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What changed in KILROY REALTY CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KILROY REALTY CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+494 added−494 removedSource: 10-K (2024-02-09) vs 10-K (2023-02-10)

Top changes in KILROY REALTY CORP's 2023 10-K

494 paragraphs added · 494 removed · 403 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

59 edited+8 added−25 removed40 unchanged
Biggest changeRisk Factors” contained in this report. • Global market, economic and geopolitical conditions may adversely affect our business, results of operations, liquidity and financial condition and those of our tenants. • Many of our costs, such as operating and general and administrative expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation. • All of our properties are located in California, greater Seattle, Washington and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas. • Our performance and the market value of our securities are subject to risks associated with our investments in real estate assets and with trends in the real estate industry. • We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds and cash flows. • Downturns in tenants’ businesses may reduce our revenues and cash flows. • A large percentage of our tenants operate in a concentrated group of industries and downturns in these industries could adversely affect our financial condition, results of operations and cash flows. • We may be unable to renew leases or re-lease available space. • We are subject to governmental regulations that may affect the development, redevelopment and use of our properties. • We may not be able to meet our debt service obligations. • The covenants in the agreements governing the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility and note purchase agreements may limit our ability to make distributions to the holders of our common stock. • A downgrade in our credit ratings could materially adversely affect our business and financial condition. • An increase in interest rates would increase our interest costs on variable rate debt and new debt and could adversely affect our ability to refinance existing debt, conduct development, redevelopment and acquisition activity and recycle capital. • We face significant competition, which may decrease the occupancy and rental rates of our properties. • In order to maintain the quality of our properties and successfully compete against other properties, we must periodically spend money to maintain, repair and renovate our properties, which reduces our cash flows. • Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations and cash flows. • We may be unable to complete acquisitions and successfully operate acquired properties. • There are significant risks associated with property acquisition, development and redevelopment. 17 • Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition, and disputes between us and our co-venturers and could expose us to potential liabilities and losses. • We own certain properties subject to ground leases and other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties and expose us to the loss of the properties if such agreements are breached by us, terminated or not renewed. • We may invest in securities related to real estate, which could adversely affect our ability to pay dividends and distributions to our security holders. • We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems. • The actual density of our undeveloped land holdings and/or any particular land parcel may not be consistent with our potential density estimates. • Loss of our key personnel could harm our operations and financial performance and adversely affect the quoted trading price of our securities. • Our growth depends on external sources of capital that are outside of our control and the inability to obtain capital on terms that are acceptable to us, or at all, could adversely affect our financial condition and results of operations. • The Chairman of our board of directors and Chief Executive Officer has substantial influence over our affairs. • Loss of the Company’s REIT status would have significant adverse consequences to us and the value of the Company’s common stock.
Biggest changeRisk Factors” contained in this report. • Global market, economic and geopolitical conditions may adversely affect our business, results of operations, liquidity and financial condition and those of our tenants. • Many of our costs, such as operating and general and administrative expenses, interest expense and real estate construction costs, as well as the value of our assets, could be adversely impacted by periods of heightened inflation. • All of our properties are located in California, Seattle, Washington and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas. • Continuing uncertainty in the office leasing market could adversely affect our business, financial condition, results of operations and cash flows. • Our performance and the market value of our securities are subject to risks associated with our investments in real estate assets and with trends in the real estate industry. • We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds and cash flows. • Downturns in tenants’ businesses may reduce our revenues and cash flows. • A large percentage of our tenants operate in a concentrated group of industries and downturns in these industries could adversely affect our financial condition, results of operations and cash flows. • We may be unable to renew leases or re-lease available space. • We are subject to governmental regulations that may affect the development, redevelopment and use of our properties. • Epidemics, pandemics or other outbreaks, and restrictions intended to prevent their spread, could adversely impact our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders. • We face significant competition, which may decrease the occupancy and rental rates of our properties. • In order to maintain the quality of our properties and successfully compete against other properties, we must periodically spend money to maintain, repair and renovate our properties, which reduces our cash flows. • Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations and cash flows. • We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties. • Our business is subject to risks associated with climate change and our sustainability strategies. • We are subject to environmental and health and safety laws and regulations, and any costs to comply with, or liabilities arising under, such laws and regulations could be material. • We may be unable to complete acquisitions and successfully operate acquired properties. • There are significant risks associated with property acquisition, development and redevelopment. • We face risks associated with the development and operation of mixed-use commercial properties. • Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition, and disputes between us and our co-venturers, and could expose us to potential liabilities and losses. 15 • We own certain properties subject to ground leases and other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties and expose us to the loss of the properties if such agreements are breached by us, terminated or not renewed. • Real estate assets are illiquid, and we may not be able to sell our properties when we desire. • We may invest in securities related to real estate, which could adversely affect our ability to pay dividends and distributions to our security holders. • We face risks associated with short-term liquid investments. • Our property taxes could increase due to reassessment or property tax rate changes. • Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting. • We face risks associated with perceived or actual security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems or those of our service providers. • We face risks associated with compliance with ever evolving federal and state laws relating to the handling of information about individuals, which involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition. • The actual density of our undeveloped land holdings and/or any particular land parcel may not be consistent with our potential density estimates. • Loss of key executive officers or our inability to successfully transition key executive officers could harm our operations and financial performance, and adversely affect the quoted trading price of our securities. • We could be adversely affected by labor disputes, strikes or other union job actions. • We may not be able to meet our debt service obligations. • The covenants in the agreements governing the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility and note purchase agreements may limit our ability to make distributions to the holders of our common stock. • A downgrade in our credit ratings could materially adversely affect our business and financial condition. • An increase in interest rates would increase our interest costs on variable rate debt and new debt and could adversely affect our ability to refinance existing debt, conduct development, redevelopment and acquisition activity and recycle capital. • Our growth depends on external sources of capital that are outside of our control and the inability to obtain capital on terms that are acceptable to us, or at all, could adversely affect our financial condition and results of operations. • Our organizational structure includes approval rights for limited partners and restrictions that may delay, deter or prevent a change of control. • We may issue additional common units and shares of capital stock without unitholder or stockholder approval, as applicable, which may dilute unitholder or stockholder investment and decrease the quoted trading price per share of the Company’s common stock. • The board of directors may change investment and financing policies without stockholder or unitholder approval. • Loss of the Company’s REIT status would have significant adverse consequences to us and the value of the Company’s common stock. 16
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations” and “—Non-GAAP Supplemental Financial Measures: Funds 7 From Operations” for a reconciliation of these measures to generally accepted accounting principles (“GAAP”) net income available to common stockholders.) Operating Strategies .
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations” and “—Non-GAAP Supplemental Financial Measures: Funds From Operations” for a reconciliation of these measures to generally accepted accounting principles (“GAAP”) net income available to common stockholders.) 7 Operating Strategies .
Properties —Significant Tenants.” Competition We compete with several developers, owners, operators and acquirers of office and life science, undeveloped land and other commercial real estate, including mixed-use and residential real estate, many of which own properties similar to ours in the same submarkets in which our properties are located.
Properties —Significant Tenants.” Competition We compete with other developers, owners, operators and acquirers of office and life science properties, undeveloped land and other commercial real estate, including mixed-use and residential real estate, many of which own properties similar to ours in the same submarkets in which our properties are located.
These risks and opportunities include transitional risks such as policy, market, technology and reputational concerns, as well as physical risks, and are a focus area for the board of directors and management. Climate-related risks and opportunities are governed by the board of directors through the CSR&S Committee.
These risks include transitional risks such as policy, market, technology and reputational concerns, as well as physical risks, and are a focus area for the board of directors and management. Climate-related risks are governed by the board of directors through the CSR&S Committee.
Science-Based Targets is a collaboration between the Carbon Disclosure Project, the United Nations Global Compact, the World Resources Institute and the World Wide Fund for Nature, which independently assesses and approves the carbon reduction goals of companies.
Science-Based Targets Initiative is a collaboration between the Carbon Disclosure Project, the United Nations Global Compact, the World Resources Institute and the World Wide Fund for Nature, which independently assesses and approves the carbon reduction goals of companies.
Therefore, we cannot provide any assurance that our insurance coverage or transactional indemnities will be sufficient or that our liability, if any, will not have a material adverse effect on our financial condition, results of operations, cash flows, quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to security holders. 16 SUMMARY RISK FACTORS The following section sets forth a summary of material factors that may adversely affect our business and operations.
Therefore, we cannot provide any assurance that our insurance coverage or transactional indemnities will be sufficient or that our liability, if any, will not have a material adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to security holders. 14 SUMMARY RISK FACTORS The following section sets forth a summary of material factors that may adversely affect our business and operations.
However, our assessments may have failed to reveal all environmental conditions, liabilities, or compliance concerns; there may be material environmental conditions, liabilities, or compliance concerns that arose at a property after the review was completed; future laws, ordinances, or regulations 15 may impose material additional environmental liability; and environmental conditions at our properties may be affected in the future by tenants, third parties, or the condition of land or operations near our properties, such as the presence of underground storage tanks or migrating plumes.
However, our assessments may have failed to reveal all environmental conditions, liabilities, or compliance concerns; there may be material environmental conditions, liabilities, or compliance concerns that arose at a property after the review was completed; future laws, ordinances, or regulations 13 may impose material additional environmental liability; and environmental conditions at our properties may be affected in the future by tenants, third parties, or the condition of land or operations near our properties, such as the presence of underground storage tanks or migrating plumes.
See Note 18 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information. Other than the accrued environmental liabilities recorded in connection with certain of our development projects, we are not aware of any such condition, liability, or concern by any other means that would give rise to material environmental liabilities.
See Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information. Other than the accrued environmental liabilities recorded in connection with certain of our development projects, we are not aware of any such condition, liability, or concern by any other means that would give rise to material environmental liabilities.
We cannot be certain that costs of future environmental compliance will not have an adverse effect on our financial condition, results of operations, cash flow, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to security holders. Use of hazardous materials by some of our tenants .
We cannot be certain that costs of future environmental compliance will not have an adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to security holders. Use of hazardous materials by some of our tenants .
The remaining interests in all three property partnerships were owned by unrelated third parties. We own our interests in all of our real estate assets through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership, of which we owned a 99.0% common general partnership interest as of December 31, 2022.
The remaining interests in all three property partnerships were owned by unrelated third parties. We own our interests in all of our real estate assets through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership, of which we owned a 99.0% common general partnership interest as of December 31, 2023.
As of December 31, 2022, the Company owned a 56% common equity interest in both 100 First LLC and 303 Second LLC. The third consolidated property partnership, Redwood City Partners, LLC (“Redwood LLC”), owned two office properties in Redwood City, California. As of December 31, 2022, the Company owned an approximate 93% common equity interest in Redwood LLC.
As of December 31, 2023, the Company owned a 56% common equity interest in both 100 First LLC and 303 Second LLC. The third consolidated property partnership, Redwood City Partners, LLC (“Redwood LLC”), owned two office properties in Redwood City, California. As of December 31, 2023, the Company owned an approximate 93% common equity interest in Redwood LLC.
The remaining 1.0% common limited partnership interest in the Operating Partnership as of December 31, 2022 was owned by non-affiliated investors and certain of our executive officers and directors. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.
The remaining 1.0% common limited partnership interest in the Operating Partnership as of December 31, 2023 was owned by non-affiliated investors and certain of our executive officers and directors. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.
We utilize multiple sources of capital, including borrowings under our unsecured term loan facility, unsecured revolving credit facility, proceeds from the issuance of public or private debt or equity securities and other bank and/or institutional borrowings and our capital recycling program, including strategic venture sources.
We utilize multiple sources of capital, including borrowings under our unsecured term loan facility and unsecured revolving credit facility, proceeds from the issuance of public or private debt or equity securities and other bank and/or institutional borrowings and our capital recycling program.
Some of our tenants handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities.
Some of our tenants handle hazardous substances and waste on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities.
We have also been included on Newsweek’s list of America’s Most Responsible Companies for the past four years. We manage our properties to offer the maximum degree of utility and operational efficiency to our tenants. We collaborate with our tenants on efforts to reduce their energy and water consumption and increase recycling diversion and compost rates.
We have also been included on Newsweek’s list of America’s Most Responsible Companies for the past five years. 9 We manage our properties to offer the maximum degree of utility and operational efficiency to our tenants. We collaborate with our tenants on efforts to reduce their energy and water consumption and increase recycling diversion and compost rates.
Our future development pipeline was comprised of eight potential development sites representing approximately 64 gross acres of undeveloped land on which we believe we have the potential to develop over 6.5 million square feet of office, life science, laboratory, residential and retail space, depending upon economic conditions.
Our future development pipeline was comprised of eight potential development sites representing approximately 64 gross acres of undeveloped land on which we believe we have the potential to develop over 6.0 million square feet of office, life science, residential and retail space, depending upon economic conditions.
For further discussion of the potential impact of competitive conditions on our business, see “Item 1A. Risk Factors.” Segment and Geographic Financial Information During 2022 and 2021, we had one reportable segment, our office and life science properties segment. For information about our office property revenues and long-lived assets and other financial information, see “Item 7.
For further discussion of the potential impact of competitive conditions on our business, see “Item 1A. Risk Factors.” 10 Segment and Geographic Financial Information During 2023 and 2022, we had one reportable segment, our office and life science properties segment. For information about our office property revenues and long-lived assets and other financial information, see “Item 7.
We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin, Texas, which we believe have strategic advantages and strong barriers to entry.
We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle and Austin, which we believe have strategic advantages and strong barriers to entry.
We have been recognized with the US EPA ENERGY STAR ® Partner of the Year Sustained Excellence Award for the last seven years, Nareit’s Leader in the Light Award in the Listed Office category for eight of the last nine years and Nareit’s Leader in the Light Most Innovative award in 2018 and 2020.
We have been recognized with the US EPA ENERGY STAR ® Partner of the Year Sustained Excellence Award for the last eight years, Nareit’s Leader in the Light Award in the Listed Office category for eight of the last ten years and Nareit’s Leader in the Light Most Innovative award in 2018 and 2020.
We are deeply aware that our buildings are part of the larger community and that we thrive when the communities around us thrive. We are proud to make these communities better places to live and work through our volunteerism and philanthropy initiatives.
Strong Communities and Healthy Planet. We are deeply aware that our buildings are part of the larger community and that we thrive when the communities around us thrive. We are proud to make these communities better places to live and work through our volunteerism and philanthropy initiatives.
Management and our board of directors, through the Corporate Social Responsibility and Sustainability Committee (the “CSR&S Committee”) established in April 2018, currently oversee and advance the Company’s corporate social responsibility and sustainability initiatives. They recognize that community engagement and sustainable 9 operations benefit our investors, tenants, and other stakeholders and are key to preserving our Company’s value and credibility.
Management and our board of directors, through the Corporate Social Responsibility and Sustainability Committee (the “CSR&S Committee”) established in April 2018, currently oversee and advance the Company’s corporate social responsibility and sustainability initiatives. The CSR&S Committee recognizes that community engagement and sustainable operations benefit our investors, tenants, and other stakeholders and are key to preserving our Company’s value and credibility.
As of December 31, 2022, all of our properties, development projects and redevelopment projects were 100% owned, excluding four office properties owned by three consolidated property partnerships. 12 Human Capital Resources As of December 31, 2022, we employed 259 people through the Operating Partnership and Kilroy Realty TRS, Inc. We believe that relations with our employees are good.
As of December 31, 2023, all of our properties, development projects and redevelopment projects were 100% owned, excluding four office properties owned by three consolidated property partnerships. 11 Human Capital Resources As of December 31, 2023, we employed 248 people through the Operating Partnership and Kilroy Realty TRS, Inc. We believe that relations with our employees are good.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations.” As of December 31, 2022, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one development project in the tenant improvement phase and one future development project located in Austin, Texas.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Results of Operations.” As of December 31, 2023, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one stabilized office property and one future development project located in Austin, Texas.
As of December 31, 2022, other than routine cleaning materials and chemicals used in routine office operations, approximately 5-7% of our tenants handled hazardous substances and/or wastes on approximately 1-2% of the aggregate square footage of our properties as part of their business operations. These tenants are primarily involved in the life sciences business.
As of December 31, 2023, other than routine cleaning materials and chemicals used in routine office operations, approximately 4-6% of our tenants handled hazardous substances and/or wastes on approximately 1-2% of the aggregate square footage of our properties as part of their business operations. These tenants are primarily involved in the life sciences business.
These estimates, which we developed with the assistance of third party experts, consist primarily of the removal of contaminated soil, treatment of contaminated groundwater in connection with dewatering efforts, performing environmental closure activities, constructing remedial systems and other related costs that are necessary when we develop new buildings at these sites.
These estimates, which we developed with the assistance of third-party experts, consist primarily of the removal of contaminated soil, treatment of contaminated groundwater in connection with dewatering efforts, performance of environmental closure activities, construction of remedial systems and other related costs that are necessary when we develop new buildings.
Acquisition Strategies. We believe we are well positioned to opportunistically acquire properties and development and redevelopment opportunities as the result of our extensive experience, strong financial position and ability to access capital.
We believe we are well-positioned to acquire properties and future development and redevelopment opportunities as the result of our extensive experience, strong financial position and ability to access capital.
We incorporate green lease language into 100% of our new leases, and the majority of our leases also include a cost recovery clause for resource-efficiency related capital expenditures.
We aim to incorporate green lease language into all of our new leases, and the majority of our leases also include a cost recovery clause for resource-efficiency related capital expenditures.
Significant Tenants As of December 31, 2022, our 15 largest tenants in terms of annualized base rental revenues represented approximately 46.5% of our total annualized base rental revenues, defined as annualized monthly contractual rents from existing tenants as of December 31, 2022.
Significant Tenants As of December 31, 2023, our 15 largest tenants in terms of annualized base rental revenues represented approximately 46.1% of our total annualized base rental revenues, defined as annualized monthly contractual rents from existing tenants as of December 31, 2023.
Number of Properties Number of Units 2022 Average Occupancy Stabilized Residential Properties 3 1,001 93.5 % Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction, or in the tenant improvement phase, redevelopment projects under construction, undeveloped land and real estate assets held for sale.
Number of Properties Number of Units 2023 Average Occupancy Stabilized Residential Properties 3 1,001 92.8 % Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction, or in the tenant improvement phase, redevelopment properties under construction, undeveloped land and real estate assets held for sale.
Our longstanding leadership in sustainability in real estate is globally recognized, and our commitment to advancing progress toward our sustainability ambitions remains strong. Our vision is a resilient portfolio that minimizes the environmental impact of the development and operation of our buildings while maximizing the health and productivity of our tenants, employees and communities as well as our financial returns.
Our longstanding leadership in sustainability in real estate is globally recognized, and our commitment to advancing progress toward our sustainability ambitions remains strong. Our vision is a resilient portfolio that minimizes the environmental impact of our buildings while maximizing the health and productivity of our tenants, employees and communities while also delivering returns to stockholders.
These factors and strategies include: • the quality, physical characteristics and operating sustainability of our properties, as well as our geographic presence in technology and life science market clusters; • our ability to efficiently manage our assets as a low cost provider of commercial real estate through our seasoned management team possessing core capabilities in all aspects of real estate ownership, including property management, leasing, marketing, financing, accounting, legal, and construction and development management; • our access to development, redevelopment, acquisition and leasing opportunities as a result of our extensive experience and significant working relationships with major West Coast property owners, corporate tenants, municipalities and landowners given our over 75-year presence in the West Coast markets; • our strong financial position that has and will continue to allow us to pursue attractive acquisition and development and redevelopment opportunities; • our ability to capitalize on inflection points in a real estate cycle to add quality assets to our portfolio at substantial discounts to long-term value, through either acquisition, development or redevelopment.
These factors and strategies include: • the quality, physical characteristics and operating sustainability of our properties, as well as our geographic presence in technology and life science market clusters; • our ability to efficiently manage our assets through our seasoned management team, which possesses core capabilities in all aspects of real estate ownership, including property management, leasing, marketing, financing, accounting, legal, and construction and development management; • our strong financial position that has and will continue to allow us to pursue attractive acquisition and development and redevelopment opportunities; • our access to development, redevelopment, acquisition and leasing opportunities as a result of our extensive experience and significant working relationships with major West Coast property owners, brokers, corporate tenants, municipalities and landowners given our over 75-year presence in the West Coast markets; • our ability to capitalize on inflection points in real estate cycles to add high quality assets to our portfolio at substantial discounts to long-term value through acquisition activity or to dispose of non-strategic assets to harvest attractively priced capital embedded in our portfolio.
In 2018, the CSR&S Committee endorsed the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) and tasked management with assessing and reporting against climate related risk for the Company. We are proud to have achieved carbon neutral operations in 2020 and 2021, and we expect to achieve this goal for a third time in 2022.
In 2018, the CSR&S Committee endorsed the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) and tasked management with assessing and reporting against climate related risk for the Company. We are proud to have achieved carbon neutral operations since 2020, and we expect to achieve this goal for a fourth consecutive year in 2023.
As of December 31, 2022, we had accrued environmental remediation liabilities of approximately $80.5 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the remaining costs we estimate we will incur prior to and during the development process at various development acquisition sites.
As of December 31, 2023, we had accrued environmental remediation liabilities of approximately $76.6 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the remaining costs we estimate we will incur prior to and during the development process.
