v3.3.1.900

Secured and Unsecured Debt of the Operating Partnership | 12 Months Ended
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Dec. 31, 2015
Debt Instrument [Line Items] |
Secured and Unsecured Debt of the Operating Partnership | Secured and Unsecured Debt of the Company In this Note 7, the “Company” refers solely to Kilroy Realty Corporation and not to any of our subsidiaries. The Company itself does not hold any indebtedness. All of our secured and unsecured debt is held directly by the Operating Partnership. The Company generally guarantees all the Operating Partnership’s unsecured debt obligations including the unsecured revolving credit facility, the $150.0 million unsecured term loan facility, the $39.0 million unsecured term loan, the 4.800% unsecured senior notes due in 2018, the 6.625% unsecured senior notes due in 2020, the 3.80% unsecured senior notes due in 2023, the 4.375% unsecured senior notes due in 2025, and the 4.250% unsecured senior notes due in 2029. At December 31, 2015 and 2014, the Operating Partnership had $1.9 billion outstanding in total under these unsecured debt obligations. In addition, although the remaining $0.4 billion of the Operating Partnership’s debt as of December 31, 2015, and $0.5 billion as of December 31, 2014 is secured and non-recourse to the Company, the Company provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities. Debt Covenants and Restrictions One of the covenants contained within the unsecured revolving credit facility, the unsecured term loan facility, and the unsecured term loan as discussed further below in Note 8 prohibits the Company from paying dividends in excess of 95% of funds from operations (“FFO”).
Kilroy Realty, L.P. [Member] |
Debt Instrument [Line Items] |
Secured and Unsecured Debt of the Operating Partnership | Secured and Unsecured Debt of the Operating Partnership Secured Debt The following table sets forth the composition of our secured debt as of December 31, 2015 and 2014:
| Annual Stated Interest Rate (1) |  | GAAP Effective Rate (1)(2) |  | Maturity Date |  | December 31,
Type of Debt |  |  |  | 2015 (3) |  | 2014 (3)
|  |  |  |  |  |  | (in thousands)
Mortgage note payable (5) | 4.27% |  | 4.27% |  | February 2018 |  | $ | 128,315 |  |  | $ | 130,767 |
Mortgage note payable (5) | 4.48% |  | 4.48% |  | July 2027 |  | 96,354 |  |  | 97,000 |
Mortgage note payable (4)(5) | 6.05% |  | 3.50% |  | June 2019 |  | 85,890 |  |  | 89,242 |
Mortgage note payable | 6.51% |  | 6.51% |  | February 2017 |  | 65,563 |  |  | 66,647 |
Mortgage note payable | 7.15% |  | 7.15% |  | May 2017 |  | 3,987 |  |  | 6,568 |
Mortgage note payable (5)(6) | 5.23% |  | 3.50% |  | January 2016 |  | — |  |  | 52,793 |
Mortgage note payable (5)(6) | 5.57% |  | 3.25% |  | February 2016 |  | — |  |  | 40,258 |
Mortgage note payable (5) | 5.09% |  | 3.50% |  | August 2015 |  | — |  |  | 34,311 |
Mortgage note payable | 4.94% |  | 4.00% |  | April 2015 |  | — |  |  | 26,285 |
Other (7) | Various |  | Various |  | Various |  | 1,809 |  |  | 2,421 |
Total |  |  |  |  |  |  | $ | 381,918 |  |  | $ | 546,292 |
______________
(1) | All interest rates presented are fixed-rate interest rates.
(2) | This represents the rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of discounts/premiums, excluding debt issuance costs.
(3) | Amounts reported include the amounts of unamortized debt premiums of $6.2 million and $10.3 million as of December 31, 2015 and 2014, respectively.
(4) | In January 2013, in connection with the acquisition of two office buildings in Seattle, Washington, we assumed a mortgage loan that is secured by the project. The loan requires monthly principal and interest payments based on a 6.4 year amortization period. As of December 31, 2015 and 2014, the mortgage loan had unamortized debt premiums of $6.2 million and $8.0 million, respectively.
(5) | The secured debt and the related properties that secure the debt are held in a special purpose entity and the properties are not available to satisfy the debts and other obligations of the Company or the Operating Partnership.
(6) | These mortgage notes payable were repaid during the year ended December 31, 2015 at par.
(7) | Excludes $0.6 million of secured debt related to real estate assets held for sale as of December 31, 2015.
