Good day and welcome to the Q4 2019 Kilroy Realty Corporation Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tyler Rose, Executive Vice President and Chief Financial Officer. Please go ahead.

Good morning everyone. Thank you for joining us. On the call with me today are John Kilroy and several other members of our senior management team who are all available for Q&A. At the outset, I need to say that some of the information we will be discussing is forward-looking in nature. Please refer to our supplemental package for a statement regarding the forward-looking information in this call and in the supplemental. This call is being telecast live on our website and will be available for replay for the next eight days both by phone and over the Internet. Our earnings release and supplemental package have been filed on a Form 8-K with the SEC and both are also available on our website. John will start the call with market color, our 2019 highlights, a review of the fourth quarter, and our objectives for 2020. I'll provide financial highlights and review our initial 2020 earnings guidance. Then we'll be happy to take your questions. John?

Thanks Tyler. Hello everybody. Thank you for joining us today. Conditions in our West Coast markets remain very strong. From San Diego to Seattle, our submarkets have not only developed into central hubs for innovators in technology, media and life science, but are also benefiting from broad-based economic growth. Unemployment rates are at record lows. San Francisco, Seattle, and San Diego fourth quarter unemployment rates dropped below 3% and L.A. came in at just under 4%. Public market returns for tech, health care, and biotech have surpassed other industries by roughly two times over the past decade. And just last week, Apple, Amazon, and Microsoft, three of our major tenants and three of the four largest companies in the world, have all reported record earnings. These companies all unveiled extraordinary plans to develop or to continue to shape our lifestyle with their products. This growth will drive increased demand for modern work environments in our markets. Real estate capital markets remain wide open as equity investors continue to search for growth and debt investors continue to search for yield. 2019 VC funding was the second highest year over the past decade and our West Coast markets accounted for 55% of that funding. In terms of the investment market high quality well-located assets in our markets continue to command strong valuations as we have seen pricing in the $1,500 per square foot range in San Francisco $1,100 per square foot in Seattle and Los Angeles and over $700 per square foot for older product in San Diego. This backdrop has resulted in real estate conditions that are amongst the strongest we have seen with very limited supply and solid demand driving declining vacancy rates and record high rents. While we don't have a crystal ball, we see this operating environment continuing…

Thanks John. FFO was $1 per share in the fourth quarter and $3.91 for the year. Fourth quarter FFO largely benefited from additional occupancy and rents commitment at the Exchange and included $0.015 of onetime items. Turning to same-store results, cash NOI grew 4.5% and GAAP NOI was up 4.8% in the fourth quarter. Same-store cash NOI growth was driven by higher rental rates and cash commencement of several large leases. For the year, cash NOI came in at negative 0.6% largely due to first half expirations. On a GAAP basis, full year NOI grew 5.3% rising in step with strong rent increases. We entered 2020 with about 700,000 square feet of lease expirations, approximately 5.5% of the portfolio. The embedded rents in our 2020 expirations are roughly 20% below market. Across our portfolio, we estimate that weighted average in-place rents are 21% below market. By region, we believe in-place rents are approximately 30% below market in San Francisco, 13% below market in Los Angeles, 13% below market in Seattle and 9% below market in San Diego. At year-end 2019 our stabilized portfolio was 94.6% occupied in line with guidance and 97% leased. Moving to the balance sheet, we completed several transactions since the end of the third quarter. First as John noted, we closed on the previously announced sale of 2211 Michelson for proceeds of approximately $116 million. Second, we sold $160 million of shares of equity under our ATM issued on a forward basis increasing our total undrawn forward equity sales to approximately $250 million. Third, we drew down approximately $315 million on our bank line to fund our recent acquisitions. Our overall financial position remains sound. In addition to the $1 billion of unused debt capacity under our credit facility, we have a large unencumbered portfolio with…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Nick Yulico of Scotiabank. Please go ahead.

Thanks. You know, just in terms of the guidance on -- Tyler, I was hoping you can just expand on some of the assumptions driving the cash same-store NOI growth this year picking up to about 7% of midpoint versus last year?

