxies for a measure we believe is used by many lenders and rating agencies to evaluate our ability to repay and service our debt obligations. We believe the ratios are beneficial disclosure to investors as supplemental means of evaluating our ability to meet obligations senior to those of our equity holders. Other REITs may use different methodologies for calculating these ratios and, accordingly, the Company’s Net Debt to Company’s Share of EBITDA, as adjusted Ratio and Net Debt to Company's Share of EBITDA, as adjusted less interest income Ratio may not be comparable to other REITs.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Management Statements on Non-GAAP Supplemental Measures, continued
Funds From Operations:
The Company calculates Funds From Operations available to common stockholders and common unitholders (“FFO”) in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of Nareit. The White Paper defines FFO as net income or loss (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.
Management believes that FFO is a useful supplemental measure of the Company’s operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of the Company’s activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, the Company’s FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, management believes that FFO along with the required GAAP presentations provides a more complete measurement of the Company’s performance relative to its competitors and a more appropriate basis on which to make decisions involving operating, financing, and investing activities than the required GAAP presentations alone would provide.
However, FFO should not be viewed as an alternative measure of the Company’s operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties, which are significant economic costs and could materially impact the Company’s results from operations.
Funds Available for Distribution:
Management believes that Funds Available for Distribution available to common stockholders and common unitholders (“FAD”) is a useful supplemental measure of the Company’s liquidity. The Company computes FAD by adding to FFO the non-cash amortization of deferred financing costs, debt discounts and premiums and share-based compensation awards, amortization of above (below) market rents for acquisition properties, then subtracting recurring tenant improvements, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements, adjusting for other lease related items and amounts of gain or loss on marketable securities related to the Company’s executive deferred compensation plan that are capitalized as development costs, and after adjustment for amounts attributable to noncontrolling interests in consolidated property partnerships. FAD provides an additional perspective on the Company’s ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company’s financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company’s FAD may not be comparable to other REITs.
06
Definitions and Reconciliations
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Definitions Included in Supplemental
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 to 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. Amounts represent percentage of total portfolio annualized contractual base rental revenue.
Capital Expenditures:
Expenditures for capital improvements, tenant improvements costs (excluding tenant-funded tenant improvements), and leasing commissions.
Change in GAAP / Cash Rents (Leases Commenced):
Calculated as the change between GAAP / cash rents for new/renewed leases and the expiring GAAP / cash rents for the same space. May include leases for which re-leasing timing was impacted by the COVID-19 pandemic and restrictions intended to prevent its spread. Excludes leases for which the space was vacant when the property was acquired by the Company.
Change in GAAP / Cash Rents (Leases Executed):
Calculated as the change between GAAP / cash rents for signed leases and the expiring GAAP / cash rents for the same space. May include leases for which re-leasing timing was impacted by the COVID-19 pandemic and restrictions intended to prevent its spread. Excludes leases for which the space was vacant when the property was acquired by the Company.
Estimated Stabilization Date (Development):
Management’s estimation of the earlier of stabilized occupancy (95%) or one year from the date of the cessation of major base building construction activities for office and retail properties and upon substantial completion for residential properties.
FAD Payout Ratio:
Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FAD.
First Generation ("1st Gen"):
Space not yet leased at recently completed development and redevelopment properties that have been added to the stabilized portfolio. Capital expenditures for first generation space do not include expenditures for in-process development and redevelopment projects and these costs are not subtracted in our calculation of FAD.
Fixed Charge Coverage Ratio - EBITDA, as adjusted:
Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums) and current year accrued preferred dividends.
Fixed Charge Coverage Ratio - Net Income:
Calculated as net income, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums) and current year accrued preferred dividends.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Definitions Included in Supplemental, continued
FFO Payout Ratio:
Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FFO attributable to common stockholders and unitholders.
GAAP Effective Rate:
The rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of any discounts/premiums, excluding debt issuance costs.
Gross Lease Types:
Represents leases where the landlord is obligated to pay the tenant's proportionate share of certain operating expenses.
Interest Coverage Ratio:
Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums).
Major Repositioning:
Space for which we are incurring significant non-recurring capital expenditures to reposition and is expected to result in additional revenue generated when re-leased. Capital expenditures for this space are not subtracted in our calculation of FAD.
Net Effect of Straight-Line Rents:
Represents the straight-line rent income recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases and the provision for bad debts recorded for deferred rent receivable balances.
Net Income Payout Ratio:
Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by net income.
Net Leases Types:
Represents leases where the tenant is obligated to pay their proportionate share of certain operating expenses.
Net Operating Income Margins:
Calculated as net operating income divided by total revenues.
Redevelopment Properties:
Properties for which we expect to spend significant development and construction costs pursuant to a formal plan to change its use.
Rentable Square Feet:
Reflects the latest Building Owners and Managers Association (“BOMA”) measurement. All occupied and leased percentages presented throughout this report are calculated based on rentable square feet at the end of the period(s) presented.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Definitions Included in Supplemental, continued
Retention Rates (Leases Executed):
Calculated as the percentage of space renewed by existing tenants at lease expiration or termination.
Same Store Portfolio:
Our Same Store Portfolio includes all of our properties 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, 2023 and still owned and included in the stabilized portfolio as of June 30, 2024. It includes our residential portfolio, which consists of our 200-unit residential tower and 193-unit Jardine project in Hollywood, California and 608 residential units at our One Paseo mixed-use project in Del Mar, California. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, completed residential developments not yet stabilized, and properties held-for-sale. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.
