Kilroy Realty Corporation · NYSE:KRC
Kilroy Realty — NAREIT REITweek 2022
33 slides from Kilroy Realty's conference presentation, Jun 7, 2022
Slide 1: Kilroy Realty NAREIT June 7-8, 2022
KILROY NAREIT REALTY June 7-8, 2022 KILROY REALTY | 0 KOP 2 / South San Francisco
Slide 2: Agenda
AGENDA 01 Platform Highlights 02 Market Observations 03 Value Creation Through Capital Allocation 04 Strong Financial Position 05 Appendix 333 Dexter | Seattle, WA KILROY REALTY | 1
Slide 3: Platform Highlights
PLATFORM HIGHLIGHTS KILROY REALTY | 2
Slide 4: Kilroy At A Glance
PLATFORM HIGHLIGHTS Indeed Tower | Austin, TX Kilroy At A Glance A Premier, Publicly Traded Developer, Owner, and Manager of Class A Properties on the West Coast and Austin, TX 15.2M RSF Owned S&P MidCap 400 Leader in Sustainability 1,000+ Company and Wellness Residential Units $4.44-$4.58 3.4% Baa2
Slide 5: Uniquely Positioned For Offense & Defense
PLATFORM HIGHLIGHTS Uniquely Positioned For Offense & Defense OFFENSIVE DEFENSIVE Development Best in Class Strong Balance Pipeline Portfolio & Team Sheet $165M of NOI coming online in ~30 months ~93% leased / ~14% YoY FFO growth (1) 5.9x net debt to EBITDA (2) ~45% of development pipeline c
Slide 6: Leasing Update
AERO | Long Beach, CA PLATFORM HIGHLIGHTS Leasing Update Significant Leases Signed QTD, Over 190K SF Including: • 72K, 11-year lease in Long Beach MEDIA & ENTERTAINMENT • 56K, ~8-year lease in Santa Monica COMPANY Average Change in Rents 39% GAAP / 22% Cash KILROY REALTY | 5 Note: Change in rents on
Slide 7: Kilroy's Growing Life Science Portfolio
PLATFORM HIGHLIGHTS Kilroy’s Growing Life Science Portfolio KRC Life Science Portfolio Today: Kilroy’s Approach: • Among top three largest portfolios of life science and • Leverage our multi-decade development expertise with healthcare tenants (1) deeply experienced team / platform in-house • Today’
Slide 8: Kilroy's Growing Life Science Portfolio
PLATFORM HIGHLIGHTS Kilroy’s Growing Life Science Portfolio LIFE SCIENCE PORTFOLIO PRO FORMA FOR PRO FORMA FOR FUTURE TODAY (1) UNDER CONSTRUCTION (2) LIFE SCIENCE (3) 12% 19% 29% Organic Life Science Growth Through Existing Land Pipeline & Convertible Assets Note: Percentages are based on current 2
Slide 9: Recent Awards For Sustainability And Updates On Diversity, Equity, & Inclusion
PLATFORM HIGHLIGHTS Recent Awards For Sustainability And Updates On Diversity, Equity, & Inclusion Workforce Diversity Highlights Prioritizing Human Capital Management Initiatives Carbon Neutral Operations Energy Star Ethnically Kilroy achieved Carbon Neutral Partner of the Year, 2014-2022 57% Femal
Slide 10: Human Capital Highlights
PLATFORM HIGHLIGHTS Human Capital Highlights • 255 employees • Best in class team • Executives with an average of ~29 years Industry experience with ~22 years of KRC experience Portfolio By Region(1) Los Angeles San Diego Northern California Seattle Austin KRC Culture Promotes Collaboration, Mentors
Slide 11: Market Observations
MARKET OBSERVATIONS KILROY REALTY | 10
Slide 12: Market Overview
Stadium Tower | Austin, TX MARKET OBSERVATIONS Market Overview • Occupancy has been increasing weekly since the pandemic started • U.S. average occupancy reached 43% in April 2022 • Austin leading the nation at 60% • Commuting trends are a leading indicator for physical occupancy • BART ridership hi
Slide 13: Building Age & Quality, A Driving Force For Net Absorption And Rent Growth
MARKET OBSERVATIONS Building Age & Quality, A Driving Force For Net Absorption And Rent Growth U.S. Net Absorption Rent Growth 2018 - 2021 0-7 61.6 35% 8-12 -4.3 30% Building Age (Years) 25% 13-22 -34.9 KRC PORTFOLIO 20% 23-32 -27.6 AVERAGE AGE ~11 YEARS 15% 33-42 -74.7 10% 43-52 -26.6 5% 53-62 -14.