Yes, a lot of it is the free rent burn off that we had in the numbers in the free rent in 2019. So you can see the difference between cash same-store and GAAP same-store is mainly the free rent burn off.

Okay. And then in terms of, I guess, San Francisco leasing market any latest thoughts you can share on demand in the market from bigger users as we're thinking about Flower Mart eventually starting? And can you just remind us there? I mean is that still an earliest start possible there is 2021?

Late 2021.

Good morning, Nick. This is Rob Paratte. I'll address the San Francisco market in terms of your question. The market is still extremely dynamic and vibrant. I mean we're tracking over 9 million square feet of demand right now in San Francisco and that's ranging in a lot of size ranges. But there is a healthy appetite in the, I'd say, 300,000 to greater market right now. There are some large transactions that are close to being announced that have not yet been announced and we think we're poised really well. There's really no new product to compete with Flower Mart. And the floor plates the design et cetera are going to be very attractive. And the last thing I'd say as we've said on multiple calls being on Brannan Street particularly with the new central subway system there is really going to be an important factor in the whole development of the south of market and specifically Central SOMA area. So we're really pleased given everything that's going on this year with elections and that kind of thing demand has remained strong and continues to be pretty much unabated.

Okay. That's helpful. Just one last question is there was some news that came out about the GM Cruise space you have at Brannan where I know when they signed that deal that's a great deal you guys got higher rents. I think the highest rents in the market when it was signed and I guess now there is a news that they're subleasing a portion of that space to Nortel. Can you just tell us what's going on there? What drove that decision?

Yes. I won't go into specific transactions and that sort of thing. But it's one -- they basically, I guess, I would say somewhat overshot the estimate for need for space. It's a very small component of the total 375,000 square feet that they've leased and they have a lot of activity on it. So without getting into specific comments on it that's what's going on. But it's very active in terms of demand for the space.

And just in terms of what type of rent you think they may get on the sublease versus where the GM Cruise deal was done?

I can't predict that. I think if you look at sub landlords throughout the city right now I think they're trying to figure out where the market is for sublease space and what kind of rents they can achieve and they're trying to maximize and do what we've done actually on a direct basis which sometimes is hard to do.

Okay. Appreciate it. Thank you.

Our next question comes from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.

Hi. Good morning. This is Elvis Rodriguez for Jamie. Can you talk a little bit about the Prop B risks and the potential there for future phases at the Flower Mart?

Yes, hang on. Tyler if you got that -- we're in two different locations and I don't have my notes on that. You -- if you got that Rob?

Sure. This is Rob Paratte again. So the way we look at Prop B, I won't comment on good or bad policy just in terms of government. But the way we look at Prop B is that it does accelerate development in the Central SOMA area. It long-term may have an impact on the ability of landlords to build new space in the city and get to the size that we're talking about at Flower Mart for existing property owners and development sites that have their Prop M allocation it's going to bode well for rental rates and asking rates because it's just going to make San Francisco tougher to develop in.

Okay. Thank you. And with your portfolio -- your development portfolio currently 89% pre-leased, how do you feel going spec on that project at the end of 2021? Or do you still expect to not start with on…

If we could start right today, we consider starting it. But I've always said I think we're going to do some substantial pre-leasing before we start it. It's two years off before we can -- in essence before we can start, a lot's going to happen between now and then. We'll be taking a look obviously at the macro environment all the local demand supply situations and so forth. So we don't need to make a decision right now but the market is very strong right now for big modern space. The -- you're going to see some deals that are going to be done in this city at near $100 triple net.

Great. Just one more for me. And you made some comments on split roll has that changed any conversations with tenants on leasing and any new leases going forward?

Hasn't come up at all.

Okay. Thank you very much.

Our next question comes from Craig Mailman with KeyBanc Capital Markets. Please go ahead.

Thanks. Tyler could you just talk a little bit about what's going into the occupancy decline assumption? I think last call you guys said you have one expiration over 100,000 square feet in 2020. Just give a little bit of color on what you guys are assuming or if it's a known move out or just lower retention expectation?

