“Our West Coast markets remain healthy and vibrant and we in turn delivered a record high leasing performance signing 3.4 million square feet of leases in our stabilized portfolio and development program.” So says CEO John Kilroy of Kilroy Realty Corp. during the company’s Q4 earnings call. “Cash and GAAP rents were up 15% and 36% respectively in the stabilized portfolio.”
According to Kilroy, the company proactively addressed its 2018 and 2019 expirations. “We signed a 12-year lease with Netflix for all–of the 355,000 square feet of our office space at the mixed-use development project that is under construction in Hollywood. We also signed leases on 91% of the retail space and have commitments on roughly 2/3rds of the office space at our One Paseo mixed-use project in Del Mar.”
He explained that the company “commenced revenue recognition on all of the office space at 100 Hooper in San Francisco. We added a key life science development opportunity to our pipeline with the acquisition of Kilroy Oyster Point, a fully entitled approximately 40-acre waterfront site in South San Francisco. We made two strategic property acquisitions, totaling $257 million, one in South San Francisco and the other in San Francisco’s technology corridor, on Brannan Street. Both acquisitions are adjacent to existing KRC assets.”
The company also generated $373 million in its capital recycling program through the disposition of three non-strategic assets. “We increased our dividend by 7.1% or 30% over the last three years. We strengthened our balance sheet, lowered our overall cost of capital and successfully managed earnings dilution with the issuance of $1.1 billion in equity and debt. And we reinforced our commitment to building a sustainable enterprise with a pledge to achieve carbon-neutral operations by year-end 2020.”
He also explained that the company also ranked number one in sustainability across all publicly traded real estate companies in the world by GRESB and received numerous other awards for our leadership positions from the EPA and NAREIT.
As for specific fourth quarter details, he explained that the company had another outstanding quarter in leasing. “In our stabilized portfolio, we signed new or renewing leases on 768,000 square feet of office space. Rents were up 25% on a cash basis and 51% on a GAAP basis, included in the fourth quarter was a five-year renewal with Microsoft, for 76,000 square feet in Silicon Valley that was to expire this year. The deal addressed the last of our five 2019 expirations, exceeding 75,000 square feet. We also signed a 10-year 71,000 square foot lease at Orange County, property that backfilled our 2019 expiration.”
The company was also equally busy closing out its investment activities for the year. “We completed the disposition of three non-strategic assets for $373 million across three markets, Seattle, the San Francisco Bay area and the 101 Corridor in Los Angeles. The average cap rate on those three transactions was in the low 5% range.”