Kilroy Realty (NYSE: KRC) 2025 Conference Summary Company Overview - **Company**: Kilroy Realty Corporation - **Industry**: Real Estate, specifically focused on office and life science properties Key Points and Arguments Market Demand and Trends - **Resurgence in Demand**: Kilroy Realty has observed a resurgence in demand across West Coast markets, particularly in the San Francisco Bay Area, driven by a favorable public policy environment and growth in the AI sector [2][3] - **AI Sector Influence**: AI companies are significantly driving demand for office space, with a notable increase in leasing activity in San Francisco, expanding beyond the Mission Bay submarket [16][18] - **Political Environment**: A new business-friendly political environment in San Francisco has improved conditions for retail and office space, contributing to increased employee return to work [17] Capital Allocation and Dispositions - **Monetization Strategy**: The company has been actively monetizing non-income-producing land and operating properties, achieving compelling pricing on recent sales [3][10] - **Balance Sheet Management**: The CFO highlighted improvements in data transparency and communication with investors, including a recent bond offering that strengthens the balance sheet [12][13] Portfolio Management - **Portfolio Assessment**: Kilroy Realty is reassessing its asset classes and locations to align with changing market demands, particularly considering the shift towards residential or alternative uses for certain parcels [10][11] - **Life Science Focus**: The company is focusing on life science properties, with expectations to sign 100,000 square feet of leases at Kilroy Oyster Point by the end of 2025 [20][22] Leasing Activity - **Tenant Improvements**: Tenant improvement costs have plateaued, with allowances reaching up to $150 per square foot depending on tenant needs [40] - **Spec Suite Program**: The company has successfully implemented a spec suite program to meet the immediate needs of AI tenants, allowing for quicker occupancy [41][42] Future Outlook - **Occupancy Projections**: The company anticipates a positive net absorption in Q4 2025, despite some expected move-outs in Q3 [53][54] - **Retention Rates**: Historical retention rates have been around 30%, with expectations for stability in occupancy levels moving forward [49][50] Market Activity and Buyer Sentiment - **Increased Liquidity**: There has been a noticeable increase in market liquidity for office space, with more buyers ready to transact, reflecting improved confidence in the market [57][59] - **Cap Rate Considerations**: Buyers are increasingly focused on return on cost and IRR, indicating a shift in investment strategies [60] AI and Technological Impact - **AI's Role in Future Growth**: The company is positioning itself to benefit from the growth of AI, recognizing the need for flexibility in leasing terms to accommodate evolving tenant requirements [35][36] Additional Important Insights - **Sublease Space**: Approximately 15% to 20% of the portfolio is currently sublet, compared to around 10% pre-COVID [51][52] - **Market Comparisons**: While Kilroy Realty is not in core life science markets like Boston, it has seen a pickup in activity in South San Francisco, indicating a broader recovery in the sector [28][31] This summary encapsulates the key insights and strategic directions discussed during the Kilroy Realty conference, highlighting the company's proactive approach to navigating market changes and capitalizing on emerging opportunities.

Core Viewpoint - Kilroy Realty Corporation (NYSE: KRC) has shown moderate performance over the past year with a 4% increase in share price and a ~6% dividend yield, although concerns about the long-term future of office properties and vacancies persist [1] Company Performance - The company is currently generating solid cash flow, which supports its dividend payments and overall financial health [1] Market Context - The ongoing challenges in the office property market, particularly regarding vacancies, continue to impact investor sentiment and the long-term outlook for companies in this sector [1]

[Explanatory Note](index=3&type=section&id=Explanatory%20Note) This section clarifies the combined reporting structure for Kilroy Realty Corporation and its Operating Partnership [Combined Reporting Structure](index=3&type=section&id=Combined%20Reporting%20Structure) This report combines Form 10-Q filings for Kilroy Realty Corporation (REIT) and its subsidiary, Kilroy Realty, L.P., viewed as a single operating unit - Kilroy Realty Corporation is a REIT and the general partner of the Operating Partnership, owning a **99.0% interest** as of June 30, 2025[11](index=11&type=chunk) - The Operating Partnership owns substantially all assets, conducts business operations, and generates capital, while the Company's primary role is acting as the general partner and issuing equity[12](index=12&type=chunk) - The main differences in the financial statements between the two entities relate to noncontrolling interests, stockholders' equity, and partners' capital[13](index=13&type=chunk) - The combined reporting approach is