Development and Redevelopment Strategies . We and our predecessors have developed office properties primarily located in California since 1947. As of December 31, 2022, we had one development project in the tenant improvement phase totaling approximately 734,000 square feet of office space and two development projects under construction totaling approximately 946,000 square feet of office and life science space.
Development and Redevelopment Strategies . We and our predecessors have developed office properties primarily located in California since 1947. As of December 31, 2023, we had one development project under construction totaling approximately 875,000 square feet of office and life science space and two redevelopment projects under construction totaling approximately 100,000 square feet.
We focus on enhancing long-term growth in Net Operating Income and FFO from our properties by: • maximizing cash flow from our properties through active leasing, early renewals and effective property management; • structuring leases to maximize returns; • managing portfolio credit risk through effective underwriting, including the use of credit enhancements and interests in collateral to mitigate portfolio credit risk; • managing operating expenses through the efficient use of internal property management, leasing, marketing, financing, accounting, legal, and construction and development management functions; • maintaining and developing long-term relationships with a diverse tenant base; • continuing to effectively manage capital improvements to enhance our properties’ competitive advantages in their respective markets and integrate technology to enhance efficiencies with building management systems, security operation centers and tenant experience solutions to provide a premium experience to our tenant base while reducing operating costs; • continuing to expand our management team with individuals who have extensive regional and product-type experience and are highly knowledgeable in their respective markets and product types; and • attracting and retaining motivated employees by providing financial and other incentives to meet our operating and financial goals.
We focus on enhancing long-term growth in Net Operating Income and FFO from our properties by: • maximizing cash flows through new and renewal leasing activity; • structuring leases to maximize returns; • managing operating expenses through the efficient use of internal property management, leasing, marketing, financing, accounting, legal, and construction and development management functions; • managing portfolio credit risk through effective underwriting, including the use of credit enhancements and interests in collateral to mitigate portfolio credit risk; • maintaining and developing long-term relationships with a diverse tenant base; • managing capital improvements to enhance our properties’ competitive advantages in their respective markets and integrating technology to enhance efficiencies with building management systems, security operation centers and tenant experience solutions to provide a premium experience to our tenant base while reducing operating costs; and • attracting and retaining motivated employees by providing financial and other incentives to meet our operating and financial goals.
Our financing strategies include: • maintaining financial flexibility, including a low secured to unsecured debt ratio; • maximizing our ability to access a variety of both public and private capital sources; • maintaining a staggered debt maturity schedule in which the maturity dates of our debt are spread over several years to limit risk exposure at any particular point in the capital and credit market cycles; • completing financing in advance of the need for capital; • managing interest rate exposure by generally maintaining a greater amount of fixed-rate debt as compared to variable-rate debt; and • maintaining our credit ratings.
Our financing strategies include: • maintaining financial flexibility, including a low secured-to-unsecured debt ratio; • maximizing our ability to access a variety of both public and private capital sources; • maintaining a staggered debt maturity schedule in which the maturity dates of our debt are spread over several years to limit risk exposure at any particular point in the capital and credit market cycles; • completing financing in advance of capital needs; • managing interest rate exposure by primarily financing on a fixed-rate basis; and • maintaining an investment grade credit rating.
During the year ended December 31, 2022, we added two development projects and two redevelopment projects to our stabilized portfolio consisting of four buildings totaling 1,114,704 square feet of office and life science space in Seattle, Washington and San Diego, California. We did not have any properties held for sale at December 31, 2022.
During the year ended December 31, 2023, we added two development projects to our stabilized portfolio consisting of two buildings totaling 829,591 square feet of office space in San Diego, California and Austin, Texas. We did not have any properties held for sale at December 31, 2023.
ITEM 1. BUSINESS The Company Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office, life science and mixed-use submarkets in the United States.
ITEM 1. BUSINESS The Company Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office, life science and mixed-use property types in the United States. The Company has earned global recognition for sustainability, building operations, innovation and design.
Financing Strategies . Our financing policies and objectives are determined by our board of directors. Our goal is to limit our dependence on leverage and maintain a conservative ratio of debt-to-total market capitalization.
Financing Strategies . Our financing policies and objectives are determined by our board of directors. Our goal is to maintain significant liquidity and a conservative leverage ratio.
We expect that our significant working relationships with tenants, municipalities and landowners on the West Coast and in Austin, Texas will give us further access to development and redevelopment opportunities. We cannot ensure that we will be able to successfully develop or redevelop any of our properties or that we will have access to additional development or redevelopment opportunities.
We expect that our significant working relationships with tenants, municipalities and landowners on the West Coast and in Austin, Texas will give us further access to development and redevelopment opportunities.
While many companies leverage a mix of competitive salaries and ancillary benefits to attract and retain their people, we have gone beyond those traditional structures and placed more emphasis on offering an expanded comprehensive benefits program including enhanced paid pregnancy and parental leave benefits, parental leave coaching, healthy snacks and well-being programming and activities provided by the company in alignment with our core values. 14 Environmental Regulations and Potential Liabilities Government Regulations Relating to the Environment.
While many companies leverage a mix of competitive salaries and ancillary benefits to attract and retain their people, we have gone beyond those traditional structures and placed more emphasis on offering an expanded comprehensive benefits program as noted above, as well as offering other benefits, including fully funded life and disability insurance, enhanced paid pregnancy and parental leave benefits, parental leave coaching, and well-being programming and activities coordinated by the company that align with our core values of Belong, Connect and Progress.
Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2022: Number of Buildings Rentable Square Feet Number of Tenants Percentage Occupied (1) Percentage Leased Stabilized Office Properties (2) 119 16,194,146 406 91.6 % 92.9 % ________________________ (1) Represents economic occupancy. (2) Includes stabilized life science and retail space.
Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2023: Number of Buildings Rentable Square Feet Number of Tenants Percentage Occupied (1) Percentage Leased Stabilized Office Properties (2) 121 17,044,128 410 85.0 % 86.4 % ________________________ (1) Represents economic occupancy. (2) Includes stabilized life science and retail space.
Our strategy with respect to development and redevelopment is to: • own land sites in highly populated, amenity rich locations that are attractive to a broad array of tenants; • be the premier provider of modern and collaborative office, life science and mixed-use projects on the West Coast and in Austin, Texas with a focus on design and environment; • maintain a disciplined approach by commencing development when appropriate based on market conditions, focusing on leasing, developing in stages or phasing, and cost control; • reinvest capital from dispositions of selective assets into new state-of-the-art development and acquisition opportunities with higher cash flow and rates of return or future redevelopment when possible; • execute on our development projects under construction and future development pipeline, including expanding entitlements; and • evaluate redevelopment opportunities in supply-constrained markets because such efforts generally achieve similar returns to new development with reduced entitlement risk and shorter construction periods. 8 We may engage in the additional development or redevelopment of office, life science and mixed-use properties when market conditions support a favorable risk-adjusted return on such development or redevelopment.
Our strategy with respect to development and redevelopment is to: • develop or redevelop assets in highly populated, amenity rich, supply-constrained locations that are attractive to a broad array of tenants; • be the premier provider of modern and collaborative office, life science and mixed-use projects on the West Coast and in Austin, Texas with a focus on design and environment; • maintain a disciplined approach by commencing development when appropriate based on market conditions, focusing on leasing, developing in stages or phasing, and cost control; • self-fund our development and redevelopment activity through internally generated free cash flows and/or selective disposition activity; We may engage in the additional development or redevelopment of office, life science and mixed-use properties when market conditions support a favorable risk-adjusted return on such development or redevelopment.
Against the backdrop of market volatility, we expect to manage a strong balance sheet, execute on our development program and selectively evaluate opportunities that add immediate Net Operating Income to our portfolio or play a strategic role in our future growth and that: • provide attractive yields and significant potential for growth in cash flow from property operations; • present growth opportunities in our existing or other strategic markets; and • demonstrate the potential for improved performance through intensive management, repositioning, capital investment and leasing that should result in increased occupancy and rental revenues.
Against the backdrop of market volatilities, we intend to maintain a strong balance sheet and selectively evaluate opportunities that: • provide attractive initial yields and/or significant potential for growth in cash flows from property operations; • present growth opportunities in our existing or new strategic markets; and • demonstrate the potential for improved performance through intensive management, repositioning, capital investment and leasing.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2022, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land. 5 As of December 31, 2022, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one development project in the tenant improvement phase and one future development project in Austin, Texas.
As of December 31, 2023, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one stabilized office property and one future development project in Austin, Texas.
Also in the fourth quarter of 2022, we put a focus on financial wellness by offering a variety of educational events, web workshops and financial tips all aimed at helping our employees improve their overall financial well-being. Strong Communities and Healthy Planet.
In addition to offering a 401(k) plan with matching contributions, in 2023, we put a focus on employee financial wellness by offering a variety of educational events, web workshops, and financial tips, all aimed at helping our employees improve their overall financial well-being. Competitive Benefits and Compensation.
As of December 31, 2022, the following properties were excluded from our stabilized portfolio: Number of Properties/Projects Estimated Rentable Square Feet (1) In-process development projects - tenant improvement 1 734,000 In-process development projects - under construction 2 946,000 In-process redevelopment projects - under construction 2 100,000 ________________________ (1) Estimated rentable square feet upon completion.
As of December 31, 2023, the following properties were excluded from our stabilized portfolio: Number of Properties/Projects Estimated Rentable Square Feet (1) In-process development projects - under construction 1 875,000 In-process redevelopment projects - under construction 2 100,000 ________________________ (1) Estimated rentable square feet upon completion. 5 Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2023, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.
This includes expansion of our product offering into new submarkets where we believe operating and fundamental synergies give us a competitive advantage, as well as in life science properties, which are concentrated in our existing markets; • our active development and redevelopment program and our future development pipeline of undeveloped land sites (see “Item 7.
Our acquisitions may include expansions of our product offerings into new submarkets where we believe operating and fundamental synergies provide us with a competitive advantage; and • our development and redevelopment program and our future development pipeline of undeveloped land sites (see “Item 7.
We build our current development and redevelopment projects to Leadership in Energy and Environmental Design (“LEED”) specifications. All of our office development projects pursue LEED certification, at the Platinum or Gold level. We are actively pursuing LEED certification for approximately 946,000 square feet of office and life science space of under construction development projects.
We have received the Institute for Market Transformation’s (“IMT’s”) Green Lease Leaders award for ten consecutive years. We build our new development and redevelopment projects to Leadership in Energy and Environmental Design (“LEED”) specifications. All of our office and life science new development projects pursue LEED certification, at the Platinum or Gold level.
This means that the entirety of our scope 1 and scope 2 emissions is offset through a combination of energy efficiency measures, onsite and offsite renewables, renewable energy credits (RECs), and verified carbon offsets. We continue to track and report on our progress toward our short-term and long-term carbon reduction goals previously validated by Science-Based Targets.
This means that the entirety of our scope 1 and scope 2 emissions, and scope 3 - downstream leased assets emissions, are offset through a combination of energy efficiency measures, onsite and offsite renewables, renewable energy credits (RECs), and verified carbon offsets.
In 2022, we were proud to be named the GRESB Regional Sector Leader in the Americas for Development (Diversified), earning the highly competitive GRESB 5 Star designation.
As a result of our commitment to sustainability, we have consistently received high rankings in sustainability performance by the Global Real Estate Sustainability Benchmark (“GRESB”). In 2023, we were proud to be named the GRESB Regional Sector Leader in the Americas for Development (Diversified), earning the highly competitive GRESB 5 Star designation.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations” for additional information pertaining to the Company’s in-process and future development pipeline); and • our capital recycling program (see “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations” for additional information pertaining to the Company’s in-process and future development pipeline). “Net Operating Income” is defined as consolidated operating revenues (rental income and other property income) less consolidated operating expenses (property expenses, real estate taxes and ground leases).
Our human capital development goals and initiatives are focused on enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture. Several of our human capital development initiatives include the following: Diversity.
We recognize the value of our employees to our business and believe that our human capital development goals and initiatives demonstrate our commitment to enhancing employee growth, satisfaction, and wellness while maintaining a collaborative and inclusive culture.
We identify climate change as a risk to our Company, its tenants and our other stakeholders, an opportunity for long-term value creation and a key driver in long-term strategic business decisions.
We pursue a variety of strategies to drive energy efficiency across the portfolio, such as utility use monitoring, systematic energy auditing, mechanical, lighting and other building upgrades, optimizing operations and engaging tenants. We identify climate change as a risk to our Company, its tenants and our other stakeholders and a key driver in long-term strategic business decisions.
We are committed to cultivating a diverse culture of inclusion that makes a positive difference in our employees’ lives and have developed targeted training to improve workplace diversity, equity and inclusion, including mandatory unconscious bias training for all employees.
We also conduct annual performance and career development reviews for all employees. Diversity and Inclusion. We are committed to cultivating a culture of inclusion. To emphasize this commitment, we have developed programming to promote workplace diversity and inclusion and we continue to require mandatory unconscious bias training for all employees.
In 2022, we increased our focus on and support towards mental health and wellness by providing our employees more education on self-care as well as offering an increased variety of resources they could utilize.
We periodically conduct wellness surveys to help us better tailor our employee health and wellness programs. In 2023, we selected a new Employee Assistance Program and continued our focus and support of mental health and wellness by providing our employees education on self-care and offering an increased variety of programming.
Over 150 employees assisted 14 organizations and donated more than 350 volunteer hours during Week of Service. Competitive Benefits and Compensation. Our compensation program is designed to, among other things, attract, retain and incentivize talented and experienced individuals in the highly competitive West Coast and Austin, Texas employment and commercial real estate markets.
Our approach is designed to, among other things, attract, retain, and incentivize talented and experienced individuals in the highly competitive employment and commercial real estate markets in which we operate. Several of our human capital development initiatives include the following: Training and Education.
As of December 31, 2022, two of our seven directors (or approximately 29%) were female. TOTAL WORKFORCE (1) ________________________ (1) As of December 31, 2022. 13 Training and Education. We support the continual development of our employees through various training and education programs throughout their tenure at the Company, from onboarding to skill building to leadership development.
We support the continual growth and development of our employees through various training and education programs throughout their tenure at the Company, from onboarding to skill building to leadership development. During 2023, across all teams and regions, employees participated in various training and developmental opportunities including virtual workshops, in-person sessions, “lunch and learns”, online webinars, and conferences.
In the fourth quarter of 2022, we launched our annual tradition of Week of Service, dedicated to giving back to the communities in which we operate. The company wide initiative gave our team added opportunities to connect with local organizations and meaningful causes in the spirit of community enrichment and employee volunteerism.
The company-wide initiative gave our team enhanced opportunities to connect with local organizations and meaningful causes in the spirit of community enrichment and employee volunteerism. Over 165 employees assisted 18 organizations, dedicating more than 1,000 hours, almost triple the number of volunteer hours provided in 2022. 12 Environmental Regulations and Potential Liabilities Government Regulations Relating to the Environment.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership” for additional information pertaining to the Company’s capital recycling program and related property and land dispositions).
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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.
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“Net Operating Income” is defined as consolidated operating revenues (rental income and other property income) less consolidated operating expenses (property expenses, real estate taxes and ground leases).
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We cannot ensure that we will be able to successfully develop or redevelop any of our properties or that we will have access to additional development or redevelopment opportunities in the future. 8 Acquisition Strategies.
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In addition, we had two redevelopment projects under construction totaling approximately 100,000 square feet.
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We are actively pursuing LEED Gold certification for approximately 946,000 square feet of recently stabilized and under construction office and life science space. Reducing energy use year over year is an ongoing aspect of our operational strategy.
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As a result of our commitment to sustainability, we have been listed as a member of the Dow Jones Sustainability World Index since 2017, and have consistently received high rankings in sustainability performance by the Global Real Estate Sustainability Benchmark (“GRESB”).
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We continue to track and report on our progress toward our short-term and long-term carbon reduction goals previously validated by Science-Based Targets Initiative.
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We have won the Institute for Market Transformation’s (“IMT’s”) Green Lease Leaders award for nine consecutive years.
Added
For the fifth year in a row, the Company has been named to Bloomberg’s Gender Equality Index, and we are proud that 56% of our workforce is female and 42% is ethnically diverse. As of December 31, 2023, two of our seven directors (or approximately 29%) were female. In December 2023, we announced the appointment of Angela M.
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Energy consumption, water consumption, and greenhouse gas (“GHG”) emissions data for the periods indicated based on the most recent available information, which was subject to an independent limited assurance engagement by DNV GL Business Assurance USA, Inc., are as follows: Energy consumption: Year (1) Energy Consumption Data Coverage as a % of Total Floor Area (2) Total Energy Consumed by Floor Area with Data Coverage (MWh) (3) % of Energy Generated From Renewable Sources (4) Like-for-Like Change in Energy Consumption of Floor Area with Data Coverage (5) % of Eligible Portfolio that has Obtained an Energy Rating and is Certified to ENERGY STAR (6) 2021 100 % 242,577 72 % (2) % 79 % 2020 100 % 257,113 55 % (13) % 76 % 2019 99 % 277,177 18 % (2) % 70 % Water consumption: Year (1) Water Withdrawal Data Coverage as a % of Total Floor Area (7) Total Water Withdrawn by Portfolio (m3) (8) Like-for-like Change in Water Withdrawn for Floor Area with Data Coverage (5) 2021 100 % 649,982 (2) % 2020 100 % 659,051 (31) % 2019 98 % 803,499 (6) % 10 GHG Emissions: Year (1) Scope 1 GHG Data Coverage as a % of Total Floor Area (9) Scope 1 GHG Emissions (Tonnes CO2) (10) Like-for-like Change in Scope 1 GHG Emissions Data (5) 2021 100 % 3,710 13 % 2020 100 % 3,000 (11) % 2019 100 % 3,082 6 % Year (1) Scope 2 Location-Based GHG Data Coverage as a % of Total Floor Area (11) Scope 2 Location-Based GHG Emissions (Tonnes CO2) (12) Like-for-like Change in Scope 2 Location-Based GHG Emissions Data (5) 2021 100 % 19,378 (5) % 2020 100 % 23,122 (21) % 2019 100 % 25,438 (5) % Year (1) Scope 2 Market-Based GHG Data Coverage as a % of Total Floor Area (11) Scope 2 Market-Based GHG Emissions (Tonnes CO2) (12) Like-for-like Change in Scope 2 Market-Based GHG Emissions Data (5) 2021 100 % — — % 2020 100 % — (100) % 2019 100 % 24,718 (8) % _____________________ (1) Full 2022 calendar year energy, water and GHG emissions data is not available until after March 30, 2023.
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Aman as our new Chief Executive Officer and a director on our Board, effective January 22, 2024. Following her appointment, women comprise 38% of our directors. Employee Health and Wellness. The physical and mental health and wellness of our employees is of central importance to our culture.
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(2) Percentage based on gross square footage of portfolio floor area with complete energy consumption data coverage as of the end of the applicable year.
Added
We evaluate our group health and ancillary benefits annually to ensure our benefits package is robust and competitive. We are proud to offer several comprehensive medical, dental, and vision benefit programs to our employees and their families, with over 90% of the premiums absorbed by the Company.
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Floor area is considered to have complete energy consumption data coverage when energy consumption data (i.e., energy types and amounts consumed) is obtained by the Company for all types of energy consumed in the relevant floor area during the fiscal year, regardless of when such data was obtained.
Added
In response to requests from our employees for increased service opportunities, in the fourth quarter of 2023, we expanded our annual tradition of “Week of Service” into “Month of Service”, transforming it into a more robust effort dedicated to giving back to the communities in which we operate.
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(3) Energy includes energy purchased from sources external to the Company and its tenants or produced by the Company or its tenants themselves (self-generated) and energy from all sources, including direct fuel usage, purchased electricity, and heating, cooling and steam energy.
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Total energy consumption based on floor area with complete energy consumption data coverage as of the end of the applicable year.
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(4) Renewable sources include renewable energy the Company directly produced and renewable energy the Company purchased if purchased through a renewable power purchase agreement that explicitly includes renewable energy certificates (“RECs”) or Guarantees of Origin (“GOs”), a Green-e Energy Certified utility or supplier program or other green power products that explicitly include RECs or GOs or for which Green-e Energy Certified RECs are paired with grid electricity.
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Percentage is based total energy consumption during the applicable year. (5) Data reported on a like-for-like comparison excludes assets that have been acquired or disposed over the past twenty-four months as of the end of the applicable year.
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(6) Eligible portfolio represents our office and residential properties that have had 50% or greater occupancy for 12 consecutive months at any point during the applicable year. Percentage is based on rentable square footage of our eligible portfolio that has obtained an energy rating and is certified to ENERGY STAR® as of the end of the applicable year.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHowever, in the future, events such as these or other significant disruptions involving our IT networks and related systems could, among other things: • result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally identifiable and account information that could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • result in unauthorized access to or changes to our financial accounting and reporting systems and related data; • result in the theft of funds; • result in our inability to maintain building systems relied on by our tenants; • require significant management attention and resources to remedy any damage that results; • subject us to regulatory penalties or claims for breach of contract, damages, credits, penalties or terminations of leases or other agreements; or • damage our reputation among our tenants and investors.