The Operating Partnership’s secured debt was collateralized by operating properties with a combined net book value of approximately $614.4 million as of December 31, 2015. Although our mortgage loans are secured and non-recourse to the Company and the Operating Partnership, the Company provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities. As of December 31, 2015, five of the Operating Partnership’s six secured loans contained restrictions that would require the payment of prepayment penalties for the acceleration of outstanding debt. The mortgage notes payable are secured by deeds of trust on certain of our properties and the assignment of certain rents and leases associated with those properties. Unsecured Senior Notes In September 2015, the Operating Partnership issued $400.0 million of aggregate principal amount of unsecured senior notes in a registered public offering. The outstanding balance of the unsecured senior notes is included in unsecured debt, net of initial issuance discount of $2.2 million, on our consolidated balance sheets. The unsecured senior notes, which are scheduled to mature on October 1, 2025, require semi-annual interest payments each April and October based on a stated annual interest rate of 4.375%. The Company used the net proceeds to repay the $325.0 million 5.000% Unsecured Senior Notes upon maturity in November 2015 and for other general corporate purposes, including the repayment of debt and funding development expenditures. In July 2014, the Operating Partnership issued $400.0 million aggregate principal amount of unsecured senior notes in a registered public offering. The outstanding balance of the unsecured senior notes is included in unsecured debt, net of initial issuance discount of $4.5 million, on our consolidated balance sheets. The unsecured senior notes, which are scheduled to mature on August 15, 2029, require semi-annual interest payments each February and August based on a stated annual interest rate of 4.250%. The Company used a portion of the net proceeds for general corporate purposes, including the repayment of borrowings under the Operating Partnership’s unsecured revolving credit facility. The following table summarizes the balance and significant terms of the registered unsecured senior notes issued by the Operating Partnership as of December 31, 2015 and 2014:
|  |  |  |  |  |  |  |  | Principal Amount as of December 31,
| Issuance date |  | Maturity date |  | Stated coupon rate |  | Effective interest rate (1) |  | 2015 |  | 2014
|  |  |  |  |  |  |  |  | (in thousands)
4.375% Unsecured Senior Notes (2) | September 2015 |  | October 2025 |  | 4.375% |  | 4.440% |  | $ | 400,000 |  |  | $ | — |
Unamortized discount |  |  |  |  |  |  |  |  | (2,159 | ) |  | $ | — |
Net carrying amount |  |  |  |  |  |  |  |  | $ | 397,841 |  |  | $ | — |
4.250% Unsecured Senior Notes (3) | July 2014 |  | August 2029 |  | 4.250% |  | 4.350% |  | $ | 400,000 |  |  | $ | 400,000 |
Unamortized discount |  |  |  |  |  |  |  |  | (4,050 | ) |  | (4,348 | )
Net carrying amount |  |  |  |  |  |  |  |  | $ | 395,950 |  |  | $ | 395,652 |
3.800% Unsecured Senior Notes (4) | January 2013 |  | January 2023 |  | 3.800% |  | 3.804% |  | $ | 300,000 |  |  | $ | 300,000 |
Unamortized discount |  |  |  |  |  |  |  |  | (70 | ) |  | (79 | )
Net carrying amount |  |  |  |  |  |  |  |  | $ | 299,930 |  |  | $ | 299,921 |
4.800% Unsecured Senior Notes (4)(5) | July 2011 |  | July 2018 |  | 4.800% |  | 4.827% |  | $ | 325,000 |  |  | $ | 325,000 |
Unamortized discount |  |  |  |  |  |  |  |  | (191 | ) |  | (265 | )
Net carrying amount |  |  |  |  |  |  |  |  | $ | 324,809 |  |  | $ | 324,735 |
6.625% Unsecured Senior Notes (6) | May 2010 |  | June 2020 |  | 6.625% |  | 6.743% |  | $ | 250,000 |  |  | $ | 250,000 |
Unamortized discount |  |  |  |  |  |  |  |  | (940 | ) |  | (1,154 | )
Net carrying amount |  |  |  |  |  |  |  |  | $ | 249,060 |  |  | $ | 248,846 |
5.000% Unsecured Senior Notes (7) | November 2010 |  | November 2015 |  | 5.000% |  | 5.014% |  | $ | — |  |  | $ | 325,000 |
Unamortized discount |  |  |  |  |  |  |  |  | — |  |  | (33 | )
Net carrying amount |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 324,967 |
Total Unsecured Senior Notes, Net |  |  |  |  |  |  |  |  | $ | 1,667,590 |  |  | $ | 1,594,121 |
________________________
(1) | This represents the rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of initial issuance discounts, excluding debt issuance costs.
(2) | Interest on these notes is payable semi-annually in arrears on April 1st and October 1st of each year.
(3) | Interest on these notes is payable semi-annually in arrears on February 15th and August 15th of each year.
(4) | Interest on these notes is payable semi-annually in arrears on January 15th and July 15th of each year.
