Kilroy Realty (KRC) 6 Feb 242023 Q4 Earnings call transcript

Company Profile

Participants

William Hutcheson	executive
Angela Aman	executive
Justin Smart	executive
Eliott Trencher	executive
Camille Bonnel	analyst
A. Paratte	executive
Nicholas Yulico	analyst
Steve Sakwa	analyst
Michael Griffin	analyst
Blaine Heck	analyst
John Kim	analyst
Dylan Burzinski	analyst
Upal Rana	analyst
Caitlin Burrows	analyst
Peter Abramowitz	analyst
Michael Carroll	analyst
Vikram Malhotra	analyst
Omotayo Okusanya	analyst

Call transcript

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Operator

Hello, everyone, and welcome to the KRC 4Q '23 Earnings Conference Call. My name is Emily, and I'll be facilitating your call today. [Operator Instructions]

I will now turn the call over to our host, Bill Hutcheson, Senior Vice President, Investor Relations and Capital Markets. Please go ahead.

William Hutcheson

Emily. you, Thank and everyone, for us. joining Good thank morning, you

CIO today Aman, Rob our On Trencher, our the Justin Angela me with our Eliott and President; call CEO; are Smart, Leasing Officer; CFO. and Chief Paratte, our

the that our live I will both information webcast a our supplemental. for supplemental Internet. This during call package and say discussing on nature. in regarding will of is call the available website over for At this call in the be forward-looking being and and to forward-looking the the Please some outset, this is need next information we be by the refer statement on for replay X days, to phone

on Our also earnings a both SEC, on with available release are and the and X-K supplemental filed website. been Form our package have

provide will and the financial development and overview Eliott Angela will our your we questions. to quarterly Angela? take highlights, and XXXX with strategic our in-process call will review will be pipeline our start discuss happy guidance. Then a Justin results

Angela Aman

first I'm my you estate of thanking in cycles. Kilroy on leadership visionary behalf happy join for CEO real of want platform as start his today this to many John on Kilroy. on company this by over everyone Bill. to various of Thanks, I call years

exceeding excited holds the John this I'm has and into built expectations diverse Kilroy. while the high about also country dynamic in to an a what future the creating capable role honored markets in stepping tenant premier meeting the portfolio of innovation-driven be organization of and for most base. our

And Los headquarters teams, XX assets meet the out also first few first team while Francisco. Seattle my I'd X regional to to spent weeks like to see job. here a in my takeaways with our share San on know from our days Angeles and I the our starting and getting getting

levels vibrancy and and traffic, more backs all the in markets trended seen have XXXX. are public the significantly by than Coast underlying of our over in feeling geographic travel course Activity energy our and better post-pandemic markets West measured period. up. domestic tourism has as First, data with usage The been up transit this foot

results. portfolio need in is share more changed. and the while an capture tenant challenging back is be evolve. be effective and our can enhancing remain are well-located, high-quality this in than market and office, office to to to that near Offices and well collaboration these in be to Employees space. will at continue Second, but They amenitized portfolio demands meet need and the positioned likely change what is efficient. to outsized needs in Kilroy's to recovery expectations and throughout market driving focused productivity extended respond process, have the their the term,

had Third, strength has the built this organization I weeks. which to the have only confirmed in over every tenants has Kilroy that clear tenant the a time impressed the been talent made economic at across this trust been X cycle. over I has and relationships last an embedded with abundantly point been has by the this the have team of by particularly extraordinarily it's in key value, by that tangible function interact opportunity priority

reputation unmatched, to our going is key responsive and The teams ability and team's asset in have construction industry the and flexible We they and are to continue to leasing, and creative. our management contributor each outperform external-facing forward. and described development be proactive, property will in a as

combined represent Area feet signed feet the since fourth highly include XXX,XXX highlights XXX leases, All Bay activity, law for firm. leasing to XXXX. which of approximately XXX,XXX quarterly of are by highest key a Notable leasing and these a fourth takeaways regarded technology international a X company's company's underscored volume quarter we square company quarter square the Fortune leases where signed

XXXX, For million represented volume with X leasing we X.X since highest XXXX. the annual the full approximately leased This square lease approximately year years. feet too term an of average

We has a continued foot we for to Games in Riot momentum extension executed pleased West this early are as in L.A. in say their of lease square XXXX, January portion a with XX,XXX space

represent X over strategy challenging of to I like Eliott, opportunities Before sheet. comments best favorable each balance going environments assure I always a navigating our pillars forward. fortress during path capturing defined to I'd equally as which turn the the properties, to Kilroy committed and growth more and a market high-quality these market strategic on a you capital few its call and can core make towards pillars am has environment. that allocation I Justin outsized

the robust life our Over quality assets science obsolescence creeping or mixed-use of sense. through only functional be and and office, to we'll make strategic the and maintaining space, on by through years, this growing development while portfolio acquisitions, they coming exposure our when focused ahead staying premier of understanding platform this if in

every we to forward we and take appropriate create opportunities will a value focused prudent are compelling in the internal and guide at returns. risk-adjusted pillars and all growth thoughtful with stakeholders. fresh that as look and capital driving be with and dollar us on same The for have external will strategy past of Kilroy's remain entrusted drive guided going We core will

Justin?

