Good morning, everyone, and welcome to the KRC 1Q '24 Earnings Conference Call. My name is Angie, and I will be coordinating your call today. I will now hand you over to your host, Bill Hutcheson, Senior Vice President of Investor Relations and Capital Markets. Please go ahead.

Thank you, Angie. Good morning, everyone. Thank you for joining us. On the call with me today are Angela Aman, our CEO; Justin Smart, President; Rob Paratte, our Chief Leasing Officer; and Eliott Trencher, our CIO and CFO. At the outset, I need to say that some of the information we will be discussing during this call 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 webcast live on our website and will be available for replay for the next 8 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 available on our website. Angela will start the call with a strategic overview and quarterly highlights, and Eliott will discuss our financial results and provide our updated '24 guidance. Then we'll be happy to take your questions. Angela?

Thanks, Bill, and good morning. On our last earnings call, I summarized some initial takeaways from my first couple of weeks as CEO, including Kilroy's strong portfolio positioning, the underlying strength of our talented team and the quality of the relationships with our tenants, and a clear trend of improving fundamentals within our market. As I have settled in over the last three months, my initial takeaways continue to be reinforced. The quality of our portfolio and platform uniquely positions us to benefit from the recovery we are beginning to see take hold in our market. I'm happy to report on a very active first quarter for Kilroy. Leasing volumes were strong. We enhanced our liquidity profile and extended debt maturities. And last night, we raised both same-property NOI growth and FFO guidance. During the first quarter, we signed approximately 400,000 square feet of leases, which represents Kilroy's highest first quarter leasing volume since 2017 and a 40% increase relative to the first quarter of 2023. We saw strength in our Southern California markets, and across multiple industries, including gaming, professional services, finance, and technology. Some specific leasing highlights include: First, as previously discussed, we signed a 77,000 square foot renewal with Riot Games for Riot's arena, a unique event base in the heart of their West L.A. campus. Second, we signed 70,000 square feet of new and renewal leases across our Del Mar portfolio in San Diego, resulting in a 98% lease rate in that submarket. The San Diego market in general and Del Mar specifically has been the strongest region in our portfolio with physical occupancy approaching 90%. High fiscal occupancy rates have given companies certainty around their space needs and confidence to make real estate decisions, which has translated into strong results for our portfolio. And finally, we signed our first new lease at West 8th street in Seattle, where an AI company took a partial floor. AI demand is notable in both San Francisco and Seattle, where the aggregation of top tech talent is most pronounced. We fully expect that the growth in AI over the next several years will lead to accelerating demands in our markets from both big tech platforms and start-up companies alike. Our forward leasing pipeline also remains strong. In particular, at Kilroy Oyster Point Phase 2, tour activity has meaningfully accelerated during 2024 with several large-format user tours occurring over the last six weeks. We also remain on track to deliver our spec suites in one of the three Phase 2 buildings in October and we'll be ready to capture demand from smaller users with requirements for move-in ready space as we approach delivery. We remain excited by the uniqueness and quality of this project and its long-term competitiveness within the South San Francisco submarket. Shifting to the fundraising environment, we are starting to see some green shoots, suggesting capital flows are improving in the technology sector. During the quarter, Stripe, our tenant at KOP Phase 1, raised a round of private funding at a $65 billion valuation, representing a 30% increase in valuation from just a year ago. Additionally, Reddit, our tenant at 303 2nd Street in San Francisco, successfully completed their IPO at a $6.5 billion valuation, the high end of its indicated range. Blue-chip tech companies are demonstrating access to capital, which bodes well for the broader tech ecosystem and ultimately for real estate requirements. As it relates to Life Science, after record years of venture capital deployment during the height of the pandemic, the pace has decelerated to more normalized levels. That said, 2023 saw over $30 billion of activity, significantly higher than any stand-alone pre-pandemic year, and 2024 appears to be on pace for similar levels. As the population continues to age, healthcare costs continue to increase and novel drug approvals continue to proceed at an accelerated pace. The stage is set for continued growth in the life science sector. And we believe that our portfolio is extremely well positioned to benefit from these long-term trends. Turning to the transaction market. We are starting to see some signs of life. Sellers for quality properties are beginning to softly test the market. The wide bid-ask spread that has been observed over the last several quarters persists and debt financing is challenging to secure. So overall transaction volumes remain low. We are hopeful that we'll begin to change over the coming quarters. As we navigate this environment, we will be patient and continue to adhere to our three core pillars: high-quality properties, strategic capital allocation, and a fortress balance sheet. Ultimately, we expect to be both an opportunistic buyer and a strategic seller when market conditions permit, making decisions based on real estate fundamentals and risk-adjusted returns, not based on capital needs as we have maintained exceptional liquidity and financial flexibility. We are proud of the company's capital allocation track record and are confident that we will identify meaningful opportunities to create value for shareholders moving forward. Before turning the call over to Eliott, on behalf of the entire management team, I want to thank our Kilroy colleagues who have continued to execute so effectively across all disciplines. I've been extraordinarily impressed with the quality and commitment of this team, specifically their motivation, creativity, and collaboration. I look forward to what we can deliver together over the coming year.