(5) | In October 2015, certain common limited partners in the Operating Partnership that previously contributed their interests in the property at 6255 W. Sunset Blvd., Los Angeles, California to the Operating Partnership entered into an agreement with the Company. Pursuant to this agreement, such common limited partners will reimburse the Company for a portion of any amounts the Company may be required to pay pursuant to its guarantee of the Operating Partnership's 4.800% Senior Notes due 2018 or that the Company may otherwise become required to pay under applicable law with respect to such notes.
(6) | Interest on these notes is payable semi-annually in arrears on June 1st and December 1st of each year.
(7) | Interest of these notes is payable semi-annually in arrears on May 3rd and November 3rd of each year.
In August 2014, upon maturity, we repaid our outstanding Series B unsecured senior notes which had an aggregate principal balance of $83.0 million and effective interest rate of 6.450% as of December 31, 2013. Unsecured Revolving Credit Facility and Unsecured Term Loan Facility The following table summarizes the balance and terms of our unsecured revolving credit facility as of December 31, 2015 and December 31, 2014:
| December 31, 2015 |  | December 31, 2014
| (in thousands)
Outstanding borrowings | $ | — |  |  | $ | 140,000 |
Remaining borrowing capacity | 600,000 |  |  | 460,000 |
Total borrowing capacity (1) | $ | 600,000 |  |  | $ | 600,000 |
Interest rate (2) | — | % |  | 1.41 | %
Facility fee-annual rate (3) | 0.200% |  | 0.250%
Maturity date | July 2019
_______________
(1) | We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $311.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.
(2) | Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.050% and LIBOR plus 1.250% as of December 31, 2015 and December 31, 2014, respectively.
(3) | Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2015, $4.6 million of deferred financing costs remains to be amortized through the amended maturity date of our unsecured revolving credit facility.
The Company intends to borrow amounts under the unsecured revolving credit facility from time to time for general corporate purposes, to fund potential acquisitions, to finance development and redevelopment expenditures and to potentially repay long-term debt. The following table summarizes the balance and terms of our term loan facility, which is included in our unsecured debt, as of December 31, 2015 and December 31, 2014:
| December 31, 2015 |  | December 31, 2014
| (in thousands)
Outstanding borrowings | $ | 150,000 |  |  | $ | 150,000 |
Interest rate (1) | 1.40 | % |  | 1.56 | %
Maturity date | July 2019 |  |  | July 2019 |
_______________
(1) | Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.150% and LIBOR plus 1.400% as of December 31, 2015 and December 31, 2014, respectively.
Additionally, the Company has a $39.0 million unsecured term loan outstanding with an annual interest rate of LIBOR plus 1.150% and LIBOR plus 1.400% as of December 31, 2015 and December 31, 2014, respectively, that matures in July 2019. Debt Covenants and Restrictions The unsecured revolving credit facility, the unsecured term loan facility, the unsecured term loan, the unsecured senior notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a minimum unsecured debt ratio and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We believe we were in compliance with all of our debt covenants as of December 31, 2015 and 2014. Debt Maturities The following table summarizes the stated debt maturities and scheduled amortization payments as of December 31, 2015:
Year | (in thousands)
2016 | $ | 9,734 |
2017 | 71,734 |
2018 | 451,713 |
2019 | 265,355 |
2020 | 251,962 |
Thereafter | 1,189,198 |
Total aggregate principal value | $ | 2,239,696 |
Less net unamortized discounts | (1,188 | )
Total debt, net of unamortized discounts | $ | 2,238,508 |
4.25% Exchangeable Senior Notes due 2014 The table below summarizes the significant terms of the Company’s $172.5 million 4.25% Exchangeable Notes due November 2014 (the “4.25% Exchangeable Notes”) prior to their repayment upon maturity in November 2014.
4.25% Exchangeable Notes |  | December 31, 2014
Issuance date |  | November 2009
Maturity date |  | November 2014
Stated coupon rate (1) |  | 4.25%
Effective interest rate (2) |  | 7.13%
Exchange rate per $1,000 principal value of the 4.25% Exchangeable Notes, as adjusted (3) |  | 27.8307
Exchange price as adjusted (3) |  | $35.93
Number of shares on which the aggregate consideration to be delivered on conversion (3) |  | 4,800,796
_______________
(1) | Interest on the 4.25% Exchangeable Notes was payable semi-annually in arrears on May 15th and November 15th of each year.
(2) | Represents the rate at which we record interest expense for financial reporting purposes, which reflects the amortization of the discounts on the 4.25% Exchangeable Notes. This rate represents our conventional debt borrowing rate at the date of issuance.
(3) | The exchange rate, exchange price, and the number of shares to be delivered upon conversation were subject to adjustment under certain circumstances, including increases in our common dividends as of December 31, 2014.