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| Same Store Portfolio Rollforward | | | | | |
| | | Number of Buildings | | Square Feet | |
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| Same Store Portfolio as of December 31, 2023 | | 115 | | 15,063,419 | | |
| Stabilized Development and Redevelopment Properties Added | | 4 | | | 1,151,118 | | |
| Remeasurements | | — | | | (3,889) | | |
| Same Store Portfolio as of June 30, 2024 | | 119 | | 16,210,648 | |
| Stabilized Development and Redevelopment Properties Excluded from Same Store | | 2 | | 829,591 | |
| Stabilized Portfolio as of June 30, 2024 | | 121 | | 17,040,239 | |
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Second Generation ("2nd Gen"):
Space at properties in the stabilized portfolio for which capital expenditures are generally recurring in nature or relate to space previously occupied.
Stated Interest Rate:
The rate at which interest expense is recorded per the respective loan documents, excluding the impact of the amortization of any debt discounts/premiums.
Tenant Improvement Phase:
Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
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Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended (1) | | | Six Months Ended (2) | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | | | 6/30/2024 | | 6/30/2023 | |
| Net Income Available to Common Stockholders | | $ | 49,211 | | | $ | 49,920 | | | $ | 47,284 | | | $ | 52,762 | | | $ | 55,587 | | | | $ | 99,131 | | | $ | 112,195 | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | | 458 | | | 502 | | | 471 | | | 515 | | | 537 | | | | 960 | | | 1,097 | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | | 4,878 | | | 5,278 | | | 5,291 | | | 5,460 | | | 5,151 | | | | 10,156 | | | 13,213 | | |
| Net Income | | 54,547 | | | 55,700 | | | 53,046 | | | 58,737 | | | 61,275 | | | | 110,247 | | | 126,505 | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| General and administrative expenses | | 18,951 | | | 17,579 | | | 22,078 | | | 24,761 | | | 22,659 | | | | 36,530 | | | 46,595 | | |
| Leasing costs | | 2,119 | | | 2,279 | | | 1,956 | | | 1,852 | | | 1,326 | | | | 4,398 | | | 2,698 | | |
| Depreciation and amortization | | 87,151 | | | 88,031 | | | 86,016 | | | 85,224 | | | 90,362 | | | | 175,182 | | | 184,038 | | |
| Interest income | | (10,084) | | | (13,190) | | | (10,696) | | | (7,015) | | | (3,421) | | | | (23,274) | | | (4,881) | | |
| Interest expense | | 36,763 | | | 38,871 | | | 32,325 | | | 29,837 | | | 26,383 | | | | 75,634 | | | 52,054 | | |
| Net Operating Income, as defined (3) | | 189,447 | | | 189,270 | | | 184,725 | | | 193,396 | | | 198,584 | | | | 378,717 | | | 407,009 | | |
| Wholly-Owned Properties | | 168,215 | | | 167,061 | | | 162,348 | | | 170,492 | | | 176,582 | | | | 335,276 | | | 356,102 | | |
| Consolidated property partnerships: (4) | | | | | | | | | | | | | | | | |
| 100 First Street (5) | | 6,073 | | | 5,958 | | | 6,561 | | | 6,782 | | | 6,075 | | | | 12,031 | | | 12,077 | | |
| 303 Second Street (5) | | 10,467 | | | 10,794 | | | 10,099 | | | 10,243 | | | 9,706 | | | | 21,261 | | | 26,942 | | |
| Crossing/900 (6) | | 4,692 | | | 5,457 | | | 5,717 | | | 5,879 | | | 6,221 | | | | 10,149 | | | 11,888 | | |
| Net Operating Income, as defined (3) | | 189,447 | | | 189,270 | | | 184,725 | | | 193,396 | | | 198,584 | | | | 378,717 | | | 407,009 | | |
| Non-Same Store Net Operating Income (7) | | (8,486) | | | (6,578) | | | (20,892) | | | (21,052) | | | (21,127) | | | | (15,064) | | | (13,627) | | |
| Same Store Net Operating Income | | 180,961 | | | 182,692 | | | 163,833 | | | 172,344 | | | 177,457 | | | | 363,653 | | | 393,382 | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Amortization of deferred revenue related to tenant-funded tenant improvements | | (4,035) | | | (6,190) | | | (5,215) | | | (4,384) | | | (4,461) | | | | (10,225) | | | (9,538) | | |
| Net effect of straight-line rents | | 2,084 | | | 5,443 | | | 8,140 | | | 617 | | | (1,992) | | | | 7,527 | | | (10,628) | | |
| Amortization of net below market rents | | (335) | | | (353) | | | (422) | | | (483) | | | (1,057) | | | | (688) | | | (3,362) | | |
| Lease related adjustments | | (467) | | | (194) | | | 2,236 | | | (805) | | | (3,374) | | | | (661) | | | 853 | | |
| Other (8) | | 133 | | | (1,147) | | | 1,144 | | | 432 | | | 1,003 | | | | (1,014) | | | 1,629 | | |
| Same Store Cash Net Operating Income | | $ | 178,341 | | | $ | 180,251 | | | $ | 169,716 | | | $ | 167,721 | | | $ | 167,576 | | | | $ | 358,592 | | | $ | 372,336 | | |
| | | | | | | | | | | | | | | | | |
________________________(1)For all quarterly periods in 2024, the Same Store Portfolio was comprised of 119 properties. For all quarterly periods in 2023, the Same Store Portfolio was comprised of 115 properties.
