Kilroy Realty(KRC) - 2024 Q3 - Quarterly Results

Revenue and Financial Performance - Revenues grew 2.2% to $289.9 million for Q3 2024 compared to $283.6 million in Q3 2023[3] - Net income available to common stockholders was $0.44 per diluted share, slightly down from $0.45 in Q3 2023[3] - Funds from operations (FFO) increased 4.5% to $140.4 million, or $1.17 per diluted share, compared to $134.0 million, or $1.12 per diluted share, in Q3 2023[3] - Revenues for Q3 2024 increased to $289.938 million, up 3.3% from $280.731 million in Q2 2024[12] - Net Income Available to Common Stockholders rose to $52.378 million in Q3 2024, a 6.4% increase from $49.211 million in Q2 2024[12] - EBITDA, as adjusted, reached $185.960 million in Q3 2024, up 4.2% from $178.461 million in Q2 2024[12] - Funds From Operations (FFO) increased to $140.448 million in Q3 2024, a 5.9% rise from $132.587 million in Q2 2024[12] - Total revenues for Q3 2024 were $289.9 million, compared to $280.7 million in Q2 2024 and $283.6 million in Q3 2023[14] - Net income available to common stockholders for Q3 2024 was $52.4 million, compared to $49.2 million in Q2 2024 and $52.8 million in Q3 2023[14] - Funds From Operations (FFO) for Q3 2024 were $140.4 million, compared to $132.6 million in Q2 2024 and $134.0 million in Q3 2023[15] - FFO per common share/unit for Q3 2024 was $1.17 (basic) and $1.17 (diluted), compared to $1.10 (basic) and $1.10 (diluted) in Q2 2024[15] - Funds Available for Distribution (FAD) for Q3 2024 were $96.8 million, compared to $114.8 million in Q2 2024 and $118.7 million in Q3 2023[15] - Total operating revenues for Q3 2024 increased by 2.2% to $289.9 million compared to $283.6 million in Q3 2023[16] - Rental income for Q3 2024 grew by 1.1% to $234.1 million from $231.6 million in Q3 2023[16] - Tenant reimbursements for Q3 2024 rose by 5.6% to $51.8 million compared to $49.1 million in Q3 2023[16] - Other property income for Q3 2024 surged by 36.9% to $4.0 million from $2.9 million in Q3 2023[16] - Net Operating Income for Q3 2024 increased by 1.7% to $196.7 million compared to $193.4 million in Q3 2023[16] - Same Store operating revenues for Q3 2024 increased by 2.8% to $272.3 million from $264.8 million in Q3 2023[17] - Same Store Cash Net Operating Income for Q3 2024 grew by 2.7% to $183.6 million compared to $178.8 million in Q3 2023[17] - Net Income Available to Common Stockholders for Q3 2024 was $52.378 million, compared to $52.762 million in Q3 2023[64] - Net Operating Income for Q3 2024 was $196.691 million, slightly down from $193.396 million in Q3 2023[64] - Same Store Net Operating Income for Q3 2024 was $188.564 million, up from $172.344 million in Q3 2023[64] - EBITDA, as adjusted for Q3 2024 was $185.960 million, compared to $173.798 million in Q3 2023[66] - Company's share of EBITDA, as adjusted for Q3 2024 was $178.475 million, up from $165.408 million in Q3 2023[66] - Funds Available for Distribution (FAD) for Q3 2024 was $96.82 million, down from $118.70 million in Q3 2023[67] - Total Funds Available for Distribution for the nine months ended September 30, 2024, was $336.98 million, compared to $370.78 million for the same period in 2023[67] Occupancy and Leasing - Stabilized portfolio occupancy was 84.3% with a leased rate of 85.8% as of September 30, 2024[4] - Signed approximately 436,000 square feet of leases in Q3 2024, including 209,000 square feet of short-term leasing[4] - GAAP rents on signed leases increased 26.0% and cash rents increased 7.1% from prior levels, excluding short-term leasing[4] - Period End Occupancy Percentage improved to 84.3% in Q3 2024, up from 83.7% in Q2 2024[12] - Average occupancy for Q3 2024 was 84.6%, down from 86.1% in Q3 2023[18] - Same Store rental income for Q3 2024 increased by 0.7% to $224.5 million from $223.0 million in Q3 2023[18] - Same Store property expenses for Q3 2024 rose by 6.4% to $61.2 million compared to $57.5 million in Q3 2023[18] - Stabilized portfolio occupancy in Los Angeles increased to 76.7% as of 9/30/2024, up from 73.9% at 6/30/2024[19] - Hollywood / West Hollywood submarket achieved 85.8% occupancy, with a leased rate of 86.1% as of 9/30/2024[19] - El Segundo submarket occupancy improved to 81.8% as of 9/30/2024, up from 74.4% at 6/30/2024[19] - San Diego's stabilized portfolio occupancy reached 87.9% as of 9/30/2024, with Del Mar submarket at 96.4% occupancy[19] - San Francisco Bay Area