Yeah. No it's what we had mentioned last time, which is we have a lease in Long Beach that rolls in the fourth quarter. So we're assuming at this point that it won't be released and so occupancy dips in the fourth quarter. It will also by the way dip a little bit in the first quarter because we have a move out in Seattle, which has already been leased. So it will -- the occupancy will come back up I think in the second quarter. So it will be a little bumpy but the reason that our guidance is down a point is from that lease in Long Beach.

That's helpful. And then John your commentary it sounds like the Flower Mart is definitely moving to a new site. I know it's not a near-term start here, but can you just talk about where your yield expectation is going on that project now that rents moving to $100 a square foot…

Well, we're not -- Craig we're not performing $100 a square foot. So I want to make that clear. But on the other hand I wouldn't mind getting that. In terms of yields, if you think about it we've had to buy another site. We're improving that. We always had to move the Flower Mart to a temporary location and bring them back. So the net cost is an increase. On the other hand at the Flower Mart, the development project between fifth and sixth on Brannan we now have square footage that would have been the return of the Flower Mart that's now office and lease at a yield that is probably 15, 20 times higher than what we would have gotten. We have a significant reduction in cost because we now don't have all the 300 or 400 parking places for the -- which would have been required for the Flower Mart that are subterranean and all the truck access ramps and so forth that had to go down below. So when you look at everything in terms of where our performance is I think it's going to be right there where you've seen everything else that's come on stream over this cycle and that we have underway right now sort of that high seven, low eight initial ROC unlevered and pretty strong GAAP rents.

That's helpful. And then just -- I apologize if I missed it. Did you give any expected timing on the start in Seattle in the new mixed-use site?

No. Well, I think what I said is it's going to be two years we have to go through. Seattle is a much simpler place than San Francisco. You know what you could build but you still go through a process that takes a little over a year, but you have a predictable outcome. We're working with the city to address how these sites that are all next door to one another will look and what the street feel will be and I think it's going to be pretty exciting. So I'm anticipating that we could be underway in a couple of years. And when we think about that, site putting aside the little historic building, which is kind of a neat little building, we have -- I love this project. It has two office buildings that total about 900,000 square feet that can be phased. And it has a residential site that I don't think we will develop I think we'll probably -- we might venture it or we might sell it we'll see. But we want to plan it and make sure it's planned sensibly with regards to the adjacent properties that we own. So it's just a fantastic site. We're really excited that this is one that I think between the Flower Mart and Vance property, we probably have the two best development sites on the West Coast if not the country.

That's helpful. And then just one more quick one for Tyler. Just you guys have been pretty successful at doing forward on the ATM, but given kind of the upward momentum in the stock price. What's the appetite to kind of try to do just spot ATM issuance versus continuing to do forwards?

Well, when we do our ATMS, we look at it what the cash needs are at the time. So, the forwards are slightly more expensive than just doing a regular way ATM. So, it's really a decision at the time -- every time we do a transaction for the cash needs. As I mentioned, we'll be drawing down $90 million in the first quarter and the remaining $160 million in the fourth quarter of the existing ATM. But we haven't decided to do any more ATM at this point anyway. So, that's a decision for the future.

Great. Thank you.

Our next question comes from Manny Korchman with Citi. Please go ahead.

Hey. Thanks. John, just if we think about Seattle and the demand there for both your new development and some others. Can you just talk about what the demand pipeline looks like from tenants in Seattle?

Yeah. Hi, Manny. This is Rob Paratte again. Seattle has a very similar I guess story to San Francisco. And in fact some ways I think almost better, because it's got more room to go. Clearly big tech has found Seattle and is expanding there in specific markets, those being South Lake Union and Bellevue and parts of downtown. And I'd say parts of downtown because you can subdivide downtown into what used to be traditional financial district and then more creative office space. And so with -- as John was talking about the Vance project, it is a really exciting project that will be a modern office next-generation building, which currently does not exist downtown. There are a lot of high rises, but this will be much more in line with what you've seen Kilroy do here in San Francisco and elsewhere. So demand is very strong. It's 7.2 million feet in Seattle right now. There are a lot of tenants probably more than I've seen over 100,000 feet in search of space right now. So, we're very excited about it, and really can't wait to get our design base so we can start really getting out into the market.

