KRC - Earnings call transcript Q3 2020 | Kilroy Realty Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the Third Quarter of 2020 Kilroy Realty Corporation Earnings Conference Call [Operator Instructions]. I would now like to turn the conference over to Tyler Rose, Executive Vice President and CFO. Please, Tyler, go ahead.

Tyler Rose

Good morning, everyone. Thank you for joining us.

me our John be management Q&A. with other and available call of members team the today Kilroy are several for On who will the in nature. some say will At discussing need information be looking the we that forward is I outset, of to this our in and refer forward-looking to statement the supplemental. package supplemental Please in a the for regarding information call and next This available for be website, and eight both call days will is Internet. being telecast live over by phone for on the the our replay

supplemental been have and a on your we'll Then and third with highlights are X-K our update release to the Web questions. happy on John? be and Form earnings Our start on the quarter quarter market package both financial filed SEC, with will site. take the third conditions. results. John an discuss call I also our available will

John Kilroy

hello thought having for our I thanks, Thank we at us of third Hey, future. But outset in remained this still the the point. continue during pandemic that, be us is don't the optimistic call everyone. and well COVID period. and that we perform at today. about any This to would said Tyler, you the think joining

financially perspective. sustainability while in includes operationally. continuously are our quality preparing our these key KRC, managing lease the defense as we expirations and areas Here as on doing construction both strong areas, for stabilized to play and proactively projects, foundation, which under years. executing and do believe a to And starts, we a development portfolio future and for we financial post-COVID months development position focused we of policy These to at and and agencies us well future, well remain coming also the influence positioning that wellness over much several governmental from working both a all offense include; well our with continue portfolio, enhancing maintaining possible our

in quarter the liquidity. highlights. successful We $XXX includes Here the of third with ended completion This offering of $X.X are quarter August. bond billion green million

construction fully development with Our cash is funded under now on hand.

continues XX%. life tenant the profile with of base life quality collection of to tenant our levels third the rent have the strong north and XX% months as continues science technology consistent collection value. outperform. science rent high across office Overall well Our collection These demonstrate and to quarter in remained rent exceeded capitalized seven pandemic its

expirations, during on We stabilized continue make signing addressing our to quarter our lease leases the progress feet. square XXX,XXX portfolio in in near-term renewal approximately

were light, on XX% GAAP were on leases volumes basis XX% and a rates rental up these basis. cash leasing a While on

through Our average at approximately X.X%. annual lease expirations stands now XXXX

net operating billion is be expiration to $X.X on track an XX,XXX fourth quarter. tour. of generate than In quarter. exception development, the continues annualized quarter square of any the not XXXX. the the income. shelter impacted have expected make end difficult fourth place in this remains office on our Leasing Netflix That's by of in to $XXX With regulations the that cash stabilized, When activity the of expirations Vine with On feet we expected do a delivery of pipeline project million construction the update through it greater year, to project

of understanding Moving its that These developing. of do lasting industries the the drive themes workspace forward, still days include, early it's in commercial see we important use. while make-up some the impact, in pandemic's physical

proactive labs the in into has their will billion XX% and we been believe have not theme drug range to current by for the approximately it healthcare science the COVID, increasingly to averaging annually secret is life population years, nation's of life continue the positively their new The our science for moving that risen of development. private first life science. has investment public pandemic the is of $XX foreseeable in benefit We is The ages encouraging five and to expenditures a the driving future. the We industry life see as impacted past want It's creation and more talent start-ups. investment locate will clusters. GDP and new annual sector they and a become and FDA believe science

decades, We are at rates dedicated million assets this and demand these by direct in forma to serve, estimate science approximately we square markets to which that the to than continue market about Looking have footage development science range with X.X life life totals million XX entitled capitalize to approximately West positioned life Today, from building more on properties, square vacancy capable opportunities. been pro science feet. feet Coast current markets square to footprint, X% million use X%. square We've life and feet. X includes the serve totals well science to existing two capabilities our current

science square publicly FDA. west our on embedded non-traditional San as Francisco is had they valuation and among essentially largest KOP XXandMe $X,XXX buildings percentage the two Recent market the Oyster X.X South University, deserves as that believe portfolio buildings forth. South including Kilroy Freeway the volume. are activity the side, tenant, the side strong as the fully the XXX strong in testing or to Several San BioMed science LabCorp, of so life strong largest a in increased medicines the more of with have portfolio's a We COVID-XX Stanford a within by Diego particularly feet of development well, as addition tenant, project We rent. appreciation science recapitalization, quarter such San sale approximately base of square total to traded highlights as and our reported approved quarter, for located in per tenants the Point, tenants the driven South San value the Acadia, great Genesis given life million these located for And is is KRC acre, comp last XX third portfolio Francisco our by ideally our not science Francisco. of foot Neurocrine, continued earnings healthcare modern. it life quite life leased REITs the tenants last do portfolio

strong We are a of state-of-the-art infrastructure. KOP feet basis per X, science that foot X entitled $XXX will foot X X and and fully looking more of To year. start XXX% carefully have feet, space considerably is Phase KOP we million we square the is seeing with interest X clearly sometime Phase Phase a discussions project of possibility and approximately leased It the next construction XXX,XXX approximately and with life variety Phase square from active substantially currently X total through are today. square in We tenants, of XXX,XXX and have are for lab another on interest space. in a built office are X is do more quantify, square we're than square Phase at footage.