Biggest changeHowever, in the future, if events such as these (or other disruptions involving our or third-party IT networks and related systems) occur, or are perceived to occur, this could, among other things: • result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally identifiable and account information; • result in disclosure of information that could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; • result in unauthorized access to or changes to our financial accounting and reporting systems and related data; • result in the theft of funds; • result in our inability to maintain building systems relied on by our tenants; • require significant management attention and resources to remedy any damage that results; • subject us to regulatory penalties, private actions or claims for breach of contract, damages, credits, penalties or terminations of leases or other agreements; • increase our costs of operations; or • damage our reputation among our tenants, investors, and others. 29 These events could have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
In addition to the 100 First LLC and 303 Second LLC strategic ventures and the Redwood City Partners, LLC venture, we may continue to co-invest in the future with third parties through partnerships, joint ventures or other entities, or through acquiring non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity, which may subject us to risks that may not be present with other methods of ownership, including the following: • we would not be able to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity’s ability to transfer or sell its assets; • partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, which could delay construction or development of a property or increase our financial commitment to the partnership or joint venture; • partners or co-venturers may pursue economic or other business interests, policies or objectives that are competitive or inconsistent with ours; • if we become a limited partner or non-managing member in any partnership or limited liability company, and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity; • disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business; and • we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
In addition to the 100 First LLC and 303 Second LLC strategic ventures and the Redwood City Partners, LLC venture, we may continue to co-invest in the future with third parties through partnerships, joint ventures or other entities, or through acquiring non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity, which may subject us to risks that may not be present with other methods of ownership, including the following: • we would not be able to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity’s ability to transfer or sell its assets; • partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, which could delay construction or development of a property or increase our financial commitment to the partnership or joint venture; • partners or co-venturers may pursue economic or other business interests, policies or objectives that are competitive or inconsistent with ours; 26 • if we become a limited partner or non-managing member in any partnership or limited liability company, and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity; • disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business; and • we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
We may be unable to successfully complete and operate acquired, developed and redeveloped properties, and it is possible that: • we may be unable to lease acquired, developed or redeveloped properties on lease terms projected at the time of acquisition, development or redevelopment or within budgeted timeframes; • the operating expenses at acquired, developed or redeveloped properties may be greater than projected at the time of acquisition, development or redevelopment, resulting in our investment being less profitable than we expected; • we may not commence or complete development or redevelopment properties on schedule or within budgeted amounts or at all; • we may not be able to develop or redevelop the estimated square footage and other features of our development and redevelopment properties; • we may suspend development or redevelopment projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when the development or redevelopment project is restarted; • we may expend funds on and devote management’s time to acquisition, development or redevelopment properties that we may not complete and as a result we may lose deposits or fail to recover expenses already incurred; • we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy, and other required governmental permits and authorizations; • we may encounter delays or unforeseen cost increases associated with building materials or construction services resulting from trade tensions, disruptions, tariffs, duties or restrictions or an outbreak of an epidemic or pandemic; • we may encounter delays, refusals, unforeseen cost increases and other impairments resulting from third-party litigation; and • we may fail to obtain the financial results expected from properties we acquire, develop or redevelop.
We may be unable to successfully complete and operate acquired, developed and redeveloped properties, and it is possible that: • we may be unable to lease acquired, developed or redeveloped properties on lease terms projected at the time of acquisition, development or redevelopment or within budgeted timeframes; • the operating expenses at acquired, developed or redeveloped properties may be greater than projected at the time of acquisition, development or redevelopment, resulting in our investment being less profitable than we expected; • we may not commence or complete development or redevelopment properties on schedule or within budgeted amounts or at all; • we may not be able to develop or redevelop the estimated square footage and other features of our development and redevelopment properties; • we may suspend development or redevelopment projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when the development or redevelopment project is restarted; • we may expend funds on and devote management’s time to acquisition, development or redevelopment properties that we may not complete and as a result we may lose deposits or fail to recover expenses already incurred; • we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy, and other required governmental permits and authorizations; • we may encounter delays or unforeseen cost increases associated with building materials or construction services resulting from trade tensions, disruptions, tariffs, duties or restrictions or an outbreak of an epidemic or pandemic; 25 • we may encounter delays, refusals, unforeseen cost increases and other impairments resulting from third-party litigation; and • we may fail to obtain the financial results expected from properties we acquire, develop or redevelop.
Our ability to acquire properties on favorable terms and successfully operate them is subject to various risks, including the following: • we may potentially be unable to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded and private REITs, institutional investment funds and other real estate investors; • even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price; • even if we enter into agreements for the acquisition of a desired property, we may be unable to complete such acquisitions because they remain subject to customary conditions to closing, including the completion of due diligence investigations to management’s satisfaction; • we may be unable to finance acquisitions on favorable terms or at all; • we may spend more than budgeted amounts in operating costs or to make necessary improvements or renovations to acquired properties; • we may lease acquired properties at economic lease terms different than projected; • we may acquire properties that are subject to liabilities for which we may have limited or no recourse; and • we may be unable to complete an acquisition after making a nonrefundable deposit and incurring certain other acquisition-related costs.
Our ability to acquire properties on favorable terms and successfully operate them is subject to various risks, including the following: • we may potentially be unable to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded and private REITs, institutional investment funds and other real estate investors; 24 • even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price; • even if we enter into agreements for the acquisition of a desired property, we may be unable to complete such acquisitions because they remain subject to customary conditions to closing, including the completion of due diligence investigations to management’s satisfaction; • we may be unable to finance acquisitions on favorable terms or at all; • we may spend more than budgeted amounts in operating costs or to make necessary improvements or renovations to acquired properties; • we may lease acquired properties at economic lease terms different than projected; • we may acquire properties that are subject to liabilities for which we may have limited or no recourse; and • we may be unable to complete an acquisition after making a nonrefundable deposit and incurring certain other acquisition-related costs.
If any of the credit rating agencies that have rated the Operating Partnership’s debt securities or any preferred stock we may issue in the future downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, 33 results of operations, cash flows, the trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
If any of the credit rating agencies that have rated the Operating Partnership’s debt securities or any preferred stock we may issue in the future downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Any adverse developments in the economy or real estate market in California and the surrounding region, or in greater Seattle or Austin, Texas or any decrease in demand for office space resulting from the California or greater Seattle or Austin, Texas regulatory or business environment could impact our ability to generate revenues sufficient to meet our operating expenses or other obligations, which would adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Any adverse developments in the economy or real estate market in California and the surrounding region, or in Seattle or Austin, Texas or any decrease in demand for office space resulting from the California or Seattle or Austin, Texas regulatory or business environment could impact our ability to generate revenues sufficient to meet our operating expenses or other obligations, which would adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We are susceptible to adverse developments in the economic and regulatory environments of California, greater Seattle and Austin, Texas (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation and other factors), as well as adverse weather conditions and natural disasters that occur in those areas (such as earthquakes, wind, landslides, droughts, fires, floods and other events).
We are susceptible to adverse developments in the economic and regulatory environments of California, Seattle and Austin, Texas (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation and other factors), as well as adverse weather conditions and natural disasters that occur in those areas (such as earthquakes, wind, landslides, droughts, fires, floods and other events).
Changes to such law and regulations could also result in increased operating costs at our properties (for example, through increased utility costs). Moreover, if we are unable to maintain carbon neutral operations or comply with laws and regulations on climate change, our reputation among our tenants and investors may be damaged and we may incur fines and/or penalties.
Changes to such laws and regulations could also result in increased operating costs at our properties (for example, through increased utility costs). Moreover, if we are unable to maintain carbon neutral operations or comply with laws and regulations on climate change, our reputation among our tenants and investors may be damaged and we may incur fines and/or penalties.
From time to time, we have significant cash balances that we invest in a variety of short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include (either directly or indirectly): • direct obligations issued by the U.S.
From time to time, we have significant cash balances that we invest in a variety of short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include (either directly or indirectly): 27 • direct obligations issued by the U.S.
Similarly, the Operating Partnership may offer its common or preferred units for contributions of cash or property without approval by our stockholders or the Operating Partnership’s unitholders. Existing security holders have no preemptive rights to acquire any of these 36 securities, and any issuance of equity securities under these circumstances may dilute a unitholder's or stockholder's investment.
Similarly, the Operating Partnership may offer its common or preferred units for contributions of cash or property without approval by our stockholders or the Operating Partnership’s unitholders. Existing security holders have no preemptive rights to acquire any of these securities, and any issuance of equity securities under these circumstances may dilute a unitholder's or stockholder's investment.
There can be no assurances that any such expenditure would result in higher occupancy or higher rental rates, or deter existing tenants from relocating to properties owned by our competitors. Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations and cash flows.
There can be no assurances that any such expenditure would result in higher occupancy or higher rental rates or deter existing tenants from relocating to properties owned by our competitors. 22 Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations and cash flows.
In addition, if 27 we elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to complete the development as expected, which could require that we identify another joint venture partner and/or complete the project ourselves (including providing any necessary financing).
In addition, if we elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to complete the development as expected, which could require that we identify another joint venture partner and/or complete the project ourselves (including providing any necessary financing).
Properties —Significant Tenants.” Our financial condition, results of operations, ability to borrow funds and cash flows would be adversely affected if any of our significant tenants fails to renew its lease(s), renew its lease(s) on terms less favorable to us, or becomes bankrupt or insolvent or otherwise unable to satisfy its lease obligations.
Properties —Significant Tenants.” 20 Our financial condition, results of operations, ability to borrow funds and cash flows would be adversely affected if any of our significant tenants fails to renew its lease(s), renew its lease(s) on terms less favorable to us, or becomes bankrupt or insolvent or otherwise unable to satisfy its lease obligations.
Moreover, there can be no assurance that our development projects will be able to achieve the anticipated LEED certifications or that any of our sustainability strategies will result in reduced operating costs, higher occupancy or higher rental rates or deter our existing tenants from relocating to properties owned by our competitors.
Moreover, there can be no assurance that our development projects will be able to achieve the anticipated 23 LEED certifications or that any of our sustainability strategies will result in reduced operating costs, higher occupancy or higher rental rates or deter our existing tenants from relocating to properties owned by our competitors.
Additionally, inflation may have a negative effect on the construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor and services from third-party contractors and suppliers. We rely on a number of third-party suppliers and contractors to supply raw materials, skilled labor and services for our construction projects.
Additionally, inflation may have a negative effect on the construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor and services from third-party contractors and suppliers. We rely on a number of third-party suppliers and contractors to 18 supply raw materials, skilled labor and services for our construction projects.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities, and we may in the future mitigate this risk through the use of derivative instruments, including interest rate swap agreements or other interest rate hedging agreements, including swaps, caps and floors.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities, and we may in the future mitigate this risk through the use of derivative instruments, including interest rate swap agreements 33 or other interest rate hedging agreements, including swaps, caps and floors.
Any of these events or circumstances could have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Any of these events or circumstances could have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations and to 32 pay dividends and distributions to our security holders.
If these conditions become more volatile or worsen, our and our tenant’s business, results of operations, liquidity and financial condition and those of our tenants may be adversely affected as a result of the following consequences, among others: • the financial condition of our tenants, many of which are technology; life science and healthcare; finance, insurance and real estate; media and professional business and other service firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or for other reasons; • significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted; • our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing 18 debt, reduce our returns from our acquisition and development activities and increase our future interest expense; • reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and • one or more lenders under the Operating Partnership’s unsecured revolving credit facility could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
If these conditions become more volatile or worsen, our business, results of operations, liquidity and financial condition and those of our tenants may be adversely affected as a result of the following consequences, among others: • the financial condition of our tenants, many of which are technology; life science and healthcare; finance, insurance and real estate; media and professional business and other service firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or for other reasons; • significant job losses in the technology; life science and healthcare; finance, insurance and real estate; media and professional business and other service firm industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted; • our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from our acquisition and development activities and increase our future interest expense; • reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and • one or more lenders under the Operating Partnership’s unsecured revolving credit facility could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
These events could have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
These events could also have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
No single stockholder may own, either actually or constructively, absent a waiver from the board of directors, more than 7.0% (by value or by number of shares, whichever is more restrictive) of the Company’s outstanding common stock.
No single stockholder may own, either actually or constructively, 34 absent a waiver from the board of directors, more than 7.0% (by value or by number of shares, whichever is more restrictive) of the Company’s outstanding common stock.
Dividends payable by REITs, including the Company, generally do not qualify for the reduced tax rates available for some dividends. “Qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates generally are subject to tax at preferential rates.
Dividends payable by REITs, including the Company, generally do not qualify for the reduced tax rates available for some dividends. “Qualified dividends” payable to U.S. stockholders that are individuals, trusts and 37 estates generally are subject to tax at preferential rates.
If we were not in compliance with material provisions of the ADA or other regulations affecting our properties, we might be required to take remedial action, which could include making modifications or renovations to our properties.
If we were not in compliance with material provisions of the ADA or other regulations affecting our properties, we 21 might be required to take remedial action, which could include making modifications or renovations to our properties.
Although management believes that we are organized and operate in a manner to permit the Company to continue to qualify as a REIT, we cannot provide assurances that the Company has 37 qualified or will continue to qualify as a REIT for tax purposes.
Although management believes that we are organized and operate in a manner to permit the Company to continue to qualify as a REIT, we cannot provide assurances that the Company has qualified or will continue to qualify as a REIT for tax purposes.
All of our properties are located in California, greater Seattle, Washington and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas.
All of our properties are located in California, Seattle, Washington and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas.
We may need to modify our methods of construction or face increased construction costs as a result of environmental conditions, and we may 25 face obligations under agreements with governmental authorities with respect to the management of such environmental conditions.
We may need to modify our methods of construction or face increased construction costs as a result of environmental conditions, and we may face obligations under agreements with governmental authorities with respect to the management of such environmental conditions.
We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs, including cash distributions to stockholders necessary to maintain the Company’s REIT qualification.
We cannot assure you that our business will generate sufficient cash flows from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs, including cash distributions to stockholders necessary to maintain the Company’s REIT qualification.
If any such restrictions remain in place for an extended period of time, we may experience 23 reductions in rents from our tenants.
If any such restrictions remain in place for an extended period of time, we may experience reductions in rents from our tenants.
Unknown or unremediated contamination or compliance with existing or new environmental or health and safety laws and regulations could require us to incur costs or liabilities that could be material. See “Item 1. Business —Environmental Regulations and Potential Liabilities” and Note 18 “Commitments and Contingencies” to our consolidated financial statements included in this report.
Unknown or unremediated contamination or compliance with existing or new environmental or health and safety laws and regulations could require us to incur costs or liabilities that could be material. See “Item 1. Business —Environmental Regulations and Potential Liabilities” and Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report.
As of December 31, 2022, we owned fourteen office buildings located on various land parcels and in various regions, which we lease individually on a long-term basis and we may in the future invest in additional properties that are subject to ground leases or other similar restrictive arrangements.
As of December 31, 2023, we owned fourteen office buildings located on various land parcels and in various regions, which we lease individually on a long-term basis, and we may in the future invest in additional properties that are subject to ground leases or other similar restrictive arrangements.
The Operating Partnership’s $1.1 billion unsecured revolving credit facility, $400.0 million unsecured term loan facility and note purchase agreements contain financial covenants that could limit the amount of distributions payable by us on our common stock and any preferred stock we may issue in the future.
The Operating Partnership’s $1.1 billion unsecured revolving credit facility, $520.0 million unsecured term loan facility and note purchase agreements contain financial covenants that could limit the amount of distributions payable by us on our common stock and any preferred stock we may issue in the future.
We caution you not to place undue reliance on the potential density estimates for our undeveloped land holdings and/or any particular land parcel because they are based solely on our estimates, using data currently available to us, and our business plans as of December 31, 2022.
We caution you not to place undue reliance on the potential density estimates for our undeveloped land holdings and/or any particular land parcel because they are based solely on our estimates, using data currently available to us, and our business plans as of December 31, 2023.
Because of these distribution requirements, the Operating Partnership is required to make distributions to the Company, and we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, management relies on third-party sources of capital to fund our capital needs.
Because of these distribution requirements, the Operating Partnership is required to make distributions to the Company, and we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flows. Consequently, management relies on third-party sources of capital to fund our capital needs.
These restrictions on our ability to sell our properties could have a material adverse effect on our financial condition, results of operations, cash flow, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
These restrictions on our ability to sell our properties could have a material adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership —Liquidity Uses.” Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital, and capital expenditures, depends on our ability to generate cash flow in the future.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership —Liquidity Uses.” Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital, and capital expenditures, depends on our ability to generate cash flows in the future.
As a result, our financial condition, results of operations, cash flow, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected.
As a result, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected.
If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations.
If we do not generate sufficient cash flows from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations.
Epidemics, pandemics or other outbreaks of an illness, disease or virus, including the ongoing COVID-19 pandemic, could result in significant governmental measures being implemented to control the spread of such illness, disease or virus, including quarantines, restrictions on travel, “shelter in place” rules, stay-at-home orders, density limitations, social distancing measures, restrictions on types of business that may continue to operate and/or restrictions on types of construction projects that may continue, which could adversely affect our ability and their respective abilities to adequately manage our respective businesses.
Epidemics, pandemics or other outbreaks of an illness, disease or virus could result in significant governmental measures being implemented to control the spread of such illness, disease or virus, including quarantines, restrictions on travel, “shelter in place” rules, stay-at-home orders, density limitations, social distancing measures, restrictions on types of business that may continue to operate and/or restrictions on types of construction projects that may continue, which could adversely affect our ability and their respective abilities to adequately manage our respective businesses.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 39
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. 38 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The loss of the ownership rights to these properties or an increase of rental expense could have a material adverse effect on our financial condition, results of operations, cash 28 flow, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
The loss of the ownership rights to these properties or an increase of rental expense could have a material adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Many of these ground leases and other restrictive agreements impose significant limitations on our uses of the subject property, restrict our ability to sell or otherwise transfer our interests in the property or restrict our leasing of the property.
Many of these ground leases and other restrictive agreements impose significant limitations on our use of the subject property, restrict our ability to sell or otherwise transfer our interests in the property or restrict our leasing of the property.
Increases in the amount of debt outstanding would result in an increase in our debt service costs, which could adversely affect cash flow and our ability to pay dividends and distributions to our security holders. Higher leverage also increases the risk of default on our obligations and limits our ability to obtain additional financing in the future.
Increases in the amount of debt outstanding would result in an increase in our debt service costs, which could adversely affect cash flows and 35 our ability to pay dividends and distributions to our security holders. Higher leverage also increases the risk of default on our obligations and limits our ability to obtain additional financing in the future.
Events and conditions applicable to owners and operators of real estate that are beyond our control and could impact our economic performance and the value of our real estate assets may include: • local oversupply or reduction in demand for office, mixed-use or other commercial space, which may result in decreasing rental rates and greater concessions to tenants; • inability to collect rent from tenants; • vacancies or inability to rent space on favorable terms or at all; • inability to finance property development and acquisitions on favorable terms or at all; • increased operating costs, including insurance premiums, utilities and real estate taxes; • costs of complying with changes in governmental regulations; • the relative illiquidity of real estate investments; 21 • declines in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing; • changing submarket demographics; • changes in space utilization by our tenants due to technology, economic conditions and business culture; • the development of harmful mold or other airborne toxins or contaminants that could damage our properties or expose us to third-party liabilities; and • property damage resulting from seismic activity or other natural disasters.
Events and conditions applicable to owners and operators of real estate that are beyond our control and could impact our economic performance and the value of our real estate assets may include: • local oversupply or reduction in demand for office, mixed-use or other commercial space, which may result in decreasing rental rates and greater concessions to tenants; • inability to collect rent from tenants; • vacancies or inability to rent space on favorable terms or at all; • inability to finance property development and acquisitions on favorable terms or at all; • increased operating costs, including insurance premiums, utilities and real estate taxes; • costs of complying with changes in governmental regulations; • the relative illiquidity of real estate investments; • declines in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing; • changing submarket demographics; • changes in space utilization by our tenants due to technology, economic conditions and business culture, including a shift away from in-person work environments to flexible work arrangements and remote work; • the development of harmful mold or other airborne toxins or contaminants that could damage our properties or expose us to third-party liabilities; and • property damage resulting from seismic activity or other natural disasters.
As of December 31, 2022, the Company had reserved for future issuance the following shares of common stock: 1,150,574 shares issuable upon the exchange, at the Company’s option, of the Operating Partnership’s common units; approximately 1.1 million shares remained available for grant under our 2006 Incentive Award Plan (see Note 15 “Share-Based and Other Compensation” to our consolidated financial statements included in this report); approximately 1.0 million shares issuable upon settlement of time-based RSUs; and a maximum of 2.0 million shares contingently issuable upon settlement of RSUs subject to the achievement of market and/or performance conditions.
As of December 31, 2023, the Company had reserved for future issuance the following shares of common stock: 1,150,574 shares issuable upon the exchange, at the Company’s option, of the Operating Partnership’s common units; approximately 2.8 million shares remained available for grant under our 2006 Incentive Award Plan (see Note 16 “Share-Based and Other Compensation” to our consolidated financial statements included in this report); approximately 0.9 million shares issuable upon settlement of time-based RSUs; and a maximum of 1.8 million shares contingently issuable upon settlement of RSUs subject to the achievement of market and/or performance conditions.
As a result, a downturn in an industry in which a significant number of our tenants operate could adversely affect our financial conditions, result of operations and cash flows. 22 We may be unable to renew leases or re-lease available space. Most of our income is derived from the rent earned from our tenants.
As a result, a downturn in an industry in which a significant number of our tenants operate could adversely affect our financial condition, results of operations and cash flows. We may be unable to renew leases or re-lease available space. Most of our income is derived from the rent earned from our tenants.
