Kilroy Realty Corporation · NYSE:KRC
Kilroy Realty — Investor Day (January 2011)
55 slides from Kilroy Realty's investor day presentation, Jan 13, 2011
Slide 1: Kilroy Realty Corporation Investor Day Presentation
Exhibit 99.1 KILROY REALTY CORPORATION Investor Day Presentation January 13, 2011
Slide 2: Disclaimer
KILROY as Kilroy statements Operating can statements. year Partnership’s Current events, certain this regarding should information estimates amended, give presentation. ended Realty, not tenants. new Reports no are REALTY properties Partnership rely can are December Readers assurance information and
Slide 3: Program
KILROY Chris SecondCorpuz West REALTY LA SanStreet, Francisco CORPORATION San Market Francisco and Program 2 Transbay I. Tyler District RoseVI.Welcome Q&A VII. II.Property John Kilroy TourCompany 100 FirstUpdate Plaza, 303 and Second StrategyStreet III. Jeff 12400 Hawken HighMarket Bluff Drive, and
Slide 4: Company Update and Strategy
KILROY REALTY CORPORATION John Kilroy President Chief Executive Officer Company Update and Strategy 3
Slide 5: 2010 Momentum for Continued Growth
KILROY footage management 17% REALTY through team Obtained CORPORATION $700 million investment of acquisitions Strong gradeMomentum ratings Diversified Platform in 2010 revenue In-place Significantly sources for Continued and increased improved Growth occupancy credit 4 profile Expanded Continued ge
Slide 6: Key Strategies for 2011
KILROYcapital development Execute REALTY Expand recycling CORPORATION organization plan Preserve as needed Key strong Strategies Maintain balancefor emphasis sheet 2011Seek Continue onGrowth leasing to Opportunities expand Move occupancy West Coast whileback franchise Maintaining into the Pursue 90s
Slide 7: Gaining Traction on Leasing
KILROY square 94% 1Q’102Q’103Q’104Q’10 YoY feetREALTY Increase: ?Continued 630 CORPORATION opportunity bps Leased 97%97%96%94%90%95%95%96%94%89% 6 forLeasing growth Gaining when comparing Traction ?Increased current occupancy 83%83%85%86%89%92% occupancy of 89% 630 bps versus from KRC’s year 100% 10
Slide 8: West Coast Acquisition Market Update
KILROY million Financial ofcapacity REALTY acquisitions and CORPORATION surety in 2Q through of execution 4Q West 2010 are Coast key ?Now Acquisition -Sellers seeingunderwriting more Market opportunities Update buyers Current ?In ?Number some Market cases, of acquirers Conditions buyersalso under-es
Slide 9: Value-Added Acquisition Strategy
KILROY REALTY opportunities Francisco 8 inat inflection key CORPORATION West Coast pointsmarkets in theKRC’s cycle Value-Added Be Acquisition both offensive andStrategy Best-in-Class andTake defensive advantage assetsIncrease Significant of window rentsamenities, over of opportunity timeincluding Ob
Slide 10: KRC's Competitive Advantage
KILROY Extensive access to broad REALTY knowledge capital CORPORATION ofsources markets Various Vertically KRC’s transaction integrated Competitive options, platform Advantage including with broad O.P. with units skill Acquisitions set Public to evaluate company Community acquisitions transparency S
Slide 11: KRC's Target Markets
KILROY submarkets KRC’s the California million Microsoft footprint 10REALTY Continue including campus in the CORPORATION toSilicon for market focus $46on Valley million dates coastal, back and Seattle KRC higher East to Target 1970s; Southern Bay barrier-to-entry, ?Acquired Markets we sold Californi
Slide 12: Diversification
KILROY from 12% approximately Other approximately REALTY 3% 12% Los Angeles CORPORATION of $2.7 NOI billion on 30% a as pro San offorma December Diego KRCbasis Acquisition 56%31, (1) ProReal 2009 Forma Diversification estate to approximately (2)investments San Francisco Acquisitions $3.5 defined 11%
Slide 13: Disciplined Approach to Acquisitions
KILROY $800 represent 1997~REALTY 1998 40% 1999 of KRC’s CORPORATION 2000total 2001acquisitions 2002Disciplined 2003 since 2004 Approach IPO 2005Bubble 2006to2007 Years Acquisitions 2008 12 2009Total 2010Property ($ in millions) Acquisitions: While$1.7 KRCbillion was not$507 a significant $254 $31 $
Slide 14: 2010 Acquisitions
KILROY rate Gold County 999 opportunity Town Excellent Certified Acquired REALTY &for Country location Majority 500,000 June CORPORATION $22 2010 with leased square million freeway 6.7% during feet ($222 cap of accessibility Second recession rate office/ PSF) LEED MOB Quarter 99,000 Full and Silver
Slide 15: Fourth Quarter 2010 Acquisitions
KILROY Class the structure, include credit Station Main A quality –San Delta office, campus REALTY builtDiego tenants, Dental in built 1988 and14 CORPORATION inand the BAE 1998 LEED GSA’s West Systems Initial Gold Campus IRScap certified and and Fourth rate (Overlake the Federal ofGSA 77% Quarter 6.
