Kilroy Realty 3Q16 Earnings Call Notes

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Kilroy Realty’s (KRC) CEO John Kilroy on Q3 2016 Results

Found it very difficult to make the math work, but now pursuing a few transactions

“Before wrapping up, let me comment on the acquisitions market. While over the last few years, we have found it very difficult to make the math work on high quality acquisition opportunities in our markets. We are now pursuing a few transactions that not may need our investment criteria. They have value creation elements and superior locations near transit and amenities, more to come on this.”

Will see some significant transactions in the coming quarters of tech and life science space

“I think you’ll see a lot of good news over the next could of quarters from Kilroy on some pretty significant transactions involve both life science and involve technology up and down the platform but there – just to put in connection with demand, you are also you of all have heard me at various conference calls or at the NAREITs or other conferences that are held talk about the kind of product that the users of the market want.”

We’re not buying coupons because cap rates aren’t attractive but we’ll buy things that we can fix up

“Well we’re not thinking of buying core product that’s leased and buttoned up because the cap rates are not compelling to us, the things that we’re looking at our products where they’re drastically under market in their rents and so we think there’s some big up side and or they’re screwed up. Think up 60 to 55 which we call Sunset media center in Hollywood. It was totally messed up, and now it’s become a terrific asset, because we had the imagination and then they capital and whatnot the straight it out. So it’s kind of a combination of those things. Manny you’re not going to see us by coupons.”

Have only seen cap rates compress further

“we haven’t seen cap rates back up in any of our markets, if anything we’ve seen added cap rate compression, because of what’s going on now there are good number of assets that are being bought by companies that are poor and there aren’t real estate companies, because they in their host countries they can borrow at 1% and then get a 3.5% coupon on the lease transaction or the sale transactions that they buy and that’s a massive spread. So if anything for great stuff, I think cap rates could compress further, but I don’t know about the tertiary stuff I just don’t follow it.”

Robert Paratte

Tech continues to lead SF market

Hi, Nick, sorry. We’re looking at demand in San Francisco currently – third quarter, it’s approximately 8.7 million and we see that continuing to track going forward. And I think it’s interesting, tech continues to lead the market but it’s significant also that there is about close to 650,000 feet of fire category tenants that are in various stages of documentation. So we are comfortable on what we are tracking that fourth quarter will show some significant executed transactions.