The wellness. second is theme

The in with square entities design, pandemic since comfort base health, and safety of adaptability, began. leaders constant contact focused We tenant are footage on per physical worker. increasing and the our been have these space and environmental

some that an driven short-term these are issue stay. is of concerns here believe While to by is needs, workspace that we wellness

markets. premium of the systems and and state-of-the-art stronger properties greater flexibility with traffic larger on want that and our not large landlords plates, light-filled are a workspace a employees' partner only to use design the see flow development. with office outdoor integration provide will and operating in competitive nature well to world layout can advantage innovative willing floor enhance We to both infrastructure invest that big interior top health. we We capitalized who in place and will protect, of in more Hence, believe KRC spaces, these able advanced trends their but quality in give

any youngest that and design enhance Our existing is a buildings' the to and systems best number portfolio needs. of and in been meet wellness Fitwel world. And properties occupants. among now of designed certified the We've company in practices leader the the highest we have understanding adopting our of these

We pursuing the thinking development choice top of these believe make new KRC in going and best, sustainability forward. have a deep batteries partner We in most that innovative concepts, wellness. experience integrate

uncertainty an our is today's I economy. that companies quality and a have the don't ball, factor discussion what of companies, industries Amidst markets of and a confident and but a and challenging engine these with down XXXX, for all of continued the be the additional technology, together in people small, fairly still lie Having for are cluster to the it the large Let that will me these to stress cannot Kilroy. science going has of on found importance municipalities. customers, wrap what ahead. Coast differentiating on and in up and thoughts top-notch established We enough from remains a through cycles and that in in biggest life companies start-ups time, the I'm tough workspaces West want their of a our to as cycles, our life passed. I concentration during sectors the crystal teams markets been confident capital, both pandemic media bring well Many is with to replicate communal as when intellectual few few the clear otherwise and is universities thrive in good remain in continue our markets. may growth a leadership

we and to competition ourselves cycle, into these we of adapt. have While ability confident entry ourselves good will. conviction, boats, times those success forward lifts are the are from we our the And with San the tide look been of suited we Francisco cycle, better and best Last markets like record and positioned. a rising in differentiating all believed track Seattle, for again through and I'm high this challenge differentiated to we never

and stabilized world wellness. sustainable is in Our portfolio young, modern, the leads

at poised and are limited, attractive significant well pipeline development as Our as markets and is liquidity, is is leased, further across solid product healthy, maturities. no low types balance fully and near-term construction under and largely our leverage very growth, has tenant basis a diversified with base our for expirations our sheet are development well funded projects capitalized our future XX%

Now I'm turn to Tyler? Tyler. going to call back the

Tyler Rose

Thanks, John.

share of For the the as reported contribution per continue see from FFO positive we development. to we quarter, $X.XX

of a Third of from in quarter allowance mixed-use also in the our office Seattle per rent. GAAP project space $X.XX contribution March assessment collectability FFO included Third incremental revenue credit related ongoing share well of benefited One as tenant quarter from Paseo a XX% at Dexter full to of as quarter our and XXX FFO Del

X.X% X.X%, the higher by year increased NOI and prior same-store At primarily cash rates of off our in occupied XX.X% results, the stabilized same-store operating third NOI quarter, due same-store was the burn rent. rental GAAP driven largely in one-time XX.X% free portfolio of payments. at leased. the to quarter, end Looking declined

bonds was This the our in X.X%. As $XXX second unsecured we John offering green bond million portion with rate We XX-year an August, of With facility. transactions liquidity today of including green interest used a loan completed the public proceeds million $XXX approximately mentioned, offering. completed, our under term those to repay cash of $X.X fully available billion, and $XXX million in revolver. stands approximately annual our million $XXX

debt net times. quarter EBITDA is X.X third to annualized Our

defeating We our use in for following property in not expenses This earnings the to specific again quarter investment we incurred $XXX $X.XX quarter, guidance are fourth assumptions XXXX the that $XXX between XX be be up million. includes know three a increase I our spending share may today of remainder year. providing this the perspective, development already can to per and that remaining We what $X.XX based on offer earnings we Proposition of have project but a this two results of will G&A. in From assessing initiative. show and potential million tax in made quarters, $X.XX

in sale later of this quarter. Area million the a advanced building $XX in discussions Bay expecting with San the on approximately France closing are We for

Santa $X,XXX haven't valuations. a side to As building from San been per there we've a several at per and recently $X,XXX at multi-tenant per trades foot ranging $X,XXX Francisco trades Seattle strong from a foot, for transactions, building include of multi-tenant in $X,XXX seen a standpoint, a note, lot foot. several while in in valuation These Monica

discussions in So their to we our retail will continue close understand appropriate. tenants remain condition. We financial opportunities with to as evaluate disposition

rental relief totaled XX% minor rent impact which of -- you $X.X these program, $X.X had million month. parking and two a tenants a minor over we per is for NOI of from approximately one perspective, our last the Non-contractual of retail cash from This As included quarters, approximately a a may earnings tenants. impact month recall, million. income deferral approximately established

Paseo commenced XXX,XXX a about we until the as project. place amount receive of to revenue on and are the office expect this in of At We recognition One square shelter rules Mar, foot third XX% Del lifted. of October,

at phases residential throughout was this the final year. units. third phase. space in to One delivered We expect remaining XXX Also the revenue commence Paseo, in leased remainder recognition and we the This of office on July,

And we leased, year. the late reminder, delivered unit up now phase, XXX project we've last phase, the last seen month. units, and a total, XXX pick is momentum As leasing this year. second the the XXX first In earlier units, a XX% over

We for project of to is expect quarter That completes Vine-Office commencement delivery On in next month. On Living the Vine, residential of revenue portion, my respect Netflix recognition on target // And XXXX. the it remarks. with // first the on

happy to be Operator? we'll Now your take questions.

