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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kilroy Realty Corporation | NYSE:KRC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.34 | -0.99% | 33.93 | 36.095 | 33.58 | 35.00 | 1,459,903 | 22:30:00 |
þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kilroy Realty Corporation
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Maryland
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95-4598246
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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|
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Kilroy Realty, L.P.
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Delaware
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95-4612685
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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|
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12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064
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(Address of principal executive offices) (Zip Code)
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(310) 481-8400
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(Registrant's telephone number, including area code)
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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Kilroy Realty Corporation
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Kilroy Realty, L.P.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
þ
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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•
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Combined reports better reflect how management and the analyst community view the business as a single operating unit;
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•
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Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
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•
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Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
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•
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Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
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•
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consolidated financial statements;
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•
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the following notes to the consolidated financial statements:
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◦
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Note 8, Stockholders’ Equity of the Company;
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◦
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Note 9, Partners’ Capital of the Operating Partnership;
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◦
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Note 13, Net Income Available to Common Stockholders Per Share of the Company;
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◦
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Note 14, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
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◦
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Note 15, Supplemental Cash Flow Information of the Company; and
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◦
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Note 16, Supplemental Cash Flow Information of the Operating Partnership;
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•
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“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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◦
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—Liquidity and Capital Resources of the Company;” and
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◦
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—Liquidity and Capital Resources of the Operating Partnership.”
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
|
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II – OTHER INFORMATION
|
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Item 1.
|
|
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Item 1A.
|
|
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Item 2.
|
|
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Item 3.
|
|
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Item 4.
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Item 5.
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Item 6.
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June 30, 2016
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December 31, 2015
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||||
ASSETS
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(unaudited)
|
|
|
||||
REAL ESTATE ASSETS (Note 2):
|
|
|
|
||||
Land and improvements
|
$
|
1,020,287
|
|
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$
|
875,794
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Buildings and improvements
|
4,639,003
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|
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4,091,012
|
|
||
Undeveloped land and construction in progress
|
894,057
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1,361,340
|
|
||
Total real estate assets held for investment
|
6,553,347
|
|
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6,328,146
|
|
||
Accumulated depreciation and amortization
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(1,054,828
|
)
|
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(994,241
|
)
|
||
Total real estate assets held for investment, net
|
5,498,519
|
|
|
5,333,905
|
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REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 3)
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30,257
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|
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117,666
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CASH AND CASH EQUIVALENTS
|
26,332
|
|
|
56,508
|
|
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RESTRICTED CASH (Notes 1 and 3)
|
266,158
|
|
|
696
|
|
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MARKETABLE SECURITIES (Note 12)
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13,388
|
|
|
12,882
|
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CURRENT RECEIVABLES, NET (Note 5)
|
10,112
|
|
|
11,153
|
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DEFERRED RENT RECEIVABLES, NET (Note 5)
|
207,851
|
|
|
189,704
|
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DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Note 4)
|
186,903
|
|
|
176,683
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 1)
|
58,913
|
|
|
27,233
|
|
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TOTAL ASSETS
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$
|
6,298,433
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|
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$
|
5,926,430
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LIABILITIES AND EQUITY
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt, net (Notes 1, 6 and 12)
|
$
|
373,500
|
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$
|
380,835
|
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Unsecured debt, net (Notes 1, 6 and 12)
|
1,845,992
|
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1,844,634
|
|
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Unsecured line of credit (Notes 6 and 12)
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220,000
|
|
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—
|
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Accounts payable, accrued expenses and other liabilities
|
211,196
|
|
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246,323
|
|
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Accrued dividends and distributions (Note 17)
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37,733
|
|
|
34,992
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Deferred revenue and acquisition-related intangible liabilities, net (Note 4)
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138,394
|
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128,156
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Rents received in advance and tenant security deposits
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44,663
|
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|
49,361
|
|
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Liabilities of real estate assets held for sale (Note 3)
|
321
|
|
|
7,543
|
|
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Total liabilities
|
2,871,799
|
|
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2,691,844
|
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COMMITMENTS AND CONTINGENCIES (Note 11)
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||||
EQUITY:
|
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|
||||
Stockholders’ Equity (Note 8):
|
|
|
|
||||
Preferred stock, $.01 par value, 30,000,000 shares authorized:
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock, $.01 par value, 4,600,000 shares authorized, 4,000,000 shares issued and outstanding ($100,000 liquidation preference)
|
96,155
|
|
|
96,155
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6.375% Series H Cumulative Redeemable Preferred stock, $.01 par value, 4,000,000 shares authorized, issued and outstanding ($100,000 liquidation preference)
|
96,256
|
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96,256
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Common stock, $.01 par value, 150,000,000 shares authorized, 92,254,768 and 92,258,690 shares issued and outstanding, respectively
|
923
|
|
|
923
|
|
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Additional paid-in capital
|
3,074,508
|
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|
3,047,894
|
|
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Retained earnings/(distributions in excess of earnings)
|
62,647
|
|
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(70,262
|
)
|
||
Total stockholders’ equity
|
3,330,489
|
|
|
3,170,966
|
|
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Noncontrolling Interests:
|
|
|
|
||||
Common units of the Operating Partnership (Note 7)
|
89,495
|
|
|
57,100
|
|
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Noncontrolling interest in consolidated subsidiary (Note 1)
|
6,650
|
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|
6,520
|
|
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Total noncontrolling interests
|
96,145
|
|
|
63,620
|
|
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Total equity
|
3,426,634
|
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|
3,234,586
|
|
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TOTAL LIABILITIES AND EQUITY
|
$
|
6,298,433
|
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$
|
5,926,430
|
|
|
Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2016
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2015
|
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2016
|
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2015
|
||||||||
REVENUES
|
|
|
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|
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|
||||||||
Rental income
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$
|
143,653
|
|
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$
|
131,450
|
|
|
$
|
277,408
|
|
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$
|
262,382
|
|
Tenant reimbursements
|
16,138
|
|
|
14,174
|
|
|
27,542
|
|
|
28,599
|
|
||||
Other property income
|
342
|
|
|
603
|
|
|
629
|
|
|
1,328
|
|
||||
Total revenues
|
160,133
|
|
|
146,227
|
|
|
305,579
|
|
|
292,309
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
29,221
|
|
|
26,866
|
|
|
55,186
|
|
|
51,580
|
|
||||
Real estate taxes
|
13,845
|
|
|
12,430
|
|
|
24,877
|
|
|
25,145
|
|
||||
Provision for bad debts
|
—
|
|
|
47
|
|
|
—
|
|
|
289
|
|
||||
Ground leases
|
768
|
|
|
813
|
|
|
1,597
|
|
|
1,589
|
|
||||
General and administrative expenses
|
13,979
|
|
|
12,633
|
|
|
27,416
|
|
|
25,401
|
|
||||
Acquisition-related expenses
|
714
|
|
|
265
|
|
|
776
|
|
|
393
|
|
||||
Depreciation and amortization
|
53,346
|
|
|
51,658
|
|
|
103,786
|
|
|
103,145
|
|
||||
Total expenses
|
111,873
|
|
|
104,712
|
|
|
213,638
|
|
|
207,542
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (Note 12)
|
311
|
|
|
511
|
|
|
582
|
|
|
871
|
|
||||
Interest expense (Note 6)
|
(14,384
|
)
|
|
(14,864
|
)
|
|
(26,213
|
)
|
|
(31,742
|
)
|
||||
Total other (expenses) income
|
(14,073
|
)
|
|
(14,353
|
)
|
|
(25,631
|
)
|
|
(30,871
|
)
|
||||
INCOME FROM OPERATIONS BEFORE GAINS (LOSSES) ON SALES OF REAL ESTATE
|
34,187
|
|
|
27,162
|
|
|
66,310
|
|
|
53,896
|
|
||||
Net (loss) gain on sales of land (Note 3)
|
(295
|
)
|
|
—
|
|
|
(295
|
)
|
|
17,268
|
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
—
|
|
|
31,428
|
|
|
145,990
|
|
|
31,428
|
|
||||
NET INCOME
|
33,892
|
