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Kilroy Realty Corporation (NYSE:KRC)
Q1 2019 Earnings Call
May. 7, 2019, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Q1 2019 Kilroy Realty Corporation Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) Please note, today's 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, sir.

Tyler Rose -- Executive Vice President and Chief Financial Officer

Good morning, everyone. Thank you for joining us. On the call with me today are John Kilroy and Jeff Hawken, as well as other senior members of our management team who are 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.

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 an update on our market conditions and review of the first quarter. Jeff will review operational highlights. I'll finish up with financial highlights, and a review of our updated 2019 earnings guidance that was published yesterday in our earnings release. And we'll be happy to take your questions. John.

John Kilroy -- President and Chief Executive Officer

Thank you, Tayler. Hello, everyone. Thank you for joining us today. I'll begin this morning with a review of our market conditions, which continue to drive strong leasing activity. Then I will summarize our first quarter results and finish with an update on our development projects. Real estate fundamentals remain strong across our West Coast Markets, new supply is extremely limited and there are few land site suitable for near-term development.

Demand remained solid up and down the West Coast and we are seeing more diversified demand, it's not just technology and media it's far more broad base. These strong conditions have driven double digit rent growth on a net basis across our key urban markets. Among the biggest gains, South Lake Union rents are up more than 25% year-over-year, San Francisco rents are up 15%, vacancy rates are now below 6% in our urban markets and hitting record lows in some areas Bellevue is at 2.9%, San Francisco is at 4.4% and South San Francisco is about 2.5%. And with very few large blocks of space available in our key markets, we expect the upward pressure on rents to continue. In fact, we're currently experiencing record high rents in most of our markets.

Other indicators that we monitor including job postings and VC funding remained healthy. Seattle and San Francisco Bay Area, continue to create new jobs at the fastest rate in the nation, led by big technology.

In San Diego, job postings ticked up approximately 15% over the prior quarter. Capital raising also remained strong year-over-year, driven by steady VC funding and a dramatically stronger IPO market. We also see support for continued regional strength in the robust levels of investment the key industries are making in their future. Global research and development spending across technology and life science approach $675 billion in 2018. This level of spending is driving rapid innovation and the continued penetration of technology into the core operations of nearly all businesses. The entertainment and media industries alone are expected to generate globally more than 2 trillion in revenues this year as digital content accelerates growth across the sector and we expect this to continue, we now have Disney and Fox and others to come, expanding into content streaming. We think this will translate into significant increased demand for space.

The unique characteristics of our West Coast Markets continue to attract significant investor interest, we are seeing diverse capital sources, including sovereigns, private equity, large institutional funds and major family offices exploring purchases or joint ventures here. There is particularly strong demand for high-quality well located assets with low CapEx requirements. Large investors seem to be shifting their preference toward high quality state of the art newer assets, as investors have achieved strong returns from the West Coast investments. The region should continue to attract more capital in all forms, creating a virtuous cycle of investment in growth. And we feel we're particularly well positioned given the young age of our modern portfolio.

Now let's move on to first quarter results, we delivered another strong performance, we signed new and renewing leases on just over 235,000 square feet of space in our stabilized and development portfolio with cash rents that were up 34% and GAAP rents that were up 50% from prior levels. Our stabilized portfolio is now 96% leased, we estimate that rents across our portfolio are approximately 20% below market, which as we mentioned last quarter is the largest rent differential in company history.

We debuted (ph) our One Paseo of mixed use development project in Del Mar with the community opening of the retail space that is now over 90% leased and over a third occupied. With this strong momentum, we made further progress on leasing the office component, which is now more than 75% committed.

We commenced construction on two life science development projects, Phase 1 of Kilroy Oyster Point, a 630,000 square foot project in South San Francisco and our 9455, Town Center Drive building,s 160,000 square foot project in the University Town Center submarket in San Diego.

