þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Kilroy Realty Corporation | Maryland | 95-4598246 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Kilroy Realty, L.P. | Delaware | 95-4612685 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064 | ||
(Address of principal executive offices) (Zip Code) | ||
(310) 481-8400 | ||
(Registrant's telephone number, including area code) | ||
N/A | ||
(Former name, former address and former fiscal year, if changed since last report) |
Kilroy Realty Corporation | |||
Large accelerated filer þ | Accelerated filer o | ||
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | ||
Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o | |||
Kilroy Realty, L.P. | |||
Large accelerated filer o | Accelerated filer o | ||
Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o | ||
Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
• | Combined reports better reflect how management and the analyst community view the business as a single operating unit; |
• | Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management; |
• | Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and |
• | Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review. |
• | consolidated financial statements; |
• | the following notes to the consolidated financial statements: |
◦ | Note 6, Stockholders’ Equity of the Company; |
◦ | Note 8, Partners’ Capital of the Operating Partnership; |
◦ | Note 13, Net Income Available to Common Stockholders Per Share of the Company; |
◦ | Note 14, Net Income Available to Common Unitholders Per Unit of the Operating Partnership; |
◦ | Note 15, Supplemental Cash Flow Information of the Company; and |
◦ | Note 16, Supplemental Cash Flow Information of the Operating Partnership; |
• | “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
◦ | —Liquidity and Capital Resources of the Company;” and |
◦ | —Liquidity and Capital Resources of the Operating Partnership.” |
Page | |||
PART I – FINANCIAL INFORMATION | |||
Item 1. | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II – OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | (unaudited) | ||||||
REAL ESTATE ASSETS (Note 2): | |||||||
Land and improvements | $ | 1,127,100 | $ | 1,076,172 | |||
Buildings and improvements | 5,017,999 | 4,908,797 | |||||
Undeveloped land and construction in progress | 1,993,314 | 1,432,808 | |||||
Total real estate assets held for investment | 8,138,413 | 7,417,777 | |||||
Accumulated depreciation and amortization | (1,361,811 | ) | (1,264,162 | ) | |||
Total real estate assets held for investment, net | 6,776,602 | 6,153,615 | |||||
CASH AND CASH EQUIVALENTS | 50,817 | 57,649 | |||||
RESTRICTED CASH | — | 9,149 | |||||
MARKETABLE SECURITIES (Note 11) | 22,519 | 20,674 | |||||
CURRENT RECEIVABLES, NET (Note 3) | 15,144 | 16,926 | |||||
DEFERRED RENT RECEIVABLES, NET (Note 3) | 256,558 | 246,391 | |||||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET | 186,649 | 183,728 | |||||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 4) | 76,495 | 114,706 | |||||
TOTAL ASSETS | $ | 7,384,784 | $ | 6,802,838 | |||
LIABILITIES AND EQUITY | |||||||
LIABILITIES: | |||||||
Secured debt, net (Notes 5 and 11) | $ | 338,189 | $ | 340,800 | |||
Unsecured debt, net (Notes 5 and 11) | 2,156,521 | 2,006,263 | |||||
Unsecured line of credit (Notes 5 and 11) | 295,000 | — | |||||
Accounts payable, accrued expenses and other liabilities | 278,508 | 249,637 | |||||
Accrued dividends and distributions (Note 17) | 47,348 | 43,448 | |||||
Deferred revenue and acquisition-related intangible liabilities, net | 146,741 | 145,890 | |||||
Rents received in advance and tenant security deposits | 58,604 | 56,484 | |||||
Total liabilities | 3,320,911 | 2,842,522 | |||||
COMMITMENTS AND CONTINGENCIES (Note 10) | |||||||
EQUITY: | |||||||
Stockholders’ Equity (Note 6): | |||||||
Common stock, $.01 par value, 150,000,000 shares authorized, 100,559,903 and 98,620,333 shares issued and outstanding, respectively | 1,006 | 986 | |||||
Additional paid-in capital | 3,951,289 | 3,822,492 | |||||
Distributions in excess of earnings | (149,368 | ) | (122,685 | ) | |||
Total stockholders’ equity | 3,802,927 | 3,700,793 | |||||
Noncontrolling Interests (Notes 1 and 7): | |||||||
Common units of the Operating Partnership | 78,223 | 77,948 | |||||
Noncontrolling interests in consolidated property partnerships | 182,723 | 181,575 | |||||
Total noncontrolling interests | 260,946 | 259,523 | |||||
Total equity | 4,063,873 | 3,960,316 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 7,384,784 | $ | 6,802,838 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUES | |||||||||||||||
Rental income | $ | 164,515 | $ | 158,925 | $ | 327,386 | $ | 315,573 | |||||||
Tenant reimbursements | 19,567 | 19,267 | 38,717 | 38,563 | |||||||||||
Other property income | 2,990 | 2,406 | 3,791 | 5,770 | |||||||||||
Total revenues | 187,072 | 180,598 | 369,894 | 359,906 | |||||||||||
EXPENSES | |||||||||||||||
Property expenses | 32,567 | 33,304 | 64,238 | 64,545 | |||||||||||
Real estate taxes | 17,813 | 16,543 | 34,959 | 34,507 | |||||||||||
Provision for bad debts (Note 12) | 5,641 | 409 | 5,376 | 1,707 | |||||||||||
Ground leases | 1,586 | 1,547 | 3,147 | 3,189 | |||||||||||
General and administrative expenses | 21,763 | 14,303 | 37,322 | 29,236 | |||||||||||
Depreciation and amortization | 64,006 | 62,251 | 126,721 | 123,170 | |||||||||||
Total expenses | 143,376 | 128,357 | 271,763 | 256,354 | |||||||||||
OTHER (EXPENSES) INCOME | |||||||||||||||
Interest income and other net investment gain/loss (Note 11) | 771 | 1,038 | 805 | 2,103 | |||||||||||
Interest expense (Note 5) | (12,712 | ) | (17,973 | ) | (26,210 | ) | (35,325 | ) | |||||||
Total other (expenses) income | (11,941 | ) | (16,935 | ) | (25,405 | ) | (33,222 | ) | |||||||
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE | 31,755 | 35,306 | 72,726 | 70,330 | |||||||||||
Gains on sales of depreciable operating properties | — | — | — | 2,257 | |||||||||||
NET INCOME | 31,755 | 35,306 | 72,726 | 72,587 | |||||||||||
Net income attributable to noncontrolling common units of the Operating Partnership | (566 | ) | (616 | ) | (1,317 | ) | (1,239 | ) | |||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | (3,640 | ) | (3,242 | ) | (7,614 | ) | (6,375 | ) | |||||||
Total income attributable to noncontrolling interests | (4,206 | ) | (3,858 | ) | (8,931 | ) | (7,614 | ) | |||||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION | 27,549 | 31,448 | 63,795 | 64,973 | |||||||||||
Preferred dividends | — | (1,615 | ) | — | (4,966 | ) | |||||||||
Original issuance costs of redeemed preferred stock and preferred units | — | — | — | (3,845 | ) | ||||||||||
Total preferred dividends | — | (1,615 | ) | — | (8,811 | ) | |||||||||
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 27,549 | $ | 29,833 | $ | 63,795 | $ | 56,162 | |||||||
Net income available to common stockholders per share – basic (Note 13) | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Net income available to common stockholders per share – diluted (Note 13) | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Weighted average common shares outstanding – basic (Note 13) | 99,691,700 | 98,275,471 | 99,220,577 | 97,834,255 | |||||||||||
Weighted average common shares outstanding – diluted (Note 13) | 100,150,856 | 98,827,378 | 99,687,682 | 98,427,345 | |||||||||||
Dividends declared per common share | $ | 0.455 | $ | 0.425 | $ | 0.880 | $ | 0.800 |
Common Stock | Total Stock- holders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||
Preferred Stock | Number of Shares | Common Stock | Additional Paid-in Capital | Retained Earnings / (Distributions in Excess of Earnings) | ||||||||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2016 | $ | 192,411 | 93,219,439 | $ | 932 | 3,457,649 | $ | (107,997 | ) | $ | 3,542,995 | $ | 216,322 | $ | 3,759,317 | |||||||||||||||
Net income | 64,973 | 64,973 | 7,614 | 72,587 | ||||||||||||||||||||||||||
Redemption of Series G Preferred stock | (96,155 | ) | (3,845 | ) | (100,000 | ) | (100,000 | ) | ||||||||||||||||||||||
Issuance of common stock | 4,427,500 | 44 | 308,788 | 308,832 | 308,832 | |||||||||||||||||||||||||
Issuance of share-based compensation awards | 4,691 | 4,691 | 4,691 | |||||||||||||||||||||||||||
Non-cash amortization of share-based compensation | 12,628 | 12,628 | 12,628 | |||||||||||||||||||||||||||
Exercise of stock options | 272,000 | 4 | 12,047 | 12,051 | 12,051 | |||||||||||||||||||||||||
Settlement of restricted stock units for shares of common stock | 278,057 | 3 | (3 | ) | — | — | ||||||||||||||||||||||||
Repurchase of common stock, stock options and restricted stock units | (150,129 | ) | (2 | ) | (11,640 | ) | (11,642 | ) | (11,642 | ) | ||||||||||||||||||||
Exchange of common units of the Operating Partnership | 304,350 | 3 | 10,936 | 10,939 | (10,939 | ) | — | |||||||||||||||||||||||
Contributions from noncontrolling interests in consolidated property partnerships | — | 250 | 250 | |||||||||||||||||||||||||||
Distributions to noncontrolling interests in consolidated property partnerships | — | (8,651 | ) | (8,651 | ) | |||||||||||||||||||||||||
Adjustment for noncontrolling interest | (3,068 | ) | (3,068 | ) | 3,068 | — | ||||||||||||||||||||||||
Preferred dividends | (4,966 | ) | (4,966 | ) | (4,966 | ) | ||||||||||||||||||||||||
Dividends declared per common share and common unit ($0.800 per share/unit) | (80,964 | ) | (80,964 | ) | (1,662 | ) | (82,626 | ) | ||||||||||||||||||||||
BALANCE AS OF JUNE 30, 2017 | $ | 96,256 | 98,351,217 | $ | 984 | $ | 3,792,028 | $ | (132,799 | ) | $ | 3,756,469 | $ | 206,002 | $ | 3,962,471 | ||||||||||||||
Common Stock | Total Stock- holders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||
Number of Shares | Common Stock | Additional Paid-in Capital | Distributions in Excess of Earnings | |||||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2017 | 98,620,333 | $ | 986 | $ | 3,822,492 | $ | (122,685 | ) | $ | 3,700,793 | $ | 259,523 | $ | 3,960,316 | ||||||||||||
Net income | 63,795 | 63,795 | 8,931 | 72,726 | ||||||||||||||||||||||
Issuance of common stock (Note 7) | 1,719,195 | 17 | 124,130 | 124,147 | 124,147 | |||||||||||||||||||||
Issuance of share-based compensation awards | 2,453 | 2,453 | 2,453 | |||||||||||||||||||||||
Non-cash amortization of share-based compensation | 16,597 | 16,597 | 16,597 | |||||||||||||||||||||||
Exercise of stock options | 1,000 | — | 41 | 41 | 41 | |||||||||||||||||||||
Settlement of restricted stock units for shares of common stock | 405,067 | 4 | (4 | ) | — | — | ||||||||||||||||||||
Repurchase of common stock, stock options and restricted stock units | (192,195 | ) | (2 | ) | (13,640 | ) | (13,642 | ) | (13,642 | ) | ||||||||||||||||
Exchange of common units of the Operating Partnership | 6,503 | 1 | 244 | 245 | (245 | ) | — | |||||||||||||||||||
Distributions to noncontrolling interests in consolidated property partnerships | — | (6,465 | ) | (6,465 | ) | |||||||||||||||||||||
Adjustment for noncontrolling interest | (1,024 | ) | (1,024 | ) | 1,024 | — | ||||||||||||||||||||
Dividends declared per common share and common unit ($0.880 per share/unit) | (90,478 | ) | (90,478 | ) | (1,822 | ) | (92,300 | ) | ||||||||||||||||||
BALANCE AS OF JUNE 30, 2018 | 100,559,903 | $ | 1,006 | $ | 3,951,289 | $ | (149,368 | ) | $ | 3,802,927 | $ | 260,946 | $ | 4,063,873 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 72,726 | $ | 72,587 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of real estate assets and leasing costs | 124,633 | 120,734 | |||||
Depreciation of non-real estate furniture, fixtures and equipment | 2,088 | 2,436 | |||||
Increase in provision for bad debts (Note 12) | 5,376 | 1,707 | |||||
Non-cash amortization of share-based compensation awards | 12,267 | 8,966 | |||||
Non-cash amortization of deferred financing costs and debt discounts and premiums | 582 | 1,469 | |||||
Non-cash amortization of net below market rents | (5,481 | ) | (3,603 | ) | |||
Gain on sale of depreciable operating properties | — | (2,257 | ) | ||||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements | (8,869 | ) | (8,243 | ) | |||
Straight-line rents | (10,566 | ) | (15,537 | ) | |||
Net change in other operating assets | (5,513 | ) | (7,418 | ) | |||
Net change in other operating liabilities | 1,600 | 7,575 | |||||
Net cash provided by operating activities | 188,843 | 178,416 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Expenditures for acquisition of undeveloped land (Note 2) | (311,299 | ) | — | ||||
Expenditures for development properties and undeveloped land | (204,039 | ) | (161,045 | ) | |||
Expenditures for acquisition of operating properties (Note 2) | (111,029 | ) | — | ||||
Expenditures for operating properties | (74,079 | ) | (40,738 | ) | |||
Net proceeds received from dispositions | — | 11,865 | |||||
Net decrease (increase) in acquisition-related deposits | 21,000 | (26,100 | ) | ||||
Proceeds received from repayment of note receivable (Note 4) | 15,100 | — | |||||
Net cash used in investing activities | (664,346 | ) | (216,018 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings on unsecured revolving credit facility (Note 5) | 505,000 | — | |||||
Repayments on unsecured revolving credit facility (Note 5) | (180,000 | ) | — | ||||
Borrowings on unsecured debt (Note 5) | 120,000 | — | |||||
Principal payments on secured debt | (1,768 | ) | (4,213 | ) | |||
Proceeds from the issuance of unsecured debt | — | 250,000 | |||||
Financing costs | (1,840 | ) | (2,191 | ) | |||
Net proceeds from issuance of common stock | 124,147 | 308,832 | |||||
Redemption of Series G Preferred stock | — | (100,000 | ) | ||||
Repurchase of common stock and restricted stock units | (13,642 | ) | (11,642 | ) | |||
Proceeds from exercise of stock options | 41 | 12,051 | |||||
Distributions to noncontrolling interests in consolidated property partnerships | (6,485 | ) | (8,651 | ) | |||
Contributions from noncontrolling interests in consolidated property partnerships | — | 250 | |||||
Dividends and distributions paid to common stockholders and common unitholders | (85,931 | ) | (255,292 | ) | |||
Dividends and distributions paid to preferred stockholders and preferred unitholders | — | (5,806 | ) | ||||
Net cash provided by financing activities | 459,522 | 183,338 | |||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (15,981 | ) | 145,736 | ||||
Cash and cash equivalents and restricted cash, beginning of period | 66,798 | 250,129 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 50,817 | $ | 395,865 |
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | (unaudited) | ||||||
REAL ESTATE ASSETS (Note 2): | |||||||
Land and improvements | $ | 1,127,100 | $ | 1,076,172 | |||
Buildings and improvements | 5,017,999 | 4,908,797 | |||||
Undeveloped land and construction in progress | 1,993,314 | 1,432,808 | |||||
Total real estate assets held for investment | 8,138,413 | 7,417,777 | |||||
Accumulated depreciation and amortization | (1,361,811 | ) | (1,264,162 | ) | |||
Total real estate assets held for investment, net | 6,776,602 | 6,153,615 | |||||
CASH AND CASH EQUIVALENTS | 50,817 | 57,649 | |||||
RESTRICTED CASH | — | 9,149 | |||||
MARKETABLE SECURITIES (Note 11) | 22,519 | 20,674 | |||||
CURRENT RECEIVABLES, NET (Note 3) | 15,144 | 16,926 | |||||
DEFERRED RENT RECEIVABLES, NET (Note 3) | 256,558 | 246,391 | |||||
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET | 186,649 | 183,728 | |||||
PREPAID EXPENSES AND OTHER ASSETS, NET (Note 4) | 76,495 | 114,706 | |||||
TOTAL ASSETS | $ | 7,384,784 | $ | 6,802,838 | |||
LIABILITIES AND CAPITAL | |||||||
LIABILITIES: | |||||||
Secured debt, net (Notes 5 and 11) | $ | 338,189 | $ | 340,800 | |||
Unsecured debt, net (Notes 5 and 11) | 2,156,521 | 2,006,263 | |||||
Unsecured line of credit (Notes 5 and 11) | 295,000 | — | |||||
Accounts payable, accrued expenses and other liabilities | 278,508 | 249,637 | |||||
Accrued distributions (Note 17) | 47,348 | 43,448 | |||||
Deferred revenue and acquisition-related intangible liabilities, net | 146,741 | 145,890 | |||||
Rents received in advance and tenant security deposits | 58,604 | 56,484 | |||||
Total liabilities | 3,320,911 | 2,842,522 | |||||
COMMITMENTS AND CONTINGENCIES (Note 10) | |||||||
CAPITAL: | |||||||
Common units, 100,559,903 and 98,620,333 held by the general partner and 2,070,690 and 2,077,193 held by common limited partners issued and outstanding, respectively (Note 8) | 3,876,145 | 3,773,941 | |||||
Noncontrolling interests in consolidated property partnerships and subsidiaries (Note 1) | 187,728 | 186,375 | |||||
Total capital | 4,063,873 | 3,960,316 | |||||
TOTAL LIABILITIES AND CAPITAL | $ | 7,384,784 | $ | 6,802,838 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUES | |||||||||||||||
Rental income | $ | 164,515 | $ | 158,925 | $ | 327,386 | $ | 315,573 | |||||||
Tenant reimbursements | 19,567 | 19,267 | 38,717 | 38,563 | |||||||||||
Other property income | 2,990 | 2,406 | 3,791 | 5,770 | |||||||||||
Total revenues | 187,072 | 180,598 | 369,894 | 359,906 | |||||||||||
EXPENSES | |||||||||||||||
Property expenses | 32,567 | 33,304 | 64,238 | 64,545 | |||||||||||
Real estate taxes | 17,813 | 16,543 | 34,959 | 34,507 | |||||||||||
Provision for bad debts (Note 12) | 5,641 | 409 | 5,376 | 1,707 | |||||||||||
Ground leases | 1,586 | 1,547 | 3,147 | 3,189 | |||||||||||
General and administrative expenses | 21,763 | 14,303 | 37,322 | 29,236 | |||||||||||