Thank you, Angela. The first quarter represented a good start to the year with FFO of $1.11 or $0.03 above the fourth quarter. The increase was predominantly due to lower straight-line rent reserves and lower G&A, partially offset by lower occupancy and higher net interest expense from our recent bond deal. On a same-store basis, first quarter cash NOI was down roughly 7%. As previously noted, the prior period included $12 million of restoration payments, making the first quarter of 2023 a difficult comparison. At the end of the quarter, our stabilized portfolio was 84.2% occupied and 85.7% leased. The decrease from the prior quarter was due to some move outs, mainly in Los Angeles, partially offset by a move in at Indeed Tower in Austin. Of note, one of the move-outs during the quarter was Box, who gave back roughly 50,000 square feet in Redwood City. However, this space is already backfilled with a long-term lease to a best-in-class law firm who we expect to move in by year-end. Turning to the balance sheet. Net debt to trailing 12-month EBITDA was in the mid-6x. As you may have noted, we are now disclosing this information on Pages 3 and 29 of our supplemental. As Angela referenced, on the capital markets side of the productive quarter. In January, we raised $400 million of 12-year unsecured bonds at a coupon of 6.25%. An opportunistic transaction, we feel even better about today given the changes in the interest rate environment over the past several months. We elected to use a portion of the proceeds to pay down $200 million of our $520 million term loan and simultaneously executed a 12-month extension for a $200 million tranche of the remaining $320 million, bringing the maturity date for that portion to 2027, including extension options. In March, we were thrilled to announce the recast of our line of credit, extending the maturity date by three years to 2028 while maintaining total capacity at $1.1 billion. We appreciate the partnership and support demonstrated by our bank syndicate and believe that these two transactions highlight that lenders and fixed income investors continue to support the credit of best-in-class sponsors across the office and life science sectors. Finally, in March, we announced the refreshment of our stock buyback and ATM programs. While we have not been active on either front, we believe it is important to have all tools available to the company particularly in light of the current volatility in the marketplace. As a result of these transactions, our liquidity remains robust. As of quarter end, we had over $2 billion of available liquidity, comprised of $950 million of cash and marketable securities and $1.1 billion available on our line of credit. Our projected uses of capital for the remainder of the year are between $550 million and $650 million, broken down as follows: roughly $400 million of debt maturities and $150 million to $250 million of development spend. Before we get to guidance, we wanted to point out some enhancements we made to the supplemental this quarter. Some of these changes included, on Pages 20 and 21, we expanded our list of top tenants from 15 to 20 and added information around tenant industry classifications. On Pages 27 and 28, we added more disclosure around our debt capitalization stack and annual debt maturities. Finally, on Page 17, we bifurcated our first-generation CapEx into two buckets. One for development and redevelopment projects that had been moved to the stabilized portfolio. And the second one for major repositionings, which consists of projects undergoing value-accretive material renovations. For the reported period, the only meaningful project in this bucket is West 8th Street in Seattle, which as many of you know, is undergoing a sizable renovation after Amazon vacated early last year. We hope these additional disclosures are beneficial and demonstrate our desire to proactively provide enhanced transparency to the investment community. Now let's discuss our updated 2024 guidance. No acquisitions or dispositions are forecast, though as Angela discussed, we will remain opportunistic on both fronts. As previously mentioned, the remaining development spend for the year is anticipated to be between $150 million to $250 million, which when combined with the first quarter spend represents no change to our original full year guidance of $200 million to $300 million. G&A is still expected to be between $72 million and $80 million. G&A in the first quarter was low due to timing of when we incurred certain costs. Straight-line rent is projected to range between negative $5 million and $6 million. Our average occupancy estimate of 82.5% to 84% has not changed. Cash same-store NOI is projected to be between negative 3.5% and negative 5.5%, a 50 basis point increase at the midpoint, mainly due to better parking income and fee income in the first quarter. In summary, our updated 2024 guidance is projected to range between $4.15 and $4.30 with a midpoint of approximately $4.23 or $0.05 increase at the midpoint. This increase is due to better NOI from recurring and nonrecurring items and slightly lower net interest expense due to lower-than-anticipated deferred financing costs and higher interest income. On a quarterly basis, guidance implies FFO for the balance of the year will be about $1.04 or $0.07 lower than the first quarter. The bridge to get there can be broken down as follows: subtract $0.02 for lower occupancy, which factors in our move-ins and move-outs, subtract $0.04 for lower interest income as our cash balance declines over the course of the year, subtract $0.01 due to timing of G&A spend. To conclude, we are pleased with the results from the quarter and believe the increase in guidance correlates with the improvements we are seeing in the portfolio. We have set up the balance sheet to be flexible and resilient and believe our robust liquidity sets us up to have multiple avenues to create and enhance shareholder value in the coming years.