(2)Based upon the Same Store Portfolio as of June 30, 2024, which was comprised of 119 properties.
(3)Please refer to page 31-33 for Management Statements on non-GAAP supplemental measures.
(4)Reflects Net Operating Income for all periods presented.
(5)For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.
(6)For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City, CA.
(7)Includes the results of one office development building added to the stabilized portfolio during the third quarter of 2023, one office development building added to the stabilized portfolio during the fourth quarter of 2023, and our in-process and future development projects.
(8)Includes revenue reversals (recoveries) related to tenant creditworthiness and other.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income, continued
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended (1) | | | | | | |
| | | 3/31/2023 | | 12/31/2022 | | 9/30/2022 | | 6/30/2022 | | | | | | | | | | |
| Net Income Available to Common Stockholders | | $ | 56,608 | | | $ | 52,625 | | | $ | 79,757 | | | $ | 47,105 | | | | | | | | | | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | | 560 | | | 588 | | | 664 | | | 515 | | | | | | | | | | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | | 8,062 | | | 6,262 | | | 6,239 | | | 6,355 | | | | | | | | | | | |
| Net Income | | 65,230 | | | 59,475 | | | 86,660 | | | 53,975 | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
| General and administrative expenses | | 23,936 | | | 25,217 | | | 23,524 | | | 22,120 | | | | | | | | | | | |
| Leasing costs | | 1,372 | | | 1,404 | | | 1,015 | | | 1,447 | | | | | | | | | | | |
| Depreciation and amortization | | 93,676 | | | 91,396 | | | 81,140 | | | 96,415 | | | | | | | | | | | |
| Interest income | | (1,460) | | | (1,264) | | | (295) | | | (125) | | | | | | | | | | | |
| Interest expense | | 25,671 | | | 23,550 | | | 19,982 | | | 20,121 | | | | | | | | | | | |
| Gain on sale of depreciable operating property | | — | | | — | | | (17,329) | | | — | | | | | | | | | | | |
| Net Operating Income, as defined (2) | | 208,425 | | | 199,778 | | | 194,697 | | | 193,953 | | | | | | | | | | | |
| Wholly-Owned Properties | | 179,500 | | | 174,983 | | | 170,166 | | | 168,721 | | | | | | | | | | | |
| Consolidated property partnerships: (3) | | | | | | | | | | | | | | | | | | |
| 100 First Street (4) | | 6,011 | | | 6,116 | | | 5,791 | | | 5,745 | | | | | | | | | | | |
| 303 Second Street (4) | | 17,247 | | | 12,702 | | | 12,941 | | | 13,333 | | | | | | | | | | | |
| Crossing/900 (5) | | 5,667 | | | 5,977 | | | 5,799 | | | 6,154 | | | | | | | | | | | |
| Net Operating Income, as defined (2) | | 208,425 | | | 199,778 | | | 194,697 | | | 193,953 | | | | | | | | | | | |
| Non-Same Store Net Operating Income (6) | | (6,866) | | | (16,435) | | | (13,335) | | | (12,239) | | | | | | | | | | | |
| Same Store Net Operating Income | | 201,559 | | | 183,343 | | | 181,362 | | | 181,714 | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | | | |
| Amortization of deferred revenue related to tenant-funded tenant improvements | | (4,893) | | | (4,607) | | | (4,646) | | | (4,631) | | | | | | | | | | | |
| Net effect of straight-line rents | | (5,359) | | | (3,689) | | | (6,992) | | | (12,183) | | | | | | | | | | | |
| Amortization of net below market rents | | (2,305) | | | (2,287) | | | (2,520) | | | (2,720) | | | | | | | | | | | |
| Lease related adjustments | | 4,673 | | | (2,010) | | | (194) | | | 401 | | | | | | | | | | | |
| Other (7) | | 626 | | | 1,008 | | | 400 | | | 530 | | | | | | | | | | | |
| Same Store Cash Net Operating Income | | $ | 194,301 | | | $ | 171,758 | | | $ | 167,410 | | | $ | 163,111 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
________________________(1)Same Store Portfolio as of the most recent comparative period. For the quarter ended March 31, 2023, the Same Store Portfolio was comprised of 119 properties. For all quarterly periods in 2022, the Same Store Portfolio was comprised of 115 properties.
(2)Please refer to page 31-33 for a Management Statements on non-GAAP supplemental measures.
(3)Reflects Net Operating Income for all periods presented.
(4)For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.
(5)For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City.
(6)Includes the results of one office development building added to the stabilized portfolio during the fourth quarter of 2023 and our in-process and future development projects.
