Kilroy Realty Corporation Quarter Ended December 31, 2024 Company Overview Who is Kilroy? | IO QUICK FACTS | | | | --- | --- | --- | | abilized Portfolio | | 17,142,721 | | ેટ | | 123 | | ed (%) | | 82.8% / 84.9% | | ENANTS BY ABR (1) | | | | % of | % of | Credit Ratings | | ABR (1) | RSF | (S&P / Moody's) | | 5.7% | 5.0% | AA+ / Aaa | | 4.5% | 2.2% | BBB / Baa2 | | 4.2% | 2.5% | NR / NR | | 3.5% | 3.1% | A+ / A1 | | 3.3% | 3.4% | AAA / Aaa | | 3.1% | 2.8% | A+ / A1 | | 3.1% | 1.7% | NR / NR | | 3.0% | 1.4% ...

Kilroy Realty Corporation Quarter Ended March 31, 2025 Company Overview Who is Kilroy? | ed Portfolio | 17.1M | | --- | --- | | | 123 | | 5) | 81.4% / 83.9% | | | 250bps | | % of | % of | Credit Ratings | | --- | --- | --- | | ABR (1) | RSF | (S&P / Moody's) | | 5.7% | 5.0% | AA+ / Aaa | | 4.5% | 2.2% | BBB / Baa2 | | 4.2% | 2.5% | NR / NR | | 3.6% | 3.1% | A+ / A1 | | 3.3% | 3.4% | AAA / Aaa | | 3.1% | 2.8% | A+ / A1 | | 3.1% | 1.7% | NR / NR | | 3.0% | 1.4% | NR / NR | | 2.8% | 2.1% | A / Baa1 | | 2.3% | ...

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Company Overview - Kilroy Realty Corporation (NYSE: KRC) is a publicly traded real estate investment trust (REIT) that focuses on owning, acquiring, developing, and operating Class A office and life science properties primarily in California and Washington, with additional assets in Austin and Seattle [1] Investment Strategy - Noor Darwish, a former management consultant at The Boston Consulting Group, emphasizes investing in companies trading at substantial discounts to their net asset value or liquidation value, as well as in crypto-related equities [1] - Darwish achieved a 250% portfolio gain by rotating into crypto, specifically investing in GDLC at $6 per share and selling at $21, outperforming both Bitcoin and the broader market [1] - The portfolio was later rotated into Grayscale private placements, resulting in an 80% gain in 6 months [1] Tax Strategy - Darwish relocated to Puerto Rico to benefit from a 0% capital gains tax rate on equities and cryptocurrencies under the Act 60 program, anticipating significant capital gains on his GDLC position [1] - The 250% gain and subsequent gains will be untaxed due to this relocation [1] Job Application Service - The company OverApply, run by Darwish, provides a job application service that allows clients to outsource their job search to human virtual assistants, applying to over 1,000 jobs monthly [1] - OverApply has applied to more than 300,000 jobs on behalf of its clients, resulting in over 4,000 interviews and 500 job offers [1]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (I.R.S. Employer Identification No.) For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-12675 (Kilroy Realty Corporation) Commission File Number: 000-54005 (Kilroy Realty, L.P.) KI ...