Depreciation and amortization | 64,006 | 62,251 | 126,721 | 123,170 | |||||||||||
Total expenses | 143,376 | 128,357 | 271,763 | 256,354 | |||||||||||
OTHER (EXPENSES) INCOME | |||||||||||||||
Interest income and other net investment gain/loss (Note 11) | 771 | 1,038 | 805 | 2,103 | |||||||||||
Interest expense (Note 5) | (12,712 | ) | (17,973 | ) | (26,210 | ) | (35,325 | ) | |||||||
Total other (expenses) income | (11,941 | ) | (16,935 | ) | (25,405 | ) | (33,222 | ) | |||||||
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE | 31,755 | 35,306 | 72,726 | 70,330 | |||||||||||
Gains on sales of depreciable operating properties | — | — | — | 2,257 | |||||||||||
NET INCOME | 31,755 | 35,306 | 72,726 | 72,587 | |||||||||||
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries | (3,740 | ) | (3,335 | ) | (7,818 | ) | (6,562 | ) | |||||||
NET INCOME ATTRIBUTABLE TO KILROY REALTY, L.P. | 28,015 | 31,971 | 64,908 | 66,025 | |||||||||||
Preferred distributions | — | (1,615 | ) | — | (4,966 | ) | |||||||||
Original issuance costs of redeemed preferred units | — | — | — | (3,845 | ) | ||||||||||
Total preferred distributions | — | (1,615 | ) | — | (8,811 | ) | |||||||||
NET INCOME AVAILABLE TO COMMON UNITHOLDERS | $ | 28,015 | $ | 30,356 | $ | 64,908 | $ | 57,214 | |||||||
Net income available to common unitholders per unit – basic (Note 14) | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Net income available to common unitholders per unit – diluted (Note 14) | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Weighted average common units outstanding – basic (Note 14) | 101,762,390 | 100,352,664 | 101,291,549 | 100,024,000 | |||||||||||
Weighted average common units outstanding – diluted (Note 14) | 102,221,546 | 100,904,571 | 101,758,654 | 100,617,090 | |||||||||||
Dividends declared per common unit | $ | 0.455 | $ | 0.425 | $ | 0.880 | $ | 0.800 |
Partners’ Capital | Total Partners’ Capital | Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries | ||||||||||||||||||||
Preferred Units | Number of Common Units | Common Units | Total Capital | |||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2016 | $ | 192,411 | 95,600,982 | $ | 3,431,768 | $ | 3,624,179 | $ | 135,138 | $ | 3,759,317 | |||||||||||
Net income | 66,025 | 66,025 | 6,562 | 72,587 | ||||||||||||||||||
Redemption of Series G Preferred units | (96,155 | ) | (3,845 | ) | (100,000 | ) | (100,000 | ) | ||||||||||||||
Issuance of common units | 4,427,500 | 308,832 | 308,832 | 308,832 | ||||||||||||||||||
Issuance of share-based compensation awards | 4,691 | 4,691 | 4,691 | |||||||||||||||||||
Non-cash amortization of share-based compensation | 12,628 | 12,628 | 12,628 | |||||||||||||||||||
Exercise of stock options | 272,000 | 12,051 | 12,051 | 12,051 | ||||||||||||||||||
Settlement of restricted stock units | 278,057 | — | — | — | ||||||||||||||||||
Repurchase of common units, stock options and restricted stock units | (150,129 | ) | (11,642 | ) | (11,642 | ) | (11,642 | ) | ||||||||||||||
Contributions from noncontrolling interests in consolidated property partnerships | 250 | 250 | ||||||||||||||||||||
Distributions to noncontrolling interests in consolidated property partnerships | (8,651 | ) | (8,651 | ) | ||||||||||||||||||
Preferred distributions | (4,966 | ) | (4,966 | ) | (4,966 | ) | ||||||||||||||||
Distributions declared per common unit ($0.800 per unit) | (82,626 | ) | (82,626 | ) | (82,626 | ) | ||||||||||||||||
BALANCE AS OF JUNE 30, 2017 | $ | 96,256 | 100,428,410 | $ | 3,732,916 | $ | 3,829,172 | $ | 133,299 | $ | 3,962,471 | |||||||||||
Partners’ Capital | Noncontrolling Interests in Consolidated Property Partnerships and Subsidiaries | |||||||||||||
Number of Common Units | Common Units | Total Capital | ||||||||||||
BALANCE AS OF DECEMBER 31, 2017 | 100,697,526 | $ | 3,773,941 | $ | 186,375 | $ | 3,960,316 | |||||||
Net income | 64,908 | 7,818 | 72,726 | |||||||||||
Issuance of common units (Note 8) | 1,719,195 | 124,147 | 124,147 | |||||||||||
Issuance of share-based compensation awards | 2,453 | 2,453 | ||||||||||||
Non-cash amortization of share-based compensation | 16,597 | 16,597 | ||||||||||||
Exercise of stock options | 1,000 | 41 | 41 | |||||||||||
Settlement of restricted stock units | 405,067 | — | — | |||||||||||
Repurchase of common units, stock options and restricted stock units | (192,195 | ) | (13,642 | ) | (13,642 | ) | ||||||||
Distributions to noncontrolling interests in consolidated property partnerships | (6,465 | ) | (6,465 | ) | ||||||||||
Distributions declared per common unit ($0.880 per unit) | (92,300 | ) | (92,300 | ) | ||||||||||
BALANCE AS OF JUNE 30, 2018 | 102,630,593 | $ | 3,876,145 | $ | 187,728 | $ | 4,063,873 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 72,726 | $ | 72,587 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of real estate assets and leasing costs | 124,633 | 120,734 | |||||
Depreciation of non-real estate furniture, fixtures and equipment | 2,088 | 2,436 | |||||
Increase in provision for bad debts (Note 12) | 5,376 | 1,707 | |||||
Non-cash amortization of share-based compensation awards | 12,267 | 8,966 | |||||
Non-cash amortization of deferred financing costs and debt discounts and premiums | 582 | 1,469 | |||||
Non-cash amortization of net below market rents | (5,481 | ) | (3,603 | ) | |||
Gain on sale of depreciable operating properties | — | (2,257 | ) | ||||
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements | (8,869 | ) | (8,243 | ) | |||
Straight-line rents | (10,566 | ) | (15,537 | ) | |||
Net change in other operating assets | (5,513 | ) | (7,418 | ) | |||
Net change in other operating liabilities | 1,600 | 7,575 | |||||
Net cash provided by operating activities | 188,843 | 178,416 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Expenditures for acquisition of undeveloped land (Note 2) | (311,299 | ) | — | ||||
Expenditures for development properties and undeveloped land | (204,039 | ) | (161,045 | ) | |||
Expenditures for acquisition of operating properties (Note 2) | (111,029 | ) | — | ||||
Expenditures for operating properties | (74,079 | ) | (40,738 | ) | |||
Net proceeds received from dispositions | — | 11,865 | |||||
Net decrease (increase) in acquisition-related deposits | 21,000 | (26,100 | ) | ||||
Proceeds received from repayment of note receivable (Note 4) | 15,100 | — | |||||
Net cash used in investing activities | (664,346 | ) | (216,018 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings on unsecured revolving credit facility (Note 5) | 505,000 | — | |||||
Repayments on unsecured revolving credit facility (Note 5) | (180,000 | ) | — | ||||
Borrowings on unsecured debt (Note 5) | 120,000 | — | |||||
Principal payments on secured debt | (1,768 | ) | (4,213 | ) | |||
Proceeds from the issuance of unsecured debt | — | 250,000 | |||||
Financing costs | (1,840 | ) | (2,191 | ) | |||
Net proceeds from issuance of common units | 124,147 | 308,832 | |||||
Redemption of Series G Preferred units | — | (100,000 | ) | ||||
Repurchase of common units and restricted stock units | (13,642 | ) | (11,642 | ) | |||
Proceeds from exercise of stock options | 41 | 12,051 | |||||
Distributions to noncontrolling interests in consolidated property partnerships | (6,485 | ) | (8,651 | ) | |||
Contributions from noncontrolling interests in consolidated property partnerships | — | 250 | |||||
Distributions paid to common unitholders | (85,931 | ) | (255,292 | ) | |||
Distributions paid to preferred unitholders | — | (5,806 | ) | ||||
Net cash provided by financing activities | 459,522 | 183,338 | |||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (15,981 | ) | 145,736 | ||||
Cash and cash equivalents and restricted cash, beginning of period | 66,798 | 250,129 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 50,817 | $ | 395,865 |
Number of Buildings | Rentable Square Feet (unaudited) | Number of Tenants | Percentage Occupied (unaudited) | Percentage Leased (unaudited) | ||||||||||
Stabilized Office Properties | 104 | 13,881,509 | 519 | 94.0 | % | 96.8 | % |
Number of Buildings | Number of Units | 2018 Average Occupancy (unaudited) | ||||||
Stabilized Residential Property | 1 | 200 | 83.3 | % |
Number of Properties/Projects | Estimated Rentable Square Feet (1) | |||
In-process development projects - tenant improvement (2) | 2 | 1,150,000 | ||
In-process development projects - under construction (3) | 3 | 956,000 |
(1) | Estimated rentable square feet upon completion. |
(2) | Includes 86,000 square feet of Production, Distribution, and Repair (“PDR”) space at 100 Hooper. |
(3) | In addition to the estimated office and PDR rentable square feet noted above, development projects under construction also include 120,000 square feet of retail space and 608 residential units. |
Property | Date of Acquisition | Number of Buildings | Rentable Square Feet (unaudited) | Purchase Price (in millions) (1) | |||||||
345, 347 & 349 Oyster Point Boulevard, South San Francisco, CA | January 31, 2018 | 3 | 145,530 | $ | 111.0 |
(1) | Excludes acquisition-related costs. |
Total 2018 Operating Property Acquisitions | |||
Assets | |||
Land and improvements | $ | 50,928 | |
Buildings and improvements (1) | 59,123 | ||
Deferred leasing costs and acquisition-related intangible assets (2) | 4,470 | ||
Total assets acquired | $ | 114,521 | |
Liabilities | |||
Deferred revenue and acquisition-related intangible liabilities (3) | $ | 3,521 | |
Total liabilities assumed | 3,521 | ||
Net assets and liabilities acquired | $ | 111,000 |
(1) | Represents buildings, building improvements and tenant improvements. |
(2) | Represents in-place leases (approximately $3.8 million with a weighted average amortization period of 2.6 years) and leasing commissions (approximately $0.7 million with a weighted average amortization period of 3.5 years). |
(3) | Represents below-market leases (approximately $3.5 million with a weighted average amortization period of 9.8 years). |
Project | Date of Acquisition | City/Submarket | Type | Purchase Price (in millions) (1) | ||||||
Kilroy Oyster Point | June 1, 2018 | South San Francisco | Land | $ | 308.2 |
(1) | Excludes acquisition-related costs. In connection with this acquisition, we also recorded $40.6 million in accrued liabilities and environmental remediation liabilities, which are not included in the purchase price above. As of June 30, 2018, the purchase price and assumed liabilities are included in undeveloped land and construction in progress and the assumed liabilities are included in accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets. |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Current receivables | $ | 19,502 | $ | 19,235 | |||
Allowance for uncollectible tenant receivables | (4,358 | ) | (2,309 | ) | |||
Current receivables, net | $ | 15,144 | $ | 16,926 |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Deferred rent receivables | $ | 260,152 | $ | 249,629 | |||
Allowance for deferred rent receivables | (3,594 | ) | (3,238 | ) | |||
Deferred rent receivables, net | $ | 256,558 | $ | 246,391 |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Furniture, fixtures and other long-lived assets, net | $ | 37,799 | $ | 39,686 | |||
Notes receivable, net (1) | 2,005 | 19,912 | |||||
Prepaid expenses & acquisition deposits | 36,691 | 55,108 | |||||
Total prepaid expenses and other assets, net | $ | 76,495 | $ | 114,706 |
(1) | During the six months ended June 30, 2018, a note receivable with a balance of $15.1 million was repaid to the Company. Notes receivable are shown net of a valuation allowance of approximately $2.9 million as of June 30, 2018. |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Outstanding borrowings | $ | 295,000 | $ | — | |||
Remaining borrowing capacity | 455,000 | 750,000 | |||||
Total borrowing capacity (1) | $ | 750,000 | $ | 750,000 | |||
Interest rate (2) | 3.10 | % | 2.56 | % | |||
Facility fee-annual rate (3) | 0.200% | ||||||
Maturity date | July 2022 |
(1) | We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $600.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility. |
(2) | Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.000% as of June 30, 2018 and December 31, 2017. |
(3) | Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of June 30, 2018 and December 31, 2017, $5.3 million and $6.0 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility. |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Outstanding borrowings | $ | 150,000 | $ | — | |||
Remaining borrowing capacity | — | 150,000 | |||||
Total borrowing capacity (1) | $ | 150,000 | $ | 150,000 | |||
Interest rate (2) | 3.17 | % | 2.66 | % | |||
Undrawn facility fee-annual rate (3) | 0.200% | ||||||
Maturity date | July 2022 |
(1) | As of June 30, 2018 and December 31, 2017, $1.0 million and $1.2 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility. |
(2) | Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.100% as of June 30, 2018 and December 31, 2017. |
(3) | Prior to borrowing the full capacity of our unsecured term loan facility, the undrawn facility fee was calculated based on any unused borrowing capacity and was paid on a quarterly basis. |
Year | (in thousands) | ||
Remaining 2018 | $ | 1,816 | |
2019 | 76,309 | ||
2020 | 255,137 | ||
2021 | 5,342 | ||
2022 | 450,554 | ||
Thereafter | 2,018,469 | ||
Total (1) | $ | 2,807,627 |
(1) | Includes gross principal balance of outstanding debt before the effect of the following at June 30, 2018: $13.7 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt, $5.9 million of unamortized discounts for the unsecured senior notes and $1.7 million of unamortized premiums for the secured debt. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Gross interest expense | $ | 28,523 | $ | 28,731 | $ | 55,603 | $ | 56,246 | |||||||
Capitalized interest and deferred financing costs | (15,811 | ) | (10,758 | ) | (29,393 | ) | (20,921 | ) | |||||||
Interest expense | $ | 12,712 | $ | 17,973 | $ | 26,210 | $ | 35,325 |
Six Months Ended June 30, 2018 | |||
(in millions, except share and per share data) | |||
Shares of common stock sold during the period | 1,719,195 | ||
Weighted average price per common share | $ | 73.66 | |
Aggregate gross proceeds | $ | 126.6 | |
Aggregate net proceeds after selling commissions | $ | 125.1 |
Six Months Ended June 30, 2018 | |||
(in millions, except share and per share data) | |||
Shares of common stock contributed by the Company | 1,719,195 | ||
Common units exchanged for share of common stock by the Company | 1,719,195 | ||
Aggregate gross proceeds | $ | 126.6 | |
Aggregate net proceeds after selling commissions | $ | 125.1 |
June 30, 2018 | December 31, 2017 | June 30, 2017 | ||||||
Company owned common units in the Operating Partnership | 100,559,903 | 98,620,333 | 98,351,217 | |||||
Company owned general partnership interest | 98.0 | % | 97.9 | % | 97.9 | % | ||
Noncontrolling common units of the Operating Partnership | 2,070,690 | 2,077,193 | 2,077,193 | |||||
Ownership interest of noncontrolling interest | 2.0 | % | 2.1 | % | 2.1 | % |
Fair Value Assumptions | |
Expected share price volatility | 20.00% |
Risk-free interest rate | 2.37% |
Expected life | 2.9 years |
Fair Value (Level 1) (1) | |||||||
June 30, 2018 | December 31, 2017 | ||||||
Description | (in thousands) | ||||||
Marketable securities (2) | $ | 22,519 | $ | 20,674 |
(1) | Based on quoted prices in active markets for identical securities. |
(2) | The marketable securities are held in a limited rabbi trust. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Description | (in thousands) | (in thousands) | |||||||||||||
Net gain on marketable securities | $ | 422 | $ | 512 | $ | 18 | $ | 1,183 |
June 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Value | Fair Value (1) | Carrying Value | Fair Value (1) | ||||||||||||
(in thousands) | |||||||||||||||
Liabilities | |||||||||||||||
Secured debt, net | $ | 338,189 | $ | 336,860 | $ | 340,800 | $ | 346,858 | |||||||
Unsecured debt, net | 2,156,521 | 2,145,159 | 2,006,263 | 2,077,199 | |||||||||||
Unsecured line of credit | 295,000 | 295,333 | — | — |
(1) | Fair value calculated using Level II inputs, which are based on model-derived valuations in which significant inputs and significant value drivers are observable in active markets. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except share and per share amounts) | |||||||||||||||
Numerator: | |||||||||||||||
Net income attributable to Kilroy Realty Corporation | $ | 27,549 | $ | 31,448 | $ | 63,795 | $ | 64,973 | |||||||
Total preferred dividends | — | (1,615 | ) | — | (8,811 | ) | |||||||||
Allocation to participating securities (1) | (514 | ) | (511 | ) | (985 | ) | (959 | ) | |||||||
Numerator for basic and diluted net income available to common stockholders | $ | 27,035 | $ | 29,322 | $ | 62,810 | $ | 55,203 | |||||||
Denominator: | |||||||||||||||
Basic weighted average vested shares outstanding | 99,691,700 | 98,275,471 | 99,220,577 | 97,834,255 | |||||||||||
Effect of dilutive securities | 459,156 | 551,907 | 467,105 | 593,090 | |||||||||||
Diluted weighted average vested shares and common share equivalents outstanding | 100,150,856 | 98,827,378 | 99,687,682 | 98,427,345 | |||||||||||
Basic earnings per share: | |||||||||||||||
Net income available to common stockholders per share | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Diluted earnings per share: | |||||||||||||||
Net income available to common stockholders per share | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 |