(7)Includes revenue reversals (recoveries) related to tenant creditworthiness and other.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Reconciliation of Net Income Available to Common Stockholders to Company's Share of EBITDA, as adjusted
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | |
| Net Income Available to Common Stockholders | | $ | 49,211 | | | $ | 49,920 | | | $ | 47,284 | | | $ | 52,762 | | | $ | 55,587 | | |
| Interest expense | | 36,763 | | | 38,871 | | | 32,325 | | | 29,837 | | | 26,383 | | |
| Depreciation and amortization | | 87,151 | | | 88,031 | | | 86,016 | | | 85,224 | | | 90,362 | | |
| | | | | | | | | | | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | | 458 | | | 502 | | | 471 | | | 515 | | | 537 | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | | 4,878 | | | 5,278 | | | 5,291 | | | 5,460 | | | 5,151 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| EBITDA, as adjusted (1) | | 178,461 | | | 182,602 | | | 171,387 | | | 173,798 | | | 178,020 | | |
| | | | | | | | | | | | |
| EBITDA, as adjusted (1), attributable to noncontrolling interests in consolidated property partnerships | | (7,601) | | | (8,660) | | | (8,328) | | | (8,390) | | | (8,162) | | |
| | | | | | | | | | | | |
| Company's share of EBITDA, as adjusted (1) | | $ | 170,860 | | | $ | 173,942 | | | $ | 163,059 | | | $ | 165,408 | | | $ | 169,858 | | |
| | | | | | | | | | | | |
| Interest income | | (10,084) | | | (13,190) | | | (10,696) | | | (7,015) | | | (3,421) | | |
| | | | | | | | | | | | |
| Company's share of EBITDA, as adjusted less interest income (1) | | $ | 160,776 | | | $ | 160,752 | | | $ | 152,363 | | | $ | 158,393 | | | $ | 166,437 | | |
| | | | | | | | | | | | |
________________________
(1)Please refer to pages 31-33 for Management Statements on non-GAAP supplemental measures.
| | | | | |
Q2 2024 Supplemental Financial Report | |
![kilroy_logoxsupplementalre.jpg](https://www.sec.gov/Archives/edgar/data/1493976/000102599624000204/kilroy_logoxsupplementalre.jpg)
Reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution
(unaudited, $ in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended June 30, | |
| | | 6/30/2024 | | 3/31/2024 | | 12/31/2023 | | 9/30/2023 | | 6/30/2023 | | | 2024 | | 2023 | |
| GAAP Net Cash Provided by Operating Activities | | $ | 88,693 | | | $ | 167,869 | | | $ | 110,223 | | | $ | 208,816 | | | $ | 101,414 | | | | $ | 256,562 | | | $ | 283,550 | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Recurring tenant improvements, leasing commissions and capital expenditures | | (22,069) | | | (11,763) | | | (31,411) | | | (20,519) | | | (17,850) | | | | (33,832) | | | (35,616) | | |
| Depreciation of non-real estate furniture, fixtures and equipment | | (1,562) | | | (1,571) | | | (1,614) | | | (1,706) | | | (1,889) | | | | (3,133) | | | (3,894) | | |
| Net changes in operating assets and liabilities (1) | | 55,471 | | | (21,554) | | | 39,064 | | | (58,450) | | | 41,727 | | | | 33,917 | | | 21,202 | | |
| Noncontrolling interests in consolidated property partnerships’ share of FFO and FAD | | (5,634) | | | (7,553) | | | (6,705) | | | (6,246) | | | (6,981) | | | | (13,187) | | | (16,606) | | |
| Cash adjustments related to investing and financing activities | | (65) | | | (100) | | | (29) | | | (3,197) | | | 3,125 | | | | (165) | | | 3,443 | | |
| Funds Available for Distribution (2) | | $ | 114,834 | | | $ | 125,328 | | | $ | 109,528 | | | $ | 118,698 | | | $ | 119,546 | | | | $ | 240,162 | | | $ | 252,079 | | |
| | | | | | | | | | | | | | | | | |
_______________________
(1)Primarily includes changes in the following assets and liabilities: marketable securities, current receivables, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, and rents received in advance and tenant security deposits.
(2)Please refer to page 31-33 for Management Statements on non-GAAP supplemental measures.
| | | | | |
Contact: | FOR RELEASE: |
Eliott Trencher | July 31, 2024 |
Executive Vice President, | |
Chief Financial Officer | |
and Chief Investment Officer | |
(310) 481-8587 | |
or | |
Taylor Friend | |
Senior Vice President, | |
Capital Markets and Treasurer | |
(310) 481-8574 | |
KILROY REALTY CORPORATION REPORTS
SECOND QUARTER FINANCIAL RESULTS
---------------
LOS ANGELES, July 31, 2024 - Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its second quarter ended June 30, 2024.
