Kilroy Realty Corp: Form 10-Q for the period ended Sep 30, 2026

The following discussion relates to our consolidated financial statements and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. The results of operations discussion is combined for the Company and the Operating Partnership because there are no material differences in the results of operations between the two reporting entities.

Forward-Looking Statements

Statements contained in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are not historical facts may be forward-looking statements. Forward-looking statements include, among other things, statements or information concerning our plans, objectives, capital resources, portfolio performance, results of operations, projected future occupancy and rental rates, lease expirations, debt maturities, potential investments, strategies such as capital recycling, development and redevelopment activity, projected construction costs, projected construction commencement and completion dates, projected square footage of space that could be constructed on undeveloped land that we own, projected rentable square footage of or number of units in properties under construction or in the development pipeline, anticipated proceeds from capital recycling activity or other dispositions and anticipated dates of those activities or dispositions, projected increases in the value of properties, dispositions, future executive incentive compensation, pending, potential or proposed acquisitions, plans to grow our Net Operating Income and FFO, our ability to re-lease properties at or above current market rates, anticipated market conditions and demographics and other forward-looking financial data, as well as the discussion in “—Factors That May Influence Future Results of Operations,” “—Liquidity and Capital Resources of the Company,” and “—Liquidity and Capital Resources of the Operating Partnership.” Forward-looking statements can be identified by the use of words such as “believes,” “expects,” “projects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates”, or “anticipates” and the negative of these words and phrases and similar expressions that do not relate to historical matters. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including actual and potential tariffs and periods of heightened inflation, and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the states of California, Texas, and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses, including bankruptcy, lack of liquidity or lack of funding, and the impact labor disruptions or strikes, such as episodic strikes in the media industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer’s office premises; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service, and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment, and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices, or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed, and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement, and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations, or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; and our ability to maintain our status as a REIT. The factors included in this report are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect the Company’s and the Operating Partnership’s business and financial performance, see the discussion below, as well as in “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s and the Operating Partnership’s annual report on Form 10-K for the year ended December 31, 2025, and their respective other filings with the SEC. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement that becomes untrue because of subsequent events, new information, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

Overview and Background

We are a self-administered REIT active in premier office, life science, and mixed-use property types in the United States. We own, manage, develop, and acquire primarily premier office and life science properties in the San Francisco Bay Area, Los Angeles, Seattle, San Diego, and Austin, which are markets we believe have long-term strategic advantages and strong barriers to entry. We own our interests in all of our real estate assets and conduct substantially all of our operations through the Operating Partnership, of which we owned an approximate 99.0% and 99.1% common general partnership interest as of September 30, 2026 and December 31, 2025, respectively. All of our properties and development and redevelopment projects are 100% owned, excluding four office properties and one future development project owned by the Consolidated Property Partnerships. As of September 30, 2026, all of our properties are held in fee except for the fourteen office buildings that are held subject to long-term ground leases.

Stabilized Portfolio Information

As of September 30, 2026, our stabilized portfolio was comprised of 123 office and life science properties encompassing an aggregate of approximately 17.1 million rentable square feet. This portfolio includes all properties except properties under development and redevelopment or in the tenant improvement phase, undeveloped land, and real estate assets held for sale, if any. Our stabilized portfolio also excludes our future development pipeline, which, as of September 30, 2026, was comprised of nine potential development sites.

The following table reconciles the changes in the rentable square feet in our stabilized portfolio of operating properties from December 31, 2025 to September 30, 2026, inclusive of four properties owned by the Consolidated Property Partnerships and excluding our residential portfolio:

(1) Excludes Kilroy Sabre Springs, which was classified as held for sale as of December 31, 2025 and not included in the stabilized portfolio, and the two residential properties disposed of in April 2026, measured in units.

(2) Represents a recalculation of a property's rentable square footage using updated industry measurement standards.

Occupancy Information

The following table sets forth certain information regarding our stabilized portfolio, excluding our residential portfolio, as of the end of the period presented:

25

The following table sets forth the average occupancy of certain property groups within our stabilized portfolio for the periods presented:

(1) Occupancy percentages reported are calculated as the average of the daily ending occupancy percentages for the period presented. Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.

(2) Kilroy Oyster Point Phase 2 (“KOP 2”) stabilized during the three months ended March 31, 2026. Excluding KOP 2, the average stabilized portfolio occupancy was 80.5% and 81.1% for the three and nine months ended September 30, 2026.

(3) The same property portfolio includes all properties owned and included in the stabilized portfolio for two comparable reporting periods, i.e., owned and included in the stabilized portfolio as of January 1, 2025 and still owned and included in the stabilized portfolio as of September 30, 2026.

(4) Our 2026 residential portfolio consists of 608 residential units at our One Paseo mixed-use property in San Diego, California. Our 2025 residential portfolio consists of 200 residential units at our Columbia Square Living property and 193 residential units at our Jardine property in Hollywood California, and 608 residential units at our One Paseo mixed-use property in San Diego, California.

