EX-99.1 2 exhibit991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

q32020supplementalcoverpagen.jpg

Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Table of Contents
 
Page
Corporate Data and Financial Highlights
 
1
2
3
4
5
6
7
8-9
10
Portfolio Data
 
11
12-16
17
18
19-21
22
23
Development
 
24
25
26
Debt and Capitalization Data
 
27
28-29
30-32
33-36
This Supplemental Financial Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, information concerning lease expirations, debt maturities, potential investments, development and redevelopment activity, projected construction costs, dispositions and other forward-looking financial data. In some instances, forward-looking statements can be identified by the use of forward-looking terminology such as “expect,” “future,” “will,” “would,” “pursue,” or “project” and variations of such words and similar expressions that do not relate to historical matters. Forward-looking statements are based on Kilroy Realty Corporation’s current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of Kilroy Realty Corporation’s control. Accordingly, actual performance, results and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect Kilroy Realty Corporation’s business and financial performance, see the factors included under the caption “Risk Factors” in Kilroy Realty Corporation’s quarterly report on Form 10-Q for the period ending June 30, 2020 and in its annual report on Form 10-K for the year ended December 31, 2019, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Company Background

Kilroy Realty Corporation (NYSE: KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is one of the West Coast’s premier landlords. The Company has over seven decades of experience developing, acquiring and managing office and mixed-use real estate assets. At September 30, 2020, the Company’s stabilized portfolio totaled approximately 14.3 million square feet of primarily office and life science space that was 92.2% occupied and 95.5% leased located in the coastal regions of Los Angeles, San Diego, the San Francisco Bay Area and Greater Seattle and 808 residential units in the Los Angeles and San Diego regions. 
Board of Directors
 
Executive Management Team
 
Investor Relations
John Kilroy
Chairman
 
John Kilroy
President and CEO
 
12200 W. Olympic Blvd., Suite 200
Los Angeles, CA 90064
(310) 481-8400
Web: www.kilroyrealty.com
E-mail: investorrelations@kilroyrealty.com
Edward F. Brennan, PhD
Lead Independent
 
Robert Paratte
Executive VP, Leasing and Business Development
 
Jolie Hunt
 
 
Tyler H. Rose
Executive VP and CFO
 
Scott S. Ingraham
 
 
Heidi R. Roth
Executive VP and Chief Administrative Officer
 
Gary R. Stevenson
 
 
Justin W. Smart
Executive VP, Development and Construction Services
 
Peter B. Stoneberg
 
 
 
 
 
Equity Research Coverage
 
 
 
 
 
BofA Securities
 
 
Jefferies LLC
 
James Feldman
(646) 855-5808
 
Peter Abramowitz
(212) 336-7241
BMO Capital Markets Corp.
 
 
J.P. Morgan
 
John P. Kim
(212) 885-4115
 
Anthony Paolone
(212) 622-6682
BTIG
 
 
KeyBanc Capital Markets
 
Thomas Catherwood
(212) 738-6140
 
Craig Mailman
(917) 368-2316
Citigroup Investment Research
 
 
Mizuho Securities USA LLC
 
Michael Bilerman
(212) 816-1383
 
Omotayo Okusanya
(646) 949-9672
Deutsche Bank Securities, Inc.
 
 
RBC Capital Markets
 
Derek Johnston
(210) 250-5683
 
Mike Carroll
(440) 715-2649
Evercore ISI
 
 
Robert W. Baird & Co.
 
Steve Sakwa
(212) 446-9462
 
David B. Rodgers
(216) 737-7341
Goldman Sachs & Co. LLC
 
 
Scotiabank
 
Richard Skidmore
(801) 741-5459
 
Nicholas Yulico
(212) 225-6904
Green Street Advisors
 
 
Wells Fargo
 
Daniel Ismail
(949) 640-8780
 
Blaine Heck
(443) 263-6529
 
Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Kilroy Realty Corporation’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Kilroy Realty Corporation or its management. Kilroy Realty Corporation does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

1
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Executive Summary
 
 
 
Quarterly Financial Highlights
 
Quarterly Operating Highlights
 
 
 
• Net income available to common stockholders per share of $0.42, including $0.02 per
 
• Stabilized portfolio was 92.2% occupied and 95.5% leased at quarter-end
   share charge against rental income due to tenant creditworthiness considerations as a
 
 
   result of the COVID-19 pandemic
 
• 279,823 square feet of leases commenced in the stabilized portfolio
 
 
 
• FFO per share of $0.99, including $0.02 per share charge against rental income as noted
 
• 123,063 square feet of leases executed in the stabilized portfolio
   above
 
 
 
 
- GAAP rents increased approximately 32.1% from prior levels
• Revenues of $228.3 million, net of the $1.8 million charge against rental income noted
 
 
   above
 
- Cash rents increased approximately 14.6% from prior levels
 
 
 
• Same Store GAAP NOI decreased 1.9% compared to the prior year
 
 
 
 
 
• Same Store Cash NOI increased 3.8% compared to the prior year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Markets Highlights
 
Strategic Highlights
 
 
 
• In August, completed a $425.0 million public offering of 12-year senior unsecured green
 
• During the quarter, commenced GAAP revenue recognition on 136,000 square feet, or
   bonds at 2.500% due November 2032
 
   48%, of our 285,000 square foot One Paseo office project in the Del Mar submarket of
 
 
   San Diego. In October, commenced GAAP revenue recognition on an additional 10,000
• In August, announced an increase to the regular quarterly cash dividend to common
 
   square feet, bringing the total GAAP revenue recognition commenced on this project to
   stockholders of 3.1% to $0.500 per share; an annualized rate of $2.00 per share

 
   approximately 59% as of the date of this report
 
 
 
• In August, fully repaid the $150.0 million unsecured term loan facility
 
• In July, completed construction on 146 residential units, the final phase of the residential
  
 
   development at our One Paseo mixed-use project in the Del Mar submarket of San Diego.
• As of the date of this report, approximately $1.4 billion of total liquidity comprised of
 
   The residential development is 51% leased and in lease-up
   $685.0 million of cash and cash equivalents on hand and full availability under the
 
 
   $750.0 million unsecured revolving credit facility
 
• In July, transferred 9455 Towne Centre Drive, a 160,000 square foot development project
 
 
   located in the University Towne Center submarket of San Diego from the under
 
 
   construction phase to the tenant improvement phase. The project is 100% leased
 
 
   to a Fortune 50 publicly traded company
 
 
 
 
 
 
 
 
 
 
 
 
________________________
Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 33-34 “Definitions Included in Supplemental.”

2
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Financial Highlights
(unaudited, $ in thousands, except per share amounts)
 
 
Three Months Ended
 
 
 
9/30/2020 (1)
 
6/30/2020 (1)
 
3/31/2020 (1)
 
12/31/2019 (1)
 
9/30/2019
 
INCOME ITEMS:
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
228,314

 
$
219,423

 
$
221,328

 
$
220,235

 
$
215,525

 
 
Lease Termination Fees, net
424

 
867

 
60

 
—

 
—

 
 
Net Operating Income (2)
163,091

 
157,410

 
157,826

 
154,679

 
152,170

 
 
Capitalized Interest and Debt Costs
19,339

 
20,516

 
21,418

 
20,339

 
20,585

 
 
Net Income Available to Common Stockholders
49,028

 
19,618

 
39,817

 
72,500

 
43,846

 
 
EBITDA, as adjusted (2) (3)
145,402

 
120,321

 
134,232

 
131,734

 
129,163

 
 
Funds From Operations (3) (4)
117,391

 
93,089

 
110,173

 
109,518

 
109,243

 
 
Net Income Available to Common Stockholders per common share – diluted (5)
$
0.42

 
$
0.17

 
$
0.37

 
$
0.67

 
$
0.41

 
 
Funds From Operations per common share – diluted (3) (4)
$
0.99

 
$
0.78

 
$
1.00

 
$
1.00

 
$
1.01

 
LIQUIDITY ITEMS:
 
 
 
 
 
 
 
 
 
 
 
Funds Available for Distribution (4)
$
88,396

 
$
68,459

 
$
84,899

 
$
65,443

 
$
65,078

 
 
Dividends per common share (5)
$
0.500

 
$
0.485

 
$
0.485

 
$
0.485

 
$
0.485

 
RATIOS:
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income Margins
71.4
%
 
71.7
%
 
71.3
%
 
70.2
%
 
70.6
%
 
 
Fixed Charge Coverage Ratio
4.0x

 
3.5x

 
3.9x

 
4.0x

 
4.2x

 
 
FFO Payout Ratio
49.9
%
 
61.0
%
 
51.5
%
 
47.8
%
 
48.0
%
 
 
FAD Payout Ratio
66.3
%
 
83.0
%
 
66.9
%
 
80.1
%
 
80.5
%
 
ASSETS:
 
 
 
 
 
 
 
 
 
 
 
Real Estate Held for Investment before Depreciation
$
10,086,784

 
$
9,945,221

 
$
9,822,116

 
$
9,628,773

 
$
8,977,843

 
 
Total Assets
9,984,608

 
9,658,665

 
9,735,147

 
8,900,094

 
8,623,815

 
CAPITALIZATION: (6)
 
 
 
 
 
 
 
 
 
 
 
Total Debt
$
3,955,668

 
$
3,681,958

 
$
3,713,236

 
$
3,579,502

 
$
3,334,967

 
 
Total Common Equity and Noncontrolling Interests in the Operating Partnership
6,088,611

 
6,874,423

 
7,458,583

 
9,064,520

 
8,414,862

 
 
Total Market Capitalization
10,044,279

 
10,556,381

 
11,171,819

 
12,644,022

 
11,749,829

 
 
Total Debt / Total Market Capitalization
39.4
%
 
34.9
%
 
33.2
%
 
28.3
%
 
28.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________________________
Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 33-34 “Definitions Included in Supplemental.”

(1)
Net Income Available to Common Stockholders includes $19.7 million of severance costs for the three months ended June 30, 2020, charges to rental income of $1.8 million, $5.9 million and $6.5 million related to the creditworthiness of tenants as a result of the COVID-19 pandemic for the three months ended September 30, 2020, June 30, 2020 and March 31, 2020, respectively, and $29.6 million of gains on sale of depreciable operating properties for the three months ended December 31, 2019.
(2)
Please refer to pages 35-36 for reconciliations of GAAP Net Income Available to Common Stockholders to Net Operating Income and EBITDA, as adjusted. The Company’s calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
(3)
EBITDA, as adjusted, and Funds From Operations include $19.7 million of severance costs for the three months ended June 30, 2020 and charges to rental income of $1.8 million, $5.9 million and $6.5 million related to the creditworthiness of tenants as a result of the COVID-19 pandemic for the three months ended September 30, 2020, June 30, 2020 and March 31, 2020, respectively.
(4)
Please refer to page 8 for reconciliations of GAAP Net Income Available to Common Stockholders to Funds From Operations available to common stockholders and unitholders and Funds Available for Distribution to common stockholders and unitholders and page 9 for a reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution to common stockholders and unitholders.
(5)
Reported amounts are attributable to common stockholders, common unitholders and restricted stock unit holders.
(6)
Please refer to page 27 for additional information regarding our capital structure.