|
|
58,590
|
|
|
212,005
|
|
|
102,592
|
|
||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
(829
|
)
|
|
(1,090
|
)
|
|
(4,439
|
)
|
|
(1,905
|
)
|
||||
Net income attributable to noncontrolling interest in consolidated subsidiary
|
(216
|
)
|
|
—
|
|
|
(411
|
)
|
|
—
|
|
||||
Total income attributable to noncontrolling interests
|
(1,045
|
)
|
|
(1,090
|
)
|
|
(4,850
|
)
|
|
(1,905
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION
|
32,847
|
|
|
57,500
|
|
|
207,155
|
|
|
100,687
|
|
||||
PREFERRED DIVIDENDS
|
(3,312
|
)
|
|
(3,312
|
)
|
|
(6,625
|
)
|
|
(6,625
|
)
|
||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
29,535
|
|
|
$
|
54,188
|
|
|
$
|
200,530
|
|
|
$
|
94,062
|
|
Net income available to common stockholders per share – basic (Note 13)
|
$
|
0.32
|
|
|
$
|
0.61
|
|
|
$
|
2.17
|
|
|
$
|
1.07
|
|
Net income available to common stockholders per share – diluted (Note 13)
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.15
|
|
|
$
|
1.06
|
|
Weighted average common shares outstanding – basic (Note 13)
|
92,209,955
|
|
|
88,126,187
|
|
|
92,217,238
|
|
|
87,514,878
|
|
||||
Weighted average common shares outstanding – diluted (Note 13)
|
92,824,786
|
|
|
88,645,868
|
|
|
92,784,065
|
|
|
88,044,292
|
|
||||
Dividends declared per common share
|
$
|
0.375
|
|
|
$
|
0.350
|
|
|
$
|
0.725
|
|
|
$
|
0.700
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interests
|
|
Total
Equity
|
|||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Distributions
in Excess of
Earnings
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2014
|
$
|
192,411
|
|
|
86,259,684
|
|
|
$
|
863
|
|
|
$
|
2,635,900
|
|
|
$
|
(162,964
|
)
|
|
$
|
2,666,210
|
|
|
$
|
57,726
|
|
|
$
|
2,723,936
|
|
Net income
|
|
|
|
|
|
|
|
|
100,687
|
|
|
100,687
|
|
|
1,905
|
|
|
102,592
|
|
|||||||||||
Issuance of common stock
|
|
|
1,866,267
|
|
|
18
|
|
|
137,906
|
|
|
|
|
137,924
|
|
|
|
|
137,924
|
|
||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
|
|
844
|
|
|
|
|
844
|
|
|
|
|
844
|
|
||||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
9,251
|
|
|
|
|
9,251
|
|
|
|
|
9,251
|
|
||||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(20,752
|
)
|
|
|
|
(1,836
|
)
|
|
|
|
(1,836
|
)
|
|
|
|
(1,836
|
)
|
|||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
37,403
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||||||
Exercise of stock options
|
|
|
252,000
|
|
|
3
|
|
|
10,735
|
|
|
|
|
10,738
|
|
|
|
|
10,738
|
|
||||||||||
Exchange of common units of the Operating Partnership
|
|
|
11,030
|
|
|
|
|
316
|
|
|
|
|
316
|
|
|
(316
|
)
|
|
—
|
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
(1,890
|
)
|
|
|
|
(1,890
|
)
|
|
1,890
|
|
|
—
|
|
|||||||||||
Contribution by noncontrolling interest in consolidated subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
203
|
|
|||||||||||||
Preferred dividends
|
|
|
|
|
|
|
|
|
(6,625
|
)
|
|
(6,625
|
)
|
|
|
|
(6,625
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.70 per share/unit)
|
|
|
|
|
|
|
|
|
(62,667
|
)
|
|
(62,667
|
)
|
|
(1,255
|
)
|
|
(63,922
|
)
|
|||||||||||
BALANCE AS OF JUNE 30, 2015
|
$
|
192,411
|
|
|
88,405,632
|
|
|
$
|
884
|
|
|
$
|
2,791,226
|
|
|
$
|
(131,569
|
)
|
|
$
|
2,852,952
|
|
|
$
|
60,153
|
|
|
$
|
2,913,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Total
Stock-
holders’
Equity
|
|
Noncontrolling Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Preferred
Stock
|
|
Number of
Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained Earnings /(Distributions
in Excess of
Earnings)
|
|
||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2015
|
$
|
192,411
|
|
|
92,258,690
|
|
|
$
|
923
|
|
|
$
|
3,047,894
|
|
|
$
|
(70,262
|
)
|
|
$
|
3,170,966
|
|
|
$
|
63,620
|
|
|
$
|
3,234,586
|
|
Net income
|
|
|
|
|
|
|
|
|
207,155
|
|
|
207,155
|
|
|
4,850
|
|
|
212,005
|
|
|||||||||||
Issuance of share-based compensation awards
|
|
|
|
|
|
|
853
|
|
|
|
|
853
|
|
|
|
|
853
|
|
||||||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
|
|
12,538
|
|
|
|
|
12,538
|
|
|
|
|
12,538
|
|
||||||||||||
Exercise of stock options
|
|
|
22,000
|
|
|
|
|
937
|
|
|
|
|
937
|
|
|
|
|
937
|
|
|||||||||||
Repurchase of common stock, stock options and restricted stock units
|
|
|
(96,360
|
)
|
|
(1
|
)
|
|
(5,882
|
)
|
|
|
|
(5,883
|
)
|
|
|
|
(5,883
|
)
|
||||||||||
Settlement of restricted stock units for shares of common stock
|
|
|
69,238
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||||
Issuance of common units in connection with acquisition (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
48,033
|
|
|
48,033
|
|
|||||||||||||
Exchange of common units of the Operating Partnership
|
|
|
1,200
|
|
|
|
|
39
|
|
|
|
|
39
|
|
|
(39
|
)
|
|
—
|
|
||||||||||
Adjustment for noncontrolling interest
|
|
|
|
|
|
|
18,130
|
|
|
|
|
18,130
|
|
|
(18,130
|
)
|
|
—
|
|
|||||||||||
Distribution to noncontrolling interest in consolidated subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
(281
|
)
|
|
(281
|
)
|
|||||||||||||
Preferred dividends
|
|
|
|
|
|
|
|
|
(6,625
|
)
|
|
(6,625
|
)
|
|
|
|
(6,625
|
)
|
||||||||||||
Dividends declared per common share and common unit ($0.725 per share/unit)
|
|
|
|
|
|
|
|
|
(67,621
|
)
|
|
(67,621
|
)
|
|
(1,908
|
)
|
|
(69,529
|
)
|
|||||||||||
BALANCE AS OF JUNE 30, 2016
|
$
|
192,411
|
|
|
92,254,768
|
|
|
$
|
923
|
|
|
$
|
3,074,508
|
|
|
$
|
62,647
|
|
|
$
|
3,330,489
|
|
|
$
|
96,145
|
|
|
$
|
3,426,634
|
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
212,005
|
|
|
$
|
102,592
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of building and improvements and leasing costs
|
102,127
|
|
|
101,812
|
|
||
Depreciation of furniture, fixtures and equipment
|
1,659
|
|
|
1,333
|
|
||
Increase in provision for bad debts
|
—
|
|
|
289
|
|
||
Noncash amortization of share-based compensation awards
|
10,034
|
|
|
7,650
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
1,306
|
|
|
889
|
|
||
Noncash amortization of net below market rents (Note 4)
|
(3,243
|
)
|
|
(5,029
|
)
|
||
Gains on sales of depreciable operating properties (Note 3)
|
(145,990
|
)
|
|
(31,428
|
)
|
||
Loss (gain) on sales of land (Note 3)
|
295
|
|
|
(17,268
|
)
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(6,100
|
)
|
|
(6,304
|
)
|
||
Straight-line rents
|
(18,537
|
)
|
|
(28,575
|
)
|
||
Net change in other operating assets
|
(6,071
|
)
|
|
(9,100
|
)
|
||
Net change in other operating liabilities
|
(9,856
|
)
|
|
(33
|
)
|
||
Net cash provided by operating activities
|
137,629
|
|
|
116,828
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(162,122
|
)
|
|
(199,358
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(33,513
|
)
|
|
(52,134
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(55,415
|
)
|
|
—
|
|
||
Expenditures for operating properties and other capital assets
|
(65,543
|
)
|
|
(50,969
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
276,622
|
|
|
165,797
|
|
||
(Increase) decrease in restricted cash (Note 3)
|
(265,462
|
)
|
|
58,444
|
|
||
Decrease (increase) in acquisition-related deposits
|
1,902
|
|
|
(6,800
|
)
|
||
Increase in note receivable
|
(1,000
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(304,531
|
)
|
|
(85,020
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock
|
—
|
|
|
137,924
|
|
||
Borrowings on unsecured revolving credit facility
|
270,000
|
|
|
250,000
|
|
||
Repayments on unsecured revolving credit facility
|
(50,000
|
)
|
|
(290,000
|
)
|
||
Principal payments on secured debt (Note 6)
|
(4,808
|
)
|
|
(64,771
|
)
|
||
Financing costs
|
(679
|
)
|
|
(769
|
)
|
||
Repurchase of common stock and restricted stock units
|
(5,883
|
)
|
|
(1,836
|
)
|
||
Proceeds from exercise of stock options
|
937
|
|
|
10,738
|
|
||
Distributions to noncontrolling interests in consolidated subsidiary
|
(281
|
)
|
|
—
|
|
||
Contributions from noncontrolling interests in consolidated subsidiary
|
—
|
|
|
203
|
|
||
Dividends and distributions paid to common stockholders and common unitholders
|
(65,935
|
)
|
|
(62,311
|
)
|
||
Dividends and distributions paid to preferred stockholders and preferred unitholders
|
(6,625
|
)
|
|
(6,625
|
)
|
||
Net cash provided by (used in) financing activities
|
136,726
|
|
|
(27,447
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(30,176
|
)
|
|
4,361
|
|
||
Cash and cash equivalents, beginning of period
|
56,508
|
|
|
23,781
|
|
||
Cash and cash equivalents, end of period
|
$
|
26,332
|
|
|
$
|
28,142
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
(unaudited)
|
|
|
||||
REAL ESTATE ASSETS (Note 2):
|
|
|
|
||||
Land and improvements
|
$
|
1,020,287
|
|
|
$
|
875,794
|
|
Buildings and improvements
|
4,639,003
|
|
|
4,091,012
|
|
||
Undeveloped land and construction in progress
|
894,057
|
|
|
1,361,340
|
|
||
Total real estate assets held for investment
|
6,553,347
|
|
|
6,328,146
|
|
||
Accumulated depreciation and amortization
|
(1,054,828
|
)
|
|
(994,241
|
)
|
||
Total real estate assets held for investment, net
|
5,498,519
|
|
|
5,333,905
|
|
||
REAL ESTATE ASSETS AND OTHER ASSETS HELD FOR SALE, NET (Note 3)
|
30,257
|
|
|
117,666
|
|
||
CASH AND CASH EQUIVALENTS
|
26,332
|
|
|
56,508
|
|
||
RESTRICTED CASH (Notes 1 and 3)
|
266,158
|
|
|
696
|
|
||
MARKETABLE SECURITIES (Note 12)
|
13,388
|
|
|
12,882
|
|
||
CURRENT RECEIVABLES, NET (Note 5)
|
10,112
|
|
|
11,153
|
|
||
DEFERRED RENT RECEIVABLES, NET (Note 5)
|
207,851
|
|
|
189,704
|
|
||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET (Note 4)
|
186,903
|
|
|
176,683
|
|
||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 1)
|
58,913
|
|
|
27,233
|
|
||
TOTAL ASSETS
|
$
|
6,298,433
|
|
|
$
|
5,926,430
|
|
LIABILITIES AND CAPITAL
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Secured debt, net (Notes 1, 6 and 12)
|
$
|
373,500
|
|
|
$
|
380,835
|
|
Unsecured debt, net (Notes 1, 6 and 12)
|
1,845,992
|
|
|
1,844,634
|
|
||
Unsecured line of credit (Notes 6 and 12)
|
220,000
|
|
|
—
|
|
||
Accounts payable, accrued expenses and other liabilities
|
211,196
|
|
|
246,323
|
|
||
Accrued distributions (Note 17)
|
37,733
|
|
|
34,992
|
|
||
Deferred revenue and acquisition-related intangible liabilities, net (Note 4)
|
138,394
|
|
|
128,156
|
|
||
Rents received in advance and tenant security deposits
|
44,663
|
|
|
49,361
|
|
||
Liabilities of real estate assets held for sale (Note 3)
|
321
|
|
|
7,543
|
|
||
Total liabilities
|
2,871,799
|
|
|
2,691,844
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 11)
|
|
|
|
||||
CAPITAL:
|
|
|
|
||||
Partners’ Capital (Note 9):
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred units, 4,000,000 units issued and
outstanding ($100,000 liquidation preference) |
96,155
|
|
|
96,155
|
|
||
6.375% Series H Cumulative Redeemable Preferred units, 4,000,000 units issued and
outstanding ($100,000 liquidation preference) |
96,256
|
|
|
96,256
|
|
||
Common units, 92,254,768 and 92,258,690 held by the general partner and 2,631,276 and 1,764,775
held by common limited partners issued and outstanding, respectively |
3,223,356
|
|
|
3,031,609
|
|
||
Total partners’ capital
|
3,415,767
|
|
|
3,224,020
|
|
||
Noncontrolling interests in consolidated subsidiaries (Note 1)
|
10,867
|
|
|
10,566
|
|
||
Total capital
|
3,426,634
|
|
|
3,234,586
|
|
||
TOTAL LIABILITIES AND CAPITAL
|
$
|
6,298,433
|
|
|
$
|
5,926,430
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES
|
|
|
|
|
|
|
|
||||||||
Rental income
|
$
|
143,653
|
|
|
$
|
131,450
|
|
|
$
|
277,408
|
|
|
$
|
262,382
|
|
Tenant reimbursements
|
16,138
|
|
|
14,174
|
|
|
27,542
|
|
|
28,599
|
|
||||
Other property income
|
342
|
|
|
603
|
|
|
629
|
|
|
1,328
|
|
||||
Total revenues
|
160,133
|
|
|
146,227
|
|
|
305,579
|
|
|
292,309
|
|
||||
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property expenses
|
29,221
|
|
|
26,866
|
|
|
55,186
|
|
|
51,580
|
|
||||
Real estate taxes
|
13,845
|
|
|
12,430
|
|
|
24,877
|
|
|
25,145
|
|
||||
Provision for bad debts
|
—
|
|
|
47
|
|
|
—
|
|
|
289
|
|
||||
Ground leases
|
768
|
|
|
813
|
|
|
1,597
|
|
|
1,589
|
|
||||
General and administrative expenses
|
13,979
|
|
|
12,633
|
|
|
27,416
|
|
|
25,401
|
|
||||
Acquisition-related expenses
|
714
|
|
|
265
|
|
|
776
|
|
|
393
|
|
||||
Depreciation and amortization
|
53,346
|
|
|
51,658
|
|
|
103,786
|
|
|
103,145
|
|
||||
Total expenses
|
111,873
|
|
|
104,712
|
|
|
213,638
|
|
|
207,542
|
|
||||
OTHER (EXPENSES) INCOME
|
|
|
|
|
|
|
|
||||||||
Interest income and other net investment gains (Note 12)
|
311
|
|
|
511
|
|
|
582
|
|
|
871
|
|
||||
Interest expense (Note 6)
|
(14,384
|
)
|
|
(14,864
|
)
|
|
(26,213
|
)
|
|
(31,742
|
)
|
||||
Total other (expenses) income
|
(14,073
|
)
|
|
(14,353
|
)
|
|
(25,631
|
)
|
|
(30,871
|
)
|
||||
INCOME FROM OPERATIONS BEFORE GAINS (LOSSES) ON SALES OF REAL ESTATE
|
34,187
|
|
|
27,162
|
|
|
66,310
|
|
|
53,896
|
|
||||
Net (loss) gain on sales of land (Note 3)
|
(295
|
)
|
|
—
|
|
|
(295
|
)
|
|
17,268
|
|
||||
Gains on sales of depreciable operating properties (Note 3)
|
—
|
|
|
31,428
|
|
|
145,990
|
|
|
31,428
|
|
||||
NET INCOME
|
33,892
|
|
|
58,590
|
|
|
212,005
|
|
|
102,592
|
|
||||
Net income attributable to noncontrolling interests in consolidated subsidiaries
|
(302
|
)
|
|
(72
|
)
|
|
(582
|
)
|
|
(147
|
)
|
||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P.