Significant Tenants

Refer to our 2025 Annual Report on Form 10-K for information about our 20 largest tenants. There have been no significant changes to the composition of the 20 largest tenants outside of the ordinary course of business during the nine months ended September 30, 2026.

Factors That May Influence Future Results of Operations

Leasing

Leasing Activity and Changes in Rental Rates

The amount of rental income generated by our properties depends principally on our ability to maintain current occupancy rates and to lease currently available space, including space at newly developed or redeveloped properties and newly acquired properties. The amount of rental income we generate also depends on our ability to maintain or increase rental rates at our properties. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity during the three and nine months ended September 30, 2026:

Leases Executed (1)

(1) Includes 100% of the Consolidated Property Partnerships. Excludes leases with a lease term of less than one year (i.e. short-term leases). During the three months ended September 30, 2026, the Company signed 11,880 square feet of new short-term leasing on vacant space. During the nine months ended September 30, 2026, the Company signed 122,169 square feet of short-term leases, comprised of 76,437 square feet of new leasing on vacant space and 45,732 square feet of renewal leasing.

(2) Includes tenant improvements and third-party leasing commissions and excludes tenant-funded tenant improvements and indirect leasing costs.

(3) Leasing at properties in the Stabilized Portfolio related to space that has been previously leased, excluding short-term leasing. Tenant improvement and leasing commission capital expenditures for projects classified as Major Repositioning are captured in 2nd Gen Capital Expenditures.

(4) New leasing activity on vacant space at recently completed Development and Redevelopment projects and new leasing new leasing activity at space that was vacant upon acquisition (“1st Gen”); space for which significant non-recurring capital expenditures are incurred to reposition and is expected to result in additional revenue generated when re-leased (“Major Repositioning”) that have been added to the Stabilized Portfolio; and space at our in-process Development and Redevelopment projects.

(5) Calculated as the change between the expiring GAAP rent and the new GAAP rent for the same space. When necessary, lease structures are modified (adjusted for net leases) for comparability. Space that was vacant when the property was acquired is excluded from these calculations.

(6) Calculated as the change between the expiring cash rent and the new cash rent for the same space. When necessary, lease structures are modified (adjusted for net leases) for comparability. Space that was vacant when the property was acquired is excluded from these calculations.

(7) Calculated as the percentage of square footage renewed by existing tenants divided by the square footage of space renewed by existing tenants and lease expirations during the period. Excludes square footage of short-term leases.

(8) Represents the retention rate, inclusive of leases with subtenants where the Company does not expect to experience downtime in occupancy between leases.

Lease Expirations (1)(2)

The following tables set forth certain information regarding our scheduled lease expirations for our stabilized portfolio, excluding our residential properties, by year and by region for the remainder of 2026 and in 2027:

(1) Represents all in-place leases as of September 30, 2026, excluding intercompany leases.

(2) Includes 100% of annualized base rent of the Consolidated Property Partnerships.

(3) Represents annualized monthly contractual base rents from existing tenants in occupancy, including the impact of straight-lined rent escalations and the amortization of free rent periods and excluding the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above / below-market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Amounts represent percentage of total portfolio annualized contractual base rental revenue.

Adjusting for leases that have been backfilled or re-leased to a subtenant as of September 30, 2026 but not yet commenced, the remaining 2026, 2027, and 2028 expirations would be 153,468, 958,485, and 1,055,370 square feet, respectively.

Our rental rates and occupancy are impacted by general economic conditions, including the pace of regional economic growth and capital availability. Therefore, we cannot guarantee that leases will be renewed or that available space will be re-leased at rental rates equal to or above current rates.

Capital Recycling Program

Our capital recycling program plays a central role in reshaping our portfolio for long-term performance and cash flow durability. By disposing of select non-core or non-strategic assets, often in markets where growth prospects have moderated, as well as undeveloped land in our portfolio, we can redeploy capital into opportunities that can realize higher returns. Refer to “Liquidity and Capital Resources of the Operating Partnership” for further discussion of our capital recycling program.

Development and Redevelopment Programs

Stabilized Development Project

During the first quarter of the nine months ended September 30, 2026, we completed and added the following development project to the stabilized development portfolio:

• Kilroy Oyster Point (Phase 2), South San Francisco, California. In June 2021, we commenced construction on Phase 2 of this 39-acre life science campus situated on the waterfront in South San Francisco and progressed the property to the tenant improvement phase during the first quarter of 2025. The second phase encompassed 871,738 square feet of office and life science space across three buildings with a total estimated investment of $1.2 billion. We added the property to the stabilized portfolio in the first quarter of 2026 upon reaching one year since substantial completion. The project is 7% occupied and 49% leased.

Future Development Pipeline

As of September 30, 2026, our future development pipeline included the following projects:

(1) Project scope, including the estimated developable square feet or number of residential units, could change materially from estimates provided due to one or more of the following: significant changes in the economy, market conditions, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes, or project design.

(2) Owned in a consolidated joint venture. Project is 58% pre-leased and is anticipated to commence construction in 2027, with delivery scheduled for 2030, at which time the Company’s ownership interest is expected to be 97%.