(1) | Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except unit and per unit amounts) | |||||||||||||||
Numerator: | |||||||||||||||
Net income attributable to Kilroy Realty, L.P. | $ | 28,015 | $ | 31,971 | $ | 64,908 | $ | 66,025 | |||||||
Total preferred distributions | — | (1,615 | ) | — | (8,811 | ) | |||||||||
Allocation to participating securities (1) | (514 | ) | (511 | ) | (985 | ) | (959 | ) | |||||||
Numerator for basic and diluted net income available to common unitholders | $ | 27,501 | $ | 29,845 | $ | 63,923 | $ | 56,255 | |||||||
Denominator: | |||||||||||||||
Basic weighted average vested units outstanding | 101,762,390 | 100,352,664 | 101,291,549 | 100,024,000 | |||||||||||
Effect of dilutive securities | 459,156 | 551,907 | 467,105 | 593,090 | |||||||||||
Diluted weighted average vested units and common unit equivalents outstanding | 102,221,546 | 100,904,571 | 101,758,654 | 100,617,090 | |||||||||||
Basic earnings per unit: | |||||||||||||||
Net income available to common unitholders per unit | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 | |||||||
Diluted earnings per unit: | |||||||||||||||
Net income available to common unitholders per unit | $ | 0.27 | $ | 0.30 | $ | 0.63 | $ | 0.56 |
(1) | Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs. |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
SUPPLEMENTAL CASH FLOWS INFORMATION: | |||||||
Cash paid for interest, net of capitalized interest of $28,267 and $20,219 as of June 30, 2018 and 2017, respectively | $ | 25,136 | $ | 30,977 | |||
NON-CASH INVESTING TRANSACTIONS: | |||||||
Accrual for expenditures for operating properties and development properties | $ | 80,198 | $ | 66,967 | |||
Assumption of accrued liabilities in connection with acquisitions (Note 2) | $ | 40,624 | $ | — | |||
Tenant improvements funded directly by tenants | $ | 4,611 | $ | 9,221 | |||
NON-CASH FINANCING TRANSACTIONS: | |||||||
Accrual of dividends and distributions payable to common stockholders and common unitholders | $ | 47,348 | $ | 43,305 | |||
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders | $ | — | $ | 797 | |||
Exchange of common units of the Operating Partnership into shares of the Company’s common stock | $ | 245 | $ | 10,939 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||
Cash and cash equivalents at beginning of period | $ | 57,649 | $ | 193,418 | |||
Restricted cash at beginning of period | 9,149 | 56,711 | |||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 66,798 | $ | 250,129 | |||
Cash and cash equivalents at end of period | $ | 50,817 | $ | 387,616 | |||
Restricted cash at end of period | — | 8,249 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 50,817 | $ | 395,865 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
SUPPLEMENTAL CASH FLOWS INFORMATION: | |||||||
Cash paid for interest, net of capitalized interest of $28,267 and $20,219 as of June 30, 2018 and 2017, respectively | $ | 25,136 | $ | 30,977 | |||
NON-CASH INVESTING TRANSACTIONS: | |||||||
Accrual for expenditures for operating properties and development properties | $ | 80,198 | $ | 66,967 | |||
Assumption of accrued liabilities in connection with acquisitions (Note 2) | $ | 40,624 | $ | — | |||
Tenant improvements funded directly by tenants | $ | 4,611 | $ | 9,221 | |||
NON-CASH FINANCING TRANSACTIONS: | |||||||
Accrual of distributions payable to common unitholders | $ | 47,348 | $ | 43,305 | |||
Accrual of distributions payable to preferred unitholders | $ | — | $ | 797 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||
Cash and cash equivalents at beginning of period | $ | 57,649 | $ | 193,418 | |||
Restricted cash at beginning of period | 9,149 | 56,711 | |||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 66,798 | $ | 250,129 | |||
Cash and cash equivalents at end of period | $ | 50,817 | $ | 387,616 | |||
Restricted cash at end of period | — | 8,249 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 50,817 | $ | 395,865 |
• | 100 Hooper, SOMA, San Francisco, California, which we acquired in July 2015 and commenced construction on in November 2016. This project encompasses approximately 314,000 square feet of office and approximately 86,000 square feet of production, distribution and repair (“PDR”) space configured in two buildings with a total estimated investment of approximately $270.0 million. The office portion of the project is 100% pre-leased to Adobe Systems Inc. and the PDR space is 39% leased as of the date of this report. The lease with Adobe Systems Inc. will commence in phases beginning in the third quarter of 2018 through the second quarter of 2020 with cash rents commencing in the first quarter of 2019 through the second quarter of 2020. The project is expected to be stabilized in the second quarter of 2019. |
• | The Exchange on 16th, Mission Bay, San Francisco, California, which we acquired in May 2014 and commenced construction on in June 2015. This project will encompass approximately 750,000 gross rentable square feet consisting of 736,000 square feet of office space and 14,000 square feet of retail space at a total estimated investment of $570.0 million. The office space in the project is 100% pre-leased to Dropbox, Inc. The lease with Dropbox, Inc. will commence in phases beginning in the fourth quarter of 2018 through the fourth quarter of 2019 with cash rents commencing in the third quarter of 2019 through the first quarter of 2020. The estimated stabilization dates for Phase I, Phase II, and Phase III are the second quarter of 2019, the fourth quarter of 2019, and the third quarter of 2020, respectively. |
• | Academy on Vine - Phase I (Office and Retail) in Hollywood, California, which we acquired in 2013 and commenced construction on in January 2018. Phase I of this mixed-use project includes the project’s overall infrastructure and site work, approximately 306,000 square feet of office space and approximately 24,000 square feet of retail space for a total estimated investment of $260.0 million. Construction is currently in progress and the cold shell is currently expected to be ready for tenant improvements in the first half of 2020. |
• | 333 Dexter, South Lake Union, Washington, which we acquired in February 2015 and commenced construction on in June 2017. This project encompasses approximately 650,000 gross rentable square feet of office space at a total estimated investment of $380.0 million. Construction is currently in progress and the cold shell is currently estimated to be ready for tenant improvements in the second half of 2019. |
• | One Paseo - Phases I & II (Retail and Residential), Del Mar Heights, San Diego, California, which we acquired in November 2007 and commenced construction on in December 2016. Phases I & II of this mixed-use project includes site work and related infrastructure for the entire project, as well as 608 residential units and approximately 96,000 square feet of retail space. The total estimated investment for these phases of the project is approximately $465.0 million. The project is expected to be stabilized in phases beginning in the first quarter of 2019 for the retail space through the third quarter of 2020 for the residential units. The retail space of the project is currently 70% leased. |
Future Development Pipeline (1) | Location | Approx. Developable Square Feet / Resi Units (1) | Total Costs as of 6/30/2018 ($ in millions)(2) | |||||
Greater Los Angeles | ||||||||
Academy on Vine - Phase II (Residential) | Hollywood | 200 Resi Units | $ | 35.4 | ||||
San Diego County | ||||||||
One Paseo - Phase III | Del Mar | 270,000 | 68.6 | |||||
2100 Kettner | Little Italy | 175,000 | 23.8 | |||||
9455 Towne Centre Drive | San Diego | 150,000 | 15.4 | |||||
Santa Fe Summit – Phases II and III | 56 Corridor | 600,000 | 80.8 | |||||
San Francisco Bay Area | ||||||||
Kilroy Oyster Point (3) | San Francisco | 2,500,000 | 365.3 | |||||
Flower Mart | San Francisco | TBD | 236.2 | |||||
TOTAL: | $ | 825.5 |
(1) | The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design. |
(2) | Represents cash paid and costs incurred, including accrued liabilities in accordance with GAAP, as of June 30, 2018. |
(3) | The Company acquired this 39-acre site located in South San Francisco fully entitled for approximately 2.5 million square feet in the second quarter of 2018 for a purchase price of $308.2 million. In addition to the purchase price, total costs as of June 30, 2018 include transaction costs, development spending, and accrued liabilities. |
1st & 2nd Generation (1)(2) | 2nd Generation (1)(2) | ||||||||||||||||||||||||||||||
Number of Leases (3) | Rentable Square Feet (3) | Retention Rates (4) | TI/LC per Sq. Ft. (5) | TI/LC Per Sq. Ft. / Year | Changes in Rents (6)(7) | Changes in Cash Rents (8) | Weighted Average Lease Term (in months) | ||||||||||||||||||||||||
New | Renewal | New | Renewal | ||||||||||||||||||||||||||||
Three Months Ended June 30, 2018 | 26 | 16 | 279,976 | 570,265 | 62.9 | % | $ | 52.29 | $ | 6.97 | 30.7 | % | 16.9 | % | 90 | ||||||||||||||||
Six Months Ended June 30, 2018 | 43 | 31 | 399,369 | 691,941 | 54.8 | % | $ | 50.52 | $ | 7.22 | 30.4 | % | 16.0 | % | 84 |
1st & 2nd Generation (1)(2) | 2nd Generation (1)(2) | |||||||||||||||||||||||||||
Number of Leases (3) | Rentable Square Feet (3) | TI/LC per Sq. Ft. (5) | TI/LC Per Sq. Ft. / Year | Changes in Rents (6)(7) | Changes in Cash Rents (8) | Weighted Average Lease Term (in months) | ||||||||||||||||||||||
New | Renewal | New | Renewal | |||||||||||||||||||||||||
Three Months Ended June 30, 2018 | 25 | 16 | 744,802 | 570,265 | $ | 52.82 | $ | 6.15 | 30.2 | % | 9.8 | % | 103 | |||||||||||||||
Six Months Ended June 30, 2018 | 45 | 31 | 924,498 | 691,941 | $ | 52.06 | $ | 6.37 | 29.9 | % | 10.2 | % | 98 |
(1) | Includes 100% of consolidated property partnerships. |
(2) | First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream. |
(3) | Represents leasing activity for leases that commenced or were signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction. |
(4) | Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration. |
(5) | Tenant improvements and leasing commissions per square foot excluding tenant-funded tenant improvements and certain tenant improvements used to fund base building improvements. |
(6) | Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired. |
(7) | Excludes commenced and executed leases of approximately 115,291 and 33,383 rentable square feet, respectively, for the three months ended June 30, 2018, and 129,620 and 161,642 rentable square feet, respectively, for the six months ended June 30, 2018, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a more meaningful market comparison. |
(8) | Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired. |
(9) | For the three months ended June 30, 2018, 22 leases totaling 711,948 rentable square feet were signed but not commenced as of June 30, 2018. For the six months ended June 30, 2018, 29 leases totaling 834,787 rentable square feet were signed but not commenced as of June 30, 2018. |
(10) | Excludes a 110,000 square foot lease executed at a property located San Francisco that the Company expects to acquire by the end of 2018. |
Year of Lease Expiration | Number of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2)(3) | % of Total Annualized Base Rent (2) | Annualized Base Rent per Sq. Ft. (2) | ||||||||||||||
(in thousands) | ||||||||||||||||||||
Remainder of 2018 (4) | 39 | 571,075 | 4.5 | % | $ | 25,544 | 4.4 | % | $ | 44.73 | ||||||||||
2019 (4) | 102 | 1,482,803 | 11.6 | % | 61,047 | 10.6 | % | $ | 41.17 | |||||||||||
2020 | 107 | 1,699,452 | 13.3 | % | 68,889 | 12.0 | % | $ | 40.54 | |||||||||||
2021 | 91 | 932,442 | 7.3 | % | 40,075 | 7.0 | % | $ | 42.98 | |||||||||||
2022 | 60 | 613,078 | 4.8 | % | 25,890 | 4.5 | % | $ | 42.23 | |||||||||||
2023 | 75 | 1,287,910 | 10.1 | % | 67,068 | 11.6 | % | $ | 52.08 | |||||||||||
Total | 474 | 6,586,760 | 51.6 | % | $ | 288,513 | 50.1 | % | $ | 43.80 |
Year (4) | Region | # of Expiring Leases | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent (2)(3) | % of Total Annualized Base Rent (2) | Annualized Rent per Sq. Ft. (2) | |||||||||||||||
2018 | Greater Los Angeles | 24 | 86,092 | 0.7 | % | $ | 3,734 | 0.6 | % | $ | 43.37 | |||||||||||
Orange County | 1 | 1,090 | — | % | 31 | — | % | $ | 28.44 | |||||||||||||
San Diego | 7 | 382,240 | 3.0 | % | 17,024 | 3.0 | % | $ | 44.54 | |||||||||||||
San Francisco Bay Area | 4 | 72,041 | 0.6 | % | 3,940 | 0.7 | % | $ | 54.69 | |||||||||||||
Greater Seattle | 3 | 29,612 | 0.2 | % | 815 | 0.1 | % | $ | 27.52 | |||||||||||||
Total | 39 | 571,075 | 4.5 | % | $ | 25,544 | 4.4 | % | $ | 44.73 | ||||||||||||
2019 | Greater Los Angeles | 45 | 324,890 | 2.6 | % | $ | 10,745 | 1.8 | % | $ | 33.07 | |||||||||||
Orange County | 6 | 77,875 | 0.6 | % | 3,234 | 0.6 | % | $ | 41.53 | |||||||||||||
San Diego | 15 | 195,661 | 1.5 | % | 7,209 | 1.3 | % | $ | 36.84 | |||||||||||||
San Francisco Bay Area | 20 | 689,340 | 5.4 | % | 33,367 | 5.8 | % | $ | 48.40 | |||||||||||||
Greater Seattle | 16 | 195,037 | 1.5 | % | 6,492 | 1.1 | % | $ | 33.29 | |||||||||||||
Total | 102 | 1,482,803 | 11.6 | % | $ | 61,047 | 10.6 | % | $ | 41.17 |
(1) | For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of June 30, 2018, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of June 30, 2018. |
(2) | Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.” |
(3) | Includes 100% of annualized base rent of consolidated property partnerships. |
(4) | Adjusting for leases executed as of June 30, 2018 but not yet commenced, the remaining 2018 and 2019 expirations would be reduced by 191,833 square feet and 590,820 square feet, respectively. |
Number of Properties/Projects | Estimated Rentable Square Feet (1) | |||
In-process development projects - tenant improvement (2) | 2 | 1,150,000 | ||
In-process development projects - under construction (3) | 3 | 956,000 |
(1) | Estimated rentable square feet upon completion. |
(2) | Includes 86,000 square feet of Production, Distribution, and Repair (“PDR”) space at 100 Hooper. |
(3) | In addition to the estimated office and PDR rentable square feet noted above, development projects under construction also include 120,000 square feet of retail space and 608 residential units. |
Number of Buildings | Rentable Square Feet | ||||
Total as of June 30, 2017 | 111 | 14,394,534 | |||
Acquisitions | 3 | 145,530 | |||
Dispositions | (10 | ) | (675,143 | ) | |
Remeasurement | — | 16,588 | |||
Total as of June 30, 2018 (1) | 104 | 13,881,509 |
(1) | Includes four properties owned by consolidated property partnerships. |
Region | Number of Buildings | Rentable Square Feet | Occupancy at (1) | ||||||||||||
6/30/2018 | 3/31/2018 | 12/31/2017 | |||||||||||||
Greater Los Angeles | 36 | 4,181,733 | 94.3 | % | 93.9 | % | 93.3 | % | |||||||
Orange County | 1 | 271,556 | 89.6 | % | 89.6 | % | 86.6 | % | |||||||
San Diego County | 21 | 2,044,781 | 98.5 | % | 98.0 | % | 97.4 | % | |||||||
San Francisco Bay Area | 34 | 5,317,300 | 93.8 | % | 95.1 | % | 96.1 | % | |||||||
Greater Seattle | 12 | 2,066,139 | 90.4 | % | 90.2 | % | 95.4 | % | |||||||
Total Stabilized Portfolio | 104 | 13,881,509 | 94.0 | % | 94.3 | % | 95.2 | % |
Average Occupancy | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Stabilized Portfolio(1) | 94.6 | % | 94.2 | % | 94.7 | % | 94.2 | % | |||
Same Store Portfolio(2) | 94.7 | % | 94.9 | % | 94.8 | % | 95.0 | % | |||
Residential Portfolio(3) | 83.6 | % | 69.6 | % | 83.3 | % | 64.2 | % |
(1) | Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented. |
(2) | Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2017 and still owned and stabilized as of June 30, 2018 and exclude our residential tower. See discussion under “Results of Operations” for additional information. |
(3) | Our residential portfolio consists of our 200-unit residential tower located in Hollywood, California. |
Tenant Name | Region | Annualized Base Rental Revenue(1)(2) | Rentable Square Feet | Percentage of Total Annualized Base Rental Revenue(2) | Percentage of Total Rentable Square Feet | ||||||||||
LinkedIn Corporation | San Francisco Bay Area | $ | 28,344 | 663,239 | 4.9 | % | 4.8 | % | |||||||
salesforce.com, inc. | San Francisco Bay Area / Greater Seattle | 23,836 | 456,867 | 4.1 | % | 3.3 | % | ||||||||
DIRECTV, LLC | Greater Los Angeles | 23,152 | 684,411 | 4.0 | % | 4.9 | % | ||||||||
Box, Inc. | San Francisco Bay Area | 22,441 | 371,792 | 3.9 | % | 2.7 | % | ||||||||
Riot Games, Inc. | Greater Los Angeles | 15,511 | 251,509 | 2.7 | % | 1.8 | % | ||||||||
Synopsys, Inc. | San Francisco Bay Area | 15,492 | 340,913 | 2.7 | % | 2.5 | % | ||||||||
Dropbox, Inc. | San Francisco Bay Area | 13,960 | 264,888 | 2.4 | % | 1.9 | % | ||||||||
Viacom International, Inc. | Greater Los Angeles | 13,718 | 211,343 | 2.4 | % | 1.5 | % | ||||||||
Bridgepoint Education, Inc. | San Diego County | 13,129 | 273,292 | 2.3 | % | 2.0 | % | ||||||||
AppDynamics, Inc. | San Francisco Bay Area | 10,792 | 147,288 | 1.9 | % | 1.1 | % | ||||||||
Concur Technologies | Greater Seattle | 10,643 | 288,322 | 1.9 | % | 2.1 | % | ||||||||
Capital One, N.A. | San Francisco Bay Area | 9,170 | 117,993 | 1.6 | % | 0.9 | % | ||||||||
AMN Healthcare, Inc. | San Diego County | 9,001 | 176,075 | 1.6 | % | 1.3 | % | ||||||||
Stanford University School of Medicine | San Francisco Bay Area | 8,461 | 128,688 | 1.5 | % | 0.9 | % | ||||||||
Adobe Systems, Inc. | San Francisco Bay Area / Greater Seattle | 7,586 | 204,757 | 1.3 | % | 1.5 | % | ||||||||
