Kilroy Pauses Another Project, Says Now Is The Time To Be Patient
Increasingly uncertain economic conditions have Kilroy Realty Corp. battening down the hatches for yet another quarter, as the company has paused another new development.
In addition to two Southern California projects the company previously announced it wouldn't start work on, Kilroy tacked another project to the waiting list: Austin’s Stadium Tower.
Kilroy acquired the fully entitled office site earlier this year for $40M. The company had planned to start construction as early as the middle of this year but now intends to hold off on construction “until the economy gives us more confidence or we pre-lease a substantial portion of the project," Kilroy Realty Corp. CEO John Kilroy said on the company's third-quarter earnings call Wednesday.
Kilroy is expanding in the life sciences industry but has traditionally been an office landlord on the West Coast, including in its hometown Los Angeles and San Francisco. Both cities have seen a big drop-off in office occupancy as tenants around the country re-evaluate their workspace needs.
The company boasts a 91% occupancy and 93% lease rate across its portfolio, and Kilroy’s net income in the third quarter was $86.6M, up from $53.5M the same time last year.
But its net income through the third quarter was $200M, about a third of the $603.7M the company made in the same period the year prior.
Kilroy signed 390K SF of new leases in the third quarter at an average lease term of eight years, executives said during the earnings call. Tenants signing these leases run across a number of industries, including major broadcasting companies, life sciences and financial services.
The economy hasn't given CRE confidence lately.
Despite the positive leasing news, the overall sentiment of the call was that of waiting and watching as the cloud over the economy moves on. As such, Kilroy indicated that it wouldn't sell properties in the near future.
Last quarter, Kilroy said it planned to sell anywhere from $200M to $500M worth of property but also said it wouldn’t do so unless the prices were right. That isn't happening yet.
“We are pleased to close the sale of 3130 Wilshire,” Kilroy said, referring to the sale of a 46-year-old office building in West LA that it sold for $48M in gross profits.
And yet, Kilroy said, “As we alluded to last quarter, we think it's prudent to let the capital markets stabilize before selling additional properties."