Kilroy Realty Corporation · NYSE:KRC
Kilroy Realty — NAREIT REITweek 2023
23 slides from Kilroy Realty's conference presentation, June 2023
Slide 1: Kilroy Realty NAREIT June 2023
KILROY REALTY NAREIT June 2023 KILROY REALTY | 0 Carmel Valley Corporate Center | San Diego
Slide 2: Kilroy at a Glance
KILROY AT A GLANCE A Premier, Publicly Traded Developer, Owner, and Manager of Class A Properties on the West Coast and Austin 16.2M RSF Owned $700M $1.6B 1,000+ LTM EBITDA Total Current Liquidity Residential Units $4.30-$4.50 7.9% Baa2 / BBB 2023E Funds From Operations (1) Dividend Yield (2) Invest
Slide 3: Key Topics
KEY TOPICS 01 1 Improving Return to Office Trends 02 2 A Strategy Built for All Environments 03 3 Outperformance of Quality Assets 04 4 Fortress Balance Sheet Columbia Square | Los Angeles KILROY REALTY | 2
Slide 4: Improving Return to Office Trends
IMPROVING RETURN TO OFFICE TRENDS KILROY REALTY | 3
Slide 5: Recent Return to Office Announcements From Major Companies Will Drive Momentum
1 IMPROVING RETURN TO OFFICE TRENDS Recent Return to Office Announcements From Major Companies Will Drive Momentum 3 days a week starting September 2023 4 days a week as of March 2023 3 days a week as of May 2023 4 days per week as of February 2023 3 days a week as of May 2023 At least 3 days a week
Slide 6: Executive Commentary Defends the Importance of Bringing Employees Together
1 IMPROVING RETURN TO OFFICE TRENDS Executive Commentary Defends the Importance of Bringing Employees Together in Physical Workspaces CHIEF EXECUTIVE OFFICER, MARK ZUCKERBERG “Our early analysis of performance data suggests that engineers who either joined Meta in- person and then transferred to rem
Slide 7: Return to Office Policies Are Being Enforced and Showing Up in the Data
1 IMPROVING RETURN TO OFFICE TRENDS Return to Office Policies Are Being Enforced and it is Showing Up in the Data -800 bps +20% DECLINE IN THE SHARE OF BAY AREA RAPID TRANSIT REMOTE JOB POSTINGS (BART) RIDERSHIP INCREASE Since February 2021 YoY in April +120% +780 bps INCREASE IN DOWNTOWN PHYSICAL O
Slide 8: Job Growth Continues to be Positive and Should Lead to Improved Demand
1 IMPROVING RETURN TO OFFICE TRENDS Job Growth Continues to be Positive and Should Lead to Improved Demand as Employees Return Change in Employment (Current vs 2019 YE) ~+2.5M +47% +91% +20% +47% +4% +40% +105% +9% +16% +38% Total Office Using (1) Jobs 2019 YE Employee Count Estimated Current Employ
Slide 9: A Strategy Built for All Environments
A STRATEGY BUILT FOR ALL ENVIRONMENTS KILROY REALTY | 8
Slide 10: KRC's Strategy is Guided by Three Principles
2 A STRATEGY BUILT FOR ALL ENVIRONMENTS KRC’s Strategy is Guided by Three Principles Best-in-Class Real Disciplined and Fortress Balance Estate in the Most Experienced Sheet Dynamic Markets Approach to Capital Allocation KILROY REALTY | 9
Slide 11: Youngest and Most Modern Portfolio Among Office REITs
2 A STRATEGY BUILT FOR ALL ENVIRONMENTS Kilroy Has the Youngest and Most Modern Portfolio Among Office REITs… 73 48 45 46 Peer Office 34 34 REIT Average 25 25 25 23 20 15 11 KRC Bi-Coastal Sunbelt Sunbelt West-Coast Bi-Coastal Sunbelt West-Coast West-Coast Bi-Coastal East-Coast East-Coast East-Coast