(3) Subject to signed purchase and sale agreements and non-refundable deposits as of the date of this filing. Both development sites are anticipated to close upon receipt of residential entitlements and permits, which is expected to occur beginning in phases in early 2027.

(4) Anticipated to close during the fourth quarter for an estimated sales price of $19.5 million. No impairment was recorded as of September 30, 2026 as the property did not meet held for sale criteria and was deemed recoverable based on a probability-weighted undiscounted future cash flow assessment.

Our land holdings have historically been intended for future development. As a result of current market conditions, we continue to evaluate the timing, scope, and economic viability of the development of these assets, as well as alternative strategies. Although our probability-weighted impairment analyses did not result in the recognition of an impairment loss as of September 30, 2026, a change in our development plans, intended use, or anticipated holding period, or changes in the expected economics of future development, could result in an impairment loss in a future period.

Fluctuations in our development activities, including a slowdown in development activities, could cause fluctuations in the average development asset balances qualifying for interest and other carrying costs and internal cost capitalization under GAAP in future periods, resulting in higher interest and other expenses. The following table sets forth our capitalized interest and other capitalized costs for our development and redevelopment properties and capital improvement projects in the stabilized portfolio:

(in thousands)

(1) The average qualifying costs for the nine months ended September 30, 2026 includes costs incurred for KOP 2 through stabilization in Q1 2026.

(2) Primarily represents compensation costs capitalized to construction and development and redevelopment projects.

(3) Represents incidental property operating and carry costs capitalized to development and redevelopment projects.

Inflation

The majority of the Company’s leases require tenants to reimburse the Company for the tenant’s proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company’s exposure to increases in operating costs resulting from inflation. The Company’s exposure to inflationary impacts is sensitive to fluctuations in the occupancy levels at its properties.

Results of Operations

Net Operating Income

Management internally evaluates the operating performance and financial results of our stabilized portfolio based on Net Operating Income. We define “Net Operating Income” as revenues less lease termination fees and consolidated operating expenses (property expenses, real estate taxes, and ground lease rent).

Net Operating Income is considered by management to be an important and appropriate supplemental performance measure to net income because we believe it helps both investors and management understand the core operations of our properties. Net Operating Income is an unlevered operating performance metric that allows for a useful comparison of the operating performance of individual assets or groups of assets. Because the Company’s Net Operating Income metrics exclude lease termination fees, leasing costs, general and administrative expenses, interest expense, depreciation and amortization, other income and expenses, impairment of real estate assets, and gains and losses, they provide performance measures that, when compared year over year, reflect the consolidated revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. In addition, Net Operating Income is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. Other real estate companies may use different methodologies for calculating Net Operating Income and, accordingly, our presentation of Net Operating Income may not be comparable to other real estate companies. Because of the exclusion of the items shown in the reconciliation below, Net Operating Income should only be used as a supplemental measure of our financial performance and not as an alternative to GAAP net income.

Management further evaluates Net Operating Income by evaluating the performance from the following property groups:

• Same Property Portfolio – includes the consolidated results of all properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2025 and still owned and included in the stabilized portfolio as of September 30, 2026, including our residential property in San Diego, California;
• Re/Development Properties – includes the results generated by certain of our in-process development and redevelopment projects, expenses for certain of our future development projects, and the results generated by the two stabilized redevelopment properties that were added to the stabilized portfolio in the third quarter of 2025 and the one development property added to the stabilized portfolio in the first quarter of 2026;
• Acquisition Properties – includes the results, from the date of acquisition through the periods presented, of the following:
• One property acquired in the third quarter of 2025; and
• One property, comprised of four buildings, acquired in the fourth quarter of 2025; and
• Disposition Properties – includes the results of the following:
• One property disposed of in the second quarter of 2025;
• One property, comprised of four buildings, disposed of in the third quarter of 2025;
• One property disposed of in the fourth quarter of 2025;
• Two properties, comprised of four buildings, disposed of in the first quarter of 2026; and
• Two residential properties, totaling 393 residential units, disposed of in the second quarter of 2026.

The following table sets forth certain information regarding the property groups within our stabilized portfolio as of September 30, 2026:

(1) Excludes development projects in the tenant improvement phase, our in-process development projects, and future development projects.

(2) Excludes our residential property, measured in units.

Comparison of the Three Months Ended September 30, 2026 to the Three Months Ended September 30, 2025

The following table summarizes our Net Operating Income for our total portfolio:

($ in thousands)

The following tables summarize our Net Operating Income for our total portfolio:

(in thousands)

32

($ in thousands)

Net Operating Income decreased $15.6 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily resulting from:

• A decrease of $13.1 million attributable to the Disposition Properties;
• A decrease of $4.0 million attributable to the Re/Development Properties, primarily due to one development property with limited occupancy added to the stabilized portfolio in the first quarter of 2026, which resulted in the cessation of cost capitalization, and a decrease in recoverable operating expenses due to low occupancy; and
• A decrease of $4.1 million attributable to the Same Property Portfolio, which was driven by the following activity:
• An increase in total operating revenues of $1.9 million, primarily due to a(n):
• $0.9 million increase in revenues primarily due to parking and residential income;
• $0.9 million increase in reimbursement revenues, primarily due to an increase in recoverable operating expenses;
• $0.6 million increase in revenue primarily due to lower bad debt expense in 2026; and
• $0.5 million increase in settlement income.

