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Secured and Unsecured Debt of the Operating Partnership | 9 Months Ended
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Sep. 30, 2024
Kilroy Realty L.P. |
Debt Instrument [Line Items] |
Secured and Unsecured Debt of the Operating Partnership | Secured and Unsecured Debt of the Operating Partnership The Company generally guarantees all of the Operating Partnership’s unsecured debt obligations, including the unsecured revolving credit facility, the unsecured term loan facility, and all of the unsecured senior notes. Unsecured Senior Notes - Registered Public Offering In January 2024, 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 an initial issuance discount of $4.5 million, on our consolidated balance sheets. The unsecured senior notes, which are scheduled to mature on January 15, 2036, require semi-annual interest payments each January and July based on a stated annual interest rate of 6.250%. The Operating Partnership may redeem the notes at any time, either in whole or in part, subject to the payment of an early redemption premium with respect to redemptions prior to October 15, 2035. On or after October 15, 2035, the Operating Partnership may redeem the notes at any time, either in whole or in part, at par. Unsecured Revolving Credit Facility and Term Loan Facilities In March 2024, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility. The amendment and restatement maintained the $1.1 billion borrowing capacity and extended the maturity date of the unsecured revolving credit facility to July 31, 2028. The following table summarizes the balance and terms of our unsecured revolving credit facility as of September 30, 2024 and December 31, 2023:
| Unsecured Revolving Credit Facility
| September 30, 2024 |  | December 31, 2023
| (in thousands)
Outstanding borrowings | $ | — |  |  | $ | — |
Remaining borrowing capacity (1) | 1,100,000 |  |  | 1,100,000 |
Total borrowing capacity (1) | $ | 1,100,000 |  |  | $ | 1,100,000 |
Interest rate (2) | 5.96 | % |  | 6.38 | %
Facility fee-annual rate (3) | 0.200%
Maturity date (4) | July 31, 2028 |  | July 31, 2025
________________________ (1)Remaining and total borrowing capacity are further reduced by the amount of our outstanding letters of credit which total approximately $5.2 million as of September 30, 2024 and December 31, 2023. We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $500.0 million under an accordion feature pursuant to the terms of the unsecured revolving credit facility. (2)Our unsecured revolving credit facility interest rate was calculated using the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% (“Adjusted SOFR”) and a margin of 0.900% based on our credit rating as of September 30, 2024 and December 31, 2023. We may be entitled to a temporary 0.01% reduction in the interest rate provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions. (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 in connection with the amendment and restatement of the unsecured revolving credit facility. As of September 30, 2024 and December 31, 2023, $13.6 million and $3.2 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the maturity date of our unsecured revolving credit facility. (4)The maturity date may be extended by two six-month periods, at the Operating Partnership’s election. The Operating Partnership intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, including to finance development and redevelopment expenditures, to fund potential acquisitions, to repay long-term debt, and to supplement cash balances in response to market conditions. In connection with amending and restating the unsecured revolving credit facility, the Operating Partnership repaid $200.0 million of its existing $520.0 million unsecured term loan facility (the “2022 Term Loan Facility”) and extended the maturity date on $200.0 million of the remaining $320.0 million principal balance by 12 months to October 3, 2025 (the “2024 Term Loan Facility”). The following table summarizes the balance and terms of our 2024 Term Loan Facility as of September 30, 2024:
| 2024 Term Loan Facility |  |
| September 30, 2024 |  |
| (in thousands)
Outstanding borrowings | $ | 200,000 |  |  |
Remaining borrowing capacity | — |  |  |
Total borrowing capacity (1) | $ | 200,000 |  |  |
Interest rate (2) | 6.16 | % |  |
Maturity date (3) | October 3, 2025 |  |
____________________ (1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $130.0 million as of September 30, 2024, under an accordion feature pursuant to the terms of the 2024 Term Loan Facility. (2)Our 2024 Term Loan Facility interest rate was calculated using Adjusted SOFR plus a margin of 0.950% based on our credit rating as of September 30, 2024. Additionally, we incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility. As of September 30, 2024, $1.6 million of unamortized deferred financing costs, inclusive of unamortized initial issuance costs transferred from the 2022 Term Loan Facility, remained to be amortized through the maturity date of the 2024 Term Loan Facility. (3)The maturity date may be extended by two 12-month periods, at the Operating Partnership’s election. In September 2024, the Operating Partnership repaid the remaining $120.0 million outstanding on its 2022 Term Loan Facility. The following table summarizes the balance and terms of our 2022 Term Loan Facility as of December 31, 2023:
| 2022 Term Loan Facility
| December 31, 2023
| (in thousands)
Outstanding borrowings | $ | 520,000 |
Remaining borrowing capacity | — |
Total borrowing capacity | $ | 520,000 |
Interest rate (1) | 6.41 | %
Undrawn facility fee-annual rate (2) | 0.200%
Maturity date | October 3, 2024
____________________ (1)Our 2022 Term Loan Facility interest rate was calculated using Adjusted SOFR plus a margin of 0.950% based on our credit rating as of December 31, 2023. (2)Our undrawn facility fee was paid on a quarterly basis and was calculated based on the remaining borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2023, $2.3 million of unamortized deferred financing costs remained to be amortized through the maturity date of our 2022 Term Loan Facility. Debt Covenants and Restrictions The unsecured revolving credit facility, unsecured term loan facility, the unsecured senior notes, including the private placement 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 maximum ratio of secured debt to total asset value, 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 were in compliance with all of our debt covenants as of September 30, 2024. Debt Maturities The following table summarizes the stated debt maturities and scheduled amortization payments for all outstanding debt as of September 30, 2024:
Year | (in thousands)
Remaining 2024 | $ | 405,235 |
2025 (1) | 606,246 |
2026 | 401,317 |
2027 | 249,125 |
2028 | 400,000 |
2029 | 475,000 |
Thereafter | 2,500,000 |
Total aggregate principal value | 5,036,923 |
Less: unamortized net discounts and deferred financing costs (2) | (35,767) |
Total debt, net | $ | 5,001,156 |
________________________ (1)Includes the $200.0 million outstanding as of September 30, 2024 on the 2024 Term Loan Facility, for which the Company has two 12-month extension options. (2)Includes $27.0 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes, and secured debt and $8.8 million of unamortized discounts for the unsecured senior notes. Excludes unamortized deferred financing costs on the unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets. Capitalized Interest and Loan Fees The following table sets forth gross interest expense, including debt discount and deferred financing cost amortization, net of capitalized interest, for the three and nine months ended September 30, 2024 and 2023. 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.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (in thousands)
Gross interest expense | $ | 57,235 |  |  | $ | 49,893 |  |  | $ | 173,191 |  |  | $ | 139,148 |
Capitalized interest and deferred financing costs | (20,827) |  |  | (20,056) |  |  | (61,149) |  |  | (57,257) |
Interest expense | $ | 36,408 |  |  | $ | 29,837 |  |  | $ | 112,042 |  |  | $ | 81,891 |

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