3
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

COVID-19 Cash Collection Summary


chart-f19f06dd8b3d208e84e.jpg chart-53eb8763ea6893e3647.jpg
Notes:
•
Q2 cash rent collections include amounts billed during the second quarter that were collected subsequent to June 30, 2020.
•
To date, rent relief has primarily been provided to retail tenants in the form of deferrals in exchange for lease extensions for an equivalent number of months.
•
For all periods presented, we collected 100% of rent from our Top 15 tenants.

4
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Common Stock Data (NYSE: KRC)
 
 
 
Three Months Ended
 
 
 
9/30/2020
 
6/30/2020
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High Price
$
60.98

 
$
68.88

 
$
88.28

 
$
84.50

 
$
80.06

 
 
Low Price
$
51.74

 
$
51.49

 
$
49.01

 
$
76.35

 
$
74.25

 
 
Closing Price
$
51.96

 
$
58.70

 
$
63.70

 
$
83.90

 
$
77.89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends per share – annualized (1)
$
2.00

 
$
1.94

 
$
1.94

 
$
1.94

 
$
1.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closing common shares (in 000’s) (2)
115,247

 
115,177

 
115,068

 
106,016

 
106,012

 
 
Closing common partnership units (in 000’s) (2)
1,932

 
1,935

 
2,021

 
2,023

 
2,023

 
 
 
117,179

 
117,112

 
117,089

 
108,039

 
108,035

 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
In August 2020, the regular quarterly cash dividend was increased to an annualized rate of $2.00 per share, a 3.1% increase from the previous annualized dividend level of $1.94 per share.
(2)
As of the end of the period.








5
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Consolidated Balance Sheets
(unaudited, $ in thousands)
 
 
9/30/2020
 
6/30/2020
 
3/31/2020
 
12/31/2019
 
9/30/2019
 
 
ASSETS:

 
 
 
 
 
 
 
 
 
 
Land and improvements
$
1,612,224

 
$
1,546,209

 
$
1,506,357

 
$
1,466,166

 
$
1,315,448

 
 
Buildings and improvements
6,535,637

 
6,289,816

 
5,997,523

 
5,866,477

 
5,770,226

 
 
Undeveloped land and construction in progress
1,938,923

 
2,109,196

 
2,318,236

 
2,296,130

 
1,892,169

 
 
Total real estate assets held for investment
10,086,784

 
9,945,221

 
9,822,116

 
9,628,773

 
8,977,843

 
 
Accumulated depreciation and amortization
(1,744,325
)
 
(1,684,837
)
 
(1,622,369
)
 
(1,561,361
)
 
(1,505,785
)
 
 
Total real estate assets held for investment, net
8,342,459

 
8,260,384

 
8,199,747

 
8,067,412

 
7,472,058

 
 
Real estate assets and other assets held for sale, net
—

 
—

 
—

 
—

 
77,751

 
 
Cash and cash equivalents
849,009

 
605,012

 
762,134

 
60,044

 
297,620

 
 
Restricted cash
16,300

 
16,300

 
16,300

 
16,300

 
6,300

 
 
Marketable securities
25,073

 
23,175

 
19,984

 
27,098

 
26,188

 
 
Current receivables, net
16,083

 
20,925

 
16,534

 
26,489

 
34,116

 
 
Deferred rent receivables, net
375,939

 
358,914

 
352,352

 
337,937

 
314,812

 
 
Deferred leasing costs and acquisition-related intangible assets, net
208,306

 
209,637

 
204,392

 
212,805

 
202,063

 
 
Right of use ground lease assets
95,733

 
95,940

 
96,145

 
96,348

 
83,200

 
 
Prepaid expenses and other assets, net
55,706

 
68,378

 
67,559

 
55,661

 
109,707

 
 
TOTAL ASSETS
$
9,984,608

 
$
9,658,665

 
$
9,735,147

 
$
8,900,094

 
$
8,623,815

 
 
LIABILITIES AND EQUITY:
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Secured debt, net
$
254,854

 
$
256,113

 
$
257,359

 
$
258,593

 
$
259,027

 
 
Unsecured debt, net
3,668,976

 
3,399,105

 
3,050,103

 
3,049,185

 
3,048,209

 
 
Unsecured line of credit
—

 
—

 
380,000

 
245,000

 
—

 
 
Accounts payable, accrued expenses and other liabilities
458,421

 
401,378

 
417,547

 
418,848

 
439,081

 
 
Ground lease liabilities
97,936

 
98,093

 
98,247

 
98,400

 
87,617

 
 
Accrued dividends and distributions
59,416

 
57,600

 
57,620

 
53,219

 
53,205

 
 
Deferred revenue and acquisition-related intangible liabilities, net
131,558

 
129,264

 
130,843

 
139,488

 
134,828

 
 
Rents received in advance and tenant security deposits
61,483

 
63,523

 
65,913

 
66,503

 
57,428

 
 
Liabilities and deferred revenue of real estate assets held for sale
—

 
—

 
—

 
—

 
4,911

 
 
Total liabilities
4,732,644

 
4,405,076

 
4,457,632


4,329,236


4,084,306

 
 
Equity:
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Common stock
1,152

 
1,152

 
1,151

 
1,060

 
1,060

 
 
Additional paid-in capital
5,089,926

 
5,084,362

 
5,067,181

 
4,350,917

 
4,342,296

 
 
Distributions in excess of earnings
(122,936
)
 
(113,223
)
 
(76,182
)
 
(58,467
)
 
(78,707
)
 
 
Total stockholders’ equity
4,968,142

 
4,972,291

 
4,992,150

 
4,293,510

 
4,264,649

 
 
Noncontrolling Interests
 
 
 
 
 
 
 
 
 
 
 
Common units of the Operating Partnership
83,226

 
83,502

 
87,655

 
81,917

 
81,393

 
 
Noncontrolling interests in consolidated property partnerships
200,596

 
197,796

 
197,710

 
195,431

 
193,467

 
 
Total noncontrolling interests
283,822

 
281,298

 
285,365

 
277,348

 
274,860

 
 
Total equity
5,251,964

 
5,253,589

 
5,277,515

 
4,570,858

 
4,539,509

 
 
TOTAL LIABILITIES AND EQUITY
$
9,984,608

 
$
9,658,665

 
$
9,735,147

 
$
8,900,094

 
$
8,623,815

 
 
 
 
 
 
 
 
 
 
 
 
 


6
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Consolidated Statements of Operations
(unaudited, $ and shares in thousands, except per share amounts)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
2020
 
2019
 
 
REVENUES
 
 
 
 
 
 
 
 
 
 
Rental income (1)
 
$
227,122

 
$
212,321

 
$
664,111

 
$
609,332

 
 
Other property income
 
1,192

 
3,204

 
4,954

 
7,887

 
 
Total revenues
 
228,314

 
215,525

 
669,065

 
617,219

 
 
EXPENSES
 
 
 
 
 
 
 
 
 
 
Property expenses
 
39,236

 
41,308

 
116,048

 
117,993

 
 
Real estate taxes
 
23,868

 
19,998

 
67,924

 
56,563

 
 
Ground leases
 
2,119

 
2,049

 
6,766

 
6,135

 
 
General and administrative expenses (2)
 
18,572

 
22,576

 
76,179

 
65,774

 
 
Leasing costs
 
986

 
1,192

 
3,772

 
5,599

 
 
Depreciation and amortization
 
71,863

 
69,230

 
226,318

 
203,617

 
 
Total expenses
 
156,644

 
156,353

 
497,007

 
455,681

 
 
OTHER (EXPENSES) INCOME
 
 
 
 
 
 
 
 
 
 
Interest income and other net investment gain
 
1,869

 
761

 
1,579

 
3,205

 
 
Interest expense
 
(19,468
)
 
(11,635
)
 
(49,796
)
 
(34,605
)
 
 
Gains on sales of depreciable operating properties
 
—

 
—

 
—

 
7,169

 
 
Total other (expenses) income
 
(17,599
)
 
(10,874
)
 
(48,217
)
 
(24,231
)
 
 
NET INCOME
 
54,071

 
48,298

 
123,841

 
137,307

 
 
Net income attributable to noncontrolling common units of the Operating Partnership
 
(785
)
 
(852
)
 
(1,857
)
 
(2,423
)
 
 
Net income attributable to noncontrolling interests in consolidated property partnerships
 
(4,258
)
 
(3,600
)
 
(13,521
)
 
(11,941
)
 
 
Total income attributable to noncontrolling interests
 
(5,043
)
 
(4,452
)
 
(15,378
)
 
(14,364
)
 
 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
 
$
49,028

 
$
43,846

 
$
108,463

 
$
122,943

 
 
Weighted average common shares outstanding – basic
 
115,226

 
104,841

 
112,406

 
102,253

 
 
Weighted average common shares outstanding – diluted
 
115,668

 
105,360

 
112,876

 
102,872

 
 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE
 
 
 
 
 
 
 
 
 
 
Net income available to common stockholders per share – basic
 
$
0.42

 
$
0.41

 
$
0.95

 
$
1.19

 
 
Net income available to common stockholders per share – diluted
 
$
0.42

 
$
0.41

 
$
0.95

 
$
1.18

 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Rental income is presented net of charges related to the creditworthiness of tenants. For the three and nine months ended September 30, 2020, rental income includes $1.2 million of allowances for doubtful accounts, primarily as a result of the COVID-19 pandemic. For the three and nine months ended September 30, 2020, rental income also includes $0.6 million and $13.0 million, respectively, of write-offs related to the cumulative impact of transitioning certain tenants to a cash basis of reporting as a result of the COVID-19 pandemic.
(2)
Includes $0.1 million and $20.5 million of severance costs for the three and nine months ended September 30, 2020.