Total Top Fifteen Tenants | $ | 225,236 | 4,581,377 | 39.2 | % | 33.2 | % | ||||||||
(1) | Includes 100% of annualized base rental revenues of consolidated property partnerships. |
(2) | Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Excludes month-to-month leases and vacant space as of June 30, 2018. |
• | Same Store Properties – includes the consolidated results of all of the properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2017 and still owned and included in the stabilized portfolio as of June 30, 2018, including our residential tower in Hollywood, California; |
• | Stabilized Development Properties – includes the results generated by the one office development project that was added to the stabilized portfolio in the first quarter of 2017; |
• | Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the three office buildings we acquired in January 2018; and |
• | Dispositions and Other Properties – includes the results of the ten properties disposed of in the third quarter of 2017, the one property disposed of during the first quarter of 2017 and expenses for certain of our in-process and future development projects. |
Group | # of Buildings | Rentable Square Feet | ||||
Same Store Properties | 98 | 13,370,620 | ||||
Stabilized Development Properties | 3 | 365,359 | ||||
Acquisition Properties | 3 | 145,530 | ||||
Total Stabilized Office Portfolio | 104 | 13,881,509 |
Three Months Ended June 30, | Dollar Change | Percentage Change | ||||||||||||
2018 | 2017 | |||||||||||||
($ in thousands) | ||||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined: | ||||||||||||||
Net Income Available to Common Stockholders | $ | 27,549 | $ | 29,833 | $ | (2,284 | ) | (7.7 | )% | |||||
Preferred dividends | — | 1,615 | (1,615 | ) | (100.0 | )% | ||||||||
Net income attributable to Kilroy Realty Corporation | $ | 27,549 | $ | 31,448 | $ | (3,899 | ) | (12.4 | )% | |||||
Net income attributable to noncontrolling common units of the Operating Partnership | 566 | 616 | (50 | ) | (8.1 | )% | ||||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | 3,640 | 3,242 | 398 | 12.3 | % | |||||||||
Net income | $ | 31,755 | $ | 35,306 | $ | (3,551 | ) | (10.1 | )% | |||||
Unallocated expense (income): | ||||||||||||||
General and administrative expenses | 21,763 | 14,303 | 7,460 | 52.2 | % | |||||||||
Depreciation and amortization | 64,006 | 62,251 | 1,755 | 2.8 | % | |||||||||
Interest income and other net investment gain/loss | (771 | ) | (1,038 | ) | 267 | (25.7 | )% | |||||||
Interest expense | 12,712 | 17,973 | (5,261 | ) | (29.3 | )% | ||||||||
Net Operating Income, as defined | $ | 129,465 | $ | 128,795 | $ | 670 | 0.5 | % |
Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
Same Store | Stabilized Develop-ment | Acquisi-tion Properties | Disposi-tions & Other | Total | Same Store | Stabilized Develop-ment | Acquisi-tion Properties | Disposi-tions & Other | Total | ||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||||||||||||||||||||
Rental income | $ | 156,507 | $ | 6,330 | $ | 1,678 | $ | — | $ | 164,515 | $ | 149,891 | $ | 5,084 | $ | — | $ | 3,950 | $ | 158,925 | |||||||||||||||||||
Tenant reimbursements | 19,160 | — | 345 | 62 | 19,567 | 18,717 | — | — | 550 | 19,267 | |||||||||||||||||||||||||||||
Other property income | 2,987 | — | — | 3 | 2,990 | 1,414 | 1 | — | 991 | 2,406 | |||||||||||||||||||||||||||||
Total | 178,654 | 6,330 | 2,023 | 65 | 187,072 | 170,022 | 5,085 | — | 5,491 | 180,598 | |||||||||||||||||||||||||||||
Property and related expenses: | |||||||||||||||||||||||||||||||||||||||
Property expenses | 31,262 | 1,123 | 135 | 47 | 32,567 | 31,193 | 1,093 | — | 1,018 | 33,304 | |||||||||||||||||||||||||||||
Real estate taxes | 16,523 | 724 | 267 | 299 | 17,813 | 15,246 | 697 | — | 600 | 16,543 | |||||||||||||||||||||||||||||
Provision for bad debts | 5,641 | — | — | — | 5,641 | 451 | — | — | (42 | ) | 409 | ||||||||||||||||||||||||||||
Ground leases | 1,586 | — | — | — | 1,586 | 1,547 | — | — | — | 1,547 | |||||||||||||||||||||||||||||
Total | 55,012 | 1,847 | 402 | 346 | 57,607 | 48,437 | 1,790 | — | 1,576 | 51,803 | |||||||||||||||||||||||||||||
Net Operating Income, as defined | $ | 123,642 | $ | 4,483 | $ | 1,621 | $ | (281 | ) | $ | 129,465 | $ | 121,585 | $ | 3,295 | $ | — | $ | 3,915 | $ | 128,795 |
Three Months Ended June 30, 2018 as compared to the Three Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||||
Same Store | Stabilized Development | Acquisition Properties | Dispositions & Other | Total | ||||||||||||||||||||||||||||||
Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||||||||
Rental income | $ | 6,616 | 4.4 | % | $ | 1,246 | 24.5 | % | $ | 1,678 | 100.0 | % | $ | (3,950 | ) | (100.0 | )% | $ | 5,590 | 3.5 | % | |||||||||||||
Tenant reimbursements | 443 | 2.4 | % | — | — | % | 345 | 100.0 | % | (488 | ) | (88.7 | )% | 300 | 1.6 | % | ||||||||||||||||||
Other property income | 1,573 | 111.2 | % | (1 | ) | (100.0 | )% | — | — | % | (988 | ) | (99.7 | )% | 584 | 24.3 | % | |||||||||||||||||
Total | 8,632 | 5.1 | % | 1,245 | 24.5 | % | 2,023 | 100.0 | % | (5,426 | ) | (98.8 | )% | 6,474 | 3.6 | % | ||||||||||||||||||
Property and related expenses: | ||||||||||||||||||||||||||||||||||
Property expenses | 69 | 0.2 | % | 30 | 2.7 | % | 135 | 100.0 | % | (971 | ) | (95.4 | )% | (737 | ) | (2.2 | )% | |||||||||||||||||
Real estate taxes | 1,277 | 8.4 | % | 27 | 3.9 | % | 267 | 100.0 | % | (301 | ) | (50.2 | )% | 1,270 | 7.7 | % | ||||||||||||||||||
Provision for bad debts | 5,190 | 1,150.8 | % | — | — | % | — | — | % | 42 | 100.0 | % | 5,232 | 1,279.2 | % | |||||||||||||||||||
Ground leases | 39 | 2.5 | % | — | — | % | — | — | % | — | — | % | 39 | 2.5 | % | |||||||||||||||||||
Total | 6,575 | 13.6 | % | 57 | 3.2 | % | 402 | 100.0 | % | (1,230 | ) | (78.0 | )% | 5,804 | 11.2 | % | ||||||||||||||||||
Net Operating Income, as defined | $ | 2,057 | 1.7 | % | $ | 1,188 | 36.1 | % | $ | 1,621 | 100.0 | % | $ | (4,196 | ) | (107.2 | )% | $ | 670 | 0.5 | % |
• | An increase of $2.1 million attributable to the Same Store Properties driven by the following activity: |
• | An increase in rental income of $6.6 million primarily due to: |
• | $5.7 million increase from new leases and renewals at higher rates across all regions; and |
• | $1.1 million increase due to an increase in occupancy primarily at three properties, each in different submarkets; |
• | An increase in tenant reimbursements of $0.4 million primarily due to higher supplemental property taxes partially offset by lower occupancy at certain properties; |
• | An increase in other property income of $1.6 million primarily due to early termination fee income from two tenants at two properties in 2018; offset by |
• | An increase in property and related expenses of $6.6 million primarily due to the following: |
• | $5.2 million increase in the provision for bad debts primarily due to a $7.0 million increase in the provision for one tenant (see further discussion below), partially offset by a $1.7 million decrease in the provision for bad debts for one property due to the assignment of the lease to a credit tenant; |
• | $1.3 million increase in real estate taxes primarily due to $1.0 million of higher supplemental taxes for a fully assessed development property completed in 2016, $0.5 million from regular annual property tax increases, partially offset by $0.2 million of supplemental adjustments, net of tax refunds received in 2017; |
• | An increase in Net Operating Income of $1.2 million attributable to the Stabilized Development Properties; |
• | An increase in Net Operating Income of $1.6 million attributable to the Acquisition Properties; and |
• | A decrease in Net Operating Income of $4.2 million attributable to the Dispositions and Other Properties. |
• | An increase of $2.1 million attributable to the Same Store Properties; |
• | An increase of $0.3 million attributable to the Stabilized Development Properties; |
• | An increase of $1.3 million attributable to the Acquisition Properties; partially offset by |
• | A decrease of $1.9 million attributable to Dispositions & Other Properties. |
Three Months Ended June 30, | ||||||||||||||
2018 | 2017 | Dollar Change | Percentage Change | |||||||||||
(in thousands) | ||||||||||||||
Gross interest expense | $ | 28,523 | $ | 28,731 | $ | (208 | ) | (0.7 | )% | |||||
Capitalized interest and deferred financing costs | (15,811 | ) | (10,758 | ) | (5,053 | ) | 47.0 | % | ||||||
Interest expense | $ | 12,712 | $ | 17,973 | $ | (5,261 | ) | (29.3 | )% |
Six Months Ended June 30, | Dollar Change | Percentage Change | ||||||||||||
2018 | 2017 | |||||||||||||
($ in thousands) | ||||||||||||||
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined: | ||||||||||||||
Net Income Available to Common Stockholders | $ | 63,795 | $ | 56,162 | $ | 7,633 | 13.6 | % | ||||||
Preferred dividends | — | 4,966 | (4,966 | ) | (100.0 | )% | ||||||||
Original issuance costs of redeemed preferred stock and preferred units | — | 3,845 | (3,845 | ) | (100.0 | )% | ||||||||
Net income attributable to Kilroy Realty Corporation | $ | 63,795 | $ | 64,973 | $ | (1,178 | ) | (1.8 | )% | |||||
Net income attributable to noncontrolling common units of the Operating Partnership | 1,317 | 1,239 | 78 | 6.3 | % | |||||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | 7,614 | 6,375 | 1,239 | 19.4 | % | |||||||||
Net income | $ | 72,726 | $ | 72,587 | $ | 139 | 0.2 | % | ||||||
Unallocated expense (income): | ||||||||||||||
General and administrative expenses | 37,322 | 29,236 | 8,086 | 27.7 | % | |||||||||
Acquisition-related expenses | — | — | — | — | % | |||||||||
Depreciation and amortization | 126,721 | 123,170 | 3,551 | 2.9 | % | |||||||||
Interest income and other net investment gains | (805 | ) | (2,103 | ) | 1,298 | (61.7 | )% | |||||||
Interest expense | 26,210 | 35,325 | (9,115 | ) | (25.8 | )% | ||||||||
Net (gain) loss on sale of land | — | (2,257 | ) | 2,257 | (100.0 | )% | ||||||||
Net Operating Income, as defined | $ | 262,174 | $ | 255,958 | $ | 6,216 | 2.4 | % |
Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
Same Store | Stabilized Develop-ment | Acquisi-tion Properties | Dispositi-ons & Other | Total | Same Store | Stabilized Develop-ment | Acquisi-tion Properties | Dispositi-ons & Other | Total | ||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||||||||||||||||||||
Rental income | $ | 311,862 | $ | 12,688 | $ | 2,836 | $ | — | $ | 327,386 | $ | 297,796 | $ | 9,901 | $ | — | $ | 7,876 | $ | 315,573 | |||||||||||||||||||
Tenant reimbursements | 38,129 | 81 | 584 | (77 | ) | 38,717 | 37,582 | — | — | 981 | 38,563 | ||||||||||||||||||||||||||||
Other property income | 3,788 | — | — | 3 | 3,791 | 4,697 | 8 | — | 1,065 | 5,770 | |||||||||||||||||||||||||||||
Total | 353,779 | 12,769 | 3,420 | (74 | ) | 369,894 | 340,075 | 9,909 | — | 9,922 | 359,906 | ||||||||||||||||||||||||||||
Property and related expenses: | |||||||||||||||||||||||||||||||||||||||
Property expenses | 61,612 | 2,298 | 251 | 77 | 64,238 | 60,855 | 1,865 | — | 1,825 | 64,545 | |||||||||||||||||||||||||||||
Real estate taxes | 32,594 | 1,453 | 443 | 469 | 34,959 | 31,936 | 1,395 | — | 1,176 | 34,507 | |||||||||||||||||||||||||||||
Provision for bad debts | 5,351 | — | — | 25 | 5,376 | 1,631 | — | — | 76 | 1,707 | |||||||||||||||||||||||||||||
Ground leases | 3,147 | — | — | — | 3,147 | 3,189 | — | — | — | 3,189 | |||||||||||||||||||||||||||||
Total | 102,704 | 3,751 | 694 | 571 | 107,720 | 97,611 | 3,260 | — | 3,077 | 103,948 | |||||||||||||||||||||||||||||
Net Operating Income, as defined | $ | 251,075 | $ | 9,018 | $ | 2,726 | $ | (645 | ) | $ | 262,174 | $ | 242,464 | $ | 6,649 | $ | — | $ | 6,845 | $ | 255,958 |
Six Months Ended June 30, 2018 as compared to the Six Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||||
Same Store | Stabilized Development | Acquisition Properties | Dispositions & Other | Total | ||||||||||||||||||||||||||||||
Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | Dollar Change | Percent Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||||||||||||
Rental income | $ | 14,066 | 4.7 | % | $ | 2,787 | 28.1 | % | $ | 2,836 | 100.0 | % | $ | (7,876 | ) | (100.0 | )% | $ | 11,813 | 3.7 | % | |||||||||||||
Tenant reimbursements | 547 | 1.5 | % | 81 | 100.0 | % | 584 | 100.0 | % | (1,058 | ) | (107.8 | )% | 154 | 0.4 | % | ||||||||||||||||||
Other property income | (909 | ) | (19.4 | )% | (8 | ) | (100.0 | )% | — | 100.0 | % | (1,062 | ) | (99.7 | )% | (1,979 | ) | (34.3 | )% | |||||||||||||||
Total | 13,704 | 4.0 | % | 2,860 | 28.9 | % | 3,420 | 100.0 | % | (9,996 | ) | (100.7 | )% | 9,988 | 2.8 | % | ||||||||||||||||||
Property and related expenses: | ||||||||||||||||||||||||||||||||||
Property expenses | 757 | 1.2 | % | 433 | 23.2 | % | 251 | 100.0 | % | (1,748 | ) | (95.8 | )% | (307 | ) | (0.5 | )% | |||||||||||||||||
Real estate taxes | 658 | 2.1 | % | 58 | 4.2 | % | 443 | 100.0 | % | (707 | ) | (60.1 | )% | 452 | 1.3 | % | ||||||||||||||||||
Provision for bad debts | 3,720 | 228.1 | % | — | — | % | — | — | % | (51 | ) | (67.1 | )% | 3,669 | 214.9 | % | ||||||||||||||||||
Ground leases | (42 | ) | (1.3 | )% | — | — | % | — | — | % | — | — | % | (42 | ) | (1.3 | )% | |||||||||||||||||
Total | 5,093 | 5.2 | % | 491 | 15.1 | % | 694 | 100.0 | % | (2,506 | ) | (81.4 | )% | 3,772 | 3.6 | % | ||||||||||||||||||
Net Operating Income, as defined | $ | 8,611 | 3.6 | % | $ | 2,369 | 35.6 | % | $ | 2,726 | 100.0 | % | $ | (7,490 | ) | (109.4 | )% | $ | 6,216 | 2.4 | % |
• | An increase of $8.6 million attributable to the Same Store Properties primarily resulting from: |
• | An increase in rental income of $14.1 million primarily due to the following: |
• | $12.0 million increase due to new leases and renewals at higher rates across all regions; |
• | $2.4 million increase due to an increase in occupancy primarily related to three properties, each in different submarkets; partially offset by |
• | $0.3 million decrease in parking income primarily due to lower occupancy at one property; |
• | A decrease in other property income of $0.9 million primarily due to $3.5 million of early lease termination fees primarily at one property in the San Francisco Bay Area in 2017 compared to $2.7 million of early lease termination fees at five properties in 2018; |
• | An increase in property and related expenses of $5.1 million primarily due to the following: |
• | $3.7 million increase in the provision for bad debts primarily due to an increase in the provision for one tenant in 2018, partially offset by the reversal of a straight line rent reserve for one tenant resulting from the assignment of its lease to a credit tenant and a $1.5 million provision related to two tenants in 2017; |
• | $0.8 million increase in property expenses primarily resulting from the following: |
◦ | $1.3 million increase in certain recurring operating costs related to security, parking, contract services, insurance and various other reimbursable expenses; partially offset by |
◦ | $0.5 million decrease in non-reimbursable expenses primarily due to a 2018 reimbursement of non-recurring expenses incurred in 2017 and lower legal expenses; |
• | $0.7 million increase in real estate taxes primarily comprised of: |
◦ | $1.0 million from regular annual property tax increases in 2018; |
◦ | $1.0 million of higher supplemental taxes for a fully assessed development property completed in 2016; |
◦ | $0.1 million of property tax refunds received in 2017; partially offset by |
◦ | $1.4 million of prior year supplemental taxes related to five properties; |
• | An increase of $2.4 million attributable to the Stabilized Development Properties; |
• | An increase of $2.7 million attributable to the Acquisition Properties; partially offset by |
• | A decrease of $7.5 million attributable to the Dispositions & Other Properties. |
• | An increase of $3.4 million attributable to the Same Store Properties; |
• | An increase of $2.9 million attributable to the Acquisition Properties; |
• | An increase of $1.1 million attributable to the Stabilized Development Properties; partially offset by |
• | A decrease of $3.8 million attributable to the Dispositions and Other Properties. |
Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | Dollar Change | Percentage Change | |||||||||||
(in thousands) | ||||||||||||||
Gross interest expense | $ | 55,603 | $ | 56,246 | $ | (643 | ) | (1.1 | )% | |||||
Capitalized interest and deferred financing costs | (29,393 | ) | (20,921 | ) | (8,472 | ) | 40.5 | % | ||||||
Interest expense | $ | 26,210 | $ | 35,325 | $ | (9,115 | ) | (25.8 | )% |
Shares/Units at June 30, 2018 | Aggregate Principal Amount or $ Value Equivalent | % of Total Market Capitalization | ||||||
($ in thousands) | ||||||||
Debt: (1) (2) | ||||||||
Unsecured Line of Credit | $ | 295,000 | 2.8 | % | ||||
Unsecured Term Loan Facility | 150,000 | 1.4 | % | |||||
Unsecured Senior Notes due 2020 | 250,000 | 2.4 | % | |||||
Unsecured Senior Notes due 2023 | 300,000 | 2.8 | % | |||||
Unsecured Senior Notes due 2024 | 425,000 | 4.0 | % | |||||
Unsecured Senior Notes due 2025 | 400,000 | 3.8 | % | |||||
Unsecured Senior Notes due 2029 | 400,000 | 3.8 | % | |||||
Unsecured Senior Notes Series A & B due 2027 & 2029 | 250,000 | 2.4 | % | |||||
Secured debt | 337,627 | 3.2 | % | |||||
Total debt | $ | 2,807,627 | 26.6 | % | ||||
Equity and Noncontrolling Interest in the Operating Partnership: (3) | ||||||||
Common limited partnership units outstanding (4) | 2,070,690 | $ | 156,627 | 1.5 | % | |||