Partially offset by:

• $0.9 million decrease in base rent attributable to $0.7 million from lower average occupancy levels and $0.2 million from lower rental rates; and
• $0.1 million decrease in amortization of deferred income and tenant funded improvements, mainly resulting from tenant move outs.
• An increase in property and related expenses of $6.1 million, primarily due to a(n):
• Approximately $3.6 million increase in property expenses, primarily due to an increase in utilities, contract services and security;
• $2.3 million increase in real estate taxes, primarily due to $1.6 million of lower property tax refunds received in 2026 and a $0.6 million increase resulting from higher assessed property values; and
• $0.2 million increase in ground lease expense.

Partially offset by:

• An increase of $5.6 million attributable to the Acquisition Properties.

General and Administrative Expenses

General and administrative expenses remained generally consistent for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.

Leasing Costs

Leasing costs increased $0.4 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to an increase in leasing deal costs and leasing overhead during the three months ended September 30, 2026.

Depreciation and Amortization

Depreciation and amortization increased $5.7 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to the following:

• An increase of $5.5 million attributable to a full quarter of expense related to the Acquisition Properties;
• An increase of $5.8 million attributable to the Re/Development Properties, primarily due to the one property added to the stabilized portfolio in the first quarter of 2026; and
• An increase of $1.1 million attributable to the Same Property Portfolio, primarily due to revenue recognition commencing for three tenants in the Seattle region in the third quarter of 2025, fourth quarter of 2025, and first quarter of 2026.

Partially offset by:

• A decrease of $6.7 million attributable to the Disposition Properties.

Interest Income

Interest income decreased $2.5 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to lower average balances maintained in interest-bearing accounts.

Interest Expense

The following table sets forth our gross interest expense and capitalized interest:

($ in thousands)

Gross interest expense, before the effect of capitalized interest, decreased $3.5 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to a decrease in the average outstanding debt balance for the three months ended September 30, 2026.

Capitalized interest decreased $10.7 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, primarily due to the stabilization of the one development property added to the stabilized portfolio during the first quarter of 2026, at which point we stopped capitalizing interest. Capitalized interest will vary based on the current status of active development or redevelopment projects and our future development pipeline. For additional information about the potential impact of inflation on our interest expense and construction costs, and the impact on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, refer to “Part I, Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025.

Net Income Attributable to Noncontrolling Interests in Consolidated Property Partnerships

Net income attributable to noncontrolling interests in consolidated property partnerships remained generally consistent for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. The amounts reported for the three months ended September 30, 2026 and 2025 are comprised of the share of net income attributable to noncontrolling interests for 100 First LLC, 303 Second LLC, Redwood LLC, and 1900 Broadway LLC. See Note 1 “Organization, Ownership, and Basis of Presentation” to our consolidated financial statements included in this report for additional information.

Comparison of the Nine Months Ended September 30, 2026 to the Nine Months Ended September 30, 2025

The following table summarizes our Net Operating Income for our total portfolio:

($ in thousands)

The following tables summarize our Net Operating Income for our total portfolio:

(in thousands)

36

($ in thousands)

Net Operating Income decreased $27.9 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily resulting from:

• A decrease of $36.3 million attributable to the Disposition Properties; and
• A decrease of $10.8 million attributable to the Re/Development Properties, primarily due to one development property with limited occupancy added to the stabilized portfolio in the first quarter of 2026, which resulted in the cessation of cost capitalization.

Partially offset by:

• An increase of $17.8 million attributable to the Acquisition Properties; and
• An increase of $1.4 million attributable to the Same Property Portfolio, which was driven by the following activity:
• An increase in total operating revenues of $9.5 million primarily due to a(n):
• $4.6 million increase in settlement income;
• $2.8 million increase in base rent attributable to $1.1 million from higher average occupancy levels and $1.7 million from higher rental rates;
• $2.2 million increase in revenues primarily due to parking and residential income;
• $1.3 million increase in reimbursement revenues, primarily due to an increase in recoverable operating expenses; and
• $0.6 million increase in revenue primarily due to lower bad debt expense in 2026.

Partially offset by:

• $2.0 million decrease in amortization of deferred income and tenant funded improvements, mainly resulting from tenant move outs.
• An increase in property and related expenses of $8.1 million primarily due to a(n):
• Approximately $5.9 million increase in property expenses, primarily due to an increase in utilities, contract services, janitorial and security;
• $1.6 million increase in real estate taxes, primarily due to a $1.3 million increase resulting from higher assessed property values and $0.3 million of lower property tax refunds received in 2026; and
• $0.6 million increase in ground lease expense.

Lease Termination Fees

Lease termination fees decreased $10.5 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a large lease termination fee recognized for one of the tenants in the San Francisco region in the second quarter of 2025.