Operator

We will now with Instructions] may [Operator the proceed. you question-and-answer Citi. Our from Manny, comes Korchman question Please, sedition begin Mr. first Manny

Michael Bilerman

the a very of your talked the I about though talked if feels solution Michael us those they're into But coast. to Thank you morning the employees tenants also that what evolve good bit with quality more the about back their capital, And spaces operate letting terms here out of remain the markets debatable work It's you in? in in little home come Bilerman about those permanent that hoped right work year. wondering either how in do your to But life, be now going little I'm have, gives you back that of that this of in intellectual that gone earlier want can anywhere and you are come though confidence certainly a the systems, talking in from future. of spaces? comments out sort dig because it of about John, benefits will despite the that the commented think how you has you. a you the hybrid you And to of bit all markets coming communal I some or university think sort a optimistic number longer you from as of the to going Manny. there. had that future all on than to then opening where elements you and the

John Kilroy

a That's question, Michael. long

few over again. we ask and So forget lot going in COVID please that about, Well, response, a was if how go, to to I going my months done knew course how and of nobody heard be it's this pieces long a it in hasn't thing, many that. back are people long What whether going work, about going it's whether Nobody really is is go. I'm we're it's seeing to knows hearing home. want to What get ape or tenants. how we're it's encouraged people working shape to by Kilroy that our from

XX% for Some down we're productivity also sure. people like But of it, hearing that work a result as home. from is

their make news people July not Now to so lot say, of the a home plans you hear headlines plans people because you had that is in lot a to the until for about to are draconian their universal from because are read going pretty every for to need make things plans further we need single then that they times work company to to and the their And of make do they XXXX care, be of and they and might the apartments, forth. on, be and day concerned workforce. date whatever we provide or need well,

totally tents San get by the reduce be life them to Francisco, basically on Francisco the across which the LA cities So a homeless the and saying, make They them. leave. if with I available, seeing as the the going rather recognized of to increased city will they're further we up positive number of to or get With cities to we're learn dramatically a as come like positive forces city messed LA, the San quality can obviously liberal now issues But freely That's going the the revenue much states making thing. them possible. shelters XXX. and starting because reduced is Econ And companies plans the quality streets they respond it's market is see that we're country companies of shelters. admit out going have off cities take same to about and cities big have to basis, the some to all these giving to that into to all to going doing liberal life, they're of that be you're in the are the base have off the thing they're And robustly and and time, but other regard flexibility progress. their big in of now in resolve now issue in

So I'm we've this Nobody out. is any And everybody we're know a of politicians, degrees as universally. they But to hate think or people. I would veracity of they varying straighten hey, because politician little better. in policies on yet, optimistic pessimistic I'm those success of got these almost what say, seeing about knows politicians about call, this things. hire always now

So an is that yes seeing for we've the case, is also I'm XX. from that a would Prop reverse -- projection, seen positive example properties commercial Prop XX XX, shift. Prop And which on go in what the on XX as

a true a in would do. to that's from result million, $XX not information been real in or that's policymakers. from rather the I just people XX behind, a in roughly that coalition positive what raising have been Kilroy the point industries to of forces LA seen the And whatever of XX $XX that is, many but XX together haven't to and lot of now other the a in million, get state have gone Getting it's spread been the of industry, Prop California. to together, to of no bad it reality, That Friday So join office people, in years estate my powerful real in yes business primarily. this coalition, They've on the XX. the want influence thing. and that a has out and the promoting people I meeting of running estate a most real have tomorrow vote some one with

there quality the gotten in better because markets. So things. in of of are there forth been has quality the rents to of regard these some so some positive life life, some cases and residential With in have some reductions

regard we of we coming are bit leases their that green If before. of to seeing about it's So a problems? and unless I'm lot demand, increases space. With of about starts, while but due, question shoots a in talk the a I seeing see it. didn't No real some multi-tenant, have are significant not fits

deals, seeing are in big are or can of with markets all that our negotiations we or of both have some a really We science transacted with development. that discussions being Rob and life tech negotiations to number our cover, regard markets for and for

to this cycle the a seen people as gets we've months reality depressive glass those I half problem a and they hopefully problem, ago empty. that's be together us, leader to all people behind than I ago. was that work three in address a just I now and that think to just then agree That and seeing as half will that as things others. have because was glass of election want positive. to you I'm once feeling about what a first look better there this together do have six So three, have important rather think are hopefully the it's I so. not is not I'm take come such the And vitally and company full at to as a months a mass

on space per the a correct pre-COVID. So what to interaction was person, at what if with per and And that, my is to increase XX% trend Rob, based those wrong others. with hearing XX% we're in roughly from are I'm regard we're person this, looking space me kind upon thoughts of

It knows and hopefully see and to home we'll you Now how capture going can't that asked? we'll is everything work more people then it who that's play I Whether there see how will I XX% per out out. work XX% person, will time. you work from Did out. space over tell

Michael Bilerman

question. you up impressive, heads on And the John. That's Yes. I give a

that. for you thank So

John Kilroy

modern I You're tell CEO from now to welcome. doing. real what of that historically Listen, we changed the has been you the all in right estate got have role dramatically

Coast of We all not and and and are now can I of taking some solidly say -- I'm are the you calls to we're but And going in REITs, the who, we're some and that the talking other will pissed arena. the have all REITs West say we're gloves Coast political off. East

Operator

next question Scotiabank. Nick Please comes ahead. Our Yulico with from Nick, go

Nick Yulico

thoughts you pieces your the mean, what have about candidates curious are and done ventures? guess, past. as additional for portfolio sales in of I them asset joint looking that John, seeing or I now right Thanks. at

future consider You sales, a you Would you asset preserving where putting haven't bought so on another And now? know Point right to program back that, even your have I maybe to much is? more forward have place. let's Would some stock you you capital, at aside you say, if equity historically. in do, don't of or development Oyster fund did look deal stock increasing some price