Justin Smart

Angela. Thank you,

the of which approximately billion, due end phase of the to Francisco. San quarter, most Kilroy Oyster the in-process quarter left from totaled Austin. Life $X.X million third related the delivery Development pipeline, in of There's down South the our fund roughly of second Point As $XXX the is Tower Science in fourth to of development Indeed our in development to

stabilization a amenities. the for Point scheduling updated to date time of construction Oyster line quarter noticed, XXXX. phase second to now have the of fourth garage is may you Kilroy the be As of the the result estimated revisions is of and The

incurred cost construction revised this period. anticipated for that carry the line, project during now time will the additional the revised the with conjunction reflects In be costs

We setting of life compelling about excited attractive quality be science Point believe campus the of projects differentiate competitiveness as the we and in our as find physically with confident many views most bit in are tenants world-class and Oyster the Kilroy others, the it waterside that every continue amenities from it's country. and will Stripe and the Cytokinetics The prospective project. We appealing to one X. unparalleled campus Phase did

a positive are drug, a with a a in thrilled see related look strong them heart recent from near aficamten, progress made resulted cap. long to and data relationship market On their history III has to Cytokinetics pipeline, XX-year trial Kilroy a in Oyster of we Point. doubling Phase with of Cytokinetics a at forward disease its drug markets public note, has and we which the

respect With anticipate entitlements all and not all design on our pipeline -- advancing future development on new we future starting any in developments in pipeline, continue maximize to order to projects XXXX. to projects intend do We optionality.

With over call that, I Eliott. the to turn will

Eliott Trencher

Thank you, the fourth to was strong to Justin. that conclusion very quarter a the pleased report I'm year.

was flat roughly Adjusting which majority FFO $X.XX of share the for in to of from Bay income tenant tied rental was this, reversals, Area. $X.XX quarter Fourth roughly was FFO and quarter. the one last included per

X% share, transition the for the year the after For best better was our which disclosed per $X.XX CEO second costs. the adjusting the guidance in of full than year, previously history more company was FFO original than and

a down income was occupancy quarter due On year-over-year. mentioned X% to fourth about to GAAP cash reversals. NOI same-store XX.X% roughly basis, rental NOI due was same-store lower previously down the

up roughly NOI was the year, than full better points basis X.X% guidance. same-store cash original For approximately XXX or our

our quarter, the decrease to inclusion well the portfolio. and due stabilized Los the of portfolio from prior of leased. XX.X% stabilized Angeles end a occupied XX% Indeed quarter Tower as the At in was expiration the was as lease in The

space. XXX,XXX As portfolio entered of a Tower which feet approximately included reminder, the December, Indeed square in unoccupied stabilized

interest, a real result, expense capitalizing or we property. the longer are As any costs for tax no estate operating

approximately Turning to annualized balance the quarter to debt Net was X.Xx. EBITDA sheet. fourth

a the million brings debt amount third bonds our which roughly we when to total repurchased quarter, December roughly added the of million. quarter, the $X our XXXX in During $XX repurchases to at repurchased discount,

As now a December remaining approximately $XXX result, is XXXX maturity our million.

use raising opportunities plans. We support We fund from term were proactively liquidity to our be should end, and $XXX pay capital to XXXX. in tightened ready our our bolster and we the been compelling rates of arise. decided development first the proceeds XX-year and late our thrilled fixed deal We've conditions XXXX, a quarter as income market of spreads at we in since million X.XX%, of bond we raised monitoring the income representing our by to patiently our received down coupon for benchmark needs portion accelerate fixed bonds to unsecured a late opportunistically Subsequent and intend to loan, XXXX they the investors. outcome

available of billion credit. currently of billion our and securities $X.X of $X.X comprised We cash $X.X billion line marketable on have of liquidity available and

Our projected million $XXX for $XXX broken and of development million uses and follows: the debt capital year are million $XXX spend. of $XXX of $XXX million to as down million, paydowns between

Now or acquisitions we let's discuss XXXX forecasts, both remain on opportunistic though dispositions fronts. No guidance. or will

highlighted, As Justin spend year mentioned, over the midpoint no million, reduction compared to million during total for is to of projected the $XXX levels. and are to development at anticipated million $XXX as $XXX XXXX be a starts previously new development XXXX

the rent full the be is midpoint $XX anticipated between a from year, a decline occupancy be $X.X to to in from point at basis expected for XX.X% XX%, to decrease million. be million is G&A to quarter. XXXX. and X expected is $XX Average fourth XXX roughly approximately the Straight-line million

expirations moving XXXX, majority space We X that in discussed, and over XXX,XXX of the getting anticipate previously that we As square tenants both XXX,XXX feet approximately have feet. back. square out total

be to received is lower Cash due of the of between is to we XXXX income same-store XXXX. of year-over-year impact and restoration X% NOI the from half The and approximately $XX negative million decrease occupancy first projected in X%.

lower back fourth XXXX $X.XX In broken of move-outs impact down fourth reserves average quarterly of for add $X.XXX move-ins the $X.XX the which this higher the expenses associated the adjust XXXX includes in the of quarter fourth FFO projected interest predominantly $X.XX as to into which, and for achieved bond the came expense, from and XXXX, subtract add $X.XX and operating to rates the lower as guidance $X.XX due in be the December, G&A. which deal and summary, significant in range occupancy, on $X.XX the an transition, increase XXXX to due and both is Tower, Indeed related $X.XX of $X.XX expected combination follows: portfolio average from previously lower of between with $X.XX or discussed, our interest can subtract the $X.XX related of stabilized from midpoint $X.XX to quarter to higher to a those anticipated of in quarter track lower XXXX disclosed bridge January projected CEO a XXXX, for to FFO quarterly we balance, is income with and approximately below interest quarter. The to subtract in count reinvestment a cash our share the

we also our able are enhance were our sheet without Kilroy. to to ways of To pleased could have we liquidity the outperform we further None XXXX finding in profile. done conclude, excellent and team at while expectations this be balance

on to we As continue remarks. my have well positioned build high come we stakeholders completes to we standard this the our That execute XXXX, at are momentum start and believe expect. to

to will Emily? Now happy take questions. your be we

Operator

Bank with Lynch. [Operator comes Bonnel The Camille question Instructions] of America Merrill first today from