The first question is from Blaine M. Heck with Wells Fargo.

Just wanted to touch on the 116,000 square feet of short-term leases signed this quarter. Can you just talk in general about those situations? Are these tenants that are just unsure of their business and don't want to commit to longer terms? Or should we think of this as more of kind of swing space while other spaces being built out? And then how do you feel about your ability to turn any of those into longer-term deals?

Thanks, Blaine. I'll go ahead and take it and Rob can jump in if there's anything he wants to add here. I would just say, we did some short-term leasing last quarter, which was predominantly renewals. And I would say those renewals kind of fall into the two buckets you mentioned, right? It's people sort of delaying making decisions or needing the space a little bit longer temporarily in advance of whatever their longer-term plan really is. This quarter, as you know, we signed about 116,000 square feet of short-term leases, about 30,000 square feet of that was short-term renewals, so a relatively immaterial amount. And again, on the short-term renewal side, we're not putting any capital in. Those are good deals just to preserve occupancy a little bit longer and get some additional revenue in the door. We also signed 86,000 square feet this quarter of short-term new leases. The bulk of that was made up really by one tenant, who took that space on an as-is basis. We put no capital into that deal either. And we are, as you sort of indicated, cautiously optimistic we may be able to convert that tenant to a long-term tenant within our Los Angeles portfolio. Our view right now is all leasing is good leasing, certainly, all positive net effective rent leasing is good leasing in this environment. I am actually really pleased by the efforts of the team here at Kilroy to be creative and to meet tenants sort of where they are in the market and to find ways to really prioritize occupancy, stability, and growth over the next several years.

The only thing I would add to what Angela said is that looking back at 2020, at the onset of the pandemic, we engaged in short-term leasing primarily because tenants were uncertain about the future. Today, the situation has changed. While some tenants remain uncertain, there are also new companies being formed. This trend is not limited to San Francisco; it is also occurring in Seattle and parts of Los Angeles. These tenants are seeking immediate, plug-and-play spaces and are opting for short-term leases because they plan to grow. As Angela mentioned, we are focused on profitability. We are selective about the tenants we choose and are diligent with our capital, making strategic bets on companies that we believe will grow and eventually become significant tenants in our portfolio.

Great. That's really helpful color. So I guess just to follow up, are these short-term deals something you think could continue to be relatively sizable part of your quarterly leasing in the near future. I think the perception is it brings volatility into the leasing rate and might be artificially inflating that number. But I guess if you're able to continue to bring in these short-term tenants, it could be a little bit more stable.

It's difficult to determine exactly where things will go. The short-term leases you've seen, especially the new lease this quarter, represent a unique situation. We hope that this does not result in fluctuations in the leasing numbers because we aim to convert them into long-term tenants. My focus is more on transitioning to long-term leasing rather than repeatedly signing new short-term leases to manage volatility in that short-term leasing figure.

I wanted to start with better understanding the drivers behind the guidance raise. First quarter looked like a good start on core, but I can't seem to reconcile that with the full year breakdown you provided, Eliott. So can you clarify how much of the core versus noncore items drove the increase?

Yes. I mentioned two main factors contributing to the increase: the core portfolio and the interest expense/interest income, which are about evenly divided. Within the core portfolio, it's also approximately split 50-50 between parking, which I mentioned, and fee income.