stabilized portfolio occupancy stood at 91.1% as of 9/30/2024, with Silicon Valley and South San Francisco at 100% occupancy[19] - Seattle's stabilized portfolio occupancy was 80.4% as of 9/30/2024, with Bellevue submarket at 94.4% occupancy[19] - Austin CBD submarket occupancy increased to 74.2% as of 9/30/2024, up from 72.3% at 6/30/2024[19] - Total stabilized portfolio occupancy across all regions was 84.3% as of 9/30/2024, with a leased rate of 85.8%[19] - 1350 Ivar Avenue in Hollywood / West Hollywood maintained 100% occupancy as of 9/30/2024[20] - 2240 E. Imperial Highway in El Segundo maintained 100% occupancy as of 9/30/2024[20] - San Diego total occupancy rate at 9/30/2024 is 87.9%, with a leased rate of 90.5%[21] - San Francisco Bay Area total occupancy rate at 9/30/2024 is 91.1%, with a leased rate of 91.7%[22] - 12348 High Bluff Drive in San Diego has an occupancy rate of 51.5% at 9/30/2024[21] - 12707 High Bluff Drive in San Diego has an occupancy rate of 93.5% at 9/30/2024[21] - 3579 Valley Centre Drive in San Diego shows a decline in occupancy from 94.7% at 6/30/2024 to 87.0% at 9/30/2024[21] - 3721 Valley Centre Drive in San Diego has an occupancy rate of 78.9% at 9/30/2024, with a leased rate of 90.3%[21] - 2100 Kettner Boulevard in San Diego has a low occupancy rate of 22.6% at 9/30/2024[21] - 100 Hooper Street in San Francisco Bay Area has an occupancy rate of 95.5% at 9/30/2024[22] - 303 Second Street in San Francisco Bay Area has an occupancy rate of 73.5% at 9/30/2024[22] - 4200 Bohannon Drive in San Francisco Bay Area has an occupancy rate of 69.4% at 9/30/2024[22] - Total stabilized portfolio occupancy rate is 84.3% as of 9/30/2024, with a leased rate of 85.8%[23] - Seattle portfolio occupancy rate is 80.4%, with a leased rate of 81.6%[23] - Austin portfolio occupancy rate is 74.2%, with a leased rate of 80.7%[23] - Residential properties average occupancy rate is 92.0% as of 9/30/2024[24] - Total 2nd generation leasing for Q3 2024 includes 261,062 square feet with a weighted average lease term of 80 months[25] - Changes in GAAP rents for Q3 2024 are 48.3%, while changes in cash rents are 22.4%[25] - Retention Rates (Leases Executed) measure the percentage of space renewed by existing tenants at lease expiration or termination[60] Capital Expenditures and Investments - Acquired Junction at Del Mar, a 104,000 square foot office property in San Diego, for $35.0 million, which is 96% leased with a weighted average lease term of 4.7 years[4] - Total capital expenditures for 2nd generation improvements are $25.66 million for Q3 2024[27] - Major repositioning capital expenditures total $4.30 million for Q3 2024[28] - 1st generation capital expenditures for tenant improvements and leasing commissions are $1.43 million for Q3 2024[28] - Average capital expenditures to average NOI ratio is 11.7% for the trailing five quarters[27] - The company acquired two buildings in Del Mar during Q3 2024, totaling 103,731 rentable square feet for $35.0 million[35] - Consolidated property ventures with Norges Bank Real Estate Management in San Francisco total 1,265,115 rentable square feet, with 56% ownership[36] - Year-to-date net operating income for consolidated ventures is $64.416 million, with adjustments leading to a cash net operating income of $63.684 million[37] - In-process development projects total 100,000 rentable square feet with an estimated investment of $80 million, currently 0% leased[38] - Kilroy Oyster Point - Phase 2, under construction, will add 875,000 rentable square feet with a total estimated investment of $1.0 billion[39] - Future development pipeline includes projects totaling approximately 5,733,000 square feet and 1,750 residential units, with $1.356 billion in cash costs incurred as of 9/30/2024[40] - Recurring tenant improvements, leasing commissions, and capital expenditures totaled $25.66 million in Q3 2024, up from $20.52 million in Q3 2023[67] Debt and Financial Ratios - Total liquidity as of September 30, 2024, was approximately $1.7 billion, including $0.6 billion in cash and $1.1 billion available under the unsecured revolving credit facility[4] - Total debt as of September 30, 2024, is $5,036,923 thousand, representing 52.2% of total market capitalization[41] - Net debt to Company's share of EBITDA, as adjusted, is 6.4x as of September 30, 2024[43] - Total equity and noncontrolling interest in the operating partnership