Kilroy 4Q16 Earnings Call Notes

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John Kilroy

Raw materials needed to succeed today are the minds on the west coast

“Let me finish by commenting on our West Coast market trends. We see a fundamental evolution, it will constitute to high tech company. Health care, transportation, auto, defense, entertainment, lodging, retail and even travel services are now being profoundly impacted by technology. This change is producing a meaningful result in all of our markets Fortune 500 companies informally stayed industries are acquiring technology startups in order to stay relevant. GM’s $1 billion acquisition of Cruise Automation is just one example, mature tech companies are using their massive cash flows to acquire new companies with potentially game changing ideas to move into faster growing spaces and to gain access to increasingly scarce talent. A whole range of new companies are being drawn to centers of high tech innovation including our west coast market. And the increase in M&A activity has enhanced the credit profile of our portfolio with transactions like Microsoft buying LinkedIn, AT&T buying DIRECTV, Adobe absorbing Livefyre and most recently Cisco acquiring AppDynamics. We believe this trend will continue and even accelerate in the years ahead. And this evolution will continue to drive demand for work space in dynamic urban centers to deliver the live/work/play convenience and amenities that attract young creative talent. This is the 21st century version of locating your production or the raw materials and transportation resources you need to succeed.”

“I hate politicians”

“Obviously the President has said that his top priority is to stimulate growth and get people working and expand the economic pie. No industry provides growth that tech does and no industry helps the US maintain its competitive edge greater than technology does. I can’t say what the President’s view is going to be in the future. I bet on the – it’s not just the tech industry, this affects everything, automobile, every industry relies upon technology. So I can’t – I can only – I could only speculate but I don’t have obviously the crystal ball that permits me to give an accurate answer to that question. Reinforces my view that I’ve long held that I hate politicians.”

Probably wont see Kilroy being a big buyer

“I’ve been surprised to see how the cap rates have compressed in some of what I would call tertiary markets or for product that you really wouldn’t own, not long term, but there’s so much money looking for stuff. That I just don’t think you’re going to see Kilroy being a big buyer. Having said that, if we find something that we think we really can turn into — we improve it through some value add component like we see in the deals that we just did, then we’ll act on it. With the balance sheet we have, we’re prepared to go with development when it makes sense. We’re prepared to acquire when it makes sense as we’ve said we’re going to dispose of things as it makes sense. We’re going to stay in a very conservative range.”