Kilroy Realty Corporation

Hello, everyone, and welcome to the KRC 4Q23 Earnings Conference Call. My name is Emily, and I'll be facilitating your call today. After the presentation, there will be the opportunity for any questions, which you can ask by pressing Start, followed by the number 1 on your telephone keypads. I will now turn the call over to our host, Bill Hutchison, Senior Vice President, Investor Relations and Capital Markets. Please go ahead.

Thank you, Emily. Good morning, everyone, and thank you for joining us. On the call with me today are Angela Amann, our CEO, Justin Smart, our president, Rob Perotte, our chief leasing officer, and Elliot Trencher, our CIO and CFO. At the outset, I need to say that some of the information we will be discussing during this call is forward-looking in nature. Please refer to our supplemental package for a statement regarding the forward-looking information on this call and in the supplemental. This call is being webcast live on our website and will be available for replay for the next eight days, both by phone and over the internet. Our earnings release and supplemental package have been filed on a form 8K with the SEC, and both are also available on our website. Angela will start the call with a strategic overview and quarterly highlights. Justin will review our in-process development pipeline, and Elliot will discuss our financial results and provide our 2024 guidance. Then we'll be happy to take your questions.

Thanks, Bill. I'm happy to join you today on my first call as CEO of Kilroy. I want to start by thanking John Kilroy on behalf of everyone on this platform for his visionary leadership of this company over many years and various real estate cycles. John has built a premier portfolio in the most dynamic, innovation-driven markets in the country, while also creating an organization capable of meeting and exceeding the high expectations of our diverse tenant base. I'm honored to be stepping into this role and excited about what the future holds for Kilroy. I spent my first two weeks getting to know the team here in our Los Angeles headquarters, while also getting out to see our assets and meet our regional teams, starting with Seattle and San Francisco. And I'd like to share a few takeaways from my first 11 days on the job. First, our West Coast geographic markets are feeling better, with more energy and vibrancy than has been seen in the post-pandemic period. The underlying data backs this up. Activity levels in our markets as measured by foot traffic, public transit usage, and domestic travel and tourism have all trended up significantly over the course of 2023. Second, while the office market is and will remain challenging in the near term, our portfolio is focused and well positioned to respond to tenant needs that continue to change and evolve. Employees are back in the office, but their expectations have changed. Offices need to be more than efficient. They need to be effective at enhancing productivity and driving collaboration and results. Kilroy's well-located, high-quality, amenitized portfolio can meet these demands and, in the process, capture outsized market share throughout what is likely to be an extended recovery in this space. Third, Kilroy has made the strength of tenant relationships a key priority, and it's abundantly clear that the trust that has been built by this team over time has tangible economic value, particularly at this point in the cycle. I have been extraordinarily impressed by the talent embedded in every function across this organization, which has only been confirmed by the tenants I have had an opportunity to interact with over the last two weeks, who have each described our external-facing teams in leasing, development and construction, and asset and property management as proactive, responsive, flexible, and creative. The team's reputation in the industry is unmatched, and they are and will continue to be a key contributor to our ability to outperform going forward. All of these key takeaways are underscored by the company's fourth quarter leasing activity, where we signed approximately 590,000 square feet of leases, which represents the company's highest quarterly leasing volume since 2019. Notable fourth quarter highlights include two Bay Area leases signed for a combined 210,000 square feet to a Fortune 500 technology company, and a highly regarded international law firm. For the full year 2023, we leased approximately 1.3 million square feet with an average lease term of approximately six years. This too represented the highest annual leasing volume since 2019. We are pleased to say this momentum has continued in early 2024 as we executed a 77,000 square foot lease extension with Riot Games in January for a portion of their space in West LA. Before I turn the call over to Justin and Elliot, I'd like to make a few comments on our strategy going forward. Kilroy has always defined its three core pillars as high-quality properties, strategic capital allocation, and a fortress balance sheet. I can assure you that I am equally committed to each of these pillars, which represent the best path towards navigating challenging market environments and capturing outsized growth opportunities during more favorable market environments. Over the coming years, we will be focused on maintaining the quality of this portfolio by understanding and staying ahead of creeping functional obsolescence in this space, while growing our exposure to premier office, life science, and mixed-use assets through our robust development platform or through strategic acquisitions when and only if they make sense. We will be prudent and thoughtful with every dollar of capital we are entrusted with and will remain focused on driving appropriate and compelling risk-adjusted returns. The same core pillars that have guided Kilroy's strategy in the past will guide us going forward as we take a fresh look at external and internal opportunities to drive growth and create value for all stakeholders. Justin?