Common shares outstanding (3) | 100,559,903 | 7,606,351 | 71.9 | % | ||||
Total equity and noncontrolling interest in the Operating Partnership | $ | 7,762,978 | 73.4 | % | ||||
Total Market Capitalization | $ | 10,570,605 | 100.0 | % |
(1) | In May, the Company completed a private placement of $50.0 million of eight-year, 4.30% unsecured senior notes and $200.0 million of eight-year, 4.35% unsecured senior notes with delayed draw options. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of June 30, 2018. In July, the Company drew the full amount of the $50.0 million of eight-year, 4.30% unsecured senior notes. The $200.0 million of eight-year, 4.35% unsecured senior notes are required to be drawn by October 22, 2018. |
(2) | Represents gross aggregate principal amount due at maturity before the effect of the following at June 30, 2018: $13.7 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt, $5.9 million of unamortized discounts for the unsecured senior notes and $1.7 million of unamortized premiums for the secured debt. |
(3) | Value based on closing price per share of our common stock of $75.64 as of June 30, 2018. |
(4) | Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships. |
• | Net cash flow from operations; |
• | Borrowings under the Operating Partnership’s unsecured revolving credit facility and term loan facility; |
• | Proceeds from our capital recycling program, including the disposition of less strategic or core assets and the formation of strategic ventures; |
• | Proceeds from additional secured or unsecured debt financings; and |
• | Proceeds from public or private issuance of debt or equity securities. |
• | Development and redevelopment costs; |
• | Operating property or undeveloped land acquisitions; |
• | Property operating and corporate expenses; |
• | Capital expenditures, tenant improvement and leasing costs; |
• | Debt service and principal payments, including debt maturities; |
• | Distributions to common and preferred security holders; |
• | Repurchases and redemptions of outstanding common or preferred stock of the Company; and |
• | Outstanding debt repurchases, redemptions and repayments. |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Outstanding borrowings | $ | 295,000 | $ | — | |||
Remaining borrowing capacity | 455,000 | 750,000 | |||||
Total borrowing capacity (1) | $ | 750,000 | $ | 750,000 | |||
Interest rate (2) | 3.10 | % | 2.56 | % | |||
Facility fee-annual rate (3) | 0.200% | ||||||
Maturity date | July 2022 |
(1) | We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $600.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility. |
(2) | Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.000% as of June 30, 2018 and December 31, 2017. |
(3) | Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of June 30, 2018 and December 31, 2017, $5.3 million and $6.0 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility. |
June 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Outstanding borrowings | $ | 150,000 | $ | — | |||
Remaining borrowing capacity | — | 150,000 | |||||
Total borrowing capacity (1) | $ | 150,000 | $ | 150,000 | |||
Interest rate (2) | 3.17 | % | 2.66 | % | |||
Undrawn facility fee-annual rate (3) | 0.200% | ||||||
Maturity date | July 2022 |
(1) | As of June 30, 2018 and December 31, 2017, $1.0 million and $1.2 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility. |
(2) | Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.100% as of June 30, 2018 and December 31, 2017. |
(3) | Prior to borrowing the full capacity of our unsecured term loan facility, the undrawn facility fee was calculated based on any unused borrowing capacity and was paid on a quarterly basis. |
Six Months Ended June 30, 2018 | |||
(in millions, except share and per share data) | |||
Shares of common stock sold during the period | 1,719,195 | ||
Weighted average price per common share | $ | 73.66 | |
Aggregate gross proceeds | $ | 126.6 | |
Aggregate net proceeds after selling commissions | $ | 125.1 |
Aggregate Principal Amount Outstanding (1) | |||
(in thousands) | |||
Unsecured Line of Credit | $ | 295,000 | |
Unsecured Term Loan Facility | 150,000 | ||
Unsecured Senior Notes due 2020 | 250,000 | ||
Unsecured Senior Notes due 2023 | 300,000 | ||
Unsecured Senior Notes due 2024 | 425,000 | ||
Unsecured Senior Notes due 2025 | 400,000 | ||
Unsecured Senior Notes due 2029 | 400,000 | ||
Unsecured Senior Notes Series A & B due 2027 & 2029 | 250,000 | ||
Secured Debt | 337,627 | ||
Total Unsecured and Secured Debt | $ | 2,807,627 | |
Less: Unamortized Net Discounts and Deferred Financing Costs (2) | (17,917 | ) | |
Total Debt, Net | $ | 2,789,710 |
(1) | In May, the Company completed a private placement of $50.0 million of eight-year, 4.30% unsecured senior notes and $200.0 million of eight-year, 4.35% unsecured senior notes with delayed draw options. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of June 30, 2018. In July, the Company drew the full amount of the $50.0 million of eight-year, 4.30% unsecured senior notes. The $200.0 million of eight-year, 4.35% unsecured senior notes are required to be drawn by October 22, 2018. |
(2) | Includes $13.7 million of unamortized deferred financing costs of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt, $5.9 million of unamortized discounts for the unsecured senior notes and $1.7 million of unamortized premiums for the secured debt. Excludes unamortized deferred financing costs on the unsecured revolving credit facility. |
Percentage of Total Debt (1) (2) | Weighted Average Interest Rate(1) (2) | ||||||||||
June 30, 2018 | December 31, 2017 | June 30, 2018 | December 31, 2017 | ||||||||
Secured vs. unsecured: | |||||||||||
Unsecured (3) | 88.0 | % | 85.6 | % | 4.0 | % | 4.2 | % | |||
Secured | 12.0 | % | 14.4 | % | 4.4 | % | 4.4 | % | |||
Variable-rate vs. fixed-rate: | |||||||||||
Variable-rate | 15.8 | % | — | % | 3.1 | % | — | % | |||
Fixed-rate (3) | 84.2 | % | 100.0 | % | 4.2 | % | 4.2 | % | |||
Stated rate (3) | 4.1 | % | 4.2 | % | |||||||
GAAP effective rate (4) | 4.0 | % | 4.2 | % | |||||||
GAAP effective rate including debt issuance costs | 4.2 | % | 4.4 | % |
(1) | As of the end of the period presented. |
(2) | In May, the Company completed a private placement of $50.0 million of eight-year, 4.30% unsecured senior notes and $200.0 million of eight-year, 4.35% unsecured senior notes with delayed draw options. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of June 30, 2018. In July, the Company drew the full amount of the $50.0 million of eight-year, 4.30% unsecured senior notes. The $200.0 million of eight-year, 4.35% unsecured senior notes are required to be drawn by October 22, 2018. |
(3) | Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs. |
(4) | Includes the impact of the amortization of any debt discounts/premiums, excluding deferred financing costs. |
• | Decreases in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility; |
• | An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and |
• | A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations. |
Unsecured Credit and Term Loan Facility and Private Placement Notes (as defined in the applicable Credit Agreements): (1) | Covenant Level | Actual Performance as of June 30, 2018 | ||
Total debt to total asset value | less than 60% | 28% | ||
Fixed charge coverage ratio | greater than 1.5x | 3.7x | ||
Unsecured debt ratio | greater than 1.67x | 3.24x | ||
Unencumbered asset pool debt service coverage | greater than 1.75x | 5.14x | ||
Unsecured Senior Notes due 2020, 2023, 2024, 2025 and 2029 (as defined in the applicable Indentures): | ||||
Total debt to total asset value | less than 60% | 34% | ||
Interest coverage | greater than 1.5x | 8.4x | ||
Secured debt to total asset value | less than 40% | 4% | ||
Unencumbered asset pool value to unsecured debt | greater than 150% | 303% |
(1) | In May, the Company completed a private placement of $50.0 million of eight-year, 4.30% unsecured senior notes and $200.0 million of eight-year, 4.35% unsecured senior notes with delayed draw options. The table above does not reflect any amounts pertaining to these notes since there were no amounts drawn or outstanding as of June 30, 2018. In July, the Company drew the full amount of the $50.0 million of eight-year, 4.30% unsecured senior notes. The $200.0 million of eight-year, 4.35% unsecured senior notes are required to be drawn by October 22, 2018. |
Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | Dollar Change | Percentage Change | |||||||||||
($ in thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 188,843 | $ | 178,416 | $ | 10,427 | 5.8 | % | ||||||
Net cash used in investing activities | (664,346 | ) | (216,018 | ) | (448,328 | ) | 207.5 | % | ||||||
Net cash provided by financing activities | 459,522 | 183,338 | 276,184 | 150.6 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Net income available to common stockholders | $ | 27,549 | $ | 29,833 | $ | 63,795 | $ | 56,162 | |||||||
Adjustments: | |||||||||||||||
Net income attributable to noncontrolling common units of the Operating Partnership | 566 | 616 | 1,317 | 1,239 | |||||||||||
Net income attributable to noncontrolling interests in consolidated property partnerships | 3,640 | 3,242 | 7,614 | 6,375 | |||||||||||
Depreciation and amortization of real estate assets | 62,956 | 61,000 | 124,633 | 120,734 | |||||||||||
Gains on sales of depreciable real estate | — | — | — | (2,257 | ) | ||||||||||
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships | (6,082 | ) | (5,924 | ) | (12,445 | ) | (11,552 | ) | |||||||
Funds From Operations (1)(2) | $ | 88,629 | $ | 88,767 | $ | 184,914 | $ | 170,701 |
(1) | Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders. |
(2) | FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.6 million and $4.5 million for the three months ended June 30, 2018 and 2017, respectively, and $8.9 million and $8.2 million for the six months ended June 30, 2018 and 2017, respectively. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total Number of Shares of Stock Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs | |||||||||
April 1, 2018 - April 30, 2018 | — | $ | — | — | — | ||||||||
May 1, 2018 - May 31, 2018 | — | — | — | — | |||||||||
June 1, 2018 - June 30, 2018 | — | — | — | — | |||||||||
Total | — | $ | — | — | — |
(1) | Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | |
3.(i)1 | ||
3.(i)2 | ||
3.(i)3 | ||
3.(i)4 | ||
3.(i)5 | ||
3.(ii)1 | ||
3.(ii)2 | ||
31.1* | ||
31.2* | ||
31.3* | ||
31.4* | ||
32.1* | ||
32.2* | ||
32.3* | ||
32.4* | ||
101.1 | The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited).(1) |
* | Filed herewith. |
† | Management contract or compensatory plan or arrangement. |
(1) | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections. |
KILROY REALTY CORPORATION | ||
By: | /s/ John Kilroy | |
John Kilroy President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Tyler H. Rose | |
Tyler H. Rose Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
By: | /s/ Heidi R. Roth | |
Heidi R. Roth Executive Vice President and Chief Accounting Officer (Principal Accounting Officer) |
KILROY REALTY, L.P. | ||
BY: | KILROY REALTY CORPORATION | |
Its general partner | ||
By: | /s/ John Kilroy | |
John Kilroy President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Tyler H. Rose | |
Tyler H. Rose Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
By: | /s/ Heidi R. Roth | |
Heidi R. Roth Executive Vice President and Chief Accounting Officer (Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ John Kilroy |
John Kilroy |
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Tyler H. Rose |
Tyler H. Rose |
Executive Vice President and Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ John Kilroy |
John Kilroy |
President and Chief Executive Officer |
Kilroy Realty Corporation, sole general partner of Kilroy Realty, L.P. |
1. | I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Tyler H. Rose |
Tyler H. Rose |
Executive Vice President and Chief Financial Officer |
Kilroy Realty Corporation, sole general partner of Kilroy Realty, L.P. |
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ John Kilroy | |
John Kilroy | |
President and Chief Executive Officer | |
Date: | July 26, 2018 |
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Tyler H. Rose | |
Tyler H. Rose | |
Executive Vice President and Chief Financial Officer | |
Date: | July 26, 2018 |
(i) | the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership. |
/s/ John Kilroy | |
John Kilroy | |
President and Chief Executive Officer | |
Kilroy Realty Corporation, sole general partner of Kilroy Realty, L.P. | |
Date: | July 26, 2018 |
(i) | the accompanying Quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership. |
/s/ Tyler H. Rose | |
Tyler H. Rose | |
Executive Vice President and Chief Financial Officer | |
Kilroy Realty Corporation, sole general partner of Kilroy Realty, L.P. | |
Date: | July 26, 2018 |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2018 |
Jul. 20, 2018 |
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Entity Registrant Name | KILROY REALTY CORP | |
Entity Central Index Key | 0001025996 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 100,559,903 | |
Kilroy Realty L.P. [Member] | ||
Entity Registrant Name | Kilroy Realty, L.P. | |
Entity Central Index Key | 0001493976 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
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Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in shares) | 100,559,903 | 98,620,333 |
Common stock, shares outstanding (in shares) | 100,559,903 | 98,620,333 |
Consolidated Statements of Equity (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Statement of Stockholders' Equity [Abstract] | ||||
Dividends declared per common share and common unit (in dollars per share) | $ 0.455 | $ 0.425000 | $ 0.88 | $ 0.8 |
Consolidated Balance Sheets (KILROY REALTY, L.P.) (Parenthetical) - Common units [Member] - Kilroy Realty L.P. [Member] - shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
General partner, units issued | 100,559,903 | 98,620,333 |
General partners, units outstanding | 100,559,903 | 98,620,333 |
Limited partners, units issued | 2,070,690 | 2,077,193 |
Noncontrolling common units of the Operating Partnership | 2,070,690 | 2,077,193 |
Consolidated Statements of Capital (KILROY REALTY, L.P.) (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Kilroy Realty L.P. [Member] | ||||
Dividends declared per common unit (in dollars per unit) | $ 0.455000 | $ 0.425000 | $ 0.88 | $ 0.8000 |
Organization, Ownership and Basis of Presentation |
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Organization, Ownership and Basis of Presentation | Organization, Ownership and Basis of Presentation Organization and Ownership Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office and mixed-use submarkets along the West Coast. We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in the coastal regions of Greater Los Angeles, Orange County, San Diego County, the San Francisco Bay Area and Greater Seattle, which we believe have strategic advantages and strong barriers to entry. Class A real estate encompasses attractive and efficient buildings of high quality that are attractive to tenants, are well-designed and constructed with above-average material, workmanship and finishes and are well-maintained and managed. We qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “KRC.” We own our interests in all of our real estate assets through Kilroy Realty, L.P. (the “Operating Partnership”) and Kilroy Realty Finance Partnership, L.P. (the “Finance Partnership”). We generally conduct substantially all of our operations through the Operating Partnership. Unless stated otherwise or the context indicates otherwise, the terms “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” refer to Kilroy Realty Corporation and its consolidated subsidiaries and the term “Operating Partnership” refers to Kilroy Realty, L.P. and its consolidated subsidiaries. The descriptions of our business, employees and properties apply to both the Company and the Operating Partnership. Our stabilized portfolio of operating properties was comprised of the following properties at June 30, 2018:
Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, undeveloped land and real estate assets held for sale. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs on the existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property. We define properties in the tenant improvement phase as properties that we are developing or redeveloping where the project has reached cold shell condition and is ready for tenant improvements, which may require additional major base building construction before being placed in service. Projects in the tenant improvement phase are added to our stabilized portfolio once the project reaches the earlier of 95% occupancy or one year from the date of the cessation of major base building construction activities. Costs capitalized to construction in progress for development and redevelopment properties are transferred to land and improvements, buildings and improvements, and deferred leasing costs on our consolidated balance sheets at the historical cost of the property as the projects are placed in service. As of June 30, 2018, the following properties were excluded from our stabilized portfolio. We did not have any redevelopment properties or properties held for sale at June 30, 2018.