Camille Bonnel

new any the in it that leasing with tenants whether types start pipeline start or we you're size of Could the since requirements, year, be of markets? themes the seeing

A. Paratte

is Camille, Paratte. Rob Sure. this

in Let about happening what's is happening a of regions. give nationally you talk our I'm me to What in going select also markets. backdrop

for 'XX. know of we into Although really be are leading QX office the there happened macroeconomic in things that positive and that to challenging, all are trends some continue QX

example, signed in foot a Silicon XXX,XXX Valley. Walmart lease square For

X.X which In Washington, past another with and Bellevue, million above was lease In about XXXX signed of As record And in is led San Francisco, in Angela leases a Hive company million. totaling feet in Pokemon, week, and OpenAI for those of foot square to with largest feet in was X.X XXX,XXX the Valley. X square our Anthropic, Silicon -- the Francisco a San fifth XXXX. all feet leasing TikTok. quarter average leases XXX,XXX mentioned, square pre-pandemic at XXX,XXX one this the gaming square

would continued much seeing last prospects. West with different Point. -- What Xth, -- we're say think exchanging I on activity Point for Kilroy have QX you our for aren't I that example, Oyster gives We're excuse where my spillover comments paper in markets. happening good is perspective activity Oyster a what's stumbling, X me, quarter. in than that So we're our we in at different at the seeing good about

there view will has X- maintained demand world, However, There's funding and space. gap tour appears activity a VC the steady that about positive tenants a more needing VC to on and and usually between to into X-month be eventually. spill funding

Lastly, country. continue firms the of I'd lease Orrick, we Herrington We have, to law say a the that attract Francisco-based San in financial with law which & Austin, firms I go activity into. the and seeing we're we best in services more signed Sutcliffe, firms and can't recently firm, from that, some like some

have we're plans in the expansionary is in think you data last tenants point that to San Diego, that project. I different I'd our give talking X

much will because flow, feel than they last be ebb it optimistic this feels did straight overall, and QX year. So cautiously still it line things won't and a better but better. of I'm

Angela Aman

kind summarize, some my together. remarks, strong into heard a I would carried pull which very quarter certainly which activity QX, of encouraged say, by. that just fourth a if of over just leasing perspective, we we're could very you had prepared I from

going facing we're meet, feels some out expectations XXXX, we're hopeful got we've But in think the the not I on highlighted, obviously occupancy. exceed can we Eliott weigh trajectory move-outs leasing laid and to As on significant good, we last night. if really that's

Camille Bonnel

of rate for the into quarter on to you've what's average outlook indicate leasing And expecting what be terms a guidance the implied so seem in similar a at baked year. achieving? than just Are because occupancy fourth to you you've it expanding been weaker in seen your retention pace the does run as XX%

Eliott Trencher

Yes.

speak weighted. when and in average timing signed about you guidance the because impact occupancy, So to if to and how be Camille, are to tends this is leasing what is of of in signed that's think back-end Eliott. terms going We're -- not it leases generally they the pretty

XXXX will versus impact more have a XXXX. of it so And on occupancy

in if add? there's of the color, to And terms you Rob, want anything

A. Paratte

as quite hard the amount are of it and large It's tenants just to on transactions pipeline. whether I hard in big for say, been activity I markets, in characterize in predict of just larger to mean that. I the few, had quarters size our sideline more to leasing There a we're now predict, some starting would would the Francisco, it's ranges. see the across Camille. larger there's San

Camille Bonnel

market. Appreciate is it. It very challenging a

from question a and final gears my Just bit. end shifting

even You substantial spend. have a for amount of development liquidity accounting the upcoming maturities and

today, look when capital fit you towards dividend where the in So allocate the context? does to this opportunities this

Eliott Trencher

or in XXXX, dividend down. whether be we'll are needs at and evaluates can Well, Right current into where comfortable something levels. get as with as our make to you dividend the we the we've time see up Board to where appropriate, levels what whether year, adjusted judgment it those done we've kept the It's levels at that current annually. we're those that this whether dividend level a that -- is -- the now, from

Operator

comes with Scotiabank. Tricarico from Daniel Our next question

Nicholas Yulico

Maybe if through the there's you're there's else Riot like or with on downsizing retaining how It's bit the first Eliott, you the whether a question what think the expiration games? year? just touch then about here. occupancy that's more meaningful little a Nick on occupancy a And a it's anything not happened of where guidance. tenant known to phasing the and could the Yulico --

Eliott Trencher

XXX,XXX what X about and quarter decline other do, our better the move-outs, move-outs as we We the but square to the range, Nick, feet. pieces ability the to in backfill other out the the over on beyond to about portfolio about end square a of and Yes. about that, some of midpoint XX in smaller the our confidence that total million higher easiest large the which at square a range, range moving those feet. XXX,XXX there moving up. range the of lot is outlined will be we our comes And our pieces us we starting about feet that's XXX-basis-point XXX,XXX in of think is in it going terms square are obviously the There think feet. gives to way occupancy, fourth nothing

Nicholas Yulico

the then role. You about be? you're viewing talked balancing of future the on new how a focus portfolio on get the you're a And I or to any balancing on in Just to just if given there's to going the early still you're same, but leasing wondering how what new early back versus occupancy? and stabilized Great. thoughts terms thoughts a an Angela, up Okay. how X about Maybe is congrats your of question I'm more about there's starting acquisition it's some attractive company staying strategy approach thinking whether leasing do the investments, those that so development pops for a to much guess items? that's thinking

