Financial Data and Key Metrics Changes - The second quarter revenue was $190 million, down from $218 million in the same quarter last year, primarily due to asset sales and lower office occupancy [19][20] - General and administrative (G&A) expenses improved significantly to $13.5 million from $20.7 million year-over-year, and $80.5 million in the first quarter of this year, marking a 3527% improvement [19][20] - Funds from operations (FFO) excluding specified items was $8 million or $0.04 per diluted share, compared to $24.5 million or $0.17 per diluted share in the same quarter last year [19][20] Business Line Data and Key Metrics Changes - Office leasing activity resulted in 1.2 million square feet of leases signed year-to-date, with 558,000 square feet signed in the quarter, 60% of which were new leases [5][12] - Studio revenue increased by 3% to $34.2 million due to additional studio occupancy, while studio expenses decreased by 11% to $36.6 million [16] - The trailing twelve-month net effective rents were 2% lower compared to the prior year and 11% lower versus pre-pandemic levels [13] Market Data and Key Metrics Changes - The West Coast office recovery is being driven by tech and AI companies, with San Francisco experiencing the largest quarterly occupancy increase in seven years [6][7] - In Silicon Valley, over 1 million square feet of positive net absorption was driven by the tech sector, with AI job postings increasing significantly [7][8] - The Bay Area currently hosts 60% of AI's footprint, indicating strong demand for office space in this sector [8] Company Strategy and Development Direction - The company is focused on enhancing its cost profile and has executed operational enhancements, asset sales, and capital transactions to drive future cash flow growth [6][11] - The strategic pursuit of non-core asset dispositions continues, with the sale of 625 Second for $28 million completed in the second quarter [11] - The company anticipates a stable and growing office occupancy due to lower expirations and increased demand [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of office occupancy, projecting a low to high 8 handle by year-end 2026 [31] - The company expects to see increased allocation activity in the studio segment due to the California Film and Television Tax Credit [10] - Management noted that the balance sheet is in a strong position, allowing for a focus on leasing and operational improvements [34] Other Important Information - The company has over $1 billion in liquidity, including $236 million in unrestricted cash and $775 million in undrawn capacity under its credit facility [21] - The outlook for the third quarter expects FFO per diluted share to range from $0.01 to $0.05, with gross FFO expected to increase due to the recent equity offering [22][23] Q&A Session Summary Question: Concerns about future tenant move-outs - Management confirmed there are no significant issues with any tenant that would change the leasing dynamics [26][28] Question: Pace of occupancy recovery - Management indicated a comfortable projection for occupancy recovery, aiming for a low to high 8 handle by year-end 2026 [31] Question: Focus on leasing versus balance sheet - Management stated that the focus has shifted to leasing and occupancy growth, with no immediate major steps needed on the balance sheet [34] Question: Studio business and lease terminations - Management explained that lease terminations were part of cost-cutting efforts, with significant reductions in expenses achieved [36] Question: Revenue recovery in the studio segment - Management projected potential recovery in studio revenue, aiming for a breakeven point with increased show counts [44] Question: Leasing environment and activity levels - Management confirmed that leasing activity has picked up, surpassing previous quarterly averages [53][54] Question: Guidance for third quarter - Management indicated that studio business activity will be a key variable affecting guidance for the third quarter [62][64]

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% ...

Financial Data and Key Metrics Changes - The company reported FFO per diluted share of $0.52 for Q1 2025, a decrease of approximately $0.03 compared to Q4 2024, primarily due to the impact of the Del Monte Center disposition [18][6] - Same store cash NOI increased by 3.1% year over year across all sectors, with positive growth reported in all sectors except mixed-use [18][19] - The company ended Q1 with liquidity of approximately $544 million, including $144 million in cash and $400 million available on a revolving line of credit [22] Business Line Data and Key Metrics Changes - The office portfolio's same store NOI increased by 5.4% in Q1 2025, driven by the expiration of a rent abatement [18][19] - The retail portfolio's same store NOI also increased by 5.4%, supported by new leases and contractual rent escalations [19] - The multifamily portfolio's NOI was flat year over year, primarily due to lower rental income in Portland, while San Diego properties showed growth [19][12] - The mixed-use portfolio's NOI declined by approximately 11.6%, mainly due to lower occupancy at the Embassy Suites Waikiki [19][20] Market Data and Key Metrics Changes - The office portfolio ended Q1 at 85.5% leased, with an increase in leasing activity and average base rents reaching an all-time high [9][11] - The retail portfolio ended the quarter 97% leased, with strong collections and an all-time high average base rent [11][12] - The multifamily properties in San Diego ended the quarter approximately 95% leased, with a blended rent increase of 2% [12][13] Company Strategy and Development Direction - The company is focused on thoughtful capital allocation, operational discipline, and enhancing asset quality to ensure long-term stability [5][6] - Recent strategic initiatives include the sale of Del Monte Center and the acquisition of Genesee Parks Apartments, aimed at concentrating capital in core markets [14][15] - The company aims to maintain a balance sheet that allows for flexibility in both offensive and defensive strategies [6][22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the ongoing shift in office dynamics, despite economic uncertainty [7][10] - The company remains focused on reducing leverage and maintaining strong liquidity, which is deemed essential in the current environment [6][22] - Management acknowledged potential challenges in leasing activity due to economic uncertainty but remains committed to monitoring market conditions closely [14][26] Other Important Information - The Board approved a quarterly dividend of $0.34 per share for Q2, reflecting confidence in the company's outlook [16][17] - The company aims to achieve and maintain a long-term net debt to EBITDA ratio of 5.5 times or below [22] Q&A Session Summary Question: Update on Bellevue assets and occupancy - Management noted significant leasing momentum in Bellevue, with recent leases bringing occupancy to 97% at Timber Ridge and ongoing interest in other properties [30][32] Question: Impact of Proposition 1A on tenant interest - Management observed increased inbound tenant inquiries in Bellevue, indicating a positive response to the proposition [34] Question: Plans for redeploying proceeds from Del Monte Center sale - The company is actively looking for additional acquisitions but is also comfortable holding cash on the balance sheet amid economic uncertainty [36][37] Question: Update on leasing pipeline at La Jolla - The UTC submarket remains tight, with ongoing proposals and construction of amenities expected to boost leasing activity [38][41]