Slide 16: Acquisition Case Study: 2211 Michelson
KILROY repositioning management Leased over time during REALTY 15 time costs downturn Conclusion: •Base CORPORATION Limited building Need near-term •Downtime substantial Commodity rollover •Lease-up discount Property 94% •Commissions to occupied Acquisition price point Belowto2211 •Total make replac
Slide 17: Development: The Growth Engine
KILROY 2003 during 2004 theREALTY bubble 2005 2006 years CORPORATION 2007 at yields 2008300 2009toDevelopment: 2010 500 bps $38higher $131 The$174 than Other acquisition $202 Growth $133 $62 Engine cap rates $85($$23 atinthe $94 millions) time $297 16Bubble $58 Total Years Development $0 $50 $100 St
Slide 18: Development Pipeline
KILROYMesa Bernardo Sorrento I-15 REALTY 21.0 7.6 57,000 320,000-1M CORPORATION OrangeSFCounty San Development Diego (Office/MOB) CC (One Pipeline Paseo Orange Project - Mixed County Location Use) 6.0 100,000-500,000 Del Gross MarSite 23.0Acreage up to TOTAL 1.8M Est. RSF SF PIPELINE Santa Carlsbad
Slide 19: Capital Recycling
KILROY -$100 Dispositions:$0.6 $0$100 REALTY $200$300$4001997 billion CORPORATION Net Development 1998 ($ 1999 in millions) Funding: 20002001Capital $0.72002 billion Recycling 2003 Dispositions 2004 Since 2005IPO averaged 2006 $38$131 2007 ~ $50M 20082009 $174per $202 year 2010 $133 Remain Developme
Slide 20: 2010 Summary and 2011 Outlook
KILROY REALTY management education, Flexibility/agility healthcare teamwill Maintained CORPORATION and be the exports key strong for aregrowth expected balance 2010 Summary 19sheet to drive 2011 Significant demand OutlookJob acquisition Anticipate growth andcontinued activity pricing has occupancy p
Slide 21: Market and Leasing Update
KILROY REALTY CORPORATION 20 Jeff Hawken Chief Operating Officer Market and Leasing Update
Slide 22: Strong Operating Performance
KILROY past buildings two years meeting REALTY LOItenant conversion CORPORATION requirements rates averaged Strong High quality Operating greaterassets than Performance located 90% Tenant in strong indefaults 2010barrier Another significantly to entry record markets reduced year of21 lease Historica
Slide 23: Strong Tenant Base
KILROYrepresents Education contractual F.I.R.E. (Baa3/BBB-) Biofuels North REALTY &base Health 3.4% America rental finance, DIRECTV, CORPORATION Services revenue LLC1.7% insurance 23% Inc. calculated Manufacturing Epson (Baa2/BBB-)2.8% and Strong America, real on Tenant aestate. straight 15% Inc. Ba
Slide 24: Leasing Strategy
KILROY leasing relationships costs REALTY Provide with the CORPORATION highest broker community quality service Leasing Kilroy and Strategy Airport maintain KRC’s Center, long-term strong Longtenant Beach balance relationships KRC sheethas andover access Renew 60 years toleases capital of early expe
Slide 25: Significant Leasing Progress in 2010
KILROY than 70% REALTY of vacant building CORPORATION square footage Successfully Sold one Leasing vacantVacant building Buildings Only 3 buildings Significant remain 2010 100% Leasing unleased Progress 24Year End 2010 Year End 2009 22 vacant buildings 1.7 million square feet Leased more
Slide 26: Occupancy Gains by Region
KILROY 80% 91.4% 98.6% 2005 90.0% 94.8% REALTY 2006 86.4% 94.1% 2007 CORPORATION 83.1% 96.5% 2008 2009 82.2% 94.9%3Q’10 76.8% 93.5% Occupancy 2010 2005 88.3% Leased 2006 84.8% Gains 100% 2007 by 2005 2008 Region 95% 2006 2009 90%Los 2007 85% 3Q’10 Angeles 2008 80% 2010 2009 Portfolio 75% Leased 3Q’1
Slide 27: Market Fundamentals Update
KILROY 2010 Demand positive soft consecutive for jobthe for remains growth REALTY near the quarter year future flat; tepid of CORPORATION Seeing projected positive Third until demand job consecutive absorption to growth beincrease positive 26returns KRC quarter Vacancy via inMarket Poised 2011 large
Slide 28: 2010 Leasing Statistics
KILROY -3.5% Francisco: Industrial: REALTY NA New -24.1% CORPORATION vs Renewal By Region • 67% • 27 20% New• 2010 Los 33% Leasing Angeles• Renewal Statistics 37%GAAP Orange Total Basis: County• Leasing New:Transactions 40% -21.9% SanRenewal: Diego• in 2010: 3% -1.1% San 2.0 477,000 Francisco millio
