Jonna Galen

Jenna Galen inquired about the UCSF anchor lease at Kilroy Oyster Point Phase Two (KOP2), specifically regarding its late occupancy commencement, potential build-out requirements, and the timeline for converting KOP2 leases to occupancy. She also asked for clarification on same-store NOI impacts from KOP2 and other capital recycling activities.

Answer

Angela Aman, CEO, explained that the UCSF lease commencement timeline is due to the building being in shell condition and multiple user groups requiring space planning and build-out. She noted the team is focused on accelerating occupancy. Regarding same-store NOI, Angela clarified KOP2 enters the stabilized portfolio in January 2026 but not the same-property pool until 2028, and no other material changes are expected from the $300 million operating property dispositions.

Jenna Galen inquired about the University of California, San Francisco (UCSF) anchor lease at Kilroy Oyster Point Phase Two (KOP2), specifically the reasons for its late commencement, such as significant build-out requirements. She also sought clarification on the impact of acquisitions and dispositions on same-property NOI, beyond KOP2's inclusion in the stabilized portfolio.

Answer

CEO Angela Aman explained that the UCSF lease involves a brand-new development in shell condition with multiple user groups, requiring time for space planning and build-out, and the team is focused on accelerating occupancy. Regarding same-property NOI, Ms. Aman clarified that KOP2 enters the same-property pool in 2028, not 2026, and no other material changes from the $300 million operating property dispositions are expected to impact the same-property pool.

Jonna Galen of Bank of America asked for more details on the planned $150 million to $200 million in Q2 asset dispositions, including timing, potential cap rates, and whether the company is actively marketing assets beyond its initial $400 million annual target.

Answer

CEO William J. McMorrow stated that the Q2 dispositions are well advanced and expected to close in late June but declined to comment on cap rates until the transactions are complete. He highlighted strong global capital demand for multifamily assets. President Matt Windisch added that a portion of the dispositions are European assets, where a more favorable interest rate environment could result in attractive cap rates, referencing the recent successful 4.1% refinancing of their Irish apartment portfolio.