Slide 14: KRC Leads All Office REITs In Quality Score
MARKET OBSERVATIONS KRC Leads All Office REITs In Quality Score FAST FACTS 72% LEED Certified 38% Fitwel Certified 78% Energy Star Certified (1) ~11 Years Average Portfolio Age 91% Occupied 93% Leased Our Commitment to Modern, Amenitized, and Sustainable Workplace Environments Differentiates Our Por
Slide 15: Average Annual Lease Expirations From 2022-2025
MARKET OBSERVATIONS Average Annual Lease Expirations From 2022-2025 16% 13% 11% 10% 10% 9% 8% 8% 7% 7% 7% KRC Bi-Coastal East-Coast Bi-Coastal Bi-Coastal Bi-Coastal East-Coast Bi-Coastal East-Coast West-Coast West-Coast REIT REIT REIT REIT REIT REIT REIT REIT REIT REIT KRC Rollover is Lowest Among P
Slide 16: Market And VC Funding Observations
MARKET OBSERVATIONS Market And VC Funding Observations Despite Recent Market Volatility, Technology and Life Science Remain a Driver of the Economy… NASDAQ S&P 500 +602% +174% As Evidenced by the Sustained Volume of VC Activity… …and Increases in the Large Cap Tech Labor Market $400 20,000 $350 16,5
Slide 17: Market Fundamentals
MARKET OBSERVATIONS Market Fundamentals • Demand Trends Continue to be Strong in KRC Markets • Increasing Transportation and Physical Occupancy Have Increased Leasing Activity • Class A Space Commands a Meaningful Premium due to Favorable Supply/Demand Imbalance Seattle San Francisco South San Los S
Slide 18: Value Creation Through Capital Allocation
VALUE CREATION THROUGH CAPITAL ALLOCATION KILROY REALTY | 17
Slide 19: Kilroy's Proven Track Record
VALUE CREATION THROUGH CAPITAL ALLOCATION Kilroy’s Proven Track Record Capital Allocation Highlights C B A A • Opportunistically entered Austin, TX • Executed the largest single asset COVID-19 sale in San Francisco at record pricing PANDEMIC • Issued $1.2B in bonds at an average interest rate of 3.1
Slide 20: Development Update – In-Process Development
VALUE CREATION THROUGH CAPITAL ALLOCATION Development Update – In-Process Development TENANT IMPROVEMENT (1) REDEVELOPMENT UNDER CONSTRUCTION ~$1.2B investment ~$115M investment ~$1.0B investment 2100 Kettner / Little Italy, San Diego 4690 Executive Drive / UTC, San Diego KOP Phase 2 / Oyster Point,
Slide 21: Programmatic Approach To Development De-Risk With Leasing
VALUE CREATION THROUGH CAPITAL ALLOCATION Programmatic Approach To Development De-Risk With Leasing Over Time, KRC Has Thoughtfully Managed Lease-Up Risk With Its Development Pipeline KILROY REALTY | 20 Note: Project timeline starts at project start date, blue line denotes unleased project, and gree
Slide 22: Liquidity / Funding Plan
VALUE CREATION THROUGH CAPITAL ALLOCATION Liquidity / Funding Plan Liquidity Takeaways Uses – Development Spending • 2022 development spend funded with cash Total 2022 Remaining Spend on hand and dispositions or borrowings on Under Construction (1) $500-575M bank line TOTAL $500-575M • Funding beyon
Slide 23: Strong Financial Position
STRONG FINANCIAL POSITION KILROY REALTY | 22
Slide 24: Best-In-Class Balance Sheet
STRONG FINANCIAL POSITION Best-In-Class Balance Sheet Baa2/BBB 5.9x ~$1.1B ~7 years Stable Outlook Net Debt / Borrowing Capacity Average Debt Investment Grade Q1 2022 EBITDA (1) on Revolver (2) Maturity Profile Rated No Significant Access to ~100% >95% Debt Maturities Diverse Fixed Rate Debt Portfol
Slide 25: Leverage Sensitivity
STRONG FINANCIAL POSITION Leverage Sensitivity Pro Forma for Completion of $2.4B of In-process Development 1Q22 Debt Funded, Debt Funded, Partially Stabilized Fully Stabilized Annualized (50% Leased) (100% Leased) 6.8x For every $100M of disposition proceeds (1) utilized to fund development, lowers
Slide 26: Top Fifteen Tenants
STRONG FINANCIAL POSITION Top Fifteen Tenants Tenant Publicly Traded MCAP ($B) Rating % of Total ABR(1) Fortune 50 Publicly-Traded Company NASDAQ $2,381 AA+ 5.0% GM Cruise, LLC NYSE $55 BBB 4.5% Amazon.com NASDAQ $1,150 AA 4.2% Stripe, Inc. -- -- -- 4.1% LinkedIn Corporation / Microsoft Corporation
Slide 27: Dividend Levels vs. Peers
STRONG FINANCIAL POSITION Dividend Levels vs. Peers 2021 FAD Payout Ratios & Dividend Growth Since 2016 91% 86% 77% 74% Avg. FAD 72% 72% 70% 71% 67% 63% 61% Ratio = 71% 49% 51% 44% 39% Avg. Dividend 27% 27% 25% 23% Growth = 15% 18% -3% 0% -16% -26% KRC Bi-Coastal Bi-Coastal Bi-Coastal Bi-Coastal Wes
Slide 28: Where Innovation Works
Where Innovation Works KILROY REALTY | 27 Indeed Tower / Austin, Texas
Slide 29: Appendix
APPENDIX KILROY REALTY | 28
Slide 30: Kilroy Oyster Point
APPENDIX Kilroy Oyster Point KILROY REALTY | 29
Slide 31: Santa Fe Summit – North and South
APPENDIX Santa Fe Summit – North and South KILROY REALTY | 30
Slide 32: Stadium Tower
APPENDIX Stadium Tower Stadium Tower KILROY REALTY | 31
Slide 33: Disclaimer
DISCLAIMER This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions,