Kilroy Realty Corp. (NYSE:KRC) Q2 2016 Earnings Conference Call - Final Transcript

Jul 26, 2016 • 01:00 pm ET


Kilroy Realty Corp. (NYSE:KRC) Q2 2016 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the Q2 2016 Kilroy Realty Corp. earnings conference call. My name is Ashley and I will be our operator for today. At this time, all participants are in listen-only mode and later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to your host for today, Tyler Rose, EVP and CFO. Please proceed.

Tyler Rose

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

[Forward-Looking Cautionary Statements]

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

John Kilroy

Thank you, Tyler. Hello, everyone. Thank you for joining us today. We had a very productive second quarter and a strong start to the third quarter. We signed leases in our stabilized portfolio during the quarter, boosting occupancy above 95%. We generated another quarter of strong financial results with same-store cash NOI up 12.4%. We increased our dividend 7.1% to an annualized rate of $1.50 per share. We acquired a fully leased office property in Mountain View with excellent incremental development potential. We completed construction on the residential portion of our Columbia Square mixed-use project in Hollywood, where leasing is ahead of schedule both in terms of rate and timing.

In our current near-term development projects, we are having meaningful discussions and trading paper for large blocks of space at The Exchange in San Francisco, at 100 Hooper in San Francisco, and at 333 Dexter in Seattle, and expect to see significant leasing activity this year. We received final title approvals for our One Paseo mixed-use project in Del Mar and for our 333 Dexter project in South Lake Union. We sold our three remaining land parcels in Carlsbad and two small buildings and a land parcel in Sorrento Mesa. And we are in final documentation on the formation of a joint venture with a large sovereign wealth fund.

Let me start there. Given that we haven't yet closed and because we are still under a confidentiality agreement, I can't go into too many specifics, but what I can say is the following. We will raise approximately 450 million in proceeds, net of some existing debt, through the formation of a joint venture in which the sovereign fund will take a significant minority interest in two of our SOMA assets. The closing is anticipated to occur in two tranches with one of the properties closing this quarter and the other property closing in the fourth quarter.

We see this as a terrific opportunity to establish a strategic relationship with a world-class organization that shares our interest in long-term value creation as well as raise capital to fund our near-term developments. This transaction