7
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
2020
 
2019
 
 
FUNDS FROM OPERATIONS: (1)
 
 
 
 
 
 
 
 
 
 
Net income available to common stockholders
 
$
49,028

 
$
43,846

 
$
108,463

 
$
122,943

 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling common units of the Operating Partnership
 
785

 
852

 
1,857

 
2,423

 
 
Net income attributable to noncontrolling interests in consolidated property partnerships
 
4,258

 
3,600

 
13,521

 
11,941

 
 
Depreciation and amortization of real estate assets
 
70,422

 
67,985

 
218,841

 
199,967

 
 
Gains on sales of depreciable real estate
 
—

 
—

 
—

 
(7,169
)
 
 
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships
 
(7,102
)
 
(7,040
)
 
(22,029
)
 
(21,145
)
 
 
Funds From Operations (1)(2)
 
$
117,391

 
$
109,243

 
$
320,653

 
$
308,960

 
 
Weighted average common shares/units outstanding – basic (3)
 
118,306

 
107,981

 
115,529

 
105,400

 
 
Weighted average common shares/units outstanding – diluted (4)
 
118,747

 
108,500

 
115,999

 
106,020

 
 
FFO per common share/unit – basic (1)
 
$
0.99

 
$
1.01

 
$
2.78

 
$
2.93

 
 
FFO per common share/unit – diluted (1)
 
$
0.99

 
$
1.01

 
$
2.76

 
$
2.91

 
 
FUNDS AVAILABLE FOR DISTRIBUTION: (1)
 
 
 
 
 
 
 
 
 
 
Funds From Operations (1)(2)
 
$
117,391

 
$
109,243

 
$
320,653

 
$
308,960

 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Recurring tenant improvements, leasing commissions and capital expenditures
 
(21,769
)
 
(31,438
)
 
(61,198
)
 
(86,454
)
 
 
Amortization of deferred revenue related to tenant-funded tenant improvements (2)(5)
 
(4,403
)
 
(6,766
)
 
(17,424
)
 
(14,947
)
 
 
Net effect of straight-line rents
 
(17,423
)
 
(18,743
)
 
(38,400
)
 
(52,201
)
 
 
Amortization of net below market rents (6)
 
(1,769
)
 
(1,826
)
 
(6,269
)
 
(6,241
)
 
 
Amortization of deferred financing costs and net debt discount/premium
 
1,176

 
194

 
2,252

 
911

 
 
Non-cash executive compensation expense (7)
 
6,364

 
6,495

 
25,418

 
21,323

 
 
Lease related adjustments, leasing costs and other (8)
 
6,435

 
3,991

 
11,460

 
2,148

 
 
Adjustments attributable to noncontrolling interests in consolidated property partnerships
 
2,394

 
3,928

 
5,262

 
9,882

 
 
Funds Available for Distribution (1)
 
$
88,396

 
$
65,078

 
$
241,754

 
$
183,381

 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
See page 32 for Management Statements on Funds From Operations and Funds Available for Distribution. Reported per common share/unit amounts are attributable to common stockholders, common unitholders and restricted stock unit holders.
(2)
FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.4 million and $6.8 million for the three months ended September 30, 2020 and 2019, respectively, and $17.4 million and $14.9 million for the nine months ended September 30, 2020 and 2019, respectively. These amounts are adjusted out of FFO in our calculation of FAD.
(3)
Calculated based on weighted average shares outstanding including participating share-based awards and assuming the exchange of all common limited partnership units outstanding.
(4)
Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options and contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
(5)
Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements.
(6)
Represents the non-cash adjustment related to the acquisition of buildings with above and/or below market rents.
(7)
Includes non-cash amortization of share-based compensation and accrued potential future executive retirement benefits. Includes $4.3 million of accelerated non-cash amortization of share-based compensation related to severance costs for the nine months ended September 30, 2020, respectively.
(8)
Includes other cash and non-cash adjustments attributable to lease-related matters including GAAP revenue recognition timing differences, leasing costs and other.

8
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution
(unaudited, $ in thousands)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
2020
 
2019
 
 
GAAP Net Cash Provided by Operating Activities 
 
$
139,958

 
$
135,730

 
$
363,980

 
$
301,390

 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Recurring tenant improvements, leasing commissions and capital expenditures
 
(21,769
)
 
(31,438
)
 
(61,198
)
 
(86,454
)
 
 
Depreciation of non-real estate furniture, fixtures and equipment
 
(1,441
)
 
(1,245
)
 
(7,477
)
 
(3,650
)
 
 
Net changes in operating assets and liabilities (1)
 
(22,798
)
 
(34,254
)
 
(33,949
)
 
(15,251
)
 
 
Noncontrolling interests in consolidated property partnerships’ share of FFO and FAD
 
(4,708
)
 
(3,112
)
 
(16,767
)
 
(11,263
)
 
 
Cash adjustments related to investing and financing activities
 
(846
)
 
(603
)
 
(2,835
)
 
(1,391
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds Available for Distribution(2)
 
$
88,396

 
$
65,078

 
$
241,754

 
$
183,381

 
 
 
 
 
 
 
 
 
 
 
 
_______________________
(1)
Primarily includes changes in the following assets and liabilities: marketable securities; current receivables; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities; and rents received in advance and tenant security deposits. 
(2)
Please refer to page 32 for a Management Statement on Funds Available for Distribution.


9
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Net Operating Income (1) 
(unaudited, $ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
% Change
 
2020
 
2019
 
% Change
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income (2)(3)
 
$
195,484

 
$
181,959

 
7.4
 %
 
$
571,103

 
$
526,906

 
8.4
 %
 
 
Tenant reimbursements (3)
 
31,638

 
30,362

 
4.2
 %
 
93,008

 
82,426

 
12.8
 %
 
 
Other property income
 
1,192

 
3,204

 
(62.8
)%
 
4,954

 
7,887

 
(37.2
)%
 
 
Total operating revenues
 
228,314

 
215,525

 
5.9
 %
 
669,065

 
617,219

 
8.4
 %
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 

 
 
Property expenses
 
39,236

 
41,308

 
(5.0
)%
 
116,048

 
117,993

 
(1.6
)%
 
 
Real estate taxes
 
23,868

 
19,998

 
19.4
 %
 
67,924

 
56,563

 
20.1
 %
 
 
Ground leases
 
2,119

 
2,049

 
3.4
 %
 
6,766

 
6,135

 
10.3
 %
 
 
Total operating expenses
 
65,223

 
63,355

 
2.9
 %
 
190,738

 
180,691

 
5.6
 %
 
 
Net Operating Income
 
$
163,091

 
$
152,170

 
7.2
 %
 
$
478,327

 
$
436,528

 
9.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Please refer to page 30 for Management Statements on Net Operating Income and page 35 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.
(2)
Rental income is presented net of charges related to the creditworthiness of tenants. For the three and nine months ended September 30, 2020, rental income includes $1.2 million of allowances for doubtful accounts, primarily as a result of the COVID-19 pandemic. For the three and nine months ended September 30, 2020, rental income also includes $0.6 million and $13.0 million, respectively, of write-offs related to the cumulative impact of transitioning certain tenants to a cash basis of reporting as a result of the COVID-19 pandemic.
(3)
Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.


10
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Same Store Analysis (1) 
(unaudited, $ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
% Change
 
2020
 
2019
 
% Change
 
 
Total Same Store Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of properties
 
92

 
92

 
 
 
92

 
92

 
 
 
 
Square Feet
 
12,937,118

 
12,937,118

 
 
 
12,937,118

 
12,937,118

 
 
 
 
Percent of Stabilized Portfolio
 
90.3
%
 
97.1
%
 
 
 
90.3
%
 
97.1
%
 
 
 
 
Average Occupancy
 
92.0
%
 
93.8
%
 
 
 
92.7
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income  (2)(3)
 
$
163,058

 
$
165,289

 
(1.3
)%
 
$
486,640

 
$
491,167

 
(0.9
)%
 
 
Tenant reimbursements (2)
 
22,934

 
25,709

 
(10.8
)%
 
68,089

 
73,983

 
(8.0
)%
 
 
Other property income
 
1,040

 
2,705

 
(61.6
)%
 
4,142

 
6,707

 
(38.2
)%
 
 
Total operating revenues
 
187,032

 
193,703

 
(3.4
)%
 
558,871

 
571,857

 
(2.3
)%
 
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property expenses
 
33,220

 
37,402

 
(11.2
)%
 
100,913

 
109,851

 
(8.1
)%
 
 
Real estate taxes
 
17,378

 
17,060

 
1.9
 %
 
51,838

 
51,237

 
1.2
 %
 
 
Ground leases
 
1,905

 
2,049

 
(7.0
)%
 
6,135

 
6,135

 
0.0
 %
 
 
Total operating expenses
 
52,503

 
56,511

 
(7.1
)%
 
158,886

 
167,223

 
(5.0
)%
 
 
GAAP Net Operating Income
 
$
134,529

 
$
137,192

 
(1.9
)%
 
$
399,985

 
$
404,634

 
(1.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Analysis (Cash Basis) (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
% Change
 
2020
 
2019
 
% Change
 
 
Total operating revenues
 
$
176,574

 
$
176,027

 
0.3
 %
 
$
535,592

 
$
510,452

 
4.9
 %
 
 
Total operating expenses
 
52,521

 
56,508

 
(7.1
)%
 
158,939

 
167,254

 
(5.0
)%
 
 
Cash Net Operating Income
 
$
124,053

 
$
119,519

 
3.8
 %
 
$
376,653

 
$
343,198

 
9.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2019 and still owned and included in the stabilized portfolio as of September 30, 2020. Same Store includes 100% of consolidated property partnerships as well as the residential tower at Columbia Square.
(2)
Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
(3)
Rental income is presented net of charges related to the creditworthiness of tenants. For the three and nine months ended September 30, 2020, rental income includes $1.2 million and $1.0 million of allowances for doubtful accounts, respectively, primarily as a result of the COVID-19 pandemic. For the three and nine months ended September 30, 2020, rental income also includes $0.6 million and $10.7 million, respectively, of write-offs related to the cumulative impact of transitioning certain tenants to a cash basis of reporting, primarily as a result of the COVID-19 pandemic. For the three months and nine months ended September 30, 2019, rental income includes $0.1 million of charges related to the creditworthiness of tenants and a recovery of provision for bad debts of $2.9 million, respectively.
(4)
Please refer to page 35 for a reconciliation of GAAP Net Income Available to Common Stockholders to Same Store GAAP Net Operating Income and Same Store Cash Net Operating Income.