Angela Aman

say creates sort Yes. just we think but really the convicted some that take be of record outperform in Thanks, incredibly an given of very allocation reputation forward. and the should advantage of an There the capital opportunities gets how that are of not about of front kind challenges, and and your the of question space, that I'm but capital allocation and heart in industry, have we'll weather incredibly would through sector -- this to of I'm portfolio, able the these really which excited of challenges only Nick. some the this about I really going about disruption team that excellent we obviously a us. talented premier in opportunity track impeccable people of a platform,

of Kilroy front now in big have us I complete think we Point X. we pipeline Oyster don't -- obviously, a development as

most lot the and Eliott going future and really what lot a those and look time with opportunities understand for Justin the I'm owns of be spending opportunities in sort company rest embedded create development pipeline, to controls. we have opportunities like the a the and within where of what value shareholders of already outsized have team the to to of We embedded and

would remarks, transaction to relates again, activity sort I how points that been it We're this a underscore over disruption. space that real on hasn't might to my evolves everything and evaluate functional do continue not need believe, As going into. this I to there quality going where there of lot I just in But to we this opportunities trades maintaining many and opportunity key data obsolescence said the of come and in we're in the an that earlier, talked to now really will Kilroy. I sort portfolio. be how out be in a of market much be about we the activity to And watch said creeping that, prepared the idea and of right that of at time. how is already point for keyed

so everything And have pricing compelling sort going that trades And going be this the of at not that of is there distressed given for trade not distressed flapped are things be focus that of them. quality. all to company, to -- sort on on

so wait and how see And things play out. we'll

in have sheet liquidity sort a we Camille and earlier, we're of really a place good perspective. of a from noted As amount tremendous balance

need we think be patient. I So to

to some other exciting side evaluate really there be the We on to of continue are But -- going opportunities to interesting think how and market this. and things are the continue trending. I need

Operator

ISI. Evercore Our comes Sakwa Steve from next question with

Steve Sakwa

not few leasing ranges. range, almost get unless It to look kind of seems the an to you I difficult very the of go Eliott, not us new -- going to occupancy. just try known as a know we to have of Welcome, really for space on exceptionally rate at gave to on sort I or the the at end It's commencing know low least a you're you pieces no very retention through you've low got that's the us move-out. Angela.

seem or X seems put would no abnormally can of assume you So low. abnormally low which to new which it's you could leasing, kind again close

factors of I to are guess, the high that some of sort you rate to of drivers of help occupancy? understand And us of leasing the kind really guess, retention get Just big to you might better low kind end? get I the end swing or the just or the can new what

Eliott Trencher

of on factors Yes, think do hit the then to The and the how head, right? we? the swing and are timely do the the portfolio factor on that's Steve, I what backfilling retention how I well you in some X it is think of that we consider. balance other are

So in the a we average, XXXX. the earlier, helps all to But have that mentioned not I as XXXX the think lot leasing that in about as that year, we success of of back half extent meaningful. the it's

is low. lower the at that range, light can of pretty leasing end assume we're the the you is new if So pretty the and retention

I fair. think that's

Angela Aman

Look, focused just also Yes. but activity to really the sure of making it's the not very stabilized can are doing across going that's get from happening development year across we we're outsized in hyper And that share possibly perspective everything well. to that's this as of we portfolio, on true market a to of be leasing true our our all pipeline an markets. the get share

little in year retention bit, to It's bring a retention highlighted X naturally lower and large going down move-outs. make is about of with need leasing. that sort we So his remarks as Eliott the to just this up

Steve Sakwa

retirement on side. coming Okay. with the G&A in, it's one-for-one the and John's dollar front, realize maybe Angela not a on And I

So cost there savings. is

think we it more envisioned. maybe I was had a bit than

through on on possibly moving walk rate? are still the kind a some things of to with So can go-forward basis the just maybe there And run you at G&A? other of pieces look

Eliott Trencher

Yes.

the range. of way $XX high you to costs, some the items I number of transition about think think of million take XXXX our it about the out to get when and to So nonrecurring kind tied you is easiest all think the

dollars midpoint of is a in our XXXX million that. the So few guidance below

area in think trying a where in in to this that's just continue all we efficiencies the appropriate we particular to really outsized of be and for do. isn't thing us from efficient that getting to time the look So it's parts one impact organization. is There

Angela Aman

structured to in, really my how just around how I'll mean I'm different different disciplines. across it's I'm only Obviously, I getting arms X -- Yes. add departments across and flows and organization that. still and work weeks and the

the lot as sure our for we to leasing efficient sure all are we're company get to of within of also goals highlighted, the need laid be, speed. G&A I going or just It's to to year. being And as a we exceed G&A, year be questions company. as It's about work to are allocated Eliott and in not functions So possibly of earlier do G&A the from really those about still number I the every of say meet dollar in to how But sort perspective. have out all the just we will the objectives up can resources have the that for development a and we absolute though. we we've of need make about primary making that what we this have is that

Operator

with from comes Michael Citigroup. question next Our Griffin

Michael Griffin

we quarter? but think it one-off terms velocity in a the of XXXX, I of guidance Maybe back it around and a the has I perspective? activity of number. more formal should on how recovery was that touching just to the But legs? think for minute realize sustained you're I in leasing going do the you give a from sustainable leasing know not kind environment the this in largest more noted you Was leasing release, view leasing since

A. Paratte

Michael, this is Rob.

Today, they space saw not so thing and look to in in office and companies as now extensions shorter-term again, mandates much? that while pace. their What need during 'XX, be that. is they've return that lease the it's so we put the is are And changed a rationalized to think, linear earlier, resolved companies straight how may pandemic. seeing employees question line. it, office of were to pandemic, companies going and same progression with the you would space, the you're I they said to the office the really thinking I need I some Because not fact at what say the that's or from have

be magnitude just it's does have am same highlighted that to that I don't I going So the that that feel think I I optimistic -- it legs. in it's cautiously quarter-to-quarter earlier.