John Kilroy

With Well, pre-COVID seeing, going significant negotiations have development and XXX,XXX that sense prices, demand these Phase at zero. to upon and We we and on the XXX,XXX, we feet the to back that blocks Phase very start make proposals based development would think XXXX and are large we we only going Point track. the program, stock demand regard crack. some interest seeing forecasted at had Oyster might forth X and XXX,XXX, remains early be in zero of space, we're absolutely stage X, is imminent have that on selling in the that a I

clarity. said that about be may insert the next it have cycle and I forth cycle Flower that. very well not again, want going and the very a to land we favorable I'm point always because greater it without be And as to out the that the basis at could so think Flower optimistic I've I Mart next Mart I'm So

tighter been dollar the a that Bay It's big the city I the fixed asset really of for think in not the we're anybody of who selling hampered regard and building in did would $XX amount. that stabilized It's Area. to a million great it's by With building a it's and sales, be prevention. foolish kind deal.

foot pre-COVID. great had things the we've problems it it because market is per in -- regard just is a of the selling recapping or the regard is regulations have in can't it or was had lot no But have projects, way more agnostic. pretty fixation look or we'll and we one to we projects of so and at the think not actually I place. building And jazzy or I'm had on matter I tour no you mother $XXX to the around it how these those. With That that. square of one so, always we of value is with is. about any particular work. That's the beautiful tours

to of do lot a that. have We options

about funding can of Tyler terms of question. In did more that, that's And your X, specifically capture Phase talk everything, part I Nick?

Nick Yulico

shorter the did a also, sub-lease needs how I are that Should in And tenants out seeing couple just are talk your just space about -- Thanks. you lease are? those kind any what of this XX continues think is What portfolio? drove if have that quarters we did of kind You their a space you your renewals as the months. next on discussions that? follow-up going? own figure shorter quarter could then within side, averaging tenant guess over of increase renewals term term,

John Kilroy

please? those, cover you want do to Rob,

Rob Paratte

everyone. Paratte. Rob is Good afternoon, This

and across really looking across, your how they based with to and to workforces decisions, their ways figure the So of I part renewals the on while rents try paying on board the to going question tenant They to relating back. country, avoid what's mean are sentiment get long-term tenants making out for are flexibility. first across

of have a July, kind to much said harder of lot of it's full their to time, to for they're predict back. lead them 'XX. June, it's sometimes And later tenants in when workforces back As have that with plans John earlier, come summer going

we of our high is flexibility finding closely them with it's our working then for uncertainty, key, always frankly, ways are the tight worked also tenants. when have them. renewal one keep and and So with so them. with very we we've rates markets the work And markets very And alternatives is a

XX that short-term that that continue I comes long will think of I look out, they times will kind an the often we're of So XX not happen, know months we flexibility be the because XX months improving as expirations don't you forever. whether in will to are cost, that expiring going because are be what's economy, it's or with trend likely renewals or at how today months because continue. to a in these situation

always I'd are my at as to demand I that were And be does that come because when if so I back, on something tenant, And look keep it increase. a expirations eye impacted. eventually will going these

And market. as to we tenant smaller a to respect about component on mentioned talked has in Los with me. space well there we've area. excuse space As the Angeles tend sub-lease portfolio, specifically past put have publicized, the Tyler on It's sub-lease calls, been our is some in that's been

we tenant in you extremely have, large But We any our companies down occur none strong base, that sub-lease put if overall have have space of market large had terms the in look on the there. sub-lease some tech at portfolio. of tech which Kilroy's the is space

Operator

Our with next question comes Evercore. proceed. Sakwa from Steve, Steve Please may you

Steve Sakwa

Tyler, a the XX% of I And collected I charge QX. in or this supplemental, so know at the rents as quarter. small you took you look

is X% risk So the sort that or possibly does unaccounted going that of And and sort future collected, of the write-offs? recent forward wasn't that X% of part still that for write-offs? is limit the of sort

Tyler Rose

of getting for October, so it's But a Well, terms could calculations rents we're the that number but in sort the and of quarter and for then -- go up. separate still calculation. October,

for reserves, reserves the had of on, haven't to and struggling, at that we're tenants straight-line for off $X.XX terms up XX% about was were worried about who collection XX% paid. setting a that And going those In of rent. were write-off writing was tenants that that we basically a looking cash and

of was of XX% that of XX-XX $X.XX. split on office that basis, sort and that it's So

up broken it's different into So a of pieces. bunch

Steve Sakwa

can't point of of problems trying of still retailers you you that are are know the write-offs. portfolio or take this you're are amount generically sort other of I for of And get you assess, to sort some to there still or trying just kind issues tail write-offs I'm in that at sense a have just toward that the guess, take end the other tenants I over? to I'm co-working just monitoring. that

Tyler Rose

it's say. we end. mean, the at mean, obviously I hope I hard we're to tail

the how from the You numbers to to trended have quarter can first quarter third the see second quarter, the every quarter. down

there co-working portfolio, some else But don't that of are to don't we're mean, side more watch, the in we we the tenants who a tenants and retail those coming. we watching types problems. on where anticipate of see we're watching. anything lot side, continue tenants gym in but the the I are So the our

Steve Sakwa

I people turned guess obviously leasing. new But Rob, time have Francisco companies allow last then know the know you if back don't months the John businesses back. tech quarters, work. And And on I given of and I to get San has of the did just to months, come feet to or guys sort not X,XXX non-essential ticket to

at XX%, the that until of remains it really here? that leasing lull the been So buildings you've kind XX% new of belief occupancy and is just folks got more a your back most are

John Kilroy

will right? Rob mute, comments. the sure I'm By have off some I'm way

Tyler Rose

Yeah.