11
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region
 
 
 
 
 
Portfolio Breakdown
 
 
 
Occupied at
 
Leased at
 
 
STABILIZED OFFICE PORTFOLIO (1)
 
Buildings
 
YTD NOI %
 
SF %
 
Total SF
 
9/30/2020
 
6/30/2020 (2)
 
9/30/2020
 
 
Greater Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Culver City
 
19
 
1.4
%
 
1.1
%
 
151,908

 
98.5
%
 
100.0
%
 
98.5
%
 
 
El Segundo
 
5
 
4.7
%
 
7.6
%
 
1,093,050

 
97.4
%
 
97.6
%
 
97.5
%
 
 
Hollywood
 
6
 
4.0
%
 
5.6
%
 
806,557

 
87.2
%
 
87.5
%
 
88.0
%
 
 
Long Beach
 
7
 
3.3
%
 
6.7
%
 
955,291

 
94.2
%
 
93.6
%
 
94.3
%
 
 
West Hollywood
 
4
 
1.3
%
 
1.3
%
 
180,244

 
89.2
%
 
90.9
%
 
92.8
%
 
 
West Los Angeles
 
10
 
5.2
%
 
5.9
%
 
844,151

 
80.7
%
 
82.0
%
 
82.7
%
 
 
Total Greater Los Angeles
 
51
 
19.9
%
 
28.2
%
 
4,031,201

 
90.8
%
 
91.2
%
 
91.6
%
 
 
San Diego County
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Del Mar
 
15
 
7.5
%
 
10.1
%
 
1,450,512

 
82.0
%
 
86.4
%
 
94.7
%
 
 
I-15 Corridor
 
5
 
1.4
%
 
3.8
%
 
540,892

 
96.4
%
 
87.4
%
 
96.4
%
 
 
Point Loma
 
1
 
0.4
%
 
0.7
%
 
107,456

 
100.0
%
 
100.0
%
 
100.0
%
 
 
University Towne Center
 
1

 
0.2
%
 
0.3
%
 
47,846

 
91.4
%
 
91.4
%
 
91.4
%
 
 
Total San Diego County
 
22
 
9.5
%
 
14.9
%
 
2,146,706

 
86.7
%
 
87.4
%
 
95.3
%
 
 
San Francisco Bay Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Menlo Park
 
7
 
2.6
%
 
2.6
%
 
378,358

 
76.5
%
 
74.8
%
 
76.5
%
 
 
Mountain View
 
4
 
4.1
%
 
3.8
%
 
542,235

 
100.0
%
 
100.0
%
 
100.0
%
 
 
Palo Alto
 
2
 
1.6
%
 
1.2
%
 
165,585

 
100.0
%
 
100.0
%
 
100.0
%
 
 
Redwood City
 
2
 
3.5
%
 
2.4
%
 
347,269

 
100.0
%
 
100.0
%
 
100.0
%
 
 
San Francisco
 
11
 
41.0
%
 
28.7
%
 
4,107,473

 
93.3
%
 
92.6
%
 
98.2
%
 
 
South San Francisco
 
3
 
1.3
%
 
1.0
%
 
145,530

 
100.0
%
 
100.0
%
 
100.0
%
 
 
Sunnyvale
 
4
 
4.9
%
 
4.6
%
 
663,460

 
100.0
%
 
100.0
%
 
100.0
%
 
 
Total San Francisco Bay Area
 
33
 
59.0
%
 
44.3
%
 
6,349,910

 
94.2
%
 
93.7
%
 
97.4
%
 
 
Greater Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bellevue
 
2
 
5.2
%
 
6.4
%
 
917,027

 
89.5
%
 
92.0
%
 
96.2
%
 
 
Lake Union
 
6
 
6.4
%
 
6.2
%
 
884,763

 
100.0
%
 
100.0
%
 
100.0
%
 
 
Total Greater Seattle
 
8
 
11.6
%
 
12.6
%
 
1,801,790

 
94.7
%
 
95.9
%
 
98.1
%
 
 
TOTAL STABILIZED OFFICE PORTFOLIO
 
114
 
100.0
%
 
100.0
%
 
14,329,607

 
92.2
%
 
92.3
%
 
95.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total No. of Units
 
Average Residential Occupancy
 
 
 
 
STABILIZED RESIDENTIAL PROPERTY
 
 
 
Submarket
 
Buildings
 
 
Quarter-to-Date
 
Year-to-Date
 
 
 
 
Greater Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1550 N. El Centro Avenue
 
 
 
Hollywood
 
1

 
200

 
85.0%
 
87.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Office Occupancy
Quarter-to-Date
 
Year-to-Date
92.3%
 
92.9%
________________________
(1)
Includes stabilized retail space.
(2)
Represents occupancy for properties in the stabilized portfolio as of the date presented, including properties sold subsequent to the date presented.

12
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued
 
 
 
Submarket
 
Square Feet
 
Occupied
 
Greater Los Angeles, California
 
 
 
 
 
 
 
 
3101-3243 La Cienega Boulevard
 
Culver City
 
151,908

 
98.5
%
 
 
2240 E. Imperial Highway
 
El Segundo
 
122,870

 
100.0
%
 
 
2250 E. Imperial Highway
 
El Segundo
 
298,728

 
100.0
%
 
 
2260 E. Imperial Highway
 
El Segundo
 
298,728

 
100.0
%
 
 
909 N. Pacific Coast Highway
 
El Segundo
 
244,136

 
90.3
%
 
 
999 N. Pacific Coast Highway
 
El Segundo
 
128,588

 
96.1
%
 
 
1500 N. El Centro Avenue (1)
 
Hollywood
 
104,504

 
27.9
%
 
 
1525 N. Gower Street
 
Hollywood
 
9,610

 
100.0
%
 
 
1575 N. Gower Street
 
Hollywood
 
251,245

 
100.0
%
 
 
6115 W. Sunset Boulevard
 
Hollywood
 
26,105

 
73.1
%
 
 
6121 W. Sunset Boulevard
 
Hollywood
 
91,173

 
100.0
%
 
 
6255 W. Sunset Boulevard
 
Hollywood
 
323,920

 
93.6
%
 
 
3750 Kilroy Airport Way (1)
 
Long Beach
 
10,718

 
62.9
%
 
 
3760 Kilroy Airport Way
 
Long Beach
 
166,761

 
94.7
%
 
 
3780 Kilroy Airport Way
 
Long Beach
 
221,452

 
95.4
%
 
 
3800 Kilroy Airport Way
 
Long Beach
 
192,476

 
88.9
%
 
 
3840 Kilroy Airport Way
 
Long Beach
 
136,026

 
100.0
%
 
 
3880 Kilroy Airport Way
 
Long Beach
 
96,923

 
100.0
%
 
 
3900 Kilroy Airport Way
 
Long Beach
 
130,935

 
91.3
%
 
 
8560 W. Sunset Boulevard
 
West Hollywood
 
71,875

 
95.7
%
 
 
8570 W. Sunset Boulevard
 
West Hollywood
 
45,941

 
97.1
%
 
 
8580 W. Sunset Boulevard (1)
 
West Hollywood
 
7,126

 
0.0
%
 
 
8590 W. Sunset Boulevard
 
West Hollywood
 
55,302

 
85.6
%
 
 
12100 W. Olympic Boulevard
 
West Los Angeles
 
152,048

 
71.6
%
 
 
12200 W. Olympic Boulevard
 
West Los Angeles
 
150,832

 
90.2
%
 
 
12233 W. Olympic Boulevard
 
West Los Angeles
 
151,029

 
55.3
%
 
 
12312 W. Olympic Boulevard
 
West Los Angeles
 
76,644

 
100.0
%
 
 
1633 26th Street
 
West Los Angeles
 
43,857

 
34.9
%
 
 
2100/2110 Colorado Avenue
 
West Los Angeles
 
102,864

 
100.0
%
 
 
3130 Wilshire Boulevard
 
West Los Angeles
 
90,074

 
97.6
%
 
 
501 Santa Monica Boulevard
 
West Los Angeles
 
76,803

 
91.4
%
 
 
Total Greater Los Angeles
 
 
 
4,031,201

 
90.8
%
 
 
 
 
 
 
 
 
 
 
________________________
(1)
This property is part of a complex of properties and is analyzed at the complex level.


13
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued
 
 
 
Submarket
 
Square Feet
 
Occupied
 
San Diego County, California
 
 
 
 
 
 
 
 
12225 El Camino Real
 
Del Mar
 
58,401

 
100.0
%
 
 
12235 El Camino Real
 
Del Mar
 
53,751

 
100.0
%
 
 
12340 El Camino Real
 
Del Mar
 
89,272

 
50.1
%
 
 
12390 El Camino Real
 
Del Mar
 
70,140

 
55.1
%
 
 
12348 High Bluff Drive
 
Del Mar
 
39,193

 
85.3
%
 
 
12400 High Bluff Drive
 
Del Mar
 
210,732

 
89.4
%
 
 
12770 El Camino Real (1)
 
Del Mar
 
73,032

 
66.1
%
 
 
12780 El Camino Real
 
Del Mar
 
140,591

 
100.0
%
 
 
12790 El Camino Real
 
Del Mar
 
78,836

 
100.0
%
 
 
3579 Valley Centre Drive (1)
 
Del Mar
 
54,960

 
13.0
%
 
 
3611 Valley Centre Drive (1)
 
Del Mar
 
130,109

 
40.6
%
 
 
3661 Valley Centre Drive
 
Del Mar
 
128,364

 
100.0
%
 
 
3721 Valley Centre Drive
 
Del Mar
 
115,193

 
100.0
%
 
 
3811 Valley Centre Drive
 
Del Mar
 
112,067

 
100.0
%
 
 
3745 Paseo Place
 
Del Mar
 
95,871

 
92.1
%
 
 
13280 Evening Creek Drive South
 
I-15 Corridor
 
41,196

 
100.0
%
 
 
13290 Evening Creek Drive South
 
I-15 Corridor
 
61,180

 
100.0
%
 
 
13480 Evening Creek Drive North
 
I-15 Corridor
 
154,157

 
100.0
%
 
 
13500 Evening Creek Drive North
 
I-15 Corridor
 
137,658

 
97.5
%
 
 
13520 Evening Creek Drive North
 
I-15 Corridor
 
146,701

 
89.0
%
 
 
2305 Historic Decatur Road
 
Point Loma
 
107,456

 
100.0
%
 
 
4690 Executive Drive
 
University Towne Center
 
47,846

 
91.4
%
 
 
Total San Diego County
 
 
 
2,146,706

 
86.7
%
 
 
 
 
 
 
 
 
 
 
________________________
(1)
This property is part of a complex of properties and is analyzed at the complex level.













14
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued
 
 
 
Submarket
 
Square Feet
 
Occupied
 
San Francisco Bay Area, California
 
 
 
 
 
 
 