General and Administrative Expenses

General and administrative expenses increased $4.4 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a $2.5 million increase in software expense and corporate initiatives and a $1.9 million increase in compensation expenses and lower internal overhead capitalization.

Leasing Costs

Leasing costs increased $1.0 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to an increase in leasing deal costs and leasing overhead during the nine months ended September 30, 2026.

Depreciation and Amortization

Depreciation and amortization increased $18.8 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to the following:

• An increase of $20.2 million attributable to the Acquisition Properties;
• An increase of $16.0 million attributable to the Re/Development Properties, primarily due to the one property added to the stabilized portfolio in the first quarter of 2026; and
• An increase of $3.7 million attributable to the Same Property Portfolio, primarily due to revenue recognition commencing for numerous tenants in late 2025 and throughout 2026, partially offset by early lease terminations for two tenants in the San Francisco Bay area in 2025.

Partially offset by:

• A decrease of $21.1 million attributable to the Disposition Properties.

Interest Income

Interest income decreased $1.9 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to lower average balances maintained in interest-bearing accounts and lower rates.

Interest Expense

The following table sets forth our gross interest expense and capitalized interest:

($ in thousands)

Gross interest expense, before the effect of capitalized interest, decreased $1.6 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to a decrease in the average outstanding debt balance for the nine months ended September 30, 2026.

Capitalized interest decreased $27.0 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to the stabilization of the one development property added to the stabilized portfolio during the first quarter of 2026, at which point we stopped capitalizing interest. Capitalized interest will vary based on the current status of active development or redevelopment projects and our future development pipeline. For additional information about the potential impact of inflation on our interest expense and construction costs, and the impact on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, refer to “Part I, Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025.

Net Income Attributable to Noncontrolling Interests in Consolidated Property Partnerships

Net income attributable to noncontrolling interests in consolidated property partnerships decreased $5.3 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to lease termination fee income from one tenant in 2025. The amounts reported for the nine months ended September 30, 2026 and 2025 are comprised of the share of net income attributable to noncontrolling interests for 100 First LLC, 303 Second LLC, Redwood LLC and 1900 Broadway LLC. See Note 1 “Organization, Ownership, and Basis of Presentation” to our consolidated financial statements included in this report for additional information.

Liquidity and Capital Resources of the Company

In this “Liquidity and Capital Resources of the Company” section, the term the “Company” refers only to Kilroy Realty Corporation on an unconsolidated basis and excludes the Operating Partnership and all other subsidiaries. As the sole general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes, and the Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are substantially the same on their respective financial statements. The section entitled “Liquidity and Capital Resources of the Operating Partnership” should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.

Our liquidity, access to capital, and ability to execute our business strategy are subject to a variety of risks and uncertainties. Our ability to obtain financing, raise capital through dispositions or joint ventures, recycle capital through tax‑deferred transaction structures, fund development activity, or pursue acquisition opportunities will depend on a number of factors, many of which are outside of our control. These factors include conditions in the public and private capital markets, interest rate and inflation trends, the availability and cost of debt and equity financing, the demand for our properties, the timing and pricing of potential dispositions, the performance of our development projects, and broader macroeconomic and geopolitical conditions.

Distributions from the Operating Partnership are the Company’s primary source of capital. The Company believes the Operating Partnership’s sources of working capital, specifically its cash flows from operations, borrowings available under its unsecured revolving credit facility, and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company to make dividend payments to its common stockholders for the next twelve months. The unavailability of capital could adversely affect the Operating Partnership’s ability to make distributions to the Company, which would in turn adversely affect the Company’s ability to pay cash dividends to its stockholders.

The Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company and the Operating Partnership of certain securities in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing, and capital needs. When the Company receives proceeds from the sales of its securities, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership.

Liquidity Highlights

As of September 30, 2026, the Company had approximately $1.4 billion in available liquidity, including $1.2 billion available under the revolving credit facility, $50.0 million available under the unsecured term loan facility, and $94.3 million of cash and cash equivalents. We believe that our available liquidity makes us well positioned to navigate any additional future uncertainties.

Distribution Requirements

The Company is required to distribute 90% of its taxable income (subject to certain adjustments and excluding net capital gains) on an annual basis to maintain qualification as a REIT for federal income tax purposes. As a result of these distribution requirements, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent as other companies whose parent companies are not REITs. In addition, the Company may be required to use borrowings under the Operating Partnership’s revolving credit facility, if necessary, to meet REIT distribution requirements and maintain its REIT status. The Company may also need to raise capital to fund the Operating Partnership’s working capital needs, as well as potential developments of new or existing properties or acquisitions.

The Company intends to continue to make, but has not committed to making, regular quarterly cash distributions to common stockholders. All such distributions are at the discretion of the Board of Directors. The Company considers market factors and its performance in addition to REIT requirements in determining its distribution levels. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which is consistent with the Company’s intention to maintain its qualification as a REIT. Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit, and interest-bearing bank deposits.