Prior to their maturity on November 15, 2014, the 4.25% Exchangeable Notes were exchangeable for shares of the Company's common stock only upon the occurrence of certain events. Upon exchange of the 4.25% Exchangeable Notes in November 2014, the holders received (i) cash up to the principal amount of the 4.25% Exchangeable Notes and (ii) to the extent the exchange value exceeded the principal amount of the 4.25% Exchangeable Notes, shares of the Company’s common stock. Shares of common stock delivered for settlement were based on a daily exchange value calculated on a proportionate basis for each day of a 30 day trading-day observation period. In connection with the 4.25% Exchangeable Notes, the Company entered into capped call option transactions (“capped calls”) that mitigated the dilutive impact of the potential conversion of the 4.25% Exchangeable Notes. The capped calls for the 4.25% Exchangeable Notes were terminated when the 4.25% Exchangeable Notes were repaid upon maturity in November 2014. The capped calls, as amended, were separate transactions entered into by us with the relevant financial institutions and were not part of the terms of the 4.25% Exchangeable Notes. The $42.81 strike prices of the capped calls, which were subject to customary anti-dilution adjustments, corresponded to the exchange prices of the applicable 4.25% Exchangeable Notes. In the third quarter of 2014, we settled early exchanges of the 4.25% Exchangeable Notes with an aggregate principal amount of $37.0 million. For the exchange settlements, the Company paid the noteholders a total of $37.0 million in cash for the principal amount and issued to the noteholders a total of 431,270 shares of our common stock for the excess exchange value. As a result of the exchange settlements, the Company exercised the equivalent proportionate amount of its capped call options and, as a result, received 111,206 shares of our common stock from the counterparties. This reduced the shares of common stock issued in connection with the exchanges to 320,064 shares. Upon maturity in November 2014, we repaid the remaining balance of the outstanding 4.25% Exchangeable Notes with an aggregate principal balance of $135.5 million. For the repayment settlement, the Company paid the noteholders a total of $135.5 million in cash for the principal amount and issued to the noteholders a total of 1,660,053 shares of our common stock for the excess exchange value. As a result of the repayment settlement, the Company exercised the equivalent proportionate amount of its capped call options and, as a result, received 404,136 shares of our common stock from the counterparties, thereby reducing the shares of common stock issued upon maturity of the 4.25% Exchangeable Notes to 1,255,917 shares. This reduced the total shares of common stock issued in connection with the exchanges and repayment settlements to 1,575,981 shares. For the respective reporting periods noted below, which preceding maturity of the 4.25% Exchangeable Notes on November 15, 2014, the per share average trading price of the Company's common stock on the NYSE was higher than the $35.93 exchange price for the 4.25% Exchangeable Notes, as presented in the table below. See Note 20 “Net Income Available to Common Stockholders Per Share of the Company” and Note 21 “Net Income Available to Common Unitholders Per Unit of the Operating Partnership” for a discussion of the impact of the 4.25% Exchangeable Notes on our diluted earnings per share and unit calculations for the years ended December 31, 2014 and 2013.
| Period Ended November 15, 2014(1) |  | Year Ended December 31, 2013
Per share average trading price of the Company's common stock | $ | 60.04 |  |  | $ | 52.12 |
_______________ (1) Represents the maturity date of the 4.25% Exchangeable Notes. Interest Expense for the 4.25% Exchangeable Notes due 2014 The unamortized discount on the 4.25% Exchangeable Notes was accreted as additional interest expense from the date of issuance through the maturity date. The following table summarizes the total interest expense attributable to the 4.25% Exchangeable Notes prior to maturity in November 2014, based on the effective interest rates, before the effect of capitalized interest, for the years ended December 31, 2014 and 2013:
| Year Ended December 31,
| 2014 |  | 2013
Contractual interest payments | $ | 5,608 |  |  | $ | 7,331 |
Amortization of discount | 3,769 |  |  | 4,427 |
Interest expense attributable to the 4.25% Exchangeable Notes | $ | 9,377 |  |  | $ | 11,758 |
Capitalized Interest and Loan Fees The following table sets forth gross interest expense reported in continuing operations, including debt discount/premium and loan cost amortization, net of capitalized interest, for the years ended December 31, 2015, 2014 and 2013. The interest expense capitalized was recorded as a cost of development and redevelopment, and increased the carrying value of undeveloped land and construction in progress.
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
| (in thousands)
Gross interest expense | $ | 109,647 |  |  | $ | 114,661 |  |  | $ | 111,238 |
Capitalized interest | (51,965 | ) |  | (47,090 | ) |  | (35,368 | )
Interest expense | $ | 57,682 |  |  | $ | 67,571 |  |  | $ | 75,870 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 + Details
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