 
4100 Bohannon Drive
 
Menlo Park
 
47,379

 
100.0
%
 
 
4200 Bohannon Drive
 
Menlo Park
 
45,451

 
70.8
%
 
 
4300 Bohannon Drive (1)
 
Menlo Park
 
63,079

 
48.8
%
 
 
4400 Bohannon Drive (1)
 
Menlo Park
 
48,146

 
39.4
%
 
 
4500 Bohannon Drive
 
Menlo Park
 
63,078

 
100.0
%
 
 
4600 Bohannon Drive
 
Menlo Park
 
48,147

 
70.7
%
 
 
4700 Bohannon Drive
 
Menlo Park
 
63,078

 
100.0
%
 
 
1290-1300 Terra Bella Avenue
 
Mountain View
 
114,175

 
100.0
%
 
 
331 Fairchild Drive
 
Mountain View
 
87,147

 
100.0
%
 
 
680 E. Middlefield Road
 
Mountain View
 
170,090

 
100.0
%
 
 
690 E. Middlefield Road
 
Mountain View
 
170,823

 
100.0
%
 
 
1701 Page Mill Road
 
Palo Alto
 
128,688

 
100.0
%
 
 
3150 Porter Drive
 
Palo Alto
 
36,897

 
100.0
%
 
 
900 Jefferson Avenue
 
Redwood City
 
228,505

 
100.0
%
 
 
900 Middlefield Road
 
Redwood City
 
118,764

 
100.0
%
 
 
100 Hooper Street
 
San Francisco
 
394,340

 
87.6
%
 
 
100 First Street
 
San Francisco
 
467,095

 
99.2
%
 
 
1800 Owens Street
 
San Francisco
 
750,370

 
99.6
%
 
 
303 Second Street
 
San Francisco
 
784,658

 
76.6
%
 
 
201 Third Street
 
San Francisco
 
346,538

 
90.3
%
 
 
360 Third Street
 
San Francisco
 
429,796

 
99.6
%
 
 
250 Brannan Street
 
San Francisco
 
100,850

 
100.0
%
 
 
301 Brannan Street
 
San Francisco
 
82,834

 
100.0
%
 
 
333 Brannan Street
 
San Francisco
 
185,602

 
100.0
%
 
 
345 Brannan Street
 
San Francisco
 
110,050

 
99.7
%
 
 
350 Mission Street
 
San Francisco
 
455,340

 
99.7
%
 
 
345 Oyster Point Boulevard
 
South San Francisco
 
40,410

 
100.0
%
 
 
347 Oyster Point Boulevard
 
South San Francisco
 
39,780

 
100.0
%
 
 
349 Oyster Point Boulevard
 
South San Francisco
 
65,340

 
100.0
%
 
 
505 Mathilda Avenue
 
Sunnyvale
 
212,322

 
100.0
%
 
 
555 Mathilda Avenue
 
Sunnyvale
 
212,322

 
100.0
%
 
 
605 Mathilda Avenue
 
Sunnyvale
 
162,785

 
100.0
%
 
 
599 Mathilda Avenue
 
Sunnyvale
 
76,031

 
100.0
%
 
 
Total San Francisco Bay Area
 
 
 
6,349,910

 
94.2
%
 
 
 
 
 
 
 
 
 
 
________________________
(1)
This property is part of a complex of properties and is analyzed at the complex level.


15
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued
 
 
 
Submarket
 
Square Feet
 
Occupied
 
Greater Seattle, Washington
 
 
 
 
 
 
 
 
601 108th Avenue NE
 
Bellevue
 
488,470

 
93.8
%
 
 
10900 NE 4th Street
 
Bellevue
 
428,557

 
84.7
%
 
 
837 N. 34th Street
 
Lake Union
 
112,487

 
100.0
%
 
 
701 N. 34th Street
 
Lake Union
 
141,860

 
100.0
%
 
 
801 N. 34th Street
 
Lake Union
 
169,412

 
100.0
%
 
 
320 Westlake Avenue North
 
Lake Union
 
184,644

 
100.0
%
 
 
321 Terry Avenue North
 
Lake Union
 
135,755

 
100.0
%
 
 
401 Terry Avenue North
 
Lake Union
 
140,605

 
100.0
%
 
 
Total Greater Seattle
 
 
 
1,801,790

 
94.7
%
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
 
 
14,329,607

 
92.2
%
 
 
 
 
 
 
 
 
 
 


16
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Information on Leases Commenced (1) 
 
 
 
1st & 2nd Generation
 
2nd Generation
 
 
 
# of Leases  (2)
 
Square Feet (2)
 
Retention
Rates
 
TI/LC
Per Sq.Ft. (3)
 
TI/LC
Per Sq.Ft. /Year (3)
 
Changes in
GAAP Rents
 
Changes in
Cash Rents
 
Weighted
Average Lease
Term (Mo.)
 
 
 
New
 
Renewal
 
New
 
Renewal
 
 
 
 
 
 
 
 
Quarter to Date
10

 
10

 
165,010

 
114,813

 
37.1
%
 
$
37.47

 
$
10.97

 
33.1
%
 
14.7
%
 
41

 
 
Year to Date
33

 
28

 
324,904

 
438,143

 
39.5
%
 
49.03

 
9.05

 
35.7
%
 
16.1
%
 
65

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Information on Leases Executed (1) 
 
 
 
1st & 2nd Generation
 
2nd Generation
 
 
 
# of Leases (4)
 
Square Feet (4)
 
TI/LC
Per Sq.Ft. (3)
 
TI/LC
Per Sq.Ft. /Year (3)
 
Changes in
GAAP Rents
 
Changes in
Cash Rents
 
Weighted
Average Lease
Term (Mo.)
 
 
 
New
 
Renewal
 
New
 
Renewal
 
 
 
 
 
 
 
Quarter to Date (5)
3

 
10

 
8,250

 
114,813

 
$
5.13

 
$
3.62

 
32.1
%
 
14.6
%
 
17

 
 
Year to Date (6)
15

 
28

 
193,125

 
438,143

 
48.01

 
8.73

 
35.7
%
 
17.5
%
 
66
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Includes 100% of consolidated property partnerships.
(2)
Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three and nine months ended September 30, 2020, including first and second generation space, net of month-to-month leases.
(3)
Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
(4)
Represents leasing activity for leases signed at properties in the stabilized portfolio during the three and nine months ended September 30, 2020, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
(5)
During the three months ended September 30, 2020, 2 new leases totaling 1,924 square feet were signed but not commenced as of September 30, 2020.
(6)
During the nine months ended September 30, 2020, 7 new leases totaling 114,553 square feet were signed but not commenced as of September 30, 2020.

 

17
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Capital Expenditures
($ in thousands)
 
 
Total 2020
 
Q3 2020
 
Q2 2020
 
Q1 2020
 
 
1st Generation (Nonrecurring) Capital Expenditures: (1)
 
 
 
 
 
 
 
 
 
Capital Improvements
$
2,374

 
$
1,162

 
$
591

 
$
621

 
 
 
 
 
 
 
 
 
 
 
 
Tenant Improvements & Leasing Commissions (2)
7,237

 
1,932

 
998

 
4,307

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
9,611

 
$
3,094

 
$
1,589

 
$
4,928

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total 2020
 
Q3 2020
 
Q2 2020
 
Q1 2020
 
 
2nd Generation (Recurring) Capital Expenditures: (1)
 
 
 
 
 
 
 
 
 
Capital Improvements
$
16,874

 
$
6,212

 
$
7,686

 
$
2,976

 
 
 
 
 
 
 
 
 
 
 
 
Tenant Improvements & Leasing Commissions (2)
44,324

 
15,557

 
14,680

 
14,087

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
61,198

 
$
21,769

 
$
22,366

 
$
17,063

 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Includes 100% of capital expenditures of consolidated property partnerships.
(2)
Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements.


18
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Summary Schedule
($ in thousands, except for annualized rent per sq. ft.)
 
Year of Expiration
 
# of Expiring
Leases
 
Total Square
Feet
 
% of Total
Leased Sq. Ft.
 
Annualized
Base Rent (1)
 
% of Total
Annualized
Base Rent
 
Annualized Rent
per Sq. Ft.
 
 
Remaining 2020 (2)
 
19

 
285,979

 
2.2
%
 
$
12,281

 
1.8
%
 
$
42.94

 
 
2021 (2)
 
74

 
624,156

 
4.8
%
 
27,479

 
3.9
%
 
44.03

 
 
2022 (2)
 
69

 
853,426

 
6.5
%
 
36,742

 
5.2
%
 
43.05

 
 
2023
 
79

 
1,264,737

 
9.7
%
 
67,187

 
9.6
%
 
53.12

 
 
2024
 
58

 
959,822

 
7.4
%
 
46,938

 
6.7
%
 
48.90

 
 
2025
 
57

 
646,079

 
5.0
%
 
31,681

 
4.5
%
 
49.04

 
 
2026
 
34

 
1,612,350

 
12.4
%
 
73,063

 
10.4
%
 
45.31

 
 
2027
 
33

 
1,259,065

 
9.7
%
 
51,877

 
7.4
%
 
41.20

 
 
2028
 
22

 
918,797

 
7.1
%
 
57,978

 
8.3
%
 
63.10

 
 
2029
 
21

 
815,588

 
6.3
%
 
46,859

 
6.7
%
 
57.45

 
 
2030 and beyond
 
58

 
3,789,012

 
28.9
%
 
247,789

 
35.5
%
 
65.40

 
 
Total (3)
 
524

 
13,029,011

 
100.0
%
 
$
699,874

 
100.0
%
 
$
53.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Includes 100% of annualized base rent of consolidated property partnerships.
(2)
Adjusting for leasing transactions executed as of September 30, 2020 but not yet commenced, the 2020, 2021 and 2022 expirations would be reduced by 73,885, 126,180 and 33,283 square feet, respectively.
(3)
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 September 30, 2020, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of September 30, 2020.

19
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Schedule by Region
($ in thousands, except for annualized rent per sq. ft.)
 
Year
 
Region
 
# of
Expiring Leases
 
Total
Square Feet
 
% of Total
Leased Sq. Ft.
 