And last month, we were awarded the EPA's Energy Star Partner of the Year, for the 6th year in a row, as well as the EPA's highest honor Sustained Excellence. This underscores our continued commitment and sustainability and our leadership position as a global leader among all publicly traded real estate companies. And just five weeks, subsequent to quarter-end we signed an additional 520,000 square foot of new leasing and renewing leases with cash rents that were up 13% and GAAP rents that were up 34%. This activity included a 154,000 square foot 10 year renewal with Lucille Packers (ph) in the San Francisco Bay area. In addition, three of the leases were expansion leases, one with 23 [inaudible] Oyster Point Tech Center and the other two were in San Diego. Across these three transactions, tenants roughly double their existing square footage. With 23 (inaudible) expansion we are now 100% leased at our Oyster Point Tech Center. This brings our total year-to-date leasing over 750,000 square foot.

Turning to developments, we are making good progress in all of our current projects. In Hollywood, all components for a mixed-use project are scheduled for completion next year, both the office and the retail space are fully leased. In Seattle at 333 Dexter, we continue to have meaningful leasing discussions and remain confident that we will be substantially leased before it's delivered later this year and at Delmar office space our One Paseo project is now 76% leased or committed and marketing is under way for the residential units that will begin delivering toward the third and fourth quarter.

Upon stabilization, these projects will generate an estimated cash NOI of approximately $90 million, 70% from office and 30% from residential retail. This is in addition to the projected stabilized NOI of $75 million from the three projects we have in the tenant improvement phase, including the exchange 100 Hooper and One Paseo retail. Given our confidence and leasing of 333 Dexter, and against the backdrop of strong market fundamentals and growth in the biotechnology and healthcare industries, we moved ahead with two new projects in the first quarter. At Kilroy Oyster Point, we commenced construction on Phase 1 of our 40 acre life science campus situated on the waterfront in South San Francisco. This phase encompasses 630,000 square feet of lab and office space in three buildings and as a total incremental investment of approximately 450 million. We expect to deliver the project in the second half of 2021. Kilroy Oyster Point commands an extremely attractive location and one of the nation's largest and most (inaudible) life science clusters, near-term demand in the area exceeds two million square feet, vacancy hovers at 2.5% and the existing supply is extremely limited. We are in discussions with a handful of tenants for Phase 1.

And in March, we commenced construction on a 160,000 square feet property in San Diego at 9455 Town Centre in the UTC submarket, our expected incremental investment in the project is approximately 95 million with a scheduled delivery date of mid 2020. The project is situated in the heart of University Town Center in close proximity to the new San Diego trolley service and the University of California San Diego. It's a key employment center for a range of technology and life science companies. Demand for the life science and UTC market -- sub-market is very strong with the vacancy rate of approximately 5% and limited new supply. Office fundamentals are similar evidenced by our vacancy rate of under 4%. While we forecast this building to be occupied by life science company, we've designed a flexible project that also appeals to office users.

As you recall, we took a similar approach to the exchange in San Francisco, creating the opportunity to make the best decision at the appropriate time.

Lastly, with regards to the Flower Mart , we expect our Prop M allocation sometime this summer. It's too soon to tell when he four secret (inaudible) challenges will be resolved, but we continue to see significant interest from a variety of large users in what is arguably one of the most sought-after commercial submarkets in the country. To fund our development, we remain committed to capital recycling, this year we are targeting $150 million to $350 million of dispositions. We are currently in the market with two assets with a total value of approximately 150 million.

To wrap up let me iterate our focus on three key 2019 objectives that we communicated on our February call. First execution in our development pipeline. During the quarter, we continued to make meaningful progress on leasing our development projects, including 333, Dexter and One Paseo and started two new projects Kilroy Oyster Point Phase 1 and our Town Center Drive building. We continue to believe that development is the best way to create shareholder value at this point in the cycle. And our focus is to ensure that our current projects deliver on time, on budget and they achieve superior returns. We expect to make meaningful leasing progress in our development projects before year-end.

