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Kilroy Realty Corporation (NYSE:KRC)
Q4 2020 Earnings Call
Feb 2, 2021, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and welcome to the Q4 2020 Kilroy Realty Corporation Earnings Conference Call. [Operator Instructions]

At this time, I'd like to turn the conference call over to Michelle Ngo, CFO. Ma'am, please go ahead.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Thank you. Good morning, everyone. Thank you for joining us. On the call with me today are John Kilroy, Tyler Rose, Rob Paratte and Eliott Trencher.

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 on 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 a review of 2020, business conditions in our markets and our objectives for 2021. I will discuss fourth quarter financial results and provide you with an earnings roadmap for this year. Then, we'll be happy to take your questions.

We are once again calling in from different locations, so bear with us if there are any delays in our responses. John?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Thanks, Michelle, and welcome to your first call as our new CFO. Congratulations. Hello, everybody. Thank you for joining us today. I hope everyone is safe and healthy and has a brighter outlook for 2021.

Let me start with a few comments about 2020. We entered the year at a very strong position. Leasing activity was solid, rents were increasing, tenants were expanding, and we had expectations of another record year. While the pandemic upended our lives in the markets, we think our 2020 performance was very strong all things considered. We moved swiftly to further strengthen our balance sheet. We worked with our tenants and workforce to adopt healthy and safety protocols. We executed our current development program largely on schedule and on budget. We delivered solid financial results and raised our dividend. And we achieved carbon-neutral operations, a key pillar of our ESG program. Now in month two of 2021, we are seeing a number of signs of renewed positivity, which we will balance with discipline as we continue to differentiate KRC as best in class and a market leader within our industry.

Let me review where we stand today. We have a solid balance sheet. We ended the fourth quarter with liquidity of approximately $1.5 billion and net debt to EBITDA of 5.8 times. Our under construction development remains largely leased and fully funded with cash on hand. We have a world-class tenant base, supporting our stabilized portfolio results. Our average portfoliowide rent collection across 2020 exceeded 97%, with office and life science rent collection at 99%. Many of our tech, media and life science tenants, including some of the largest and most successful companies in the world, continue to grow last year and remained stronger than ever. Our lease expirations are limited. They average 6.3% per year through 2025 and our portfolio was 94.3% leased. Despite shelter-in-place restrictions, we signed more than 730,000 square feet of new or renewal leases in 2020, with strong average rental rates that were up 37% on a GAAP basis and 18% on a cash basis.

Our development projects under construction are delivering substantial cash flow and value. We completed core and shell construction on 1.3 billion of office space and 371 residential units in 2020, including the fourth quarter completion of our $300 million Netflix // On Vine project. By year-end 2021, we expect to complete an additional $770 million of office and life science space and 193 residential units. At that point, our development program, excluding 2100 Kettner, will be generating an estimated $140 million of annualized cash NOI. And our approximately $2 billion investment in these projects is expected to yield more than 7.5% on a cash ROC basis across office and life science. Based on market cap rates, we think we've created significant value.

Our future development pipeline is diversified by market, by product, by start schedule, and even by industry, and has an attractive basis. Our pipeline of projects aggregating approximately 6 million square feet, of which approximately 40% is life science, spans the most innovation-driven and attractive submarkets along the West Coast, including Seattle, San Francisco, South San Francisco, Los Angeles and San Diego. We continue to make great progress on entitlements, positioning these projects for future starts when conditions makes sense.

Of particular note, we are fully entitled for an additional 2 million square feet at Kilroy Oyster Point in the City of South San Francisco, and continue to see strong interest from potential tenants. A Phase II start this year is a strong possibility, based on our ongoing discussions with multiple prospective tenants. Phase II totals approximately 900,000 square feet across three buildings and can be developed in phases. The incremental investment for Phase II would be approximately $750 million with an estimated spend of approximately $275 million through the end of 2022.

We remain committed to a prudent capital recycling program as integral part of our core business strategy. We completed $76 million of dispositions in the fourth quarter and realized a gain of approximately $36 million. Despite the issues created by the pandemic, we increased our dividend for the fifth year in a row, bringing the cumulative five year increase to over 40%. We are one of only two office REITs to increase its dividend last year.

Lastly, we continued to build on our strong leadership role in ESG. We achieved carbon-neutral operations last year, multiple decades ahead of both California and Federal standards, and continue to advance our leadership in the design and development of sustainable and healthy workplaces. We've been recognized year after year by many industry groups across the world, including GRESB, which has ranked us leading office developer globally and leading office company in the Americas across all asset classes for the past seven years. We have won the EPA's highest honor of ENERGY STAR Partner of the Year Sustained Excellence Award for the past five years and NAREIT's Leader in the Light Award for the past seven years. We are included in the Dow Jones Sustainability World Index and the Bloomberg Gender Equality Index. And we have the largest Fitwell portfolio in the world among non-government organizations. While we are proud of our accomplishments, we will continue to look for new and better ways to foster a diverse and inclusive work environment, engage our communities and minimize the environmental impact.

Switching gears, I'd like to comment on the current business environment and the implications on our Company and strategy. First, we believe companies and employees want to return to work. Rob is going to talk about this further in our report. Based on our discussions with tenants, companies are focused on bringing their employees back together in productive common workspaces where they can collaborate in person. In the short-term, companies will adjust their space to address heightened health and safety concerns. They'll exert more active control over workspace access and layout. They'll have heightened expectations about the quality of ventilation systems. They will seek ways to give their employees more access to natural light, fresh air and personal space. Longer-term, we expect these tenant preferences will get incorporated into the commercial real estate landscape and will help reshape property design standards for operational systems and management practices. For the largest and most influential tenants, generic office space is a non-starter. They will require environments tailored to their specific needs. These trends all favor our young and modern portfolio, our development experience, our track record of partnership with innovative and creative companies and our demonstrated ability to adapt.

Second, the economic demand drivers continue to be technology, media and life science companies, most of whom remain headquartered in or committed to the West Coast. Public market returns and VC funding for tech, healthcare and biotech have surpassed other industries by more than two times over the past decade. Further, they have demonstrated the range and depth of their value throughout the pandemic. And they drive huge benefits from clustering locations that support their constant need for talent, capital and exposure to new ideas. These industry clusters are in the West Coast markets. The pandemic experience brought new thinking about how and where people can work. Companies may be more willing to experiment with diversifying their workspace location and densities. But the speed, scale and growth for these innovation-driven industries will drive strong demand for workspace and multiple competing markets. We believe the West Coast, with this intellectual capital world-class universities and research institutions and unique quality of life, will continue to win that competition.

Specifically, we believe life science industry represents a huge opportunity for our Company. The pandemic has highlighted how critically important medical innovation is to our economy and to our health. The attention is now driving big increases in private and public investment. The growing demand for quality lab and workspaces in preferred West Coast life science submarkets has driven vacancy rates to 2% or lower. We've been building the capabilities to serve life science tenants for more than two decades and we are now in a strong position to capitalize on additional opportunities. We currently have the third largest portfolio of life science and healthcare tenants among publicly traded REITs, approximately 14% of our total base rent. And pro forma for the development of the entirety of KOP, our life science and healthcare tenant base will roughly double in size.

Third, from a political landscape, most state and local governments on the West Coast remain focused on managing the negative impact of the coronavirus. As the virus is controlled, we expect them to move quickly to restore the economic health in a highly valued quality of life of their major urban centers. We plan to take an active role in that work. We fought hard along with others to stop the destructive economic impact of Proposition 15 here in California. We will be just as active going forward in supporting business-friendly initiatives for civic recovery and pushing back against destructive ones.

Lastly, having operated through multiple cycles, we believe we are uniquely qualified to navigate through this downturn given our track record of unlocking value and our ability to adapt. Last cycle, we believe we set ourselves apart from the competition through our entry into the San Francisco and Seattle markets where we recognized early on tenants preferences for inspiring and collaborative workplaces as strong growth drivers of office demand. Then in 2018, we were deliberate in increasing our life science footprint in a meaningful way with the acquisition of Kilroy Oyster Point land. We are focused on differentiating ourselves again this cycle bolstered by a strong balance sheet and experienced team and a high quality portfolio.

Let me close with our five key objectives for 2021. One, maintaining a strong financial foundation with sufficient liquidity that allows us to play defense and offense. Two, maximizing the value in our operating portfolio through proactively managing lease, expirations and boosting sustainability and wellness profiles. Three, completing the leasing -- completing and leasing our remaining under construction development projects and preparing for new development starts as they make sense, including KOP Phase II. Four, staying agile and continuing to evaluate our capital allocation opportunities and strategies. And fifth and final, working with government agencies to positively influence public policy.

All of us here at KRC are energized. We're ready to tackle this new year. We appreciate the many challenges and uncertainties that lie ahead of us. It will likely be a tough transitional period, but we have never been better positioned to take on the year's challenges and opportunities. We are financially strong, operationally sound and prepared to act decisively as events unfold.

That completes my remarks. Now, I'll turn the call over to Michelle. Michelle?

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Thank you, John. FFO was $0.95 per share in the fourth quarter and $3.71 for the year. Throughout 2020, FFO benefited from the growing contribution of our current development pipeline, as well as higher rents across our stabilized portfolio. These benefits were offset by one-time charges, revenue reductions related to our assessment of tenant credit and collectability of rent, as well as lower parking revenues as a result of the COVID-19 pandemic. Fourth quarter FFO benefited from the revenue commencement of our Netflix // On Vine project in November. Offsetting this, FFO included $0.065 of extraordinary items, comprised of a net $0.03 per share of COVID-19 charges primarily driven by co-working, advertising and residential tenant credit assessments, and $0.035 of Prop 15 expense.

Turning to same-store operating results, cash same-store NOI increased 3.9% in the fourth quarter and 8.3% for the year, largely due to higher rental revenues driven by the commencement of and burn off of free rent from several large San Francisco leases. GAAP same-store NOI declined 2.3% in the quarter and 1.4% for the year. Excluding the COVID-19 related net charges, GAAP same-store NOI would have been positive 0.6% in the fourth quarter and 1.4% for the full year 2020.

At the end of the fourth quarter, our stabilized portfolio was 91.2% occupied and 94.3% leased. The occupancy and percentage lease decline of 100 basis points from the third quarter was primarily attributable to the 136,000 square foot expiration in the Long Beach submarket, which we have previously discussed on prior calls.

Overall, rent collection in the fourth quarter exceeded 96%, with office and life science rent collection north of 98%. These strong rent collection levels have remained consistent across the 10 months of the pandemic, as our well-capitalized technology, life science and media tenant base continues to outperform.

Including the disposition John mentioned, our liquidity today stands at approximately $1.5 billion, including approximately $700 million in cash. [Technical Issues] for the year.

We estimate that our G&A will be in a range of $82 million to $86 million for the year.

NOI margin is expected to be in line with our historical average ranging between 70% and 71%.

With respect to our retail portfolio, we extended the rent relief program, which included approximately 90% of our retail tenants through the end of February. This has a minor earnings impact. And from a cash perspective, one month of rent deferral for these tenants is approximately $1.5 million. Non-contractual parking income totals approximately $1.5 million of NOI per month. We expect to receive about a third of this amount until businesses resume more normal operations.

With respect to lease expiration, we have approximately 450,000 square feet of expiration remaining to be leased this year, with only two leases that are greater than 50,000 square feet expiring in the third quarter. Additionally, we are currently in discussions with the tenant in the LA region that had an option to terminate up to 150,000 square feet in 2022, but did not validly exercise its option. More to come on this.

We expect to commence revenue recognition for the following office and life science projects within the following timeframe. At 9455 Towne Centre Drive, we expect revenue commencement on a 100% of the project by the end of the first quarter. At One Paseo Office, we expect revenue commencement on the remaining one-third of the project by September. At 333 Dexter, we expect the remaining 51% of the 635,000 square foot project to come online in the fourth quarter. And at KOP Phase I, we expect revenue commencement on the entirety of the 656,000 square foot project by December. With respect to Jardine, our Living // On Vine residential project of 193 units, we expect completion and delivery in the spring. Due to COVID-19 restrictions, we expect relatively modest leasing this year. At One Paseo residential, we expect the project to be between 75% to 80% leased by year-end. And lastly, we anticipate development spending of $275 million to $350 million on our projects under construction. And the high-end could increase to $450 million if we start KOP Phase II.

That completes my remarks. Now, we'll be happy to take your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Emmanuel Korchman from Citi. Please go ahead with your question.

Emmanuel Korchman -- Citigroup -- Analyst

Hey, everyone. Michelle and Elliott, congratulations on your promotions. Elliot, one for you. You're taking a more active role in sort of investment pipeline. What types of deals are you most focused on and sort of what time are you guys thinking about as you make those investments?

Eliott Trencher -- Senior Vice President and Chief Investment Officer

Sure, Manny. Happy to take that. I think strategically not much is going to change. I mean, we're going to continue to focus on deals that fit our profile. And John talks about a lot, the circle, square and triangle. We're going to continue to follow that, right. It's got to be well-located. It's got to have the right bones, and the right physicality, and the math has to make sense. So we think that, if it's not broke, don't fix it. And what we've been doing from a capital allocation perspective has been pretty good. And we're going to keep doing it that way.

Emmanuel Korchman -- Citigroup -- Analyst

Great. And then, Michelle, you mentioned that DIRECTV's, sort of, desire to terminate part of their lease. And I think you mentioned you are in discussions with them. I guess the question was what changed for them that they all decided not to stay when previously they made an impression on you that they were going to stay?

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Yeah. Rob, do you want to handle that?

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

Sure. How are you doing, Manny? This is Rob Paratte. We've had discussions with them over the past two or three years, and their business, this is really a DIRECTV entity. But after AT&T acquired DIRECTV, they've had multiple scenarios for -- in fact growing and contracting, and then staying stable. And so I don't want to get into a lot of the discussion about what we're doing with them, but we are engaged with them and will report when we have more clarity on what the outcome is going to be. But it's basically been driven by their business needs changing over time.

Emmanuel Korchman -- Citigroup -- Analyst

All right. Thank you.

Operator

Our next question comes from Nick Yulico from Scotiabank. Please go ahead with your question.

Nicholas Yulico -- Scotiabank -- Analyst

Okay. Thank you. I guess first question was just on -- not -- the decision to not provide guidance, maybe you can just walk us through a little bit on the thought process? And then, Michelle, I know you did give a lot of components, I'm sorry. I think you were cutting up a little bit or maybe it was my phone, but I don't know if you did give any range to think about in terms of occupancy year-end, how to think about that in sort of same-store portfolio? And I guess also on the lease expiration, how we should think about your confidence in getting releasing done this year, the fourth quarter volume? Well, it did look a little bit light on that front.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

[Technical Issues]

John Kilroy -- Chairman of the Board and Chief Executive Officer

Hey, Michelle? Michelle? This is John. We can't hear you. It's like you're cutting out every other words. I don't know if I'm the only one. I think Nick mentioned that. I don't know whether you can hear me clearly, but you've got a problem on your end on broadcast.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Okay. Yeah, it looks like our line is choppy.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Okay. It's better now.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Okay. Nick, I heard the first two parts of your question. I'll take the guidance piece with respect to occupancy and same-store. And Tyler can provide a little bit more color on why we chose not to provide guidance. I think with respect to the occupancy range, I did not include that in my prepared remarks. I think, more to come as we get more visibility in terms of where the restrictions on COVID-19 goes. But I think directionally, we think occupancy should be higher in 2020 given all the development leasing that will come online toward the end of this year. We've got roughly 2 million square feet that's coming online, that's 100% leased. So I think hopefully, that gives you a sense of where occupancies going. And then, we did not provide same-store NOI guidance either. And more to come as we get more visibility as we move through the year.

Tyler H. Rose -- President

Yeah. And this is Tyler. I think that, Michelle just said it, the reason we're not providing guidance is really nothing. Although much has changed from last quarter where we didn't see a lot of visibility to where things are going with some of our income in terms of parking income, retail income, even residential income, and we're very solid on the office front. But given that we're still in lockdown, it's just a little too early we think to provide guidance. Hopefully, we can do in next quarter, but more to come on that.

Nicholas Yulico -- Scotiabank -- Analyst

Okay. Thanks, and congrats on the promotions everyone as well. Just one other question is on the leasing markets, maybe for Rob. A bit of an update on what you're seeing in terms of tenant demand, if activity is picking up at all, perhaps, you can go through some of your markets? And just I guess a big picture, how we should think about again -- retaining tenants among the lease expirations this year versus any sort of gut feel also about a rebound in new leasing activity for the portfolio? Thanks.

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

Okay. Hi, Nick. I'll try to keep this to a brief answer, but you asked a lot there. I would say definitely that the overall market sentiment throughout our portfolio in the first month of 2021, which is really kind of just three weeks, is significantly more positive. If you start in Seattle and look at how the companies that have moved up there, continued to hire. Net tech job growth in 2020 was 6,500 new jobs. And that's a direct correlation to the fact that Seattle and Bellevue are becoming the cloud headquarters for the world. So you have Amazon Web Services, Microsoft, Google Cloud, all of them have expanded, all of them have continued to hire employees.

Microsoft, which had for many years, particularly in Bellevue, retracted, has actually renewed leases in the Bellevue area and has taken small amounts of space outside of the Redmond campus. So I think it's just a good indication that Bellevue and Seattle continue to have the employee pool that employers are looking for. And in fact hiring in Seattle has outpaced hiring in Austin for tech talent. And that's based on LinkedIn surveys that were recently done. So we continue to feel really good about the Pacific Northwest. As you know our portfolio in Bellevue is virtually leased and our Dexter project is completely leased. So we're in really good shape. And it's a market that we see having a long-term improvement over time just because of the sheer presence and size of the tech companies that are in the market.

In San Francisco, we have -- San Francisco has been more shutdown than any city in the country and more shutdown longer than any city in the country. We have had more tour activity in January than we had in March and April combined. We're at about 70% right now in January so far of tour activity pre-COVID. So there is definitely a pickup. Two phenomenon that are happening is that of the sublease space that's on the market that is long-term. Brokers -- and this is through multiple brokerage houses are projecting that sublease space. One example would be macys.com. There's others out there that are large will be absorbed in this year in 2021. The second trend is that again 19,000 new jobs by the five largest public companies that are headquartered in the Bay Area has been added between Q2 '20 and Q4 '20. And if you just use sort of a rough depending on what your density number is per employee, that equates to about 4.75 million square feet. And I just have to say I just -- I don't think all those people are going to be working at home 24/7. It's going to have a positive impact on the office market.

Skipping to LA and the Bay Area -- actually don't let me leave the Bay Area. Life science is a force to be reckoned with. It continues to be the most dynamic in terms of activity and what we see going on. There is no -- very limited supply. I mean really BioMed and their Gateway of Pacific project is going to be the only shell and core complete project by the end of this year. I'll give you just a quick analogy. There was a company in Hayward, which is in the East Bay. A life science company. Came out of nowhere. Signed 109,000 square foot lease in Sierra Point in December. And that literally came out of nowhere. They had the choice to wait for the BioMed project, but they ended up taking Sierra Point, which we think is the secondary market to Oyster Point, just so they could lock in space. So I think it gives you a flavor of the robust nature of the life science market and what's going on there. And one other piece of color I'd give you, if you look at life science in the Bay Area, there are about a dozen life science biotech companies in Mission Bay in San Francisco. There are over 180 of those companies in South San Francisco. So it's just a very vibrant growing market and we're really happy about that.

Los Angeles has been right up there with San Francisco in terms of shutdown and very restrictive shutdown. But I think, a really good bellwether or indicator is that restaurant activity and interest in -- we have a couple of restaurants that are vacant has picked up. We had no activity whatsoever in '20. I mean a couple of inquiries, but now we have conversations and paper being exchanged in Los Angeles, as well as San Diego on vacant retail that we have. And as we've said on previous calls, really the sweet spot in Los Angeles are three markets. It's Culver City, Hollywood and Burbank. And that's where the production is happening. That's where the employees are. I think you're going to see a continued trend of employees and employers seeking out space east of the 405 Freeway for the reasons I just stated cited: transportation access, housing, talent and where the employers are based. So I think, in general, with these markets I've talked about so far, you're just going to see this -- we are in a transitional period right now. And it's -- the sentiment in the markets is that people are feeling better about it and sublease space will be absorbed and things will start to slowly improve.

San Diego -- I'll finish quickly. Again very robust life science market. We've also got it compounded by Amazon and Apple both competing for -- would have been life science space with life science companies. So areas like UTC, Del Mar, where we operate, are really benefiting from that demand. So again, it's a transitional year. I don't want to be overly optimistic. There is -- we have a ways to go, right. We have to get that vaccine out and into people's arms. But it's feeling 100% better than it did in March or April or May of last year.

Nicholas Yulico -- Scotiabank -- Analyst

Okay. Great. Thank you, Rob.

Operator

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

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Hey, everyone. I just wanted to circle back on the DIRECTV. Michelle, I think you said 2022 would be the termination. Can you just kind of give a little bit of details about their termination option? And also outside of DIRECTV, maybe any other top 15 tenants with near-term early expiration options that we should have on the radar?

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Yeah. Hi, Craig. We are limited in terms of what we can say on DIRECTV at this time. But I said that they have a contraction option at the end of 2020, with the effective date being early in January of 2022 for up to 150,000 square feet. And with respect to our top 15 tenants, there are no other material contraction options associated with any of those tenants.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

That's helpful. And then just on kind of maybe DIRECTV, but in general -- Rob, that was a really good overview on the leasing. But just a little bit on kind of what your mark to market is in the portfolio? I know there is a lot of concern about net effective rents getting weak, but your mark to market has always been pretty strong. So just your ability to absorb any potential weakness here in the near to medium-term in your markets?

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

Yeah. I'll start this and Michel may want to jump in on it. Craig, I think, again, if you look at what's happening -- and this is transformational on the West Coast, but I think it's going to happen across the country. There are companies that grew and they grew into B-quality type buildings. They are still growing. And they're going to use this opportunity, whether it's in San Francisco, LA, the West Coast or New York, to upgrade their facilities. And that's what we're seeing happening. And in fact the example I gave in San Francisco of tour activity and that sort of thing are -- that very example where a company -- they're growth companies. They are in B-product buildings. They can now take advantage of A-product. And we have the good fortunate being pretty leased up in San Francisco. And what I think you're going to see is that institutional quality, great landlords with great product are going to hold their rates. And you're seeing that already across the board with renewals, not only with Kilroy, but renewals at the other trophy properties that are in the San Francisco Financial District where rates -- renewal rates have been either at pre-COVID rates or higher. You may see landlords in those -- in that description I just gave, the class -- the institutional class of landlord increasing TI's here and there, but I think that -- if we had a lot of space, I think we'd feel comfortable keeping our rates where they were pre-COVID, given the quality of our portfolio.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Yeah. And on the lease expirations or mark to market rent, it's hard to peg where rents are at this point. But we said there is limited expirations in 2021, and we think rents are roughly 20% below market.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

That's helpful. Thanks.

Operator

And our next question comes from Steve Sakwa from Evercore ISI. Please go ahead with your question.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. A bunch of my questions were asked already, but maybe, Michel, I just want to make sure I understand. You talked a little bit about the retail and some of the rent that you're not collecting. I just want to know kind of in aggregate when you sort of look at the Q4 results, I'm trying to really just get a kind of an aggregate number of how much rent you're maybe not collecting from office, but primarily retail tenants that are still kind of in your occupancy stats but maybe move to cash accounting? So like what is not being recognized kind of in the P&L today that you may start to collect going forward?

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Yeah. So we said 90 -- roughly 90% of our retail tenants are on the rent deferral program. And roughly 70% of that program are already on a cash basis. Does that answer your question, Steve?

Steve Sakwa -- Evercore ISI -- Analyst

Well, I'm making file [Phonetic]. I'm just looking for maybe a dollar figure, just to kind of say $2 million, $5 million, $10 million. I'm trying to kind of get a sense for, if those tenants sort of all come back, what is the dollar amount that we should be thinking about -- maybe you won't get all of it back, but sort of what's the growth potential pickup that you might get if all those tenants came back online and were sort of paying rent again?

Tyler H. Rose -- President

Yeah. I think we said -- in Michelle's comments that one month of rent deferral for these tenants is approximately $1.5 million. So for quarter, it'll be $4.5 million.

Steve Sakwa -- Evercore ISI -- Analyst

Okay. And anything on co-working or is it really the issue really I guess center on just retail?

Tyler H. Rose -- President

So, on co-working, we had -- we didn't have a lot of co-working going into the crisis. And we've taken most of our co-working tenants to a cash basis already. We're really just left with one co-working tenant in an immaterial amount, if we did go to cash basis of around $0.01 for 2021. So we're in very good shape on the co-working front.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah. Steve, this is John. And Tyler you might comment on this. The other component of rent that we're not collecting that we normally collect would be monthly and transient parking revenue. And the magnitude of that, Tyler?

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

That $1.5 million a month.

Steve Sakwa -- Evercore ISI -- Analyst

Okay. Great. That's helpful. And then I know you said this kind of early lease termination. It's not really prevalent in the current portfolio today. But I'm just curious, Rob, is -- are things like that becoming any more prevalent in lease discussions? I know I heard about one at least in New York. And I'm just wondering if tenants are looking for more flexibility? Are they trying to put some kind of early termination clause into the leases to give them a little more flexibility?

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

It's an interesting question, Steve. If you go back pre-COVID particularly with tech companies, the reason that if they tried to negotiate terminations and that sort of thing was because they were growing so quickly. They were afraid of growing out of the premises they had. And we haven't seen -- it comes up, frankly, in every negotiation and kind of in every cycle. We had -- Kilroy have had the good fortune of resisting giving those sorts of concessions, primarily because we're also -- a lot of what we've done is ground-up development and it just doesn't pencil to give a termination rate in a ground-up development.

Steve Sakwa -- Evercore ISI -- Analyst

Got it. Thanks.

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

And conversely also, you do have discussions about options to grow and that sort of thing that happened as well. So it's not just always ratcheting down. There's often -- more often than not discussion about, OK, if we're taking a building what happens when we need more space, where can we grow, that kind of thing.

Steve Sakwa -- Evercore ISI -- Analyst

Okay. That's it from me. Thanks.

Operator

And our next question comes from Derek Johnston from Deutsche Bank. Please go ahead with your question.

Derek Johnston -- Deutsche Bank -- Analyst

Hi, everyone. Thank you. While many point toward San Fran as one of the weaker US market at this point, you guys are still pretty well leased there. But as you had mentioned demand and sublet headwinds kind of remain, more concerning to us is your LA lease rate. Now, you're only 88.3%, I think, further declining in 4Q by 330 basis points. And this is the weakest we've seen since we've been keeping track back to 2012. So I guess the question is what drove this quarter's big decline and what can you guys do to plug the hole in LA?

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

Do you want to start -- I mean, I'll address the vacancy in LA. We have in Hollywood space that's about 75,000 square feet. It's in Colombia Square, which is the preeminent Class A project in Hollywood. As I said, with tech and every other company, production companies have basically been on hold over 2020. To just give some color, we had little to no interest -- and we were also negotiating with the tenant that was in the space to terminate them. But in 2020, we had a little to no activity on that space. And now we have five different entities looking at either all of it or portions of it. And that's -- again, that's come up in the last two to three months. So wherever their space and vacancy, I guarantee, it's been hampered by lack of availability of people to tour. People not being comfortable touring even if they can due to the pandemic. And so, it has really impacted LA. But I feel given the growth and the demand that we see from the content producers and the strength of these companies, I think we're going to be just fine.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

And just to follow up on your question about the occupancy decline, largely, it was driven by the Long Beach expiration that we've talked about. And that impacted both LA and the overall portfolio, obviously.

Derek Johnston -- Deutsche Bank -- Analyst

Okay. Thank you. And next, this is more of big picture. But how is the work-from-home trend changed business leader decision making, and I'd say, especially for TAMI and FIRE tenants? We acknowledge life science has been a bright spot. But I'd say we have a pretty good sense of the cyclical impacts of the recession on office REITs. But there does seem to be some evidence of work-from-home secular shift at play as well. How do you view? And could you address the possible impacts of a work-from-home secular risk on office space demand and net effective rents in your markets from what you can see at this time? Thank you.

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

Sure. This is Rob. I'll address that, again. As I said earlier, when I was going through some of the hiring numbers, it's just not possible with that many people are going to be working from home 24/7. There is -- and if you look at the FANG companies and the other large tech companies behind them and including FIRE category tenants, every one of those entities is pretty much a work in the office entity and some of them have been very public about it. If you look in Google, Netflix, and what their CEO said about working from home versus working in the office. Microsoft CEO, same thing. As John said in his remarks, working from home, the pandemic has changed the dynamic. Working from home will be a more accepted practice, if you will, or more formalized practice, if you will, in every workforce and labor force. However, you're not going to be doing the team building. You're not doing the collaboration. It's extremely difficult. We're going through it at Kilroy ourselves, extremely difficult to on-board new employees, when they can't meet their colleagues or really ramp up as quickly as they would ordinarily.

And frankly, aside from the employer demands, it's also becoming pretty clear from employees, especially young, talented, aspiring employees who really can't get face time with their bosses and get a career path established because they are working from home. So I think the world looks to tech to be the leaders in what's going on. And right now, tech has said people should stay home until we have clarity on the pandemic. But the conversations we're having with our tech clients and other large tech companies are some of the advanced plans to begin opening in 2021 when they were -- mid '21 when they were actually looking at the end of '21. So I think there is a lot that's going to unfold here in the next three to four months. But I personally just think you can't make a film at home. You can't collaborate on software or a complex problem solving from home. And so, as we said, there are going to be various times people are working from home, but you're going to have large teams needing to be in office space, using the technology that office provides.

Operator

Our next question comes from Frank Lee from BMO. Please go ahead with your question.

Frank Lee -- BMO -- Analyst

Hi. Good morning, everyone. I just wanted to touch on some of the prominent headquarter relocations announced since your last call in California. What are your thoughts on the longer-term implications there? And maybe in the shorter-term, have you seen any early impact on rents or tenants further delaying leasing decisions?

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

I'll address part of it. And John, please jump in if you feel like you want to. But let's specifically talk about Oracle, for example. They've been a long time headquartered Bay Area company. They announced moving to Austin, their headquarters. But if you look at Oracle over the last 15 years in the Bay Area, they have not been an absorber of space. They have not signed one third-party lease since they've been headquartered in the Bay Area. They've grown by acquiring companies. They've generally kept the space of the company they acquired or as the lease expired, didn't renew it and absorbed it within their portfolio. What we understand about that relocation is they are continuing to grow and hire tech talent in the Bay Area. They're not planning to pull the plug on the people that actually create their growth in their business, and they are continuing to look at other markets to expand as well. So I think it depends on how you look at the headquarters relocation and what that really means. Does it mean the support services like HR, accounting, finance, that sort of thing, that are going to markets like Texas versus where the talent and where you can hire the talent in bulk? Yes.

Frank Lee -- BMO -- Analyst

Okay. Thanks. And then question on the redevelopment opportunities at Blackwelder. What are your current thoughts there? And could we see redevelopment plan to accelerate given the strong leasing activity in the Culver City market and just general overall strong media content demand?

John Kilroy -- Chairman of the Board and Chief Executive Officer

This is John. We're evaluating that. We had some elections that had occurred in LA before we wanted to develop our expansion plans there. We'll be able to talk more about this over the course of the next 12 months. But I don't see anything happening soon. We have tenants that are in place. We have people that want all the space that comes up and will take everything that we have. If we go down that route, then we block ourselves from future development. So we're sort of in the assessment period. With COVID and the things that we've been talking about so much on this call, it just hasn't been a high priority for us to figure out the development scheme there, but we will be.

Frank Lee -- BMO -- Analyst

Okay. Thank you.

Operator

Our next question comes from Dave Rodgers from Baird. Please go ahead with your question.

David B. Rodgers -- Robert W. Baird & Company -- Analyst

Yeah. Maybe John or Elliot, you guys have become more positive over the last couple of quarters just on the ability to develop here in 2021, and that came through again today. I guess, I'm curious on the flip side of that from a funding perspective. How you think about funding, maybe KOP Phase II? Are you comfortable where you're at today? And then John, maybe talk a little bit more about some of the asset sales you had previously discussed that were put on hold with COVID, and how the demand might be for those kind of credit tenant net leased assets that you had considered selling?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah, well, let me deal with development spend. And some of this is a repeat of what we had in our prepared remarks and what Michelle mentioned. But we have $1.6 billion of development under way today. And the spend -- pardon me, the spend on that in 2021 is $275 million, in 2022, it's $200 million, and then we're done. If we add KOP Phase II, there is roughly $750 million of incremental spending. And if we started that in the second quarter, we'd spend about $75 million this year, $200 million next year, and then $475 million in 2023, 2024, with most -- I think probably most of that is weighted to 2023. So if you add all that up, you've got roughly $350 million, $275 million on the current under development, plus $75 million KOP II this year. Next year, $200 million to finish off the current development, $200 million more for KOP Phase II. That's $750 million over the next two years, Dave.

David B. Rodgers -- Robert W. Baird & Company -- Analyst

All right.

John Kilroy -- Chairman of the Board and Chief Executive Officer

And then $475 million in 2023-2024. So million -- $1.2 billion, '25 in round numbers. And then, Michelle, you want to talk about our -- just remind everybody what our current cash on hand and bank lines are, and then I'll deal with the second part of your question, which is dispositions.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Sure. Yeah. As I mentioned, we've got roughly a $1.5 billion of liquidity today. [Technical Issues]

John Kilroy -- Chairman of the Board and Chief Executive Officer

Michelle, you're breaking up again. You're breaking up.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Okay [Technical Issues]

John Kilroy -- Chairman of the Board and Chief Executive Officer

Maybe you call in by your cellphone, maybe. And maybe I'll just try to deal with that, if you can hear me. Can people hear me?

David B. Rodgers -- Robert W. Baird & Company -- Analyst

Yeah.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Okay. Great. Sorry about this confusion. I mean, it just comes with the telephone company, I guess. As Michelle mentioned, we have roughly $1.5 billion in current liquidity. Half of that is on our line. Half of it's in cash. So we're well -- we're completely funded on anything that's under development and anything that's under way or would become under way over the next couple of years. Obviously, if we start something else, then we've got to talk about it. We've always said with the Flower Mart that we'll have our funding plan in order and communicate that to the market before we start. I don't see starting this Flower Mart anytime soon. We need greater clarity on that. Nothing else is ready to go for at least another year.

In terms of dispositions, as we always do, we evaluate what things we might do. I think we'll have some thoughts on that to express within the next couple of conference calls. Nothing to express today, other than the market is strong for good assets, very strong. And I don't -- Elliott, could give you examples on that, some of the record price per square foot and cap rates and so forth. So we think we're in great shape on the liquidity front. Great firepower to do whatever we want to do from an opportunistic standpoint, and we're going to stay that way. We are not seeing anything that's really into stress that we would have an interest in buying at this point.

David B. Rodgers -- Robert W. Baird & Company -- Analyst

All right. Thanks, John.

John Kilroy -- Chairman of the Board and Chief Executive Officer

You're welcome.

Operator

And our next question comes from Jamie Feldman from Bank of America. Please go ahead with your question.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Thank you. I wanted to get your thoughts on life science supply, with so much capital going into the space. Can you maybe talk about, if you look over the next couple of years, the demand pipeline versus the supply pipeline in Seattle, San Diego and Bay Area?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah. Well, this is John, Jamie, and Happy New Year. Let me give you a couple of thoughts on life science supply and then Rob can give -- drill into the specific markets. You know it's interesting on life science now -- it's the du jour flavor. And I say that a little bit kiddingly, but it's true. We're seeing crummy old shopping centers that don't have any relationship to any life science market or any kind of proximity to what drives life science, build themselves as life science and title future life science campus and so forth. That's just nonsense. Brokers have great imaginations and I think they've taken them to new heights.

There is a -- there has been some real success in the traditional life science markets on converting office space or other space that has the physical characteristics that lends itself to conversion. And then there's a whole bunch of people talking about it. And what we see in the private world are a lot of people that are out trying to raise funds or have raised funds to say they're going to expand life science and they're buying some strange things and wish them very success. But I don't think all of them are going to be successful. That doesn't mean there won't be supply increases, there will.

But if you look at where we're primarily focused, which is the City of South San Francisco, we have the largest development of life science capability of any major cluster on the West Coast, if not the entire country. We have the ability to deliver many millions more square feet there in the best market on the West Coast, where it's proven, it's kind of Main & Main [Phonetic], if you will.

In terms of the supply that's coming on stream, Rob, I don't know if you want to talk about that with regard to Seattle or if you're prepared to talk about that with regard to Seattle and San Diego, and Bay Area.

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

Sure. Jamie, just -- again, starting with Seattle, the life science hub in Seattle, the place to be is South Lake Union. And similar to Oyster Point, as well as our UTC locations, you have these competing forces of tech companies and life science companies. And this is somewhat of a generalization that life science companies are going to cluster around universities in the same way the tech companies do. So right now in Seattle, BioMed has a project. There is very little current supply. It's hard to find sites for life science.

And I think another phenomenon that may change or life science may be forced to change the way they operate is that tech is much more nimble and much more agile, and they end up signing leases quicker than life science companies do. I gave that example earlier about the life science company in South San Francisco that signed in December. It's just -- it's a different way of operating and they need to be more nimble and it's very difficult. There are secondary markets outside of the cluster area that I would call South Lake Union. But where Kilroy wants to be is where there is supply constraints, where it's harder to get sites and where you can drive rents.

So South San Francisco, as I mentioned, we're tracking 2.2 million square feet of supply, two-thirds of that is already leased. BioMed will have the only ground up construction, shell and core complete end of this year. And I gave you an example, again earlier about the 180 different companies, biotech companies, in that market. And it is not there -- It's unrelenting. I mean, we're tracking about 3.5 million square feet of demand right now for tenants and our project, specifically, Oyster Point. We've been very active in presentations and zoom meetings and some physical onsite presentations to companies. So we're feeling very good about that.

And again, talking about clusters, you really only have South San Francisco, and then you have parts of San Mateo County, but the life science market in the Bay Area really kind of stops at Palo Alto. So it's hard to imagine going back to John's point about conversions and that sort of thing that you'll see life science leapfrog into San Jose, for example, even though there is R&D type product that may be able to be converted, that's not where they want to be.

And then San Diego, particularly UTC, where vacancy is about 1.4%. I mentioned earlier the theme and I just mentioned now too, you've got these competing forces of tech versus life science, and it's literally a race for space. So hopefully that gives you some color.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah, Jamie. There is building that I toured the other day that I'll go and [Phonetic] mention. That's here in San Diego. That was office building. It's institutionally owned. It's got some vacancy. It will have some increased vacancy over time, but not for a number of years. It would not be a product I would have been interested in buying for office, and it's now being marketed for as life science conversion. I went and walked and toured it the other day. No way, no way. There's just so much noise in the market right now, everything is about life science. And there are some excellent examples of where it does work and will work. ARE [Phonetic] has communicated that to the market, I'm sure, some of the stuff they're doing in San Diego and elsewhere, but there is a lot that's just being marketed as potential life science that in my view doesn't stand a chance.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. I appreciate the color. I guess, as I think about it though as you guys think about it, I mean do you feel like there's a window here as we talk to people across the different markets, Boston especially, it's like you've got a couple of years here of really good demand and under-supply and then the question is, what does it look like after that? Do you feel the same way in your markets, like there's kind of a race to get the good product up? Or do you think you can be patient and as long as you have the best product you're not in any hurry?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Well, I, that there is, we always look at the competitive set of what might be coming back on the market becoming vacant or might be developed and you try to as best you can, put yourself in a window where you kind of have a sweet spot. I think that's exactly what is happening with Phase II of KOP, that we have a beautiful window there of a couple of years where there is no product that can come on stream to compete with us, and certainly nothing of any high quality. And then beyond that, we are kind of at the ultimate sweet spot there. So I think that we will have great demand. Unless demand were to drive completely, we're in a great spot. And as Rob mentioned, we could lease the whole thing to tech, which is not our intent, but we could. So, we've got kind of competing demands there.

And other than that, we have some life science capable stuff that we can develop down in Orange -- rather in San Diego. It's too early to talk about that. Hopefully, later this year, we'll have something we could talk about. I'm not promising. But we're having some good discussions. And yeah, there -- it could be -- it's that's old -- remember the old thing that always happen in our office buildings. When I was a private guy, there was some report that said, a market needs 400,000 square feet of office space to meet demand, and then eight different developers go out and develop 400,000 square feet. And so all of a sudden you flooded the market with oversupply. Could that happen? It's kind of hard to see it happening in the preferred locations because the barriers naturally are so great. A lot of people could develop what they call life science products in areas where patent, which haven't been traditional life science markets. But I'm not sure people will go there. So we'll just see what happens. But there is a lot of froth in the brokerage community and some of the folks trying to get into life science that haven't had experience in it. So we'll see what happens.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. That's really helpful. And then, just thinking about leasing volume. So, dropped to 61,000 square feet this quarter, 123,000 square feet last quarter, but you talked about more activity. I mean, how long do you think before that number starts to grow again? Is it a six-month lag...

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah. Hey, Rob. -- Sorry. Rob, do you want to talk about kind of what's going on in the first month of the year for us, and then further to sharing these questions?

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

So we've -- I may have said this earlier. We've signed 75,000 feet of leases in January with a cash increase of 10% to 15% and GAAP increase of 20%. We have other leasing activity. We're working on that. We haven't announced yet, in our core portfolio. And I think, to more directly answer your question, Jamie about how long. Two things are happening. I think companies have been on hold basically for a year. And there are fundamental changes that are happening within those companies. For example, like I said, if they have a lease that's coming up and they're in a B-product building and they want A, they're going to make that move as a strategic move. I think the more robust recovery if you will, will happen when there are larger numbers of vaccines out and people are actually coming back to the office and their companies are providing that flexibility. And I've cited on other calls, several of the companies we're close to have changed their plans, where they're actually opening offices that people were forbidden to go to. They're opening them now with plans for them to be back at work in March, not the entire workforce. But people that have put their hands up saying I can't work at home anymore.

So I really think it's, watch the vaccine rollout. And I think you'll see a correlation to leasing activity, tour activity, etc.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. Thanks, Rob. I appreciate everyone's thoughts.

Operator

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

John P. Kim -- BMO Capital Markets -- Analyst

Thank you. Good morning. John, you mentioned in your prepared remarks having that liquidity to go on the offense potentially. Can you just elaborate on what that means? Is that development opportunities or something else potentially?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Well, See, If you take a look at, not that this is an absolute roadmap. But if you take a look at 2009 and 2010, you saw us move to San Francisco, then Seattle. You saw us buy, then you saw us develop, and we bought a very good pricing. We're not saying the pricing that's attractive to us as a buyer today. But if we do, and it meets our kind of our square circle, and circle will be active. I don't know how much of that will happen. I think that's there's a lot of folks that could become sellers if the vaccine doesn't s rollout. Do I want -- do we want to be a big buyer if the vaccine does rollout, that's a whole different question. But we had a lot of discussions with people. People that are interested buying our product, people that might be interested in selling their product. There isn't clarity at this point, John, that there is a path to a highly accretive acquisitions. There may be in the limited amount in the value-add area. We always see some of that. But that's what my comments were directed at.

John P. Kim -- BMO Capital Markets -- Analyst

Got it. Okay. And it sounds like I believe from Rob's comments that you want to hold rents given the quality of your portfolio. But given where your occupancy level is today, at what point do you think about becoming more aggressive in building up occupancy?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Never going to share that with you on up on. We're not going to comment on that on this call. I don't know how many tenants listen or will get our report. But I don't think that is in our best interest to communicate. We obviously have -- the market is pretty efficient. And if we feel that we can get high rents, we'll get them. And if we feel we can't and we have to adjust, we'll will adjust.

John P. Kim -- BMO Capital Markets -- Analyst

If I could squeeze one more in. The DIRECTV termination. Is there a termination fee associated with that? Or is there no penalty?

John Kilroy -- Chairman of the Board and Chief Executive Officer

There is a fee associated with it.

John P. Kim -- BMO Capital Markets -- Analyst

Okay. Thank you.

Operator

[Operator Instructions] Our next question comes from Daniel Ismail from Green Street Advisors. Please go ahead with your question.

Daniel Ismail -- Green Street Advisors -- Analyst

Great. Thank you. I was hoping to get a bit more color on your health -- excuse me, you're life science and healthcare exposure. Can you parse out how much of that 14% of rent is currently being used as lab space?

Eliott Trencher -- Senior Vice President and Chief Investment Officer

This is Elliot. So it's not an exact science, but I think you can also refer to. We've given you square footages of how much of our space is life science, and I think we've talked about that as the million plus right now, that's active life science. So that's one data point. If tying in to the 14% is a little trickier, but call it 25% to 30% give or take.

Daniel Ismail -- Green Street Advisors -- Analyst

Okay. Great. And then going back to the '21 objectives. John, you mentioned taking a more active role on the regulatory front. Is there anything currently on your radar or being pursued at the moment with regards to any of those? I think you mentioned in the past.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Well, yeah, I mean if you think about it, there is. I'll address that in greater depth as the year goes on. I don't really want to give the opposition too much of a heads up, but let's just say there is a bunch of us that worked on Prop 15, and that group as a coalition has grown significantly to include a lot more than real estate companies, and we're pissed off.

Daniel Ismail -- Green Street Advisors -- Analyst

Okay. Fair enough.

John Kilroy -- Chairman of the Board and Chief Executive Officer

We're going to fight and I think the climate is right. You see right now, recall that fitness. I'm not saying this is part of the initiative, but you can see in California. I think you're in California, aren't you?

Daniel Ismail -- Green Street Advisors -- Analyst

Yes, we are.

John Kilroy -- Chairman of the Board and Chief Executive Officer

Yeah, so our governor is not very popular, not popular with box boys [Phonetic], restaurant tours, executives. Now, everybody is pissed off. Thinks he is an idiot, and I do too. And then there's a lot yet that gets out there. And they need to be confronted. And policy needs to be good, not bad. And we have our problems just like all states and -- or big cities that have been stupid. And we have a lot of stupid people and a lot of stupid policies. And there's a lot of us that are pissed off. And it's not just people in the real estate business or people that are wealthy, it's people at every level. And I think you're going to see a ground swell of opposition to tax increases and to other things, and that's what the polls are showing.

And we have, as I often say, if we are a rug merchant, we could roll up the rugs, put them in the car and go over to Arizona or in Nevada or wherever we can. We got real estate that's stuck to the ground. We got to fight.

Daniel Ismail -- Green Street Advisors -- Analyst

Do you foresee this being more of a state level issue or working within the local jurisdictions that you've invested in San Francisco and San Diego and where else?

John Kilroy -- Chairman of the Board and Chief Executive Officer

Unfortunately, the idiots are everywhere, and we're going to have to confront them in quite a few different venues. Some will be at the state level. The idiot, whether its policy or people, but also at the local level. There hasn't been sufficient push back. I think we've -- as a state and some of these cities, and I would apply this to some of the cities and states outside of California. It's been too good for too long and people just look the other way. I don't like this policy, but everything seems to be going well. Now, people are starting to say this is getting too expensive. This is being intrusive. I'm tired of people telling me what to do. I want to fight back. I'm tired. I'm sick and tired. I'm not going to take it anymore. I think that was the line from a movie network that probably nobody on this call remembers because it was so long ago. But it's sort of that attitude. And there is some policies that need to change. There's a lot of good policies. A lot of bad ones.

Daniel Ismail -- Green Street Advisors -- Analyst

Got it. I appreciate the color and the candor, John.

John Kilroy -- Chairman of the Board and Chief Executive Officer

You're welcome. You know how much I love politicians.

Operator

And ladies and gentlemen, with that we'll conclude today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

Thank you for joining us today. We appreciate your continuing interest in KRC. Goodbye. [Operator Closing Remarks]

Duration: 76 minutes

Call participants:

Michelle Ngo -- Senior Vice President, Chief Financial Officer and Treasurer

John Kilroy -- Chairman of the Board and Chief Executive Officer

Eliott Trencher -- Senior Vice President and Chief Investment Officer

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

Tyler H. Rose -- President

Emmanuel Korchman -- Citigroup -- Analyst

Nicholas Yulico -- Scotiabank -- Analyst

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Derek Johnston -- Deutsche Bank -- Analyst

Frank Lee -- BMO -- Analyst

David B. Rodgers -- Robert W. Baird & Company -- Analyst

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

John P. Kim -- BMO Capital Markets -- Analyst

Daniel Ismail -- Green Street Advisors -- Analyst

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