Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its fourth quarter and full year ended December 31, 2023.

Fourth Quarter and Full Year Highlights

Financial Results

• Revenues of $269.0 million
• Net income available to common stockholders of $0.40 per diluted share
• Funds from operations available to common stockholders and unitholders (“FFO”) of $129.3 million, or $1.08 per diluted share

Leasing and Occupancy

• Stabilized portfolio was 85.0% occupied and 86.4% leased at December 31, 2023
• Signed approximately 588,000 square feet of new and renewal leases during the quarter, including short-term leases, the highest quarterly leasing volume since Q2 2019
  • GAAP and cash rents increased 21.7% and 1.6%, respectively, from prior levels in the stabilized portfolio, excluding short-term leases
• For the full year, signed approximately 1,347,000 square feet of new and renewal leases, including short-term leases, the highest annual leasing volume since 2019

Development

• Added approximately $750.0 million of new development properties to the stabilized portfolio throughout the year
  • During the fourth quarter, added Indeed Tower, a $690.0 million, approximately 759,000 square foot office building in the Austin CBD, which is currently 78% leased and 65% occupied
  • During the third quarter, added 9514 Towne Centre Drive, a $60.0 million, approximately 71,000 square foot office building in the University Towne Center submarket of San Diego, which is 100% leased and occupied

Balance Sheet / Liquidity

• During the first quarter, increased the borrowing capacity of the unsecured term loan facility to $520.0 million, which was fully outstanding at December 31, 2023
• During the third quarter, entered into an eleven-year, non-recourse mortgage note for $375.0 million. The mortgage note bears interest at a fixed rate of 5.90% and matures on August 10, 2034
• As of the date of this release, the company had approximately $2.2 billion of total liquidity comprised of approximately $1.1 billion of cash and short-term investments and approximately $1.1 billion available under the unsecured revolving credit facility

Dividend

• The company’s Board of Directors (the “Board”) declared and paid a regular quarterly cash dividend on its common stock of $0.54 per share, equivalent to an annual rate of $2.16

Sustainability and Corporate Social Responsibility

• Achieved carbon neutral operations across the portfolio for the fourth consecutive year
• On-site solar at company properties has the capacity to generate over six megawatts of clean electricity, which is equivalent to the annual electricity use of over 1,200 homes
• Listed on U.S. EPA’s National Top 100 List of largest green power users
• For the eighth consecutive year, awarded the ENERGY STAR Partner of the Year Sustained Excellence Award
• Named the GRESB Regional Sector Leader in the Americas for Development (Diversified), earning the highly competitive GRESB 5 Star designation
• For the fifth consecutive year, included in Bloomberg’s Gender Equality Index

Recent Developments

• On January 12, 2024, completed a public offering of $400.0 million of 12-year unsecured senior notes at an interest rate of 6.250% due January 2036
• On January 21, 2024, John Kilroy retired as Chief Executive Officer (“CEO”) and effective January 22, 2024, Angela Aman assumed the CEO role and joined the Board. John Kilroy will serve as an advisor through the end of 2024 and will remain Chair of the Board through his current term

Net Income Available to Common Stockholders / FFO Guidance and Outlook

The company is providing Nareit-defined FFO per diluted share guidance for the full year 2024 of $4.10 to $4.25 per share, with a midpoint of $4.18 per share.

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The company’s guidance estimates for the full year 2024, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this press release, reflect management’s views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this press release. These guidance estimates do not include the impact on the company’s operating results from potential future acquisitions, dispositions (including any associated gains or losses), capital markets activity, impairment charges or any events outside of the company’s control, as the timing and magnitude of any such events are not known at the time the company provides guidance. There can be no assurance that the company’s actual results will not differ materially from these estimates.

Conference Call and Audio Webcast

The company’s management will discuss fourth quarter results and the current business environment during the company’s February 6, 2024 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. To participate and obtain conference call dial-in details, register by using the following link, https://www.netroadshow.com/events/login?show=87605277&confId=57126. Those interested in listening via the Internet can access the conference call at https://events.q4inc.com/attendee/931384027. It may be necessary to download audio software to hear the conference call. A replay of the conference call will be available via telephone on February 6, 2024 through February 13, 2024 by dialing (866) 813-9403 and entering passcode 236874. International callers should dial (929) 458-6194 and enter the same passcode. The replay will also be available on our website at https://investors.kilroyrealty.com/shareholders/investor-events/default.aspx.

About Kilroy Realty Corporation

Kilroy Realty Corporation (NYSE: KRC, the “company”, “Kilroy”) is a leading U.S. landlord and developer, with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, Greater Seattle and Austin. The company has earned global recognition for sustainability, building operations, innovation and design. As a pioneer and innovator in the creation of a more sustainable real estate industry, the company’s approach to modern business environments helps drive creativity and productivity for some of the world’s leading technology, entertainment, life science and business services companies.

The company is a publicly traded real estate investment trust (“REIT”) and member of the S&P MidCap 400 Index with more than seven decades of experience developing, acquiring and managing office, life science and mixed-use projects.

As of December 31, 2023, Kilroy’s stabilized portfolio totaled approximately 17.0 million square feet of primarily office and life science space that was 85.0% occupied and 86.4% leased. The company also had approximately 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 92.5%. In addition, the company had two in-process life science redevelopment projects totaling approximately 100,000 square feet with total estimated redevelopment costs of $80.0 million and one approximately 875,000 square foot in-process development project with a total estimated investment of $1.0 billion.

A Leader in Sustainability and Commitment to Corporate Social Responsibility

Kilroy has a longstanding commitment to sustainability and continues to be a recognized leader in our sector. For over a decade, the company and its sustainability initiatives have been recognized with numerous honors, including earning the GRESB five star rating and being named a sector and regional leader in the Americas. Other honors have included the Nareit Leader in the Light Award, being listed on the Dow Jones Sustainability World Index, being named ENERGY STAR Partner of the Year and receiving the ENERGY STAR highest honor of Sustained Excellence.

Kilroy is proud to have achieved carbon neutral operations across our portfolio since 2020. The company also has a longstanding commitment to maintain high levels of LEED, Fitwel and ENERGY STAR certifications across the portfolio.

A significant part of the company’s foundation is its commitment to enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture. For the fifth year in a row, the company has been named to Bloomberg’s Gender Equality Index, which recognizes companies committed to supporting gender equality through policy development, representation, and transparency.

More information is available at http://www.kilroyrealty.com.

Forward-Looking Statements

This press release 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. Forward-looking statements are based on our 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 our 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, including periods of heightened inflation, 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, Texas 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, including bankruptcy, lack of liquidity or lack of funding and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than the employer's office premises; 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; changes in interest rates and 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; and our ability to maintain our status as a REIT. 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 our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 and our 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. We assume no obligation to update any forward-looking statement made in this press release 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.

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