intended to better reflect how the business is managed, enhance investor understanding, and improve efficiency[14](index=14&type=chunk) [PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements of Kilroy Realty Corporation](index=6&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29%20OF%20KILROY%20REALTY%20CORPORATION) This section presents Kilroy Realty Corporation's unaudited consolidated financial statements, covering Balance Sheets, Operations, Equity, and Cash Flows [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets%20-%20KRC) Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate assets held for investment, net | $9,542,932 | $9,834,579 | | **Total Assets** | **$10,867,832** | **$10,898,357** | | Total Debt, net (Secured + Unsecured) | $4,597,719 | $4,597,765 | | **Total Liabilities** | **$5,274,388** | **$5,289,488** | | Total Stockholders' Equity | $5,366,455 | $5,382,046 | | **Total Equity** | **$5,593,444** | **$5,608,869** | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20-%20KRC) Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $289,892 | $280,731 | $560,736 | $559,312 | | Total Expenses | $196,736 | $199,378 | $393,728 | $396,291 | | Gain on sale of property | $16,554 | $0 | $16,554 | $0 | | Net Income | $79,568 | $54,547 | $123,249 | $110,247 | | **Net Income Available to Common Stockholders** | **$68,449** | **$49,211** | **$107,457** | **$99,131** | | EPS - basic | $0.58 | $0.41 | $0.91 | $0.83 | | EPS - diluted | $0.57 | $0.41 | $0.90 | $0.83 | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20-%20KRC) Consolidated Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $280,667 | $256,562 | | Net cash (used in) provided by investing activities | ($100,343) | $40,815 | | Net cash (used in) provided by financing activities | ($152,885) | $28,353 | | **Net increase in cash and cash equivalents** | **$27,439** | **$325,730** | [Financial Statements of Kilroy Realty, L.P.](index=14&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29%20OF%20KILROY%20REALTY%2C%20L.P.) This section presents Kilroy Realty, L.P.'s unaudited consolidated financial statements, largely mirroring the Company's, with equity section differences [Consolidated Balance Sheets](index=14&type=section&id=Consolidated%20Balance%20Sheets%20-%20KRLP) - The Operating Partnership's total assets, liabilities, and total capital were **$10.87 billion**, **$5.27 billion**, and **$5.59 billion**, respectively, as of June 30, 2025, showing minimal change from year-end 2024[33](index=33&type=chunk) [Consolidated Statements of Operations](index=15&type=section&id=Consolidated%20Statements%20of%20Operations%20-%20KRLP) Consolidated Statements of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $289,892 | $280,731 | $560,736 | $559,312 | | Net Income | $79,568 | $54,547 | $123,249 | $110,247 | | **Net Income Available to Common Unitholders** | **$69,112** | **$49,669** | **$108,495** | **$100,091** | [Notes to Unaudited Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering organization, property dispositions, debt, share-based compensation, and rental income [Note 1. Organization, Ownership, and Basis of Presentation](index=19&type=section&id=Note%201.%20Organization%2C%20Ownership%2C%20and%20Basis%20of%20Presentation) - The company is a REIT focused on premier office, life science, and mixed-use properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin[45](index=45&type=chunk) Stabilized Portfolio Summary as of June 30, 2025 | Property Type | Count | Rentable Square Feet / Units | Occupancy | | :--- | :--- | :--- | :--- | | Office Properties | 118 buildings | 16,395,491 | 80.8% | | Residential Properties | 3 properties | 1,001 units | 94.5% | - As of June 30, 2025, properties excluded from the stabilized portfolio include one property held for sale (**663,460 sq ft**) and three development/redevelopment projects in the tenant improvement phase (**975,000 sq ft**)[48](index=48&type=chunk) [Note 2. Dispositions and Real Estate Held for Sale](index=22&type=section&id=Note%202.%20Dispositions%20and%20Real%20Estate%20Held%20for%20Sale) - During the six months ended June 30, 2025, the company sold one operating property for a gross price of **$40.0 million**, realizing a gain of **$16.6 million**[62](index=62&type=chunk)[63](index=63&type=chunk) - A four-building office property in Silicon Valley (**663,460 sq ft**) was classified as Held for Sale in Q2 2025, with an expected gross sales price of **$365.0 million**, anticipated to close in Q3 2025[64](index=64&type=chunk) Assets and Liabilities Held for Sale as of June 30, 2025 (in thousands) | Category | Amount | | :--- | :--- | | Total real estate and other assets held for sale, net | $255,795 | | Total liabilities related to real estate assets held for sale | $4,887 | [Note 4. Secured and Unsecured Debt of the Operating Partnership](index=23&type=section&id=Note%204.