Financial Data and Key Metrics Changes - FFO was reported at $1.2 per diluted share, with cash same property NOI declining by 160 basis points year over year [20] - Cash same property base rent growth was 90 basis points despite a 300 basis point decline in average occupancy, which ended the quarter at 81.4%, down from 82.8% at year-end [20] - First quarter GAAP releasing spreads were negative 15.8%, while cash releasing spreads were negative 23% [21] Business Line Data and Key Metrics Changes - The office segment saw a 60% year-over-year increase in tour activity in the San Francisco portfolio, indicating strong future leasing visibility [8] - Life science leasing momentum remained unaffected despite market volatility, with continued tenant engagement at the KOP Phase two development project [10][11] - The overall portfolio-wide improvement in tour activity was 40% year over year, reflecting a positive trend in leasing activity [9] Market Data and Key Metrics Changes - San Francisco experienced a significant rebound in office demand, with the lowest crime rate in 23 years contributing to increased foot traffic [6][7] - The office sales volume in the first quarter was roughly flat year over year, with notable activity increases in Silicon Valley and Seattle [14][16] - The demand for office space in San Francisco is driven by the expansion of AI businesses and a return to office mandates from major employers [6][8] Company Strategy and Development Direction - The company is focused on maximizing value through selective land sales and evaluating operating property dispositions to achieve attractive valuations [12][17] - A commitment to sustainability was highlighted with the publication of an annual sustainability report, introducing ambitious goals for environmental and social topics [12] - The company aims to stay agile and responsive to market changes while investing in tenants and maintaining financial flexibility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in office demand, particularly in San Francisco, driven by AI industry growth and improved safety [6][8] - The company remains cautious about the life science sector due to regulatory complexities but sees unprecedented opportunities in the market [10] - Management noted that despite macroeconomic uncertainties, leasing activity has shown resilience, with minimal impact from recent headlines on transaction volume [9] Other Important Information - The company is actively working on the Flower Mart site to explore a wider range of uses and ensure responsiveness to market conditions [25][26] - The company has a significant unencumbered asset base and a well-structured debt maturity schedule, providing financial flexibility [23] Q&A Session Summary Question: Update on the Flower Mart site - Management is exploring various uses for the Flower Mart site and is optimistic about the leasing environment in San Francisco [25][26] Question: Timing for decisions on the Flower Mart site - Active discussions are ongoing, with expectations for clarity on the site's future by the second half of the year [27][28] Question: Commentary on leasing activity and pipeline - The leasing team is engaged in numerous transactions, with a 15% increase in the leasing pipeline quarter over quarter [30][40] Question: Quantification of deals that slipped from Q1 to April - Approximately 50,000 to 60,000 square feet of deals slipped into April, impacting Q1 leasing volume [42] Question: Plans for the Santa Fe Summit land sale - The company is evaluating additional sales of land parcels, with a focus on maximizing value [44][45] Question: Demand for space from Dermtech's downsizing - The outcome of Dermtech's downsizing was better than expected, with marketing efforts underway for the remaining space [98][99] Question: Recovery in Los Angeles office demand - The Los Angeles market is fragmented, with Long Beach performing well, while other areas face challenges [100]

Financial Data and Key Metrics Changes - The company reported FFO of $1.2 per diluted share, with cash same property NOI declining by 160 basis points year over year [19] - Average occupancy ended the quarter at 81.4%, down from 82.8% at year-end [19] - Cash same property base rent growth was 90 basis points despite a 300 basis point decline in average occupancy [19] Business Line Data and Key Metrics Changes - In the office segment, there was a 60% year-over-year increase in tour activity in the San Francisco portfolio, indicating strong future leasing visibility [5][6] - The life science sector remains robust, with no discernible impact on leasing momentum despite market volatility [8][9] - The company signed a significant 60,000 square foot lease with a technology company in San Francisco, marking the largest lease execution since 2019 [5] Market Data and Key Metrics Changes - San Francisco is experiencing a rebound in office demand, driven by return-to-office mandates and a growing AI industry [4][5] - The company noted a positive trend in leasing activity across various markets, with notable increases in Silicon Valley and Seattle [12][14] - The overall office sales volume in Q1 was roughly flat year-over-year, but there is a wider array of capital pursuing deals [12] Company Strategy and Development Direction - The company is focused on maximizing value through selective sales and evaluating land parcels for future development [9][16] - There is an emphasis on maintaining financial flexibility and exploring various paths for the Flower Mart site to adapt to market conditions [25][28] - The company aims to balance economics, future growth plans, and balance sheet strength in its capital allocation strategy [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in San Francisco, citing improvements in safety and vibrancy [4][5] - The company remains committed to corporate responsibility and sustainability goals, with new ambitious targets set for 2030 [10] - Management acknowledged the challenges posed by macroeconomic uncertainty but highlighted strong leasing activity and a growing pipeline [4][6] Other Important Information - The company introduced enhanced disclosures around rental income components and a new retention statistic that highlights the effect of direct leases executed with in-place subtenants [17][18] - The company is actively working on capitalizing on its land bank while also considering operating property dispositions [16][45] Q&A Session Summary Question: Update on the Flower Mart site - Management is exploring a wider range of uses for the Flower Mart site and is hopeful for positive engagement with the new city administration [25][26] Question: Impact of leasing activity and fires in LA - Management noted that some deals were pulled forward into Q4, impacting Q1 leasing activity, but expressed confidence in the pipeline moving forward [30][31] Question: Quantification of leasing pipeline - The leasing pipeline is up approximately 15% quarter-over-quarter, with around 50,000 to 60,000 square feet of deals slipping into April [38][41] Question: Sale of land at Santa Fe Summit - The company is evaluating additional sales of land parcels and focusing on maximizing value based on market demand [43][44] Question: Trends in renewals and expansions - Companies are generally retaining their existing footprints, with some new companies seeking more space, particularly in the AI sector [46][47] Question: Capitalized interest and future projects - Management provided details on capitalized interest for KOP Phase 2 and Flower Mart, indicating significant costs associated with these projects [49][51] Question: Demand in LA and recovery progress - The LA market is fragmented, with some areas like Long Beach performing well, while the Westside is experiencing slower recovery [100][102]