Michael Griffin

you. Got that's helpful.

A. Paratte

just just early It I up the year the did. just in year, 'XX -- said it's like end [indiscernible] a good could quarter.

Michael Griffin

how you. you legal that's of particularly taking more much sort then Rob, just tech-focused on markets, I the mean, maybe talked think, driving Got the some demand those market and That's in sticking the leasing, fill often demand those really that And traditional tech helpful. to about do for firms of you're I of you seeing. to of sectors void bigger do back coming some have Or tech to leasing? space? see step and the

A. Paratte

Seattle of to and of there's are combination leases. use mentioned executed we and around that XX% the the a It's related that San that we'll higher of think, I tech. AI XX% So AI, Francisco and, leasing roughly and I is examples. of proportion XX% of as up demand a different that see coming

feet So taking tenant 'XX. or tech example, a average the leases the the average, beginning and for because It's tenant mentioned. that out we as up trend that's is XX,XXX in X,XXX QX that Francisco of -- was escalated in San now to a those is see AI really large of AI size that feet, I

So have services, another Seattle tech, happening transaction et in I XX% from is being professional of and from think San Francisco XX% volume the about firms, that law cetera, you services. roughly in financial

Operator

next Wells with comes from Blaine Our Fargo. question Heck

Blaine Heck

a your each any guys of especially that whether and metric update us proportion on your hoping where mark-to-market seen have in give large an pretty you expirations was you've of recently, in you year? guys the change in I markets this could Los Angeles,

Eliott Trencher

portfolio, And that the is we're the percent we're plus sort it outsized to others across XX-ish market. the digits, minus, in call is or Blaine, -- so the region X% market. Austin where only of relative about double below below

around about kind are The minus specifically, flat. it's or that of L.A. X%. plus others

Blaine Heck

Great.

the Second outlook that what the those on accounting? situations little for those color question, about moved bit tenant tenants? cash that were can you a or talk tenants Just drove maybe shift specific tenant more and and that or to

Eliott Trencher

Yes.

an on instance, current was we Bay So rent. will do in future And Area. we it on one it quarter We and I single as was, to rents. deemed predominantly of basis. they evaluation in the tenant their analysis collectibility every appropriate said, cash a the say to are them this convert

we to. of so came that's to how the kind we came that conclusion And

Blaine Heck

you And can prospects for color retaining there? Okay. them? Any give

Eliott Trencher

expectation to that pay Our continue rent in they're is XXXX. going to

Blaine Heck

share where can and just given All you as update for question respect Angela the trading to an me. an Can development? stock and with right. on is remain give just attractive use funds That's the alternative additional whether might guys you chime maybe helpful. and repurchases on Last in guys of thoughts sidelines those be your on acquisitions

Angela Aman

at take Thanks. Eliott a it, Yes. certainly in here. and can I'll jump crack

emerge compete for next capital going will at buybacks us allocation and the embedded couple we're everything investment to portfolio to opportunities one to with going or of either But a But to available the are opportunities in have perspective, menu think of certainly of full opportunities all we are of of over the the sort the look buybacks years. from have those other alternatives. we capital today,

market or protects see development acquisitions it's always in whether smart But over on got a underscore, capital be a way the lots whether whether going to we've in think, we're so also few I also capacity a it's able like it's sheet. of to we've tremendous I'd the or liquidity we've next that, do allocate just way. few obviously, balance to we hit times, buybacks got the that years, in

Operator

Our Kim next from BMO. comes question with John

John Kim

provide you're have the on also on what Angela. and KOP just yields? development And market, that impact I parking the cost softer to first property? Any you commentary the of amenities question higher Congratulations, additional guess My that X. new and could space your supply, adding is on the will

Justin Smart

Yes. Justin. this the is the of John, center that The for was by affected project schedule ran the project. utilities through

work their times. the before despite imagine scheduling and including utility notoriously the full of gas, companies had be can street the far you are to And If to plus all conduits, took project. telephone. they pipes They reconstruction we contingency, And could at electric, power the best of for relocated, slow and longer. the of get

was net that to So what or went on had work of go top on effect delayed. the that utilities to is the the scheduled be top is,

the the longer. exactly had we the scheduled took meant couldn't parking of start it structure So as amenities corner and

another effect is X So months. the net

Angela Aman

phases say jump of said project with his I I Justin Rob in at remarks. about just and echo am as with really this Phase I rest and really product toured long-term And here. well. in week Justin the and outstanding I'll for prospects, for an everything potential last excited the unparalleled only I'd KOP team, I want not to but Right. X, is future prepared just the the amenities. think

in in to the take a of I that of term. I leasing requirements have tenants work underscore, obviously And looking It's many the right From piece tenants from But very think to we've now biggest would isn't that just standpoint, the are project today. space and near have do market the we taking our there. feedback looking ready received just space yet.

product that's KOP X leasing as is our think I'm just I the finish resonating with move we'll the progress hopeful in have this through on we to need but construction, we year. market, demand So

John Kim

do announced will will be Timing this -- year? something wise, be you the think leasing

Angela Aman

really Everybody hard, to work going We're is it. on focused yes.