Yes. I mean, I think we're being thoughtful and creative about everything. I think there are a lot of good synergies between our office portfolio and our life science portfolio. You see that in a project like Kilroy Oyster Point in Phase 1, where we have both a combination of life science tenants and office tenants. So I don't think, unlike certain other situations where there's clearly a business that's distinct and different from the core business or the primary business of the company. It's not really the situation we have here. I think there are a lot of good synergies and certainly a lot of platform synergies across the leasing and development teams as well. So while we'll consider everything, and we'll always be looking to maximize value for shareholders in any way that makes sense. I do think there are good synergies within our business that prevent a spin-off from making a ton of sense.

I want to revisit the leasing outlook for a moment. Regarding the Riot renewal, it appears to be a three-year renewal extending to 2026. I believe there are still some leases set to expire for them this year. How should we approach securing a tenant like that for a longer-term lease? I would also ask a similar question about LinkedIn, considering they have some leases expiring this year, with a significant portion set for 2026.

Michael, it's Rob Paratte. I can't get into a lot of detail about the conversations that we have with either Riot or LinkedIn. But I think that it's safe to say, again, as I said earlier to Blaine, we are being very strategic. And as these companies are looking at their strategic sort of layout for the firm, we're trying to accommodate that. And Riot, as you know, has a very critical infrastructure here with us, with their arena, but they also have other headquarters buildings here that they're using. So it remains to be seen, but we have active conversations going on. And with LinkedIn, you recall we did in Q4, in the campus, over 150,000 foot conversion of a sublease tenant to a direct tenant. And with the 599 Mathilda, which is where LinkedIn is, we're working on a renovation plan and marketing plan, and we'll be ready when that lease expires.

Yes. I think those are important questions. I mentioned in my prepared remarks that while there is no leasing activity to report at KOP 2 currently, we've seen a significant increase in tour activity over the last two quarters, and especially in the past six weeks, including several large user tours. While this does not guarantee immediate lease execution, you cannot secure leases without increased tour activity. We're really encouraged by this development. Additionally, I noted that at KOP 2, we've transformed one of the three buildings into a multi-tenant space and are constructing spec suites. Although there hasn't been any lease execution in the South San Francisco submarket recently, we anticipate demand will come from smaller users seeking move-in ready spaces. Our recent lost deals were due to our inability to meet those immediate needs. So, as we deliver this space in one of the buildings at KOP 2 in the fourth quarter, we will be much more competitive for those smaller users looking for prebuilt lab spaces. I believe we are well positioned and are working hard to capture all the demand in the market. I'm very encouraged that tour activity is accelerating at a preliminary level.

The only thing I'd add on to Angela's comments, Michael, are that just some color on life science in the Bay Area and South San Francisco. Right now, we're tracking 2.5 million square feet of demand. That's up 25% from Q4. So that's a good bump. And Q4 was pretty flat throughout the year in terms of demand, being roughly around 1.8 million to 1.9 million square feet. Bay Area VC funding in the first quarter was about $2 billion, $2.5 billion. That's a 30% increase over Q4. And when that funding starts increasing, there's usually a 6- to 9-month lag between the funding and then tenant requirements popping up. And then the last point I'd make is that three bigger companies had successful IPOs in Q1. So we think the fundamental market is improving. And as Angela said in her remarks, this project is unlike any other in the South San Francisco market. We've got the bay. We've got the bike trails. We have the amenities that are really showing well now because tenants and prospects can walk through pretty much every built space in the project, and we're starting our landscaping now. So it's really turning the corner. And I agree with Angela on Austin. You see a lot of big numbers about Austin and sublease space, but you have to look at Indeed tower, it's the best building in the CBD, and we have a finite amount of space left and the professional services firms in Austin as well as firms outside of Austin are looking and giving us the foot traffic we need to convert to leases.

I know you're not budgeting for acquisitions or dispositions, Angela, and you're talking about being sort of opportunistic. I'm just wondering, a, what are you seeing out there? And kind of where are the hurdle rates for you, in order to kind of pull the trigger on an acquisition today, given kind of where the stock trades?

