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Secured and Unsecured Debt of the Operating Partnership
6 Months Ended
Jun. 30, 2020
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

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 - Private Placement

On April 28, 2020, the Operating Partnership entered into a Note Purchase Agreement in connection with the issuance and sale of $350.0 million principal amount of the Operating Partnership’s 4.27% Senior Notes due January 31, 2031 (the “Notes”), pursuant to a private placement. The Notes mature on their due date, unless earlier redeemed or prepaid pursuant to the terms of the Note Purchase Agreement. Interest on the Notes is payable semi-annually in arrears on April 18 and October 18 of each year beginning October 18, 2020.

The Operating Partnership may, at its option and upon notice to the purchasers of the Notes, prepay at any time all, or from time to time, any part of the principal amount then outstanding (in an amount not less than 5% of the aggregate principal amount then outstanding in the case of a partial prepayment), at 100% of the principal amount so prepaid, plus the make-whole amount determined for the prepayment date with respect to such principal amount as set forth in the Note Purchase Agreement.

In connection with the issuance of the Notes, the Company entered into an agreement whereby it will guarantee the payment by the Operating Partnership of all amounts due with respect to the Notes and the performance by the Operating Partnership of its obligations under the Note Purchase Agreement.

Unsecured Revolving Credit Facility and Term Loan Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of June 30, 2020 and December 31, 2019:
 
June 30, 2020
 
December 31, 2019
 
(in thousands)
Outstanding borrowings
$

 
$
245,000

Remaining borrowing capacity 
750,000

 
505,000

Total borrowing capacity (1)
$
750,000

 
$
750,000

Interest rate (2)
1.16
%
 
2.76
%
Facility fee-annual rate (3)
0.200%
Maturity date
July 2022
________________________
(1)
We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $600.0 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 the contractual rate of LIBOR plus 1.000% as of June 30, 2020 and December 31, 2019.
(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 June 30, 2020 and December 31, 2019, $2.7 million and $3.4 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.

The Company intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions, to potentially repay long-term debt and to supplement cash balances given uncertainties and volatility in market conditions.

The following table summarizes the balance and terms of our unsecured term loan facility as of June 30, 2020 and December 31, 2019:
 
June 30, 2020
 
December 31, 2019
 
(in thousands)
Outstanding borrowings
$
150,000

 
$
150,000

Remaining borrowing capacity

 

Total borrowing capacity (1)
$
150,000

 
$
150,000

Interest rate (2)
1.28
%
 
2.85
%
Undrawn facility fee-annual rate
0.200%
Maturity date
July 2022
________________________
(1)
As of June 30, 2020 and December 31, 2019, $0.5 million and $0.7 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.
(2)
Our unsecured term loan facility interest rate was calculated based on the contractual rate of LIBOR plus 1.100% as of June 30, 2020 and December 31, 2019.

Debt Covenants and Restrictions

The unsecured revolving credit facility, the unsecured term loan facility, the unsecured senior notes, the Series A and B Notes due 2026, Series A and B Notes due 2027 and 2029, and Notes due 2031 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 June 30, 2020.

Debt Maturities

The following table summarizes the stated debt maturities and scheduled amortization payments as of June 30, 2020:
Year
(in thousands) 
Remaining 2020
$
2,594

2021
5,342

2022
155,554

2023
305,775

2024
431,006

2025
406,245

Thereafter
2,375,442

Total aggregate principal value (1)
$
3,681,958

________________________ 
(1)
Includes gross principal balance of outstanding debt before the effect of the following at June 30, 2020: $20.7 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt and $6.0 million of unamortized discounts for the unsecured senior notes.

Capitalized Interest and Loan Fees

The following table sets forth gross interest expense, including debt discount/premium and deferred financing cost amortization, net of capitalized interest, for the three and six months ended June 30, 2020 and 2019. The interest expense capitalized was recorded as a cost of development and increased the carrying value of undeveloped land and construction in progress.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
(in thousands)
Gross interest expense
$
36,400

 
$
32,607

 
$
72,262

 
$
63,287

Capitalized interest and deferred financing costs
(20,516
)
 
(20,880
)
 
(41,934
)
 
(40,317
)
Interest expense
$
15,884

 
$
11,727

 
$
30,328

 
$
22,970