分组1 - Kilroy Realty (KRC) reported quarterly funds from operations (FFO) of $1.02 per share, missing the Zacks Consensus Estimate of $1.03 per share, and down from $1.11 per share a year ago, representing an FFO surprise of -0.97% [1] - The company posted revenues of $270.84 million for the quarter, missing the Zacks Consensus Estimate by 1.51%, and down from $278.58 million year-over-year [2] - Kilroy Realty shares have declined approximately 19.9% since the beginning of the year, compared to a decline of -3.3% for the S&P 500 [3] 分组2 - The current consensus FFO estimate for the upcoming quarter is $1.03 on revenues of $273.54 million, and for the current fiscal year, it is $4 on revenues of $1.09 billion [7] - The Zacks Industry Rank for REIT and Equity Trust - Other is currently in the bottom 37% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

Financial Performance - Revenues for Q1 2025 were $270.8 million, a decrease of 2.8% from $278.6 million in Q1 2024[8] - Net income available to common stockholders was $39.0 million, or $0.33 per diluted share, compared to $49.9 million, or $0.42 per diluted share in the prior year[8] - Funds from operations (FFO) for the quarter were $122.3 million, or $1.02 per diluted share, down from $133.7 million, or $1.11 per diluted share in Q1 2024[8] - Revenues for Q1 2025 were $270,844,000, a decrease of 5.4% compared to $286,379,000 in Q4 2024[27] - Net income available to common stockholders for Q1 2025 was $39,008,000, down 34.4% from $59,460,000 in Q4 2024[27] - Net operating income for Q1 2025 was $180,239,000, a decline of 6.9% from $193,645,000 in Q4 2024[27] - Funds from operations (FFO) for Q1 2025 were $122,310,000, compared to $144,875,000 in Q4 2024, representing a decrease of 15.6%[27] - The company's share of adjusted EBITDAre for Q1 2025 was $153,585,000, down from $168,788,000 in Q4 2024, a decrease of 9.0%[27] - The net income payout ratio for Q1 2025 was 147.6%, significantly higher than 99.0% in Q4 2024[29] - Total expenses for Q1 2025 were $196.992 million, slightly down from $198.376 million in Q4 2024[39] - Interest income for Q1 2025 was $1.134 million, a significant decrease from $4.790 million in Q4 2024[39] - Interest expense for Q1 2025 was $31.148 million, down from $33.245 million in Q4 2024, indicating a reduction of 6.3%[39] - The company reported a total of $161,999,000 in EBITDAre for Q1 2025, down from $181,421,000 in Q4 2024[1] - The company reported a decrease in EBITDA from $165,625,000 in Q4 2023 to $163,059,000 in Q1 2025[155] Occupancy and Leasing - The stabilized portfolio was 81.4% occupied and 83.9% leased as of March 31, 2025[8] - Approximately 248,000 square feet of leases were signed during the quarter, including 98,000 square feet of new leasing on previously vacant space[8] - Average occupancy rate decreased to 81.3% in Q1 2025 from 84.3% in Q1 2024[1] - The total leased rate for the stabilized portfolio is 83.9% as of March 31, 2025, down from 84.9% on December 31, 2024[58] - The company executed 21 new and renewal leases totaling 244,189 square feet, with a retention rate of 19.3% for the quarter[66] - The company is focusing on maintaining and improving occupancy rates through strategic leasing efforts[63] - The overall trend shows a slight decline in occupancy rates across the portfolio, which may require further analysis and strategic adjustments[63] Dividends and Shareholder Returns - The board declared a quarterly cash dividend of $0.54 per share, equivalent to an annual rate of $2.16 per share[6] - The company declared dividends of $0.54 per common share, consistent with the previous quarters[29] - The FFO Payout Ratio is calculated as current-quarter dividends divided by FFO attributable to common stockholders, indicating the proportion of earnings distributed[133] Debt and Financial Ratios - As of March 31, 2025, total debt amounts to $4,630,149, representing 54.2% of total market capitalization of $8,542,327[98] - The company has a fixed charge coverage ratio of 3.3x, exceeding the required minimum of 1.5x[106] - The total principal amount of debt is $4,630,149, with net debt calculated at $4,483,438[106] - The company's share of trailing 12-month EBITDAre is $677,632, with a net debt to EBITDAre ratio of 6.6x[106] - The secured debt to total asset value ratio is 5%, well below the 40% limit[106] - The company’s unsecured debt ratio stands at 3.04x, above the required minimum of 1.67x[106] Future Outlook and Guidance - The company affirmed FFO per share guidance for the full year 2025 at $3.85 to $4.05 per diluted share[9] - Same Property Cash Net Operating Income (NOI) growth guidance for 2025 is projected to be between (1.5%) to (3.0%)[10] - Total annualized base rent for 2025 is projected to be $447,571,000, representing a 3.3% increase[75] - The company expects a total of 1,900,007 rentable square feet by 2026, with a 13.9% increase in annualized base rent to $89,927,000[75] - In 2027, total rentable square feet is anticipated to be 1,078,806, with a 7.9% increase in annualized base rent to $43,722,000[75] Property and Portfolio Management - The total assets as of March 31, 2025, were $10,878,685,000, a slight decrease from $10,898,357,000 at the end of Q4 2024[33] - The total liabilities as of March 31, 2025, were $5,298,700,000, compared to $5,289,488,000 at the end of Q4 2024[33] - The company maintains a diversified tenant industry portfolio, with significant contributions from technology and entertainment sectors[80] - The company has ongoing projects with a total estimated investment of $1,105 million, including 975,000 square feet of office/life science space[89] - The company plans to stabilize the Kilroy Oyster Point - Phase 2 project by Q1 2026, with an estimated rentable area of 875,000 square feet[89] Changes in Accounting and Metrics - The company began excluding lease termination fees from Net Operating Income starting January 1, 2025, aligning with a new definition[1] - The Company began excluding lease termination fees from the calculation of rental revenue for Net Operating Income (NOI) metrics starting January 1, 2025, to provide a more accurate measure of operating performance[111] - The Company's Funds From Operations (FFO) is calculated in accordance with the 2018 Restated White Paper on FFO, excluding depreciation and amortization related to real estate, and is considered a standard measure for REITs[118] - The Company computes Funds Available for Distribution (FAD) by adjusting FFO for recurring tenant improvements, leasing commissions, and capital expenditures, providing insight into liquidity[122] - The Company calculates EBITDAre as a supplemental measure of operating performance, which excludes financing costs and depreciation, providing a clearer view of operational results[115]