John Kim

There the recurring, should an at not point forward? XX.X%. in second thought question think in is also My how how it sure but decline NOI unexpected was occupancy, basis with we in what about margins your quarter, think we property was Okay. I'm decline guidance XXX XXXX? about we going fourth taxes. if ended should that's of margins In

Eliott Trencher

Yes.

parts. X are is Eliott, there This John. So

that property the estate which you taxes, through. gets most passed which referenced -- that real got reimbursement on refund a we -- of a was So tax

is us you So meaningful was we the mentioned. quarter, call it why impact in the obviously which not It net to as margins, does impact the not out. did

our I occupancy lower, think margins have forward at gets to fact the if to XXXX about our as and we're for look that going impacts lower negatively margins. the think margins is adjust going right occupancy, our way you the then that

Operator

The next Dylan from Burzinski question Street with comes Advisors. Green

Dylan Burzinski

sort or effective rent further think about net on XXXX? effective wanted of rents decline guess, to in as growth just expectations I touch potential for we net

A. Paratte

it's to every transaction to about be market talking think hard specific? is you Kilroy are Because tell Dylan, I or going different. specific

Dylan Burzinski

you maybe expecting, concessions Yes, maybe further right? market across to or market just are, still face given rents Are degradation the finally start pressure in we footprint, down? occupancies start see on [indiscernible] level, broad where to further trickle

A. Paratte

if the what's market, is that a say that, every tier what the I premium premium. look would commanding you again, Yes. at market and really is space almost space in

they example, XXXX. were effective rents for substantially from where so in are Francisco, in And up net San

in that Another at like or years -- it of of way is the vacancy in of market XX over that's XX% is Seattle, that buildings the older. are the look to

deal commanding newer construction, the mentioned so Pokemon including premium And I that rents. are

be So going it's to the transaction, at is it's the it's a the function and going market and of be also to given market the that it's credit of that in just of tenant, time. function that just a -- where

Angela Aman

I I you've prepared Rob think referred a to and Yes, in company over right to and haves of think as really have the I sort and -- creeping flight point my it but on the functional remarks, quality, this is, others heard hitting is here, obsolescence as by losers, time referred that's winners which to nots. it

way. to bifurcation really and pretty meaningful that significant You're in continue see a going

against So I'd the markets just Kilroy. overall a data any portfolios quality market these as the to in caution at like of read-through looking

Dylan Burzinski

were today I hear they portfolio, And did Kilroy's that higher net for than you pre-COVID? rent you're saying quality are right, effective

A. Paratte

No.

think... I

Dylan Burzinski

concessions? the given Even rise significant in

A. Paratte

a premium rate, No, has I city the availability than lower but in higher pre-pandemic. like said it's San rents space also a that's Francisco, tier left commanding that

Dylan Burzinski

it. Got

A. Paratte

General [indiscernible].

Dylan Burzinski

tenants leases. much to density earlier need. touring but versus comments regarding on I with what of how tenants you're out or just sort just they they they're discussions questions figure your signing the looking sort trying at space any In pre-COVID? guess need today one over I helpful. for as of space, to realizing sense pivoting That's mean of

A. Paratte

part trying most thing create is that less back people to dense to -- are employers coming to mean space critical probably it's work. do than pre-COVID. of a the Yes, attractive what employers I that's really and comfortable

and a you're open lot more So that sort collaborative of space, space that thing. seeing

to -- that X more sort you're out XXX. below of still also pretty Getting So a seeing about it of in is XXX, And we significantly you're use X to spread -- space. use threshold uncomfortable. we

trend seeing as to watch. So hoteling it's an of almost way as always in you're sort interesting But people well any example, not being in of industry. a very space use seen more space. received put less an and And to that was sort

Angela Aman

have to they perspective, be in of about comments the anymore. to was office head space has Yes. some just home efficient work. at to their productivity. I as from on are hitting effective productive It really And that be a quiet doesn't and my what being able as be put that's down driving able really need to in at to People be

think And I driving the highlighted. that of really that's so some trends Rob

Operator

with The Rana question Upal comes from next KeyCorp.

Upal Rana

you on providing trajectory either. Do year thanks X% expirations your 'XX? Congrats top could new color about occupancy don't next any again to for the role, on out next begin Eliott, and the for you grow in that tenants You have year Angela. of and office this this feel year. the only expiring bottom have year

well. that So want get to sense as a I on better

Eliott Trencher

Yes.

to as than That the guidance everything doing to on is good leasing in So we a that talk I hit we're can good and is said, XXXX Angela XXXX is and it point today. one. think prepared in trajectory this backdrop top priority mentioned, space not certainly a about company, XXXX and the is I better question, for you the that that the appreciate ensure

Upal Rana

there to that leasing for wanted Got on be like project. I looks wanted get a And it. about XX% Towers. update to and up lease sense left a what on It then Indeed little seems get Okay. to to pipeline the

A. Paratte

particularly basis, touring so were how lot a we the temperatures activity, Sure. really or since it's In QX and of on daily really a hitting QX, picked curtailed we when the holidays. up XXX and summer, talked about

So to we seen mix about. feel really services. of some which good seeing one financial same we've services, sort of earlier, as are law And tech. firms, a the We're have pipeline seeing mentioned we the tenant we're I professional high-end questions, before,

a turned really at of have has of left. meaning as it activity lot we So a dwindling least in sort our the of corner space the asset, space. market sort don't don't and people we Ultimately, see of have terms

So back to quality. flight to

Operator

Burrows Our next from question Caitlin with Sachs. Goldman comes

Caitlin Burrows

by about tenant Congrats West whether Could follow Maybe specifically again, kind received? West you and up they're just at on moving new Seattle to just then new activity and broadly more up was -- how that the maybe the on activity the the now has property of completed planned being Xth follow improvements Angela, Xth talk the comments in are the company. at and to leasing how interest at role earlier trended forward. you

A. Paratte

Sure, This is again. Caitlin. Rob

me our about Let talk just X I'll markets. split --

assets have So from in Bellevue for strong. activity I space little held that is in a CBD We Seattle And and any central Net tech market large for as us that well have Pokemon despite meaningful is users. are of slower. very The TikTok don't rents market. deals this quite some bit sublease that mentioned, submarket.