Thanks, Rob. And Tyler, if we just think about your fourth quarter results. I think you said there was $0.015 of one-time items in there. What else drove the beat to sort of your previous guidance?

It's mainly the Exchange came online earlier than anticipated from a GAAP perspective about $0.03 of that.

Okay. And then Tyler to you again, on Prop 13, I think previously you had given a range of $0.02 to $0.04. What's changed that you're less comfortable or uncomfortable with giving a range today?

Yeah. I mean it's still in that same general ballpark, but there just seems more and more uncertainty. There's drafting issues in the current proposal that are uncertain about how small businesses are dealt with. There's uncertainties about how the assessors are going to value the properties and when they're going to value the properties. So, it just seems more and more uncertain almost every day. So it's harder for us to value.

Thanks everyone.

Our next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Hey, thanks. Can you just talk about the dispositions you guys are targeting for this year? Are there any specific properties you can talk about that are up for disposition? And I guess how should we think about timing and pricing on those sales?

Well, in terms of -- I'll answer the first part. This is John. We always have a handful of projects that we look at. We evaluate everything. We have not yet made a decision on what would constitute all $300 million if we go that high. We have a number of projects that we have identified, but we don't like to get identified internally. But for a lot of reasons we don't like to get too specific until we have something that's transacted. It can impact people here at Kilroy. It can impact tenants. It can impact other things going on with cities. So, I'm not going to get specific. In terms of the timing Tyler, you want to address that?

Yeah. We've modeled effectively mid-year for the proceeds from the dispositions.

All right. That's helpful. And maybe if I can ask just a little bit differently. Would you characterize the sales as more non-core or maybe more harvesting value in properties that might be kind of stabilized at a high level of NOI or a pretty even mix?

Yeah. We look at both, and there might be some of both. One of the dilemmas right now is with the cost of land and with the cost of replacing assets. Unless something is in a market that you really don't care to be in any longer or a building that perhaps isn't going to see continuously better days, it's really hard to pull a trigger because rents have gone up so much and you want to harvest that. And if you have a new building, for an example, some of the buildings we've recently completed in the cycle, while you can sell them and make a profit the trouble is you can't replace some of these things. So, it gets harder to find which ones to identify which buildings you want to sell. But we go through a rigorous process and we're going through that right now. More to come.

All right. That's very helpful. And maybe for John or Rob. You guys have clearly done a great job of backfilling some move outs you've had in the last couple of years and I know it's a small part of the portfolio but it seems as though there's still some vacancy in the I-15 Corridor. Have you guys seen any of the incremental demand in the San Diego market filter out to that submarket? Or is it kind of still focused more in Del Mar, UTC and Downtown at this point?

No, Blaine it definitely has – this is Rob. It has filtered into the I-15 Corridor and we have some activity that I can't get specific on but stay tuned with what's going on. And with the renovations we've done and that sort of thing it's become a very attractive submarket. And I guess the other thing I'd say is that so much tech has started to come into San Diego. Big Tech is going into San Diego and scale and they are looking at various opportunities in different parts of the county. So we see demand as being very strong and getting stronger.

Wait till next quarter.

Okay. Good to hear. Thanks.

Our next question comes from John Guinee with Stifel. Please go ahead.

Great. Thank you. Just more of a curiosity question. In Seattle with the 900,000 square foot office building, 600,000 square feet of multifamily, looks like about a 25 FAR project and you're clearly not building low-rise there. What's going to be – what's the cost all in per unit? And what's the cost all in per square foot when you start out with that sort of land basis?

John, I don't have those numbers. We went through our whole DSP, which is our process to approve a project and so forth. I just don't have those numbers on my head. I can get back to you with them. But do you have those Michelle?

Yes. John I think on a full project on the office basis, we're modeling roughly $700 to $800 per square foot in terms of total estimated investment.

Great. And where do you get to sort of uncomfortable on a per square foot when you're building in these markets? Have you gotten close? Or do you think that the rents are so strong and the tenants or so price insensitive that they'll just pay up for quality product?