On September 14, 2026, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share of common stock. The regular quarterly cash dividend was payable to stockholders of record on September 30, 2026 and a corresponding cash distribution of $0.54 per Operating Partnership unit was payable to holders of the Operating Partnership’s common limited partnership interests of record on September 30, 2026, including those owned by the Company. The total cash quarterly dividends and distributions paid on October 14, 2026 were $63.4 million.

The covenants contained within certain of our unsecured debt obligations generally prohibit the Company from making distribution payments during an event of default except to the extent that such payments result in distributions sufficient to (i) maintain our qualification as a REIT for federal and state income tax purposes, and (ii) avoid the payment of federal or state income or excise tax.

Capitalization

As of September 30, 2026, our total debt as a percentage of total market capitalization was 53.0%, as shown in the following table:

(1) Represents gross aggregate principal amount due at maturity before the effect of the following at September 30, 2026: $23.7 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes, and secured debt and $9.9 million of unamortized discounts for the unsecured senior notes.

(2) Green bond.

(3) Value based on closing price per share of our common stock of $33.27, as of September 30, 2026.

(4) Includes common units of the Operating Partnership not owned by the Company. Excludes noncontrolling interests in consolidated property partnerships.

Liquidity and Capital Resources of the Operating Partnership

In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we,” “our,” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.

General

Our primary liquidity sources and uses are as follows:

Liquidity Sources

• Net cash flows from operations;
• Proceeds from our capital recycling program, including the disposition of assets and the formation of strategic ventures;
• Proceeds from additional secured or unsecured debt financings;
• Borrowings under the Operating Partnership’s unsecured revolving credit facility; and
• Proceeds from equity or preferred equity securities.

Liquidity Uses

• Debt service and principal payments, including debt maturities, debt repurchases, and redemptions;
• Capital expenditures, tenant improvements, and leasing costs;
• Development and redevelopment costs;
• Operating property or undeveloped land acquisitions;
• Distributions to common security holders; and
• Repurchases and redemptions of outstanding common stock of the Company.

General Strategy

Our general strategy is to maintain a conservative balance sheet with a strong credit profile and to maintain a capital structure that allows for financial flexibility and diversification of capital resources. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our long-term capital requirements. We believe that our current projected liquidity requirements for the next twelve-month period, as set forth above under the caption “—Liquidity Uses,” will be satisfied using a combination of the liquidity sources listed above, although there can be no assurance in this regard. We believe our disciplined capital structure and staggered debt maturities provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities, although there can be no assurance in this regard.

Liquidity Sources

Unsecured Revolving Credit and Term Loan Facilities

In June 2026, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility. The amendment and restatement expanded the borrowing capacity to $1.25 billion and extended the maturity date to July 31, 2030.

The following table summarizes the balance and terms of our unsecured revolving credit facility:

($ in thousands)

(1) We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $450.0 million and $500.0 million as of September 30, 2026 and December 31, 2025, respectively, under an accordion feature pursuant to the terms of the unsecured revolving credit facility. At December 31, 2025, remaining and total borrowing capacity are further reduced by the amount of our outstanding letters of credit, which totals approximately $5.2 million.

(2) Our unsecured revolving credit facility interest rate was calculated using the Secured Overnight Financing Rate (“SOFR”) and a margin of 1.000% based on our credit rating as of September 30, 2026, and using SOFR plus a SOFR adjustment of 0.10% (together “Adjusted SOFR”) and a margin of 1.100% based on our credit rating as of December 31, 2025.

(3) Our annual facility fee is paid on a quarterly basis and is calculated based on total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility, which are included in Prepaid expenses and other assets, net on our consolidated balance sheets, and will continue to be amortized through the amended maturity date.

(4) The maturity date may be extended by two six-month periods, at the Operating Partnership’s election.

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

In connection with amending and restating the revolving credit facility, the Operating Partnership amended and restated the unsecured term loan facility, expanding the borrowing capacity to $250.0 million, and extending the maturity date to July 31, 2031. Of the $250.0 million, $50.0 million represents additional delayed draw term loan commitments available to be drawn through June 11, 2027.

The following table summarizes the balance and terms of our Term Loan Facility:

($ in thousands)

(1) As of September 30, 2026, we could elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $150.0 million under an accordion feature pursuant to the terms of the Term Loan Facility. As of December 31, 2025, we could elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $130.0 million under an accordion feature pursuant to the terms of the previous Term Loan Facility.

(2) Our Term Loan Facility interest rate was calculated using SOFR and a margin of 1.150% based on our credit rating as of September 30, 2026, and using Adjusted SOFR and a margin of 1.200% based on our credit rating as of December 31, 2025.

(3) We incurred debt origination and legal costs in connection with the amendment and restatement of the Term Loan Facility in June 2026, which will continue to be amortized through the maturity date of the Term Loan Facility. Approximately $0.5 million of these costs related to the delayed draw term loan commitments available are included in Prepaid expenses and other assets, net on our consolidated balance sheets, and will continue to be amortized through the amended maturity date.

(4) There are no extension options available under the terms of the amended and restated Term Loan Facility. As of December 31, 2025, one 12-month extension option was available.

