LOS ANGELES--(BUSINESS WIRE)--
Kilroy Realty Corporation (KRC) today announced that year to date it has signed approximately 2.6 million square feet of new or renewing leases at rents that are up 15% on a cash basis and 37% on a GAAP basis over the prior leases. The average lease term is approximately nine years and annual rent escalations are approximately 3%. Included in this leasing activity are nearly 2.2 million square feet of leases signed through the end of the third quarter and 415,000 square feet of leases signed month to date.
During the third quarter, the company completed two large transactions greater than 80,000 square feet, including 10-year leases with Facebook, Inc. (NASDAQ: FB) encompassing 85,000 square feet in Bellevue, Washington and a 12-year renewal with Internet Brands for 92,000 square feet in the El Segundo submarket of Los Angeles.
In October, among other leases, the company signed a long term lease with a technology tenant for approximately 193,000 square feet of office space in the South of Market Area (SOMA) district of San Francisco. This lease underscores the intense demand that exists for high quality, well-located, large blocks of space among San Francisco’s creative companies whose expectations have risen dramatically as they face increasing competition for top talent. To lock-in space that is desirable to today’s millennial workforce, companies are having to be flexible in how they acquire space, often times, committing to leases a few years out.
Also in October, in the submarket of Del Mar in San Diego, the company signed two large leases at strong rent levels, including a 67,000 square foot lease with a publicly traded life science company for its future headquarters space for a term of 10.5 years. FICO (NYSE: FICO), formerly known as Fair, Isaac and Company, a data analytics company, also signed an 80,000 square foot renewal that extends the original lease expiration from early 2020 to 2027.
About Kilroy Realty Corporation. Kilroy Realty Corporation (KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is one of the West Coast’s premier landlords. The company has over 70 years of experience developing, acquiring and managing office and mixed-use real estate assets. The company provides physical work environments that foster creativity and productivity and serves a broad roster of dynamic, innovation driven tenants, including technology, entertainment, digital media and health care companies.
At September 30, 2018, the company’s stabilized portfolio totaled approximately 13.9 million square feet of office space located in the coastal regions of Los Angeles, Orange County, San Diego, the San Francisco Bay Area and Greater Seattle and 200 residential units located in the Hollywood submarket of Los Angeles. In addition, KRC had three projects under construction totaling approximately 1.0 million square feet of office space, 608 residential units and 120,000 square feet of retail space as well as two projects in the tenant improvement phase totaling approximately 1.2 million square feet of office and PDR space. The office components of the two projects are fully leased to Adobe and Dropbox.
The company’s commitment and leadership position in sustainability has been recognized by various industry groups across the world. In September 2018, the company was recognized by GRESB both as North American leader across all asset classes and global world leader among all publicly traded real estate companies. Other sustainability accolades include NAREIT’s Leader in the Light award for the past four years, the EPA’s highest honor of Sustained Excellence and winner of Energy Star Partner of the Year for the past five years. The company is listed in the Dow Jones Sustainability World Index. At the end of the third quarter, the company’s stabilized portfolio was 59% LEED certified and 77% of eligible properties were ENERGY STAR certified. More information is available at http://www.kilroyrealty.com.
Forward-Looking Statements. This press release 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, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or implementations of, applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information, and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statement made in this press release 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.