Slide 29: Industry Diversification
KILROY11% Services REALTY Manufacturing CORPORATION 10% Technology 28 2010 Leasing: and MediaIndustry 32% F.I.R.E. Diversification 10% Demand2.0 million drivenSquare by a diverse Footage spectrum Wholesale of industries and Retail Trade 16% Other 5% Professional Services 16% Education & Health
Slide 30: Lease Maturity Schedule
KILROY 5-Year Average REALTYof 12% CORPORATION 29 Note: Percentage Lease Maturity of leased Schedule square footage 20.0%expiring 15.0% 10.0% by year. 5.0% 0.0% 14.7% 13.5% 17.6% 16.4% 5.8% 10.3% 12.1% 13.3% 16.6% Historical 4-Year Average of 16% Next
Slide 31: Property Management Integration Update
KILROY no incorporate property, REALTY KRC need branding forCORPORATION on-siteLeveraging management Integration existing property Updatemanagement 30 Successfully teams integrated in San Diego $698 million and Orange of new County acquisitions Built newintoteam stabilized in San portfolio Francisco
Slide 32: Financial Update
KILROY REALTY CORPORATION Financial Update Tyler Rose Chief Financial Officer 31
Slide 33: KRC Positioned for Future Growth
KILROY Comprehensive Santa Fe Summit, REALTY internal San CORPORATION Diego investment 32 process KRC Positioned Strong property, for Future legal,Growth construction Full liquidity and financial on ourdue $500 diligence millionteams bank line Centralized (expandable decision to $700 making million)
Slide 34: 2010 Financing Transactions
KILROY $575 Bank 8% Line16% REALTY $159 Secured Other CORPORATION $145 Debt,Total $123$1,170 Equity, 2010 Total $313 Financing $1,170 21% 19% Transactions 33 Sources: Total Uses:Capital Equity Raise $313 Acquisitions of $1.5 billion $646 $1,600 Secured $1,400 Debt $1,200 $123$1,000 Repay $800 Secure
Slide 35: Diversified Capital Structure
KILROY 12% Preferreds REALTY8% Bank CORPORATION Line 4% Exchangeable Diversified Notes Capital9% Structure Private Year Placement End 2008 Notes Year 2%End Unsecured 2010 Equity Bonds46% 16%Bank Secured LineDebt 10% 9% Exchangeable Preferreds 6% Notes …While 18% Private Maintaining Placement LowNote
Slide 36: Extended Debt Maturities
KILROY $256 2017 $3 $0 2018+ REALTY $100 $ in million $200 CORPORATION $300 Extended $400 $500 debtExtended maturities 20102011Debt 20122013 withMaturities limited 2014 interest Year 2015 End rate 2016 2009 risk 2017 Year 35 2018+ End 2010 $ in million Weighted$70Average $301 $159 Debt$256 Maturity:
Slide 37: Strong Track Record of Financial Discipline
KILROY 90% 2010 95% Occupancy REALTY 95% 96% Total CORPORATION 94%Debt/ 89% Undepreciated 83% 89% Strong 37%Book Track 44%Value Record 42% Reduced 43%of Financial 41%leverage 40% Discipline 40% in 2009 39% 12 44% to solidify Year 44% Average 37% balance 41% Occupancy sheet 55%3650% and45% Leverage 4
Slide 38: Valuation Upside
KILROY to increases Occupancy REALTY increases, historical CORPORATION development level of 95% Development andValuation acquisitions Upside Pipeline willFree drive of Rent approximately potential Approximately upside $1.3 37billion $4 million to $1.8 in 4Q10, billion$13 Historical millionROC for 20
Slide 39: Financing Update
KILROY REALTY approximately 60% CORPORATION Lender is MetLifeFinancing Locked-inUpdate Rate Prior Just to closed Recent a $135 Rise million in 303 Second securedStreet, mortgage SanSeven-year Francisco Treasuries term 4.27%38fixed interest rate Secured by 303 Second Street Loan to value of
Slide 40: 2010 Preliminary Results and Guidance
KILROY results FFO REALTY per share CORPORATION of $2.04 to $2.052010 Occupancy Preliminary at 89% Results Second2010 quarter guidance of positive on the same 3Q10 store Conference results 2211 Call FFO Michelson, per share Irvine range 39of $2.01 to $2.06 Occupancy guidance of 88% 2010 preliminary
Slide 41: San Francisco Market and Transbay District