John Kilroy

for Yeah, on. good. meetings I've to talking lately in a lot of mute I check. with been have to -- myself always

the ago, to just and and months. on around Not walking beginning traffic driving now not streets. when was back the day you're at down people ball around you the the So a work day. walking to likely airport city so forth. the get XXX hit a There's Bridge in of People over going haven't A Bridge. I streets, actually traffic. in There Golden was but right, the fire car. number I When over were the before, was Gate there cannon I around. as Steve. seen in went other I was could the yesterday and nearly streets Bay the traffic the Freeway traffic and Oakland It Francisco to San there that apologize. month are people robust Look,

to I this with to to back And ability improving. going to happen And not in think it's are San work. workforce now So it's go get but Francisco, to people going XX% it change, is a to still while. about any and some is people some and seem to to people have have a And COVID, is there of seem There lot going right? fear fear, it's take -- a fear, to overnight. going don't

don't but make positive. any I to trend, look it's So -- gut is think a at can data you kind there you have not to is of I feel, just enough this think make

and cases playing to here. I in post with a election. see a is think so of municipalities, new of probably numbers people we'll lot the forth, some There games relaxation subject the politics

So come. you know more don't to to if have that? Rob, add to anything I

Rob Paratte

Every back would thinking July. had be of place. you in that smaller we real they tsunami that add to back asking into bring talking June, to in they is them. place. this was, we're a groups sentiment people to office, the plan wave I'd very some They're in. bringing looking June thing say only to how if or people they to by work. executives' lot that, estate which have people corporate company at people is I were cases the they were of wouldn't tidal Steve, a go coming actually plans has in They Today, at do but have form and And were May them, back been of back at just concerned come negative, coming because

pretty we're stage point to how think can sentiment going do do seeing, off companies they start requirements. at the those think look longer the company X,XXX I that's larger I but engineers that that people where is in, I can't about back you're back now engineers, names, to has get production hired X,XXX engineers well we talking how they're especially know name started the to that take again. need Hollywood, once going term In COVID put So, gets we eye to somewhere. secure their to since and on

ancillary Sony the in production. there So that or Netflix every is support And jobs. and you've seven for is, production jobs statistic job, are got,

going then start office science a there. for beat. missed lastly, that's think impacting we to hasn't demand So life space And

are really our markets, demand on on. exciting more in science going and is working to which discussions there for science be throughout us fact, life In is for life

Steve Sakwa

probably you I are your now requirements issues some next at and start? Mart to point. make just Flower there on point, that mentioned got it's you this M you've it kind Kilroy to when becomes point like cycle any Prop you've or John, this at your question. Last sure, at just of that want start economical for allocation given or got

John Kilroy

and period others start agreement time basically which a a we something. and of starting starting which to most longer is a development within foundation Well, unlike have or we have

make any to of revenue any of about to from built are of SoMa get development course, Mart prohibition area. projects some so worried of dollars of and have. we and jobs not It's And SoMa. and Central if them think transportation from delays planned, city, to about other of including want Flower The things massive they've important it, affordable other that the potential on point. tens they have thousands has forth. of the at fund sure and that restriction Central fees billions I'm in counted to you amounts with vitally housing the the and They So regard subway revenue

with well. have others they're I be no to very going So cooperative doubt as

I So I'm that Steve. have not concern, -- don't

Operator

from with Craig Please Craig, KeyBanc go Our next question comes ahead. Markets. Mailman Capital

Craig Mailman

strong life Clearly, be suit continues to science the office a for sector.

in conversions. you game? has have -- an talk been about ready about to on a term supply to in getting some near the go. are Are medium wild guys here there everyone concerned You with kind the uptick projects all at guys of And

Tyler Rose

that, on John? to want You me touch

John Kilroy

on may mute now. I be

Tyler Rose

that. conversions. A are are conversions -- are they lot I'll on that, they that the going of are Craig, just handle not

the lot So life can project. designed lot product, are a be afford road create a taking science is HVAC problems building, product and of will life mechanical an And some ceiling systems, go successful modern it the capacities office into of a was the best of of hope it in difficult down and a fact, entrepreneurs etc., heights, and to state-of-the-art and facilities. as that's they repurposing what over science the what it's and companies over want

is we operate; Seattle, are markets so conversions San they we're prime San where where the other South typically seeing not Diego. say thing I'd Francisco And the in or

everyone a board, is talking definitely across San class about than conversions But trend. different it's our science project So across Diego. or I mean, science life the science are prime think the like I again, Point spectrum. portfolio product Oyster -- a Kilroy life in a difficult, life pretty

Craig Mailman

that maybe bringing it is touched this could you life we into to this into you clearly a just markets. need distressed know And pandemic see don't in breakthrough curious cycle been and but on, to past. enter area would act where as given lack to expertise the it's but opportunities guys new is you talked about I so another potential you maybe other still that your could science tough, guys have as Francisco San market been radar specifically? maybe the be after unfold opportunistic I -- market. one on that I'm And where the John science of translate would far, seems continues he clearly this if crisis for your move a some life on like financial know the and in in have

Tyler Rose

why you you have cover don't that? Eliott, back? John, No. come

Eliott Trencher

it opportunity. to we're Hey, cycle see on the be screens. We But where didn't the what and going our our patient. Craig. business until It's to say life Eliott acquisition XXXX, we're prepared we Trencher. make similar we radar like science is that Yeah, first right if I'd last happened to growing

I we're think and going appropriate. at And look that so we to it's think move everything when

Craig Mailman

to just are then your that resi under just And yields in last development given one on market? Any the resi softening changes one. projects the

Eliott Trencher

this a fair from say sure. it's bit to little think earlier down for I year that rents are

assumption So your a on reasonable part. I think that's

Operator

comes Bank America. of ahead. from Jamie with Feldman Our Jamie, go question Please next