Yes. Thanks, Steve. Those are good and important question. I mean the fact is we're just not seeing much at this point, that's really come to market. That's of the quality that we're really looking for. So it's been a bit of an academic exercise to date. As I mentioned in my prepared remarks, we do think there's more market testing going on and that ultimately will lead to more transaction activity over the next 6 to 12 months. And so the team is certainly ready and capable of underwriting a lot more transactions than we've seen over the last 12 months and trying to find interesting opportunities that we think we can really bring something special to the table and drive better outcomes in the market at large. In terms of underwriting, which sort of gets to your question about hurdle rates and the cost of capital, I mean, one of the challenging things right now, particularly if you're looking at assets that we might view as high quality from a physicality perspective or a submarket perspective, but have vacancy or need to be repositioned or something like that. It's a question of really making sure we understand how much capital needs to be deployed into those transactions to reposition those assets, and as importantly, the expected timeline in order to stabilize. And those are big variables, I think, as you think about expected IRRs in the current environment. Again, sort of it's a little preliminary to talk about exactly what a hurdle rate is, based on the fact that we just haven't seen much in terms of transaction activity to begin with. But we're very cognizant of where our cost of capital is and certainly think that on an IRR basis, on an unlevered IRR basis, we'd have to be kind of in the low double-digit range to get really excited about a transaction based on realistic underwriting.

Angela, you talked about green shoots mostly on the tech and biotech side. I was wondering if you had seen anything similar in LA, any improvement on demand on the horizon. You've occupancy in the mid-70s in your portfolio, which is not unique, but I was wondering if there's anything that could turn it around?

Yes. I mean I would say, interestingly, our first quarter activity and even into the fourth quarter, our April activity. We have lots of activity in the L.A. portfolio in a range of different sizes of uses. So we are seeing some momentum there. But to your point, we have a fair amount of vacancy that needs to be addressed, so we need to see that momentum pick up. But I'll let Rob talk a little more specifically about it.

John, so just to give you some color, year-to-date, we've done 20 deals that total just about 285,000 square feet in our L.A. portfolio. Just another piece of color, we've, year-to-date, had 40 tours that total over 320,000 square feet. So the way to fill the vacancy is by getting people through the buildings and start negotiating and talking. I think if you kind of segment the markets further, Hollywood has been quite active after a long period of being fairly dormant and Long Beach has been very active as well. So again, L.A. is a very broad, big market, and we have to really segment the submarkets to really understand what's going on with demand and vacancy.

So I'll start with the first half. But in our press release, we really tried to break this out to be more explicit. So you can see we said 161,000 square feet of leasing on previously vacant space, 79,000 square feet on of new leasing, on currently occupied space, and 160,000 square feet of renewal leasing.

Yes. The San Diego market has been active lately, and there's a high demand in that area. We are seeing good activity, and I think we have more activity right now than we have remaining vacancy in the building. That's coming from new users and interestingly, also from one existing tenant in the building that's looking to expand.

Maybe the flip side of Steve's question earlier, you've mentioned before that you could consider monetizing stabilized high-quality assets, lower-quality assets and/or land parcels. So I'm just wondering what type of assets do you think we could see you sell first? How big of an opportunity could it be? And is it something that you're already kind of working on behind the scenes?

I mean there's nothing that's out of the stage that I really think is appropriate to talk about at this point or report on. You're right. So we laid out different buckets of potential sources of capital that we could harvest across the portfolio. On the call last quarter I think you laid out the buckets or reiterated the buckets pretty well. We're just always going to be looking to raise capital in places we think it's most attractively priced within the portfolio. So that may be in the future land bank. It may be in assets where we have a different point of view about the future trajectory of that asset, and it might be in higher-quality assets where we just don't feel like there's a lot of additional value creation potential at those assets as well. So how those all price on an implied IRR basis, could all be well below our current cost of capital as implied by our stock and implied by where we can raise debt today. So the goal, really, again, is just risk-adjusted returns and trying to find places to raise capital as attractively as possible.

Yes. This is Eliott. We've certainly thought about that. We like to think that we're going to be creative and look at where the opportunities are. And as you said, there is a lack of financing for that type of product. I think the challenge for us is there has to be a clear path to ownership. Our core competency is buying, operating, building office and life science buildings. And if we can't see that, then it isn't something we would seriously consider.

We have observed that some of the land parcels have included information indicating that residential development could be the optimal use for these parcels. Currently, our portfolio consists of 65% office, 25% life science, and 10% mixed use. As we evaluate potential acquisitions and sales, should we assume that any and all assets may be for sale, and will you be assessing opportunities across those three asset classes? How should we approach this?

Yes. Well, I'll say a few things. One, as it relates to the development disclosure. And as you noted, there are additional disclosures around potential residential multifamily units at East Village in San Diego and associated in Seattle. That was more of just a clarification from a disclosure perspective than anything else. That's been a component of potential expectations for those properties for quite a while, and we were TBD, I think, on at least East Village, we thought the additional disclosure was helpful for people understanding the potential value in those parcels. The company, I think, does have a really strong track record in developing and managing and maximizing value across office, across life science, and across mixed-use projects like One Paseo. I think we have the expertise and capabilities to play in any of those asset classes. As it relates to ground-up development and some of the parcels in the future land bank, I think it's reasonable to assume at this point that, to the extent that the primary or, in some cases, the only use for that parcel is outside of our core competency is that, a path of execution or a likely path of execution would be a sale of the parcel or a joint venture or something like that. But we're going to look at each and every opportunity as it comes up on a stand-alone basis and again, really focusing in on risk-adjusted returns and where our capital is best deployed and where the capabilities of this platform are best deployed. Yes. I mean I do think, this is a real driver of leasing activity in San Francisco. I also mentioned that the first lease we signed at West 8th in Seattle was an AI company. So we are seeing AI migrate to Seattle as well, again, I think really driven by where top technology talent resides. And so we think that's going to be a driver in that market as well. But Rob, do you want to add?

Sure. Just to provide a bit more detail on San Francisco, in Q4, there were three major transactions that totaled over 750,000 square feet in leasing. These involved Anthropic, OpenAI, and Hive in our 101st building. I can't share too many specifics, but one of these companies is considering a significant expansion beyond their current space, which we are closely monitoring. In Q1, we have nearly 500,000 square feet of leases that have either been signed or are pending signatures, and two of those leases involve AI-focused companies. We are quite optimistic about the transition from Q4 to Q1, as it appears that the trend and momentum are increasing. Additionally, we've observed a surge in new company formations, particularly among smaller businesses. Historically, we noted that demand in San Francisco consisted of about 35% from professional services, such as law firms, and 35% from technology. This has now shifted to approximately 54% coming from tech. The remainder includes life sciences, professional services, and government services. This significant increase in tech demand is a positive indication not only for AI but for the broader technology market in San Francisco.

Yes. I think if you're comparing it to the prior period, I think you have to recall that last period, we had material amounts of real estate tax refunds and that impacted the numbers. So nothing all that unusual in the first quarter. It's really more the fourth quarter.

In terms of KOP, the development Phase 2, can you just remind us how much square footage is going to be delivered on the spec suite basis? And remind us of the timing for that later this year. And I just want to be clear as well, if you're delivering that spec space and you got a lease on end of the year, would that be something that could commence right away under that situation? Or is there still some sort of delay in revenue that would happen?

Nick, this is Rob. So we have two floors that we're doing. So total is roughly just a little over 80,000 square feet. They will deliver in October of this year. We've already had, as we talked about earlier, between Angela and myself, tour activity and people looking at them. And yes, that could be immediate occupancy upon completion.

A lot of the demand has been in that area. I mentioned that activity has been quite limited in the entire submarket in the first quarter and year-to-date. However, even in the fourth quarter, most of the activity we observed was from people seeking to meet immediate needs. We believe that once the speculative suites are delivered, we could see occupancy increase. If we have a lease signed, we could expect a quick commencement.

We had a couple of move-outs at Sunset Media Center. Nothing particularly chunky, just a few 20,000 square foot move-outs.

I just want to go back to some of Rob's comments before about the life science market. You mentioned a 6- to 9-month lag between funding and leasing decisions, from what you're seeing in the market right now, I think historically, that seems to be the rule of thumb. Has it changed at all or kind of been extended by some of the funding issues or just some macro uncertainty? Or is that generally still kind of what you look at as the timeline of a demand recovery?

Yes, it's a good question. First of all, it depends on the immediacy of the tenant, if they have something that they're feeling very positive about in the FDA, for example, then that could drive immediacy on the tenant's part. But as a rule of thumb, it's typically 6 to 9 months, that's the same with office. I would just caveat that by saying there's still a lot of scrutiny by boards and as a potential lease floats up through senior management. There's a lot of examination and reexamination that goes on. So it could potentially delay that a little bit, but we are seeing tenants acting with conviction. So overall, it's feeling like there's more certainty out there in terms of closure. Yes, the San Diego market has seen some encouraging activity with three or four companies securing funding in the UTC and Torrey Pines areas. However, large-format users have not yet returned. We are noticing an uptick in tour activity. Although we currently have no vacancies, we actively track tenant engagement and discuss additional opportunities outside of Torrey Pines. I believe both Torrey Pines and UTC are in a recovery phase, but large-format users, who typically operate in that region, have not yet made a significant return.

Thank you, Angie, and thank you, everyone, for joining us today. We appreciate your continued interest in KRC.

Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect your lines.