We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds and cash flows. As of December 31, 2022, our 15 largest tenants represented approximately 46.5% of total annualized base rental revenues on a prospective basis.
We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds and cash flows. As of December 31, 2023, our 15 largest tenants represented approximately 46.1% of total annualized base rental revenues on a prospective basis.
The Company has a currently effective registration statement registering 10.7 million shares of our common stock for possible issuance under our 2006 Incentive Award Plan. The Company has a currently effective registration statement registering 783,192 shares of our common stock for possible issuance to and resale by certain holders of the Operating Partnership’s common units.
The Company has a currently effective registration statement registering 12.6 million shares of our common stock for possible issuance under our 2006 Incentive Award Plan. The Company has a currently effective registration statement registering 783,192 shares of our common stock for possible issuance to and resale by certain holders of the Operating Partnership’s common units.
In addition, we are building our current development projects to LEED specifications, and all of our office development projects are now designed to achieve LEED certification, either LEED Platinum or Gold.
In addition, we are building our current development projects to LEED specifications, and all of our office and life science new development projects are now designed to achieve LEED certification, either LEED Platinum or Gold.
Our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory, environmental and other factors, many of which are beyond our control.
Our cash flows are subject to general economic, industry, financial, competitive, operating, legislative, regulatory, environmental and other factors, many of which are beyond our control.
As of December 31, 2022, we had a $1.1 billion unsecured revolving credit facility and a $400.0 million unsecured term loan facility, each bearing interest at a variable rate on any amount drawn and outstanding.
As of December 31, 2023, we had a $1.1 billion unsecured revolving credit facility and a $520.0 million unsecured term loan facility, each bearing interest at a variable rate on any amount drawn and outstanding.
Interest rate increases would increase our interest costs for any variable rate debt and for new debt, which could in turn make the financing of any development, redevelopment and acquisition activity costlier.
These interest rate increases have increased the costs of our variable rate debt, and any further interest rate increases would increase our interest costs for any variable rate debt and for new debt, which could in turn make the financing of any development, redevelopment and acquisition activity costlier.
We had office space representing approximately 8.4% of the total square footage of our stabilized office properties that was not occupied as of December 31, 2022. In addition, leases representing approximately 10.3% and 7.9% of the leased rentable square footage of our properties are scheduled to expire in 2023 and 2024, respectively.
We had office space representing approximately 15.0% of the total square footage of our stabilized office properties that was not occupied as of December 31, 2023. In addition, leases representing approximately 7.3% and 4.8% of the leased rentable square footage of our properties are scheduled to expire in 2024 and 2025, respectively.
Our total debt at December 31, 2022 represented 48.5% of our total market capitalization (which we define as the aggregate of our long-term debt and the market value of the Company’s common stock and the Operating Partnership’s common units of limited partnership interest, or common units, based on the closing price per share of the Company’s common stock as of that date).
Our total debt at December 31, 2023 represented 51.3% of our total market capitalization (which we define as the aggregate of our long-term debt and the market value of the Company’s common stock and the Operating Partnership’s common units of limited partnership interest, or common units, based on the closing price per share of the Company’s 31 common stock as of that date).
However, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. As of December 31, 2022, we had approximately $4.3 billion aggregate principal amount of indebtedness outstanding, which represented 48.5% of our total market capitalization. See “Item 7.
However, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. As of December 31, 2023, we had approximately $5.0 billion aggregate principal amount of indebtedness outstanding, which represented 51.3% of our total market capitalization. See “Item 7.
As of December 31, 2022, there was no amount outstanding under our unsecured revolving credit facility and $200.0 million was outstanding under our unsecured term loan facility. However, we may borrow on the revolving credit facility, borrow additional amounts on the term loan facility, or incur additional variable rate debt in the future.
As of December 31, 2023, there was no amount outstanding under our unsecured revolving credit facility and $520.0 million was outstanding under our unsecured term loan facility. However, we may borrow on the revolving credit facility, borrow additional amounts under the accordion feature of the term loan facility, or incur additional variable rate debt in the future.
If the Company were to lose its REIT status, the Company would face adverse tax consequences that would substantially reduce the funds available for distribution to its stockholders for each of the years involved because: • the Company would not be allowed a deduction for dividends paid to its stockholders in computing the Company’s taxable income and would be subject to regular U.S. federal corporate income tax; • the Company could be subject to increased state and local taxes; and • unless entitled to relief under statutory provisions, the Company could not elect to be taxed as a REIT for four taxable years following the year during which the Company was disqualified.
If the Company were to lose its REIT status, the Company would face adverse tax consequences that would substantially reduce the funds available for distribution to its stockholders for each of the years involved because: • the Company would not be allowed a deduction for dividends paid to its stockholders in computing the Company’s taxable income and would be subject to regular U.S. federal corporate income tax; • the Company could be subject to increased state and local taxes; • the Company could be subject to the one percent excise tax on stock repurchases imposed by the 2022 Inflation Reduction Act; and • unless entitled to relief under statutory provisions, the Company could not elect to be taxed as a REIT for four taxable years following the year during which the Company was disqualified.
As of December 31, 2022, we had accrued environmental remediation liabilities of approximately $80.5 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the costs we estimate we will incur when we commence development at various development acquisition sites.
As of December 31, 2023, we had accrued environmental remediation liabilities of approximately $76.6 million on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the costs we estimate we will incur when we commence development at various development acquisition sites.
We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with perceived or actual security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems or those of our service providers.
However, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging.
There can be no assurance that controls and efforts to maintain the security and integrity of our and third-party IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging.
While we historically have acquired, developed and redeveloped office properties in California and greater Seattle markets, over the past two years we have acquired properties in Austin, Texas, where we currently have one development project in the tenant improvement phase and one future development project.
While we historically have acquired, developed and redeveloped office properties in California and Seattle markets, over the past two years we have acquired properties in Austin, Texas, where we currently have one stabilized office property and one future development project.
If we cannot finance property acquisitions on favorable terms or operate acquired properties to meet financial expectations, our financial condition, results of operations, cash flows, the quoted trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders could be adversely affected. 26 There are significant risks associated with property acquisition, development and redevelopment.
If we cannot finance property acquisitions on favorable terms or operate acquired properties to meet financial expectations, our financial condition, results of operations, cash flows, the quoted trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders could be adversely affected.
Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition qualifies under certain statutory safe harbors, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors. 38 Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition qualifies under certain statutory safe harbors, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors.
Downturns in tenants’ businesses may reduce our revenues and cash flows . For the year ended December 31, 2022, we derived approximately 99.0% of our revenues from rental income.
Downturns in tenants’ businesses may reduce our revenues and cash flows . For the year ended December 31, 2023, we derived approximately 98.9% of our revenues from rental income.
As of December 31, 2022, as a percentage of our annualized base rental revenue for the stabilized portfolio, 58% of our tenants operated in the technology industry, 18% in the life science and health care industries, 8% in the media industry, 6% in the finance, insurance and real estate industries, 4% in the professional, business and other services industries and 6% in other industries.
As of December 31, 2023, as a percentage of our annualized base rental revenue for the stabilized portfolio, 54% of our tenants operated in the technology industry, 17% in the life science and health care industries, 8% in the finance, insurance and real estate industries, 7% in the media industry, 7% in the professional, business and other services industries and 7% in other industries.
Management cannot predict whether future issuances of shares of the Company’s common stock, or the availability of shares for resale in the open market will result in decreasing the market price per share of the Company’s common stock. As of December 31, 2022, 116,878,031 shares of the Company’s common stock were issued and outstanding.
Management cannot predict whether future issuances of shares of the Company’s common stock, or the availability of shares for resale in the open market will result in decreasing the market price per share of the Company’s common stock. As of December 31, 2023, 117,239,558 shares of the Company’s common stock were issued and outstanding.
The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, especially given the use of more advanced hacking tools and techniques and use of artificial intelligence.
A modified net lease is similar to a triple net lease, except the tenants are obligated to pay their proportionate share of certain operating expenses directly to the service provider.
Under a triple net lease, the tenants pay their proportionate share of real estate taxes, operating costs and utility costs. A modified net lease is similar to a triple net lease, except the tenants are obligated to pay their proportionate share of certain operating expenses directly to the service provider.
At December 31, 2022, 43% of our properties were leased to tenants on a triple net basis, 25% of our properties were leased to tenants on a full service gross basis, 24% were leased to tenants on a modified gross basis, and 8% were leased to tenants on a modified net basis, in each case as a percentage of our annualized base rental revenue.
At December 31, 2023, 48% of our properties were leased to tenants on a triple net basis, 23% of our properties were leased to 17 tenants on a full service gross basis, 21% were leased to tenants on a modified gross basis, and 8% were leased to tenants on a modified net basis, in each case as a percentage of our annualized base rental revenue.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems), and, in some cases, may be critical to the operations of certain of our tenants. The Audit Committee of our Board of Directors oversees our risk management processes related to cybersecurity.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems), and, in some cases, may be critical to the operations of certain of our tenants.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations.” 31 Loss of our key personnel could harm our operations and financial performance and adversely affect the quoted trading price of our securities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations.” Loss of key executive officers or our inability to successfully transition key executive officers could harm our operations and financial performance, and adversely affect the quoted trading price of our securities.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems.
We face risks associated with perceived or actual security breaches, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, IT bugs or malfunctions, 28 persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems or those of our service providers.
However, the effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our floating-rate lines of credit or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt. For more information, see “Item 1A.
However, the effect of inflation on interest rates has increased borrowing costs on our variable rate debt and could further increase our financing costs over time, either through near-term borrowings on our floating-rate lines of credit or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt.
The right of our common limited partners to vote on these transactions could limit our ability to complete a change of control transaction that might otherwise be in the best interest of all our security holders. The Chairman of our board of directors and Chief Executive Officer has substantial influence over our affairs.
The right of our common limited partners to vote on these transactions could limit our ability to complete a change of control transaction that might otherwise be in the best interest of all our security holders.
Risks Related to Our Indebtedness We may not be able to meet our debt service obligations. As of December 31, 2022, we had approximately $4.3 billion aggregate principal amount of indebtedness, of which $5.8 million in principal payments will be paid during the year ending December 31, 2023.
Risks Related to Our Indebtedness We may not be able to meet our debt service obligations. As of December 31, 2023, we had approximately $5.0 billion aggregate principal amount of indebtedness, of which $929.7 million in principal payments, before the consideration of extension options, is expected to be paid during the year ending December 31, 2024.
We believe that these annual lease expirations allow us to reset these leases to market rents upon renewal or re-leasing and that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation on non-recoverable costs, such as general and administrative expenses and interest expense.
We have long-term lease agreements with our tenants, and we believe that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation on non-recoverable costs, such as general and administrative expenses and interest expense.
If we cannot obtain capital from third-party sources, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected. 34 Our common limited partners have limited approval rights, which may prevent us from completing a change of control transaction that may be in the best interests of all our security holders.
If we cannot obtain capital from third-party sources, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected.
Similarly, technology services and professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services.
Similarly, technology services and professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation may increase our general and administrative expenses over time and may adversely impact our results of operations and cash flows.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. If the Federal Reserve Board increases the federal funds rate, overall interest rates will likely rise.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Since 2022, the Federal Reserve has raised interest rates in an effort to curb inflation.
In addition, the real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.
Our property taxes could increase due to reassessment or property tax rate changes. We are required to pay state and local taxes on our properties. In addition, the real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Code is greater in the case of a REIT that, like the Company, holds its assets through a partnership.
The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Code is greater in the case of a REIT that, like the Company, holds its assets through a partnership.
As a result of all these factors, the Company’s failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and could adversely affect the value and quoted trading price of the Company’s common stock.
As a result of all these factors, the Company’s failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and could adversely affect the value and the quoted trading price of the Company’s common stock. 36 Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations.

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Item 2. Properties

Properties — owned and leased real estate

33 edited+1 added−9 removed8 unchanged
Biggest changeProperty Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2022 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) Greater Los Angeles 3101-3243 La Cienega Boulevard, Culver City, California 19 2008-2017 154,165 78.8 % $ 6,263 $ 51.85 2240 East Imperial Highway, El Segundo, California 1 1983/ 2008 122,870 100.0 % 3,713 30.21 2250 East Imperial Highway, El Segundo, California 1 1983 298,728 96.9 % 8,826 30.63 2260 East Imperial Highway, El Segundo, California 1 1983/ 2012 298,728 100.0 % 9,026 30.21 909 North Pacific Coast Highway, El Segundo, California 1 1972/ 2005 244,880 81.3 % 7,431 37.85 999 North Pacific Coast Highway, El Segundo, California 1 1962/ 2003 138,389 69.3 % 2,882 31.53 1350 Ivar Avenue, Los Angeles, California 1 2020 16,448 100.0 % 1,005 61.10 1355 Vine Street, Los Angeles, California 1 2020 183,129 100.0 % 10,882 59.42 1375 Vine Street, Los Angeles, California 1 2020 159,236 100.0 % 9,805 61.58 1395 Vine Street, Los Angeles, California 1 2020 2,575 100.0 % 161 62.65 1500 North El Centro Avenue, Los Angeles, California 1 2016 113,447 28.8 % 1,967 60.11 1525 North Gower Street, Los Angeles, California 1 2016 9,610 100.0 % 650 67.61 1575 North Gower Street, Los Angeles, California 1 2016 264,430 100.0 % 16,085 60.83 6115 West Sunset Boulevard, Los Angeles, California 1 1938/ 2015 26,238 100.0 % 1,274 48.55 6121 West Sunset Boulevard, Los Angeles, California 1 1938/ 2015 93,418 100.0 % 4,605 49.29 41 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2022 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 6255 West Sunset Boulevard, Los Angeles, California 1 1971/ 1999 331,888 88.3 % 13,875 47.39 3750 Kilroy Airport Way, Long Beach, California 1 1989 10,718 100.0 % 116 30.19 3760 Kilroy Airport Way, Long Beach, California 1 1989 166,761 96.4 % 5,567 35.79 3780 Kilroy Airport Way, Long Beach, California 1 1989 221,452 79.3 % 6,042 35.26 3800 Kilroy Airport Way, Long Beach, California 1 2000 192,476 87.7 % 5,475 32.44 3840 Kilroy Airport Way, Long Beach, California 1 1999 138,441 — % — — 3880 Kilroy Airport Way, Long Beach, California 1 1987/ 2013 96,923 100.0 % 2,839 29.29 3900 Kilroy Airport Way, Long Beach, California 1 1987 130,935 82.8 % 2,801 34.43 8560 West Sunset Boulevard, West Hollywood, California 1 1963/ 2007 76,558 59.0 % 3,410 76.57 8570 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 49,276 95.6 % 3,050 64.78 8580 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 6,875 59.0 % 335 82.65 8590 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 56,750 97.4 % 2,315 41.90 12100 West Olympic Boulevard, Los Angeles, California 1 2003 155,679 100.0 % 10,828 69.56 12200 West Olympic Boulevard, Los Angeles, California 1 2000 154,544 90.3 % 7,505 72.00 12233 West Olympic Boulevard, Los Angeles, California 1 1980/ 2011 156,746 71.5 % 3,704 42.32 12312 West Olympic Boulevard, Los Angeles, California 1 1950/ 1997 76,644 100.0 % 4,096 53.44 2100/2110 Colorado Avenue, Santa Monica, California 3 1992/ 2009 104,853 55.4 % 4,580 78.79 501 Santa Monica Boulevard, Santa Monica, California 1 1974 78,509 85.3 % 4,765 71.13 Subtotal/Weighted Average – Los Angeles and Ventura Counties 53 4,332,319 85.2 % $ 165,878 $ 46.38 San Diego County 12225 El Camino Real, Del Mar, California 1 1998 58,401 100.0 % $ 2,483 $ 42.52 12235 El Camino Real, Del Mar, California 1 1998 53,751 100.0 % 2,627 48.87 12340 El Camino Real, Del Mar, California 1 2002/ 2022 109,307 100.0 % 8,040 73.56 12390 El Camino Real, Del Mar, California 1 2000 73,238 100.0 % 4,221 57.64 12770 El Camino Real, Del Mar, California 1 2016 75,035 100.0 % 4,045 61.50 12780 El Camino Real, Del Mar, California 1 2013 140,591 100.0 % 7,138 50.77 12790 El Camino Real, Del Mar, California 1 2013 87,944 100.0 % 4,940 56.18 12830 El Camino Real, Del Mar, California 1 2020 196,444 100.0 % 14,424 73.42 12860 El Camino Real, Del Mar, California 1 2020 92,042 100.0 % 6,621 71.93 12348 High Bluff Drive, Del Mar, California 1 1999 39,193 100.0 % 1,620 41.33 12400 High Bluff Drive, Del Mar, California 1 2004/ 2022 216,518 100.0 % 16,351 75.52 42 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2022 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 3579 Valley Centre Drive, Del Mar, California 1 1999 54,960 100.0 % 3,206 58.33 3611 Valley Centre Drive, Del Mar, California 1 2000 132,425 96.4 % 6,981 54.66 3661 Valley Centre Drive, Del Mar, California 1 2001 131,662 100.0 % 6,269 50.25 3721 Valley Centre Drive, Del Mar, California 1 2003 115,193 100.0 % 5,431 47.15 3811 Valley Centre Drive, Del Mar, California 1 2000 118,912 100.0 % 6,782 57.03 3745 Paseo Place, Del Mar, California 1 2019 95,871 80.5 % 5,100 66.12 13480 Evening Creek Drive North, San Diego, California 1 2008 143,401 6.4 % 104 12.00 13500 Evening Creek Drive North, San Diego, California 1 2004 143,749 100.0 % 6,101 45.69 13520 Evening Creek Drive North, San Diego, California 1 2004 146,701 97.5 % 5,619 40.15 2100 Kettner Boulevard, San Diego, California 1 2022 204,682 — % — — 2305 Historic Decatur Road, Point Loma, California 1 2009 107,456 93.9 % 4,298 42.62 9455 Towne Centre Drive, UTC, California 1 2021 160,444 100.0 % 7,822 48.76 Subtotal/Weighted Average – San Diego County 23 2,697,920 86.2 % $ 130,223 $ 56.72 San Francisco Bay Area 4100 Bohannon Drive, Menlo Park, California 1 1985 47,379 100.0 % $ 2,640 $ 55.72 4200 Bohannon Drive, Menlo Park, California 1 1987 45,451 65.8 % 1,720 57.50 4300 Bohannon Drive, Menlo Park, California 1 1988 63,079 48.7 % 2,205 71.75 4500 Bohannon Drive, Menlo Park, California 1 1990 63,078 100.0 % 4,074 64.58 4600 Bohannon Drive, Menlo Park, California 1 1990 48,147 93.0 % 2,586 57.77 4700 Bohannon Drive, Menlo Park, California 1 1989 63,078 100.0 % 3,513 55.70 1290-1300 Terra Bella Avenue, Mountain View, California 1 1961 114,175 100.0 % 7,440 65.17 680 East Middlefield Road, Mountain View, California 1 2014 171,676 100.0 % 7,763 45.22 690 East Middlefield Road, Mountain View, California 1 2014 171,215 100.0 % 7,729 45.14 1701 Page Mill Road, Palo Alto, California 1 2015 128,688 100.0 % 8,461 65.75 3150 Porter Drive, Palo Alto, California 1 1998 36,886 100.0 % 3,277 88.83 900 Jefferson Avenue, Redwood City, California 1 2015 228,505 100.0 % 13,670 59.82 900 Middlefield Road, Redwood City, California 1 2015 118,764 100.0 % 6,954 58.80 100 Hooper Street, San Francisco, California 1 2018 417,914 100.0 % 24,283 58.11 100 First Street, San Francisco, California 1 1988 480,457 94.6 % 30,863 71.11 303 Second Street, San Francisco, California 1 1988 784,658 84.9 % 58,330 87.89 201 Third Street, San Francisco, California 1 1983 346,538 77.3 % 20,021 75.79 43 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2022 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 360 Third Street, San Francisco, California 1 2013 429,796 99.6 % 32,623 76.35 250 Brannan Street, San Francisco, California 1 1907/ 2001 100,850 100.0 % 10,323 102.36 301 Brannan Street, San Francisco, California 1 1909/ 1989 82,834 100.0 % 7,391 89.23 333 Brannan Street, San Francisco, California 1 2016 185,602 100.0 % 17,688 95.30 345 Brannan Street, San Francisco, California 1 2015 110,050 99.7 % 10,551 96.16 350 Mission Street, San Francisco, California 1 2016 455,340 99.7 % 24,076 53.09 345 Oyster Point Boulevard, South San Francisco, California 1 2001 40,410 100.0 % 2,192 54.24 347 Oyster Point Boulevard, South San Francisco, California 1 1998 39,780 100.0 % 2,158 54.24 349 Oyster Point Boulevard, South San Francisco, California 1 1999 65,340 100.0 % 3,868 59.19 350 Oyster Point Boulevard, South San Francisco, California 1 2021 234,892 100.0 % 18,167 77.34 352 Oyster Point Boulevard, South San Francisco, California 1 2021 232,215 100.0 % 18,062 77.78 354 Oyster Point Boulevard, South San Francisco, California 1 2021 193,472 100.0 % 15,048 77.78 505 North Mathilda Avenue, Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50 555 North Mathilda Avenue, Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50 599 North Mathilda Avenue, Sunnyvale, California 1 2000 76,031 100.0 % 3,610 47.48 605 North Mathilda Avenue, Sunnyvale, California 1 2014 162,785 100.0 % 7,244 44.50 Subtotal/Weighted Average – San Francisco 33 6,163,729 95.5 % $ 397,428 $ 67.85 Greater Seattle 601 108th Avenue North East, Bellevue, Washington 1 2000 490,738 99.8 % $ 19,513 $ 40.27 10900 North East 4th Street, Bellevue, Washington 1 1983 428,557 98.8 % 17,400 41.26 2001 West 8th Avenue, Seattle, Washington 1 2009 539,226 90.0 % 21,511 44.34 333 Dexter Ave North, Seattle, Washington 1 2022 618,766 100.0 % 31,940 51.62 701 North 34th Street, Seattle, Washington 1 1998 141,860 100.0 % 5,318 37.49 801 North 34th Street, Seattle, Washington 1 1998 173,615 100.0 % 5,789 33.34 837 North 34th Street, Seattle, Washington 1 2008 112,487 100.0 % 4,093 36.38 320 Westlake Avenue North, Seattle, Washington 1 2007 184,644 96.1 % 8,041 45.31 321 Terry Avenue North, Seattle, Washington 1 2013 135,755 100.0 % 5,554 40.91 401 Terry Avenue North, Seattle, Washington 1 2003 174,530 100.0 % 7,008 40.15 Subtotal/Weighted Average – Greater Seattle 10 3,000,178 97.7 % $ 126,167 $ 43.12 TOTAL/WEIGHTED AVERAGE 119 16,194,146 91.6 % $ 819,696 $ 55.93 ____________________ (1) Based on all leases at the respective properties in effect as of December 31, 2022.