Jamie Feldman

your I markets. there the large is even the when they're of more think pretty would provide do the size of actually something? the timing around and in deals you some some tenants just comments color floating in you those those, markets maybe said some earlier Can on on

Rob Paratte

taken view rate. market. there's the Starting with up buildings other a been said, on activity Google, Amazon lease Bellevue a been cap market last in in space amount have Francisco, square implied XXXX are a have in REI Bellevue gives And Eastern San or really rate activity a the buying Facebook XX are days, that that tremendous all this in that during X published Seattle, been Amazon million office of Bellevue. examples Oyster in over in active just optimistic Phase specific And market the we've pandemic. renewal feeling phase as science signed in that has of to Oyster Francisco positive In we're The go just some and have that we're restrictive has in healthy general. as at Point. Facebook, to return foot cap said, of discussions has there had what about any a us been work. exceeds shutdown San very variety shining in with we're me well have companies the starting space XX% the X that the I U.S., the market see we has And John just which most won't have city beyond as life science. Point. the interest very at for that star is the And we in amount life of

The other of had say two Hollywood expansions. other lot would and are and a have and are at Amazon I markets that have looked that City. the Apple Culver Both activity and companies there Netflix

recently. has Netflix feet about fact, and XXX,XXX Hollywood In expanded Burbank by between between

the activity I'd of science San extremely And about discovered in in and thing South interest market science is science in from life happening segments tight there the come we've of market So that's before, there. expand I demand has those about Vista. the of too. own. two side west then our lot on in last West XX,XXX San really We've a there. Francisco said to lot a on tech there last that's feet and Apple submarkets. expansion has, the a took the down life life bellwether side thing for like say Diego its And of companies The some on promising Diego. Diego seen Diego has -- portfolio San as been San say would Large San Facebook

Jamie Feldman

I to get curious, tenants Okay, doing the on forward? terms get that's of just you more And Dropbox think how And reaction your be going Studios in helpful. something designing that the would buildings thoughts you does to change Dropbox be your for will just forward? And that layout? then announcement wanted wanted I does going I'm

Rob Paratte

John want Is John. step I the forward, on to don't call.

I told to work that announcing people think, announced to Jamie, a what permanent four Three, now that. right out companies it reflect lot companies and been have And always work adapt have headlines now have from in They've how space work back. even have do of figure that companies tech market. home. ago to companies was are their months with those And the that experimenting never you to flexible a employees. -- them, looking really is be to are dialed specific

wanted before accommodate Google even or employee Austin, the a work up, pandemic, his up put would that. her to So company hand if the in hand

So flexibility has key. been always a

even had the has a make are the him of to about phenomenon concern B, burning with work about it's which what they're working safe terms from is how to home even is do Nadella trying more his in figure out and companies is more vaccine, doing, And whole Microsoft's a He so productivity. A, lot it and quotes Satya hours. but these people, to CEO of articles what written concerned productive. out make with workspace, how

it, people. space doing to in they're much time they what the hiring capital, as puts their that he looking at social so enhance so how with is And work spent building

I So my Difficulty] specific, is of great studies looking time Yeah. globally the floor fixed probably a of opposed and There and there, [Technical lot on I congregating Benzlers to it's space hard type been this to other as the is a some collaboration areas there get done by who firms guess, anyway. benches. at more exceeded have more where

think companies see adaptation of lot a there's anyway, going I going operator flexibility. I was space you're talk, think to hearing people used be how is office the how tired bring in and and to me back, but

the how location. that that are for need have going does coming days product into months and you know teams central office be working that or we a are a the come team a may on certain certain get to when to fact global So to accommodated

it's workstations toward of And I as a benches. to, again, said think or sort earlier, concept, opposed hospitality of hard fixed studio as so layout almost a just I more moving

Jamie Feldman

itself think you lends exchange would or that the design the do you or different? to if it be -- And

Rob Paratte

do. I

have architects one the floor and think And XX,XXX the refer large you I plate a floor different need really like as that's are feet, I'm to the plates, where you of floor functions. of large that hallmarks if exchange Flower is you what What the Mart about to can it, into accommodate. neighborhoods. segment different

are it what may it be how where solving and in different So it and a that And that different working flow. collaboration complex happening may those have different a trying problem does database hack takes segments be to departments software you, or that's on space. work are or and that or in things again team working

with you seen a to again is you've example gathering meeting you're making become check kind of And more So I that and just fits modified can opposed this walls, in. you're into the how as the segmenting best hotel space space hospitality arena. use areas to hard truly lobbies not

Jamie Feldman

Okay. talking great. All been we've for It sounds this right, I thoughts. like Thanks. time. about appreciate your long a

Rob Paratte

Yeah, sure.

Tyler Rose

back And he on is get call, trying for the just can't. as reason John aside, technical but to an some

soon him get we'll So as Operator, we'll back just keep going. hopefully, possible. going. as keep And on

Operator

Yeah, Thank you. sure.