Financial Data and Key Metrics Changes - The company reported a normalized FFO of $0.27 per diluted share and an FFO of $0.29 per diluted share for Q4 2024, with a full year FFO of $1.02 and normalized FFO of $1.29 per diluted share [10][38] - The overall portfolio occupancy at the end of Q4 stood at 96%, slightly increasing compared to the prior quarter [42] - The company achieved same-store NOI growth of $1.3 million at 3.6% on a GAAP basis [41] Business Line Data and Key Metrics Changes - The retail segment achieved an 11.1% GAAP releasing spread, while the office segment achieved an 18.7% GAAP releasing spread [39] - The multi-family portfolio reported a combined trade-out spread of negative 0.8% for the quarter, with renewal spreads remaining strong at 4.7% [40] - The construction management segment posted $2.1 million of gross profit, with expectations to return closer to historical levels in the short term [42] Market Data and Key Metrics Changes - The office assets in mixed-use environments commanded around a 15% premium above competing central business districts [22] - The retail portfolio had a strong performance with 95% occupancy, executing new leases covering approximately 195,000 square feet [27] - The multi-family portfolio operated at 95.3% occupancy, with rent growth in markets such as Baltimore and Virginia Beach [33] Company Strategy and Development Direction - The company remains committed to improving income streams and balance sheet quality, focusing on sustainable growth and financial strength [9] - The strategy includes recycling stabilized assets and capitalizing on better long-term opportunities [14] - The company is focused on strengthening its balance sheet by reducing leverage and enhancing financial flexibility [18] Management's Comments on Operating Environment and Future Outlook - Management expects 2025 to be the trough year for earnings, with anticipated growth in 2026 and beyond as developments stabilize [90] - The company is actively managing challenges related to construction delivery delays and increased interest expenses [46] - Management remains confident in the long-term value of the portfolio and the potential for redevelopment opportunities [36] Other Important Information - The company disposed of two non-core retail assets at a blended cap rate in the low 6% range, achieving an $82 million aggregate sales price [15] - The company successfully executed a $109 million common equity offering to reduce leverage and position for future growth [19] - The company has hedged 100% of its variable rate debt exposure to ensure stability in interest expenses [44] Q&A Session Summary Question: What does the market look like going forward on the Mez side? - Management noted inquiries about financing deals and the pressure in the lending market has created a gap that needs to be filled [52][54] Question: Any new investments need to be a loan to own rather than just a straight loan? - Management indicated that all options are possible, but the focus is on risk-adjusted returns [57][58] Question: Can you talk about the occupancy of your apartment assets in the home market? - Management attributed lower occupancy to price point issues and new developments in the broader market, but expressed confidence in maintaining market rents [59][60] Question: Can you comment on the dilution from recent equity raises and asset sales? - Management stated that the equity raise in September resulted in roughly 5 cents worth of dilution [62][65] Question: How is the company thinking about the longer-term play with T. Rowe headquarters? - Management is monitoring the market and believes it is not the right time to sell the asset at a discount [66][68] Question: Can you provide details on Southgates First occupancy decline? - Management explained the decline was related to specific tenants and expressed optimism about backfill negotiations [73][74] Question: Do you have any active properties that you are marketing on the retail side? - Management mentioned receiving unsolicited activity for retail properties and is open to capital recycling opportunities [80][81]

Office Sector Trends - Tenant requirements increased by 28% in 1Q24 compared to 1Q23[3] - Gross leasing activity accelerated by 14% in 1Q24 compared to 1Q23[3] - Sublease additions decreased by 67% from March 2024 compared to the December 2022 peak[3] - The development pipeline shrank by 62% from 2023 compared to 2019[3] - Remote job postings on LinkedIn declined by 12 percentage points from February 2022 to December 2023[3] HPP Market Performance - Tenant demand increased in West Los Angeles, San Francisco, and Silicon Valley[4] - Sublease availability decreased in West Los Angeles, San Francisco (by 400K sq ft), and Silicon Valley (by 500K sq ft)[4] - Under construction as a percentage of inventory decreased in West Los Angeles (~130 bps YOY), Silicon Valley (~290 bps YOY), and Seattle (~370 bps YOY)[4] - AI companies in San Francisco leased 228K sq ft YTD, with another 825K sq ft of requirements in the market[9] - Bay Area received 78% of approximately $10 billion in US AI VC funding in 1Q24[10] HPP Leasing Activity - HPP executed 305K sq ft of leases in April-May, with 83% being new leases[12] - HPP's current pipeline increased 10% to 2.0M sq ft compared to 1Q24[13] - HPP signed 91K sq ft of leases at 411 First, increasing occupancy from 57% to 93% between 2Q22 and 1Q24[18]