Biggest changeProperty Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2023 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) Greater Los Angeles 3101-3243 La Cienega Boulevard, Culver City, California 19 2008-2017 166,207 71.9 % $ 6,030 $ 50.45 2240 East Imperial Highway, El Segundo, California 1 1983/ 2008 122,870 100.0 % 3,712 30.21 2250 East Imperial Highway, El Segundo, California 1 1983 298,728 46.2 % 4,517 33.03 2260 East Imperial Highway, El Segundo, California 1 1983/ 2012 298,728 100.0 % 9,026 30.21 909 North Pacific Coast Highway, El Segundo, California 1 1972/ 2005 244,880 78.6 % 7,175 37.84 999 North Pacific Coast Highway, El Segundo, California 1 1962/ 2003 138,389 58.1 % 2,557 33.91 1350 Ivar Avenue, Los Angeles, California 1 2020 16,448 100.0 % 1,005 61.10 1355 Vine Street, Los Angeles, California 1 2020 183,129 100.0 % 10,882 59.42 1375 Vine Street, Los Angeles, California 1 2020 159,236 100.0 % 9,805 61.58 1395 Vine Street, Los Angeles, California 1 2020 2,575 100.0 % 161 62.65 1500 North El Centro Avenue, Los Angeles, California 1 2016 113,447 41.4 % 3,084 65.62 1525 North Gower Street, Los Angeles, California 1 2016 9,610 100.0 % 650 67.61 1575 North Gower Street, Los Angeles, California 1 2016 264,430 100.0 % 16,209 61.30 6115 West Sunset Boulevard, Los Angeles, California 1 1938/ 2015 26,238 53.0 % 481 34.56 42 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2023 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 6121 West Sunset Boulevard, Los Angeles, California 1 1938/ 2015 93,418 100.0 % 4,605 49.29 6255 West Sunset Boulevard, Los Angeles, California 1 1971/ 1999 332,100 77.9 % 10,775 43.00 3750 Kilroy Airport Way, Long Beach, California 1 1989 10,718 100.0 % 126 32.81 3760 Kilroy Airport Way, Long Beach, California 1 1989 166,761 77.0 % 4,696 38.15 3780 Kilroy Airport Way, Long Beach, California 1 1989 221,452 91.4 % 7,300 36.81 3800 Kilroy Airport Way, Long Beach, California 1 2000 192,476 89.3 % 5,588 32.53 3840 Kilroy Airport Way, Long Beach, California 1 1999 138,441 77.6 % 4,451 41.44 3880 Kilroy Airport Way, Long Beach, California 1 1987/ 2013 96,923 100.0 % 2,839 29.29 3900 Kilroy Airport Way, Long Beach, California 1 1987 130,935 78.7 % 3,473 33.77 8560 West Sunset Boulevard, West Hollywood, California 1 1963/ 2007 76,558 87.6 % 5,438 81.87 8570 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 49,276 94.5 % 3,050 65.84 8580 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 6,875 59.0 % — — 8590 West Sunset Boulevard, West Hollywood, California 1 2002/ 2007 56,750 97.4 % 2,315 41.90 12100 West Olympic Boulevard, Los Angeles, California 1 2003 155,679 74.1 % 8,519 73.89 12200 West Olympic Boulevard, Los Angeles, California 1 2000 154,544 32.0 % 1,055 75.00 12233 West Olympic Boulevard, Los Angeles, California 1 1980/ 2011 156,746 52.7 % 4,073 59.61 12312 West Olympic Boulevard, Los Angeles, California 1 1950/ 1997 76,644 100.0 % 4,096 53.44 2100/2110 Colorado Avenue, Santa Monica, California 3 1992/ 2009 104,853 55.4 % 4,580 78.79 501 Santa Monica Boulevard, Santa Monica, California 1 1974 78,509 68.4 % 4,264 79.40 Subtotal/Weighted Average – Los Angeles 53 4,344,573 79.0 % $ 156,537 $ 46.79 San Diego County 12225 El Camino Real, Del Mar, California 1 1998 58,401 100.0 % $ 2,555 $ 43.75 12235 El Camino Real, Del Mar, California 1 1998 53,751 100.0 % 2,627 48.87 12340 El Camino Real, Del Mar, California 1 2002/ 2022 109,307 100.0 % 7,942 72.66 12390 El Camino Real, Del Mar, California 1 2000 73,238 100.0 % 4,237 57.85 12770 El Camino Real, Del Mar, California 1 2016 75,035 100.0 % 4,226 64.26 12780 El Camino Real, Del Mar, California 1 2013 140,591 100.0 % 7,138 50.77 12790 El Camino Real, Del Mar, California 1 2013 87,944 100.0 % 4,940 56.18 12830 El Camino Real, Del Mar, California 1 2021 196,444 100.0 % 14,424 73.42 12860 El Camino Real, Del Mar, California 1 2021 92,042 100.0 % 6,621 71.93 12348 High Bluff Drive, Del Mar, California 1 1999 39,192 100.0 % 1,620 41.33 43 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2023 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 12400 High Bluff Drive, Del Mar, California 1 2004/ 2022 216,518 91.7 % 15,475 77.93 3579 Valley Centre Drive, Del Mar, California 1 1999 54,960 94.7 % 3,098 59.54 3611 Valley Centre Drive, Del Mar, California 1 2000 132,425 100.0 % 7,373 55.68 3661 Valley Centre Drive, Del Mar, California 1 2001 131,662 100.0 % 6,269 50.25 3721 Valley Centre Drive, Del Mar, California 1 2003 115,193 78.4 % 5,161 57.20 3811 Valley Centre Drive, Del Mar, California 1 2000 118,912 100.0 % 6,782 57.03 3745 Paseo Place, Del Mar, California 1 2019 95,871 89.6 % 5,762 67.10 13480 Evening Creek Drive North, San Diego, California 1 2008 143,401 54.5 % 3,514 50.99 13500 Evening Creek Drive North, San Diego, California 1 2004 143,749 92.9 % 6,077 45.50 13520 Evening Creek Drive North, San Diego, California 1 2004 146,701 100.0 % 5,972 41.57 2100 Kettner Boulevard, San Diego, California 1 2022 206,527 20.5 % 3,058 72.27 2305 Historic Decatur Road, Point Loma, California 1 2009 107,456 82.1 % 4,015 45.51 9455 Towne Centre Drive, UTC, California 1 2021 160,444 100.0 % 7,823 48.76 9514 Towne Centre Drive, UTC, California 1 2023 70,616 100.0 % 5,220 73.92 Subtotal/Weighted Average – San Diego County 24 2,770,380 88.6 % $ 141,929 $ 58.47 San Francisco Bay Area 4100 Bohannon Drive, Menlo Park, California 1 1985 47,643 100.0 % $ 2,640 $ 55.41 4200 Bohannon Drive, Menlo Park, California 1 1987 43,600 69.4 % 1,720 56.79 4300 Bohannon Drive, Menlo Park, California 1 1988 63,430 48.8 % 2,206 71.28 4500 Bohannon Drive, Menlo Park, California 1 1990 63,429 100.0 % 4,074 64.23 4600 Bohannon Drive, Menlo Park, California 1 1990 48,413 100.0 % 2,792 57.67 4700 Bohannon Drive, Menlo Park, California 1 1989 63,429 100.0 % 3,513 55.39 1290-1300 Terra Bella Avenue, Mountain View, California 1 1961 114,175 100.0 % 7,445 65.21 680 East Middlefield Road, Mountain View, California 1 2014 171,676 100.0 % 7,763 45.22 690 East Middlefield Road, Mountain View, California 1 2014 171,215 100.0 % 7,729 45.14 1701 Page Mill Road, Palo Alto, California 1 2015 128,688 100.0 % 8,461 65.75 3150 Porter Drive, Palo Alto, California 1 1998 36,886 100.0 % 3,277 88.83 900 Jefferson Avenue, Redwood City, California 1 2015 228,505 100.0 % 13,468 58.94 900 Middlefield Road, Redwood City, California 1 2015 118,764 100.0 % 6,487 54.85 100 Hooper Street, San Francisco, California 1 2018 417,914 95.5 % 23,676 59.41 100 First Street, San Francisco, California 1 1988 480,457 98.3 % 32,646 71.83 44 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2023 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 303 Second Street, San Francisco, California 1 1988 784,658 71.1 % 50,885 91.63 201 Third Street, San Francisco, California 1 1983 346,538 68.2 % 17,659 75.90 360 Third Street, San Francisco, California 1 2013 436,357 66.6 % 25,489 88.08 250 Brannan Street, San Francisco, California 1 1907/ 2001 100,850 100.0 % 10,323 102.36 301 Brannan Street, San Francisco, California 1 1909/ 1989 82,834 100.0 % 7,391 89.23 333 Brannan Street, San Francisco, California 1 2016 185,602 100.0 % 17,688 95.30 345 Brannan Street, San Francisco, California 1 2015 110,050 99.7 % 10,551 96.76 350 Mission Street, San Francisco, California 1 2016 455,340 99.7 % 24,076 53.09 345 Oyster Point Boulevard, South San Francisco, California 1 2001 40,410 100.0 % 2,192 54.24 347 Oyster Point Boulevard, South San Francisco, California 1 1998 39,780 100.0 % 2,158 54.24 349 Oyster Point Boulevard, South San Francisco, California 1 1999 65,340 100.0 % 4,265 65.27 350 Oyster Point Boulevard, South San Francisco, California 1 2021 234,892 100.0 % 18,167 77.34 352 Oyster Point Boulevard, South San Francisco, California 1 2021 232,215 100.0 % 18,062 77.78 354 Oyster Point Boulevard, South San Francisco, California 1 2021 193,472 100.0 % 15,048 77.78 505 North Mathilda Avenue, Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50 555 North Mathilda Avenue, Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50 599 North Mathilda Avenue, Sunnyvale, California 1 2000 76,031 100.0 % 3,610 47.48 605 North Mathilda Avenue, Sunnyvale, California 1 2014 162,785 100.0 % 7,244 44.50 Subtotal/Weighted Average – San Francisco 33 6,170,022 91.0 % $ 381,603 $ 68.32 Greater Seattle 601 108th Avenue North East, Bellevue, Washington 1 2000 490,738 100.0 % $ 19,647 $ 40.46 10900 North East 4th Street, Bellevue, Washington 1 1983 428,557 86.2 % 15,082 41.01 2001 West 8th Avenue, Seattle, Washington 1 2009 539,226 20.0 % 4,587 43.15 333 Dexter Ave North, Seattle, Washington 1 2022 618,766 100.0 % 31,940 51.62 701 North 34th Street, Seattle, Washington 1 1998 141,860 100.0 % 5,199 36.65 801 North 34th Street, Seattle, Washington 1 1998 173,615 100.0 % 5,789 33.34 837 North 34th Street, Seattle, Washington 1 2008 112,487 100.0 % 4,093 36.38 320 Westlake Avenue North, Seattle, Washington 1 2007 184,644 96.1 % 8,041 45.31 321 Terry Avenue North, Seattle, Washington 1 2013 135,755 100.0 % 5,374 39.59 401 Terry Avenue North, Seattle, Washington 1 2003 174,530 100.0 % 7,008 40.15 Subtotal/Weighted Average – Greater Seattle 10 3,000,178 83.4 % $ 106,760 $ 42.80 Austin 45 Property Location No. of Buildings Year Built/ Renovated Rentable Square Feet Percentage Occupied at 12/31/2023 (1) Annualized Base Rent (in $000’s) (2) Annualized Rent Per Square Foot (2) 200 W. 6th Street, Austin CBD, Texas 1 2023 758,975 64.9 % $ 20,975 $ 42.61 Subtotal/Weighted Average - Austin 1 758,975 64.9 % $ 20,975 $ 42.61 TOTAL/WEIGHTED AVERAGE 121 17,044,128 85.0 % $ 807,804 $ 56.31 ____________________ (1) Based on all leases at the respective properties in effect as of December 31, 2023.
(3) For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of December 31, 2022, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2022.
(3) For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of December 31, 2023, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2023.
All our properties are held in fee, except for the fourteen office buildings that are held subject to five long-term ground leases for the land (see Note 18 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information regarding our ground lease obligations).
All our properties are held in fee, except for the fourteen office buildings that are held subject to five long-term ground leases for the land (see Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information regarding our ground lease obligations).
Our markets are dynamic and populated with innovative and creative tenants, including but not limited to technology, entertainment and digital media.
Our markets are dynamic and populated with innovative and creative tenants, including but not limited to technology, entertainment and digital media companies.
All of our properties, development projects and redevelopment projects are 100% owned, excluding four office properties owned by three consolidated property partnerships. 40 We own our interests in all of our real estate assets through the Operating Partnership.
All of our properties, development projects and redevelopment projects are 100% owned, excluding four office properties owned by three consolidated property partnerships. 41 We own our interests in all of our real estate assets through the Operating Partnership.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Sources,” Notes 8 and 9 to our consolidated financial statements and Schedule III—Real Estate and Accumulated Depreciation included in this report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Sources,” Notes 9 and 10 to our consolidated financial statements and Schedule III—Real Estate and Accumulated Depreciation included in this report.
In addition, some office and life science properties, primarily in the Greater Seattle region and certain properties in certain submarkets in the San Francisco Bay Area and Greater Los Angeles, are leased to tenants on a triple net basis, pursuant to which the tenants pay their proportionate share of real estate taxes, operating costs and utility costs.
In addition, some office and life science properties, primarily in Seattle and Austin and certain properties in certain submarkets in the San Francisco Bay Area and Los Angeles, are leased to tenants on a triple net basis, pursuant to which the tenants pay their proportionate share of real estate taxes, operating costs and utility costs.
For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. 45 In-Process Redevelopment Projects As of December 31, 2022, we had the following redevelopment project under construction: Construction Start Date Estimated Stabilization Date (1) Estimated Rentable Square Feet % Leased UNDER CONSTRUCTION Location Life Science San Francisco Bay Area 4400 Bohannon Drive Menlo Park 4Q 2022 3Q 2025 48,000 —% San Diego County 4690 Executive Drive (2) University Towne Center 1Q 2022 3Q 2023 52,000 100% TOTAL: 100,000 52% ____________________ (1) Represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.
For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. 46 In-Process Redevelopment Projects As of December 31, 2023, the following redevelopment projects were under construction: Construction Start Date Estimated Stabilization Date (1) Estimated Rentable Square Feet % Leased UNDER CONSTRUCTION Location Life Science San Francisco Bay Area 4400 Bohannon Drive Menlo Park 4Q 2022 3Q 2025 48,000 —% San Diego County 4690 Executive Drive University Towne Center 1Q 2022 2Q 2025 52,000 —% TOTAL: 100,000 —% ____________________ (1) Represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2022, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2023, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.
Developable Square Feet (1) Greater Los Angeles 1633 26th Street West Los Angeles 190,000 San Diego County Santa Fe Summit South / North 56 Corridor 600,000 - 650,000 2045 Pacific Highway Little Italy 275,000 Kilroy East Village East Village TBD San Francisco Bay Area Kilroy Oyster Point - Phases 3 and 4 South San Francisco 875,000 - 1,000,000 Flower Mart SOMA 2,300,000 Greater Seattle SIX0 - Office & Residential Denny Regrade 925,000 Austin Stadium Tower Stadium District / Domain 493,000 ____________________ (1) The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design. 46 Significant Tenants The following table sets forth information about our 15 largest tenants based upon annualized base rental revenues, as defined below, as of December 31, 2022, adjusted for expirations through February 1, 2023.
Developable Square Feet (1) Greater Los Angeles 1633 26th Street West Los Angeles 190,000 San Diego County Santa Fe Summit South / North 56 Corridor 600,000 - 650,000 2045 Pacific Highway Little Italy 275,000 Kilroy East Village East Village TBD San Francisco Bay Area Kilroy Oyster Point - Phases 3 and 4 South San Francisco 875,000 - 1,000,000 Flower Mart SOMA 2,300,000 Greater Seattle SIX0 Denny Regrade 925,000 Austin Stadium Tower Stadium District / Domain 493,000 ____________________ (1) The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design. 47 Significant Tenants The following table sets forth information about our 15 largest tenants based upon annualized base rental revenues, as defined below, as of December 31, 2023.
Excludes month-to-month leases and vacant space as of December 31, 2022. Includes 100% of annualized base rent of consolidated property partnerships.
Excludes month-to-month leases and vacant space as of December 31, 2023. Includes 100% of annualized base rent of consolidated property partnerships.
Represents economic occupancy. 44 (2) Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above/below market rent, amortization for lease incentives due under existing leases and expense reimbursement revenue.
(2) Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above/below market rent, amortization for lease incentives due under existing leases and expense reimbursement revenue.
Number of Properties Number of Units 2022 Average Occupancy Stabilized Residential Properties 3 1,001 93.5 % Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction or in the tenant improvement phase, redevelopment properties under construction, undeveloped land, and real estate assets held for sale.
Number of Properties Number of Units 2023 Average Occupancy Stabilized Residential Properties 3 1,001 92.8 % Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction or in the tenant improvement phase, redevelopment properties under construction, undeveloped land, and real estate assets held for sale.
As of December 31, 2022, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one development project in the tenant improvement phase and one future development project located in Austin, Texas.
As of December 31, 2023, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington and one stabilized office property and one future development project located in Austin, Texas.
While technology companies comprise 58% of our office portfolio base rent, technology is a broad concept that encompasses diverse industries including software, social media, hardware, cloud computing, internet media and technology services. 48 Lease Expirations The following table sets forth a summary of our office lease expirations for each of the next ten years beginning with 2023, assuming that none of the tenants exercise renewal options or termination rights.
While technology companies comprise 54% of our office portfolio base rent, technology is a broad concept that encompasses diverse industries including software, social media, hardware, cloud computing, internet media and technology services. 49 Lease Expirations The following table sets forth a summary of our lease expirations for our stabilized portfolio, excluding our residential properties, for each of the next ten years beginning with 2024, assuming that none of the tenants exercise renewal options or termination rights.
Secured Debt As of December 31, 2022, the Operating Partnership had two outstanding mortgage notes payable which were secured by certain of our properties. Our secured debt represents an aggregate principal indebtedness of approximately $243.5 million . See additional information regarding our secured debt in “Item 7.
Secured Debt As of December 31, 2023, the Operating Partnership had three outstanding mortgage notes payable which were secured by certain of our properties. Our secured debt represents an aggregate principal indebtedness of approximately $612.7 million . See additional information regarding our secured debt in “Item 7.
As of December 31, 2022, the following properties were excluded from our stabilized portfolio: Number of Properties/Projects Estimated Rentable Square Feet (1) In-process development projects - tenant improvement 1 734,000 In-process development projects - under construction 2 946,000 In-process redevelopment projects - under construction 2 100,000 ________________________ (1) Estimated rentable square feet upon completion.
As of December 31, 2023, the following properties were excluded from our stabilized portfolio: Number of Properties/Projects Estimated Rentable Square Feet (1) In-process development projects - under construction 1 875,000 In-process redevelopment projects - under construction 2 100,000 ________________________ (1) Estimated rentable square feet upon completion.
At December 31, 2022, 43% of our properties were leased to tenants on a triple net basis, 25% of our properties were leased to tenants on a full service gross basis, and 24% were leased to tenants on a modified gross basis. We believe that all of our properties are well maintained and do not require significant capital improvements.
At December 31, 2023, 48% of our properties were leased to tenants on a triple net basis, 23% of our properties were leased to tenants on a full service gross basis, and 21% were leased to tenants on a modified gross basis. We believe that all of our properties are well maintained and do not require significant capital improvements.
As of December 31, 2022, we managed all of our stabilized office properties through internal property managers. Office Properties The following table sets forth certain information relating to each of the stabilized office properties owned as of December 31, 2022.