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Our stabilized portfolio also excludes our future development pipeline, which as of June 30, 2018 was comprised of seven potential development sites, representing approximately 80 gross acres of undeveloped land. As of June 30, 2018, all of our properties and development projects were owned and all of our business was conducted in the state of California with the exception of twelve office properties and one development project under construction located in the state of Washington. All of our properties and development projects are 100% owned, excluding four office properties owned by three consolidated property partnerships, as well as an office project and a development site held by consolidated variable interest entities for future transactions intended to qualify as like-kind exchanges pursuant to Section 1031 of the Code (“Section 1031 Exchanges”). Two of the three property partnerships, 100 First Street Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”), each owned one office property in San Francisco, California through subsidiary REITs. As of June 30, 2018, the Company owned a 56% common equity interest in both 100 First LLC and 303 Second LLC. The third property partnership, Redwood City Partners, LLC (“Redwood LLC”) owned two office properties in Redwood City, California. As of June 30, 2018, the Company owned an approximate 93% common equity interest in Redwood LLC. The remaining interests in all three property partnerships were owned by unrelated third parties. Ownership and Basis of Presentation The consolidated financial statements of the Company include the consolidated financial position and results of operations of the Company, the Operating Partnership, the Finance Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. The consolidated financial statements of the Operating Partnership include the consolidated financial position and results of operations of the Operating Partnership, the Finance Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements. As of June 30, 2018, the Company owned an approximate 98.0% common general partnership interest in the Operating Partnership. The remaining approximate 2.0% common limited partnership interest in the Operating Partnership as of June 30, 2018 was owned by non-affiliated investors and certain of our executive officers and directors. Both the general and limited common partnership interests in the Operating Partnership are denominated in common units. Generally, the number of common units held by the Company is equivalent to the number of outstanding shares of the Company’s common stock, and the rights of all the common units to quarterly distributions and payments in liquidation mirror those of the Company’s common stockholders. The common limited partners have certain redemption rights as provided in the Operating Partnership’s Seventh Amended and Restated Agreement of Limited Partnership, as amended, the “Partnership Agreement.” Kilroy Realty Finance, Inc., which is a wholly-owned subsidiary of the Company, is the sole general partner of the Finance Partnership and owns a 1.0% common general partnership interest in the Finance Partnership. The Operating Partnership owns the remaining 99.0% common limited partnership interest. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned. The accompanying interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The interim financial statements for the Company and the Operating Partnership should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017. Variable Interest Entities The Operating Partnership is a variable interest entity (“VIE”) that is consolidated by the Company as the primary beneficiary as the Operating Partnership is a limited partnership in which the common limited partners do not have substantive kick-out or participating rights. At June 30, 2018, the consolidated financial statements of the Company included six VIEs in addition to the Operating Partnership: 100 First LLC, 303 Second LLC, an entity established during the first quarter of 2018 to facilitate potential future Section 1031 Exchanges and three entities established during the second quarter of 2018 to facilitate potential future Section 1031 Exchanges. At June 30, 2018, the Operating Partnership was determined to be the primary beneficiary of these six VIEs since the Operating Partnership had the ability to control the activities that most significantly impact each of the VIE’s economic performance. As of June 30, 2018, the six VIEs’ total assets, liabilities and noncontrolling interests included on our consolidated balance sheet were approximately $896.8 million (of which $846.5 million related to real estate held for investment), approximately $77.0 million and approximately $176.5 million, respectively. Revenues, income and net assets generated by 100 First LLC and 303 Second LLC may only be used to settle their contractual obligations, which primarily consist of operating expenses, capital expenditures and required distributions. At December 31, 2017, the consolidated financial statements of the Company and the Operating Partnership included two VIEs in which we were deemed to be the primary beneficiary: 100 First LLC and 303 Second LLC. At December 31, 2017, the impact of consolidating the VIEs increased the Company’s total assets, liabilities and noncontrolling interests on our consolidated balance sheet by approximately $426.5 million (of which $382.1 million related to real estate held for investment), approximately $27.3 million and approximately $175.4 million, respectively. Accounting Pronouncements Adopted January 1, 2018 Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) ASU No. 2014-09 “Revenue From Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014-09, on a modified retrospective basis. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most of the existing revenue recognition guidance. We evaluated each of the Company’s revenue streams to determine the sources of revenue that are impacted by ASU 2014-09 and concluded that two revenue streams, sales of real estate and revenue from our multi-tenant parking arrangements, fall within the scope of Topic 606. We evaluated the impact of the adoption of the guidance on the timing of gain recognition for our historical dispositions and concluded there was no significant impact to our consolidated financial statements given the straight forward nature of our historical disposition transactions. We also evaluated the impact of the guidance on the timing and pattern of revenue recognition for our multi-tenant parking arrangements and determined there was no significant impact to our consolidated financial statements. We generally provide parking for our multi-tenant properties based on the prevailing market rate per parking space, which adjusts based on prevailing market rates during the tenant’s occupancy, and we recognize parking revenue as parking spaces are utilized by the tenant. Given the structure of these arrangements whereby the amount of parking revenue we recognize corresponds directly to the tenant’s use, we were able to apply the practical expedient provided in Accounting Standards Codification (“ASC”) 606-10-50-14(b) (the “right to invoice” practical expedient). As a result of applying this practical expedient, we are not required to disclose the transaction price allocated to future performance obligations for multi-tenant parking since we cannot predict or estimate the use of such parking spaces. During the three months ended June 30, 2018 and 2017, we recognized $6.8 million and $6.9 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. During the six months ended June 30, 2018 and 2017, we recognized $13.4 million and $13.6 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. We concluded that the adoption of Topic 606 did not have an impact on our consolidated financial statements or a material impact on the notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2017-09 “Compensation - Stock Compensation (Topic 718)” on a prospective basis. Under the guidance, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions, and classification as an equity or liability instrument remain the same immediately before and after the change. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2017-05 “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)” (“ASU 2017-05”) on a retrospective basis. This standard clarifies the scope of the original guidance within Subtopic 610-20 “Gains and Losses from the Derecognition of Nonfinancial Assets” that was issued in connection with ASU 2014-09 which provided guidance for recognizing gains and losses from the transfer of nonfinancial assets in transactions with noncustomers. Additionally, ASU 2017-05 adds guidance pertaining to the partial sales of real estate and clarifies that nonfinancial assets within the scope of ASC 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. We evaluated the impact of the new amendments on our historical transactions and concluded that there was no impact. As such, the adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2016-15 (“ASU 2016-15”) which provides guidance where there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, on a retrospective basis. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2016-01 (“ASU 2016-01”) which amends the accounting guidance on the classification and measurement of financial instruments and FASB ASU No. 2018-03 (“ASU 2018-03”) which provides technical corrections and improvements to ASU 2016-01, on a modified retrospective basis. The amendments require that all investments in equity securities, including other ownership interests, are reported at fair value with changes in fair value reported in net income. This requirement does not apply to investments that qualify for equity method accounting or to those that result in consolidation of the investee or for which the entity has elected the predictability exception to fair value measurement. Additionally, the amendments require that the portion of the total fair value change caused by a change in instrument-specific credit risk for financial liabilities for which the fair value option has been elected would be recognized in other comprehensive income. Any accumulated amount remaining in other comprehensive income is reclassified to earnings when the liability is extinguished. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements since our only financial instruments within the scope of ASU 2016-01 and 2018-03 are the marketable securities related to our deferred compensation plan which are classified as trading securities and marked to market at fair value through earnings each reporting period. Accounting Pronouncements Effective January 1, 2019 ASU No. 2016-02 “Leases (Topic 842)” On February 25, 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We continue to have a project team, led by senior accounting management, that is proactively working to analyze and evaluate the impact of the guidance on our consolidated financial statements. In January 2018, the FASB released an exposure draft to amend ASU No. 2016-02 that would (1) simplify transition requirements for both lessees and lessors by adding an option that would permit an organization to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) provide a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate nonlease components from the associated lease components if certain criteria are met. In March 2018, the FASB finalized the changes with respect to optional transition relief and approved a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate nonlease components from the associated lease components, by class of underlying asset, if the following two criteria are met: (1) the timing and pattern of transfer of the lease and nonlease components are the same and (2) the lease component would be classified as an operating lease if accounted for separately. For leases where we are the lessor, we currently believe that we will elect the optional transition relief and that we will meet the noted criteria to not be required to bifurcate and separately report nonlease components, such as common area maintenance revenue, for operating leases on our consolidated statements of operations. As a result, we currently believe that leases where we are the lessor will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. The FASB is expected to issue an Accounting Standards Update codifying these changes and we currently expect to adopt ASU 2016-02 using the practical expedients proposed in the standard and the changes approved by the FASB. ASU 2016-02 also specifies that upon adoption, lessors will no longer be able to capitalize and amortize certain leasing related costs and instead will only be permitted to capitalize and amortize incremental direct leasing costs. As a result, we have concluded that upon the adoption of the standard, we will be required to expense as incurred certain leasing costs we are currently able to capitalize and amortize as deferred leasing costs under existing guidance. We continue to evaluate the impact of this change in the guidance and we currently expect this change will have a material impact to the Company’s consolidated financial statements and results of operations upon adoption of the standard on January 1, 2019. For leases where we are the lessee, specifically for our ground leases, we expect that the adoption of the standard will significantly change the accounting on our consolidated balance sheets since both existing ground leases and any future ground leases will be required to be recorded on the Company’s consolidated balance sheets as an obligation of the Company. We currently believe that existing ground leases executed before the January 1, 2019 adoption date will continue to be accounted for as operating leases and the new guidance will not have a material impact on our recognition of ground lease expense or our results of operations. However, we believe that we will be required to recognize a right of use asset and a lease liability on our consolidated balance sheets equal to the present value of the minimum lease payments required in accordance with each ground lease. As of June 30, 2018, our future undiscounted minimum rental payments under these leases totaled $249.9 million, with several of the leases containing provisions for rental payments to fluctuate based on fair market value and operating income measurements with expirations through 2093. In addition, we currently believe that for new ground leases entered into after the adoption date of the new standard, such leases could be required to be accounted for as financing type leases, resulting in ground lease expense recorded using the effective interest method instead of on a straight-line basis over the term of the lease. This could have a significant impact on our results of operations if we enter into material new ground leases after the date of adoption since ground lease expense calculated using the effective interest method results in an increased amount of ground lease expense in the earlier years of a ground lease as compared to the current straight-line method. Accounting Pronouncements Effective in 2020 and Beyond ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” On June 16, 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) to amend the accounting for credit losses for certain financial instruments. Under the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements. |
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Acquisitions | Acquisitions Operating Property Acquisitions During the six months ended June 30, 2018, we acquired the three operating properties listed below from an unrelated third party. The acquisition was funded with proceeds from the Company’s unsecured revolving credit facility and unsecured term loan facility.
The related assets, liabilities and results of operations of the acquired properties are included in the consolidated financial statements as of the date of acquisition. The following table summarizes the assets acquired and liabilities assumed as of the date of acquisition, excluding acquisition-related costs:
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Development Project Acquisitions During the six months ended June 30, 2018, we acquired the following development site, which is located adjacent to the three operating properties we acquired in January 2018, from an unrelated third party. The acquisition was funded with proceeds from the Company’s unsecured revolving credit facility and the Company’s at-the-market stock offering program.
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | Receivables Current Receivables, net Current receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
Deferred Rent Receivables, net Deferred rent receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
Other Significant Events During the three and six months ended June 30, 2018, we recognized $5.6 million and $5.4 million of provision for bad debts, respectively. The provision for bad debts in 2018 is primarily due to a $7.0 million increase in the provision for one tenant during the three months ended June 30, 2018, partially offset by a $1.7 million and $1.4 million decrease in the provision for bad debts for one lease due to the assignment of the lease to a credit tenant during the three and six months ended June 30, 2018, respectively. |
Prepaid Expenses and Other Assets, Net |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Assets, Net | Prepaid Expenses and Other Assets, Net Prepaid expenses and other assets, net consisted of the following at June 30, 2018 and December 31, 2017:
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Secured and Unsecured Debt of the Operating Partnership |
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Kilroy Realty L.P. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Secured and Unsecured Debt of the Operating Partnership | Secured and Unsecured Debt of the Operating Partnership The Company generally guarantees all of the Operating Partnership’s unsecured debt obligations including the unsecured revolving credit facility, the unsecured term loan facility and all of the unsecured senior notes. Unsecured Senior Notes - Private Placement On May 11, 2018, the Operating Partnership entered into a Note Purchase Agreement (the “Note Purchase Agreement”) in connection with the issuance and sale of $50.0 million principal amount of the Operating Partnership’s 4.30% Senior Notes, Series A, due July 18, 2026 (the “Series A Notes”), and $200.0 million principal amount of the Operating Partnership’s 4.35% Senior Notes, Series B, due October 18, 2026 (the “Series B Notes” and, together with the Series A Notes, the “Series A and B Notes”), pursuant to a private placement. As of June 30, 2018, there were no amounts issued or outstanding under the Series A and B Notes. In July 2018, the Company drew the full amount of the Series A Notes. The Series B Notes are required to be drawn by October 22, 2018. The Series A and B Notes mature on their respective due dates, unless earlier redeemed or prepaid pursuant to the terms of the Note Purchase Agreement. Interest on the Series A and B Notes is payable semi-annually in arrears on April 18 and October 18 of each year beginning April 18, 2019. The Operating Partnership may, at its option and upon notice to the purchasers of the Series A and B Notes, prepay at any time all, or from time to time any part of the Series A and B Notes then outstanding (in an amount not less than 5% of the aggregate principal amount of the Series A and B Notes then outstanding in the case of a partial prepayment), at 100% of the principal amount so prepaid, plus the make-whole amount determined for the prepayment date with respect to such principal amount as set forth in the Note Purchase Agreement. In connection with the issuance of the Series A and B Notes, the Company will enter into an agreement whereby it will guarantee the payment by the Operating Partnership of all amounts due with respect to the Series A and B Notes and the performance by the Operating Partnership of its obligations under the Note Purchase Agreement. Unsecured Revolving Credit Facility and Term Loan Facility The following table summarizes the balance and terms of our unsecured revolving credit facility as of June 30, 2018 and December 31, 2017:
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The Company intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions and to potentially repay long-term debt. During the first quarter of 2018, we borrowed the full $150.0 million borrowing capacity of our unsecured term loan facility. In connection with the funding of the outstanding borrowings, we transferred $30.0 million of outstanding borrowings under the unsecured revolving credit facility to the balance of our unsecured term loan facility. As a result, only $120.0 million of cash proceeds were received from the funding of the unsecured term loan facility. The following table summarizes the balance and terms of our unsecured term loan facility as of June 30, 2018 and December 31, 2017:
Debt Covenants and Restrictions The unsecured revolving credit facility, unsecured term loan facility, unsecured senior notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a minimum unsecured debt ratio and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We believe we were in compliance with all of our debt covenants as of June 30, 2018. Debt Maturities The following table summarizes the stated debt maturities and scheduled amortization payments of our issued and outstanding debt, excluding unamortized debt discounts, premiums and deferred financing costs, as of June 30, 2018:
Capitalized Interest and Loan Fees The following table sets forth gross interest expense, including debt discount/premium and deferred financing cost amortization, net of capitalized interest, for the three and six months ended June 30, 2018 and June 30, 2017. The interest expense capitalized was recorded as a cost of development and increased the carrying value of undeveloped land and construction in progress.