Annualized
Base Rent (1)
 
% of Total
Annualized
Base Rent
 
Annualized Rent
per Sq. Ft.
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
 
Greater Los Angeles
 
11

 
188,743

 
1.4
%
 
$
7,407

 
1.1
%
 
$
39.24

 
 
 
San Diego
 
4

 
41,294

 
0.3
%
 
1,275

 
0.2
%
 
30.88

 
 
 
San Francisco Bay Area
 
4

 
55,942

 
0.5
%
 
3,599

 
0.5
%
 
64.33

 
 
 
Greater Seattle
 
—

 
—

 
—
%
 
—

 
—
%
 
—

 
 
 
Total
 
19

 
285,979

 
2.2
%
 
$
12,281

 
1.8
%
 
$
42.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2021
 
Greater Los Angeles
 
46

 
238,684

 
1.8
%
 
$
9,619

 
1.4
%
 
$
40.30

 
 
 
San Diego
 
15

 
140,808

 
1.1
%
 
5,474

 
0.8
%
 
38.88

 
 
 
San Francisco Bay Area
 
9

 
232,887

 
1.8
%
 
11,893

 
1.6
%
 
51.07

 
 
 
Greater Seattle
 
4

 
11,777

 
0.1
%
 
493

 
0.1
%
 
41.86

 
 
 
Total
 
74

 
624,156

 
4.8
%
 
$
27,479

 
3.9
%
 
$
44.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2022
 
Greater Los Angeles
 
47

 
472,460

 
3.6
%
 
$
20,898

 
3.0
%
 
$
44.23

 
 
 
San Diego
 
8

 
204,237

 
1.6
%
 
6,991

 
1.0
%
 
34.23

 
 
 
San Francisco Bay Area
 
6

 
115,111

 
0.9
%
 
6,558

 
0.9
%
 
56.97

 
 
 
Greater Seattle
 
8

 
61,618

 
0.4
%
 
2,295

 
0.3
%
 
37.25

 
 
 
Total
 
69

 
853,426

 
6.5
%
 
$
36,742

 
5.2
%
 
$
43.05

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
 
Greater Los Angeles
 
39

 
390,624

 
3.0
%
 
$
20,851

 
3.0
%
 
$
53.38

 
 
 
San Diego
 
12

 
164,371

 
1.3
%
 
6,867

 
1.0
%
 
41.78

 
 
 
San Francisco Bay Area
 
20

 
594,404

 
4.5
%
 
35,674

 
5.1
%
 
60.02

 
 
 
Greater Seattle
 
8

 
115,338

 
0.9
%
 
3,795

 
0.5
%
 
32.90

 
 
 
Total
 
79

 
1,264,737

 
9.7
%
 
$
67,187

 
9.6
%
 
$
53.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
 
Greater Los Angeles
 
33

 
450,689

 
3.5
%
 
$
20,274

 
2.9
%
 
$
44.98

 
 
 
San Diego
 
6

 
61,313

 
0.5
%
 
2,944

 
0.4
%
 
48.02

 
 
 
San Francisco Bay Area
 
13

 
245,526

 
1.9
%
 
16,127

 
2.3
%
 
65.68

 
 
 
Greater Seattle
 
6

 
202,294

 
1.5
%
 
7,593

 
1.1
%
 
37.53

 
 
 
Total
 
58

 
959,822

 
7.4
%
 
$
46,938

 
6.7
%
 
$
48.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2025
and
Beyond
 
Greater Los Angeles
 
58

 
1,808,742

 
13.9
%
 
$
77,514

 
11.1
%
 
$
42.86

 
 
 
San Diego
 
74

 
1,229,732

 
9.4
%
 
61,882

 
8.8
%
 
50.32

 
 
 
San Francisco Bay Area
 
54

 
4,698,482

 
36.1
%
 
316,841

 
45.3
%
 
67.43

 
 
 
Greater Seattle
 
39

 
1,303,935

 
10.0
%
 
53,010

 
7.6
%
 
40.65

 
 
 
Total
 
225

 
9,040,891

 
69.4
%
 
$
509,247

 
72.8
%
 
$
56.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Includes 100% of annualized base rent of consolidated property partnerships.







20
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Quarterly Lease Expirations for 2020 and 2021
($ in thousands, except for annualized rent per sq. ft.)
 
 
 
# of Expiring
Leases
 
Total Square
Feet
 
% of Total
Leased Sq. Ft.
 
Annualized
Base Rent (1)
 
% of Total
Annualized
Base Rent
 
Annualized Rent
per Sq. Ft.
 
 
2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2020
 
19

 
285,979

 
2.2
%
 
$
12,281

 
1.8
%
 
$
42.94

 
 
Total 2020 (2)
 
19

 
285,979

 
2.2
%
 
$
12,281

 
1.8
%
 
$
42.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2021:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2021
 
15

 
118,364

 
0.9
%
 
$
5,085

 
0.7
%
 
$
42.96

 
 
Q2 2021
 
17

 
96,495

 
0.7
%
 
3,552

 
0.5
%
 
36.81

 
 
Q3 2021
 
26

 
317,564

 
2.4
%
 
15,461

 
2.2
%
 
48.69

 
 
Q4 2021
 
16

 
91,733

 
0.8
%
 
3,381

 
0.5
%
 
36.86

 
 
Total 2021 (2)
 
74

 
624,156

 
4.8
%
 
$
27,479

 
3.9
%
 
$
44.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Includes 100% of annualized base rent of consolidated property partnerships.
(2)
Adjusting for leasing transactions executed as of September 30, 2020 but not yet commenced, the 2020 and 2021 expirations would be reduced by 73,885 and 126,180 square feet, respectively.


21
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Top Fifteen Tenants (1) 
($ in thousands)  
 
Tenant Name
 
Region
 
Annualized Base Rental Revenue (2)
 
Rentable
Square Feet
 
Percentage of
Total Annualized Base Rental Revenue
 
Percentage of
Total Rentable
Square Feet
 
Year(s) of Lease Expiration
 
 
Dropbox, Inc.
 
San Francisco Bay Area
 
$
55,998

 
738,081

 
7.8
%
 
5.0
%
 
2033
 
 
GM Cruise, LLC
 
San Francisco Bay Area
 
36,337

 
374,618

 
5.1
%
 
2.6
%
 
2031
 
 
LinkedIn Corporation / Microsoft Corporation
 
San Francisco Bay Area
 
29,752

 
663,460

 
4.2
%
 
4.5
%
 
2024 / 2026
 
 
Adobe Systems, Inc.
 
San Francisco Bay Area / Greater Seattle
 
27,897

 
513,111

 
3.9
%
 
3.5
%
 
2027 / 2031
 
 
salesforce.com, inc.
 
San Francisco Bay Area
 
24,076

 
451,763

 
3.4
%
 
3.1
%
 
2031 / 2032
 
 
DIRECTV, LLC
 
Greater Los Angeles
 
23,152

 
684,411

 
3.2
%
 
4.7
%
 
2027
 
 
Box, Inc.
 
San Francisco Bay Area
 
22,441

 
371,792

 
3.1
%
 
2.5
%
 
2021 / 2028
 
 
Okta, Inc.
 
San Francisco Bay Area
 
22,331

 
265,979

 
3.1
%
 
1.8
%
 
2028
 
 
Riot Games, Inc.
 
Greater Los Angeles
 
15,554

 
251,509

 
2.2
%
 
1.7
%
 
2023 / 2024
 
 
Synopsys, Inc.
 
San Francisco Bay Area
 
15,492

 
340,913

 
2.2
%
 
2.3
%
 
2030
 
 
Fortune 50 Publicly-Traded Company
 
Greater Seattle
 
15,355

 
311,983

 
2.2
%
 
2.1
%
 
2033
 
 
Amazon.com
 
Greater Seattle
 
14,760

 
348,880

 
2.1
%
 
2.4
%
 
2023 / 2030
 
 
Viacom International, Inc.
 
Greater Los Angeles
 
13,718

 
211,343

 
1.9
%
 
1.4
%
 
2028
 
 
DoorDash, Inc
 
San Francisco Bay Area
 
13,531

 
135,137

 
1.9
%
 
0.9
%
 
2032
 
 
Nektar Therapeutics, Inc.
 
San Francisco Bay Area
 
12,297

 
135,350

 
1.7
%
 
0.9
%
 
2030
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Top Fifteen Tenants
 
 
 
$
342,691

 
5,798,330

 
48.0
%
 
39.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
The information presented is as of September 30, 2020.
(2)
Includes 100% of annualized base rental revenues of consolidated property partnerships.


22
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Consolidated Ventures (Noncontrolling Property Partnerships)

 
 
 
 
 
 
 
 
 
 
 
 
Property (1)
 
Venture Partner
 
Submarket
 
Rentable Square Feet
 
KRC Ownership %
 
 
100 First Street, San Francisco, CA
 
Norges Bank Real Estate Management
 
San Francisco
 
467,095
 
56%
 
 
303 Second Street, San Francisco, CA
 
Norges Bank Real Estate Management
 
San Francisco
 
784,658
 
56%
 
 
900 Jefferson Avenue and 900 Middlefield Road, Redwood City, CA (2)
 
Local developer
 
Redwood City
 
347,269
 
93%
 
 
 
 
 
 
 
 
 
 
 
 
____________________
(1)
For breakout of Net Operating Income by partnership, refer to page 35, Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income.
(2)
Reflects the KRC ownership percentage at time of agreement. Actual percentage may vary depending on cash flows or promote structure.

23
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Stabilized Office Development Projects and Completed Residential Development Projects
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STABILIZED OFFICE AND RETAIL DEVELOPMENT PROJECTS (1)
 
Location
 
Start Date
 
Stabilization Date (2)
 
Total Estimated Investment
 
Rentable
Square Feet
 
Total Project % Occupied
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1st Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Exchange on 16th
 
San Francisco
 
2Q 2015
 
1Q 2020
 
$
585.0

 
750,370

 
100%
 
 
One Paseo - Retail
 
Del Mar
 
4Q 2016
 
1Q 2020
 
100.0

 
95,871

 
92%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL:
 
 
 
 
 
 
 
$
685.0

 
846,241

 
99%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COMPLETED RESIDENTIAL DEVELOPMENT PROJECTS NOT YET STABILIZED
 
Location
 
Start Date
 
Completion
Date
 
Total Estimated Investment
 
Number of Units
 
% Leased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One Paseo - Residential Phase I
 
Del Mar
 
4Q 2016
 
3Q 2019
 
$
145.0

 
237

 
76%
 
 
One Paseo - Residential Phase II
 
Del Mar
 
4Q 2016
 
1Q 2020
 
145.0

 
225

 
45%
 
 
One Paseo - Residential Phase III
 
Del Mar
 
4Q 2016
 
3Q 2020
 
100.0

 
146

 
22%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL:
 
 
 
 
 
 
 
$
390.0

 
608

 
51%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
____________________
(1)
Our stabilized office portfolio includes stabilized retail space.
(2)
For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.


