Kilroy Realty Corp. (NYSE:KRC.PRH) Q1 2016 Earnings Conference Call Transcript

Apr 28, 2016 • 01:00 pm ET

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Kilroy Realty Corp. (NYSE:KRC.PRH) Q1 2016 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day ladies and gentlemen and welcome to the Q1 2016 Kilroy Realty Corporation's Earnings Conference Call. My name is LaToya and I will be your operator for today. At this time, all participants are in listen-only mode. (Operator Instructions).As a reminder, this conference is being recorded.

I would now like to turn the conference over to the Executive Vice President, Chief Financial Officer, Tyler Rose. Please proceed.

Executive
Tyler Rose

Good morning everyone. Thank you for joining us. On the call with me today are John Kilroy, Jeff Hawken, David Simon, Heidi Roth, Mike Sanford, Rob Paratte and Michelle Ngo.

(Forward-Looking Cautionary Statement)

John will start the call with a review of the first quarter, Jeff will dicuss conditions in our key markets. I'll finish up with financial highlights and review of our updated earnings guidance for 2016. Then we will be happy to take your questions. John?

Executive
John Kilroy

Thank you, Tyler. Hello everybody and thanks for joining us today. Four months into the New Year fundamentals in our markets remain healthy. Rental rates and net absorption continue to increase, while vacancy rates continue to decrease in the innovation driven sub markets of San Francisco, Seattle, Los Angeles, and San Diego. Cap rates and IRRs on West Coast transactions continue to reflect strong investor demand for quality real estate. VC investment in the Bay area was up slightly over last quarter and on an annualized basis was 50% to 75% greater than investment in the years of 2011, 2012 and 2013.

VC fund raising was at its highest level in over 15 years and sublease phased in the San Francisco market declined 23% quarter-over-quarter to approximately 1.7 million square feet or only 2% of the total market. The ongoing strength and resilience of our West Coast real estate market helped dry up our solid performance in the first quarter. We signed leases on 239,000 square feet of space in our stabilized portfolio maintaining occupancy to near 95%.

We delivered and stabilized 381 million of new development ahead of schedule and under budget we added a key corner site to our Flower Mart project in San Francisco enhancing the project overall development potential and value. We closed 267 million of dispositions and we report strong overall financial results including a more than 20% increase in same store NOI. More specifically on the operations front, we signed 239,000 square feet of leases in our stabilized portfolio during the quarter at rents that were up 11% on a cash basis and 21% on a GAAP basis. And we are also seeing this trend and letters of intent.

We have approximately 330,000 square feet of LOIs in our stabilized portfolio of rents that are up 20% on a cash basis and 40% on a GAAP basis. And an 115,000 square of LOIs in our development pipeline at rents higher than pro forma. We also continued to successfully execute on our end process development program delivering and stabilizing our fully leased projects at 350 Mission Street and 333 Brannan