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Stockholders' Equity of the Company |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||
Stockholders' Equity of the Company | Stockholders’ Equity of the Company At-The-Market Stock Offering Program During the three months ended June 30, 2018, the Company completed its existing at-the-market stock offering program, under which we sold an aggregate of $300.0 million in gross sales of shares. In June 2018, the Company commenced a new at-the-market stock offering program (the “2018 At-The-Market Program”), under which we may currently offer and sell shares of our common stock with an aggregate gross sales price of up to $500.0 million. In connection with the 2018 At-The-Market-Program, the Company also entered into related forward purchase agreements whereby, at our discretion, we may sell shares of our common stock under the 2018 At-The-Market-Program under forward equity sales agreements. The use of a forward equity sales agreement would allow the Company to lock in a share price on the sale of shares of our common stock at the time the agreement is executed, but defer receiving the proceeds from the sale of shares until a later date. This also allows us to defer the potential dilutive impact of such offering of shares until such time as we settle the forward equity sales agreement. Since commencement of our 2018 At-The-Market Program in June 2018, we have sold 349,466 shares of common stock through June 30, 2018, none of which were sold under forward equity sales agreements. Approximately $473.4 million remains available to be sold under this program. The following table sets forth information regarding sales of common stock under our at-the-market offering programs for the six months ended June 30, 2018:
The proceeds from sales were used to fund acquisitions, development expenditures and general corporate purposes. Actual future sales will depend upon a variety of factors, including but not limited to, market conditions, the trading price of the Company’s common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under this program. |
Noncontrolling Interests on the Company's Consolidated Financial Statements |
6 Months Ended |
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Jun. 30, 2018 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interests on the Company's Consolidated Financial Statements | Noncontrolling Interests on the Company’s Consolidated Financial Statements Common Units of the Operating Partnership The Company owned an approximate 98.0%, 97.9%, and 97.9% common general partnership interest in the Operating Partnership as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively. The remaining approximate 2.0%, 2.1%, and 2.1% common limited partnership interest as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively, was owned by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units. There were 2,070,690, 2,077,193 and 2,077,193 common units outstanding held by these investors, executive officers and directors as of June 30, 2018, December 31, 2017 and June 30, 2017, respectively. The noncontrolling common units may be redeemed by unitholders for cash. Except under certain circumstances, we, at our option, may satisfy the cash redemption obligation with shares of the Company’s common stock on a one-for-one basis. If satisfied in cash, the value for each noncontrolling common unit upon redemption is the amount equal to the average of the closing quoted price per share of the Company’s common stock, par value $.01 per share, as reported on the NYSE for the ten trading days immediately preceding the applicable redemption date. The aggregate value upon redemption of the then-outstanding noncontrolling common units was $156.2 million and $154.5 million as of June 30, 2018 and December 31, 2017, respectively. This redemption value does not necessarily represent the amount that would be distributed with respect to each noncontrolling common unit in the event of our termination or liquidation. In the event of our termination or liquidation, it is expected in most cases that each common unit would be entitled to a liquidating distribution equal to the liquidating distribution payable in respect of each share of the Company’s common stock. |
Partners' Capital of the Operating Partnership |
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Partners' Capital Notes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Partners’ Capital of the Operating Partnership | Partners’ Capital of the Operating Partnership At-The-Market Stock Offering Program During the six months ended June 30, 2018, the Company utilized its at-the-market stock offering programs to issue shares of common stock (see Note 6 “Stockholders’ Equity of the Company” for additional information). The net offering proceeds were contributed by the Company to the Operating Partnership in exchange for common units for the six months ended June 30, 2018 as follows:
Common Units Outstanding The following table sets forth the number of common units held by the Company and the number of common units held by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units as well as the ownership interest held on each respective date:
For further discussion of the noncontrolling common units as of June 30, 2018 and December 31, 2017, refer to Note 7. |
Share-Based Compensation |
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Jun. 30, 2018 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||
Share-Based Compensation | Share-Based Compensation Stockholder Approved Equity Compensation Plans As of June 30, 2018, we maintained one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan, as amended (the “2006 Plan”). As of June 30, 2018, approximately 1.8 million shares were available for grant under the 2006 Plan. The calculation of shares available for grant is presented after taking into account a reserve for a sufficient number of shares to cover the vesting and payment of 2006 Plan awards that were outstanding on that date, including performance-based vesting awards at (i) levels actually achieved for the performance or market conditions (as defined below) for which the performance period has been completed and (ii) at target levels for the performance or market conditions (as defined below) for awards still in a performance period. 2018 Share-Based Compensation Grants In January and February 2018, the Executive Compensation Committee of the Company’s Board of Directors awarded 282,038 restricted stock units (“RSUs”) to certain officers of the Company under the 2006 Plan, which included 158,205 RSUs (at the target level of performance) that are subject to market and/or performance-based vesting requirements (the “2018 Performance-Based RSUs”) and 123,833 RSUs that are subject to time-based vesting requirements (the “2018 Time-Based RSUs”). 2018 Performance-Based RSU Grant The 2018 Performance-Based RSUs are scheduled to vest at the end of a three-year period (consisting of calendar years 2018-2020). A target number of 2018 Performance-Based RSUs were awarded, and the final number of 2018 Performance-Based RSUs that vest (which may be more or less than the target number) will be based upon (1) the achievement of pre-set FFO per share goals for the year ending December 31, 2018 that applies to 100% of the Performance-Based RSUs awarded (the “FFO performance condition”) and (2) a performance measure that applies to 50% of the award based upon a measure of the Company’s average debt to EBITDA ratio for the three-year performance period (the “debt to EBITDA ratio performance condition”) and a market measure that applies to the other 50% of the award based upon the relative ranking of the Company’s total stockholder return for the three-year performance period compared to the total stockholder returns of an established comparison group of companies over the same period (the “market condition”). The 2018 Performance-Based RSUs are also subject to a three-year service vesting provision and are scheduled to cliff vest on the date the final vesting percentage is determined following the end of the three-year performance period under the awards. The number of 2018 Performance-Based RSUs ultimately earned could fluctuate from the target number of 2018 Performance-Based RSUs granted based upon the levels of achievement for the FFO performance condition, the debt to EBITDA ratio performance condition, the market condition, and the extent to which the service vesting condition is satisfied. The estimate of the number of 2018 Performance-Based RSUs earned is evaluated quarterly during the performance period based on our estimate for each of the performance conditions measured against the applicable goals. As of June 30, 2018, the number of 2018 Performance-Based RSUs estimated to be earned based on the Company’s estimate of the performance conditions measured against the applicable goals was 158,205, and the compensation cost recorded to date for this program was based on that estimate. Compensation expense for the 2018 Performance-Based RSU grant is recognized on a straight-line basis over the requisite service period for each participant, which is generally the three-year service period. Each 2018 Performance-Based RSU represents the right, subject to the applicable vesting conditions, to receive one share of our common stock in the future. The determination of the grant date fair value of the portion of the 2018 Performance-Based RSU grants covered by the debt to EBITDA ratio performance condition was based on the $66.46 share price on the grant date. The determination of the grant date fair value of the portion of the 2018 Performance-Based RSU grants covered by the market condition was calculated using a Monte Carlo simulation pricing model based on the assumptions in the table below, which resulted in a $70.08 grant date fair value per share.
The computation of expected volatility is based on a blend of the historical volatility of our shares of common stock over approximately 5.8 years, as that is expected to be most consistent with future volatility and equates to a time period twice as long as the approximate 2.9-year performance period of the RSUs, and implied volatility data based on the observed pricing of six month publicly-traded options on our shares of common stock. The risk-free interest rate is based on the yield curve on zero-coupon U.S. Treasury STRIP securities in effect at February 14, 2018. The expected life of the 2018 Performance-Based RSUs is equal to the remaining 2.9-year vesting period as of February 14, 2018. The total grant date fair value of the 2018 Performance-Based RSU awards was $10.8 million on the February 14, 2018 grant date of the awards. For the six months ended June 30, 2018, we recorded compensation expense based upon the grant date fair value per share for each component multiplied by the estimated number of RSUs to be earned as discussed above. 2018 Time-Based RSU Grant The 2018 Time-Based RSUs are scheduled to vest in three equal annual installments beginning on January 5, 2019 through January 5, 2021. Compensation expense for the 2018 Time-Based RSUs is recognized on a straight-line basis over the requisite service period for each participant, which is generally the three-year service vesting period. Each 2018 Time-Based RSU represents the right to receive one share of our common stock in the future. The total grant date fair value of the 2018 Time-Based RSU awards was $8.4 million, which was based on the $70.37 and $66.46 closing share prices of the Company’s common stock on the NYSE on the January 29, 2018 and February 14, 2018, respectively, grant dates of the awards. Share-Based Compensation Cost Recorded During the Period The total compensation cost for all share-based compensation programs was $11.5 million and $6.5 million for the three months ended June 30, 2018 and 2017, respectively, and $16.6 million and $12.6 million for the six months ended June 30, 2018 and 2017, respectively. Of the total share-based compensation costs, $2.8 million and $1.6 million was capitalized as part of real estate assets and deferred leasing costs for the three months ended June 30, 2018 and 2017, respectively, and $4.3 million and $3.7 million for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was approximately $30.2 million of total unrecognized compensation cost related to nonvested incentive awards granted under share-based compensation arrangements that is expected to be recognized over a weighted-average period of 1.8 years. The remaining compensation cost related to these nonvested incentive awards had been recognized in periods prior to June 30, 2018. |
Commitments and Contingencies |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies General As of June 30, 2018, we had commitments of approximately $833.2 million, excluding our ground lease commitments, for contracts and executed leases directly related to our operating properties and development projects. Environmental Matters We follow the policy of monitoring all of our properties, both acquisition and existing stabilized portfolio properties, for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to our stabilized portfolio properties that would have a material adverse effect on our financial condition, results of operations and cash flow, or that we believe would require additional disclosure or the recording of a loss contingency. As of June 30, 2018, we had accrued environmental remediation liabilities of approximately $68.8 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the costs we estimate we will incur when we commence development at various development acquisition sites. These estimates, which we developed with the assistance of third party experts, consist primarily of the removal of contaminated soil and other related costs since we are required to dispose of any existing contaminated soil when we develop new properties at these sites. We record estimated environmental remediation obligations for acquired properties at the acquisition date when we are aware of such costs and when such costs are probable of being incurred and can be reasonably estimated. Estimated costs related to development environmental remediation liabilities are recorded as an increase to the cost of the development project. Actual costs are recorded as a decrease to the liability when incurred. These accruals are adjusted as an increase or decrease to the development project costs and as an increase or decrease to the accrued environmental remediation liability if we obtain further information or circumstances change. The environmental remediation obligation recorded at June 30, 2018 was not discounted to its present value since we expect to complete the remediation activities in the next one to five years in connection with development activities at the various sites. It is possible that we could incur additional environmental remediation costs in connection with these future development projects. However, given we are in the pre-development phase on these future development projects, potential additional environmental costs cannot be reasonably estimated at this time and certain changes in estimates could occur as the site conditions, final project timing, design elements, actual soil conditions and other aspects of the projects, which may depend upon municipal and other approvals beyond the control of the Company, are determined. Other than the accrued environmental liabilities discussed above, we are not aware of any unasserted claims and assessments with respect to an environmental liability that we believe would require additional disclosure or the recording of an additional loss contingency. |
Fair Value Measurements and Disclosures |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements and Disclosures | Fair Value Measurements and Disclosures Assets and Liabilities Reported at Fair Value The only assets we record at fair value on our consolidated financial statements are the marketable securities related to our Deferred Compensation Plan. The following table sets forth the fair value of our marketable securities as of June 30, 2018 and December 31, 2017:
We report the change in the fair value of the marketable securities at the end of each accounting period in interest income and other net investment gain/loss in the consolidated statements of operations. We also adjust the related Deferred Compensation Plan liability to fair value at the end of each accounting period based on the performance of the benchmark funds selected by each participant, which results in a corresponding increase or decrease to compensation cost for the period. The following table sets forth the net gain on marketable securities recorded during the three and six months ended June 30, 2018 and 2017:
Financial Instruments Disclosed at Fair Value The following table sets forth the carrying value and the fair value of our other financial instruments as of June 30, 2018 and December 31, 2017:
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Other Significant Events |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Events | Receivables Current Receivables, net Current receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
Deferred Rent Receivables, net Deferred rent receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
Other Significant Events During the three and six months ended June 30, 2018, we recognized $5.6 million and $5.4 million of provision for bad debts, respectively. The provision for bad debts in 2018 is primarily due to a $7.0 million increase in the provision for one tenant during the three months ended June 30, 2018, partially offset by a $1.7 million and $1.4 million decrease in the provision for bad debts for one lease due to the assignment of the lease to a credit tenant during the three and six months ended June 30, 2018, respectively. |
Net Income Available to Common Stockholders Per Share of the Company |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available to Common Stockholders Per Share of the Company | Net Income Available to Common Stockholders Per Share of the Company The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three and six months ended June 30, 2018 and 2017:
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Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common shares, including stock options, RSUs and other securities are considered in our diluted earnings per share calculation for the three and six months ended June 30, 2018 and 2017. Certain market measure-based RSUs are not included in dilutive securities for the three and six months ended June 30, 2018 and 2017, as not all performance metrics had been met by the end of the applicable reporting periods. See Note 9 “Share-Based Compensation” for additional information regarding share-based compensation. |
Net Income Available to Common Unitholders Per Unit of the Operating Partnership |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available To Common Unitholders [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available to Common Unitholders Per Unit of the Operating Partnership | Net Income Available to Common Stockholders Per Share of the Company The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three and six months ended June 30, 2018 and 2017:
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Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common shares, including stock options, RSUs and other securities are considered in our diluted earnings per share calculation for the three and six months ended June 30, 2018 and 2017. Certain market measure-based RSUs are not included in dilutive securities for the three and six months ended June 30, 2018 and 2017, as not all performance metrics had been met by the end of the applicable reporting periods. See Note 9 “Share-Based Compensation” for additional information regarding share-based compensation. |
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Kilroy Realty L.P. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available To Common Unitholders [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available to Common Unitholders Per Unit of the Operating Partnership | Net Income Available to Common Unitholders Per Unit of the Operating Partnership The following table reconciles the numerator and denominator in computing the Operating Partnership’s basic and diluted per-unit computations for net income available to common unitholders for the three and six months ended June 30, 2018 and 2017:
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Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common units, including stock options, RSUs and other securities are considered in our diluted earnings per share calculation for the three and six months ended June 30, 2018 and 2017. Certain market measure-based RSUs are not included in dilutive securities for the three and six months ended June 30, 2018 and 2017, as not all performance metrics had been met by the end of the applicable reporting periods. See Note 9 “Share-Based Compensation” for additional information regarding share-based compensation. |
Supplemental Cash Flow Information of the Company |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information of the Company | Supplemental Cash Flow Information of the Company Supplemental cash flow information is included as follows (in thousands):
The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Supplemental Cash Flow Information of the Operating Partnership |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Significant Noncash Transactions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information of the Operating Partnership | Supplemental Cash Flow Information of the Company Supplemental cash flow information is included as follows (in thousands):
The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Kilroy Realty L.P. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Noncash Transactions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information of the Operating Partnership | Supplemental Cash Flow Information of the Operating Partnership: Supplemental cash flow information is included as follows (in thousands):
The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On July 18, 2018, aggregate dividends, distributions and dividend equivalents of $47.3 million were paid to common stockholders, common unitholders and RSU holders of record on June 29, 2018. On July 18, 2018, the Operating Partnership issued $50.0 million principal amount of its 4.30% Senior Notes, Series A, due July 18, 2026 pursuant to the Note Purchase Agreement. |
Organization, Ownership and Basis of Presentation (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation policy | The consolidated financial statements of the Company include the consolidated financial position and results of operations of the Company, the Operating Partnership, the Finance Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. The consolidated financial statements of the Operating Partnership include the consolidated financial position and results of operations of the Operating Partnership, the Finance Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements. |
Basis of accounting | The accompanying interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The interim financial statements for the Company and the Operating Partnership should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017. |
Revenue | Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) ASU No. 2014-09 “Revenue From Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014-09, on a modified retrospective basis. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most of the existing revenue recognition guidance. We evaluated each of the Company’s revenue streams to determine the sources of revenue that are impacted by ASU 2014-09 and concluded that two revenue streams, sales of real estate and revenue from our multi-tenant parking arrangements, fall within the scope of Topic 606. We evaluated the impact of the adoption of the guidance on the timing of gain recognition for our historical dispositions and concluded there was no significant impact to our consolidated financial statements given the straight forward nature of our historical disposition transactions. We also evaluated the impact of the guidance on the timing and pattern of revenue recognition for our multi-tenant parking arrangements and determined there was no significant impact to our consolidated financial statements. We generally provide parking for our multi-tenant properties based on the prevailing market rate per parking space, which adjusts based on prevailing market rates during the tenant’s occupancy, and we recognize parking revenue as parking spaces are utilized by the tenant. Given the structure of these arrangements whereby the amount of parking revenue we recognize corresponds directly to the tenant’s use, we were able to apply the practical expedient provided in Accounting Standards Codification (“ASC”) 606-10-50-14(b) (the “right to invoice” practical expedient). As a result of applying this practical expedient, we are not required to disclose the transaction price allocated to future performance obligations for multi-tenant parking since we cannot predict or estimate the use of such parking spaces. During the three months ended June 30, 2018 and 2017, we recognized $6.8 million and $6.9 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. During the six months ended June 30, 2018 and 2017, we recognized $13.4 million and $13.6 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. We concluded that the adoption of Topic 606 did not have an impact on our consolidated financial statements or a material impact on the notes to our consolidated financial statements. |
New accounting pronouncements | Accounting Pronouncements Adopted January 1, 2018 Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) ASU No. 2014-09 “Revenue From Contracts with Customers (Topic 606)” (“ASU 2014-09”) and the related FASB ASU Nos. 2016-12 and 2016-20, which provide practical expedients, technical corrections, and improvements for certain aspects of ASU 2014-09, on a modified retrospective basis. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most of the existing revenue recognition guidance. We evaluated each of the Company’s revenue streams to determine the sources of revenue that are impacted by ASU 2014-09 and concluded that two revenue streams, sales of real estate and revenue from our multi-tenant parking arrangements, fall within the scope of Topic 606. We evaluated the impact of the adoption of the guidance on the timing of gain recognition for our historical dispositions and concluded there was no significant impact to our consolidated financial statements given the straight forward nature of our historical disposition transactions. We also evaluated the impact of the guidance on the timing and pattern of revenue recognition for our multi-tenant parking arrangements and determined there was no significant impact to our consolidated financial statements. We generally provide parking for our multi-tenant properties based on the prevailing market rate per parking space, which adjusts based on prevailing market rates during the tenant’s occupancy, and we recognize parking revenue as parking spaces are utilized by the tenant. Given the structure of these arrangements whereby the amount of parking revenue we recognize corresponds directly to the tenant’s use, we were able to apply the practical expedient provided in Accounting Standards Codification (“ASC”) 606-10-50-14(b) (the “right to invoice” practical expedient). As a result of applying this practical expedient, we are not required to disclose the transaction price allocated to future performance obligations for multi-tenant parking since we cannot predict or estimate the use of such parking spaces. During the three months ended June 30, 2018 and 2017, we recognized $6.8 million and $6.9 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. During the six months ended June 30, 2018 and 2017, we recognized $13.4 million and $13.6 million, respectively, of parking revenue for arrangements that are within the scope of Topic 606, which is included in rental revenues on our consolidated statements of operations. We concluded that the adoption of Topic 606 did not have an impact on our consolidated financial statements or a material impact on the notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2017-09 “Compensation - Stock Compensation (Topic 718)” on a prospective basis. Under the guidance, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions, and classification as an equity or liability instrument remain the same immediately before and after the change. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2017-05 “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)” (“ASU 2017-05”) on a retrospective basis. This standard clarifies the scope of the original guidance within Subtopic 610-20 “Gains and Losses from the Derecognition of Nonfinancial Assets” that was issued in connection with ASU 2014-09 which provided guidance for recognizing gains and losses from the transfer of nonfinancial assets in transactions with noncustomers. Additionally, ASU 2017-05 adds guidance pertaining to the partial sales of real estate and clarifies that nonfinancial assets within the scope of ASC 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. For example, a parent may transfer control of nonfinancial assets by transferring ownership interests in a consolidated subsidiary. We evaluated the impact of the new amendments on our historical transactions and concluded that there was no impact. As such, the adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2016-15 (“ASU 2016-15”) which provides guidance where there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, on a retrospective basis. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements. Effective January 1, 2018, we adopted FASB ASU No. 2016-01 (“ASU 2016-01”) which amends the accounting guidance on the classification and measurement of financial instruments and FASB ASU No. 2018-03 (“ASU 2018-03”) which provides technical corrections and improvements to ASU 2016-01, on a modified retrospective basis. The amendments require that all investments in equity securities, including other ownership interests, are reported at fair value with changes in fair value reported in net income. This requirement does not apply to investments that qualify for equity method accounting or to those that result in consolidation of the investee or for which the entity has elected the predictability exception to fair value measurement. Additionally, the amendments require that the portion of the total fair value change caused by a change in instrument-specific credit risk for financial liabilities for which the fair value option has been elected would be recognized in other comprehensive income. Any accumulated amount remaining in other comprehensive income is reclassified to earnings when the liability is extinguished. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to our consolidated financial statements since our only financial instruments within the scope of ASU 2016-01 and 2018-03 are the marketable securities related to our deferred compensation plan which are classified as trading securities and marked to market at fair value through earnings each reporting period. Accounting Pronouncements Effective January 1, 2019 ASU No. 2016-02 “Leases (Topic 842)” On February 25, 2016, the FASB issued ASU No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We continue to have a project team, led by senior accounting management, that is proactively working to analyze and evaluate the impact of the guidance on our consolidated financial statements. In January 2018, the FASB released an exposure draft to amend ASU No. 2016-02 that would (1) simplify transition requirements for both lessees and lessors by adding an option that would permit an organization to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) provide a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate nonlease components from the associated lease components if certain criteria are met. In March 2018, the FASB finalized the changes with respect to optional transition relief and approved a practical expedient for lessors that would permit lessors to make an accounting policy election to not separate nonlease components from the associated lease components, by class of underlying asset, if the following two criteria are met: (1) the timing and pattern of transfer of the lease and nonlease components are the same and (2) the lease component would be classified as an operating lease if accounted for separately. For leases where we are the lessor, we currently believe that we will elect the optional transition relief and that we will meet the noted criteria to not be required to bifurcate and separately report nonlease components, such as common area maintenance revenue, for operating leases on our consolidated statements of operations. As a result, we currently believe that leases where we are the lessor will be accounted for in a similar method to existing standards with the underlying leased asset being reported and recognized as a real estate asset. The FASB is expected to issue an Accounting Standards Update codifying these changes and we currently expect to adopt ASU 2016-02 using the practical expedients proposed in the standard and the changes approved by the FASB. ASU 2016-02 also specifies that upon adoption, lessors will no longer be able to capitalize and amortize certain leasing related costs and instead will only be permitted to capitalize and amortize incremental direct leasing costs. As a result, we have concluded that upon the adoption of the standard, we will be required to expense as incurred certain leasing costs we are currently able to capitalize and amortize as deferred leasing costs under existing guidance. We continue to evaluate the impact of this change in the guidance and we currently expect this change will have a material impact to the Company’s consolidated financial statements and results of operations upon adoption of the standard on January 1, 2019. For leases where we are the lessee, specifically for our ground leases, we expect that the adoption of the standard will significantly change the accounting on our consolidated balance sheets since both existing ground leases and any future ground leases will be required to be recorded on the Company’s consolidated balance sheets as an obligation of the Company. We currently believe that existing ground leases executed before the January 1, 2019 adoption date will continue to be accounted for as operating leases and the new guidance will not have a material impact on our recognition of ground lease expense or our results of operations. However, we believe that we will be required to recognize a right of use asset and a lease liability on our consolidated balance sheets equal to the present value of the minimum lease payments required in accordance with each ground lease. As of June 30, 2018, our future undiscounted minimum rental payments under these leases totaled $249.9 million, with several of the leases containing provisions for rental payments to fluctuate based on fair market value and operating income measurements with expirations through 2093. In addition, we currently believe that for new ground leases entered into after the adoption date of the new standard, such leases could be required to be accounted for as financing type leases, resulting in ground lease expense recorded using the effective interest method instead of on a straight-line basis over the term of the lease. This could have a significant impact on our results of operations if we enter into material new ground leases after the date of adoption since ground lease expense calculated using the effective interest method results in an increased amount of ground lease expense in the earlier years of a ground lease as compared to the current straight-line method. Accounting Pronouncements Effective in 2020 and Beyond ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326)” On June 16, 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) to amend the accounting for credit losses for certain financial instruments. Under the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements. |
Organization, Ownership and Basis of Presentation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of real estate properties | Our stabilized portfolio of operating properties was comprised of the following properties at June 30, 2018:
As of June 30, 2018, the following properties were excluded from our stabilized portfolio. We did not have any redevelopment properties or properties held for sale at June 30, 2018.