Slide 12: Proven Track Record of Thoughtful Capital Allocation
2 A STRATEGY BUILT FOR ALL ENVIRONMENTS … With a Proven Track Record of Thoughtful Capital Allocation Throughout Different Points in the Cycle… COVID-19 EXPANSION CONTRACTION EXPANSION CONTRACTION EXPANSION PANDEMIC ACQUISITIONS ($M) $507 $698 $538 $674 $394 $1,070 $5.3B $254 $31 $98 $287 $207 $257
Slide 13: Fortress Balance Sheet Positioned for Offense and Defense
2 A STRATEGY BUILT FOR ALL ENVIRONMENTS … and Anchored by a Fortress Balance Sheet That Uniquely Positions Us to Play Both Offense & Defense OFFENSIVE DEFENSIVE Development Best in Class Strong Balance Pipeline Portfolio & Team Sheet $1.8B under development (1) ~92% leased 5.7x net debt to EBI
Slide 14: Outperformance of Quality Assets
OUTPERFORMANCE OF QUALITY ASSETS KILROY REALTY | 13
Slide 15: In The Current Office Environment, Quality is Prevailing
3 OUTPERFORMANCE OF QUALITY ASSETS In The Current Office Environment, Quality is Prevailing ➢ The top 10% of buildings reduced their vacancy by 100M SF, while the bottom 10% of buildings increased their vacancy by 250M SF Increase in Total U.S. Vacancies 300 250 200 Vacant Space (m.s.f.) 150 100 50
Slide 16: Asking Rents for Prime Assets Continue to Outpace the Broader Market
3 OUTPERFORMANCE OF QUALITY ASSETS Asking Rents for Prime Assets Continue to Outpace the Broader Market ➢ The spread between prime and non-prime rents is ~23%, the widest it has been in over 15 years Average Asking Rent for Five Select Downtowns $85 $80 $75 $70 ~23% $65 $60 $55 $50 $45 $40 Prime Not
Slide 17: New Starts Have Come to a Halt
3 OUTPERFORMANCE OF QUALITY ASSETS While New Starts Have Come to a Halt ➢ Supply continues to moderate with national groundbreakings of ~2.5M SF in 1Q23 a ~70% reduction to the two-year trailing average Total U.S. Groundbreakings 65 62.5M 55 Groundbreakings (m.s.f) 49.5M 45 39.0M 35 25.5M 25 15 5 2.
Slide 18: Quality Office Has Always Outperformed; Gap Should Widen
3 OUTPERFORMANCE OF QUALITY ASSETS Quality Office Has Always Outperform But the Gap Should Widen in the Coming Years With Flight to Quality Tailwinds Annual Same-Store NOI Growth (Cash) 14.3% 8.2% 8.3% 7.3% 7.4% 7.0% 5.6% 3.6% 3.2% 3.5% 3.1% 3.0% 2.4% 1.0% (0.6%) 2011 2012 2013 2014 2015 2016 2017 2
Slide 19: Fortress Balance Sheet
FORTRESS BALANCE SHEET KILROY REALTY | 18
Slide 20: Premier Access to Liquidity Enhancing Avenues
4 FORTRESS BALANCE SHEET Premier Access to a Multitude of Liquidity Enhancing Avenues in Both Public and Private Markets Fortress Balance Sheet Strong Liquidity Sources No Significant Low Leverage Total Debt Maturities Profile Until December Cash on Hand $330M 2024 5.7x (1) Term Loan Availability $1
Slide 21: Leverage Remains Manageable Assuming No Additional Leasing
4 FORTRESS BALANCE SHEET Even Assuming No Additional Leasing and All Debt Funding, Leverage Remains Manageable Pro Forma for Completion of In-process Development Debt Funded, Debt Funded, Full Year 2022 Partially Stabilized Fully Stabilized (32% Leased) (100% Leased) 6.8x 6.9 For every $100M of disp
Slide 22: Where Innovation Works
Where Innovation Works KILROY REALTY | 21 Jardine | 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,