Second, maximizing value in our stabilized portfolio. This includes leasing up our vacancies, driving rents where possible and proactively addressing expirations. And third, maintaining a strong and flexible balance sheet. This includes keeping our metrics conservative and having access to multiple forms of capital. That completes my remarks.

Now I'll turn the call over to Jeff, for more detail on operations. Jeff ?

Jeff Hawken -- Executive Vice President and Chief Operating Officer

Thanks, John. Hello, everyone. Since John, has given you a good picture of conditions in our markets. I know most of you follow market statistics. I will focus my comments on updating you on lease expirations in the mark to market rental rates across our portfolio.

I'll begin with an update on lease expirations. We've made a lot of progress on our remaining 2019 expirations. We now have leased approximately 65% or 549,000 square feet of the 856,000 square feet of 2019 expirations, that leaves a little over 300,000 square feet or approximately 2.5% of the core portfolio of remaining this year. None of the leases exceed 25,000 square feet and they are spread across our four regions.

In total, we estimate that our 2019 of lease expirations are approximately 24% below market. As we discussed last quarter, we had two lease expirations in 2020 that exceeded 100,000 square feet, one in Northern California and one in Southern California. Two weeks ago, we signed a renewal on the Northern California property and Southern California we now expect the tenant to vacate on lease expiration in the fourth quarter of 2020. We have begun marketing of the space and plan to make good progress over roughly 18 months before expiration. Average rents in our stabilized portfolio continue to provide upside opportunity. On a portfoliowide basis our estimated average in-place rents are approximately 20% below market. As John noted the gap has never been larger in our history as a public company.

By region, our in-place rents for San Francisco are approximately 31% below market, Seattle is 14% below market, San Diego is 8% below market and Los Angeles about 12% below market.

Now Tyler, will cover our financial results in more detail. Tyler?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Thanks, Jeff. FFO was $0.95 per share in the first quarter, which includes a positive $0.03 related to the improved credit quality of the tenant for which the company took a reserve in 2018. Same-store NOI grew 3.2% on a GAAP basis in the first quarter on a cash basis it declined 4.2%. As we previously commented, the decline was largely driven by last quarter San Diego expirations, as well as downtime from Amazon lease in Seattle and downtime related to the crews and Dropbox leases in San Francisco. At the end of the first quarter our stabilized portfolio with 92.5% occupied and 96.2% leased.

Moving to the balance sheet, in February we repaid $74 million mortgage note at par, that was due in June 2019. In March and April, we sold approximately 1.2 million shares structured a 12 month forward agreements under our ATM program at a weighted average price of $75.92. To date we have not settled on these nor the five million forward shares hold (ph) last August at this time, we expect to sell the five million shares in July.

We currently have $465 million available on our credit facility, which is expandable by $600 million under an accordion feature. Our debt-to-market cap at quarter end was approximately 24% and our debt to EBITDA was approximately 5.7 times, pro forma for the equity raises.

Now let's discuss our updated guidance for 2019 provided in yesterday's earnings release. To begin, let me remind you that we approach our near-term performance forecasting with a high degree of caution given all the uncertainties in today's economy. Our current guidance reflects information and market intelligence, as we know it today and it's [inaudible] shifts in the economy, our market tenant demand, construction costs and new supply going forward, could have a meaningful impact on our results in ways not currently reflected in our analysis projected revenue recognition data to several factors that we can't control, including the timing of tenant occupancies.

With those caveats, our updated assumptions for 2019 are as follows. Our targeted dispositions for 2019 remain in the range of $150 million to $350 million. With the commencement of construction at Oyster Point and UTC we anticipate remaining 2019 development spending of $400 million to $500 million.

We expect to commence revenue recognition on our Dropbox lease at the exchange in three phases, the first phase in the third quarter, the second phase at year-end. And the third phase in 2020.