South fairly Lake have do we decent Union, where and activity. specifically, assets Fremont, we have

tech we're the seeing in predominantly, they're and it's but -- services but say also looking market. I'd mix, So professional a

the we're in has that based talk the upgrading mix amenities to amenities of just facility. commanded quality and amenities us you've you and and attention Xth about, West for know refreshing as on heard a the and all about of lot it's tenants. And flight

And we have lounge. childcare tenant a so on-site. doing We're

in put this somewhere have deck And one thought of We are gym that's space an a in a through in, largest the tenant not of example. that we amenities the the -- city. all outdoor they're perspective, there building all for from over really left the

tenants right activity being with tour So paper exchanged that is into now. and translating

Angela Aman

asset. I first I would my Yes. really excited about but it with work I certainly there say to walking that We're look plans very, and many toured is it's going complete. I'm the of think resonate complete not forward West I at upgrades, to redevelopment the yet the have week for company. developed Xth well, with once you been through And or that just the very

Caitlin Burrows

of majority gets Got the expected 'XX and lease Kilroy space for then mentioned earlier you now both to move Eliott, out expirations the it. And back. maybe, the are large how X

could decisions could you maybe if of or for the kind office share why what So of just bigger suggest leaving, And picture wondering where or you're they're they're details clarify not? all any getting back think then if you space could those you needs? going for

Eliott Trencher

of backfilled Yes. -- backfilled tenant. we've the where a small There is some space to we've another it portion of

So the that's space. of you not the it entirety want... why Rob, if is And then

A. Paratte

Yes.

Some of it's consolidation.

going -- through pretty for a of of revamping in massive it of a themselves lot trying go for to cultural are -- the some forward. is change And companies terms

easier so location And sometimes new in-house. do that to trying moving and than is to fresh a starting

So...

Operator

Jefferies. Our Abramowitz with next question from comes P

Peter Abramowitz

some from of quarter exposure Just one and themes taking lenders the kind partners office or looking emerging industry potentially are is peers of that advantage now. trim your of of this right the to

being So could into of how are are or in your you plans having your deals talk you're seeing potentially signs that about, of In marketed that any capital play you conversations and markets? terms that generally, allocation? for could

Eliott Trencher

Yes, sure.

what the seen on, think I bit X is the of have of. market, the a surveyed of a kind we've of X don't as little you So partners. dynamics lot touched We we've lender more

with partners. X We're both happy X -- we of relationship very partners. those with have have We our

been there a of more lender lender been of the the say than is warrants they're these what on have quality rule been on types the that -- the facilitated exception Angela sales. focus from seen utmost for for that quality something additional of us. consideration we've side, not And as so and few I'd the So importance. instances situations, far has mentioned, in us, has

And have of material amount not we so those on a deals. spent time

Peter Abramowitz

watch science side you list? the development your could drug tenant potentially watch they guess, potentially lease about life for just Are of news with the generally, They've then back their think you issues business. the in it. just and some tenant on Oyster talk pulling the Got for a Point. And in side, there been at have in just And XXandMe just I on general? list I

Eliott Trencher

tenants you sure are can't I'm or on talk Yes, about what list. appreciate. can the watch We are not

the through and are tenant. So appropriate we single rents, how business quarter. we every accounting current on looks a It's their tenants' treatment process, trajectory history, what very both credit it of evaluate on the what every like robust what is they making we assessment continuously go for and do is

large, of have picture. percentage list. in seen seen in quantity of by and the tenants The watch life of kind slight are the tick of as We -- there the majority big low well. the the ABR. up and We're a watch science there mid-single more retail-related tenants office as make digits a a on list, but are up that some certainly to We've

Operator

Carroll Michael with RBC. The comes next from question

Michael Carroll

Kilroy the Yes. the And earlier, I the this I answered you And that wanting just garage some the can but Oyster Point wanted take the parking to without property, tenants prohibiting in tenants still down to and congratulate from space? in the job. be construction that Angela on new delay, believe is amenities that is lease meantime? of space Or they'll just

Justin Smart

Justin. is This

square feet. can a the come XXX,XXX is Point been that It's amenities, work has including and ready, project. garage before that a appreciate to together a building is big delayed. lot Oyster need of There's that other the site You details

delivered we XXXX, deliver very project and So 'XX. net-net, be that we think and we late can time the within will the building first are line revised stabilizing the confident

A. Paratte

having created be steady. has space one We're occupy that we're where our space a has able reasons have and -- away, Michael, our this F to if physically is market that But expiring, ready it. quite the bit. also that's is right in in that the comment we're Building has That's is demand that that not is building ready remained not lease for will somebody or of a changing needs the them expired spring activity we're rapidly. lab

could yes, the order about -- sign what So is a landlords down. occurrence will pinned natural leases and Justin occupancy sign get in tenants talking work and development a and And we leases. that's together and date natural to

Michael Carroll

demand that of you to of demand? at the the type in AI type still veering Point? city? that away I seeing that's the Oyster Or what's then Francisco? any breakout science staying is just you helpful. seeing South tech Then proper city potentially Okay. San possibly guess, from kind demand of between And life guess are type I And and what are demand

A. Paratte

a purpose-built actually again, tech. located mind are to do able speed of from data science tech is quite are They I'd to We've because AI One in help So science. also rapidly process smattering drug seen AI life science producers life Stripe and market. that buildings since these there. coming and and amounts simulate of is massive together interest trials life for work thing keep things

-- the of there's that expecting Oyster to Francisco, San people example, from a really seen life to we industry. in to well for involved come as start-ups, science big leaving be pharma haven't we're not lot we're going But the as Point. So AI

Operator

Malhotra Our next question comes from Mizuho. Vikram with

Vikram Malhotra

occupancy Or you rate But Eliott, guess, to economics go Can it just Just volumes give XX-month back, giving I'm leasing just period, is just and should of the I to us between perhaps anticipated the both to not kind we gap for today, see modeling trying historical know a think over to wider? about what us through to and lease to you're likely year. -- understand a XX-, I of the kind the be qualitative just of similar averages? be you sort sense?