Heck Our Please with go ahead. Fargo. next from Blaine Blaine, comes question Wells

Blaine Heck

I'm Rob from much majority guys And Probably of the been if San lot or back. effective pre-pandemic in wondering and give on, year? impact of next declined rents levels net leasing of expirations think rents, especially but Clearly, space hasn't of Great, in the can us you have sense you if what he LA asking of guys how there John, you any been for markets? comes going sub-lease each Francisco on where a has thanks. your your have

Rob Paratte

just earlier they leases effective just said done few get data, face-to-face. very be are data you're enough pinpointing and to points. to in to able where tough there not just extremely it's There time, net have with there's done no that John been problem this particularly is The are today because rents isolated things months. in as last three And comments, four during the his new not

Francisco. expires feet, that's of more of in that's number are it's is, fishing indicator last at if it done the Goldman of let's offset $XXX I to California you located at been expires mid-market look Half trading down, serviced and need and of that, it. sub-lease Specifically everybody rent your just and XX% or space is focusing if that you're buildings space -- renewals it segment But sense is right in million that go million. fact I'd in or Seattle exercising be sub-lease like Francisco, from the about in company XXXX. the months, market can a recently, really it's San in to a is locations in the of But break see and X.X if But probably trophy that Sachs losses. whether you've fully at say, always always precipitous over say the two, five that of your discount. in drop, option you sub-lease the great XXX financial to to next the working if on you makes look X with have four at a what San your to renew that the district space foot or at in an an now year at mitigate markets, And some any space San rental expense. having sub-lease I there area the home in probably mean, lease tenants our look got and and Francisco not reported

a you space direct with So can space. expiration space if long-term a with decided are in sub-lease no tenant, market or put you way to even date, 'XX the there's compete leasing as you space

then just significantly affecting to that some I to layouts in bringing as that in become take. participated And their space some space. think of people we'll short-term discount have conversations do sub-lease heard they actually going will distancing we've what on You're and it start -- back And that need fact. to space that social space with see flex is companies

is on very So little close feet, tenants, keep again, and thing then got doubt, going something keep really And Kilroy there direct say we to to at the do sub-lease our lease -- very XXXX portfoliowide. there also, and our last number close only a through in you that's to how eye no have on I but think really you look it's respect what's with space being But need on the is we headline I'd we with the segment about XX,XXX where market. the largest really is eye X% a the on, space. We've portfolio a basis. roll it

to hard terms type where sub-lease again, effective rents. question direct to done. depending get So all it, to of your is especially think over on pinpoint map I the be And net going space, things rent, of just in the

Blaine Heck

the reduction in expenses was the seems the at of looking driver major for as just NOI Tyler, same-store quarter, cash positive it the results.

So, environment? forward ask in there I more wanted of expense savings expense buildings to in utilization carry whether were normal if of was just reduction that other office related lower kind to your think could all a that any you or

Tyler Rose

wasn't hardly reason the were approximately to you tenant down Actually, reimbursements in not the Yes. because related totally all noticed expenses, fact, by at amount. same if

of offset that. just didn't the So recover we

it related much and it expenses burn off really free to as to related was higher rents as rent. wasn't So of

the less So in buildings. occupancy there is

are not as higher having are from we're we from expenses, much less but so the And benefiting benefiting we that as rents.

Blaine Heck

Got it. Thanks.

Tyler Rose

John, are you back? No.

Okay.

John Kilroy

me? hear you can Tylor,

Tyler Rose

Yeah.

you. hear Now we can

John Kilroy

Okay.

because everybody. now nobody very moment. but classical music Sorry fourth heard frustrated until me hear been everybody, can I've I connected been I've -- I've could it's this time. And hear the and

reflection So home. apologize. from work of is I This a do good

Operator

Okay, thanks.

Next John, question Kim John from Please with ahead. BMO. go comes

John Kim

you a asset? Good Thanks. science not views a comments on science morning. Mart your updated particular, as be John, have on in developed whether And or Flower as [Technical difficulty] cold do life could winter. life

John Kilroy

It's the the interesting. mean, about where Area, Well, a life it not, square the And or east failed. see, know is it has life but thousand and if of side the several It's are on several Rob and being knows science. bandwagon, would big I And the we've sense Everybody is Bay health projects Northeast. where refinery accommodate marketed malls dollars feet. it's now Standard on -- said year is and that have side, because make as anybody in of is we'll that old live kind the east Richmond that Marin. sure. north all the Oil million as don't there a concerns. they And they citizens of the that paid two can there science I And

can we're seeing You donkey is call what to but doesn't say, science is now And right a think hot. it it a everybody horse, make I horse. a is trying life

science. try So every everywhere let's to city everything, say, let's let's to and try property every redesignate convert as in life

a to do certainly hear could. be it's total regard we lot we You're With wants science I to Flower don't going just but nonsense. lot And that could life the Mart, a that. sure, to of that. there, of know

John Kim

would other you as a to enter main the see national may is more biotech the wondering rationale of on Coast? on looking do or call, are the that you a operational the provide platform absence And you brief mentioned Eliot that your I'm attractive In Coast for have as East to biotech advantages that be that if some opportunities markets. West it development

John Kilroy

are to as science not have. to but know that to in that's that, going to any know, listening about answer to we on because life I'm not say, everybody have we focused that going is life I'm But going strategic thoughts like we and science. be what I'd talk you to

have the for into I and markets. scale to as believe to that people And the looking happen. been that of say, and of sure to forth. which couple different allows move rents be up we to us and a scale are market do looking want do unless a we if top market make don't want focused well, of buying going on of can are Kilroy a things we I we I we kind talented substantially requires, to the at number so that We the at years that that requires make the go have the

Nothing So imminent, more we're to but focused. very come.

Tyler Rose

we're actively And I looking don't John, the straight. just said set be markets, to other Eliott clear. record that at to think

said... I think he

John Kilroy

Okay.

Tyler Rose

the I comment. I'm Yes. mean John just Kim's correcting

John Kilroy

in markets. mean When actively, say I evaluating we other active I are

any active are strategy We not in another executing for market.

Tyler Rose

Right.