Our forecast for year end office occupancy is between 94% and 95%. We expect 3% to 4% growth in GAAP same store NOI for the full year and flat results on a cash basis, with the negative impact, largely incurred in the first half of the year.

The impact of expensing internal leasing costs and third party legal fees associated with the change in lease accounting, remains in the $0.08 to $0.10 range for the year, $0.02 of this was incurred in the first quarter.

Taking all these assumptions into account, our updated 2019 earnings guidance is $3.64 to $3.78 per share with a midpoint of $3.71 per share. We're effectively increasing the midpoint of our range by $0.03 from last quarter, driven by the reversal of the bad debt provision for the improved tenant credit quality.

That's the latest news from KRC now we'll be happy to take your questions. Operator?

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Today's first question comes from Nick Yulico of Scotiabank. Please go ahead.

Nick Yulico -- Scotiabank. -- Analyst

Great, thank you. I just had a couple of questions here, first on Oyster Point. Can you just talk a little bit more about the demand you're seeing in the market, whether market rents, you think have have hit close to $6 net per month. And then on the cost for the project. Is there anything in the first phase, that's impacted by, let's say, a higher amenity offering for tenants, which drove up the cost per square foot for the first phase?

Tracy Murphy -- Executive Vice President, Life Science

Hey Nick, this is Tracy Murphy. I'll try to take them in the order you gave them. So demand continues to be very strong in that market as everywhere in the Bay Area and across all of our markets, but it's just beyond about two million feet, specific to South San Francisco. And rents, to answer your question haven't quite reached $72 annually, but they have been squarely sort of in the 65 or mid-60s sort of range from a class A perspective.

And then total cost. I think John covered that in his comments, but the incremental spend on Phase 1 is roughly 450 million, call it 950 all in for Phase 1. And on the amenities we will have a pretty robust amenity package consistent with expectations for Class A project. And there will be redundancy across phases that we've been thoughtful to plan that sort of holistically before we committed to dollars for amenities on phase 1.

Nick Yulico -- Scotiabank. -- Analyst

Okay. That's helpful. Thank you, Tracy. John, just turn to San Francisco and this essential summer (ph) plan litigation, which is under way I mean, as well is your -- is your intention there still to wait for that to get resolved, before you thought about starting [inaudible] even assuming if you got [inaudible] M allocation?

John Kilroy -- President and Chief Executive Officer

Well, I think we could start substructure and so forth, but I think we'll take a look at that, Nick. I'm open minded, but I want to understand what the consequences could be given this particular litigation, which is more about blocking views -- not by us but others, to some existing condo owners those and then one neighborhood group. I think one of the four is going to be solved here pretty soon.

So we're pretty open minded, but I'm optimistic that these things get resolved [inaudible] the full distance the court based upon the history in this city and based upon the history we've had elsewhere, but we're not the final arbiter of what happens, but we'll keep open minded.

Nick Yulico -- Scotiabank. -- Analyst

I guess, just one follow-up, John, is do you think that we could see more announcements that came on leasing for projects in that area where there has already been obviously one major lease that was done while this litigation was going on? Do you think there's a chance that other tenants could take take leases ahead of this

being resolved because....

John Kilroy -- President and Chief Executive Officer

Yeah, I think there is a -- I think there's is a likelihood that there's going to be a really big one that's all I'm going to say.

Nick Yulico -- Scotiabank. -- Analyst

Okay. Thank you very much.

Operator

And our next question today comes from Craig Mailman of KeyBanc Capital Markets. Please go ahead.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Hey guys, Tyler. I just wanted to follow up on the bad debt expense. I think 2Q18 you guys, I think it was $0.05 net maybe $0.7 gross. Is there any more bed debt related to the tenant that you reversed that could come in through the balance of the year or is this it-do you guys think?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Yeah, no, there is a couple of pennies left of that reserve. So that could come over time, to the extent we have a different view on the tenant.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Okay. And they are current on rent and everything. Right?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Yes.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Okay. And then just kind of bigger picture thoughts here. You guys did additional forward equity here to discount NAV. You guys did the forward deal last year to discount NAV. But the sales market is still pretty robust and Park Tower went at a pretty-- , pretty nice cap rate here. Any thoughts on accelerating dispositions above your guidance versus incremental equity offerings were the stock price today?