Second Quarter Highlights
Financial Results
•Revenues of $280.7 million
•Net income available to common stockholders of $0.41 per diluted share
•Funds from operations available to common stockholders and unitholders (“FFO”) of $132.6 million, or $1.10 per diluted share
Leasing and Occupancy
•Stabilized portfolio was 83.7% occupied and 85.4% leased at June 30, 2024
•Signed approximately 235,000 square feet of leases, comprised of 122,000 square feet of new leasing on previously vacant space, 55,000 square feet of new leasing on currently occupied space, and 58,000 square feet of renewal leasing
◦Includes 16,000 square feet of short-term leasing, comprised of 11,000 square feet of short-term new leasing and 5,000 square feet of short-term renewal leasing
◦GAAP rents increased 7.2% and cash rents decreased 4.6% from prior levels on second generation leasing, excluding short-term leasing
Balance Sheet / Liquidity
•As of June 30, 2024, the Company had approximately $1.9 billion of total liquidity comprised of approximately $0.8 billion of cash and approximately $1.1 billion available under the unsecured revolving credit facility
Dividend
•The Board declared and paid a regular quarterly cash dividend on its common stock of $0.54 per share, equivalent to an annual rate of $2.16
Recent Developments
•In July, signed approximately 184,000 square feet of leases, inclusive of 46,000 square feet of short-term renewal leases
Personnel Updates
•Eliott Trencher who currently serves as EVP, Chief Financial Officer and Chief Investment Officer, will remain as Chief Financial Officer through August 18, 2024 after which he will continue as EVP, Chief Investment Officer. In addition to his investment responsibilities, Mr. Trencher will also oversee asset level strategic planning across the portfolio
•Jeffrey Kuehling has been appointed EVP, Chief Financial Officer effective August 19, 2024. Mr. Kuehling joins the Company from Brixmor Property Group (“Brixmor”, NYSE: BRX) where he has worked since 2018 holding a variety of roles, most recently SVP, Corporate Strategy & Finance. Prior to Brixmor, Mr. Kuehling held various finance and capital markets positions at two publicly-traded REITs
•Lauren Stadler has been promoted to EVP, General Counsel and Secretary effective immediately. Ms. Stadler has been with the Company for over 10 years most recently serving as SVP, Corporate Counsel and Assistant Secretary. Prior to joining Kilroy, Ms. Stadler was an Associate at Latham & Watkins LLP
•Michael Schmidt has been hired as SVP, Leasing – Northern California Region effective August 19, 2024. Mr. Schmidt brings over 23 years of office experience across various West Coast markets. Prior to joining Kilroy, Mr. Schmidt worked at Lake Washington Partners and Columbia Property Trust where he led Leasing and Asset Management across the West Coast
“I am thrilled to welcome Jeffrey and Lauren to Kilroy’s executive team. They are both talented and collaborative leaders who will work closely with their counterparts across the Company to deliver value for our shareholders. In addition, I want to thank Eliott for his leadership in his combined CIO and CFO roles. I am excited to continue to partner with Eliott on all of our capital allocation initiatives going forward,” said Angela Aman, CEO. “I would also like to welcome Michael to the Kilroy leasing team. His expertise, relationships, and track record of execution across the West Coast will optimally position Kilroy to capitalize on the recovery we see taking hold across our markets.”
Net Income Available to Common Stockholders / FFO Guidance and Outlook
The Company is providing an updated Nareit-defined FFO per diluted share guidance for the full year 2024 of $4.21 to $4.31 per share, with a midpoint of $4.26 per share.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Full Year 2024 Range as of May 2024 | | Full Year 2024 Range as of July 2024 | |
| | Low End | | High End | | Low End | | High End | |
| | $ and shares/units in thousands, except per share/unit amounts | |
| Net income available to common stockholders per share - diluted | $ | 1.46 | | | $ | 1.61 | | | $ | 1.50 | | | $ | 1.59 | | |
| | | | | | | | | |
| Weighted average common shares outstanding - diluted (1) | 118,000 | | | 118,000 | | | 118,000 | | | 118,000 | | |
| | | | | | | | | |
| Net income available to common stockholders | $ | 172,500 | | | $ | 190,000 | | | $ | 177,000 | | | $ | 188,000 | | |
| Adjustments: | | | | | | | | |
| Net income attributable to noncontrolling common units of the Operating Partnership | 1,900 | | | 2,000 | | | 1,800 | | | 1,900 | | |
| Net income attributable to noncontrolling interests in consolidated property partnerships | 20,500 | | | 21,000 | | | 20,500 | | | 21,000 | | |
| Depreciation and amortization of real estate assets | 335,000 | | | 336,000 | | | 338,000 | | | 339,000 | | |
| Gains on sales of depreciable real estate | — | | | — | | | — | | | — | | |
| Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (31,000) | | | (32,000) | | | (31,500) | | | (32,000) | | |
| Funds From Operations (2) | $ | 498,900 | | | $ | 517,000 | | | $ | 505,800 | | | $ | 517,900 | | |
| | | | | | | | | |
| Weighted average common shares/units outstanding – diluted (3) | 120,250 | | | 120,250 | | | 120,200 | | | 120,200 | | |
| | | | | | | | | |
| Funds From Operations per common share/unit – diluted (3) | $ | 4.15 | | | $ | 4.30 | | | $ | 4.21 | | | $ | 4.31 | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Key Assumptions | | May 2024 Assumptions | | July 2024 Assumptions | |
| Change in same store cash NOI (4) | | (3.5%) to (5.5%) | | (3.0%) to (4.0%) | |
| Average full year occupancy | | 82.50% to 84.00% | | 82.75% to 83.75% | |
| General and administrative expenses | | $72 million to $80 million | | $72 million to $80 million | |
| Total development spending (5) | | $200 million to $300 million | | $225 million to $275 million | |
| Weighted average common shares/units outstanding – diluted (in thousands) (3) | | 120,250 | | 120,200 | |
| | | | | | |
| | | | | | |
________________________
(1)Calculated based on estimated weighted average shares outstanding, including non-participating share-based awards.
(2)See management statement for Funds From Operations at end of release.
(3)Calculated based on weighted average shares outstanding, including participating and non-participating share-based awards, and the dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(4)See management statement for Same Store Cash Net Operating Income on page 32 of our Supplemental Financial Report furnished on Form 8-K with this press release.