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Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisitions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of acquisitions | During the six months ended June 30, 2018, we acquired the three operating properties listed below from an unrelated third party. The acquisition was funded with proceeds from the Company’s unsecured revolving credit facility and unsecured term loan facility.
During the six months ended June 30, 2018, we acquired the following development site, which is located adjacent to the three operating properties we acquired in January 2018, from an unrelated third party. The acquisition was funded with proceeds from the Company’s unsecured revolving credit facility and the Company’s at-the-market stock offering program.
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Schedule of estimated fair values of the assets acquired and liabilities assumed | The following table summarizes the assets acquired and liabilities assumed as of the date of acquisition, excluding acquisition-related costs:
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Receivables (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current receivables, net | Current receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
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Deferred rent receivables, net | Deferred rent receivables, net consisted of the following as of June 30, 2018 and December 31, 2017:
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Prepaid Expenses and Other Assets, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other assets, net | Prepaid expenses and other assets, net consisted of the following at June 30, 2018 and December 31, 2017:
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Secured and Unsecured Debt of the Operating Partnership (Tables) - Kilroy Realty L.P. [Member] |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unsecured revolving credit facility | The following table summarizes the balance and terms of our unsecured revolving credit facility as of June 30, 2018 and December 31, 2017:
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The following table summarizes the balance and terms of our unsecured term loan facility as of June 30, 2018 and December 31, 2017:
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Schedule of debt maturities | The following table summarizes the stated debt maturities and scheduled amortization payments of our issued and outstanding debt, excluding unamortized debt discounts, premiums and deferred financing costs, as of June 30, 2018:
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Capitalized interest and loan fees | The following table sets forth gross interest expense, including debt discount/premium and deferred financing cost amortization, net of capitalized interest, for the three and six months ended June 30, 2018 and June 30, 2017. The interest expense capitalized was recorded as a cost of development and increased the carrying value of undeveloped land and construction in progress.
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Stockholders' Equity of the Company (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||
Common stock under at-the-market offering programs | The following table sets forth information regarding sales of common stock under our at-the-market offering programs for the six months ended June 30, 2018:
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Partners' Capital of the Operating Partnership (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Partners' Capital Notes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Partnership | The net offering proceeds were contributed by the Company to the Operating Partnership in exchange for common units for the six months ended June 30, 2018 as follows:
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Schedule of Common Units Outstanding | The following table sets forth the number of common units held by the Company and the number of common units held by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units as well as the ownership interest held on each respective date:
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Share-Based Compensation (Tables) |
6 Months Ended | ||||||||||||
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Jun. 30, 2018 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||
Schedule of share-based payment award, restricted stock units, valuation assumptions |
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Fair Value Measurements and Disclosures (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of the company's marketable securities | The following table sets forth the fair value of our marketable securities as of June 30, 2018 and December 31, 2017:
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Fair value adjustment of marketable securities and deferred compensation plan liability | The following table sets forth the net gain on marketable securities recorded during the three and six months ended June 30, 2018 and 2017:
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Carrying value and fair value of company's remaining financial assets and liabilities | The following table sets forth the carrying value and the fair value of our other financial instruments as of June 30, 2018 and December 31, 2017:
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Net Income Available to Common Stockholders Per Share of the Company (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income available to common stockholders | The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three and six months ended June 30, 2018 and 2017:
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Net Income Available to Common Unitholders Per Unit of the Operating Partnership (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available To Common Unitholders [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common unitholders | The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three and six months ended June 30, 2018 and 2017:
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Kilroy Realty L.P. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Available To Common Unitholders [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common unitholders | The following table reconciles the numerator and denominator in computing the Operating Partnership’s basic and diluted per-unit computations for net income available to common unitholders for the three and six months ended June 30, 2018 and 2017:
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Supplemental Cash Flow Information of the Company (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flows | Supplemental cash flow information is included as follows (in thousands):
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Supplemental Cash Flow Information of the Operating Partnership (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Noncash Transactions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flows | Supplemental cash flow information is included as follows (in thousands):
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Kilroy Realty L.P. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Noncash Transactions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flows | Supplemental cash flow information is included as follows (in thousands):
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Reconciliation of cash and cash equivalents and restricted cash | The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the six months ended June 30, 2018 and 2017.
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Receivables (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
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Current Receivables, net | ||
Current receivables | $ 19,502 | $ 19,235 |
Allowance for uncollectible tenant receivables | (4,358) | (2,309) |
Current receivables, net | 15,144 | 16,926 |
Deferred Rent Receivables, net | ||
Deferred rent receivables | 260,152 | 249,629 |
Allowance for deferred rent receivables | (3,594) | (3,238) |
Deferred rent receivables, net | $ 256,558 | $ 246,391 |
Prepaid Expenses and Other Assets, Net (Details) - USD ($) $ in Thousands |
6 Months Ended | |
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Jun. 30, 2018 |
Dec. 31, 2017 |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Furniture, fixtures and other long-lived assets, net | $ 37,799 | $ 39,686 |
Note receivable | 2,005 | 19,912 |
Prepaid expenses & acquisition deposits | 36,691 | 55,108 |
Total prepaid expenses and other assets, net | 76,495 | $ 114,706 |
Proceeds received from repayment of note receivable (Note 3) | 15,100 | |
Notes receivable, valuation allowance | $ 2,900 |
Secured and Unsecured Debt of the Operating Partnership - Debt Maturities (Details) - Kilroy Realty L.P. [Member] $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Stated debt maturities and scheduled amortization payments, excluding debt discounts | |
Remaining 2018 | $ 1,816 |
2019 | 76,309 |
2020 | 255,137 |
2021 | 5,342 |
2022 | 450,554 |
Thereafter | 2,018,469 |
Total debt | 2,807,627 |
Unamortized deferred financing costs | 13,700 |
Unsecured senior notes [Member] | |
Stated debt maturities and scheduled amortization payments, excluding debt discounts | |
Unamortized discount | 5,900 |
Secured debt [Member] | |
Stated debt maturities and scheduled amortization payments, excluding debt discounts | |
Unamortized premium | $ 1,700 |
Secured and Unsecured Debt of the Operating Partnership - Capitalized Interest and Loan Fees (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Capitalized Interest and Loan Fees [Line Items] | ||||
Interest expense | $ 12,712 | $ 17,973 | $ 26,210 | $ 35,325 |
Kilroy Realty L.P. [Member] | ||||
Capitalized Interest and Loan Fees [Line Items] | ||||
Gross interest expense | 28,523 | 28,731 | 55,603 | 56,246 |
Capitalized interest and deferred financing costs | (15,811) | (10,758) | (29,393) | (20,921) |
Interest expense | $ 12,712 | $ 17,973 | $ 26,210 | $ 35,325 |
Noncontrolling Interests on the Company's Consolidated Financial Statements - Common Units of the Operating Partnership (Details) $ / shares in Units, $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018
USD ($)
trading_day
$ / shares
shares
|
Dec. 31, 2017
USD ($)
$ / shares
shares
|
Jun. 30, 2017
shares
|
|
Noncontrolling Interest [Line Items] | |||
Common general partnership interest in the Operating Partnership | 98.00% | 97.90% | 97.90% |
Common limited partnership interest in the Operating Partnership | 2.00% | 2.10% | 2.10% |
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | |
Number of trading days | trading_day | 10 | ||
Aggregate value upon redemption of outstanding noncontrolling common units | $ | $ 156.2 | $ 154.5 | |
Kilroy Realty L.P. [Member] | Common units [Member] | |||
Noncontrolling Interest [Line Items] | |||
Common units outstanding held by common limited partners | shares | 2,070,690 | 2,077,193 | 2,077,193 |
Partners' Capital of the Operating Partnership - OP Common Units(Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Class of Stock [Line Items] | |||
Common stock, shares issued (in shares) | 100,559,903 | 98,620,333 | |
Net proceeds from issuance of common units | $ 124,147 | $ 308,832 | |
Kilroy Realty L.P. [Member] | |||
Class of Stock [Line Items] | |||
Net proceeds from issuance of common units | $ 124,147 | $ 308,832 | |
Kilroy Realty L.P. [Member] | Issuance of Equity - at the market offering [Member] | |||
Class of Stock [Line Items] | |||
Common stock, shares issued (in shares) | 1,719,195 | ||
Common units exchanged for share of common stock by the Company (in units) | 1,719,195 | ||
At the market stock offering aggregate gross sales price of common units | $ 126,600 | ||
Net proceeds from issuance of common units | $ 125,100 |
Partners' Capital of the Operating Partnership (Details) - shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|---|
General Partners' Capital Account [Abstract] | |||
Company owned general partnership interest | 98.00% | 97.90% | 97.90% |
Ownership interest of noncontrolling interest | 2.00% | 2.10% | 2.10% |
Kilroy Realty L.P. [Member] | Common units [Member] | |||
General Partners' Capital Account [Abstract] | |||
Company owned common units in the Operating Partnership | 100,559,903 | 98,620,333 | 98,351,217 |
Noncontrolling common units of the Operating Partnership | 2,070,690 | 2,077,193 | 2,077,193 |
Share-Based Compensation (Details) - 2018 Performance-Based RSUs [Member] |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected share price volatility | 20.00% |
Risk-free interest rate | 2.37% |
Expected life | 2 years 11 months |
Commitments and Contingencies (Details) $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | $ 833.2 |
Accrued environmental remediation liabilities | $ 68.8 |
Fair Value Measurements and Disclosures (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Fair value adjustment of marketable securities and deferred compensation plan liability | |||||
Net gain on marketable securities | $ 422 | $ 512 | $ 18 | $ 1,183 | |
Fair value, measurements, recurring [Member] | Fair value (Level 1) [Member] | |||||
Assets and Liabilities Reported at Fair Value | |||||
Marketable securities | $ 22,519 | $ 22,519 | $ 20,674 |
Other Significant Events (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018
USD ($)
tenant
property
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
tenant
property
|
Jun. 30, 2017
USD ($)
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Provision for Doubtful Accounts | $ 5,641 | $ 409 | $ 5,376 | $ 1,707 |
Tenant One [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Provisions for bad debts, increase (decrease) | $ 7,000 | |||
Number Of tenants | tenant | 1 | 1 | ||
Tenant Two [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Provisions for bad debts, increase (decrease) | $ (1,700) | $ (1,400) | ||
Number of properties | property | 1 | 1 |
Supplemental Cash Flow Information of the Company (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
SUPPLEMENTAL CASH FLOWS INFORMATION: | ||
Cash paid for interest, net of capitalized interest of $28,267 and $20,219 as of June 30, 2018 and 2017, respectively | $ 25,136 | $ 30,977 |
Interest capitalized | 28,267 | 20,219 |
NON-CASH INVESTING TRANSACTIONS: | ||
Accrual for expenditures for operating properties and development properties | 80,198 | 66,967 |
Assumption of accrued liabilities in connection with acquisitions (Note 2) | 40,624 | 0 |
Tenant improvements funded directly by tenants | 4,611 | 9,221 |
NON-CASH FINANCING TRANSACTIONS: | ||
Accrual of dividends and distributions payable to common stockholders and common unitholders | 47,348 | 43,305 |
Accrual of dividends and distributions payable to preferred stockholders and preferred unitholders | 0 | 797 |
Exchange of common units of the Operating Partnership into shares of the Company’s common stock | $ 245 | $ 10,939 |
Supplemental Cash Flow Information of the Company - Reconciliation of cash and cash equivalents and restricted cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Supplemental Cash Flow Elements [Abstract] | ||||
Cash and cash equivalents | $ 50,817 | $ 57,649 | $ 387,616 | $ 193,418 |
Restricted cash | 0 | 9,149 | 8,249 | 56,711 |
Cash and cash equivalents and restricted cash | $ 50,817 | $ 66,798 | $ 395,865 | $ 250,129 |
Supplemental Cash Flow Information of the Operating Partnership - Reconciliation of cash and cash equivalents and restricted cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Other Significant Noncash Transactions [Line Items] | ||||
Cash and cash equivalents | $ 50,817 | $ 57,649 | $ 387,616 | $ 193,418 |
Restricted cash | 0 | 9,149 | 8,249 | 56,711 |
Cash and cash equivalents and restricted cash | 50,817 | 66,798 | 395,865 | 250,129 |
Kilroy Realty L.P. [Member] | ||||
Other Significant Noncash Transactions [Line Items] | ||||
Cash and cash equivalents | 50,817 | 57,649 | 387,616 | 193,418 |
Restricted cash | 0 | 9,149 | 8,249 | 56,711 |
Cash and cash equivalents and restricted cash | $ 50,817 | $ 66,798 | $ 395,865 | $ 250,129 |
Subsequent Events (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jul. 18, 2018 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Subsequent Event [Line Items] | |||
Payment of dividend | $ 85,931,000 | $ 255,292,000 | |
Subsequent event [Member] | |||
Subsequent Event [Line Items] | |||
Payment of dividend | $ 47,300,000 | ||
Kilroy Realty L.P. [Member] | |||
Subsequent Event [Line Items] | |||
Payment of dividend | 85,931,000 | $ 255,292,000 | |
Kilroy Realty L.P. [Member] | Unsecured debt [Member] | 4.30% Series A Senior Note | |||
Subsequent Event [Line Items] | |||
Debt, principal | $ 0 | ||
Kilroy Realty L.P. [Member] | Unsecured debt [Member] | 4.30% Series A Senior Note | Subsequent event [Member] | |||
Subsequent Event [Line Items] | |||
Debt, principal | $ 50,000,000 | ||
Stated coupon rate | 4.30% | ||
Debt instrument, maturity date | Jul. 18, 2026 |
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