Kilroy Realty Corporation · NYSE:KRC
Kilroy Realty — NAREIT REITweek: 2023 Investor Conference
23 slides from Kilroy Realty's conference presentation, November 2023
Slide 1: Kilroy Realty NAREIT November 2023
KILROY REALTY NAREIT November 2023 KILROY REALTY | 0 Kilroy Oyster Point Phase 2 | San Francisco
Slide 2: Agenda
AGENDA 01 Company Update 02 Market Observations 03 Strong Financial Position The Sunset | Los Angeles KILROY REALTY | 1
Slide 3: Company Update
COMPANY UPDATE KILROY REALTY | 2
Slide 4: Kilroy at a Glance
COMPANY UPDATE Kilroy at a Glance A Developer, Owner, and Manager of Premier Properties on the West Coast and Austin Pacific Northwest // ~15% 16.3M RSF Owned Baa2 / BBB 1,000+ Investment Grade San Francisco // ~25% Residential Units Other Bay Area // ~26% Los Angeles // ~16% 5.6% 7.6% San Diego //
Slide 5: Kilroy is Built for All Environments
COMPANY UPDATE Kilroy is Built for All Environments… Three Guiding Principles Best-in-Class Real Disciplined and Fortress Balance Estate in the Most Experienced Sheet Dynamic Markets Approach to Capital Allocation KILROY REALTY | 4
Slide 6: Optionality to Play Both Offense & Defense Through Real Estate Cycles
…And Has Optionality to Play Both Offense & Defense Through COMPANY UPDATE Real Estate Cycles… Select Categories Commentary OFFENSIVE DEFENSIVE DEFENSE • $1.9B of liquidity including ~$790M in cash and undrawn term loan proceeds Fortress Balance Sheet • 6.2x (1) debt / EBITDA with no debt maturities
Slide 7: Proven Track Record of Thoughtful Capital Allocation
COMPANY UPDATE … With a Proven Track Record of Thoughtful Capital Allocation COVID-19 EXPANSION CONTRACTION EXPANSION CONTRACTION EXPANSION PANDEMIC ACQUISITIONS ($M) $507 $698 $538 $674 $394 $1,070 $5.3B $254 $31 $287 $207 $257 $186 $8 $98 $31 $25 Total 1997 1998 1999 2000 2001 2002 2003 2004 2005
Slide 8: Market Fundamentals & Leasing Update
COMPANY UPDATE Market Fundamentals & Leasing Update Key Themes Across KRC Markets • Green shoots via rising public transit usage, employee foot traffic and increased demand requirements • AI companies leading the way in San Francisco (Open AI / Anthropic) • Total tenant requirements increased over 6
Slide 9: In-Process Development
COMPANY UPDATE In-Process Development REDEVELOPMENT UNDER CONSTRUCTION ~$80M investment ~$940M investment 4690 Executive Drive (Est. Stabilization 4Q24) | UTC, San Diego 4400 Bohannon Drive (Est. Stabilization in 2025) | Menlo Park, San Francisco KOP Phase 2 (Est. Stabilization in 2025) | Oyster Poi
Slide 10: Market Observations
MARKET OBSERVATIONS KILROY REALTY | 9
Slide 11: Recent Employment Trends in the Tech Sector
MARKET Recent Employment Trends in the Tech Sector OBSERVATIONS Slowdown in Tech Layoffs Coupled With Increased Office Job Postings Will Drive Positive Momentum U.S. Tech Layoffs Large Cap Tech Job Postings in KRC Markets (1) 8K 70K 60K 7K 50K 6K 40K -90% YTD 5K 30K 4K 20K 3K Jan-23 Feb-23 Mar-23 Ap
Slide 12: Recent Return to Office Announcements
MARKET Recent Return to Office Announcements OBSERVATIONS Return to Office Momentum Continues and Existing Mandates Are Strengthened 3 days per week; Instituting stricter monitoring and 4+ days per week commenced in September enforcement of hybrid employees’ attendance 3 days per week; Instituting s
Slide 13: Improving Physical Occupancy Trends
MARKET Improving Physical Occupancy Trends OBSERVATIONS Return to Office Policies Are Being Enforced and it is Showing Up in the Data -1,200 bps +3,000 bps DECLINE IN THE SHARE OF BAY AREA RAPID TRANSIT REMOTE JOB POSTINGS (BART) RIDERSHIP INCREASE Since February 2021 Year-to-date in September +2,00
Slide 14: Political Updates Across KRC's Markets
MARKET Political Updates Across KRC’s Markets OBSERVATIONS Momentum Shift in a Positive Direction with More Pro Business Councils in Positions to Make an Impact • Increased police funding and hiring (California/Washington) • Strengthened response to criminal activity and repeat drug offenders (Calif
Slide 15: Building Age and Quality Influence Market Vacancy Rates
MARKET Building Age and Quality Influence Market Vacancy Rates OBSERVATIONS Kilroy Vacancy vs. Market Vacancy 25% 21% 19% 14% 13% 9% 8% 3% Overall Market Average San Francisco Del Mar Hollywood KRC Markets Select KRC Submarkets Kilroy Vacancy Market Vacancy Note: Data based on Company’s’ stabilized
Slide 16: U.S. Office Supply Slowing Down
MARKET U.S. Office Supply Slowing Down OBSERVATIONS The Deceleration of Groundbreakings Will Create a Future Shortage of High-Quality Product 80 70 Groundbreakings (m.s.f) 60 50 40 77.5M 30 49.5M 20 42.0M 25.5M 10 8.0M 0 2019 2020 2021 2022 YTD Source: JLL. KILROY REALTY | 15
Slide 17: Strong Financial Position
STRONG FINANCIAL POSITION KILROY REALTY | 16
Slide 18: Fortress Balance Sheet
STRONG FINANCIAL Fortress Balance Sheet POSITION Premier Access to a Multitude of Liquidity-Enhancing Avenues in Both Public and Private Markets Fortress Balance Sheet Strong Liquidity Uses ~6 Years Low Leverage Profile Total 2024 Bond Maturity ~$410M Average Debt Remaining In-Process Development Sp
Slide 19: Platform Debt Maturities
STRONG FINANCIAL Platform Debt Maturities POSITION KRC Has Addressed December 2024 Bond Maturity With One Paseo Financing $520 $157 $475 $500 $411 $82 $425 $450 $400 $400 $375 $350 $250 $175 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Avg. Interest Rate (Weighted) 3.5% 4.4% 5.6% 3.7%
Slide 20: Annual Lease Expirations From 2023-2025
COMPANY UPDATE Annual Lease Expirations From 2023-2025 KRC Rollover is Among the Lowest Within Its Peer Set, Mitigating Near-Term Lease-Up Risk and Re-Leasing Costs 18% Regarding 2024, 14% KRC has only two leases over 100K 12% 11% 11% that roll 9% 8% 8% 7% 6% 6% East-Coast KRC Bi-Coastal Bi-Coastal
Slide 21: Leverage Sensitivity
STRONG FINANCIAL Leverage Sensitivity POSITION Even Assuming No Additional Leasing and All Debt Funding, Leverage Remains Manageable Pro Forma for Completion of In-Process Development 3Q23 Debt Funded, Debt Funded, Partially Stabilized Fully Stabilized Annualized (30% Leased) (100% Leased) 7.0x 6.4x
Slide 22: Where Innovation Works
Where Innovation Works KILROY REALTY | 21 21 909 & 999 N. PCH | Los Angeles
Slide 23: Disclaimer
DISCLAIMER This presentation 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,
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