24
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

In-Process Development
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
Construction Start Date
 
Estimated Stabilization Date (2)
 
Estimated Rentable Square Feet
 
Total Estimated Investment
 
Total Cash Costs Incurred as of
9/30/2020 (3)
 
% Leased
 
Total Project % Occupied
 
 
TENANT IMPROVEMENT (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego County
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   One Paseo - Office
 
Del Mar
 
4Q 2018
 
2Q 2021
 
285,000

 
$
205.0

 
$
184.0

 
91%
 
59%
 
 
   9455 Towne Centre Drive
 
University Towne Center
 
1Q 2019
 
1Q 2021
 
160,000

 
110.0

 
73.6

 
100%
 
—%
 
 
Greater Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
333 Dexter
 
South Lake Union
 
2Q 2017
 
3Q 2022
 
635,000

 
410.0

 
293.9

 
100%
 
49%
 
 
Greater Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Netflix // On Vine - Office
 
Hollywood
 
1Q 2018
 
4Q 2020
 
355,000

 
300.0

 
234.6

 
100%
 
—%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL:
 
 
 
 
 
 
 
1,435,000

 
$
1,025.0

 
$
786.1

 
98%
 
33%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDER CONSTRUCTION
 
Location
 
Construction Start Date
 
Estimated Stabilization Date (2)
 
Estimated Rentable Square Feet
 
Total Estimated Investment
 
Total Cash Costs Incurred as of
9/30/2020 (3)
 
Office % Leased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office / Life Science
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco Bay Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kilroy Oyster Point - Phase I
 
South San Francisco
 
1Q 2019
 
4Q 2021
 
656,000

 
$
570.0

 
$
246.5

 
100%
 
 
San Diego County
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2100 Kettner
 
Little Italy
 
3Q 2019
 
1Q 2022
 
200,000

 
140.0

 
77.4

 
—%
 
 
Residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Los Angeles
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Living // On Vine - Residential
 
Hollywood
 
4Q 2018
 
1Q 2021
 
193 Resi Units

 
200.0

 
168.6

 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL:
 
 
 
 
 
 
 
 
 
$
910.0

 
$
492.5

 
77%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
(2)
For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. The timing of completion of our projects may be impacted by factors outside of our control, including government restrictions and/or social distancing requirements on construction projects due to the COVID-19 pandemic. As of the date of this report, all of our in-process development projects were under active construction.
(3)
Represents costs incurred as of September 30, 2020, excluding accrued liabilities recorded in accordance with GAAP. Upon adoption of ASC 842 “Leases” effective January 1, 2019, also excludes leasing overhead.


25
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Future Development Pipeline
($ in millions)
 
FUTURE DEVELOPMENT PIPELINE
 
Location
 
Approx. Developable
Square Feet (1)
 
Total Cash Costs Incurred as of 9/30/2020 (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
San Diego County
 
 
 
 
 
 
 
 
 
 
Santa Fe Summit – Phases II and III
 
56 Corridor
 
600,000 - 650,000
 
$
79.8

 
 
1335 Broadway & 901 Park Boulevard
 
East Village
 
TBD
 
47.4

 
 
San Francisco Bay Area
 
 
 
 
 
 
 
 
 
 
Kilroy Oyster Point - Phases II - IV
 
South San Francisco
 
1,750,000 - 1,900,000
 
323.1

 
 
Flower Mart
 
SOMA
 
2,300,000
 
391.3

 
 
Greater Seattle
 
 
 
 
 
 
 
 
 
 
SIX0 - Office & Residential
 
Seattle CBD
 
TBD
 
136.7

 
 
TOTAL:
 
 
 
 
 
 
 
$
978.3

 
 
 
 
 
 
 
 
 
 
 
 
________________________
(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 costs incurred as of September 30, 2020, excluding accrued liabilities recorded in accordance with GAAP.


26
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Capital Structure
As of September 30, 2020
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
Shares/Units
September 30, 2020
 
Aggregate Principal
Amount or
$ Value Equivalent
 
% of Total
Market
Capitalization
 
 
DEBT: (1)(2)
 
 
 
 
 
 
 
 
Unsecured Senior Notes due 2023
 
 
 
$
300,000

 
3.0
%
 
 
Unsecured Senior Notes due 2024
 
 
 
425,000

 
4.2
%
 
 
Unsecured Senior Notes due 2025
 
 
 
400,000

 
4.0
%
 
 
Unsecured Senior Notes Series A & B due 2026
 
 
 
250,000

 
2.5
%
 
 
Unsecured Senior Notes due 2028
 
 
 
400,000

 
4.0
%
 
 
Unsecured Senior Notes due 2029
 
 
 
400,000

 
4.0
%
 
 
Unsecured Senior Notes Series A & B due 2027 & 2029
 
 
 
250,000

 
2.5
%
 
 
Unsecured Senior Notes due 2030
 
 
 
500,000

 
5.0
%
 
 
Unsecured Senior Notes due 2031
 
 
 
350,000

 
3.5
%
 
 
Unsecured Senior Notes due 2032
 
 
 
425,000

 
4.2
%
 
 
Secured Debt
 
 
 
255,668

 
2.5
%
 
 
Total Debt
 
 
 
$
3,955,668

 
39.4
%
 
 
EQUITY AND NONCONTROLLING INTEREST IN THE OPERATING PARTNERSHIP: (3)
 
 
 
 
 
 
 
 
Common limited partnership units outstanding (4)
 
1,931,574
 
$
100,365

 
1.0
%
 
 
Shares of common stock outstanding
 
115,247,221
 
5,988,246

 
59.6
%
 
 
Total Equity and Noncontrolling Interests in the Operating Partnership
 
 
 
$
6,088,611

 
60.6
%
 
 
TOTAL MARKET CAPITALIZATION
 
 
 
$
10,044,279

 
100.0
%
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
(2)
As of September 30, 2020, there was no outstanding balance on the unsecured revolving credit facility. During the three months ended September 30, 2020, we fully repaid the $150.0 million unsecured term loan facility.
(3)
Value based on closing share price of $51.96 as of September 30, 2020.
(4)
Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.



27
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Debt Analysis
As of September 30, 2020
 
 
 
 
 
 
 
 
 
 
TOTAL DEBT COMPOSITION (1)
 
 
 
 
Percent of
Total Debt
 
Weighted Average
 
 
 
 
Interest Rate
 
Years to Maturity
 
 
Secured vs. Unsecured Debt
 
 
 
 
 
 
 
 
Unsecured Debt
 
93.5%
 
3.8%
 
7.6
 
 
Secured Debt
 
6.5%
 
3.9%
 
6.4
 
 
Floating vs. Fixed-Rate Debt
 
 
 
 
 
 
 
 
Floating-Rate Debt
 
—%
 
—%
 
1.8
 
 
Fixed-Rate Debt
 
100.0%
 
3.8%
 
7.5
 
 
 
 
 
 
 
 
 
 
 
Stated Interest Rate
 
 
 
3.8%
 
7.5
 
 
 
 
 
 
 
 
 
 
 
GAAP Effective Rate
 
 
 
3.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Effective Rate Including Debt Issuance Costs
 
 
 
4.1%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KEY DEBT COVENANTS
 
 
 
Covenant
 
Actual Performance
as of September 30, 2020
 
 
Unsecured Credit Facility and Private Placement Notes (as defined in the Credit Agreements):
 
 
 
 
 
 
Total debt to total asset value
 
less than 60%
 
30%
 
 
Fixed charge coverage ratio
 
greater than 1.5x
 
3.3x
 
 
Unsecured debt ratio
 
greater than 1.67x
 
3.15x
 
 
Unencumbered asset pool debt service coverage
 
greater than 1.75x
 
4.04x
 
 
 
 
 
 
 
 
 
Unsecured Senior Notes due 2023, 2024, 2025, 2028, 2029, 2030 and 2032 (as defined in the Indentures): 
 
 
 
 
 
 
Total debt to total asset value
 
less than 60%
 
35%
 
 
Interest coverage
 
greater than 1.5x
 
8.8x
 
 
Secured debt to total asset value
 
less than 40%
 
2%
 
 
Unencumbered asset pool value to unsecured debt
 
greater than 150%
 
295%
 
 
 
 
 
 
 
 
________________________
(1)
As of September 30, 2020, there was no outstanding balance on the unsecured revolving credit facility. During the three months ended September 30, 2020, we fully repaid the $150.0 million unsecured term loan facility.


28
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Debt Analysis
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEBT MATURITY SCHEDULE
 
Floating/
Fixed Rate
 
Stated
Rate
 
Maturity
Date
 
2020
 
2021
 
2022
 
2023
 
2024
 
After 2024
 
Total (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured Debt(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed 
 
3.80%
 
1/15/2023
 
 
 
 
 
 
 
$
300,000

 
 
 
 
 
$
300,000

 
 
Fixed
 
3.45%
 
12/15/2024
 
 
 
 
 
 
 
 
 
425,000

 
 
 
425,000

 
 
Fixed
 
4.38%
 
10/1/2025
 
 
 
 
 
 
 
 
 
 
 
400,000

 
400,000

 
 
Fixed
 
4.30%
 
7/18/2026
 
 
 
 
 
 
 
 
 
 
 
50,000

 
50,000

 
 
Fixed
 
4.35%
 
10/18/2026
 
 
 
 
 
 
 
 
 
 
 
200,000

 
200,000

 
 
Fixed
 
3.35%
 
2/17/2027
 
 
 
 
 
 
 
 
 
 
 
175,000

 
175,000

 
 
Fixed
 
4.75%
 
12/15/2028
 
 
 
 
 
 
 
 
 
 
 
400,000

 
400,000

 
 
Fixed
 
3.45%
 
2/17/2029
 
 
 
 
 
 
 
 
 
 
 
75,000

 
75,000

 
 
Fixed
 
4.25%
 
8/15/2029
 
 
 
 
 
 
 
 
 
 
 
400,000

 
400,000

 
 
Fixed
 
3.05%
 
2/15/2030
 
 
 
 
 
 
 
 
 
 
 
500,000

 
500,000

 
 
Fixed
 
4.27%
 
1/31/2031
 
 
 
 
 
 
 
 
 
 
 
350,000

 
350,000

 
 
Fixed
 
2.50%
 
11/15/2032
 
 
 
 
 
 
 
 
 
 
 
425,000

 
425,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total unsecured debt
 
3.78%
 
 
 
—

 
—

 
—

 
300,000

 
425,000

 
2,975,000

 
3,700,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured Debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed
 
3.57%
 
12/1/2026
 
817

 
3,341

 
3,462

 
3,587

 
3,718

 
152,668

 
167,593

 
 
Fixed
 
4.48%
 
7/1/2027
 
487

 
2,001

 
2,092

 
2,188

 
2,288

 
79,019

 
88,075

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total secured debt
 
3.88%
 
 
 
1,304

 
5,342

 
5,554

 
5,775

 
6,006

 
231,687

 
255,668

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
3.78%
 
 
 
$
1,304

 
$
5,342

 
$
5,554

 
$
305,775

 
$
431,006

 
$
3,206,687

 
$
3,955,668

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
(2)
As of September 30, 2020, there was no outstanding balance on the unsecured revolving credit facility. During the three months ended September 30, 2020, we fully repaid the $150.0 million unsecured term loan facility.