(5)Remaining 2024 development spending is $100 million to $150 million.
The Company’s guidance estimates for the full year 2024, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this press release, reflect management’s views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this press release. These guidance estimates do not include the impact on the Company’s operating results from potential future acquisitions, dispositions (including any associated gains or losses), capital markets activity, impairment charges, or any events outside of the Company’s control, as the timing and magnitude of any such events are not known at the time the Company provides guidance. There can be no assurance that the Company’s actual results will not differ materially from these estimates.
Conference Call and Audio Webcast
The Company’s management will discuss second quarter results and the current business environment during the Company’s August 1, 2024 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. To participate and obtain conference call dial-in details, register by
using the following link, https://www.netroadshow.com/events/login?show=f15f60b2&confId=58185. Those interested in listening via the Internet can access the conference call at https://events.q4inc.com/attendee/326412379. It may be necessary to download audio software to hear the conference call.
About Kilroy Realty Corporation
Kilroy Realty Corporation (NYSE: KRC, the “Company”, “Kilroy”) is a leading U.S. landlord and developer, with operations in San Diego, Los Angeles, the San Francisco Bay Area, Seattle, and Austin. The Company has earned global recognition for sustainability, building operations, innovation, and design. As a pioneer and innovator in the creation of a more sustainable real estate industry, the Company’s approach to modern business environments helps drive creativity and productivity for some of the world’s leading technology, entertainment, life science, and business services companies.
The Company is a publicly traded real estate investment trust (“REIT”) and member of the S&P MidCap 400 Index with more than seven decades of experience developing, acquiring, and managing office, life science, and mixed-use projects.
As of June 30, 2024, Kilroy’s stabilized portfolio totaled approximately 17.0 million square feet of primarily office and life science space that was 83.7% occupied and 85.4% leased. The Company also had approximately 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 92.8%. In addition, the Company had two in-process life science redevelopment projects totaling approximately 100,000 square feet with total estimated redevelopment costs of $80.0 million, and one approximately 875,000 square foot in-process development project with a total estimated investment of $1.0 billion.
A Leader in Sustainability and Commitment to Corporate Social Responsibility
Kilroy has a longstanding commitment to sustainability and continues to be a recognized leader in our sector. For over a decade, the Company and its sustainability initiatives have been recognized with numerous honors, including earning the GRESB five star rating and being named a sector and regional leader in the Americas. Other honors have included the Nareit Leader in the Light Award, being listed on the Dow Jones Sustainability World Index, being named ENERGY STAR Partner of the Year, and receiving the ENERGY STAR highest honor of Sustained Excellence.
Kilroy is proud to have achieved carbon neutral operations across our portfolio since 2020. The Company also has a longstanding commitment to maintain high levels of LEED, Fitwel, and ENERGY STAR certifications across the portfolio.
A significant part of the Company’s foundation is its commitment to enhancing employee growth, satisfaction, and wellness while maintaining a diverse and thriving culture. For four consecutive years, the Company has been named to Bloomberg’s Gender Equality Index, which recognizes companies committed to supporting gender equality through policy development, representation, and transparency.
More information is available at http://www.kilroyrealty.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in
circumstances, trends, and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including periods of heightened inflation, and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California, Texas, and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses, including bankruptcy, lack of liquidity or lack of funding, and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer's office premises; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service, and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment, and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices, or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed, and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement, and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations, or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition, and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2023, and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
KILROY REALTY CORPORATION
SUMMARY OF QUARTERLY RESULTS
(unaudited; in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenues | $ | 280,731 | | | $ | 284,282 | | | $ | 559,312 | | $ | 577,084 |
| | | | | | | |
Net income available to common stockholders | $ | 49,211 | | | $ | 55,587 | | | $ | 99,131 | | $ | 112,195 |
| | | | | | | |
Weighted average common shares outstanding – basic | 117,375 | | | 117,155 | | | 117,356 | | 117,107 |
Weighted average common shares outstanding – diluted | 117,663 | | | 117,360 | | | 117,810 | | 117,383 |
| | | | | | | |
Net income available to common stockholders per share – basic | $ | 0.41 | | | $ | 0.47 | | | $ | 0.83 | | $ | 0.95 |
Net income available to common stockholders per share – diluted | $ | 0.41 | | | $ | 0.47 | | | $ | 0.83 | | $ | 0.95 |
| | | | | | | |
Funds From Operations (1)(2) | $ | 132,587 | | | $ | 141,853 | | | $ | 266,310 | | $ | 287,812 |
| | | | | | | |
Weighted average common shares/units outstanding – basic (3) | 120,034 | | | 118,930 | | | 119,847 | | 118,874 |
Weighted average common shares/units outstanding – diluted (4) | 120,322 | | | 119,134 | | | 120,301 | | 119,149 |
| | | | | | | |
Funds From Operations per common share/unit – basic (2) | $ | 1.10 | | | $ | 1.19 | | | $ | 2.22 | | $ | 2.42 |
Funds From Operations per common share/unit – diluted (2) | $ | 1.10 | | | $ | 1.19 | | | $ | 2.21 | | $ | 2.42 |
| | | | | | | |
Common shares outstanding at end of period | | | | | 117,385 | | 117,178 |
Common partnership units outstanding at end of period | | | | | 1,151 | | 1,151 |
Total common shares and units outstanding at end of period | | | | | 118,536 | | 118,329 |
| | | | | | | |
| | | | | June 30, 2024 | | June 30, 2023 |
Stabilized office portfolio occupancy rates: (5) | | | | | | | |
Los Angeles | | | | | 73.9 | % | | 81.5 | % |
San Diego | | | | | 88.5 | % | | 85.4 | % |
San Francisco Bay Area | | | | | 90.1 | % | | 92.3 | % |
Seattle | | | | | 83.1 | % | | 83.4 | % |
Austin | | | | | 72.3 | % | | — | % |
Weighted average total | | | | | 83.7 | % | | 86.6 | % |
| | | | | | | |
Total square feet of stabilized office properties owned at end of period: (5) | | | | | | | |
Los Angeles | | | | | 4,338 | | 4,344 |
San Diego | | | | | 2,776 | | 2,700 |
San Francisco Bay Area | | | | | 6,171 | | 6,170 |
Seattle | | | | | 2,996 | | 3,000 |
Austin | | | | | 759 | | — |
Total | | | | | 17,040 | | 16,214 |
________________________
(1)Reconciliation of Net income available to common stockholders to Funds From Operations available to common stockholders and unitholders and management statement on Funds From Operations are included after the Consolidated Statements of Operations.