As of December 31, 2023, all of our stabilized office properties, excluding one office property and our three residential properties, were managed through internal property managers. Office Properties The following table sets forth certain information relating to each of the stabilized office properties owned as of December 31, 2023.
During the year ended December 31, 2022, we added two development projects and two redevelopment projects to our stabilized portfolio consisting of four buildings totaling 1,114,704 square feet of office and life science space in Seattle, Washington and San Diego, California. We did not have any properties held for sale at December 31, 2022.
During the year ended December 31, 2023, we added two development projects to our stabilized portfolio consisting of two buildings totaling 829,591 square feet of office space in San Diego, California and Austin, Texas. We did not have any properties held for sale at December 31, 2023.
Construction Start Date Estimated Stabilization Date (1) Estimated Rentable Square Feet % Leased UNDER CONSTRUCTION Location Office / Life Science San Francisco Bay Area Kilroy Oyster Point - Phase 2 South San Francisco 2Q 2021 2Q 2025 875,000 —% San Diego County 9514 Towne Centre Drive University Towne Center 3Q 2021 4Q 2023 71,000 100% TOTAL: 946,000 8% ____________________ (1) Represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.
In-Process Development Projects As of December 31, 2023, the following development project was under construction: Construction Start Date Estimated Stabilization Date (1) Estimated Rentable Square Feet % Leased UNDER CONSTRUCTION Location Office / Life Science San Francisco Bay Area Kilroy Oyster Point - Phase 2 South San Francisco 2Q 2021 4Q 2025 875,000 —% TOTAL: 875,000 —% ____________________ (1) Represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.
ITEM 2. PROPERTIES General Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2022: Number of Buildings Rentable Square Feet Number of Tenants Percentage Occupied (1) Percentage Leased Stabilized Office Properties (2) 119 16,194,146 406 91.6 % 92.9 % _______________________ (1) Represents economic occupancy. (2) Includes stabilized life science and retail space.
ITEM 2. PROPERTIES General Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2023: Number of Buildings Rentable Square Feet Number of Tenants Percentage Occupied (1) Percentage Leased Stabilized Office Properties (2) 121 17,044,128 410 85.0 % 86.4 % _______________________ (1) Represents economic occupancy. (2) Includes stabilized life science and retail space.
Includes month-to-month leases as of December 31, 2022.
Includes month-to-month leases as of December 31, 2023. Represents economic occupancy.
Tenant Name Region Annualized Base Rental Revenue (1)(2) Percentage of Total Annualized Base Rental Revenue (1) Lease Expiration Date (in thousands) Global technology company Greater Seattle / San Diego County $ 39,631 4.8% Various (3) Cruise LLC San Francisco Bay Area 35,449 4.3% November 2031 Stripe, Inc.
Tenant Name Region Annualized Base Rental Revenue (1)(2) Rentable Square Feet Percentage of Total Annualized Base Rental Revenue (1) Percentage of Total Rentable Square Feet Year(s) of Significant Lease Expiration(s) (3) (in thousands) Global technology company Greater Seattle / San Diego County $ 44,851 849,826 5.6% 5.0% 2032 - 2033 / 2037 Cruise LLC San Francisco Bay Area 35,449 374,618 4.4% 2.2% 2031 Stripe, Inc.
San Francisco Bay Area 15,492 1.9% August 2030 Total $ 382,424 46.5% _____________________ (1) Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue.
(7) Greater Los Angeles 14,628 218,824 1.8% 1.3% 2024 / 2031 Total $ 370,091 6,352,824 46.1% 37.3% _____________________ (1) Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue.
Stabilized Development and Redevelopment Projects During the year ended December 31, 2022, the following properties were added to our stabilized portfolio of operating properties: Construction Period Stabilized Office / Life Science Development & Redevelopment Projects Location Start Date Completion Date Stabilization Date (1) Rentable Square Feet % Occupied (2) 333 Dexter Avenue North Lake Union 2Q 2017 2Q 2022 2Q 2022 618,766 100% 2100 Kettner Little Italy 3Q 2019 3Q 2021 3Q 2022 204,682 —% 12340 El Camino Real (3) Del Mar 4Q 2021 3Q 2022 3Q 2022 109,307 100% 12400 High Bluff Drive (4) Del Mar 1Q 2022 3Q 2022 3Q 2022 181,949 100% TOTAL: 1,114,704 82% ____________________ (1) For office and retail, represents the earlier of anticipated 95% occupancy date or one year from cessation of major base building construction activities.
Stabilized Development Projects During the year ended December 31, 2023, the following properties were added to our stabilized portfolio of operating properties: Construction Period Stabilized Development Projects Location Start Date Completion Date Stabilization Date (1) Rentable Square Feet % Occupied (2) 9514 Towne Centre Drive University Towne Center 3Q 2021 3Q 2023 3Q 2023 70,616 100% Indeed Tower Austin CBD 2Q 2021 4Q 2022 4Q 2023 758,975 65% TOTAL: 829,591 68% ____________________ (1) For office and retail, represents the earlier of anticipated 95% occupancy date or one year from cessation of major base building construction activities.
The lease of 151,455 rentable square feet of space expired on January 1, 2023 and is excluded from the table above. 47 The following pie chart sets forth the composition of our tenant base by industry and as a percentage of our annualized base rental revenue based on the North American Industry Classification System as of December 31, 2022.
(7) The 2024 lease expiration represents 131,982 rentable square feet comprised of 8,691 rentable square feet that expired on January 31, 2024, 6,411 rentable square feet expiring on July 31, 2024 and 116,880 rentable square feet expiring on November 30, 2024, of which 76,644 rentable square feet was renewed in January 2024. 48 The following pie chart sets forth the composition of our tenant base by industry and as a percentage of our annualized base rental revenue based on the North American Industry Classification System as of December 31, 2023.
San Francisco Bay Area 33,110 4.0% June 2034 Amazon.com Greater Seattle 31,437 3.8% Various (4) LinkedIn Corporation / Microsoft Corporation San Francisco Bay Area 29,752 3.6% Various (5) Adobe Systems, Inc. San Francisco Bay Area / Greater Seattle 27,897 3.4% Various (6) Salesforce, Inc. San Francisco Bay Area 24,076 2.9% Various (7) DoorDash, Inc.
San Francisco Bay Area 33,110 425,687 4.1% 2.5% 2034 Salesforce, Inc. (4) San Francisco Bay Area / Greater Seattle 29,981 613,497 3.7% 3.6% 2024 / 2029 - 2030 / 2032 LinkedIn Corporation / Microsoft Corporation (5) San Francisco Bay Area 29,752 663,460 3.7% 3.9% 2024 / 2026 Adobe Systems, Inc.
For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. (2) Redevelopment will occur in phases based on existing lease expiration dates and timing of the tenant improvement build-out.
For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. Future Development Pipeline The following table sets forth certain information relating to our future development pipeline as of December 31, 2023. Future Development Pipeline Location Approx.
Lease Expirations Year of Lease Expiration # of Expiring Leases Total Square Feet % of Total Leased Square Feet Annualized Base Rent (000’s) (1) (2) % of Total Annualized Base Rent (1) Annualized Rent per Square Foot (1) 2023 63 1,504,289 10.3 % $ 72,367 8.8 % $ 48.11 2024 76 1,153,427 7.9 % 54,973 6.7 % 47.66 2025 64 745,112 5.1 % 37,168 4.5 % 49.88 2026 54 1,940,792 13.3 % 90,757 11.1 % 46.76 2027 62 1,043,534 7.2 % 41,487 5.1 % 39.76 2028 36 1,022,867 7.0 % 64,904 7.9 % 63.45 2029 22 962,596 6.6 % 53,105 6.5 % 55.17 2030 37 1,525,681 10.5 % 91,127 11.1 % 59.73 2031 31 1,911,843 13.1 % 129,488 15.8 % 67.73 2032 14 1,054,719 7.2 % 71,555 8.7 % 67.84 2033 and beyond 13 1,706,987 11.8 % 112,765 13.8 % 66.06 Total (3) 472 14,571,847 100.0 % $ 819,696 100.0 % $ 56.25 ____________________ (1) Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue.
Lease Expirations Year of Lease Expiration # of Expiring Leases Total Square Feet % of Total Leased Square Feet Annualized Base Rent (000’s) (1) (2) % of Total Annualized Base Rent (1) Annualized Rent per Square Foot (1) 2024 70 1,054,096 7.3 % $ 52,196 6.4 % $ 49.52 2025 65 677,463 4.8 % 33,731 4.2 % 49.79 2026 61 1,921,594 13.5 % 90,656 11.2 % 47.18 2027 70 1,064,205 7.5 % 43,736 5.4 % 41.10 2028 51 1,106,414 7.8 % 68,568 8.5 % 61.97 2029 36 1,162,475 8.2 % 62,676 7.8 % 53.92 2030 39 1,539,066 10.8 % 91,673 11.3 % 59.56 2031 40 2,085,131 14.6 % 137,161 17.0 % 65.78 2032 15 1,115,436 7.8 % 73,937 9.2 % 66.29 2033 13 1,156,673 8.1 % 69,315 8.6 % 59.93 2034 and beyond 16 1,354,882 9.6 % 84,155 10.4 % 62.11 Total (3) 476 14,237,435 100.0 % $ 807,804 100.0 % $ 56.74 ____________________ (1) Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue.
Excludes month-to-month leases and vacant space as of December 31, 2022. (2) Includes 100% of the annualized base rental revenues of consolidated property partnerships. (3) The Global Technology Company leases, which contribute $7.8 million and $31.8 million, expire in January 2032 and July 2033, respectively.
Excludes month-to-month leases and vacant space as of December 31, 2023. (2) Includes 100% of the annualized base rental revenues of consolidated property partnerships. (3) We define significant lease expirations as those with space expiring greater than 25,000 rentable square feet. (4) The 2024 lease expiration represents 140,509 rentable square feet expiring on August 31, 2024.
San Francisco Bay Area 23,842 2.9% January 2032 Riot Games, Inc. Greater Los Angeles 22,855 2.8% Various (8) Okta, Inc. San Francisco Bay Area 22,387 2.7% October 2028 Netflix, Inc. Greater Los Angeles 21,854 2.7% July 2032 Box, Inc. San Francisco Bay Area 20,390 2.5% June 2028 Cytokinetics, Inc.
San Francisco Bay Area / Greater Seattle 27,897 522,879 3.5% 3.1% 2027 / 2031 Okta, Inc. San Francisco Bay Area 24,206 293,001 3.0% 1.7% 2028 DoorDash, Inc. San Francisco Bay Area 23,842 236,759 3.0% 1.4% 2032 Netflix, Inc. Greater Los Angeles 21,854 361,388 2.7% 2.1% 2032 Box, Inc.
San Francisco Bay Area 18,167 2.2% October 2033 DIRECTV, LLC Greater Los Angeles 16,085 2.0% Various (9) Synopsys, Inc.
(6) San Francisco Bay Area 19,788 341,441 2.5% 2.0% 2024 / 2028 Cytokinetics, Inc. San Francisco Bay Area 18,167 234,892 2.3% 1.4% 2033 DIRECTV, LLC Greater Los Angeles 16,085 532,956 2.0% 3.1% 2026 - 2027 Synopsys, Inc. San Francisco Bay Area 15,492 342,891 1.9% 2.0% 2030 Amazon.com Greater Seattle 14,989 340,705 1.9% 2.0% 2029 - 2030 Riot Games, Inc.
Removed
(2) Represents economic occupancy. (3) Redevelopment project. (4) Completed 144,000 rentable square feet that was in the scope of redevelopment.
Added
(5) The 2024 lease expiration represents 76,031 rentable square feet expiring on October 31, 2024. (6) The 2024 lease expiration represents 53,762 rentable square feet that expired on January 31, 2024.
Removed
In-Process Development Projects The following tables set forth certain information relating to our in-process development pipeline as of December 31, 2022: Location Construction Start Date Estimated Stabilization Date (2) Estimated Rentable Square Feet Total Project % Leased Total Project % Occupied (3) TENANT IMPROVEMENT (1) Office Austin Indeed Tower Austin CBD 2Q 2021 4Q 2023 734,000 71% 58% TOTAL: 734,000 71% 58% ____________________ (1) Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
Removed
(2) Represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. (3) Represents economic occupancy.
Removed
Future Development Pipeline The following table sets forth certain information relating to our future development pipeline as of December 31, 2022. Future Development Pipeline Location Approx.
Removed
(4) The Amazon.com leases, which contribute $16.9 million, $2.0 million and $12.5 million, expire in April 2023, September 2029 and February 2030, respectively. The lease of 71,481 rentable square feet of space expired on January 30, 2023 and is excluded from the table above.
Removed
(5) The LinkedIn Corporation / Microsoft Corporation leases, which contribute $3.6 million and $26.2 million, expire in October 2024 and September 2026, respectively. (6) The Adobe Systems Inc. leases, which contribute $1.1 million, $5.8 million and $21.0 million, expire in June 2027, July 2031 and August 2031, respectively.
Removed
(7) The salesforce.com, inc. leases, which contribute $0.6 million and $23.5 million, expire in May 2031 and September 2032, respectively. (8) The Riot Games leases, which contribute $8.9 million, $0.3 million, $7.3 million and $6.4 million, expire in November 2023, July 2024, November 2024, and May 2031, respectively.
Removed
(9) The DIRECTV, LLC leases, which contribute $1.5 million and $14.6 million, expire in September 2026 and September 2027, respectively.
Removed
Management believes that, as of December 31, 2022, the value of the properties securing the applicable secured obligations in each case exceeded the principal amount of the outstanding obligation.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeAs of December 31, 2022, we were not a defendant in, and our properties were not subject to, any legal proceedings that we believe, if determined adversely to us, would have a material adverse effect upon our financial condition, results of operations, or cash flows.
Biggest changeAs of December 31, 2023, we were not a defendant in, and our properties were not subject to, any legal proceedings that we believe, if determined adversely to us, would have a material adverse effect upon our financial condition, results of operations, or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−1 removed0 unchanged
Biggest changeThe value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date. 50 MARKET FOR KILROY REALTY, L.P.’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES There is no established public trading market for the Operating Partnership’s common units.
Biggest changeThe Company did not purchase any equity securities during the three month period leading up to December 31, 2023. 51 MARKET FOR KILROY REALTY, L.P.’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES There is no established public trading market for the Operating Partnership’s common units.
ITEM 5. MARKET FOR KILROY REALTY CORPORATION’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “KRC.” As of the date this report was filed, there were approximately 93 registered holders of the Company’s common stock.
ITEM 5. MARKET FOR KILROY REALTY CORPORATION’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “KRC.” As of the date this report was filed, there were approximately 86 registered holders of the Company’s common stock.
The following table illustrates dividends declared during 2022 and 2021 as reported on the NYSE. 2022 Per Share Common Stock Dividends Declared First quarter $ 0.5200 Second quarter 0.5200 Third quarter 0.5400 Fourth quarter 0.5400 2021 Per Share Common Stock Dividends Declared First quarter $ 0.5000 Second quarter 0.5000 Third quarter 0.5200 Fourth quarter 0.5200 The Company pays distributions to common stockholders quarterly each January, April, July and October, at the discretion of the board of directors.
The following table illustrates dividends declared during 2023 and 2022 as reported on the NYSE. 2023 Per Share Common Stock Dividends Declared First quarter $ 0.5400 Second quarter 0.5400 Third quarter 0.5400 Fourth quarter 0.5400 2022 Per Share Common Stock Dividends Declared First quarter $ 0.5200 Second quarter 0.5200 Third quarter 0.5400 Fourth quarter 0.5400 The Company pays distributions to common stockholders quarterly each January, April, July and October, at the discretion of the board of directors.
The following table reports the distributions per common unit declared during the years ended December 31, 2022 and 2021. 2022 Per Unit Common Unit Distribution Declared First quarter $ 0.5200 Second quarter 0.5200 Third quarter 0.5400 Fourth quarter 0.5400 2021 Per Unit Common Unit Distribution Declared First quarter $ 0.5000 Second quarter 0.5000 Third quarter 0.5200 Fourth quarter 0.5200 51 PERFORMANCE GRAPH The following line graph compares the change in cumulative stockholder return on shares of the Company’s common stock to the cumulative total return of the FTSE Nareit All Equity REIT Index, the Standard & Poor’s (“S&P”) 500 Stock Index, and the S&P Composite 1500 – Office REIT Index for the five-year period ended December 31, 2022.
The following table reports the distributions per common unit declared during the years ended December 31, 2023 and 2022. 2023 Per Unit Common Unit Distribution Declared First quarter $ 0.5400 Second quarter 0.5400 Third quarter 0.5400 Fourth quarter 0.5400 2022 Per Unit Common Unit Distribution Declared First quarter $ 0.5200 Second quarter 0.5200 Third quarter 0.5400 Fourth quarter 0.5400 52 PERFORMANCE GRAPH The following line graph compares the change in cumulative stockholder return on shares of the Company’s common stock to the cumulative total return of the FTSE Nareit All Equity REIT Index, the Standard & Poor’s (“S&P”) 500 Stock Index, and the S&P Composite 1500 – Office REIT Index for the five-year period ended December 31, 2023.
As of the date this report was filed, there were 18 holders of record of common units (including through the Company’s general partnership interest).
As of the date this report was filed, there were 19 holders of record of common units (including through the Company’s general partnership interest).
The graph assumes the investment of $100 in us and each of the indices on December 31, 2017 and, as required by the SEC, the reinvestment of all distributions. The return shown on the graph is not necessarily indicative of future performance.
The graph assumes an investment of $100 in us and each of the indices on December 31, 2018 and, as required by the SEC, the reinvestment of all distributions. The return shown on the graph is not necessarily indicative of future performance.
We include an additional index, the S&P Composite 1500 – Office REIT Index, to the performance graph since management believes it provides additional information to investors about our performance relative to a more specific peer group. The S&P Composite 1500 – Office REIT Index is a published and widely recognized index that comprises 17 office equity REITs, including us.
We include the S&P Composite 1500 – Office REIT Index because management believes it provides additional information to investors about our performance relative to a more specific peer group. The S&P Composite 1500 – Office REIT Index is a published and widely recognized index that comprises 13 office equity REITs, including us.
Distribution amounts depend on our FFO, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the board of directors deems relevant. The table below reflects our purchases of equity securities during the three month period leading up to December 31, 2022.
Distribution amounts depend on our FFO, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the board of directors deems relevant.
Removed
Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Units) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs October 1 - October 31, 2022 — $ — — $ — November 1 - November 30, 2022 308 41.92 — — December 1 - December 31, 2022 — — — — Total 308 $ 41.92 — $ — _______________________ (1) Represents shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

192 edited+36 added−39 removed126 unchanged
Biggest changeYear Ended December 31, 2022 2021 Same Store Develop- ment Acquisi- tion Disposi- tion Total Same Store Develop- ment Acquisi- tion Disposi- tion Total (in thousands) Operating revenues: Rental income $ 877,925 $ 172,208 $ 33,748 $ 2,137 $ 1,086,018 $ 839,604 $ 72,697 $ 9,908 $ 26,785 $ 948,994 Other property income 9,110 1,628 183 48 10,969 5,754 237 40 15 6,046 Total 887,035 173,836 33,931 2,185 1,096,987 845,358 72,934 9,948 26,800 955,040 Property and related expenses: Property expenses 169,887 28,078 3,712 1,067 202,744 148,789 11,163 1,307 4,443 165,702 Real estate taxes 84,223 18,821 2,649 176 105,869 81,897 8,580 840 1,892 93,209 Ground leases 7,162 403 — — 7,565 7,390 31 — — 7,421 Total 261,272 47,302 6,361 1,243 316,178 238,076 19,774 2,147 6,335 266,332 Net Operating Income, as defined $ 625,763 $ 126,534 $ 27,570 $ 942 $ 780,809 $ 607,282 $ 53,160 $ 7,801 $ 20,465 $ 688,708 Year Ended December 31, 2022 as compared to the Year Ended December 31, 2021 Same Store Development Acquisition Disposition Total Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change ($ in thousands) Operating revenues: Rental income $ 38,321 4.6 % $ 99,511 136.9 % $ 23,840 240.6 % $ (24,648) (92.0) % $ 137,024 14.4 % Other property income 3,356 58.3 % 1,391 586.9 % 143 357.5 % 33 220.0 % 4,923 81.4 % Total 41,677 4.9 % 100,902 138.3 % 23,983 241.1 % (24,615) (91.8) % 141,947 14.9 % Property and related expenses: Property expenses 21,098 14.2 % 16,915 151.5 % 2,405 184.0 % (3,376) (76.0) % 37,042 22.4 % Real estate taxes 2,326 2.8 % 10,241 119.4 % 1,809 215.4 % (1,716) (90.7) % 12,660 13.6 % Ground leases (228) (3.1) % 372 NM* — — % — — % 144 1.9 % Total 23,196 9.7 % 27,528 139.2 % 4,214 196.3 % (5,092) (80.4) % 49,846 18.7 % Net Operating Income, as defined $ 18,481 3.0 % $ 73,374 138.0 % $ 19,769 253.4 % $ (19,523) (95.4) % $ 92,101 13.4 % ________________________ * Percentage not meaningful. 75 Net Operating Income increased $92.1 million, or 13.4%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily resulting from: • An increase of $18.5 million attributable to the Same Store Properties which was driven by the following activity: • An increase in total operating revenues of $41.7 million, or 4.9%, primarily due to the following: • $20.2 million net increase resulting from a $18.3 million increase from new leases and renewals at higher rates in all regions, $2.4 million increase due to the recognition of deferred rent balances associated with tenants restored from a cash basis of revenue recognition, $1.5 million higher collections from tenants and $0.7 million increase in residential and other miscellaneous income, partially offset by a $2.7 million decrease due to lower occupancy and lease modifications primarily in the Greater Los Angeles and San Francisco Bay Area regions; • $17.3 million increase in the tenant reimbursements component of rental income primarily due to higher operating expenses and lower abatements; • $7.2 million increase due to higher parking income, of which $4.3 million relates to an increase in the number of monthly parking spaces rented as a result of tenants returning to the office and $2.9 million relates to higher transient parking income; • $3.1 million decrease due to early lease termination fees recognized in 2021 primarily related to two tenants; • An increase in property and related expenses of $23.2 million primarily due to the following: • $14.9 million increase in property expenses due to our tenants’ continued return to the office, including utilities, parking, janitorial, contract services, and various other recurring expenses; • $6.0 million increase due to an increase in certain non-recurring expenses and higher residential expenses; and • $2.3 million increase in real estate taxes primarily due to favorable property tax assessments and tax refunds received in 2021. • An increase of $73.4 million attributable to the Development Properties; and • An increase of $19.8 million attributable to the Acquisition Properties; partially offset by • A decrease of $19.5 million attributable to the Disposition Properties.
