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Acquisitions

12 Months Ended

Dec. 31, 2019

Operating Property Acquisitions

During the year ended December 31, 2019, we acquired the 19-building creative office campus listed below in one transaction from an unrelated third party. During the year ended December 31, 2018, we acquired the four operating properties listed below in two transactions from unrelated third parties.



Property	Date of Acquisition	Number of Buildings	Rentable Square Feet (unaudited)	Occupancy as of December 31, 2019 (unaudited)		Purchase Price (in millions) ⁽¹⁾
2019 Acquisitions
3101-3243 La Cienega Boulevard, Culver City, CA⁽²⁾	October 15, 2019	19	151,908	100.0	%	$	186.0

2018 Acquisitions
345, 347 & 349 Oyster Point Boulevard, South San Francisco, CA	January 31, 2018	3	145,530	100.0	%	$	111.0
345 Brannan Street, San Francisco, CA ⁽³⁾	December 21, 2018	1	110,050	99.7	%	146.0
Total ⁽⁴⁾		4	255,580			$	257.0

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(1)	Excludes acquisition-related costs.


(2)	The results of operations for the properties acquired during 2019 contributed $3.7 million to revenue and a net loss of $0.1 million primarily due to a write-off of lease-related intangible assets as a result of an early lease termination.


(3)	At December 31, 2018, this property was temporarily being held in a separate VIE to facilitate potential Section 1031 Exchanges. During January 2019, the Company completed the Section 1031 Exchange related to this VIE.


(4)	The results of operations for the properties acquired during 2018 contributed $8.0 million and $1.7 million to revenue and net income, respectively, for the year ended December 31, 2018.

The related assets, liabilities and results of operations of the acquired properties are included in the consolidated financial statements as of the date of acquisition. The following table summarizes the estimated fair values of the assets and liabilities assumed at the respective acquisition dates for our 2019 and 2018 operating property acquisitions, respectively:



	Total 2019 Operating Property Acquisitions ⁽¹⁾		Total 2018 Operating Property Acquisitions ⁽²⁾
Assets
Land and improvements	$	150,561	$	80,269
Buildings and improvements ⁽³⁾	30,932		172,059
Deferred leasing costs and acquisition-related intangible assets ⁽⁴⁾	12,063		13,593
Right of use ground lease asset ⁽⁵⁾	13,334		—
Total assets acquired	$	206,890	$	265,921
Liabilities
Acquisition-related intangible liabilities ⁽⁶⁾	$	9,950	$	8,921
Ground lease liability ⁽⁵⁾	10,940		—
Total liabilities assumed	$	20,890	$	8,921
Net assets and liabilities acquired	$	186,000	$	257,000

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(1)	The purchase price of the acquisition completed during the year ended December 31, 2019 was less than 10% of the Company’s total assets as of December 31, 2018.


(2)	The purchase price of the two acquisitions completed during the year ended December 31, 2018 were individually less than 5% and in aggregate less than 10% of the Company’s total assets as of December 31, 2017.


(3)	Represents buildings, building improvements and tenant improvements.

(4)

For the 2019 operating property acquisition, represents in-place leases (approximately $9.2 million with a weighted average amortization period of 3.3 years) and leasing commissions (approximately $2.9 million with a weighted average amortization period of 3.5 years). For the 2018 operating property acquisitions, represents in-place leases (approximately $11.8 million with a weighted average amortization period of 1.3 years) and leasing commissions (approximately $1.8 million with a weighted average amortization period of 6.6 years).

(5)

We evaluated the ground lease assumed in connection with the 2019 operating property acquisition and concluded it met the criteria to be classified as an operating lease. The discount rate used in determining the present value of the minimum future lease payments was 4.79%. The right of use asset ground lease asset is equal to the ground lease liability adjusted for above and below market intangibles and deferred leasing costs. Refer to Note 18 “Commitments and Contingencies” for further discussion of the Company's ground lease obligations.


(6)	For the 2019 operating property acquisition, represents below-market leases (approximately $10.0 million with a weighted average amortization period of 3.5 years). For the 2018 operating property acquisitions, represents below-market leases (approximately $8.9 million with a weighted average amortization period of 9.8 years).

Development Project Acquisitions

During the year ended December 31, 2019, we acquired the following development sites in two transactions from unrelated third parties. The acquisitions were funded from various sources of liquidity including proceeds from the Company’s unsecured revolving credit facility, the issuance of debt and the settlement of the Company’s 2018 forward equity sales agreements. During the year ended December 31, 2018, we acquired a development site adjacent to the three operating properties we acquired in January 2018, from an unrelated third party. The acquisition was funded with proceeds from the Company’s unsecured revolving credit facility and the Company’s at-the-market stock offering program.



Project	Date of Acquisition	City/Submarket	Purchase Price (in millions)
2019 Acquisitions
1335 Broadway & 901 Park Boulevard, San Diego, CA⁽¹⁾	August 19, 2019	East Village	$	40.0
Seattle CBD Project ⁽²⁾	December 12, 2019	Seattle CBD	133.0
Total 2019 Acquisitions			$	173.0

2018 Acquisitions
Kilroy Oyster Point⁽³⁾	June 1, 2018	South San Francisco	$	308.2
Total 2018 Acquisitions			$	308.2

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(1)

Excludes acquisition-related costs. In connection with this acquisition, we also recorded $4.0 million in accrued liabilities and environmental remediation liabilities at the date of acquisition, which are not included in the purchase price above. As of December 31, 2019, the purchase price and our current estimate of assumed liabilities are included in undeveloped land and construction in progress and the assumed liabilities are included in accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

(2)

Excludes acquisition-related costs. In connection with this acquisition, we also recorded $6.3 million in accrued liabilities and environmental remediation liabilities at the date of acquisition, which are not included in the purchase price above. As of December 31, 2019, the purchase price and our current estimate of assumed liabilities are included in undeveloped land and construction in progress and the assumed liabilities are included in accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets. In addition, as of December 31, 2019, the Company had $10.0 million in restricted cash, which is excluded from the purchase price above, related to this acquisition which may be payable to the seller only if certain events occur within three years following the date of acquisition.

(3)

Excludes acquisition-related costs. In connection with this acquisition, we also recorded $40.6 million in accrued liabilities and environmental remediation liabilities at the date of acquisition, which are not included in the purchase price above. As of December 31, 2018, the purchase price and our current estimate of assumed liabilities are included in undeveloped land and construction in progress and the assumed liabilities are included in accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.

In addition to the acquisitions listed above, during 2019, we acquired an additional land parcel for an existing development project for $99.5 million.

Acquisition Costs

During the years ended December 31, 2019, 2018, and 2017, we capitalized $1.6 million, $3.8 million, and $4.6 million, respectively, of acquisition costs.