Capital Recycling Program

As discussed in the section “Factors That May Influence Future Results of Operations - Capital Recycling Program,” we continuously evaluate opportunities for the potential disposition of non-core properties and undeveloped land in our portfolio, or the formation of strategic ventures, with the intent of using the proceeds generated to acquire new operating and development properties, finance development and redevelopment expenditures, repay long-term debt, and for other general corporate purposes.

In connection with our capital recycling strategy, during the nine months ended September 30, 2026, we completed the sale of four operating properties to unaffiliated third parties for gross proceeds totaling approximately $347.5 million. The timing of any potential future disposition or strategic venture transactions will depend on market conditions and other factors, including, but not limited to, our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained due to current economic and market conditions), and our ability to absorb or defer some or all of the taxable gains on the sales.

Shelf Registration Statement

The Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company and the Operating Partnership of certain securities in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing, and capital needs. When the Company receives proceeds from the sales of its preferred or common stock, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership. The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility and unsecured term loan facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.

At-The-Market Stock Offering Program

Under the 2024 ATM Program, which commenced in March 2024, we may offer and sell shares of the Company’s common stock having an aggregate gross sales price of up to $500.0 million from time to time in “at-the-market” offerings. In connection with the 2024 ATM Program, the Company may also, at its discretion, enter into forward equity sale agreements. The use of forward equity sale agreements allows the Company to fix a share price on the sale of shares of our common stock at the time an agreement is executed but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. The Company did not have any outstanding forward equity sale agreements to be settled at September 30, 2026. Since commencement of the 2024 ATM Program, we have not completed any sales of common stock.

Liquidity Uses

Unsecured Debt

Repayment of $200.0 million and $50.0 million Unsecured Senior Notes due 2026

During 2026, the Company repaid an aggregate $250.0 million of unsecured private placement senior notes at par. In April 2026, the Company repaid the outstanding $50.0 million of 4.300% Private Placement Senior Notes, Series A, which were scheduled to mature in July 2026. In July 2026, the Operating Partnership repaid the outstanding $200.0 million of 4.350% Private Placement Senior Notes, Series B, which were scheduled to mature in October 2026.

Contractual Obligations

Refer to our 2025 Annual Report on Form 10-K for a discussion of our contractual obligations. There have been no material changes outside of the ordinary course of business to these contractual obligations during the nine months ended September 30, 2026, with the exception of the additional development commitments for 1900 Broadway.

Other Liquidity Uses

Potential Future Leasing Costs and Capital Improvements

The amounts we incur for tenant improvements and leasing costs depend on leasing activity in each period. Tenant improvements and leasing costs generally fluctuate in any given period depending on factors such as the type and condition of the property, the term of the lease, the type of the lease, the involvement of external leasing agents, and overall market conditions, including the level of inflation. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to maintain our properties and may be impacted by inflationary pressures on the cost of construction materials.

Development

We believe we may spend between $25.0 million to $75.0 million on development projects throughout the remainder of 2026. The ultimate timing of these expenditures may fluctuate given construction progress and leasing status of the projects, or as a result of events outside our control, such as delays or increased costs as a result of heightened inflation and market conditions. We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, or strategic venture opportunities. We cannot provide assurance that development projects will be completed on the terms, for the amounts, or on the timelines currently contemplated, or at all.

Potential Future Acquisitions

As discussed in the section “—Factors That May Influence Future Results of Operations - Capital Recycling Program,” we continue to evaluate strategic opportunities and remain a disciplined buyer of core, value-add, and strategic operating properties and land, dependent on market conditions and business cycles, among other factors. We focus on growth opportunities primarily in markets populated by knowledge and creative-based tenants in a variety of industries, including technology, media, healthcare, life sciences, and professional services. We expect that any material acquisitions will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, the formation of strategic ventures, or through the assumption of existing debt, although there can be no assurance in this regard.

Debt Composition

The composition of the Operating Partnership’s aggregate debt balances between secured and unsecured and fixed-rate and variable-rate debt was as follows:

(1) As of the end of the period presented.

(2) As of December 31, 2025, there was no outstanding balance on the unsecured revolving credit facility.

(3) Includes the impact of an unused facility fee, amortization of deferred financing costs, and amortization of discounts.

Share Repurchase Program

Under our current share repurchase program, which commenced in February 2024 (the “Share Repurchase Program”), we are authorized to repurchase shares of the Company’s common stock having an aggregate gross purchase price of up to $500.0 million. Under the Share Repurchase Program, repurchases may be made from time to time using a variety of methods, which may include open market purchases and privately negotiated transactions. The specific timing, price, and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The Share Repurchase Program does not have a termination date and repurchases may be discontinued at any time. We did not repurchase any shares of common stock during the three months ended September 30, 2026. During the nine months ended September 30, 2026, we repurchased 2,357,739 shares of common stock at a weighted average price of $30.80 per common share for an aggregate purchase price of $72.7 million. The remaining repurchase capacity as of September 30, 2026 was $427.3 million.