|
33,590
|
|
|
58,518
|
|
|
211,423
|
|
|
102,445
|
|
||||
PREFERRED DISTRIBUTIONS
|
(3,312
|
)
|
|
(3,312
|
)
|
|
(6,625
|
)
|
|
(6,625
|
)
|
||||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS
|
$
|
30,278
|
|
|
$
|
55,206
|
|
|
$
|
204,798
|
|
|
$
|
95,820
|
|
Net income available to common unitholders per unit – basic (Note 14)
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.16
|
|
|
$
|
1.06
|
|
Net income available to common unitholders per unit – diluted (Note 14)
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.15
|
|
|
$
|
1.06
|
|
Weighted average common units outstanding – basic (Note 14)
|
94,841,231
|
|
|
89,919,357
|
|
|
94,514,876
|
|
|
89,309,718
|
|
||||
Weighted average common units outstanding – diluted (Note 14)
|
95,456,062
|
|
|
90,439,038
|
|
|
95,081,703
|
|
|
89,839,132
|
|
||||
Dividends declared per common unit
|
$
|
0.375
|
|
|
$
|
0.350
|
|
|
$
|
0.725
|
|
|
$
|
0.700
|
|
|
Partners’ Capital
|
|
Total
Partners’
Capital
|
|
Noncontrolling Interests in Consolidated Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
|
Total
Capital
|
|||||||||||||
BALANCE AS OF DECEMBER 31, 2014
|
$
|
192,411
|
|
|
88,063,884
|
|
|
$
|
2,521,900
|
|
|
$
|
2,714,311
|
|
|
$
|
9,625
|
|
|
$
|
2,723,936
|
|
Net income
|
|
|
|
|
102,445
|
|
|
102,445
|
|
|
147
|
|
|
102,592
|
|
|||||||
Issuance of common units
|
|
|
1,866,267
|
|
|
137,924
|
|
|
137,924
|
|
|
|
|
137,924
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
|
|
844
|
|
|
844
|
|
|
|
|
844
|
|
||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
9,251
|
|
|
9,251
|
|
|
|
|
9,251
|
|
||||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(20,752
|
)
|
|
(1,836
|
)
|
|
(1,836
|
)
|
|
|
|
(1,836
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
37,403
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Exercise of stock options
|
|
|
252,000
|
|
|
10,738
|
|
|
10,738
|
|
|
|
|
10,738
|
|
|||||||
Contribution by noncontrolling interest in consolidated subsidiary
|
|
|
|
|
|
|
|
|
203
|
|
|
203
|
|
|||||||||
Preferred distributions
|
|
|
|
|
(6,625
|
)
|
|
(6,625
|
)
|
|
|
|
(6,625
|
)
|
||||||||
Distributions declared per common unit ($0.70 per unit)
|
|
|
|
|
(63,922
|
)
|
|
(63,922
|
)
|
|
|
|
(63,922
|
)
|
||||||||
BALANCE AS OF JUNE 30, 2015
|
$
|
192,411
|
|
|
90,198,802
|
|
|
$
|
2,710,719
|
|
|
$
|
2,903,130
|
|
|
$
|
9,975
|
|
|
$
|
2,913,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Capital
|
|
Total
Partners’
Capital
|
|
Noncontrolling Interests in Consolidated Subsidiaries
|
|
|
|||||||||||||||
|
Preferred
Units
|
|
Number of
Common
Units
|
|
Common
Units
|
|
|
Total
Capital
|
||||||||||||||
BALANCE AS OF DECEMBER 31, 2015
|
$
|
192,411
|
|
|
94,023,465
|
|
|
$
|
3,031,609
|
|
|
$
|
3,224,020
|
|
|
$
|
10,566
|
|
|
$
|
3,234,586
|
|
Net income
|
|
|
|
|
211,423
|
|
|
211,423
|
|
|
582
|
|
|
212,005
|
|
|||||||
Issuance of common units in connection with acquisition (Note 2)
|
|
|
867,701
|
|
|
48,033
|
|
|
48,033
|
|
|
|
|
48,033
|
|
|||||||
Issuance of share-based compensation awards
|
|
|
|
|
853
|
|
|
853
|
|
|
|
|
853
|
|
||||||||
Noncash amortization of share-based compensation
|
|
|
|
|
12,538
|
|
|
12,538
|
|
|
|
|
12,538
|
|
||||||||
Exercise of stock options
|
|
|
22,000
|
|
|
937
|
|
|
937
|
|
|
|
|
937
|
|
|||||||
Repurchase of common units, stock options and restricted stock units
|
|
|
(96,360
|
)
|
|
(5,883
|
)
|
|
(5,883
|
)
|
|
|
|
(5,883
|
)
|
|||||||
Settlement of restricted stock units
|
|
|
69,238
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Distribution to noncontrolling interest in consolidated subsidiary
|
|
|
|
|
|
|
|
|
(281
|
)
|
|
(281
|
)
|
|||||||||
Preferred distributions
|
|
|
|
|
(6,625
|
)
|
|
(6,625
|
)
|
|
|
|
(6,625
|
)
|
||||||||
Distributions declared per common unit ($0.725 per unit)
|
|
|
|
|
(69,529
|
)
|
|
(69,529
|
)
|
|
|
|
(69,529
|
)
|
||||||||
BALANCE AS OF JUNE 30, 2016
|
$
|
192,411
|
|
|
94,886,044
|
|
|
$
|
3,223,356
|
|
|
$
|
3,415,767
|
|
|
$
|
10,867
|
|
|
$
|
3,426,634
|
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
212,005
|
|
|
$
|
102,592
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization of building and improvements and leasing costs
|
102,127
|
|
|
101,812
|
|
||
Depreciation of furniture, fixtures and equipment
|
1,659
|
|
|
1,333
|
|
||
Increase in provision for bad debts
|
—
|
|
|
289
|
|
||
Noncash amortization of share-based compensation awards
|
10,034
|
|
|
7,650
|
|
||
Noncash amortization of deferred financing costs and debt discounts and premiums
|
1,306
|
|
|
889
|
|
||
Noncash amortization of net below market rents (Note 4)
|
(3,243
|
)
|
|
(5,029
|
)
|
||
Gains on sales of depreciable operating properties (Note 3)
|
(145,990
|
)
|
|
(31,428
|
)
|
||
Loss (gain) on sales of land (Note 3)
|
295
|
|
|
(17,268
|
)
|
||
Noncash amortization of deferred revenue related to tenant-funded tenant improvements
|
(6,100
|
)
|
|
(6,304
|
)
|
||
Straight-line rents
|
(18,537
|
)
|
|
(28,575
|
)
|
||
Net change in other operating assets
|
(6,071
|
)
|
|
(9,100
|
)
|
||
Net change in other operating liabilities
|
(9,856
|
)
|
|
(33
|
)
|
||
Net cash provided by operating activities
|
137,629
|
|
|
116,828
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Expenditures for development properties and undeveloped land
|
(162,122
|
)
|
|
(199,358
|
)
|
||
Expenditures for acquisition of undeveloped land (Note 2)
|
(33,513
|
)
|
|
(52,134
|
)
|
||
Expenditures for acquisition of operating properties (Note 2)
|
(55,415
|
)
|
|
—
|
|
||
Expenditures for operating properties and other capital assets
|
(65,543
|
)
|
|
(50,969
|
)
|
||
Net proceeds received from dispositions (Note 3)
|
276,622
|
|
|
165,797
|
|
||
(Increase) decrease in restricted cash (Note 3)
|
(265,462
|
)
|
|
58,444
|
|
||
Decrease (increase) in acquisition-related deposits
|
1,902
|
|
|
(6,800
|
)
|
||
Increase in note receivable
|
(1,000
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(304,531
|
)
|
|
(85,020
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of common stock
|
—
|
|
|
137,924
|
|
||
Borrowings on unsecured revolving credit facility
|
270,000
|
|
|
250,000
|
|
||
Repayments on unsecured revolving credit facility
|
(50,000
|
)
|
|
(290,000
|
)
|
||
Principal payments on secured debt (Note 6)
|
(4,808
|
)
|
|
(64,771
|
)
|
||
Financing costs
|
(679
|
)
|
|
(769
|
)
|
||
Repurchase of common stock and restricted stock units
|
(5,883
|
)
|
|
(1,836
|
)
|
||
Proceeds from exercise of stock options
|
937
|
|
|
10,738
|
|
||
Distributions to noncontrolling interests in consolidated subsidiary
|
(281
|
)
|
|
—
|
|
||
Contributions from noncontrolling interests in consolidated subsidiary
|
—
|
|
|
203
|
|
||
Distributions paid to common unitholders
|
(65,935
|
)
|
|
(62,311
|
)
|
||
Distributions paid to preferred unitholders
|
(6,625
|
)
|
|
(6,625
|
)
|
||
Net cash provided by (used in) financing activities
|
136,726
|
|
|
(27,447
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(30,176
|
)
|
|
4,361
|
|
||
Cash and cash equivalents, beginning of period
|
56,508
|
|
|
23,781
|
|
||
Cash and cash equivalents, end of period
|
$
|
26,332
|
|
|
$
|
28,142
|
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
|
Number of
Tenants
|
|
Percentage
Occupied
|
||||
Stabilized Office Properties
|
102
|
|
|
13,660,231
|
|
|
526
|
|
|
95.5
|
%
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Properties held for sale
(2)
|
2
|
|
136,908
|
|
Development projects in
“
lease-up
”
|
2
|
|
443,000
|
|
Development projects under construction
|
1
|
|
700,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
These properties include
two
operating properties totaling
136,908
rentable square feet and a
7.0
acre undeveloped land parcel. See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
Property
|
|
Date of Acquisition
|
|
Number of Buildings
|
|
Rentable Square Feet (unaudited)
|
|
Purchase Price (in millions)
(1)
|
|||
1290-1300 Terra Bella Avenue, Mountain View, CA
|
|
June 8, 2016
|
|
1
|
|
114,175
|
|
|
$
|
55.4
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In connection with this acquisition, we assumed
$0.2 million
in accrued liabilities that are not included in the purchase price above.
|
|
Total 2016 Operating Property Acquisitions
(1)
|
||
|
|
||
Assets
|
|
||
Land and improvements
|
$
|
28,730
|
|
Buildings and improvements
(2)
|
27,555
|
|
|
Deferred leasing costs and acquisition-related intangible assets
(3)
|
4,180
|
|
|
Total assets acquired
|
60,465
|
|
|
Liabilities
|
|
||
Accounts payable, accrued expenses and other liabilities
|
170
|
|
|
Deferred revenue and acquisition-related intangible liabilities
(4)
|
4,880
|
|
|
Total liabilities assumed
|
5,050
|
|
|
Net assets and liabilities acquired
|
$
|
55,415
|
|
(1)
|
The purchase price of the acquisition completed during the
six
months ended June 30, 2016 was less than 5% of the Company’s total assets as of June 30, 2016.
|
(2)
|
Represents buildings, building improvements and tenant improvements.
|
(3)
|
Represents in-place leases (approximately
$2.5 million
with a weighted average amortization period of
3.6
years) and leasing commissions (approximately
$1.7 million
with a weighted average amortization period of
3.7
years).
|
(4)
|
Represents below-market leases (approximately
$4.9 million
with a weighted average amortization period of
3.4
years).
|
Property
|
|
Submarket
|
|
Month of Disposition
|
|
Gross Site Acreage (unaudited)
|
|
Sales Price
(1)
(in millions)
|
||
Carlsbad Oaks - Lot 7
(2)
|
|
Carlsbad
|
|
January
|
|
7.6
|
|
$
|
4.5
|
|
Carlsbad Oaks - Lots 4 & 5
|
|
Carlsbad
|
|
June
|
|
11.2
|
|
6.0
|
|
|
Carlsbad Oaks - Lot 8
|
|
Carlsbad
|
|
June
|
|
13.2
|
|
8.9
|
|
|
Total Land Dispositions
(3)
|
|
|
|
|
|
32.0
|
|
$
|
19.4
|
|
(1)
|
Represents gross sales price before the impact of broker commissions and closing costs.
|
(2)
|
This land parcel was classified as held for sale as of December 31, 2015.
|
(3)
|
In connection with these land dispositions,
$2.3 million
of secured debt was assumed by the buyers. See Note 6 “Secured and Unsecured Debt of the Operating Partnership” for additional information.
|
Location
|
|
Property Type
|
|
Month of Disposition
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
Sales Price
(1)
(in millions)
|
|||
Torrey Santa Fe Properties
(2)
|
|
Office
|
|
January
|
|
4
|
|
465,812
|
|
|
$
|
262.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents gross sales price before the impact of broker commissions and closing costs.
|
(2)
|
The Torrey Santa Fe Properties include the following: 7525 Torrey Santa Fe, 7535 Torrey Santa Fe, 7545 Torrey Santa Fe, and 7555 Torrey Santa Fe. These properties were classified as held for sale at
December 31, 2015
.
|
Location
|
|
Submarket
|
|
Property Type
|
|
Number of Buildings
|
|
Rentable Square Feet
|
|
4930, 4939 & 4955 Directors Place
(1)
|
|
Sorrento Mesa
|
|
Office
|
|
2
|
|
136,908
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These properties include
two
operating properties totaling
136,908
rentable square feet and a
7.0
acre undeveloped land parcel. On July 21, 2016, the Company completed the sale of these properties for a gross sales price of
$49.0 million
.
|
Real estate assets and other assets held for sale
|
|
(in thousands)
|
||
Land and improvements
|
|
$
|
5,377
|
|
Buildings and improvements
|
|
34,246
|
|
|
Undeveloped land
|
|
12,355
|
|
|
Total real estate held for sale
|
|
51,978
|
|
|
Accumulated depreciation and amortization
|
|
(22,400
|
)
|
|
Total real estate held for sale, net
|
|
29,578
|
|
|
Deferred rent receivables, net
|
|
467
|
|
|
Deferred leasing costs and acquisition-related intangible assets, net
|
|
57
|
|
|
Prepaid expenses and other assets, net
|
|
155
|
|
|
Real estate and other assets held for sale, net
|
|
$
|
30,257
|
|
Liabilities and deferred revenue of real estate assets held for sale
|
|
|
||
Accounts payable, accrued expenses and other liabilities
|
|
$
|
120
|
|
Deferred revenue and acquisition-related intangible liabilities, net
|
|
201
|
|
|
Liabilities and deferred revenue of real estate assets held for sale
|
|
$
|
321
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Deferred Leasing Costs and Acquisition-Related Intangible Assets, net:
(1)
|
|
|
|
||||
Deferred leasing costs
|
$
|
228,701
|
|
|
$
|
205,888
|
|
Accumulated amortization
|
(81,460
|
)
|
|
(72,745
|
)
|
||
Deferred leasing costs, net
|
147,241
|
|
|
133,143
|
|
||
Above-market operating leases
|
10,662
|
|
|
10,989
|
|
||
Accumulated amortization
|
(7,188
|
)
|
|
(6,739
|
)
|
||
Above-market operating leases, net
|
3,474
|
|
|
4,250
|
|
||
In-place leases
|
72,944
|
|
|
72,639
|
|
||
Accumulated amortization
|
(37,212
|
)
|
|
(33,810
|
)
|
||
In-place leases, net
|
35,732
|
|
|
38,829
|
|
||
Below-market ground lease obligation
|
490
|
|
|
490
|
|
||
Accumulated amortization
|
(34
|
)
|
|
(29
|
)
|
||
Below-market ground lease obligation, net
|
456
|
|
|
461
|
|
||
Total deferred leasing costs and acquisition-related intangible assets, net
|
$
|
186,903
|
|
|
$
|
176,683
|
|
Acquisition-Related Intangible Liabilities, net:
(2) (3)
|
|
|
|
||||
Below-market operating leases
|
$
|
57,166
|
|
|
$
|
53,502
|
|
Accumulated amortization
|
(29,899
|
)
|
|
(27,074
|
)
|
||
Below-market operating leases, net
|
27,267
|
|
|
26,428
|
|
||
Above-market ground lease obligation
|
6,320
|
|
|
6,320
|
|
||
Accumulated amortization
|
(475
|
)
|
|
(424
|
)
|
||
Above-market ground lease obligation, net
|
5,845
|
|
|
5,896
|
|
||
Total acquisition-related intangible liabilities, net
|
$
|
33,112
|
|
|
$
|
32,324
|
|
(1)
|
Excludes deferred leasing costs and acquisition-related intangible assets, net related to properties held for sale.
|
(2)
|
Excludes acquisition-related intangible liabilities, net related to properties held for sale.
|
(3)
|
Included in deferred revenue and acquisition-related intangible liabilities, net in the consolidated balance sheets.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Deferred leasing costs
(1)
|
$
|
6,961
|
|
|
$
|
7,093
|
|
|
$
|
13,744
|
|
|
$
|
13,914
|
|
Above-market operating leases
(2)
|
384
|
|
|
737
|
|
|
776
|
|
|
1,648
|
|
||||
In-place leases
(1)
|
2,669
|
|
|
4,416
|
|
|
5,557
|
|
|
8,637
|
|
||||
Below-market ground lease obligation
(3)
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Below-market operating leases
(4)
|
(2,024
|
)
|
|
(3,838
|
)
|
|
(4,019
|
)
|
|
(6,677
|
)
|
||||
Above-market ground lease obligation
(5)
|
(25
|
)
|
|
(25
|
)
|
|
(50
|
)
|
|
(50
|
)
|
||||
Total
|
$
|
7,967
|
|
|
$
|
8,385
|
|
|
$
|
16,012
|
|
|
$
|
17,476
|
|
(1)
|
The amortization of deferred leasing costs and in-place leases is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.
|
(2)
|
The amortization of above-market operating leases is recorded as a decrease to rental income in the consolidated statements of operations for the periods presented.
|
(3)
|
The amortization of the below-market ground lease obligation is recorded as an increase to ground lease expense in the consolidated statements of operations for the periods presented.
|
(4)
|
The amortization of below-market operating leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.
|
(5)
|
The amortization of the above-market ground lease obligation is recorded as a decrease to ground lease expense in the consolidated statements of operations for the periods presented.
|
Year
|
Deferred Leasing Costs
|
|
Above-Market Operating Leases
(1)
|
|
In-Place Leases
|
|
Below-Market Ground Lease Obligation
(2)
|
|
Below-Market Operating Leases
(3)
|
|
Above-Market Ground Lease Obligation
(4)
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Remaining 2016
|
$
|
14,251
|
|
|
$
|
725
|
|
|
$
|
5,466
|
|
|
$
|
4
|
|
|
$
|
(4,494
|
)
|
|
$
|
(50
|
)
|
2017
|
26,180
|
|
|
1,241
|
|
|
9,738
|
|
|
8
|
|
|
(8,437
|
)
|
|
(101
|
)
|
||||||
2018
|
22,883
|
|
|
831
|
|
|
6,998
|
|
|
8
|
|
|
(7,159
|
)
|
|
(101
|
)
|
||||||
2019
|
18,748
|
|
|
643
|
|
|
5,149
|
|
|
8
|
|
|
(4,583
|
)
|
|
(101
|
)
|
||||||
2020
|
14,495
|
|
|
16
|
|
|
2,923
|
|
|
8
|
|
|
(2,169
|
)
|
|
(101
|
)
|
||||||
Thereafter
|
50,684
|
|
|
18
|
|
|
5,458
|
|
|
420
|
|
|
(425
|
)
|
|
(5,391
|
)
|
||||||
Total
|
$
|
147,241
|
|
|
$
|
3,474
|
|
|
$
|
35,732
|
|
|
$
|
456
|
|
|
$
|
(27,267
|
)
|
|
$
|
(5,845
|
)
|
(1)
|
Represents estimated annual amortization related to above-market operating leases. Amounts will be recorded as a decrease to rental income in the consolidated statements of operations.
|
(2)
|
Represents estimated annual amortization related to below-market ground lease obligations. Amounts will be recorded as an increase to ground lease expense in the consolidated statements of operations.
|
(3)
|
Represents estimated annual amortization related to below-market operating leases. Amounts will be recorded as an increase to rental income in the consolidated statements of operations.
|
(4)
|
Represents estimated annual amortization related to above-market ground lease obligations. Amounts will be recorded as a decrease to ground lease expense in the consolidated statements of operations.
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Current receivables
|
$
|
11,930
|
|
|
$
|
13,233
|
|
Allowance for uncollectible tenant receivables
|
(1,818
|
)
|
|
(2,080
|
)
|
||
Current receivables, net
(1)
|
$
|
10,112
|
|
|
$
|
11,153
|
|
(1)
|
Excludes current receivables, net related to real estate held for sale.
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Deferred rent receivables
|
$
|
209,378
|
|
|
$
|
191,586
|
|
Allowance for deferred rent receivables
|
(1,527
|
)
|
|
(1,882
|
)
|
||
Deferred rent receivables, net
(1)
|
$
|
207,851
|
|
|
$
|
189,704
|
|
(1)
|
Excludes deferred rent receivables related to real estate held for sale.
|
Type of Debt
|
Annual Stated Interest Rate
(1)
|
|
Effective Interest Rate
(1)(2)
|
|
Maturity Date
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
|
|
|
|
|
|
(in thousands)
|
||||||
Mortgage note payable
(4)
|
4.27%
|
|
4.27%
|
|
February 2018
|
|
$
|
127,049
|
|
|
$
|
128,315
|
|
Mortgage note payable
(4)
|
4.48%
|
|
4.48%
|
|
July 2027
|
|
95,563
|
|
|
96,354
|
|
||
Mortgage note payable
(3)
(4)
|
6.05%
|
|
3.50%
|
|
June 2019
|
|
84,179
|
|
|
85,890
|
|
||
Mortgage note payable
|
6.51%
|
|
6.51%
|
|
February 2017
|
|
64,994
|
|
|
65,563
|
|
||
Mortgage note payable
|
7.15%
|
|
7.15%
|
|
May 2017
|
|
2,625
|
|
|
3,987
|
|
||
Other
(5)
|
Various
|
|
Various
|
|
Various
|
|
—
|
|
|
1,809
|
|
||
Total secured debt
|
|
|
|
|
|
|
$
|
374,410
|
|
|
$
|
381,918
|
|
Unamortized deferred financing costs
|
|
|
|
|
|
|
(910
|
)
|
|
(1,083
|
)
|
||
Total secured debt, net
|
|
|
|
|
|
|
$
|
373,500
|
|
|
$
|
380,835
|
|
(1)
|
All interest rates presented are fixed-rate interest rates.
|
(2)
|
Represents the effective interest rate including the amortization of initial issuance discounts/premiums excluding the amortization of deferred financing costs.
|
(3)
|
Amounts reported include the amounts of unamortized debt premiums of
$5.3 million
and
$6.2 million
as of
June 30, 2016
and
December 31, 2015
, respectively.
|
(4)
|
The secured debt and the related properties that secure the debt are held in a special purpose entity and the properties are not available to satisfy the debts and other obligations of the Company or the Operating Partnership.
|
(5)
|
Balance of
$1.8 million
as of
December 31, 2015
included public facility bonds that were assumed by the buyers in connection with sales of land during the
six
months ended
June 30, 2016
.
|
|
|
|
|
|
|
|
|
|
Principal Amount as of
|
||||||
|
Issuance date
|
|
Maturity date
|
|
Stated
coupon rate
|
|
Effective interest rate
(1)
|
|
June 30,
2016 |
|
December 31, 2015
|
||||
|
|
|
|
|
|
|
|
|
(in thousands)
|
||||||
4.375% Unsecured Senior Notes
(2)
|
September 2015
|
|
October 2025
|
|
4.375%
|
|
4.440%
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(5,123
|
)
|
|
(5,400
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
394,877
|
|
|
$
|
394,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4.250% Unsecured Senior Notes
(3)
|
July 2014
|
|
August 2029
|
|
4.250%
|
|
4.350%
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(6,962
|
)
|
|
(7,228
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
393,038
|
|
|
$
|
392,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
3.800% Unsecured Senior Notes
(4)
|
January 2013
|
|
January 2023
|
|
3.800%
|
|
3.804%
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(1,794
|
)
|
|
(1,931
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
298,206
|
|
|
$
|
298,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4.800% Unsecured Senior Notes
(4) (5)
|
July 2011
|
|
July 2018
|
|
4.800%
|
|
4.827%
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(1,009
|
)
|
|
(1,251
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
323,991
|
|
|
$
|
323,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
6.625% Unsecured Senior Notes
(6)
|
May 2010
|
|
June 2020
|
|
6.625%
|
|
6.743%
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Unamortized discount and deferred financing costs
|
|
|
|
|
|
|
|
|
(2,142
|
)
|
|
(2,414
|
)
|
||
Net carrying amount
|
|
|
|
|
|
|
|
|
$
|
247,858
|
|
|
$
|
247,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Unsecured Senior Notes, Net
|
|
|
|
|
|
|
|
|
$
|
1,657,970
|
|
|
$
|
1,656,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the effective interest rate including the amortization of initial issuance discounts/premiums excluding the amortization of deferred financing costs.
|
(2)
|
Interest on these notes is payable semi-annually in arrears on April 1st and October 1st of each year.
|
(3)
|
Interest on these notes is payable semi-annually in arrears on February 15th and August 15th of each year.
|
(4)
|
Interest on these notes is payable semi-annually in arrears on January 15th and July 15th of each year.
|
(5)
|
In October 2015, certain common limited partners in the Operating Partnership that previously contributed their interests in the property at 6255 W. Sunset Blvd., Los Angeles, California to the Operating Partnership entered into an agreement with the Company. Pursuant to this agreement, such common limited partners will reimburse the Company for a portion of any amounts the Company may be required to pay pursuant to its guarantee of the Operating Partnership’s 4.800% Senior Notes due 2018 or that the Company may otherwise become required to pay under applicable law with respect to such notes.
|
(6)
|
Interest on these notes is payable semi-annually in arrears on June 1st and December 1st of each year.
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
(1)
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Interest rate
(2)
|
1.62
|
%
|
|
1.40
|
%
|
||
Maturity date
|
July 2019
|
(1)
|
As of
June 30, 2016
and
December 31, 2015
,
$0.8 million
and
$0.9 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
|
(2)
|
Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus
1.150%
as of
June 30, 2016
and
December 31, 2015
.
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Outstanding borrowings
(1)
|
$
|
220,000
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
380,000
|
|
|
600,000
|
|
||
Total borrowing capacity
(2)
|
$
|
600,000
|
|
|
$
|
600,000
|
|
Interest rate
(3)
|
1.52
|
%
|
|
1.40
|
%
|
||
Facility fee-annual rate
(4)
|
0.200%
|
||||||
Maturity date
|
July 2019
|
(1)
|
On July 20, 2016, we repaid the total outstanding borrowings on our unsecured revolving credit facility. Refer to Note 17 “Subsequent Events” for additional information.
|
(2)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$311.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and term loan facility.
|
(3)
|
Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus
1.050%
as of
June 30, 2016
and
December 31, 2015
.
|
(4)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of
June 30, 2016
and
December 31, 2015
,
$3.9 million
and
$4.6 million
, of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.
|
Year
|
(in thousands)
|
||
Remaining 2016
|
$
|
4,926
|
|
2017
|
71,692
|
|
|
2018
|
451,669
|
|
|
2019
|
485,309
|
|
|
2020
|
251,913
|
|
|
Thereafter
|
1,187,589
|
|
|
Total
(1)
|
$
|
2,453,098
|
|
(1)
|
Includes gross principal balance of outstanding debt before the effect of the following at
June 30, 2016
:
$11.9 million
of unamortized deferred financing costs,
$7.0 million
of unamortized discounts for the unsecured senior notes and
$5.3 million
of unamortized premiums for the secured debt.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Gross interest expense
|
$
|
26,668
|
|
|
$
|
27,187
|
|
|
$
|
52,843
|
|
|
$
|
54,936
|
|
Capitalized interest and deferred financing costs
|
(12,284
|
)
|
|
(12,323
|
)
|
|
(26,630
|
)
|
|
(23,194
|
)
|
||||
Interest expense
|
$
|
14,384
|
|
|
$
|
14,864
|
|
|
$
|
26,213
|
|
|
$
|
31,742
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
June 30, 2015
|
|||
Company owned common units in the Operating Partnership
|
92,254,768
|
|
|
92,258,690
|
|
|
88,405,632
|
|
Company owned general partnership interest
|
97.2
|
%
|
|
98.1
|
%
|
|
98.0
|
%
|
Noncontrolling common units of the Operating Partnership
|
2,631,276
|
|
|
1,764,775
|
|
|
1,793,170
|
|
Ownership interest of noncontrolling interest
|
2.8
|
%
|
|
1.9
|
%
|
|
2.0
|
%
|
|
Fair Value Assumptions
|
Fair value per share at January 28, 2016
|
$57.08
|
Expected share price volatility
|
26.00%
|
Risk-free interest rate
|
1.13%
|
Remaining expected life
|
2.9 years
|
|
Fair Value (Level 1)
(1)
|
||||||
|
June 30, 2016
|
|
December 31, 2015
|
||||
Description
|
(in thousands)
|
||||||
Marketable securities
(2)
|
$
|
13,388
|
|
|
$
|
12,882
|
|
(1)
|
Based on quoted prices in active markets for identical securities.