Yes. I kind of – I'm one of those believers that you want to get a good strong yield upfront and you want to have a valuation when you capitalize that people that can be supported. There have been some things that have traded that we've looked at and just said you got to have too many things go right to get to a place where the cost is a little high, the yields are a little thin and why do that? I guess, what I'm trying to say is John, we're not at that point in any of the projects that we have on the books. We're at a point where I think our delivery cost is less – well less than what things you're trading for and our yields are projected to be pretty strong like the ones I've historically discussed. So all I can talk about is what we have and I feel very comfortable about our underwriting and what our delivery prices are in all of our markets. You're seeing Seattle now, trade, buildings in the $1100 range for quality projects and we took a look at all of those. Some we didn't like for various reasons. And as Michelle said, we've got one of the best sites in town with two buildings that total 900,000 square feet, two different office buildings, not one 900,000. And as she pointed out with our land costs, with highest quality Kilroy type standards, the best in sustainability, all the great stuff that we do in our buildings and a big amount of projected increase in construction costs and being in a $700 or $800, I mean that's pretty spectacular.

And then second question along the same lines. Culver City, you're paid $1200 a foot for a bunch of 8,000 square foot buildings, that's clearly not the end game. It's just a covered land play. Are you at liberty to talk about what the ultimate entitlement you expect in Culver City?

Not in a political year but you can imagine it can accommodate. We have – what do we have there seven, eight acres?

Yes.

And if you think about the Flower Mart, we have seven acres, okay? And I'm not saying it's going to be exactly the same size of the Flower Mart but it's going to be a lot more than what's there, but I just don't want to become a lightning rod for any political agendas.

Thank you. Have a good day.

Thank you.

Our next question comes from John Kim with BMO Capital Markets. Please go ahead.

Thank you. With GM Cruise, your second largest tenant now, can you remind us if this lease is now fully contributing to FFO and cash same-store this year?

GM Cruise isn't our second largest tenant. Where are they Michelle or Tyler? They're way down the line.

Fully contributing as of the fourth quarter -- last fourth quarter.

Okay. So the Nortel sublease does not impact that at all?

That's right.

On split roll, I realize it's hard to assess the earnings impact, given the moving pieces. But can you provide an estimate as to how much of the exiting $7 million to $8 million in real estate taxes you get reimbursed today from tenant?

Well one way to answer to that is about 50% of our leases are triple net, but that's not an exact number. I don't have any further details on that question.

Okay. And any thoughts on Prop 10? I realize that multifamily has not been a big part of your portfolio, but any views on the likelihood of this passing? And how this would impact your mixed-use developments going forward?

Prop, what?

Prop 10.

This is Eliott Trencher. While we're not going to comment on whether it passes or not given the age of our product which is pretty new, we don't think it will have a material impact on us.

Our next question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Thanks. Just in terms of sublet in general, are there any other properties currently in the portfolio where you're maybe seeing sublet activity? Or just what a sublet activity in your markets look like and maybe within your portfolio specifically?

Sure. Steve, this is Rob. How are you doing? In our portfolio, we've already talked about the Cruise potential sublease. Dropbox has some space on the market at The Exchange. Its short-term space and I understand they've got activity on that. If I can just take a step back on sublease space in general in San Francisco, there are three things that I'm looking at the numbers ticked up. But really you've got three factors that affect how quickly that will be absorbed. One is the rate expectations of the sub landlords. Secondly, seven out of the 12 sublease spaces in San Francisco right now have a term of less than 24 months. And then thirdly given the demand of over nine million square feet sublease space as we've said on multiple calls that is built in what I would call next-generation or tech-friendly sort of configuration, the sublease space is manageable given all the demand we've got. So, we have -- now and then there are conversations where there are small pockets, but nothing meaningful in the portfolio in San Francisco. And I would say in general on the West Coast, we haven't seen a lot of subleasing.

Okay. And then secondly, just up in Seattle, I know the big focus has generally been more in South Lake Union, but you do own two buildings in Bellevue and there seems to be some shift of Amazon's activity over to the east side. Just curious John or anybody else, how you're sort of looking at Bellevue and potential land opportunities in that market?