(2)Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.
(3)Calculated based on weighted average shares outstanding, including participating share-based awards (i.e. nonvested stock and certain time-based restricted stock units) and assuming the exchange of all common limited partnership units outstanding.
(4)Calculated based on weighted average shares outstanding, including participating and non-participating share-based awards, dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
(5)Occupancy percentages and total square feet reported are based on the Company’s stabilized office portfolio for the periods presented.
KILROY REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
ASSETS | | | |
REAL ESTATE ASSETS: | | | |
Land and improvements | $ | 1,743,170 | | | $ | 1,743,170 | |
Buildings and improvements | 8,501,976 | | | 8,463,674 | |
Undeveloped land and construction in progress | 2,207,180 | | | 2,034,804 | |
Total real estate assets held for investment | 12,452,326 | | | 12,241,648 | |
Accumulated depreciation and amortization | (2,671,141) | | | (2,518,304) | |
Total real estate assets held for investment, net | 9,781,185 | | | 9,723,344 | |
| | | |
| | | |
Cash and cash equivalents | 835,893 | | | 510,163 | |
| | | |
Marketable securities | 32,648 | | | 284,670 | |
Current receivables, net | 10,229 | | | 13,609 | |
Deferred rent receivables, net | 458,177 | | | 460,979 | |
Deferred leasing costs and acquisition-related intangible assets, net | 220,485 | | | 229,705 | |
Right of use ground lease assets | 129,760 | | | 125,506 | |
Prepaid expenses and other assets, net | 75,379 | | | 53,069 | |
| | | |
TOTAL ASSETS | $ | 11,543,756 | | | $ | 11,401,045 | |
| | | |
LIABILITIES AND EQUITY | | | |
LIABILITIES: | | | |
Secured debt, net | $ | 600,741 | | | $ | 603,225 | |
Unsecured debt, net | 4,519,796 | | | 4,325,153 | |
| | | |
Accounts payable, accrued expenses and other liabilities | 361,759 | | | 371,179 | |
Ground lease liabilities | 128,787 | | | 124,353 | |
Accrued dividends and distributions | 65,118 | | | 64,440 | |
Deferred revenue and acquisition-related intangible liabilities, net | 160,284 | | | 173,638 | |
Rents received in advance and tenant security deposits | 73,013 | | | 79,364 | |
| | | |
Total liabilities | 5,909,498 | | | 5,741,352 | |
| | | |
EQUITY: | | | |
Stockholders’ Equity | | | |
Common stock | 1,174 | | | 1,173 | |
Additional paid-in capital | 5,216,699 | | | 5,205,839 | |
Retained earnings | 187,796 | | | 221,149 | |
Total stockholders’ equity | 5,405,669 | | | 5,428,161 | |
Noncontrolling Interests | | | |
Common units of the Operating Partnership | 52,985 | | | 53,275 | |
Noncontrolling interests in consolidated property partnerships | 175,604 | | | 178,257 | |
Total noncontrolling interests | 228,589 | | | 231,532 | |
Total equity | 5,634,258 | | | 5,659,693 | |
TOTAL LIABILITIES AND EQUITY | $ | 11,543,756 | | | $ | 11,401,045 | |
KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
REVENUES | | | | | | | |
Rental income | $ | 275,919 | | | $ | 281,309 | | | $ | 550,809 | | | $ | 571,413 | |
| | | | | | | |
Other property income | 4,812 | | | 2,973 | | | 8,503 | | | 5,671 | |
Total revenues | 280,731 | | | 284,282 | | | 559,312 | | | 577,084 | |
| | | | | | | |
EXPENSES | | | | | | | |
Property expenses | 59,279 | | | 55,008 | | | 116,599 | | | 108,788 | |
Real estate taxes | 29,009 | | | 28,277 | | | 58,248 | | | 56,505 | |
| | | | | | | |
Ground leases | 2,996 | | | 2,413 | | | 5,748 | | | 4,782 | |
General and administrative expenses (1) | 18,951 | | | 22,659 | | | 36,530 | | | 46,595 | |
| | | | | | | |
Leasing costs | 2,119 | | | 1,326 | | | 4,398 | | | 2,698 | |
Depreciation and amortization | 87,151 | | | 90,362 | | | 175,182 | | | 184,038 | |
Total expenses | 199,505 | | | 200,045 | | | 396,705 | | | 403,406 | |
| | | | | | | |
OTHER INCOME (EXPENSES) | | | | | | | |
Interest income | 10,084 | | | 3,421 | | | 23,274 | | | 4,881 | |
Interest expense | (36,763) | | | (26,383) | | | (75,634) | | | (52,054) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total other expenses | (26,679) | | | (22,962) | | | (52,360) | | | (47,173) | |
| | | | | | | |
NET INCOME | 54,547 | | | 61,275 | | | 110,247 | | | 126,505 | |
| | | | | | | |
Net income attributable to noncontrolling common units of the Operating Partnership | (458) | | | (537) | | | (960) | | | (1,097) | |
Net income attributable to noncontrolling interests in consolidated property partnerships | (4,878) | | | (5,151) | | | (10,156) | | | (13,213) | |
Total income attributable to noncontrolling interests | (5,336) | | | (5,688) | | | (11,116) | | | (14,310) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 49,211 | | | $ | 55,587 | | | $ | 99,131 | | | $ | 112,195 | |
| | | | | | | |
Weighted average shares of common stock outstanding – basic | 117,375 | | | 117,155 | | | 117,356 | | | 117,107 | |
Weighted average shares of common stock outstanding – diluted | 117,663 | | | 117,360 | | | 117,810 | | | 117,383 | |