KILROY REALTY CORPORATION Chris Corpuz Executive Vice President San Francisco Market and Transbay District 40
Slide 42: San Francisco Office Market
KILROY with directly overall with REALTY vacancy KRC, the CORPORATION ofvacancy 14% North is less Financial San thanFrancisco 10% District Collaborative Office •27 million Market tenant square San spaces Francisco feet at and303 16% market Second vacancy totals Street South 7341 million Financial sq
Slide 43: San Francisco Office Market Demand
KILROY biggest significant Collaborative years REALTY space Salesforce.com tenant include CORPORATION spaces Twitter, 42plans Dolby, to build SanMetaCafe Francisco a two million and Office Goodby square Market Silverstein foot ?Significant headquarter Collaborative demand campuscoming work in thespa
Slide 44: Transbay Terminal Area Map
MARKETTerminal Transbay STREET250 MOSCONE BRANNAN CONVENTION 100 FIRST PLAZA CENTER (2015) INTERSTATE America’s Cup 80 AT&T (2013)PARK SPEAR (2000) STREET St. Regis CORRIDOR Hotel (2006) FERRYSECOND BUILDING STREET (2003) 303BAY SECOND BRIDGE STREET America’s America’s Cup (2013) Cup (2013) 43 Futur
Slide 45: Technology Companies Have Arrived
KILROY -63,000 Microsoft 3 20,000 Mobile Dolby SF 20,141 Adteractive Table 2008 46,157 Comm. Visage Total --SF 17,500 -32,289 SF 19, -REALTY --Cisco Fox Hotwire -58,000 92,000 30,577 -Wager 1,099,602 027 36,000 SF Interactive SF-Fox Open 37,570 SF Coverty Works SF -SF CORPORATION 44,356 SF Interacti
Slide 46: KRC's San Francisco Investment Strategy
KILROY REALTY replacement restaurants Proximity cost Tenant CORPORATION to workforce base oriented 00 KRC’s First towardPlaza, San growth Francisco Santenants, Francisco Investment including 250 Brannan Strategy tech and Street, 100 mediaFirst Sanbusinesses Francisco Plaza, San Collaborative 45 Fran
Slide 47: 250 Brannan Street
KILROYAdobe tenants, Waterfront, REALTY AT&T andPark Splunk CORPORATION andthrough wide array 2013 Under ofInitial retail Contract: cap and on restaurants 250 in-place Brannan Submarket leasing Approximately of approximately is home to $33 many million 6.8%well-known 250 ($363 Brannan PSF) technolog
Slide 48: Transbay Infrastructure Enhances Value
KILROY infrastructure retail in 2017amenities ?303 REALTY Second project Features CORPORATION Reinforces Street 2 parks and 100 5.4 the acre First migration Transbay of Street public ofProject will the park directly epicenter will on the Enhance benefit roof of the offrom Value CBD the Transit the t
Slide 49: Transbay Redevelopment Project Area
KILROY REALTYSITE DEVELOPMENT CORPORATION RESIDENTIAL NORTH DEVELOPMENT FINANCIALSITE DISTRICT TRANSBAY SOUTHREDEVELOPMENT FINANCIAL DISTRICT PROJECT TRANSBAY AREA Transbay TRANSIT map CENTER 48 AND URBAN PARK LEGEND OFFICE
Slide 50: Demolition Has Begun and the Area Has Already Seen Improvement
KILROY REALTY CORPORATION Demolition Has Begun and the Area has Already Seen Improvement 49
Slide 51: Transbay Terminal: Significant Infrastructure Investment
KILROYproject planned REALTY50 CORPORATION Transbay Terminal –Significant Infrastructure Investment City Park Bus Level Retail/ Concourse Grand Hall Train Mezzanine Train Level Cross section of the
Slide 52: Transbay Terminal: Value Enhancement to Existing Owners
KILROY REALTY CORPORATION Transbay Terminal –Value Enhancement to Existing Owners 51
Slide 53: America's Cup Economic Impact
KILROY Cup economic that cup San would in 2013 Francisco REALTY impact provide The event inbay substantial CORPORATION sport Alcatraz is projected to host long Fort countries, to term mason South have benefits abehind Treasure Financial $1.4tobillion the the Island District Olympic region’s economic
Slide 54: Key Takeaways
KILROYapproximately increased totaling REALTY to 89% at CORPORATION year$700 end;million portfolio Anticipate Key nowTakeaways 92% additional leased– Acquiring John acquisitions KilroytopGaining Prepared tier assets traction for at discounts development on leasing to replacement core Expect portfoli
Slide 55: Q&A
KILROY REALTY CORPORATION Q&A 54