|
(2)
|
The marketable securities are held in a limited rabbi trust.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Description
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Net gain on marketable securities
|
$
|
249
|
|
|
$
|
122
|
|
|
$
|
386
|
|
|
$
|
510
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying
Value |
|
Fair
Value (1) |
|
Carrying
Value |
|
Fair
Value (1) |
||||||||
|
(in thousands)
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Secured debt, net
|
$
|
373,500
|
|
|
$
|
387,976
|
|
|
$
|
380,835
|
|
|
$
|
391,611
|
|
Unsecured debt, net
|
1,845,992
|
|
|
1,987,469
|
|
|
1,844,634
|
|
|
1,898,863
|
|
||||
Unsecured line of credit
|
220,000
|
|
|
220,442
|
|
|
—
|
|
|
—
|
|
(1)
|
Fair value calculated using Level II inputs, which are based on model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands, except share and per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty Corporation
|
$
|
32,847
|
|
|
$
|
57,500
|
|
|
$
|
207,155
|
|
|
$
|
100,687
|
|
Preferred dividends
|
(3,312
|
)
|
|
(3,312
|
)
|
|
(6,625
|
)
|
|
(6,625
|
)
|
||||
Allocation to participating securities
(1)
|
(423
|
)
|
|
(418
|
)
|
|
(818
|
)
|
|
(833
|
)
|
||||
Numerator for basic and diluted net income available to common stockholders
|
$
|
29,112
|
|
|
$
|
53,770
|
|
|
$
|
199,712
|
|
|
$
|
93,229
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested shares outstanding
|
92,209,955
|
|
|
88,126,187
|
|
|
92,217,238
|
|
|
87,514,878
|
|
||||
Effect of dilutive securities
|
614,831
|
|
|
519,681
|
|
|
566,827
|
|
|
529,414
|
|
||||
Diluted weighted average vested shares and common share equivalents outstanding
|
92,824,786
|
|
|
88,645,868
|
|
|
92,784,065
|
|
|
88,044,292
|
|
||||
Basic earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.32
|
|
|
$
|
0.61
|
|
|
$
|
2.17
|
|
|
$
|
1.07
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income available to common stockholders per share
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.15
|
|
|
$
|
1.06
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands, except unit and per unit amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Kilroy Realty, L.P.
|
$
|
33,590
|
|
|
$
|
58,518
|
|
|
$
|
211,423
|
|
|
$
|
102,445
|
|
Preferred distributions
|
(3,312
|
)
|
|
(3,312
|
)
|
|
(6,625
|
)
|
|
(6,625
|
)
|
||||
Allocation to participating securities
(1)
|
(423
|
)
|
|
(418
|
)
|
|
(818
|
)
|
|
(833
|
)
|
||||
Numerator for basic and diluted net income available to common unitholders
|
$
|
29,855
|
|
|
$
|
54,788
|
|
|
$
|
203,980
|
|
|
$
|
94,987
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average vested units outstanding
|
94,841,231
|
|
|
89,919,357
|
|
|
94,514,876
|
|
|
89,309,718
|
|
||||
Effect of dilutive securities
|
614,831
|
|
|
519,681
|
|
|
566,827
|
|
|
529,414
|
|
||||
Diluted weighted average vested units and common unit equivalents outstanding
|
95,456,062
|
|
|
90,439,038
|
|
|
95,081,703
|
|
|
89,839,132
|
|
||||
Basic earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.16
|
|
|
$
|
1.06
|
|
Diluted earnings per unit:
|
|
|
|
|
|
|
|
||||||||
Net income available to common unitholders per unit
|
$
|
0.31
|
|
|
$
|
0.61
|
|
|
$
|
2.15
|
|
|
$
|
1.06
|
|
(1)
|
Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $25,674 and $22,753 as of June 30, 2016 and 2015, respectively
|
$
|
25,787
|
|
|
$
|
31,846
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
50,246
|
|
|
$
|
65,752
|
|
Tenant improvements funded directly by tenants
|
$
|
10,713
|
|
|
$
|
13,036
|
|
Assumption of accrued liabilities in connection with acquisitions (Note 2)
|
$
|
4,911
|
|
|
$
|
1,478
|
|
Release of holdback funds to third party
|
$
|
—
|
|
|
$
|
9,279
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Issuance of common units of the Operating Partnership in connection with an acquisition (Note 2)
|
$
|
48,033
|
|
|
$
|
—
|
|
Accrual of dividends and distributions payable to common stockholders and common unitholders
|
$
|
36,093
|
|
|
$
|
32,030
|
|
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,656
|
|
Secured debt assumed by buyers in connection with land dispositions (Note 3)
|
$
|
2,322
|
|
|
$
|
—
|
|
Exchange of common units of the Operating Partnership into shares of the Company’s common stock
|
$
|
39
|
|
|
$
|
316
|
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
SUPPLEMENTAL CASH FLOWS INFORMATION:
|
|
|
|
||||
Cash paid for interest, net of capitalized interest of $25,674 and $22,753 as of June 30, 2016 and 2015, respectively
|
$
|
25,787
|
|
|
$
|
31,846
|
|
NONCASH INVESTING TRANSACTIONS:
|
|
|
|
||||
Accrual for expenditures for operating properties and development properties
|
$
|
50,246
|
|
|
$
|
65,752
|
|
Tenant improvements funded directly by tenants
|
$
|
10,713
|
|
|
$
|
13,036
|
|
Assumption of accrued liabilities in connection with development acquisitions (Note 2)
|
$
|
4,911
|
|
|
$
|
1,478
|
|
Release of holdback funds to third party
|
$
|
—
|
|
|
$
|
9,279
|
|
NONCASH FINANCING TRANSACTIONS:
|
|
|
|
||||
Issuance of common units in connection with an acquisition (Note 2)
|
$
|
48,033
|
|
|
$
|
—
|
|
Accrual of distributions payable to common unitholders
|
$
|
36,093
|
|
|
$
|
32,030
|
|
Accrual of distributions payable to preferred unitholders
|
$
|
1,656
|
|
|
$
|
1,656
|
|
Secured debt assumed by buyers in connection with land dispositions (Note 3)
|
$
|
2,322
|
|
|
$
|
—
|
|
•
|
Columbia Square - Residential, Hollywood, California, the 21-story residential component of the Columbia Square project, which is comprised of
200
units, is a mix of high-end long-term rentals and extended stay apartment homes and has a total estimated investment of approximately
$160 million
. As of
June 30, 2016
, the project was
22%
leased. Construction on the project was completed in the second quarter of 2016.
|
•
|
350 Mission Street, SOMA, San Francisco, California, which we acquired in October 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately
$277.8 million
and encompasses approximately
455,340
rentable square feet. The office component of this project is
100%
leased to salesforce.com, inc.
|
•
|
333 Brannan Street, SOMA, San Francisco, California, which we acquired in July 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately
$101.5 million
and encompasses approximately
185,602
rentable square feet. The office component of the project is
100%
leased to Dropbox, Inc.
|
•
|
Columbia Square Office Phase 2, Hollywood, California, located in the heart of Hollywood, California, two blocks from the corner of Sunset Boulevard and Vine Street. This project is comprised of three buildings totaling approximately
370,000
rentable square feet with a total estimated investment of
$220 million
.
The building core and shell of the project were completed in the first quarter of 2016. The project is currently
80%
committed and
7%
occupied and is expected to be stabilized in the first quarter of 2017.
|
•
|
The Heights at Del Mar, Del Mar, California, a
73,000
square foot office project that has a total estimated investment of approximately
$45 million
.
The building core and shell of the project were completed in the fourth quarter of 2015. The project is currently
34%
committed and is expected to be stabilized in the fourth quarter of 2016.
|
•
|
The Exchange on 16th, Mission Bay, San Francisco, California, was acquired in May 2014 and we commenced construction in June 2015. This project encompasses approximately
700,000
gross rentable square feet in four buildings and represents a total estimated investment of approximately
$485 million
.
Construction is currently in process and the building core and shell are currently estimated to be completed in the second half of 2017.
|
Near-Term Development Pipeline
(1)
|
|
Location
|
|
Potential Start Date
(2)
|
|
Approx. Developable Square Feet
|
|
Total Estimated Investment
|
|
Total Costs as of 6/30/2016
(3)
($ in millions)
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
100 Hooper
|
|
San Francisco
|
|
2016
|
|
400,000
|
|
$
|
255
|
|
|
$
|
94.6
|
|
333 Dexter
(4)
|
|
South Lake Union
|
|
2016
|
|
700,000
|
|
385
|
|
|
65.3
|
|
||
One Paseo
(5)
|
|
Del Mar
|
|
2016
|
|
1,100,000
|
|
TBD
|
|
|
190.5
|
|
||
Academy Project
|
|
Hollywood
|
|
2017
|
|
545,000
|
|
385
|
|
|
67.5
|
|
||
Total Near-Term Development Pipeline
|
|
|
|
|
|
2,745,000
|
|
|
|
|
$
|
417.9
|
|
(1)
|
Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one of more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new office supply, regulatory and entitlement processes, and project design.
|
(2)
|
Potential start dates assume successfully obtaining all entitlements and approvals necessary to commence construction. Actual commencement is subject to extensive consideration of market conditions and economic factors. 100 Hooper is fully-entitled with Proposition M allocation.
|
(3)
|
Represents cash paid and costs incurred as of
June 30, 2016
.
|
(4)
|
Consists of four adjacent parcels in the South Lake Union submarket of Seattle.
|
(5)
|
In July 2016, the Company received final entitlement approval for this project.
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
||||||||||||||||||||||||
|
Number of Leases
(2)
|
|
Rentable Square Feet
(2)
|
|
TI/LC per
Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(5)
|
|
Changes in
Cash Rents
(6)
|
|
Retention Rates
(7)
|
|
Weighted Average Lease Term (in months)
|
||||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|||||||||||||||||||
Three Months Ended
June 30, 2016
|
24
|
|
|
16
|
|
|
135,452
|
|
|
137,500
|
|
|
$
|
41.89
|
|
|
25.1
|
%
|
|
7.3
|
%
|
|
50.7
|
%
|
|
74
|
|
Six Months Ended
June 30, 2016
|
45
|
|
|
34
|
|
|
275,978
|
|
|
234,452
|
|
|
$
|
38.96
|
|
|
33.3
|
%
|
|
18.1
|
%
|
|
45.6
|
%
|
|
73
|
|
|
1st & 2nd Generation
(1)
|
|
2nd Generation
(1)
|
|||||||||||||||||||||
|
Number of Leases
(2)
|
|
Rentable Square Feet
(2)
|
|
TI/LC per Sq. Ft.
(3)
|
|
Changes in
Rents
(4)(5)
|
|
Changes in
Cash Rents
(6)
|
|
Weighted Average Lease Term
(in months)
|
|||||||||||||
|
New
|
|
Renewal
|
|
New
|
|
Renewal
|
|
|
|
||||||||||||||
Three Months Ended
June 30, 2016 |
20
|
|
|
16
|
|
|
128,612
|
|
|
137,500
|
|
|
$
|
47.58
|
|
|
40.1
|
%
|
|
19.0
|
%
|
|
72
|
|
Six Months Ended
June 30, 2016 |
47
|
|
|
34
|
|
|
270,974
|
|
|
234,452
|
|
|
$
|
41.66
|
|
|
29.8
|
%
|
|
14.9
|
%
|
|
74
|
|
(1)
|
First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream.
|
(2)
|
Represents leasing activity for leases that commenced or signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
|
(3)
|
Tenant improvements and leasing commissions per square foot exclude tenant-funded tenant improvements.
|
(4)
|
Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.
|
(5)
|
Excludes commenced and executed leases of approximately 24,446 and 40,061 square feet, respectively, for the
three
months ended
June 30, 2016
, and
96,477 and 71,772 rentable square feet, respectively, for the
six
months ended
June 30, 2016
, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a meaningful market comparison.
|
(6)
|
Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.
|
(7)
|
Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.
|
(8)
|
For the
three
months ended
June 30, 2016
,
13
leases totaling
103,114
rentable square feet were signed but not commenced as of
June 30, 2016
. F
or the
six
months ended
June 30, 2016
,
23
new leases totaling
201,007
rentable square feet were signed but not commenced as of
June 30, 2016
.
|
Year of Lease Expiration
|
|
Number of
Expiring
Leases
|
|
Total Square Feet
|
|
% of Total Leased Sq. Ft.
|
|
Annualized Base Rent
(2)
|
|
% of Total Annualized Base Rent
(2)
|
|
Annualized Base Rent per Sq. Ft.
(2)
|
||||||||
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
||||||||
Remainder of 2016
|
|
44
|
|
|
273,159
|
|
|
2.1
|
%
|
|
$
|
10,161
|
|
|
1.9
|
%
|
|
$
|
37.20
|
|
2017
|
|
109
|
|
|
1,192,681
|
|
|
9.3
|
%
|
|
44,793
|
|
|
8.5
|
%
|
|
37.56
|
|
||
2018
|
|
78
|
|
|
1,356,827
|
|
|
10.6
|
%
|
|
54,648
|
|
|
10.4
|
%
|
|
40.28
|
|
||
2019
|
|
100
|
|
|
1,637,865
|
|
|
12.8
|
%
|
|
59,448
|
|
|
11.3
|
%
|
|
36.30
|
|
||
2020
|
|
92
|
|
|
1,913,643
|
|
|
15.0
|
%
|
|
71,568
|
|
|
13.6
|
%
|
|
37.40
|
|
||
2021
|
|
73
|
|
|
1,021,230
|
|
|
8.0
|
%
|
|
43,288
|
|
|
8.2
|
%
|
|
42.39
|
|
||
Total
|
|
496
|
|
|
7,395,405
|
|
|
57.8
|
%
|
|
$
|
283,906
|
|
|
53.9
|
%
|
|
$
|
38.39
|
|
(1)
|
The information presented for all lease expiration activity reflects leasing activity through
June 30, 2016
for our stabilized portfolio. For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases, intercompany leases, vacant space and lease renewal options not executed as of
June 30, 2016
.
|
(2)
|
Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”
|
|
Number of
Properties/Projects
|
|
Estimated Rentable
Square Feet
(1)
|
|
Properties held for sale
(2)
|
2
|
|
136,908
|
|
Development projects in
“
lease-up
”
|
2
|
|
443,000
|
|
Development projects under construction
|
1
|
|
700,000
|
|
(1)
|
Estimated rentable square feet upon completion.
|
(2)
|
These properties include
two
operating properties totaling
136,908
rentable square feet and a
7.0
acre undeveloped land parcel. See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
|
Number of
Buildings
|
|
Rentable
Square Feet
|
||
Total as of June 30, 2015
|
101
|
|
|
13,050,947
|
|
Acquisitions
(1)
|
1
|
|
|
114,175
|
|
Completed development properties placed in-service
|
6
|
|
|
1,089,446
|
|
Dispositions and properties held for sale
|
(6
|
)
|
|
(602,713
|
)
|
Remeasurement
|
—
|
|
|
8,376
|
|
Total as of June 30, 2016
|
102
|
|
|
13,660,231
|
|
(1)
|
Excludes development property acquisitions.
|
Region
|
|
Number of
Buildings |
|
Rentable Square Feet
|
|
Occupancy at
(1)
|
|||||||||
|
6/30/2016
|
|
3/31/2016
|
|
12/31/2015
|
||||||||||
Los Angeles and Ventura Counties
|
|
29
|
|
|
3,619,014
|
|
|
94.2
|
%
|
|
94.3
|
%
|
|
95.1
|
%
|
Orange County
|
|
1
|
|
|
271,556
|
|
|
97.8
|
%
|
|
97.6
|
%
|
|
94.0
|
%
|
San Diego
|
|
31
|
|
|
2,711,584
|
|
|
89.0
|
%
|
|
88.8
|
%
|
|
89.6
|
%
|
San Francisco Bay Area
|
|
29
|
|
|
4,991,939
|
|
|
98.7
|
%
|
|
98.6
|
%
|
|
98.1
|
%
|
Greater Seattle
|
|
12
|
|
|
2,066,138
|
|
|
98.1
|
%
|
|
95.3
|
%
|
|
95.1
|
%
|
Total Stabilized Portfolio
|
|
102
|
|
|
13,660,231
|
|
|
95.5
|
%
|
|
94.9
|
%
|
|
94.8
|
%
|
|
Average Occupancy
|
||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Stabilized Portfolio
(1)
|
95.0
|
%
|
|
96.5
|
%
|
|
95.0
|
%
|
|
95.9
|
%
|
Same Store Portfolio
(2)
|
95.1
|
%
|
|
96.3
|
%
|
|
95.1
|
%
|
|
96.1
|
%
|
(1)
|
Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and excludes occupancy percentages of properties held for sale.
|
(2)
|
Occupancy percentages reported are based on office properties owned and stabilized as of January 1,
2015
and still owned and stabilized as of
June 30, 2016
and excludes occupancy percentages of properties held for sale at
June 30, 2016
. See discussion under “Results of Operations” for additional information.
|
Tenant Name
|
|
Annualized Base Rental Revenue
($ in thousands)
|
|
Rentable
Square Feet
|
|
Percentage of Total Annualized Base Rental Revenue
|
|
Percentage of
Total Rentable
Square Feet
|
||||||
LinkedIn Corporation
|
|
$
|
28,344
|
|
|
663,239
|
|
|
5.4
|
%
|
|
4.9
|
%
|
|
salesforce.com, inc.
(2)
|
|
24,183
|
|
|
468,445
|
|
|
4.6
|
%
|
|
3.4
|
%
|
||
DIRECTV, LLC
|
|
22,467
|
|
|
667,852
|
|
|
4.3
|
%
|
|
4.9
|
%
|
||
Box, Inc.
(3)
|
|
22,441
|
|
|
371,792
|
|
|
4.3
|
%
|
|
2.7
|
%
|
||
Synopsys, Inc.
|
|
15,492
|
|
|
340,913
|
|
|
2.9
|
%
|
|
2.5
|
%
|
||
Bridgepoint Education, Inc.
|
|
15,066
|
|
|
322,342
|
|
|
2.9
|
%
|
|
2.4
|
%
|
||
Dropbox, Inc.
|
|
14,827
|
|
|
182,054
|
|
|
2.8
|
%
|
|
1.3
|
%
|
||
Delta Dental of California
|
|
10,313
|
|
|
188,143
|
|
|
2.0
|
%
|
|
1.4
|
%
|
||
AMN Healthcare, Inc.
|
|
9,001
|
|
|
176,075
|
|
|
1.7
|
%
|
|
1.3
|
%
|
||
Concur Technologies
|
|
8,852
|
|
|
243,429
|
|
|
1.7
|
%
|
|
1.8
|
%
|
||
Zenefits Insurance Service
|
|
7,314
|
|
|
96,305
|
|
|
1.4
|
%
|
|
0.7
|
%
|
||
Adobe Systems, Inc.
|
|
6,596
|
|
|
204,757
|
|
|
1.3
|
%
|
|
1.5
|
%
|
||
Group Health Cooperative
|
|
6,372
|
|
|
183,422
|
|
|
1.2
|
%
|
|
1.3
|
%
|
||
Neurocrine Biosciences, Inc.
|
|
6,366
|
|
|
140,591
|
|
|
1.2
|
%
|
|
1.0
|
%
|
||
Riot Games, Inc.
|
|
6,230
|
|
|
114,565
|
|
|
1.2
|
%
|
|
0.8
|
%
|
||
Total Top Fifteen Tenants
|
|
$
|
203,864
|
|
|
4,363,924
|
|
|
38.9
|
%
|
|
31.9
|
%
|
(1)
|
The information presented is as of
June 30, 2016
and excludes properties held for sale at
June 30, 2016
. See Note 3 “Dispositions and Real Estate Assets Held for Sale” for additional information.
|
(2)
|
The Company has entered into leases with various affiliates of the tenant
.
|
(3)
|
Includes 100% of annualized base rental revenues from Redwood City Partners, LLC, a consolidated subsidiary.
|
•
|
Same Store Properties – which includes the results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1,
2015
and still owned and included in the stabilized portfolio as of
June 30, 2016
;
|
•
|
Stabilized Development Properties – which includes the results generated by the following:
|
◦
|
Two office development projects that were completed and stabilized in March 2016;
|
◦
|
Two office development projects comprising four office buildings that were completed and stabilized in the fourth quarter of 2015;
|
•
|
Acquisition Property – which includes the results, from the dates of acquisition through the periods presented, for the one office building we acquired in June 2016; and
|
•
|
2016 Held for Sale, Dispositions and Other – which includes the results of the
four
properties disposed of in 2016, the
ten
properties disposed of in 2015, two properties held for sale at
June 30, 2016
, two office projects in “lease-up” at June 30, 2016, the recently completed residential property, and expenses for certain of our in-process, near-term and future development projects.
|
Group
|
|
# of Buildings
|
|
Rentable
Square Feet
|
||
Same Store Properties
|
|
95
|
|
|
12,449,328
|
|
Stabilized Development Properties
|
|
6
|
|
|
1,096,728
|
|
Acquisition Property
|
|
1
|
|
114,175
|
|
|
Total Stabilized Portfolio
|
|
102
|
|
13,660,231
|
|
|
Three Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2016
|
|
2015
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
116,299
|
|
|
$
|
106,071
|
|
|
$
|
10,228
|
|
|
9.6
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
(13,979
|
)
|
|
(12,633
|
)
|
|
(1,346
|
)
|
|
10.7
|
|
|||
Acquisition-related expenses
|
(714
|
)
|
|
(265
|
)
|
|
(449
|
)
|
|
169.4
|
|
|||
Depreciation and amortization
|
(53,346
|
)
|
|
(51,658
|
)
|
|
(1,688
|
)
|
|
3.3
|
|
|||
Interest income and other net investment gains
|
311
|
|
|
511
|
|
|
(200
|
)
|
|
(39.1
|
)
|
|||
Interest expense
|
(14,384
|
)
|
|
(14,864
|
)
|
|
480
|
|
|
(3.2
|
)
|
|||
Net loss on sales of land
|
(295
|
)
|
|
—
|
|
|
(295
|
)
|
|
100.0
|
|
|||
Gains on sales of depreciable operating properties
|
—
|
|
|
31,428
|
|
|
(31,428
|
)
|
|
(100.0
|
)
|
|||
Net Income
|
$
|
33,892
|
|
|
$
|
58,590
|
|
|
$
|
(24,698
|
)
|
|
(42.2
|
)%
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Property
|
|
2016 Held for Sale, Disposi-tions & Other
|
|
Total
|
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisi-tion Property
|
|
2016 Held for Sale, Disposi-tions & Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
125,346
|
|
|
$
|
17,135
|
|
|
$
|
371
|
|
|
$
|
801
|
|
|
$
|
143,653
|
|
|
$
|
122,563
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,887
|
|
|
$
|
131,450
|
|
Tenant reimbursements
|
13,008
|
|
|
2,911
|
|
|
54
|
|
|
165
|
|
|
16,138
|
|
|
12,818
|
|
|
—
|
|
|
—
|
|
|
1,356
|
|
|
14,174
|
|
||||||||||
Other property income
|
322
|
|
|
7
|
|
|
—
|
|
|
13
|
|
|
342
|
|
|
600
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
603
|
|
||||||||||
Total
|
138,676
|
|
|
20,053
|
|
|
425
|
|
|
979
|
|
|
160,133
|
|
|
135,981
|
|
|
—
|
|
|
—
|
|
|
10,246
|
|
|
146,227
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
25,374
|
|
|
1,893
|
|
|
11
|
|
|
1,943
|
|
|
29,221
|
|
|
25,544
|
|
|
—
|
|
|
—
|
|
|
1,322
|
|
|
26,866
|
|
||||||||||
Real estate taxes
|
11,270
|
|
|
2,069
|
|
|
17
|
|
|
489
|
|
|
13,845
|
|
|
11,357
|
|
|
—
|
|
|
—
|
|
|
1,073
|
|
|
12,430
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
—
|
|
|
—
|
|
|
(76
|
)
|
|
47
|
|
||||||||||
Ground leases
|
768
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
768
|
|
|
813
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
813
|
|
||||||||||
Total
|
37,412
|
|
|
3,962
|
|
|
28
|
|
|
2,432
|
|
|
43,834
|
|
|
37,837
|
|
|
—
|
|
|
—
|
|
|
2,319
|
|
|
40,156
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
101,264
|
|
|
$
|
16,091
|
|
|
$
|
397
|
|
|
$
|
(1,453
|
)
|
|
$
|
116,299
|
|
|
$
|
98,144
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,927
|
|
|
$
|
106,071
|
|
|
Three Months Ended June 30, 2016 as compared to the Three Months Ended June 30, 2015
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized Development
|
|
Acquisition Property
|
|
2016 Held for Sale, Dispositions & Other
|
|
Total
|
|||||||||||||||||||||||||
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Rental income
|
$
|
2,783
|
|
|
2.3
|
%
|
|
$
|
17,135
|
|
|
100.0
|
%
|
|
$
|
371
|
|
|
100.0
|
%
|
|
$
|
(8,086
|
)
|
|
(91.0
|
)%
|
|
$
|
12,203
|
|
|
9.3
|
%
|
Tenant reimbursements
|
190
|
|
|
1.5
|
|
|
2,911
|
|
|
100.0
|
|
|
54
|
|
|
100.0
|
|
|
(1,191
|
)
|
|
(87.8
|
)
|
|
1,964
|
|
|
13.9
|
|
|||||
Other property income
|
(278
|
)
|
|
(46.3
|
)
|
|
7
|
|
|
100.0
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
333.3
|
|
|
(261
|
)
|
|
(43.3
|
)
|
|||||
Total
|
2,695
|
|
|
2.0
|
|
|
20,053
|
|
|
100.0
|
|
|
425
|
|
|
100.0
|
|
|
(9,267
|
)
|
|
(90.4
|
)
|
|
13,906
|
|
|
9.5
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
(170
|
)
|
|
(0.7
|
)
|
|
1,893
|
|
|
100.0
|
|
|
11
|
|
|
100.0
|
|
|
621
|
|
|
47.0
|
|
|
2,355
|
|
|
8.8
|
|
|||||
Real estate taxes
|
(87
|
)
|
|
(0.8
|
)
|
|
2,069
|
|
|
100.0
|
|
|
17
|
|
|
100.0
|
|
|
(584
|
)
|
|
(54.4
|
)
|
|
1,415
|
|
|
11.4
|
|
|||||
Provision for bad debts
|
(123
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76
|
|
|
(100.0
|
)
|
|
(47
|
)
|
|
(100.0
|
)
|
|||||
Ground leases
|
(45
|
)
|
|
(5.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
(5.5
|
)
|
|||||
Total
|
(425
|
)
|
|
(1.1
|
)
|
|
3,962
|
|
|
100.0
|
|
|
28
|
|
|
100.0
|
|
|
113
|
|
|
4.9
|
|
|
3,678
|
|
|
9.2
|
|
|||||
Net Operating Income,
as defined
|
$
|
3,120
|
|
|
3.2
|
%
|
|
$
|
16,091
|
|
|
100.0
|
%
|
|
$
|
397
|
|
|
100.0
|
%
|
|
$
|
(9,380
|
)
|
|
(118.3
|
)%
|
|
$
|
10,228
|
|
|
9.6
|
%
|
•
|
An increase in Net Operating Income of
$3.1 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in rental income of
$2.8 million
primarily due the following:
|
◦
|
$2.5 million increase from new leases and renewals at higher rates primarily in the San Francisco Bay Area and Los Angeles regions; and
|
◦
|
$0.3 million increase due to parking income;
|
•
|
An offsetting decrease in other property income of
$0.3 million
due primarily to lease termination fees recognized during the three months ended
June 30, 2015
; and
|
•
|
A decrease in property and related expenses of
$0.4 million
primarily due to a decrease in property expenses as a result of lower non-reimbursable expenses;
|
•
|
An increase in Net Operating Income of
$16.1 million
attributable to the Stabilized Development Properties;
|
•
|
An increase in Net Operating Income of
$0.4 million
attributable to the Acquisition Property; and
|
•
|
A decrease in Net Operating Income of
$9.4 million
attributable to the 2016 Held for Sale, Disposition and Other Properties, of which $1.1 million was attributable to the residential property that was completed during June 2016 and is in the very early stages of operations.
|
•
|
An increase of $5.0 million attributable to the Stabilized Development Properties; partially offset by
|
•
|
A decrease of $1.9 million attributable to the Same Store Properties due to certain specific acquisition-related lease intangibles being fully amortized during 2016; and
|
•
|
A decrease of $1.6 million attributable to the 2016 Held for Sale, Dispositions and Other Properties.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
26,668
|
|
|
$
|
27,187
|
|
|
$
|
(519
|
)
|
|
(1.9
|
)%
|
Capitalized interest and deferred financing costs
|
(12,284
|
)
|
|
(12,323
|
)
|
|
39
|
|
|
(0.3
|
)%
|
|||
Interest expense
|
$
|
14,384
|
|
|
$
|
14,864
|
|
|
$
|
(480
|
)
|
|
(3.2
|
)%
|
|
Six Months Ended June 30,
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||||
|
2016
|
|
2015
|
|
||||||||||
|
($ in thousands)
|
|||||||||||||
Reconciliation to Net Income:
|
|
|
|
|
|
|
|
|||||||
Net Operating Income, as defined
|
$
|
223,919
|
|
|
$
|
213,706
|
|
|
$
|
10,213
|
|
|
4.8
|
%
|
Unallocated (expense) income:
|
|
|
|
|
|
|
|
|||||||
General and administrative expenses
|
(27,416
|
)
|
|
(25,401
|
)
|
|
(2,015
|
)
|
|
7.9
|
|
|||
Acquisition-related expenses
|
(776
|
)
|
|
(393
|
)
|
|
(383
|
)
|
|
97.5
|
|
|||
Depreciation and amortization
|
(103,786
|
)
|
|
(103,145
|
)
|
|
(641
|
)
|
|
0.6
|
|
|||
Interest income and other net investment gain
|
582
|
|
|
871
|
|
|
(289
|
)
|
|
(33.2
|
)
|
|||
Interest expense
|
(26,213
|
)
|
|
(31,742
|
)
|
|
5,529
|
|
|
(17.4
|
)
|
|||
Net (loss) gain on sales of land
|
(295
|
)
|
|
17,268
|
|
|
(17,563
|
)
|
|
(101.7
|
)
|
|||
Gains on sales of depreciable operating properties
|
145,990
|
|
|
31,428
|
|
|
114,562
|
|
|
364.5
|
|
|||
Net income
|
$
|
212,005
|
|
|
$
|
102,592
|
|
|
$
|
109,413
|
|
|
106.6
|
%
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisition Property
|
|
2016 Held for Sale, Dispositi-ons & Other
|
|
Total
|
|
Same Store
|
|
Stabilized
Develop-ment |
|
Acquisition Property
|
|
2016 Held for Sale, Dispositi-ons & Other
|
|
Total
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Rental income
|
$
|
249,513
|
|
|
$
|
25,501
|
|
|
$
|
371
|
|
|
$
|
2,023
|
|
|
$
|
277,408
|
|
|
$
|
243,151
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,231
|
|
|
$
|
262,382
|
|
Tenant reimbursements
|
22,784
|
|
|
4,318
|
|
|
54
|
|
|
386
|
|
|
27,542
|
|
|
25,353
|
|
|
—
|
|
|
—
|
|
|
3,246
|
|
|
28,599
|
|
||||||||||
Other property income
|
605
|
|
|
9
|
|
|
—
|
|
|
15
|
|
|
629
|
|
|
1,326
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
1,328
|
|
||||||||||
Total
|
272,902
|
|
|
29,828
|
|
|
425
|
|
|
2,424
|
|
|
305,579
|
|
|
269,830
|
|
|
—
|
|
|
—
|
|
|
22,479
|
|
|
292,309
|
|
||||||||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Property expenses
|
49,467
|
|
|
3,140
|
|
|
11
|
|
|
2,568
|
|
|
55,186
|
|
|
48,680
|
|
|
—
|
|
|
—
|
|
|
2,900
|
|
|
51,580
|
|
||||||||||
Real estate taxes
|
21,126
|
|
|
2,907
|
|
|
17
|
|
|
827
|
|
|
24,877
|
|
|
22,678
|
|
|
—
|
|
|
—
|
|
|
2,467
|
|
|
25,145
|
|
||||||||||
Provision for bad debts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
342
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
289
|
|
||||||||||
Ground leases
|
1,597
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,597
|
|
|
1,589
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,589
|
|
||||||||||
Total
|
72,190
|
|
|
6,047
|
|
|
28
|
|
|
3,395
|
|
|
81,660
|
|
|
73,289
|
|
|
—
|
|
|
—
|
|
|
5,314
|
|
|
78,603
|
|
||||||||||
Net Operating Income,
as defined
|
$
|
200,712
|
|
|
$
|
23,781
|
|
|
$
|
397
|
|
|
$
|
(971
|
)
|
|
$
|
223,919
|
|
|
$
|
196,541
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,165
|
|
|
$
|
213,706
|
|
|
Six Months Ended June 30, 2016 as compared to the Six Months Ended June 30, 2015
|
|||||||||||||||||||||||||||||||||
|
Same Store
|
|
Stabilized Development
|
|
Acquisition Property
|
|
2016 Held for Sale, Dispositions & Other
|
|
Total
|
|||||||||||||||||||||||||
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|
Dollar Change
|
|
Percent Change
|
|||||||||||||||
|
($ in thousands)
|
|||||||||||||||||||||||||||||||||
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Rental income
|
$
|
6,362
|
|
|
2.6
|
%
|
|
$
|
25,501
|
|
|
100.0
|
%
|
|
$
|
371
|
|
|
100.0
|
%
|
|
$
|
(17,208
|
)
|
|
(89.5
|
)%
|
|
$
|
15,026
|
|
|
5.7
|
%
|
Tenant reimbursements
|
(2,569
|
)
|
|
(10.1
|
)
|
|
4,318
|
|
|
100.0
|
|
|
54
|
|
|
100.0
|
|
|
(2,860
|
)
|
|
(88.1
|
)
|
|
(1,057
|
)
|
|
(3.7
|
)
|
|||||
Other property income
|
(721
|
)
|
|
(54.4
|
)
|
|
9
|
|
|
100.0
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
650.0
|
|
|
(699
|
)
|
|
(52.6
|
)
|
|||||
Total
|
3,072
|
|
|
1.1
|
|
|
29,828
|
|
|
100.0
|
|
|
425
|
|
|
100.0
|
|
|
(20,055
|
)
|
|
(89.2
|
)
|
|
13,270
|
|
|
4.5
|
|
|||||
Property and related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Property expenses
|
787
|
|
|
1.6
|
|
|
3,140
|
|
|
100.0
|
%
|
|
11
|
|
|
100.0
|
|
|
(332
|
)
|
|
(11.4
|
)
|
|
3,606
|
|
|
7.0
|
|
|||||
Real estate taxes
|
(1,552
|
)
|
|
(6.8
|
)
|
|
2,907
|
|
|
100.0
|
|
|
17
|
|
|
100.0
|
|
|
(1,640
|
)
|
|
(66.5
|
)
|
|
(268
|
)
|
|
(1.1
|
)
|
|||||
Provision for bad debts
|
(342
|
)
|
|
(100.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
(100.0
|
)
|
|
(289
|
)
|
|
(100.0
|
)
|
|||||
Ground leases
|
8
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
0.5
|
|
|||||
Total
|
(1,099
|
)
|
|
(1.5
|
)
|
|
6,047
|
|
|
100.0
|
|
|
28
|
|
|
100.0
|
|
|
(1,919
|
)
|
|
(36.1
|
)
|
|
3,057
|
|
|
3.9
|
|
|||||
Net Operating Income,
as defined
|
$
|
4,171
|
|
|
2.1
|
%
|
|
$
|
23,781
|
|
|
100.0
|
%
|
|
$
|
397
|
|
|
100.0
|
%
|
|
$
|
(18,136
|
)
|
|
(105.7
|
)%
|
|
$
|
10,213
|
|
|
4.8
|
%
|
•
|
An increase of
$4.2 million
attributable to the Same Store Properties primarily resulting from:
|
•
|
An increase in rental income of
$6.4 million
primarily due to the following:
|
◦
|
$5.6 million increase due to increased occupancy and new leases primarily in the San Francisco Bay Area, Seattle and Los Angeles regions; and
|
◦
|
$0.5 million increase in parking income resulting from increased rates and occupancy at certain of our buildings;
|
•
|
A partially offsetting decrease in tenant reimbursements of
$2.6 million
primarily resulting from:
|
◦
|
$1.9 million reduction as a result of a change in estimate due to lower supplemental taxes primarily at two properties we developed and stabilized in 2014; and
|
◦
|
$0.7 million net decrease due to a number of lease renewals with base year resets and adjustments, offset by changes in occupancy and expenses;
|
•
|
A partially offsetting decrease in other property income of
$0.7 million
primarily due to lease termination fees recognized in 2015;
|
•
|
A decrease in property and related expenses of
$1.1 million
primarily due to the following:
|
•
|
A decrease of
$1.6 million
in real estate taxes primarily due to a $1.9 million reduction in supplemental taxes at two of our properties we developed and stabilized in 2014, partially offset by a $0.3 million increase in annual property taxes at other properties;
|
•
|
A decrease of
$0.3 million
due to bad debt expense recorded in 2015 related to a specific tenant; partially offset by
|
•
|
An increase of
$0.8 million
in property expenses primarily resulting from an increase in certain recurring operating costs related to security, janitorial, engineers contract services, and various other reimbursable expenses as a result of higher rates from third-party vendors;
|
•
|
An increase of
$23.8 million
attributable to the Stabilized Development Properties;
|
•
|
An increase of
$0.4 million
attributable to the Acquisition Property; and
|
•
|
A decrease of
$18.1 million
attributable to the 2016 Held for Sale, Dispositions & Other Properties of which $1.1 million was attributable to the recently completed residential property that is in the very early stages of operations.
|
•
|
An increase of $7.6 million attributable to the Stabilized Development Properties; partially offset by
|
•
|
A decrease of $5.6 million attributable to the 2016 Held for Sale, Dispositions and Other Properties; and
|
•
|
A decrease of $1.6 million attributable to the Same Store Properties due to certain specific acquisition-related lease intangibles being fully amortized during 2016.
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Gross interest expense
|
$
|
52,843
|
|
|
$
|
54,936
|
|
|
$
|
(2,093
|
)
|
|
(3.8
|
)%
|
Capitalized interest and deferred financing costs
|
(26,630
|
)
|
|
(23,194
|
)
|
|
(3,436
|
)
|
|
14.8
|
%
|
|||
Interest expense
|
$
|
26,213
|
|
|
$
|
31,742
|
|
|
$
|
(5,529
|
)
|
|
(17.4
|
)%
|
|
Shares/Units at
June 30, 2016
|
|
Aggregate
Principal
Amount or
$ Value
Equivalent
|
|
% of Total
Market
Capitalization
|
||||
|
($ in thousands)
|
||||||||
Debt:
|
|
|
|
|
|
||||
Unsecured Line of Credit
(1)
|
|
|
$
|
220,000
|
|
|
2.5
|
%
|
|
Unsecured Term Loan Facility
|
|
|
150,000
|
|
|
1.7
|
%
|
||
Unsecured Term Loan
|
|
|
39,000
|
|
|
0.4
|
%
|
||
Unsecured Senior Notes due 2018
(2)
|
|
|
325,000
|
|
|
3.6
|
%
|
||
Unsecured Senior Notes due 2020
(2)
|
|
|
250,000
|
|
|
2.8
|
%
|
||
Unsecured Senior Notes due 2023
(2)
|
|
|
300,000
|
|
|
3.3
|
%
|
||
Unsecured Senior Notes due 2025
(2)
|
|
|
400,000
|
|
|
4.5
|
%
|
||
Unsecured Senior Notes due 2029
(2)
|
|
|
400,000
|
|
|
4.5
|
%
|
||
Secured debt
(2)
|
|
|
369,098
|
|
|
4.1
|
%
|
||
Total debt
|
|
|
$
|
2,453,098
|
|
|
27.4
|
%
|
|
Equity and Noncontrolling Interests:
|
|
|
|
|
|
||||
6.875% Series G Cumulative Redeemable Preferred stock
(3)
|
4,000,000
|
|
|
$
|
100,000
|
|
|
1.1
|
%
|
6.375% Series H Cumulative Redeemable Preferred stock
(3)
|
4,000,000
|
|
|
100,000
|
|
|
1.1
|
%
|
|
Common limited partnership units outstanding
(4)(5)
|
2,631,276
|
|
|
174,427
|
|
|
2.0
|
%
|
|
Common shares outstanding
(5)
|
92,254,768
|
|
|
6,115,569
|
|
|
68.4
|
%
|
|
Total equity and noncontrolling interests
|
|
|
$
|
6,489,996
|
|
|
72.6
|
%
|
|
Total Market Capitalization
|
|
|
$
|
8,943,094
|
|
|
100.0
|
%
|
(1)
|
As of the date of this report, there were no outstanding borrowings on our unsecured line of credit.
|
(2)
|
Represents gross aggregate principal amount due at maturity before the effect of the following at
June 30, 2016
:
$11.9 million
of unamortized deferred financing costs,
$7.0 million
of unamortized discounts for the unsecured senior notes and
$5.3 million
of unamortized premiums for the secured debt.
|
(3)
|
Value based on $25.00 per share liquidation preference.
|
(4)
|
Represents common units not owned by the Company.
|
(5)
|
Value based on closing price per share of our common stock of
$66.29
as of
June 30, 2016
.
|
•
|
Net cash flow from operations;
|
•
|
Borrowings under the Operating Partnership’s unsecured revolving credit facility and term loan facility;
|
•
|
Proceeds from the disposition of assets through our capital recycling program or the formation of joint ventures;
|
•
|
Proceeds from additional secured or unsecured debt financings; and
|
•
|
Proceeds from public or private issuance of debt or equity securities.
|
•
|
Development and redevelopment costs;
|
•
|
Property or undeveloped land acquisitions;
|
•
|
Property operating and corporate expenses;
|
•
|
Capital expenditures, tenant improvement and leasing costs;
|
•
|
Debt service and principal payments, including debt maturities;
|
•
|
Distributions to common and preferred security holders;
|
•
|
Repurchases of outstanding common stock of the Company; and
|
•
|
Outstanding debt repurchases.