John Kilroy -- President and Chief Executive Officer

Craig, this is John. We look at all those things more to come.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Okay, would you be willing to take more dilution equity versus the sales, I guess just high -- the big picture, I know you guys have nice yields that you're getting on the development. I mean does the math continue to work to take the discount and then make it up over time or there are better alternatives to that initial dilution?

John Kilroy -- President and Chief Executive Officer

Tyler, you want to?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Yes, I mean I think we do look at both alternatives in terms of funding and given that we had started Kilroy Oyster Point at 9455, we thought it was the right thing from a balance sheet perspective to use the ATM a bit more to help fund 2020. But you're right, we look at both dispositions and equity and evaluate how best to fund our growth. But in either event what we're building and the returns we're getting are very accretive in either event, so that's where we stand on that.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Okay and then just on the forward ATM, when do you think the takedown of that roughly 100 million is?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Probably 2020, we have flexibility and we can take it down in pieces over time. Then, as I said on in my remarks probably July for the four we did last year and probably 2020 for the forward we just did.

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Alright great, thank you.

Operator

And the next question today comes from Manny Korchman of Citi. Please go ahead.

Manny Korchman -- Citi -- Analyst

Hey, everyone. Tracy, Oyster Point, as you guys build that, do you think that leasing will come sooner and be more build-to-suit nature or later something like Dexter, where you have confidence you will lease little bit closer to delivery and so you're building more of a generic spec projects.

Tracy Murphy -- Executive Vice President, Life Science

Hey, no, I would think of it more in the latter, Manny. I mean the market is really healthy and conversations continue to be healthy despite how early, it is but it's historically not really been a pre-leasing market. But we are pretty excited about our position in that market and as John likes to say, more to come.

Manny Korchman -- Citi -- Analyst

And then maybe John, specifically on 333 Dexter, I guess we keep asking the same question is why is it not leased in such a hot market, is there anything specific that's holding things up or is it just a matter of the tenant hasn't signed yet?

John Kilroy -- President and Chief Executive Officer

No comment.

Manny Korchman -- Citi -- Analyst

Thanks, everyone.

Operator

And our next question today comes from John Kim of BMO Capital Markets. Please go ahead.

John Kim -- BMO Capital Markets. -- Analyst

Thank you. at KLP, are you committed to have a life science tenants in that asset, or is there flexibility for an office user as there is that PTC?

Tracy Murphy -- Executive Vice President, Life Science

Hey, John, this is. Tracy, I mean we, if you remember back to exchange, we have a life science warm up committed on Phase 1, we think it's likely Phase 1 will go life science, but it does have the flexibility to accommodate either, so I don't know if that gives you any clarity, but there's a lot of flexibility with the way we've designed it intentionally.

John Kim -- BMO Capital Markets. -- Analyst

Is there a strong preference to have it life science, just given the market or is there greater demand or terminal value of if it's -- if it's an office tenant?

John Kilroy -- President and Chief Executive Officer

This is John. John, we're kind of agnostic in one sense because we're looking for what's best for value creation, on the other hand, we have multiple phases and it makes sense for the latter phases are likely to be life science to make the first phase, life science. We've had many inquiries from the tech community non-life science and then we have is treating had a handful of significant deals that are pure life science, I think, Phase 1 is likely to be life science, we could explore other opportunities and we will, we want to keep our options open. But we are in the unique position of having one of the few really well located entitled sites for lots of square footage for 2.5-2.7 million square feet whatever it turns out to be there in the four phases.

So more to come as we-- as we build the final phase. I think we're going to do very well in Phase 1 with a number of life science companies that we're working with..