Biggest changeYear Ended December 31, 2023 2022 Same Store Develop- ment Disposi- tion Total Same Store Develop- ment Disposi- tion Total (in thousands) Operating revenues: Rental income $ 1,006,033 $ 111,704 $ — $ 1,117,737 $ 1,017,322 $ 66,559 $ 2,137 $ 1,086,018 Other property income 10,874 1,083 — 11,957 9,820 1,101 48 10,969 Total 1,016,907 112,787 — 1,129,694 1,027,142 67,660 2,185 1,096,987 Property and related expenses: Property expenses 213,788 15,176 — 228,964 193,353 8,324 1,067 202,744 Real estate taxes 93,383 12,485 — 105,868 98,266 7,427 176 105,869 Ground leases 7,588 2,144 — 9,732 7,162 403 — 7,565 Total 314,759 29,805 — 344,564 298,781 16,154 1,243 316,178 Net Operating Income, as defined $ 702,148 $ 82,982 $ — $ 785,130 $ 728,361 $ 51,506 $ 942 $ 780,809 Year Ended December 31, 2023 as compared to the Year Ended December 31, 2022 Same Store Development Disposition Total Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change ($ in thousands) Operating revenues: Rental income $ (11,289) (1.1) % $ 45,145 67.8 % $ (2,137) (100.0) % $ 31,719 2.9 % Other property income 1,054 10.7 % (18) (1.6) % (48) (100.0) % 988 9.0 % Total (10,235) (1.0) % 45,127 66.7 % (2,185) (100.0) % 32,707 3.0 % Property and related expenses: Property expenses 20,435 10.6 % 6,852 82.3 % (1,067) (100.0) % 26,220 12.9 % Real estate taxes (4,883) (5.0) % 5,058 68.1 % (176) (100.0) % (1) — % Ground leases 426 5.9 % 1,741 432.0 % — — % 2,167 28.6 % Total 15,978 5.3 % 13,651 84.5 % (1,243) (100.0) % 28,386 9.0 % Net Operating Income, as defined $ (26,213) (3.6) % $ 31,476 61.1 % $ (942) (100.0) % $ 4,321 0.6 % 75 Net Operating Income increased $4.3 million, or 0.6%, for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily resulting from: • A decrease of $26.2 million attributable to the Same Store Properties which was driven by the following activity: • A decrease in total operating revenues of $10.2 million, or 1.0%, primarily due to the following: • $22.5 million net decrease resulting from a $33.8 million decrease from lease expirations net of an $11.3 million increase from new leases and renewals at higher rates; partially offset by • $12.3 million increase in the tenant reimbursements component of rental income primarily due to $17.4 million higher reimbursable operating expenses offset by $5.1 million decrease in property taxes due to favorable property tax assessments. • An increase in property and related expenses of $16.0 million, or 5.3%, primarily due to the following: • $20.4 million increase in property expenses primarily due to cost increases in utilities and insurance, in addition to security, janitorial, contract services, repairs and maintenance and various other recurring expenses predominately related to our tenants continued return to the office; partially offset by • $4.9 million decrease in real estate taxes primarily due to favorable property tax assessments and tax refunds received; • An increase of $31.5 million attributable to the Development Properties; partially offset by • A decrease of $0.9 million attributable to the Disposition Properties.
The timing of any potential future disposition or strategic venture transactions will depend on market conditions and other factors, including but not limited to our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained for some potential buyers due to current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales.
The timing of any potential future disposition or strategic venture transactions will depend on market conditions and other factors, including but not limited to, our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained for some potential buyers due to the current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales.
Liquidity Uses • Development and redevelopment costs; • Property operating and corporate expenses; • Capital expenditures, tenant improvement and leasing costs; • Operating property or undeveloped land acquisitions; • Debt service and principal payments, including debt maturities; • Distributions to common security holders; • Repurchases and redemptions of outstanding common stock of the Company; and • Outstanding debt repurchases, redemptions and repayments.
Liquidity Uses • Property operating and corporate expenses; • Capital expenditures, tenant improvement and leasing costs; • Development and redevelopment costs; • Operating property or undeveloped land acquisitions; • Debt service and principal payments, including debt maturities; • Distributions to common security holders; • Repurchases and redemptions of outstanding common stock of the Company; and • Outstanding debt repurchases, redemptions and repayments.
The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities of all of these types in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing and capital needs.
The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities of all of these types in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing and capital needs.
Debt Maturities We believe our conservative leverage, staggered debt maturities and unsecured term loan facility and unsecured revolving credit facility provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we believe we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities.
Debt Maturities We believe our conservative leverage, staggered debt maturities, unsecured term loan facility and our unsecured revolving credit facility provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we believe we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities.
We focus on growth opportunities primarily in markets populated by knowledge and creative based tenants in a variety of industries, including technology, media, healthcare, life sciences, entertainment and professional services.
We focus on growth opportunities primarily in markets populated by knowledge and creative based tenants in a variety of industries, including technology, media, healthcare, life sciences, entertainment and professional services.
Specifically, the grant date fair value of share-based compensation programs that include market conditions are calculated using a Monte Carlo simulation pricing model. Additionally, certain of our market condition share-based compensation programs also contain pre-defined financial performance conditions, including FFO per share and debt to EBITDA ratio goals which can impact the number of restricted stock units ultimately earned.
Specifically, the grant date fair value of share-based compensation programs that include market conditions are calculated using a Monte Carlo simulation pricing model. Additionally, certain of our market condition share-based compensation programs also contain pre-defined financial performance conditions, including FFO per share and 63 debt to EBITDA ratio goals which can impact the number of restricted stock units ultimately earned.
Indicators we use to determine whether an impairment evaluation is necessary include: • low occupancy levels, forecasted low occupancy levels or near term lease expirations at a specific property; • current period operating or cash flow losses combined with a historical pattern or future projection of potential continued operating or cash flow losses at a specific property; • deterioration in rental rates for a specific property as evidenced by sudden significant rental rate decreases or continuous rental rate decreases over numerous quarters, which could signal a continued decrease in future cash flow for that property; 60 • deterioration of a given rental submarket as evidenced by significant increases in market vacancy and/or negative absorption rates or continuous increases in market vacancy and/or negative absorption rates over numerous quarters, which could signal a decrease in future cash flow for properties within that submarket; • significant increases in property sales yields, continuous increases in property sales yields over several quarters, or recent property sales at a loss within a given submarket, each of which could signal a decrease in the market value of properties; • significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay; • evidence of material physical damage to the property; and • default by a significant tenant when any of the other indicators above are present.
Indicators we use to determine whether an impairment evaluation is necessary include: • low occupancy levels, forecasted low occupancy levels or near term lease expirations at a specific property; • current period operating or cash flow losses combined with a historical pattern or future projection of potential continued operating or cash flow losses at a specific property; • deterioration in rental rates for a specific property as evidenced by sudden significant rental rate decreases or continuous rental rate decreases over numerous quarters, which could signal a continued decrease in future cash flows for that property; • deterioration of a given rental submarket as evidenced by significant increases in market vacancy and/or negative absorption rates or continuous increases in market vacancy and/or negative absorption rates over numerous quarters, which could signal a decrease in future cash flows for properties within that submarket; • significant increases in property sales yields, continuous increases in property sales yields over several quarters, or recent property sales at a loss within a given submarket, each of which could signal a decrease in the market value of properties; • significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay; • evidence of material physical damage to the property; and • default by a significant tenant when any of the other indicators above are present.
For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the 58 lease term, and for some tenants may include an offsetting partial allowance for uncollectible accounts related to current tenant and deferred rent receivables that exhibit a certain level of collection risk based on the results of the assessment described above.
For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term and, for some tenants, may include an offsetting partial allowance for uncollectible accounts related to current tenant and deferred rent receivables that exhibit a certain level of collection risk based on the results of the assessment described above.
However, any potential future disposition transactions and the timing of any potential future capital recycling transactions will depend on market conditions and other factors including but not limited to our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained for some potential buyers due to current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales.
Any potential future disposition transactions and the timing of any potential future capital recycling transactions will depend on market conditions and other factors including but not limited to our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained for some potential buyers due to current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales.
Such assessment involves using a methodology that incorporates a specific identification analysis and an aging analysis, considering the current economic and business environment, including factors such as the age and nature of the receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations, and the status of negotiations of any disputes with the tenant.
Such assessment involves using a methodology that incorporates a specific identification analysis and an aging analysis, considering the current economic and business environment, including factors such as the age and nature of the receivables, the payment 59 history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations, and the status of negotiations of any disputes with the tenant.
We believe that our available liquidity demonstrates a strong balance sheet and makes us well positioned to navigate any additional future uncertainties. In addition, the Company is a well-known seasoned issuer and has historically been able to raise capital on a timely basis in the public markets, as well as the private markets.
We believe that our available liquidity demonstrates a strong balance sheet and makes us well positioned to navigate any additional future uncertainties. In addition, the Company is a well-known seasoned issuer and has historically been able to raise capital on a timely basis in the public markets, as well as the private 78 markets.
In addition, for development and redevelopment projects, we also 61 capitalize the following costs during periods in which activities necessary to prepare the project for its intended use are in progress: interest costs based on the weighted average interest rate of our outstanding indebtedness for the period, real estate taxes and insurance.
In addition, for development and redevelopment projects, we also capitalize the following costs during periods in which activities necessary to prepare the project for its intended use are in progress: interest costs based on the weighted average interest rate of our outstanding indebtedness for the period, real estate taxes and insurance.
As discussed in the section “—Factors That May Influence Future Results of Operations - Acquisitions,” we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment opportunities as well as value-add and strategic operating properties, dependent on market conditions and business cycles, among other factors.
Potential Future Acquisitions As discussed in the section “—Factors That May Influence Future Results of Operations - Acquisitions,” we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment opportunities as well as value-add and strategic operating properties, dependent on market conditions and business cycles, among other factors.
We may elect to repurchase shares of our common stock under this program in the future depending upon various factors, including market conditions, the trading price of our common stock and our other uses of capital. This program does not have a termination date, and repurchases may be discontinued at any time.
We may elect to repurchase shares of our common stock under this program in the future depending upon various factors, including market conditions, the trading price of our common stock and our other uses of capital. This program does not have a 87 termination date and repurchases may be discontinued at any time.
Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flow and property fair values, including determining our estimated holding period and selecting the discount or capitalization rate that reflects the risk inherent in future cash flow.
Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and property fair values, including determining our estimated holding period and selecting the discount or capitalization rate that reflects the risk inherent in future cash flows.
Termination fee income, included in rental income, is recognized on a straight-line basis from the date of the executed termination agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is probable. This fee income is reduced on a straight-line basis by any deferred rent receivable related to the lease.
Termination fee income, included in rental income, is recognized on a straight-line basis from the date of the executed termination agreement through revised lease expiration when the amount of the fee is determinable and collectability of the fee is probable. This fee income is reduced on a straight-line basis by any deferred rent receivable related to the lease.
Risk Factors” included in this report for additional information about the potential impact of inflation on our interest expense and construction costs and the impact on 79 our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations.
Risk Factors” included in this report for additional information about the potential impact of inflation on our interest expense and construction costs and the impact on our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations.
For further discussion of our significant accounting policies, see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report. Revenue Recognition Rental revenue for office, life science and retail operating properties is our principal source of revenue.
For further discussion of our significant accounting policies, see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report. Revenue Recognition Rental revenue for office, life science, retail and residential operating properties is our principal source of revenue.
Distribution Requirements For a discussion of our dividend and distribution requirements, see “Liquidity and Capital Resources of the Company —Distribution Requirements.” 90 Factors That May Influence Future Sources of Capital and Liquidity of the Company and the Operating Partnership We continue to evaluate sources of financing for our business activities, including borrowings under the unsecured revolving credit facility, the unsecured term loan facility, issuance of public and private equity securities, unsecured debt and fixed-rate secured mortgage financing, proceeds from the disposition of selective assets through our capital recycling program, and the formation of strategic ventures.
Distribution Requirements For a discussion of our dividend and distribution requirements, see “Liquidity and Capital Resources of the Company —Distribution Requirements.” 88 Factors That May Influence Future Sources of Capital and Liquidity of the Company and the Operating Partnership We continue to evaluate sources of financing for our business activities, including borrowings under the unsecured revolving credit facility, the unsecured term loan facility, issuance of public and private equity securities, unsecured debt and fixed-rate secured mortgage financing, proceeds from the disposition of selective assets through our capital recycling program, and the formation of strategic ventures.
In addition, in the event the Company is unable to successfully complete Section 1031 Exchanges to defer some or all of the taxable gains related to property dispositions (or in the event additional legislation is enacted that further modifies or repeals laws with respect to Section 1031 Exchanges), the Company may be required to distribute a special dividend to its common stockholders and common unitholders in order to minimize or eliminate income taxes on such gains.
In addition, in the event the Company completes additional dispositions in the future and is unable to successfully complete Section 1031 Exchanges to defer some or all of the taxable gains related to property dispositions (or in the event additional legislation is enacted that further modifies or repeals laws with respect to Section 1031 Exchanges), the Company may be required to distribute a special dividend to its common stockholders and common unitholders in order to minimize or eliminate income taxes on such gains.
Further, the Company may deliver leased space in phases, rather than for an entire building or project, resulting in various revenue commencement dates for a particular lease, which involves significant judgment surrounding when the tenant takes possession of or controls each respective phase, building or project. 56 The determination of whether we are or the tenant is the owner of tenant improvements for accounting purposes is subject to significant judgment.
Further, the Company may deliver leased space in phases, rather than for an entire building or project, resulting in various revenue commencement dates for a particular lease, which involves significant judgment surrounding when the tenant takes possession of or controls each respective phase, building or project. 57 The determination of whether we are or the tenant is the owner of tenant improvements for accounting purposes is subject to significant judgment.
(3) Our residential portfolio consists of our 200-unit residential tower and 193-unit Jardine project in Hollywood, California and 608 residential units at our One Paseo mixed-use project in Del Mar, California. 72 Results of Operations Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 Net Operating Income Management internally evaluates the operating performance and financial results of our stabilized portfolio based on Net Operating Income.
(3) Our residential portfolio consists of our 200-unit residential tower and 193-unit Jardine project in Hollywood, California and 608 residential units at our One Paseo mixed-use project in Del Mar, California. 72 Results of Operations Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Net Operating Income Management internally evaluates the operating performance and financial results of our stabilized portfolio based on Net Operating Income.
Capital Recycling Program We continuously evaluate opportunities for the potential disposition of non-core properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated into capital used to fund new operating and development acquisitions, to finance development and redevelopment expenditures, to repay long-term debt and for other general corporate purposes.
Capital Recycling Program We continuously evaluate opportunities for the potential disposition of non-core properties in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated into capital used to fund new operating and development acquisitions, to finance development and redevelopment expenditures, to repay long-term debt and for other general corporate purposes.
The amounts recorded for below-market operating leases 59 are included in deferred revenue and acquisition-related liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable.
The amounts recorded for below-market operating leases are included in deferred revenue and acquisition-related intangible liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable.
However, in the event of an economic slowdown or continued volatility in the credit markets, there is no certainty that the Operating Partnership will be able to continue to satisfy all the covenant requirements. 91 Consolidated Historical Cash Flow Summary The following summary discussion of our consolidated historical cash flow is based on the consolidated statements of cash flows in Item 15.
However, in the event of an economic slowdown or continued volatility in the credit markets, there is no certainty that the Operating Partnership will be able to continue to satisfy all the covenant requirements. 89 Consolidated Historical Cash Flow Summary The following summary discussion of our consolidated historical cash flow is based on the consolidated statements of cash flows in Item 15.
This variability relating to the level of the performance condition achieved requires management’s judgment and estimates, which impacts compensation cost recognized for these awards during the performance period. As of December 31, 2022, the performance condition for certain of our outstanding market condition share-based compensation programs has been met and compensation cost for these awards is no longer variable.
This variability relating to the level of the performance condition achieved requires management’s judgment and estimates, which impacts compensation cost recognized for these awards during the performance period. As of December 31, 2023, the performance condition for certain of our outstanding market condition share-based compensation programs has been met and compensation cost for these awards is no longer variable.
If both of those conditions are met, the amendment is accounted for as a separate lease contract. If either of those conditions are not met, the amendment is accounted for as a lease modification .
If both of these conditions are met, the amendment is accounted for as a separate lease contract. If either of those conditions are not met, the amendment is accounted for as a lease modification.
After completing this process, we determined that for each of the operating properties evaluated, undiscounted cash flows over the holding period were in excess of carrying value and, therefore, we did not record any impairment losses for these properties for the years ended December 31, 2022, 2021 and 2020.
After completing this process, we determined that for each of the operating properties evaluated, undiscounted cash flows over the holding period were in excess of carrying value and, therefore, we did not record any impairment losses for these properties for the years ended December 31, 2023, 2022 and 2021.
(4) Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships. 81 Liquidity and Capital Resources of the Operating Partnership In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we,” “our,” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.
(4) Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships. 80 Liquidity and Capital Resources of the Operating Partnership In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we,” “our,” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.
Share Repurchases As of December 31, 2022, 4,935,826 shares remained eligible for repurchase under a share repurchase program approved by the Company’s Board of Directors in 2016. Under this program, repurchases may be made in open market transactions at prevailing prices or through privately negotiated transactions.
Share Repurchases As of December 31, 2023, 4,935,826 shares remained eligible for repurchase under a share repurchase program approved by the Company’s Board of Directors in 2016. Under this program, repurchases may be made in open market transactions at prevailing prices or through privately negotiated transactions.
Capital Recycling Program As discussed in the section “Factors That May Influence Future Results of Operations - Capital Recycling Program,” we continuously evaluate opportunities for the potential disposition of properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated from the disposition of less strategic or core assets into capital used to finance development and redevelopment expenditures, to fund new acquisitions, to repay long-term debt and for other general corporate purposes.
Capital Recycling Program As discussed in the section “Factors That May Influence Future Results of Operations - Capital Recycling Program,” we continuously evaluate opportunities for the potential disposition of non-core properties in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated from the disposition of less strategic or core assets into capital used to finance development and redevelopment expenditures, to fund new acquisitions, to repay long-term debt and for other general corporate purposes.
(2) Represents cash paid and costs incurred, including accrued liabilities in accordance with GAAP, as of December 31, 2022. Fluctuations in our development activities could cause fluctuations in the average development asset balances qualifying for interest and other carrying cost and internal cost capitalization in future periods.
(2) Represents cash paid and costs incurred, including accrued liabilities in accordance with GAAP, as of December 31, 2023. Fluctuations in our development activities could cause fluctuations in the average development asset balances qualifying for interest and other carrying cost and internal cost capitalization in future periods.
As the Company intends to maintain distributions at a level sufficient to meet the REIT distribution requirements and minimiz e its obligation to pay income and excise taxes, it will continue to evaluate whether the current levels of distribution are appropriate to do so throughout 2023.
As the Company intends to maintain distributions at a level sufficient to meet the REIT distribution requirements and minimiz e its obligation to pay income and excise taxes, it will continue to evaluate whether the current levels of distribution are appropriate to do so throughout 2024.
The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.
The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility and unsecured term loan facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.
The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.
The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility and unsecured term loan facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.
We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the unsecured term loan facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, or strategic venture opportunities.
We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, or strategic venture opportunities.
Termination options require advance notification from the tenant and payment of a termination fee that reimburses us for a portion of the remaining rent under the original lease term and the net book value of lease inception costs such as commissions, tenant improvements and lease 57 incentives.
Termination options require advance notification from the tenant and payment of a termination fee that reimburses us for a portion of the remaining rent under the original 58 lease term and the net book value of lease inception costs such as commissions, tenant improvements and lease incentives.
Represents economic occupancy. (2) Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2021 and still owned and stabilized as of December 31, 2022 and exclude our residential portfolio. See discussion under “Results of Operations” for additional information.
Represents economic occupancy. (2) Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2022 and still owned and stabilized as of December 31, 2023 and exclude our residential portfolio. See discussion under “Results of Operations” for additional information.