John Kim

That makes sense.

not the was if Okay. find color Whether mentioned you it the And provide then, or rate wondering a just non-core the opportunistic asset did or can expectation sale? you sale? pricing? Tyler, I was million if on asset on could give sale, any you any cap you $XX guidance And on

Tyler Rose

a little mean, this I think year. a I marketing it in was that I started Yes. we've pre-COVID about bit mean, commented earlier back process was it.

hope We're it until going from I transaction. closes. prevented we much comment closed to too we to we're close we're yet, so, about or -- transaction haven't confidentiality. think the details. a can John the $XXX around here still next in not it said, was month But We and foot under provide talking more

Operator

you may Okusanya with Mizuho. Our Omotayo next comes Please from proceed. Omotayo, question

Omotayo Okusanya

over the a one there just to have John, one I just out you to votes heard the that the mentioned polls all A Good the the you. XX, one first morning Yes. Coast. you is in just quite Prop West ever there behind yes few but for regards no has on votes. of

it? if we're curious, the of And involved us one that of kind passing? in have polls Prop in confidence full-size have of bit could poll and why you that kind talk number just some versus to of XX little that more you I'm So the other that a about

John Kilroy

and with names them that's on tell had groups accurate because are. have what issues, I most think I that you And But we're these in at. with the polls can't most working data don't historically sure. close the The California Prop democrat by because general, misled biased race, are of and slanted gone it's all of a democrat a as looking accurate. heavily it was people. they and I'm the how that the Well, this assembly. exactly we polls XX have for of is it approved demonstrates state just remarkably the how Senate, it governor, up democrat; had screwed is description attorney government. out democrat And attorney It's general, to democrat scholar

you sort if that, so good. sounds read it of And

pension going is the the But go asked schools to of as will percentage has the to other funds, schools, some this They to it is to learn answer. changed. like that, is government it of Sounds going about the governments. the XX% unsustainable go question people that funds and of is or tell pension money going when to going to not What more you? classroom? the And does the

fighting the of be and the that to see what there's election. the us I have misinformation things same of to struggle national of a we sides regards these with on corrupt consider So kind fairly a lot a voters, to we're both that that is we're fighting lot of thing that machine

close so polls so And much go also we can't almost but are again seen are than pollster, many this It's times week. the shift. every not I'm biased. have major further I seeing we a But that.

I'm optimistic. optimistic XX get Cautiously Prop defeated. will so that cautiously And

Operator

question Please next Street. go Green ahead. Ismail comes Our with Daniel Daniel, from

Daniel Ismail

are your I any want or regarding down little discussions comments of for firms among about from industries come productivity smaller John, distinctions noticing you the up? tenants, being noticing you're larger Thank of those Great. where or home. you. geographies working with concerns terms In bit you productivity a mentioned more

John Kilroy

think it. I about Well, mean,

much business If work, getting go you're to and if you're entertainment so forth, can't you done. in the production not and

there hearing -- and And the a with mentioned, whatnot. Microsoft, so sort lot of tech big was outspoken we're CEO way are Rob regard is what forth as issue with the is of off. capital you're the of the there and very regard If he's social to productivity to that that been Rob mentioning,

group small of a -- you're you're and make say you're company, consultants up. I'll a If just it

computer, talking from with how the that employees, and well. got, and And people do feet you've many home pretty you don't the to X,XXX I you're in You're telephone things something. know probably could XX on basically or doing

to husband story. for different tell that I different San have going in it's for their they us children, months and A be house of her in. I and and work little get is We've There executive is wonderful. could home were whatnot. you no could After with would can't. a So I works little thing gosh, to as the and you really the opened to finally and or get about rest want had work Diego And to a from dogs -- she forever. passed, months was remodeled she their she from as with got separation got percentage San between never Diego and of long kinds I work three back home woman life. bit in, an office companies live. thinking all her just and home their I in regard like again the couple were I earlier because this a four to

demand You're with everybody. on always

are kids in are we have -- Your you to your Zoom, are your and nothing barking, husband dogs say. else

some be this kids So damage And back but I regard looking imagine really anthropologists think socially, executives. pretty I now a that shocking XX, period. years the time at to of also particularly, XX to interesting are going would people from it's to have going with

drug way use alcohol some was If you up, up, know up you it's people told and insane. look kind one the department, in -- exact home country These unhappy. of the by the up. psychiatric I think at from but work of that don't medical biggest just are I'm the being not that manifestations XX%, and miserably is directional, it numbers, thing is of to of kumbaya and all head that I'm are suicide divorces way is the can centers is way I pollyannaish that everybody the of statistics, again, kind giving is And there

Daniel Ismail

that just then long-term the plans in expiration. of or Beach backfilling there space on follow-up Any And that update terms property? Long a quick with

Rob Paratte

vacancy, I the talking some on and detail of about end thing. executive want of the to respect So lot our that and discussions to a I we're I regard And landscaping, into to at lobbies, medium call on. our at just we yesterday don't with prospects fairly what good good doing going was sort would feeling there. have that specifically they very are with November been the updating with some get a a refresh, But doing, bringing a property, we've their transaction we're we're to to what because credit team company of call

but and call. do So move, cost to long of a on point to back the Zoom phone takes get have to what's time it together they through have twice getting we is, as teams and wouldn't it a take we do an question all John's different the renew, it's we that people, and talk a people decision the there. that on and call a on all input about The problem long example it's the because just taking space, demand productivity,

personally So Beach. is It's very that's submarket we offices, I regional there. best-in-class in perfectly thing, national which have the the situated County. of feel a And the good looking that and about is between sort companies in asset it's roster that have lot strong and salespeople, it Long why what Orange prospects is, that of LA tenant

Operator

I concludes Please, conference our Tyler like This would remarks. to question-and-answer turn back Tyler. Mr. any Rose session. to over the closing for

Tyler Rose

your KRC. healthy and safe. Good remain all Thank today. bye. you And in appreciate wish for we joining continuing interest you We us

Operator

for presentation. has conference attending all The you Thank concluded. now today's

You many disconnect. now

Kilroy Realty (KRC) 31 Oct 202020 Q3 Earnings call transcript