John Kim -- BMO Capital Markets. -- Analyst

Okay and then John, just another question Flower Mart, there are local reports that the planning department will recommend 1.4 million square feet to be allocated to your developments, which is a little bit less than what you have in Phase 1. Would you feel comfortable moving forward if you didn't get the full allocation of the Phase 1 part of the Flowe Mart?

John Kilroy -- President and Chief Executive Officer

I don't really want to get into that, John, because there is lot of negotiations going on between the city and the various developers and so forth and I don't think it's prudent to the answer that at this time.

John Kim -- BMO Capital Markets. -- Analyst

Understood. Thank you.

Operator

And our next question today comes from Dave Rodgers with Baird. Please go ahead.

Dave Rodgers -- Baird -- Analyst

Yes, John. I wanted to follow up on the asset sales. You did a good job in your comments talking about the demand for the highest quality assets in the net lease building. What are you comfortable taking to market. You said, you've got a couple in the market now with these would be more non-core or you're going to sell some of the better assets in the portfolio, how do you think about that today?

John Kilroy -- President and Chief Executive Officer

Yes, I will remember to the issue of funding, just generally because dispositions typically are a source of funding for either acquisition or just our development as the case may be. There is, as you know there's debt, there is equity, there is joint venturing either of recapping existing assets or development joint venturing and of course there's dispositions. And we've tried to make it clear over the years that we look at all four of those things in sort of harmony, and what is the best for us at any particular time specific to the range, we've given a range 150 to 300 or 450 was it? 350, excuse me, too many numbers in my head today and we're very confident on the 150, we're assessing a couple of other projects. There is one that we thought we would sell. But when we take it -- we really drilled down into it we think there is big upside, given where rents have gone and where demand is and we think there's probably 25%, 30%, maybe as much as 50% more value if we do some lease things in that one particular assets.

So I can't give you specifics at this point, but we are not going to, I don't see us selling any particularly strong core assets at this point other than one of the ones that's in the current 150. So we got a long year ahead of us. We have a lot of initiatives and where [inaudible] agnostic to tell you the truth, although when I see the rent increases that we're getting, for an example here in San Francisco deals that we did Just a couple of years ago or a year and a half ago, now are at rents that are might be a third under today's market in a market that's likely to escalate by another 20%, 30%, 40% over the next few years. So those obviously wouldn't be great candidates.

So it's the acceleration in the market rents and demand for space is making our calculation as to what assets to select to dispose off a little bit more difficult.

Dave Rodgers -- Baird -- Analyst

I appreciate all that added color. Maybe shifting to One Paseo, the office leasing activity that you've done there, anymore color that you can give on that. And then the demand for the remainder of the space that you have under construction there?

John Kilroy -- President and Chief Executive Officer

Sorry was that One Paseo?

Dave Rodgers -- Baird -- Analyst

Yes, sorry.

John Kilroy -- President and Chief Executive Officer

Yeah, OK. You want to cover that Ron?

Robert Paratte -- Executive Vice President, Leasing and Business Development

Sure. Dave, this is Rob Paratte. You know, as we said on our last earnings call, the leasing activity we've had on the office space, particularly at One Paseo is unprecedented and I think what we're seeing in San Diego in general is similar to

seeing in San Diego in general is similar to the trends we're seeing in our other coastal markets on the West Coast, which is that along with fire category tenants you've got technology tenants, life science tenants that are creating pressure in the market for the best in class office space.

So when you look at what One Paseo delivers to a modern tenant in terms of floor heights, light near that sort of thing, that's what's driving the market. Commodity space as it always does kind of lags the market and we think, I think what's unique also about One Paseo particularly is that it is mixed use. So you've got the residential, which is -- it's all going to add-be additive, you've got residential, you've got this great retail where we are 96% committed now, with many of the shops open and that's just creating synergistic effect between the three components. So we're really excited about the activity we have, we're excited about the types of tenants we're talking to, and I think it bodes well for this whole Del Mar submarket, in terms of just future rent growth and absorption.