Eliott Trencher

Yes. It's similar today. probably

wider few generally, think sort flow through similar little If X the to think been XXXX, it, occupancy. years, call But depends, years. relative last that take, back has bit then. quarters to for similar. And went I it we to the few I a was it's of totally been it to as it XXXX, today last X it certainly probably will

Vikram Malhotra

Got it.

the through XXXX. similar -- XXXX XXXX, a to be be So like to the average, you gap gap year, longer-term over that expect

Okay. That makes sense.

I just might $XX could color, I'm what on expectations it more just said if wanted are get think then you million. in rents point, And $XX around when a On costs the us -- give those just were there to that property? Oyster related you you like was I changes at bit clarify, Point, just higher costs, to? million, any

Eliott Trencher

remarks, in change So just his in to clarify, tied which carry. Justin to cost the higher prepared mentioned was

entirety operating delta. So And the of cetera, then the carry have et as we and longer the property that expenses, in longer, until rents... to have interest, of terms we is a period we deliver,

A. Paratte

well very This competitors rates both have from as as -- rates. is our well as well as Rob. year-over-year, our asking maintained Rents asking

to So again, of different it's transaction each going a hard set have components. to pinpoint is because

Vikram Malhotra

role. things Great. your or one, if And space curious in on that just congrats the given going exciting at any on the perspective? lend just office of your similarities of retail, outset, Okay. well I to from in itself the office. then Lot But kind Angela last broad I'm strategies experience may,

Angela Aman

there obviously, to lots are of mean, I things. Yes. But of lots similarities and out big differences. call a just few

not the about some piece portfolio and in just to the management with can in all function move institutionalized I sort construction lease same the execution landlords, tenant is different And users think has in they've markets between in retail, the I relationship in process and make legal tenant-relationship and space property not very really way business. portfolios versus of in prepared remarks you large when taken similar. connections Kilroy's things office, over and work tenants and after this create the think like are spent about just a occupancy, that to you where my that sort leasing a particularly the the time of of the make talking company but ability faster these big in

Kilroy I'm to see And I very done how past. has pleased in the think well that

between of similarity and types office leasing. retail a think I of types leasing big that's

in is At really capital think allocation. it and the it leasing whether really development they're it's the of true, in of and sector, the basic not tenants, the sort end all invest capital dispositions any redevelopment, And I retail office but just or types with or these tenants acquisitions whether or respect of whatever whether to tech and is. about that's day, we just retailers or and

decisions the is way so similar asset you And categories. those pretty really make across different

the last over functional the of say flight stranger then and or landlords, been XX increasing XX to course have I that only quality the years, last is other And obsolescence. no thing would retail to

it assets market think portfolio is path like how really of forward. be honest there or to the of trajectory seeing specific there the are intellectually of lessons and about the lots looks you're the for sort quality important to in specific what prioritize the growth And in and of opportunities going so terms I

Operator

with The next Deutsche Okusanya Omo question Bank. comes from

Omotayo Okusanya

congratulations. that for of groundwork just do of And and in think things help this -- just Very we wants guidance, like do to First around Question a that? could to we upwards particular, around all, good you see kind guidance Angela, excited laid second-generation us of who anyone for FFO, through look what through onwards. pretty like FAD and of also specifically think of of kind for how kind FAD? about some you've How but think TI. year, kind

Eliott Trencher

Yes.

So will which year. we rent our be big the on prepared from touched a in delta prior remarks, straight-line

run In is our question minus. then XQ terms think the of I plus XXX, run FAS And CapEx. use, rate to is or the a big good rate

of sort few last as I years. think of in that that low a double we've NOI percentage digits been the in

function XXXX. done have higher be that there'll that quarter our that's we we the fourth than is more come that, and leasing in expectation in anticipation to Our of leasing the that that this we're year. think And the

Omotayo Okusanya

again you learned And lessons world portfolio, quality retail Okay. there could the dispositions be the of for to a you think kind side, one -- thinking flight in have while mentioned then Kilroy high-quality of we guidance idea this me. about additional if of should XXXX, a you That's in portfolio? we be would not about the maintaining where more any dispositions of Angela, indulge kind should on your about do helpful. some

Angela Aman

both Yes. very, prepared The very is or it's up in that on market right I which going is dispositions remarks, right opportunistic think be quiet I Eliott whether transaction his fronts. now. mean acquisitions, we're it to framed

more don't really So bake going -- portfolio. spend evaluating into think I But to guidance. time anything I we're it's need the to to prudent

look what think at like I the that those assets has be think values forward standard time amazing robust, to growth opportunities can't are There to add assets them platform, trade we be just that so we would sell think conversely are we choose them do to we'd in to because be. need at this there going done that's company value that the sell going are also to assets. to trade and past we prospects over because be additional to I as to not the the really

either X those balance guidance put specific pin to relates think or each it in But on there's sort really just I acquisitions. not for of the other XXXX, time. things So over us out transaction dispositions to of activity kind as a enough in market

Operator

I'll back further no questions. remarks. have we the that, for to call With closing turn Bill any

William Hutcheson

you, continued Corporation. Realty Well, Right. thank you, Thank great. Thank and today. for your in appreciate us Kilroy interest Emily, everyone, We joining you.

Operator

for may joining call, now you, today. Thank us and concludes disconnect This your you our everyone lines.

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