In the event we are unable to complete dispositions as planned, we may raise capital through other sources of liquidity including our available unsecured revolving credit facility, unsecured term loan facility or the public or private issuance of unsecured debt. 84 Shelf Registration Statement The Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company of its preferred stock, common stock, depository shares and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts.
In the event we are unable to complete dispositions as planned, we may raise capital through other sources of liquidity including our available unsecured revolving credit facility or the public or private issuance of unsecured debt. 83 Shelf Registration Statement The Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company of its preferred stock, common stock, depository shares and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts.
In connection with our growth strategy, we often have one or more potential acquisitions of properties and/or undeveloped land under consideration that are in varying stages of negotiation and due diligence review, or under contract, at any point in time.
In connection with our growth strategy, we may have one or more potential acquisitions of properties and/or undeveloped land under consideration that are in varying stages of negotiation and due diligence review, or under contract, at any point in time.
For 2022, the annual cash bonus program was structured to allow the Executive Compensation Committee to evaluate a variety of key quantitative and qualitative metrics at the end of the year and make a determination based on the Company’s and management’s overall performance.
For 2023, the annual cash bonus program was structured to allow the Executive Compensation Committee to evaluate a variety of key quantitative and qualitative metrics at the end of the year and make a determination based on the Company’s and management’s overall performance.
The timing of these expenditures may fluctuate. (7) Amounts represent commitments under signed leases for pre-leased development projects and contractual commitments for projects in the tenant improvement phase and under construction as of December 31, 2022. The timing of these expenditures may fluctuate based on the ultimate progress of construction.
(7) Amounts represent commitments under signed leases for pre-leased development projects and contractual commitments for projects in the tenant improvement phase and under construction as of December 31, 2023. The timing of these expenditures may fluctuate based on the ultimate progress of construction.
The Company intends to continue to make, but has not committed to make, regular quarterly cash distributions to common stockholders, and through the Operating Partnership, to common unitholders from the Operating Partnership’s cash flow from operating activities. All such distributions are at the discretion of the Board of Directors .
The Company intends to continue to make, but has not committed to make, regular quarterly cash distributions to common stockholders, and through the Operating Partnership, to common unitholders from the Operating Partnership’s cash flows from operating activities. All such distributions are at the discretion of the Board of Directors .
In the event our estimates were not consistent with actual collections and we had to change our allowances by 1% of revenue from continuing operations, the potential impact to our net income available to common stockholders would be approximately $11.0 million, $9.6 million and $9.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
In the event our estimates were not consistent with actual collections and we had to change our allowances by 1% of revenue from continuing operations, the potential impact to our net income available to common stockholders would be approximately $11.3 million, $11.0 million and $9.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
If we recognize an impairment loss, the estimated fair value of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis would be depreciated (amortized) over the remaining useful life of that asset.
If we recognize an impairment loss, the estimated fair value of the real estate asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis would be depreciated (amortized) over the remaining useful life of that asset.
We own our interests in all of our real properties through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership. We owned an approximate 99.0% general partnership interest in the Operating Partnership as of both December 31, 2022 and 2021.
We own our interests in all of our real properties through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership. We owned an approximate 99.0% general partnership interest in the Operating Partnership as of both December 31, 2023 and 2022.
The amounts reported for the years ended December 31, 2022 and 2021 are comprised of the noncontrolling interest’s share of net income for 100 First Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”) and the noncontrolling interest’s share of net income for Redwood LLC.
The amounts reported for the years ended December 31, 2023 and 2022 are comprised of the noncontrolling interest’s share of net income for 100 First Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”) and the noncontrolling interest’s share of net income for Redwood LLC.
(2) As of December 31, 2022 and 2021, there was no outstanding balance on the unsecured revolving credit facility. (3) Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs.
(2) As of December 31, 2023 and 2022, there was no outstanding balance on the unsecured revolving credit facility. (3) Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs.
We believe our conservative leverage and staggered debt maturities provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities, although there can be no assurance in this regard. 2022 Capital and Financing Transactions We continue to be active in the capital markets and our capital recycling program to finance potential acquisitions and our development activity, as well as our continued desire to extend our debt maturities.
We believe our conservative leverage and staggered debt maturities provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities, although there can be no assurance in this regard. 81 2023 Capital and Financing Transactions We continue to be active in the capital markets to finance potential acquisitions and our development activity, as well as our continued desire to extend our debt maturities.
Our historical experience for the years ended December 31, 2021 and 2020 has been that our final reconciliation and billing process resulted in final amounts that approximated the total annual additional rent recognized.
Our historical experience for the years ended December 31, 2022 and 2021 has been that our final reconciliation and billing process resulted in final amounts that approximated the total annual additional rent recognized.
“Exhibits and Financial Statement Schedules” and is not meant to be an all-inclusive discussion of the changes in our cash flow for the periods presented below. Changes in our cash flow include changes in cash and cash equivalents and restricted cash.
“Exhibits and Financial Statement Schedules” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Changes in our cash flows include changes in cash and cash equivalents and restricted cash.
As of December 31, 2022, there are certain outstanding share-based compensation awards where the achievement of the performance condition is yet unknown as the award is still within its performance measurement period.
As of December 31, 2023, there are certain outstanding share-based compensation awards where the achievement of the performance condition is yet unknown as the award is still within its performance measurement period.
Capital expenditures per square foot decreased in 2022 as compared to 2021 due to a decrease in general building improvements in 2022. We currently anticipate capital expenditures for 2023 to be consistent with 2022 levels.
Capital expenditures per square foot decreased in 2023 as compared to 2022 due to a decrease in general building improvements in 2023. We currently anticipate capital expenditures per square foot for 2024 to be consistent with 2023 levels.
However, our ability to obtain new financing or refinance existing borrowings on favorable terms could be impacted by various factors, including the state of the macro economy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for office properties, a decrease in market rental rates or market values of real estate assets in our submarkets, the amount of our future borrowings and uncertainty related to interest rates, inflation rates, geopolitical events (including the military conflict between Russia and Ukraine) and other factors (refer to “Part I, Item IA.
However, our ability to obtain new financing or refinance existing borrowings on favorable terms could be impacted by various factors, including the state of the macro economy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for office properties, a decrease in market rental rates or market values of real estate assets in our submarkets, the amount of our future borrowings and uncertainty related to interest rates, inflation rates, geopolitical events and other factors (refer to “Part I, Item IA.
Management’s Discussion and Analysis of Financial Condition and Results of Operations –Results of Operations” in our Form 10-K for the year ended December 31, 2021 for a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020. 78 Liquidity and Capital Resources of the Company In this “Liquidity and Capital Resources of the Company” section, the term the “Company” refers only to Kilroy Realty Corporation on an unconsolidated basis and excludes the Operating Partnership and all other subsidiaries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations –Results of Operations” in our Form 10-K for the year ended December 31, 2022 for a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021. 77 Liquidity and Capital Resources of the Company In this “Liquidity and Capital Resources of the Company” section, the term the “Company” refers only to Kilroy Realty Corporation on an unconsolidated basis and excludes the Operating Partnership and all other subsidiaries.
Interest Expense The following table sets forth our gross interest expense, including debt discounts and deferred financing cost amortization and capitalized interest, including capitalized debt discounts and deferred financing cost amortization for the years ended December 31, 2022 and 2021.
Interest Expense The following table sets forth our gross interest expense, including debt discounts and deferred financing cost amortization and capitalized interest, including capitalized debt discounts and deferred financing cost amortization for the years ended December 31, 2023 and 2022.
Cash flows from operating activities generated by the Operating Partnership for the year ended December 31, 2022 were sufficient to cover the Company’s payment of cash dividends to its stockholders.
Cash flows from operating activities generated by the Operating Partnership for the year ended December 31, 2023 were sufficient to cover the Company’s payment of cash dividends to its stockholders.
Costs incurred for tenant improvement and leasing commissions in 2023 will depend upon the current economic environment, market conditions in each of our submarkets and actual leasing activity.
Costs incurred for tenant improvement and leasing commissions in 2024 will depend upon the current economic environment, market conditions in each of our submarkets and actual leasing activity.
In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2022 and 2021, $5.3 million and $7.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2023 and 2022, $3.2 million and $5.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility.
We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin, Texas, which we believe have strategic advantages and strong barriers to entry.
We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle and Austin, which we believe have strategic advantages and strong barriers to entry.
The following tables set forth certain information regarding our lease expirations for our stabilized portfolio for the next five years and by region for the next two years. Lease Expirations (1) Year of Lease Expiration Number of Expiring Leases Total Square Feet % of Total Leased Sq. Ft.
The following tables set forth certain information regarding our lease expirations for our stabilized portfolio, excluding our residential properties, for the next five years and by region for the next two years. Lease Expirations (1) Year of Lease Expiration Number of Expiring Leases Total Square Feet % of Total Leased Sq. Ft.
The acquired assets and assumed liabilities for an operating property acquisition generally include but are not limited to: land and improvements, buildings and improvements, construction in progress and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any.
The acquired assets and assumed liabilities for an acquisition generally include but are not limited to: (i) land and improvements, buildings and improvements, undeveloped land and construction in progress and (ii) identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired in-place lease values and tenant relationships, if any.
General Our primary liquidity sources and uses are as follows: Liquidity Sources • Net cash flow from operations; • Borrowings under the Operating Partnership’s unsecured revolving credit facility and unsecured term loan facility; • Proceeds from our capital recycling program, including the disposition of assets and the formation of strategic ventures; • Proceeds from additional secured or unsecured debt financings; and • Proceeds from public or private issuance of debt, equity or preferred equity securities.
General Our primary liquidity sources and uses are as follows: Liquidity Sources • Net cash flows from operations; • Borrowings under the Operating Partnership’s unsecured revolving credit facility; • Proceeds from our capital recycling program, including the disposition of assets and the formation of strategic ventures; • Proceeds from additional secured or unsecured debt financings; and • Proceeds from public or private issuance of debt, equity or preferred equity securities.
The Company believes the Operating Partnership’s sources of working capital, specifically its cash flow from operations and borrowings available under its unsecured revolving credit facility and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its common stockholders for the next twelve months.
The Company believes the Operating Partnership’s sources of working capital, specifically its cash flows from operations and borrowings available under its unsecured revolving credit facility and unsecured term loan facility and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its common stockholders for the next twelve months.
We assume no obligation to update any forward-looking statement 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. 54 Company Overview We are a self-administered REIT active in premier office, life science and mixed-use submarkets in the United States.
We assume no obligation to update any forward-looking statement 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. 55 Company Overview We are a self-administered REIT active in premier office, life science and mixed-use property types in the United States.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2022 was comprised of eight potential development sites, representing approximately 64 gross acres of undeveloped land on which we believe we have the potential to develop more than 6.5 million rentable square feet, depending upon economic conditions.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2023 was comprised of eight potential development sites, representing approximately 64 gross acres of undeveloped land on which we believe we have the potential to develop more than 6.0 million rentable square feet, depending upon economic conditions.
Excludes leases not commenced as of December 31, 2022, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2022.
Excludes leases not commenced as of December 31, 2023, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2023.
Refer to our 2022 Financing Highlights in “—Liquidity and Capital Resources of the Operating Partnership” for a list of financing transactions completed in 2022 and Note 9, “Secured and Unsecured Debt of the Operating Partnership” to our consolidated financial statements included in this report for additional information regarding our debt and capital market activity. 55 Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods.
Refer to our 2023 Financing Highlights in “—Liquidity and Capital Resources of the Operating Partnership” for a list of financing transactions completed in 2023 and Note 10, “Secured and Unsecured Debt of the Operating Partnership” to our consolidated financial statements included in this report for additional information regarding our debt and capital market activity. 56 Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods.
Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit, and interest-bearing bank deposits. On December 7, 2022, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share of common stock.
Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit, and interest-bearing bank deposits. On December 6, 2023, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share of common stock.
Cost Capitalization and Depreciation We capitalize costs associated with development and redevelopment activities, capital improvements, and tenant improvements, including internal compensation costs. For the years ended December 31, 2022, 2021 and 2020, we capitalized $19.9 million, $20.7 million and $21.8 million, respectively, of internal costs to our qualifying development and redevelopment projects.
Cost Capitalization and Depreciation We capitalize costs associated with development and redevelopment activities, capital improvements, and tenant improvements, including internal compensation costs. For the years ended December 31, 2023, 2022 and 2021, we capitalized $15.8 million, $19.9 million and $20.7 million, respectively, of internal costs to our qualifying development and redevelopment projects.
We intend to borrow under the unsecured revolving credit facility as necessary for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions, and to potentially repay long-term debt to supplement cash balances given uncertainties and volatility in market conditions.
We intend to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions, and to potentially repay long-term debt and to supplement cash balances given uncertainties and volatility in market conditions.
The amount of rental income we generate also depends on our ability to maintain or increase rental rates in our submarkets. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity for our stabilized portfolio during the year ended December 31, 2022.
The amount of rental income we generate also depends on our ability to maintain or increase rental rates in our submarkets. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity during the year ended December 31, 2023.
New Accounting Pronouncements For a discussion of new accounting pronouncements see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report. We did not adopt any new accounting pronouncements during the year ended December 31, 2022. 94
New Accounting Pronouncements For a discussion of new accounting pronouncements see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report. We did not adopt any new accounting pronouncements during the year ended December 31, 2023. 92
If the estimated undiscounted future cash flow is less than the net carrying amount of the real estate asset, we perform an impairment loss calculation to determine if the fair value of the real estate asset is less than the net carrying value of the real estate asset.
If the estimated undiscounted future cash flows are less than the net carrying amount of the real estate asset, we perform an impairment loss calculation to determine if the fair value of the real estate asset is less than the net carrying value of the real estate asset.
The information in the table above reflects our projected interest rate obligations for these fixed-rate payments based on the contractual interest rates on an accrual basis and scheduled maturity dates. (4) As of December 31, 2022, 4.7% of our debt bore interest at variable rates which was incurred under the unsecured term loan facility.
The information in the table above reflects our projected interest rate obligations for these fixed-rate payments based on the contractual interest rates on an accrual basis and scheduled maturity dates. (4) As of December 31, 2023, 10.5% of our debt bore interest at variable rates which was incurred under the unsecured term loan facility.
When we conclude that the tenant is the owner of certain tenant improvements for accounting purposes, we record our contribution towards those tenant-owned improvements as a lease incentive, which is included in deferred leasing costs and acquisition-related intangible assets, net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease.
When we conclude that the tenant is the owner of certain tenant improvements for accounting purposes, we record our contribution towards those tenant-owned improvements as a lease incentive, which is included in deferred leasing costs and acquisition-related intangible assets, net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease beginning upon substantial completion of the leased premises.
For these asset acquisitions, we record the acquired tangible and intangible assets and assumed liabilities based on each asset’s and liability’s relative fair value at the acquisition date of the total purchase price plus any capitalized acquisition costs.
For these asset acquisitions, we record the acquired tangible and intangible assets and assumed liabilities based on each asset’s and liability’s relative fair value at the acquisition date of the total purchase price plus any capitalized acquisition costs, including costs incurred during negotiation.
If the valuation of the grant date fair value for such programs changed by 10%, the potential impact to our net income available to common stockholders would be approximately $1.5 million, $2.3 million, and $2.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. 63 Factors That May Influence Future Results of Operations Development and Redevelopment Programs We believe that a portion of our long-term future growth will continue to come from the completion of our in-process development and redevelopment projects and, subject to market conditions, executing on our future development pipeline, including expanding entitlements.
If the valuation of the grant date fair value for such programs changed by 10%, the potential impact to our net income available to common stockholders would be approximately $2.9 million, $1.5 million, and $2.3 million for the years ended December 31, 2023, 2022, and 2021, respectively. 64 Factors That May Influence Future Results of Operations Development and Redevelopment Programs We believe that a portion of our long-term future growth will continue to come from the completion of our in-process development and redevelopment projects and, subject to market conditions, identifying new redevelopment opportunities and executing on our future development pipeline, including expanding entitlements.
We intend to fund repurchases, if any, primarily with the proceeds from property dispositions. Potential Future Leasing Costs and Capital Improvements The amounts we incur for tenant improvements and leasing costs depend on leasing activity in each period.
We intend to fund repurchases, if any, primarily with the proceeds from property dispositions and/or existing cash balances. Potential Future Leasing Costs and Capital Improvements The amounts we incur for tenant improvements and leasing costs depend on leasing activity in each period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+0 added−1 removed8 unchanged
Biggest changeThese policies include maintaining prudent amounts of debt, including a greater amount of fixed-rate debt as compared to variable-rate debt in our portfolio, and may include the periodic use of derivative instruments. As of December 31, 2022 and 2021, we did not have any interest-rate sensitive derivative assets or liabilities.
Biggest changeThese policies include maintaining prudent amounts of debt, including a greater amount of fixed-rate debt as compared to variable-rate debt in our portfolio, and may include the periodic use of derivative instruments. Information about our changes in interest rate risk exposures from December 31, 2022 to December 31, 2023 is incorporated herein by reference from “Item 7.
These calculations are significantly affected by the assumptions used, including the discount rate, credit spreads and estimates of future cash flow.
These calculations are significantly affected by the assumptions used, including the discount rate, credit spreads and estimates of future cash flows.
Assuming no changes in the outstanding balance of our existing variable-rate debt as of December 31, 2022, a 100 basis point increase in the Adjusted SOFR rate would have increased our projected annual interest expense, before the effect of capitalization, by approximately $2.0 million.
Assuming no changes in the outstanding balance of our existing variable-rate debt as of December 31, 2023, a 100 basis-point increase in the Adjusted SOFR rate would have increased our projected annual interest expense, before the effect of capitalization, by approximately $5.2 million.
See Note 19 “Fair Value Measurements and Disclosures” and Note 2 “Basis of Presentation and Significant Accounting Policies” in the consolidated financial statements included in this report for additional information on the fair value of our financial assets and liabilities as of December 31, 2022 and December 31, 2021.
See Note 20 “Fair Value Measurements and Disclosures” and Note 2 “Basis of Presentation and Significant Accounting Policies” in the consolidated financial statements included in this report for additional information on the fair value of our financial assets and liabilities as of December 31, 2023 and December 31, 2022.
There was no outstanding balance on our $1.1 billion unsecured revolving credit facility at December 31, 2022; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 0.90% (weighted average interest rate of 5.20%).
As of December 31, 2022, there was no outstanding balance on our unsecured revolving credit facility; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 0.900% (weighted average interest rate of 5.20%).
Comparatively, a 100 basis point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $262.7 million, or 6.0%, as of December 31, 2021. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the index included at Item 15. “Exhibits and Financial Statement Schedules.”
Comparatively, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $172.6 million, or 4.9%, as of December 31, 2022. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the index included at Item 15. “Exhibits and Financial Statement Schedules.”
The total carrying value of our fixed-rate debt was approximately $4.1 billion as of December 31, 2022 and 2021, respectively. The total estimated fair value of our fixed-rate debt was approximately $3.5 billion and $4.4 95 billion as of December 31, 2022 and 2021, respectively.
The total carrying value of our fixed-rate debt was approximately $4.4 billion and $4.1 billion as of December 31, 2023 and 2022, respectively. The total estimated fair value of our fixed-rate debt was approximately $4.0 billion 93 and $3.5 billion as of December 31, 2023 and 2022, respectively.
We calculate the market rate of our unsecured revolving credit facility and unsecured term loan facility by obtaining the period-end Adjusted SOFR and then adding an appropriate credit spread based on our credit ratings, and the amended terms of our unsecured revolving credit facility and unsecured term loan facility agreements.
We calculate the market rate of our unsecured revolving credit facility and unsecured term loan facility by obtaining the period-end SOFR, adding a SOFR adjustment of 0.10% (“Adjusted SOFR”) and then adding an appropriate credit spread based on our credit ratings, and the amended terms of our unsecured revolving credit facility and unsecured term loan facility agreements.
At December 31, 2022, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $200.0 million, which was indexed to Adjusted SOFR plus a spread of 0.950% (weighted average interest rate of 5.23%).
At December 31, 2023, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $520.0 million, which was indexed to Adjusted SOFR plus a spread of 0.950% (weighted average interest rate of 6.41%).
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership.” Interest Rate Risk As of December 31, 2022, 4.7% of our total outstanding debt of $4.3 billion (before the effects of debt discounts and deferred financing costs) was subject to variable interest rates. The remaining 95.3% bore interest at fixed rates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership.” Interest Rate Risk As of December 31, 2023, 10.5% of our total outstanding debt of $5.0 billion (before the effects of debt discounts and deferred financing costs) was subject to variable interest rates. The remaining 89.5% bore interest at fixed rates.
For sensitivity purposes, a 100 basis point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $172.6 million, or 4.9%, as of December 31, 2022.
For sensitivity purposes, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $180.7 million, or 4.5%, as of December 31, 2023.
As of December 31, 2021, there was no outstanding balance on our unsecured revolving credit facility; however, it was available for borrowing at the following variable rate: LIBOR plus a spread of 0.90% (weighted average interest rate of 1.00%).
There was no outstanding balance on our $1.1 billion unsecured revolving credit facility at December 31, 2023; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 0.900% (weighted average interest rate of 6.38%).
Removed
Information about our changes in interest rate risk exposures from December 31, 2021 to December 31, 2022 is incorporated herein by reference from “Item 7.

Other KRC 10-K year-over-year comparisons