Dave Rodgers -- Baird -- Analyst

Great, thanks. Last question for me, Jeff, that 4Q '20 exploration sizing on that and how much worth the building might need to retenant.

Jeff Hawken -- Executive Vice President and Chief Operating Officer

So the one tenant, that's going to be vacating in the fourth quarter 2020, it's about 135,000 square feet, and we got 18 months. So we're pretty excited about the activity and Robin and his team are actively involved in -- looking for new tenants.

Dave Rodgers -- Baird -- Analyst

Okay, thank you everyone.

Operator

And our next question today comes from Aaron Wolf of Stifel. Please go ahead.

John Guinee -- Stifel -- Analyst

Great, thank you John Guinee here. I guess, Tracy two quick questions. What's your fully loaded price per square foot to develop Oyster Point and UTC and how much more is that then generic office product?

Tracy Murphy -- Executive Vice President, Life Science

Okay, let's take that. So the first one on Kilroy Oyster Point I think we kind of touched on that incremental spend is roughly 450 but per square foot we are approximately 950 a foot, which is a little bit shy of where market is on a competitive basis just based on our favorable land basis. So we're in a good spot from an all-in cost basis on Kilroy Oyster Point. And then -- I'm gonna rely on Michelle for the total cost of 9455, I think we quoted 95 million on an incremental basis.

Michelle

And then the price per foot is about 775 that's all in.

Tracy Murphy -- Executive Vice President, Life Science

Yes, so slightly different -- you can see the difference of land basis and just construction cost but -- they're both very favorable in terms of the competitive that they will play in, so to speak, as we lease up.

And then your question on just the incremental difference between office and life science, I don't know that we've said, but it's pretty modest some structural things that we do. But as you know about Kilroy we do a lot of big floor plays, more rigid floor to accommodate tech intensity . So for us it's really modest.

John Guinee -- Stifel -- Analyst

Okay. And then, Tyler. I think at the Investor Day last June in New York City, you gave soft guidance of an ability at maybe $110 (ph) or $120 (ph) a square foot net a share in FFO by year end 2020. Do you still feel good about that number?

Tyler Rose -- Executive Vice President and Chief Financial Officer

Yeah. Taking all the other changes have occurred like the lease accounting change -- and disposition and staying leverage neutral and all that, we still feel we're in that ballpark. Yes.

John Guinee -- Stifel -- Analyst

Great, thank you.

Operator

And today's final question comes from Jason Green at Evercore. Please go ahead.

Jason Green -- Evercore

Just a question on dispositions, given disposition guidance is unchanged from a modeling perspective, can you help us understand the expected cadence of dispositions through the year.

Tyler Rose -- Executive Vice President and Chief Financial Officer

Roughly third quarter for those.

Jason Green -- Evercore

Got it, thank you.

Operator

Thank you, this concludes our question-and-answer session. I'd like to turn the conference back over to Tyler Rose for any closing remarks.

Tyler Rose -- Executive Vice President and Chief Financial Officer

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

Operator

Thank you, sir. Today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day .

Duration: 36 minutes

Call participants:

Tyler Rose -- Executive Vice President and Chief Financial Officer

John Kilroy -- President and Chief Executive Officer

Jeff Hawken -- Executive Vice President and Chief Operating Officer

Tracy Murphy -- Executive Vice President, Life Science

Robert Paratte -- Executive Vice President, Leasing and Business Development

Michelle

Nick Yulico -- Scotiabank. -- Analyst

Craig Mailman -- KeyBanc Capital Markets. -- Analyst

Manny Korchman -- Citi -- Analyst

John Kim -- BMO Capital Markets. -- Analyst

Dave Rodgers -- Baird -- Analyst

John Guinee -- Stifel -- Analyst

Jason Green -- Evercore

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