Yes. We've looked at all of them. And there are obviously quite a few people playing in Bellevue. We think it's a great market. We're hitting all-time high rental rates there now with our recent leasing. One thing about Bellevue is you can build a lot of space there. And you're going to see a lot of space built and most of it is spoken for, but some of it is not. And you're going to see some projects come on stream that I think are at inferior locations. And I think they'll be pushing hard to get tenants. And I just think the dynamics for us we're much more compelling as an example advance. So, I'm not in any way shape or form suggesting that we've lost enthusiasm for Bellevue. It kind of goes back to John, I think it was John Guinee's question at what point do you get uncomfortable? I look at what can be delivered. What's starting spec? What costs are you going to have for a completed project? What rental rates do you have to get? And I'm not as enthused currently about Bellevue spec development as I am about Seattle.

Got it. Thanks.

The next question will come from Dave Rodgers with Baird. Please go ahead.

Yes. Tyler, maybe a question for you with some help from John, but as you look at 2019, I think you guys came in relatively low on the dispositions relative to guidance and acquisitions kind of came in above, you have issued some on the forward ATM and thanks for the details on the quarters. But I guess, I'm wondering between the two years '19 and '20, it seems like you probably have issued or monetized fewer assets than maybe you thought a year ago. So, one without putting words in your mouth, is that kind of true? And then two, are you seeing it longer to put money to work in the development pipeline? Are there acquisitions that just haven't come to fruition that maybe make up that difference in your thinking?

Well, let me first start with your comment on regarding acquisitions came in above we don't give guidance on acquisitions because it's totally unpredictable. On dispositions, we did give guidance between $150 million and $300 million. We came in a little bit on the shy on the lower side. I've made comments throughout the year, throughout 2019 that a couple of projects we looked at as candidates for sale, which would have pushed us to -- if we done both, it would have pushed us well above the $300 million. We decided that there was some real opportunity to gain value and appreciable value by repositioning those assets and leasing them up at much higher rates. So that's the course we took, and we're going to be flexible like that Dave. It's -- we do not operate by, we got to allocate so much capital to this or that in a year or that we have to go buy this or that or sell this or that. It really is far more of a -- I think a much more thoughtful process than that. In terms of 2020, we gave the guidance of $150 million to $300 million that seems like a reasonable range. On dispose, I made the comment that we haven't -- we're not going to identify for all of you until they close, which ones those are. Acquisitions we're not really -- we look at everything. The three that we did this year were very compelling for the reasons I mentioned, and I think they set the company up in development projects and got one with a covered land play, where we're going to have a terrific cost per square foot comparatively, and great locations where there is just tremendous demand. So I think it really positions us well. And we don't -- we're not looking at acquiring existing core type assets and what not. It's not the right place for us to put our money unless their leases are being sold based upon a very low in-place rent, but then it's going to be so competitive. I doubt we'd be successful. So I hope that helps but it's -- each year is different. You've seen us years where we didn't acquire anything years when we acquired something in this case with the success of our development program, we felt comfortable re-upping, refilling the pipeline in these very strong markets where we have a really good business, good platform.

Any change in your thinking on timing for KOP Phase II through IV or any of the additional pipeline assets you already addressed Flower Mart in Seattle so?

Yes that's a good question. On Oyster Point the timing for Phase II, III, IV we actually have a fifth phase that we'll talk about it in the future. The -- we submitted the precise plan for Phases II through IV earlier this -- or rather this last year. We anticipate approval very soon. And design work is underway for Phase II. The earliest potential start would be the end of this year. Phase II consists of approximately 900,000 square feet, but it can be phased within the phase. So we haven't determined just what we're going to pull the trigger on. And obviously, we'll make that assessment as to timing in square footage when we get further into the year based upon what we're seeing in the market. The demand there is very strong. And it's -- if I had it up today I think it would be leased very quickly, and I think we've got just the greatest position in that market of anybody and we're really excited. So, more to come.

Thanks John.

Our next question comes from Daniel Ismail with Green Street Advisors. Please go ahead.