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Outstanding borrowings
|
$
|
220,000
|
|
|
$
|
—
|
|
Remaining borrowing capacity
|
380,000
|
|
|
600,000
|
|
||
Total borrowing capacity
(1)
|
$
|
600,000
|
|
|
$
|
600,000
|
|
Interest rate
(2)
|
1.52
|
%
|
|
1.40
|
%
|
||
Facility fee-annual rate
(3)
|
0.200%
|
||||||
Maturity date
|
July 2019
|
(1)
|
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional
$311.0 million
under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
|
(2)
|
Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus
1.050%
as of
June 30, 2016
and
December 31, 2015
.
|
(3)
|
Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of
June 30, 2016
and
December 31, 2015
,
$3.9 million
and
$4.6 million
of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.
|
|
Aggregate Principal
Amount Outstanding
|
||
|
(in thousands)
|
||
Unsecured Line of Credit
|
$
|
220,000
|
|
Unsecured Term Loan Facility
|
150,000
|
|
|
Unsecured Term Loan
|
39,000
|
|
|
Unsecured Senior Notes due 2018
|
325,000
|
|
|
Unsecured Senior Notes due 2020
|
250,000
|
|
|
Unsecured Senior Notes due 2023
|
300,000
|
|
|
Unsecured Senior Notes due 2025
|
400,000
|
|
|
Unsecured Senior Notes due 2029
|
400,000
|
|
|
Secured Debt
|
369,098
|
|
|
Total Unsecured and Secured Debt
|
$
|
2,453,098
|
|
Less: Unamortized Net Discounts and Deferred Financing Costs
|
(13,606
|
)
|
|
Total Debt, Net
|
$
|
2,439,492
|
|
|
Percentage of Total Debt
|
|
Weighted Average Interest Rate
|
||||||||
|
June 30, 2016
|
|
December 31, 2015
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Secured vs. unsecured
(1)
:
|
|
|
|
|
|
|
|
||||
Unsecured
|
85.0
|
%
|
|
83.2
|
%
|
|
4.1
|
%
|
|
4.3
|
%
|
Secured
|
15.0
|
%
|
|
16.8
|
%
|
|
5.1
|
%
|
|
5.1
|
%
|
Variable-rate vs. fixed-rate
(1)
:
|
|
|
|
|
|
|
|
||||
Variable-rate
|
16.7
|
%
|
|
8.4
|
%
|
|
1.6
|
%
|
|
1.4
|
%
|
Fixed-rate
|
83.3
|
%
|
|
91.6
|
%
|
|
4.7
|
%
|
|
4.7
|
%
|
Stated rate
(1)
|
|
|
|
|
4.2
|
%
|
|
4.5
|
%
|
||
GAAP effective rate
(2)
|
|
|
|
|
4.2
|
%
|
|
4.4
|
%
|
||
GAAP effective rate including deferred financing costs
|
|
|
|
|
4.4
|
%
|
|
4.6
|
%
|
(1)
|
Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs.
|
(2)
|
Includes the impact of the amortization of any debt discounts/premiums, excluding deferred financing costs.
|
|
Payment Due by Period
|
|
|
||||||||||||||||
|
Less than
1 Year (Remainder of 2016) |
|
2-3 Years
(2017-2018) |
|
4-5 Years
(2019-2020) |
|
More than
5 years (After 2020) |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Principal payments: secured debt
(1)
|
$
|
4,926
|
|
|
$
|
198,361
|
|
|
$
|
78,222
|
|
|
$
|
87,589
|
|
|
$
|
369,098
|
|
Principal payments: unsecured debt
(2)
|
—
|
|
|
325,000
|
|
|
659,000
|
|
|
1,100,000
|
|
|
2,084,000
|
|
|||||
Interest payments: fixed-rate debt
(3)
|
48,400
|
|
|
172,648
|
|
|
125,142
|
|
|
276,443
|
|
|
622,633
|
|
|||||
Interest payments: variable-rate debt
(4)
|
1,543
|
|
|
6,124
|
|
|
1,518
|
|
|
—
|
|
|
9,185
|
|
|||||
Interest payments: unsecured revolving credit facility
(5)
|
1,686
|
|
|
6,688
|
|
|
1,658
|
|
|
—
|
|
|
10,032
|
|
|||||
Ground lease obligations
(6)
|
1,572
|
|
|
6,288
|
|
|
6,288
|
|
|
151,738
|
|
|
165,886
|
|
|||||
Lease and contractual commitments
(7)
|
58,467
|
|
|
6,833
|
|
|
—
|
|
|
—
|
|
|
65,300
|
|
|||||
Development commitments
(8)
|
210,000
|
|
|
119,000
|
|
|
—
|
|
|
—
|
|
|
329,000
|
|
|||||
Total
|
$
|
326,594
|
|
|
$
|
840,942
|
|
|
$
|
871,828
|
|
|
$
|
1,615,770
|
|
|
$
|
3,655,134
|
|
(1)
|
Represents gross aggregate principal amount before the effect of the unamortized premium and deferred financing costs of approximately
$5.3 million
and
$0.9 million
, respectively, as of
June 30, 2016
.
|
(2)
|
Represents gross aggregate principal amount before the effect of the unamortized discount and deferred financing costs of approximately
$7.0 million
and
$11.0 million
, respectively, as of
June 30, 2016
.
|
(3)
|
As of
June 30, 2016
,
83.3%
of our debt was contractually fixed. The information in the table above reflects our projected interest rate obligations for these fixed-rate payments based on the contractual interest rates on an accrual basis and scheduled maturity dates.
|
(4)
|
As of
June 30, 2016
,
7.7%
of our debt bore interest at variable rates that was incurred under the unsecured term loan facility and unsecured term loan. The variable interest rate payments are based on LIBOR plus a spread of
1.150%
as of
June 30, 2016
. The information in the table above reflects our projected interest rate obligations for these variable-rate payments based on outstanding principal balances as of
June 30, 2016
, the scheduled interest payment dates and the contractual maturity dates.
|
(5)
|
As of
June 30, 2016
,
9.0%
of our debt bore interest at variable rates which was incurred under the unsecured revolving credit facility. The variable interest rate payments are based on LIBOR plus a spread of
1.050%
as of
June 30, 2016
. The information in the table above reflects our projected interest rate obligations for these variable-rate payments based on outstanding principal balances as of
June 30, 2016
, the scheduled interest payment dates and the contractual maturity dates.
|
(6)
|
Reflects minimum lease payments through the contractual lease expiration date before the impact of extension options.
|
(7)
|
Amounts represent commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements and for other contractual commitments. The timing of these expenditures may fluctuate.
|
(8)
|
Amounts represent commitments under signed leases for pre-leased development projects, contractual commitments for projects under construction, in “lease-up”, and the recently completed residential project as of
June 30, 2016
, in addition to $41.0 million for two recently completed office projects. The timing of these expenditures may fluctuate based on the ultimate progress of construction. We may start additional construction during the remainder of
2016
(see “—Development Activities” for additional information).
|
•
|
Decreases in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;
|
•
|
An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
|
•
|
A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.
|
Unsecured Credit Facility, Unsecured Term Loan Facility and Unsecured Term Loan
(as defined in the applicable Credit Agreements):
|
|
Covenant Level
|
|
Actual Performance
as of June 30, 2016
|
Total debt to total asset value
|
|
less than 60%
|
|
28%
|
Fixed charge coverage ratio
|
|
greater than 1.5x
|
|
2.8x
|
Unsecured debt ratio
|
|
greater than 1.67x
|
|
3.27x
|
Unencumbered asset pool debt service coverage
|
|
greater than 1.75x
|
|
3.92x
|
|
|
|
|
|
Unsecured Senior Notes due 2018, 2020, 2023, 2025 and 2029
(as defined in the applicable Indentures):
|
|
|
|
|
Total debt to total asset value
|
|
less than 60%
|
|
35%
|
Interest coverage
|
|
greater than 1.5x
|
|
7.6x
|
Secured debt to total asset value
|
|
less than 40%
|
|
5%
|
Unencumbered asset pool value to unsecured debt
|
|
greater than 150%
|
|
294%
|
|
Six Months Ended June 30,
|
|||||||||||||
|
2016
|
|
2015
|
|
Dollar
Change
|
|
Percentage
Change
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net cash provided by operating activities
|
$
|
137,629
|
|
|
$
|
116,828
|
|
|
$
|
20,801
|
|
|
17.8
|
%
|
Net cash used in investing activities
|
(304,531
|
)
|
|
(85,020
|
)
|
|
(219,511
|
)
|
|
258.2
|
%
|
|||
Net cash provided by (used in) financing activities
|
136,726
|
|
|
(27,447
|
)
|
|
164,173
|
|
|
(598.1
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income available to common stockholders
|
$
|
29,535
|
|
|
$
|
54,188
|
|
|
$
|
200,530
|
|
|
$
|
94,062
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to noncontrolling common units of the Operating Partnership
|
829
|
|
|
1,090
|
|
|
4,439
|
|
|
1,905
|
|
||||
Depreciation and amortization of real estate assets
|
52,358
|
|
|
50,969
|
|
|
101,936
|
|
|
101,812
|
|
||||
Gains on sales of depreciable real estate
|
—
|
|
|
(31,428
|
)
|
|
(145,990
|
)
|
|
(31,428
|
)
|
||||
Funds From Operations
(1)(2)
|
$
|
82,722
|
|
|
$
|
74,819
|
|
|
$
|
160,915
|
|
|
$
|
166,351
|
|
(1)
|
Reported amounts are attributable to common stockholders and common unitholders.
|
(2)
|
FFO includes amortization of deferred revenue related to tenant-funded tenant improvements of
$3.2 million
and
$3.3 million
for the
three
months ended
June 30, 2016
and
2015
, respectively, and
$6.1 million
and
$6.3 million
for the
six
months ended
June 30, 2016
and
2015
, respectively.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number of Shares of Stock Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs
|
|
|||||
April 1, 2016 - April 30, 2016
|
|
4,271
|
|
(1)
|
$
|
61.87
|
|
(1)
|
—
|
|
|
—
|
|
|
May 1, 2016 - May 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
June 1, 2016 - June 30, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
4,271
|
|
|
$
|
61.87
|
|
|
—
|
|
|
—
|
|
|
(1)
|
Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
|
|
|
3.(i)1
|
|
Kilroy Realty Corporation Articles of Restatement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2012)
|
|
|
|
3.(i)2
|
|
Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
|
|
|
|
3.(i)3
|
|
Amendment to the Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
|
|
|
|
3.(i)4
|
|
Articles Supplementary designating Kilroy Realty Corporation's 6.375% Series H Cumulative Redeemable Preferred Stock (previously filed by Kilroy Realty Corporation on Form 8-A as filed with the Securities and Exchange Commission on August 10, 2012)
|
|
|
|
3.(ii)1
|
|
Fourth Amended and Restated Bylaws of Kilroy Realty Corporation (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on February 23, 2016)
|
|
|
|
3.(ii)2
|
|
Seventh Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P. dated as of August 15, 2012, as amended (previously filed by Kilroy Realty Corporation on Form 10-Q for the quarter ended June 30, 2014)
|
|
|
|
31.1*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
31.2*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
31.3*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
31.4*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
32.1*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
|
|
|
|
32.2*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
|
|
|
|
32.3*
|
|
Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
|
|
|
|
32.4*
|
|
Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
|
|
|
|
101.1
|
|
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited).
(1)
|
*
|
Filed herewith
|
†
|
Management contract or compensatory plan or arrangement.
|
(1)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.
|
KILROY REALTY CORPORATION
|
||
|
|
|
|
By:
|
/s/ John Kilroy
|
|
|
John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
KILROY REALTY, L.P.
|
||
|
|
|
BY:
|
KILROY REALTY CORPORATION
|
|
|
Its general partner
|
|
|
|
|
|
By:
|
/s/ John Kilroy
|
|
|
John Kilroy
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Tyler H. Rose
|
|
|
Tyler H. Rose
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
By:
|
/s/ Heidi R. Roth
|
|
|
Heidi R. Roth
Executive Vice President, Chief Accounting Officer and Controller
(Principal Accounting Officer)
|
1 Year Kilroy Realty Chart |
1 Month Kilroy Realty Chart |
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