29
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures
 
Included in this section are management’s statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations available to common stockholders and common unitholders (“FFO”), in the Company’s earnings release on October 28, 2020 and the reasons why management believes that these measures provide useful information to investors about the Company’s financial condition and results of operations.

Net Operating Income:

Management believes that Net Operating Income (“NOI”) is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as follows: consolidated operating revenues (rental income and other property income) less consolidated property and related expenses (property expenses, real estate taxes and ground leases). Other real estate investment trusts (“REITs”) may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.

Because NOI excludes leasing costs, general and administrative expenses, interest expense, depreciation and amortization, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the consolidated revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a portfolio basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base have on the Company’s results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company’s financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.

However, NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.

Same Store Net Operating Income:

Management believes that Same Store NOI is a useful supplemental measure of the Company’s operating performance. Same Store NOI represents the consolidated NOI for all of the properties that were owned and included in the Company's stabilized portfolio for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company’s Same Store NOI may not be comparable to other REITs.

However, Same Store NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect the operations of the Company’s entire portfolio, nor does it reflect the impact of general and administrative expenses, leasing costs, interest expense, depreciation and amortization costs, other nonproperty income and losses and the level of capital expenditures necessary to maintain the operating performance of the Company’s properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company’s results from operations.



30
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued
 
Same Store Cash Net Operating Income:

Management believes that Same Store Cash NOI is a useful supplemental measure of the Company’s operating performance. Same Store Cash NOI represents the consolidated NOI for all of the properties that were owned and included in the Company’s stabilized portfolio for two comparable reporting periods, adjusted for the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles, and the provision for bad debts. Because Same Store Cash NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends on a cash basis such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store Cash NOI, and accordingly, our Same Store Cash NOI may not be comparable to other REITs.

However, Same Store Cash NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect the operations of the Company's entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Company's results from operations.

EBITDA, as adjusted:

Management believes that consolidated earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, gains and losses on depreciable real estate, net income attributable to noncontrolling interests, preferred dividends and distributions, original issuance costs of redeemed preferred stock and preferred units, and impairment losses (“EBITDA, as adjusted”) is a useful supplemental measure of the Company’s operating performance. When considered with other GAAP measures and FFO, management believes EBITDA, as adjusted, gives the investment community a more complete understanding of the Company’s consolidated operating results, including the impact of general and administrative expenses and acquisition-related expenses, before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA, as adjusted, as it is used in several of the Company’s financial covenants for both its secured and unsecured debt. However, EBITDA, as adjusted, should not be viewed as an alternative measure of the Company’s operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Company’s results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA, as adjusted, and, accordingly, the Company’s EBITDA, as adjusted, may not be comparable to other REITs. The Company’s calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
 




31
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued
 
Funds From Operations:

The Company calculates Funds From Operations available to common stockholders and common unitholders (“FFO”) in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.

Management believes that FFO is a useful supplemental measure of the Company’s operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of the Company’s activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, the Company’s FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, management believes that FFO along with the required GAAP presentations provides a more complete measurement of the Company’s performance relative to its competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.

However, FFO should not be viewed as an alternative measure of the Company’s operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties, which are significant economic costs and could materially impact the Company’s results from operations.

Funds Available for Distribution:

Management believes that Funds Available for Distribution available to common stockholders and common unitholders (“FAD”) is a useful supplemental measure of the Company’s liquidity. The Company computes FAD by adding to FFO the non-cash amortization of deferred financing costs, debt discounts and premiums and share-based compensation awards, amortization of above (below) market rents for acquisition properties and non-cash executive compensation expense then subtracting recurring tenant improvements, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements, adjusting for other lease related items and amounts of gain or loss on marketable securities related to the Company’s executive deferred compensation plan that are capitalized as development costs, and after adjustment for amounts attributable to noncontrolling interests in consolidated property partnerships. FAD provides an additional perspective on the Company’s ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company’s financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company’s FAD may not be comparable to other REITs.


32
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Definitions Included in Supplemental
Annualized Base Rent:

Includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue.

Change in GAAP/Cash Rents (Leases Commenced):

Calculated as the change between GAAP/cash rents for new/renewed leases and the expiring GAAP/cash rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company.

Change in GAAP/Cash Rents (Leases Executed):

Calculated as the change between GAAP/cash rents for signed leases and the expiring GAAP/cash rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company.

Estimated Stabilization Date (Development):

Management’s estimation of the earlier of stabilized occupancy (95%) or one year from the date of the cessation of major base building construction activities for office and retail properties and upon substantial completion for residential properties.

FAD Payout Ratio:

Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FAD.

First Generation Capital Expenditures:

Capital expenditures for newly acquired space, newly developed, redeveloped, or repositioned space. These costs are not subtracted in our calculation of FAD.

Fixed Charge Coverage Ratio:

Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums) and current year accrued preferred dividends.

FFO Payout Ratio:

Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FFO attributable to common stockholders and unitholders.


33
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Definitions Included in Supplemental, continued
GAAP Effective Rate:

The rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of any discounts/premiums, excluding debt issuance costs.

Interest Coverage Ratio:

Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums).

Net Effect of Straight-Line Rents:

Represents the straight-line rent income recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases and the provision for bad debts recorded for deferred rent receivable balances.

Net Operating Income Margins:

Calculated as Net Operating Income divided by total revenues.

Retention Rates (Leases Commenced):

Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.

Same Store Portfolio:

Our Same Store portfolio includes all of our properties owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2019 and still owned and included in the stabilized portfolio as of September 30, 2020. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, completed residential developments not yet stabilized and properties held-for-sale. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.

Stated Interest Rate:

The rate at which interest expense is recorded per the respective loan documents, excluding the impact of the amortization of any debt discounts/premiums.

Tenant Improvement Phase:

Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.


34
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

    
Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income
(unaudited, $ in thousands)
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
2020
 
2019
 
2020
 
2019
 
 
Net Income Available to Common Stockholders
 
$
49,028

 
$
43,846

 
$
108,463

 
$
122,943

 
 
Net income attributable to noncontrolling common units of the Operating Partnership
 
785

 
852

 
1,857

 
2,423

 
 
Net income attributable to noncontrolling interests in consolidated property partnerships
 
4,258

 
3,600

 
13,521

 
11,941

 
 
Net Income
 
54,071

 
48,298

 
123,841

 
137,307

 
 
Adjustments:
 


 


 

 


 
 
General and administrative expenses
 
18,572

 
22,576

 
76,179

 
65,774

 
 
Leasing costs
 
986

 
1,192

 
3,772

 
5,599

 
 
Depreciation and amortization
 
71,863

 
69,230

 
226,318

 
203,617

 
 
Interest income and other net investment gain
 
(1,869
)
 
(761
)
 
(1,579
)
 
(3,205
)
 
 
Interest expense
 
19,468

 
11,635

 
49,796

 
34,605

 
 
Gains on sales of depreciable operating properties
 
—

 
—

 
—

 
(7,169
)
 
 
Net Operating Income, as defined (1)
 
163,091

 
152,170

 
478,327

 
436,528

 
 
Wholly-Owned Properties
 
142,523

 
131,976

 
416,007

 
389,644

 
 
Consolidated property partnerships: (2)
 
 
 
 
 
 
 
 
 
 
100 First Street (3)
 
5,470

 
5,934

 
15,858

 
5,153

 
 
303 Second Street (3)
 
9,338

 
8,349

 
29,220

 
24,219

 
 
Crossing/900 (4)
 
5,760

 
5,911

 
17,242

 
17,512

 
 
Net Operating Income, as defined (1)
 
163,091

 
152,170

 
478,327

 
436,528

 
 
Non-Same Store GAAP Net Operating Income (5)
 
(28,562
)
 
(14,978
)
 
(78,342
)
 
(31,894
)
 
 
Same Store GAAP Net Operating Income
 
134,529

 
137,192

 
399,985

 
404,634

 
 
GAAP to Cash Adjustments:
 


 
 
 
 
 
 
 
 
GAAP Operating Revenues Adjustments, net (6)
 
(10,458
)
 
(17,676
)
 
(23,279
)
 
(61,405
)
 
 
GAAP Operating Expenses Adjustments, net (7)
 
(18
)
 
3

 
(53
)
 
(31
)
 
 
Same Store Cash Net Operating Income
 
$
124,053

 
$
119,519

 
$
376,653

 
$
343,198

 
 
 
 
 
 
 
 
 
 
 
 
________________________
(1)
Please refer to pages 30-31 for Management Statements on Net Operating Income, Same Store Net Operating Income and Same Store Cash Net Operating Income.
(2)
Reflects GAAP Net Operating Income for all periods presented.
(3)
For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.
(4)
For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City, CA.
(5)
Includes the results of one office property disposed of during the second quarter of 2019, one property disposed of during the fourth quarter of 2019, one office property we acquired in the third quarter of 2019, our completed residential development that is not yet stabilized and our in-process and future development projects.
(6)
Includes the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements and amortization of above and below market lease intangibles.
(7)
Includes the amortization of above and below market lease intangibles for ground leases and the provision for bad debts.

35
Kilroy Realty Corporation
Third Quarter 2020 Supplemental Financial Report

Reconciliation of Net Income Available to Common Stockholders to EBITDA, as Adjusted
(unaudited, $ in thousands)
 
 
 
Three Months Ended September 30,
 
 
 
 
2020
 
2019
 
 
Net Income Available to Common Stockholders
 
$
49,028

 
$
43,846

 
 
Interest expense
 
19,468

 
11,635

 
 
Depreciation and amortization
 
71,863

 
69,230

 
 
Net income attributable to noncontrolling common units of the Operating Partnership
 
785

 
852

 
 
Net income attributable to noncontrolling interests in consolidated property partnerships
 
4,258

 
3,600

 
 
EBITDA, as adjusted (1)
 
$
145,402

 
$
129,163

 
 
 
 
 
 
 
 
________________________
(1)
Please refer to page 31 for a Management Statement on EBITDA, as adjusted. The Company’s calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.


36