Great. Thank you. Just a few quick ones for me. It looks like construction costs fell slightly quarter-over-quarter for a few projects. Can you describe what was the cause of the decline? And was this mostly a result of going from life science to traditional office tenants?

Yeah. That's the at both 9455 and Dexter the cost -- overall construction cost coming in lower and KOP as well coming in lower because it was indexed with KOP that came in lower because of non-life science.

Well, it also came in lower because a lot less carry because we lease them up so quickly so...

Okay. And it looks like retention rates were a bit lower than historical average in 2019. Was this more of a function of the leases that rolled in 2019 or anything really notable in that figure?

No. I think it -- we don't have much the lease, but there's nothing specific that went on in 2019 that's any different than any other year.

Okay. And just in terms of construction costs it seems like the last few years have seen mid single-digit type increases in construction -- overall construction costs. Can you maybe share your thoughts on what you guys are projecting going forward for total development cost increases?

Michelle, you want to handle that?

Yeah, I think it's going to be within the same range. We said it's been that 5% to 7% over the past few years and I think we expect that the same going forward.

Actually talking with Justin who is our Executive Vice President of Development runs all our development and construction activities, he's mentioning that we're actually doing -- he thinks we're going to do better than that now. There's been some changes. And notwithstanding all the construction that's going on in our markets, there's been some positive changes in some of the areas. And by the way that 5% to 7%, doesn't mean the project is 5% to 7% higher. It means that, various -- it’s a way of kind of all flows through, when you look at burden, and you look at a design, and you look at construction materials, the ones that are going up, going down. And labor that's going up or whatever it is, it's been translating into about 3% -- 3.5% increase in the cost of the delivered project. We talk in terms of these 5% to 7% and whatnot, in terms of labor and materials. But it's not uniform. It's -- that's not 5% to 7% on the total project cost.

Great, thanks John.

Our next question comes from Tony Paolone with JPMorgan. Please go ahead.

Thanks. On Culver City, is there any sort of time line we should think about before we start to see some change in the state of play there?

You mean in terms of redeveloping it?

Yeah. Just even coming up with a little more specificity on the plan? And what you think you could do there?

Yeah. I'm going to wait for a non-political year. And we have tenants -- remind me Eliott the tenants, don't roll out there, until 2024, is that right?

Yeah. Over the next 36 months or so.

Yeah. So we have a strategy on how -- rents by the way, when we bought it, we're something like 35%, 40% below market in the buildings or -- it's kind of a cool little place if you haven't seen it go look at it. It's really a neat environment. So, we have a strategy to put ourselves in a position to win those tenants get when they roll out, that we are capable of proceeding with an enhanced development. And that means that we'll be submitting our plans and what not to the city in due course, so that we can be ready to go, by that 2024 period. So working backwards you'll probably see something in 2021 or 2022. We might have some things earlier than that to show. But we're pretty good at getting through all the stuff, even though it may look like it takes an awful long-time and it does and its frustrating and so forth. It's just an unfortunate process that we have to go through here in this environment. I would imagine, New York is probably similar.

Okay. And then just a few numbers items hopefully quickly, I may have missed this. Did you give G&A guidance for 2020?

Yeah. It's roughly $85 million.

Okay. And that's excluding leasing costs, just pure G&A?

No, including leasing cost.

$85 million?

Yeah.

Okay.

It's a portion - the leasing cost gets split between, stabilize and development.

Okay. But if I look at the income statements, it's like closer to $96 million combined in 2019. So that goes down a decent amount?

Yeah, that's about right.

Okay. And then capitalized interest, any number for that?

Around $80 million.

Okay. And then last question, can you give us a sense as to what residential NOI was in 4Q? And then, what that might look like when all the projects underway stabilize?

Yeah. I mean we don't really comment on specific projects. I mean, we only have one project. So, we don't comment on the NOI, of a specific asset. So, when we have all three up and running we'll probably be breaking that out.

Okay. So there's no contribution from the second project in the fourth quarter then?

No.

Okay. That's it. Thanks.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Tyler Rose for any closing remarks.

Thank you for joining us today. We appreciate your interest in KRC. Bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.