is $4,612,933 thousand, representing 47.8% of total market capitalization[41] - Weighted average stated rate for total debt is 4.13% as of September 30, 2024[41] - Net debt decreased to $4,411,528 thousand as of September 30, 2024, from $4,322,539 thousand as of June 30, 2024[43] - Total debt to total asset value covenant is 33%, well below the 60% limit as of September 30, 2024[44] - Fixed charge coverage ratio is 3.2x, exceeding the 1.5x covenant requirement as of September 30, 2024[44] - Unencumbered asset pool debt service coverage is 3.58x, surpassing the 1.75x covenant requirement as of September 30, 2024[44] - Interest coverage ratio is 5.1x, significantly above the 1.5x covenant requirement as of September 30, 2024[44] - Unencumbered asset pool value to unsecured debt is 282%, well above the 150% covenant requirement as of September 30, 2024[44] - Net Debt to Company's Share of EBITDA, as adjusted Ratio is a measure of borrowed capital used to increase real estate investment returns and assess debt repayment ability[51] Expenses and Costs - Property expenses for Q3 2024 were $63.6 million, compared to $59.3 million in Q2 2024 and $59.4 million in Q3 2023[14] - Depreciation and amortization for Q3 2024 were $91.9 million, compared to $87.2 million in Q2 2024 and $85.2 million in Q3 2023[14] - Interest expense for Q3 2024 was $36.4 million, compared to $36.8 million in Q2 2024 and $29.8 million in Q3 2023[14] - Recurring tenant improvements, leasing commissions, and capital expenditures for Q3 2024 were $25.7 million, compared to $22.1 million in Q2 2024 and $20.5 million in Q3 2023[15] - Interest expense for Q3 2024 was $36.408 million, compared to $29.837 million in Q3 2023[64] - Depreciation and amortization for Q3 2024 was $91.879 million, up from $85.224 million in Q3 2023[64] - General and administrative expenses for Q3 2024 were $18.066 million, down from $24.761 million in Q3 2023[64] - Depreciation of non-real estate furniture, fixtures, and equipment was $1.64 million in Q3 2024, slightly lower than $1.71 million in Q3 2023[67] Leasing and Tenant Metrics - Total expiring leases in 2024 account for 2.0% of total leased square feet, with an annualized base rent of $17,069 thousand, representing 2.1% of total ABR[29] - In 2025, expiring leases represent 5.4% of total leased square feet, with an annualized base rent of $33,134 thousand, accounting for 4.2% of total ABR[29] - For 2026, expiring leases make up 13.6% of total leased square feet, with an annualized base rent of $91,231 thousand, representing 11.4% of total ABR[29] - The San Francisco Bay Area has the highest expiring leases in 2026, with 945,807 square feet (6.8% of total leased square feet) and an annualized base rent of $49,543 thousand (6.2% of total ABR)[30] - In 2027, expiring leases account for 7.8% of total leased square feet, with an annualized base rent of $44,373 thousand, representing 5.6% of total ABR[29] - The San Francisco Bay Area leads in 2028 with 730,462 square feet (5.2% of total leased square feet) and an annualized base rent of $49,244 thousand (6.2% of total ABR)[30] - For 2029 and beyond, expiring leases represent 62.9% of total leased square feet, with an annualized base rent of $540,815 thousand, accounting for 67.7% of total ABR[29] - The San Francisco Bay Area dominates in 2029 and beyond, with 3,450,764 square feet (24.8% of total leased square feet) and an annualized base rent of $257,088 thousand (32.2% of total ABR)[30] - Los Angeles has significant expiring leases in 2029 and beyond, with 1,419,998 square feet (10.2% of total leased square feet) and an annualized base rent of $81,371 thousand (10.2% of total ABR)[30] - Seattle's expiring leases in 2029 and beyond total 1,697,982 square feet (12.2% of total leased square feet) with an annualized base rent of $78,027 thousand (9.8% of total ABR)[30] - Top 20 tenants contribute $428.742 million in annualized base rental revenue, representing 53.6% of total annualized base rental revenue and 42.5% of total rentable square feet[32] - The largest tenant, a global technology company, contributes $44.851 million annually, accounting for 5.6% of total annualized base rental revenue and 5.0% of total rentable square feet[32] - Technology sector tenants account for 54% of annualized base rent and 51% of rentable square feet, highlighting strong sector diversification[34] Portfolio and Asset Management - Total real