Factors That May Influence Future Sources of Capital and Liquidity of the Company and the Operating Partnership

We continue to evaluate sources of financing for our business activities, including borrowings under the unsecured revolving credit facility, the unsecured term loan facility, issuance of public and private equity securities, unsecured debt and fixed-rate secured mortgage financing, proceeds from the disposition of selective assets through our capital recycling program, and the formation of strategic ventures. However, our ability to obtain new financing or refinance existing borrowings on favorable terms could be impacted by various factors, including the state of the macroeconomy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for commercial real estate properties, a decrease in market rental rates or market values of real estate assets in our submarkets, the amount of our future borrowings and uncertainty related to interest rates, inflation rates, geopolitical events, and other factors (refer to “Part I, Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025 for additional information). These events could result in the following:

• A decrease in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;
• An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
• A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.

In addition to the factors noted above, the Operating Partnership’s credit ratings are subject to ongoing evaluation by credit rating agencies and may be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.

Financial Covenants and Restrictions

The unsecured revolving credit facility, unsecured term loan facility, unsecured senior notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. The Operating Partnership was in compliance with all of its financial covenants as of September 30, 2026. Our current expectation is that the Operating Partnership will continue to meet the requirements of its financial covenants in both the short and long term. However, in the event of an economic slowdown or continued volatility in the credit markets, there is no certainty that the Operating Partnership will be able to continue to satisfy all the covenant requirements.

Consolidated Historical Cash Flows Summary

The following summary discussion of our consolidated historical cash flows is based on the consolidated statements of cash flows in Item 1. “Financial Statements” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Changes in our cash flows include changes in cash and cash equivalents. Our historical cash flow activity is as follows:

($ in thousands)

Operating Activities

Our cash flows from operating activities depend on numerous factors, including the occupancy level of our portfolio, the rental rates achieved on our leases, the collectability of rent and recoveries from our tenants, the level of operating expenses, the impact of property acquisitions, completed development and redevelopment projects and related financing activities, and other general and administrative costs. See additional information under the caption “—Results of Operations.” Our net cash provided by operating activities decreased by $72.2 million, or 15.8%, for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to lower net cash operating income from properties not in the same property portfolio, decreased capitalized interest following the stabilization of a development property during the nine months ended September 30, 2026, and a lease termination fee received from a tenant in the San Francisco region during the nine months ended September 30, 2025.

Investing Activities

Our cash flows from investing activities are generally used to fund development and operating property acquisitions, expenditures for development and redevelopment projects, recurring and nonrecurring capital expenditures for our operating properties, and include net proceeds received from dispositions of real estate assets. We had net cash provided by investing activities of $48.9 million for the nine months ended September 30, 2026 as compared to net cash used in investing activities of $10.9 million for the nine months ended September 30, 2025, primarily due to higher net proceeds from capital recycling activity during the nine months ended September 30, 2026.

Financing Activities

Our cash flows from financing activities are principally impacted by our capital raising activities, debt repayments, share repurchases, and dividends and distributions paid to common stockholders and common unitholders. Our net cash used in financing activities increased by $279.2 million, or 116.5%, for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to the aggregate $250.0 million repayment of unsecured private placement senior notes, as well as the common stock repurchases made during the nine months ended September 30, 2026 under our current Share Repurchase Program.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from these estimates.

In our Annual Report on Form 10-K for the year ended December 31, 2025, we identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not made any material changes to our critical accounting policies and estimates during the period covered by this report.

Non-GAAP Supplemental Financial Measure: Funds From Operations (“FFO”)

We calculate FFO available to common stockholders and common unitholders in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of Nareit. The White Paper defines FFO as net income or loss (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.

We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing, and investing activities than the required GAAP presentations alone would provide.

FFO should not be viewed as an alternative measure of our operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.

The following table presents our FFO:

(in thousands)

(1) Reported amounts are attributable to common stockholders, common unitholders, and restricted stock unitholders.

(2) FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $3.4 million and $3.6 million for the three months ended September 30, 2026 and 2025, respectively, and $9.9 million and $11.1 million for the nine months ended September 30, 2026 and 2025, respectively.

Information about our market risk is disclosed in “Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and is incorporated herein by reference. There have been no material changes for the nine months ended September 30, 2026, to the information provided in “Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Kilroy Realty Corporation

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is processed, recorded, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2026, the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded, as of that time, the disclosure controls and procedures were effective at the reasonable assurance level.

There have been no changes that occurred during the period covered by this report in the Company’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Kilroy Realty, L.P.

The Operating Partnership maintains disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Operating Partnership’s reports under the Exchange Act is processed, recorded, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer of its general partner, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of its general partner, of the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2026, the end of the period covered by this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of its general partner concluded, as of that time, the disclosure controls and procedures were effective at the reasonable assurance level.

There have been no changes that occurred during the period covered by this report in the Operating Partnership’s internal control over financial reporting identified in connection with the evaluation referenced above that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

There have been no material changes to the risk factors included in the Company’s and the Operating Partnership’s annual report on Form 10-K for the year ended December 31, 2025.