| | | | | | | |
Net income available to common stockholders per share – basic | $ | 0.41 | | | $ | 0.47 | | | $ | 0.83 | | | $ | 0.95 | |
Net income available to common stockholders per share – diluted | $ | 0.41 | | | $ | 0.47 | | | $ | 0.83 | | | $ | 0.95 | |
________________________
(1)The three and six months ended June 30, 2023 includes $3.1 million and $6.3 million, respectively, of retirement costs for our former CEO and former President, primarily comprised of accelerated stock compensation expense.
KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
(unaudited; in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net income available to common stockholders | $ | 49,211 | | | $ | 55,587 | | | $ | 99,131 | | | $ | 112,195 | |
Adjustments: | | | | | | | |
Net income attributable to noncontrolling common units of the Operating Partnership | 458 | | | 537 | | | 960 | | | 1,097 | |
Net income attributable to noncontrolling interests in consolidated property partnerships | 4,878 | | | 5,151 | | | 10,156 | | | 13,213 | |
Depreciation and amortization of real estate assets | 85,589 | | | 88,473 | | | 172,049 | | | 180,144 | |
| | | | | | | |
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (7,549) | | | (7,895) | | | (15,986) | | | (18,837) | |
Funds From Operations(1)(2)(3) | $ | 132,587 | | | $ | 141,853 | | | $ | 266,310 | | | $ | 287,812 | |
| | | | | | | |
Weighted average common shares/units outstanding – basic (4) | 120,034 | | | 118,930 | | | 119,847 | | | 118,874 | |
Weighted average common shares/units outstanding – diluted (5) | 120,322 | | | 119,134 | | | 120,301 | | | 119,149 | |
| | | | | | | |
Funds From Operations per common share/unit – basic (2) | $ | 1.10 | | | $ | 1.19 | | | $ | 2.22 | | | $ | 2.42 | |
Funds From Operations per common share/unit – diluted (2) | $ | 1.10 | | | $ | 1.19 | | | $ | 2.21 | | | $ | 2.42 | |
________________________
(1)We calculate Funds From Operations available to common stockholders and common unitholders (“FFO”) in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of Nareit. The White Paper defines FFO as net income or loss (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.
We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing, and investing activities than the required GAAP presentations alone would provide.
However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.
(2)Reported amounts are attributable to common stockholders, common unitholders, and restricted stock unitholders.
(3)FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.4 million and $4.9 million for the three months ended June 30, 2024 and 2023, respectively, and $10.9 million and $10.1 million for the six months ended June 30, 2024 and 2023, respectively.
(4)Calculated based on weighted average shares outstanding, including participating share-based awards (i.e. certain time-based restricted stock units) and assuming the exchange of all common limited partnership units outstanding.
(5)Calculated based on weighted average shares outstanding, including participating and non-participating share-based awards, dilutive impact of contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
v3.24.2
Cover Page Cover Page
|
|
3 Months Ended |
Jul. 30, 2024 |
Mar. 31, 2024 |
Entity Information [Line Items] |
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|
Document Type |
8-K
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|
Document Period End Date |
Jul. 30, 2024
|
|
Entity Registrant Name |
KILROY REALTY CORP
|
|
Entity Incorporation, State or Country Code |
MD
|
|
Entity File Number |
001-12675
|
|
Entity Tax Identification Number |
95-4598246
|
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Entity Central Index Key |
0001025996
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Amendment Flag |
false
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12200 W. Olympic Boulevard
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Suite 200
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Los Angeles
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CA
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90064
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City Area Code |
310
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Local Phone Number |
481-8400
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Common Stock, $.01 par value
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NYSE
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KRC
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Entity Information [Line Items] |
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Entity Registrant Name |
KILROY REALTY, L.P.
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Entity Incorporation, State or Country Code |
DE
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Entity File Number |
000-54005
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