Core Viewpoint - J.P. Morgan analyst Anthony Paolone maintains an Overweight rating on Kilroy Realty Corporation (KRC) while lowering the price forecast to $42 from $49, citing the company's high-quality assets and strong balance sheet compared to other office REITs [1] Group 1: Company Portfolio and Market Outlook - The analyst expresses a positive view on Kilroy Realty's portfolio, highlighting its high-quality assets and strong balance sheet [1] - Leasing activity in key West Coast markets is expected to improve, particularly as tech companies encourage employees to return to the office [1][2] - Operational expense growth is projected to stabilize [2] Group 2: Valuation and Financial Projections - The stock appears undervalued based on a 9%+ implied cap rate and a current occupancy rate of around 80%, indicating it is cheap from a real estate valuation perspective [3] - During peak cycles, Kilroy Realty's assets were valued at cap rates in the low 4% range, further supporting the view that the stock is discounted [3] - The analyst has revised financial outlooks for 2025 and 2026, lowering FFO/share estimates to $4.01 for 2025 and $3.52 for 2026, reflecting a 12.3% year-over-year decline [4] Group 3: Factors Influencing Financial Revisions - The downward revisions in financial outlook are primarily driven by a reduction in capitalized interest, assuming that another $1 billion in land and projects will be excluded from active development [5] - This includes an estimated $600+ million from the Flower Mart project, over $200 million from the SIX0 development, and an additional $100-$200 million from various smaller projects [5] Group 4: Current Market Performance - KRC shares are trading higher by 1.10% to $33.22 as of the latest check [6]