%20Secured%20and%20Unsecured%20Debt%20of%20the%20Operating%20Partnership) Unsecured Revolving Credit Facility Summary as of June 30, 2025 | Metric | Value | | :--- | :--- | | Outstanding Borrowings | $0 | | Remaining Borrowing Capacity | $1.1 billion | | Interest Rate | 5.65% | | Maturity Date | July 31, 2028 | Debt Maturities as of June 30, 2025 (in thousands) | Year | Principal Amount | | :--- | :--- | | Remaining 2025 | $603,153 | | 2026 | $401,317 | | 2027 | $249,125 | | 2028 | $400,000 | | Thereafter | $3,375,000 | | **Total Debt, Net** | **$4,597,719** | - For the six months ended June 30, 2025, the company capitalized **$41.9 million** of interest expense related to development and redevelopment projects, compared to **$40.3 million** in the same period of 2024[79](index=79&type=chunk) [Note 7. Share-Based Compensation](index=27&type=section&id=Note%207.%20Share-Based%20Compensation) - In February 2025, the company awarded **535,398 restricted stock units (RSUs)** to certain officers, split between performance-based and time-based vesting requirements[85](index=85&type=chunk) Share-Based Compensation Cost (in millions) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Compensation Cost | $5.7 | $6.9 | $10.8 | $11.7 | - As of June 30, 2025, there was approximately **$33.4 million** of total unrecognized compensation cost related to nonvested RSUs, expected to be recognized over a weighted-average period of **2.0 years**[95](index=95&type=chunk) [Note 8. Rental Income and Future Minimum Rent](index=31&type=section&id=Note%208.%20Rental%20Income%20and%20Future%20Minimum%20Rent) Future Contractual Minimum Rent as of June 30, 2025 (in thousands) | Year | Amount | | :--- | :--- | | Remaining 2025 | $389,469 | | 2026 | $768,433 | | 2027 | $746,063 | | 2028 | $701,989 | | 2029 | $609,393 | | Thereafter | $1,644,306 | | **Total** | **$4,859,653** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and operating results, including portfolio, tenants, leasing, development, and liquidity [Overview and Background](index=39&type=section&id=Overview%20and%20Background) Stabilized Portfolio Occupancy by Region as of June 30, 2025 | Region | Rentable Square Feet | Occupancy | | :--- | :--- | :--- | | Los Angeles | 4,261,793 | 74.4% | | San Diego | 2,871,241 | 85.0% | | San Francisco Bay Area | 5,507,135 | 84.8% | | Seattle | 2,996,347 | 78.5% | | Austin | 758,975 | 79.9% | | **Total Stabilized Portfolio** | **16,395,491** | **80.8%** | - The top 20 tenants accounted for **54.6%** of total annualized base rental revenue as of June 30, 2025, with a weighted average remaining lease term of **5.9 years**[130](index=130&type=chunk) [Factors That May Influence Future Results of Operations](index=42&type=section&id=Factors%20That%20May%20Influence%20Future%20Results%20of%20Operations) Leasing Activity - Six Months Ended June 30, 2025 | Leasing Type | Number of Leases | Total Rentable Square Feet | Change in GAAP Rents | Change in Cash Rents | | :--- | :--- | :--- | :--- | :--- | | 2nd Gen Leasing (New & Renewal) | 61 | 484,860 | (13.1)% | (18.5)% | | 1st Gen / Development | 8 | 105,272 | N/A | N/A | | **Total** | **69** | **590,132** | | | - Leases representing **12.4%** of the occupied square footage of the stabilized portfolio are scheduled to expire during the remainder of 2025 and in 2026[145](index=145&type=chunk) - The company has one development project (Kilroy Oyster Point Phase 2, **875,000 sq ft**) and two redevelopment projects (**90,000 sq ft** total) in the tenant improvement phase[154](index=154&type=chunk)[157](index=157&type=chunk) - The future development pipeline includes eight projects with the potential for over **6.0 million sq ft** of office space and approximately **1,750 residential units**[155](index=155&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Net Operating Income (NOI) Comparison (in thousands) | Period | Q2 2025 | Q2 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total NOI** | **$190,779** | **$187,996** | **1.5%** | **$371,018** | **$375,581** | **(1.2)%** | - Q2 2025 Same Property NOI increased by **$4.0 million** (**2.2%**) YoY, driven by higher revenue from tenant creditworthiness considerations and lower real estate taxes[172](index=172&type=chunk) - YTD 2025 Same Property NOI decreased by **$3.0 million** (**0.8%**) YoY, primarily due to a **$12.1 million** decrease in straight-line rent, partially offset by lower real estate taxes[187](index=187&type=chunk) - Interest expense decreased by **$5.9 million** in Q2 2025 and **$13.6 million** YTD 2025 compared to the prior year periods, mainly due to lower average outstanding debt balances[177](index=177&type=chunk)[192](index=192&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had approximately **$193.1 million** in cash and cash equivalents and **$1.1 billion** available under its unsecured revolving credit facility[202](index=202&type=chunk) - The company's next significant debt maturities are in October 2025, including a **$200.0 million** term loan and **$400.0 million** in unsecured senior notes[234](index=234&type=chunk) Debt Composition as of June 30, 2025 | Debt Type | Percentage of Total Debt | Weighted Average Interest Rate | | :--- | :--- | :--- | | Unsecured | 87.0% | 4.0% | | Secured | 13.0% | 5.1% | | Variable-rate | 4.3% | 5.6% | | Fixed-rate | 95.7% | 4.1% | - The company has a **$500.0 million** share repurchase program, which commenced in February 2024, but has not completed any repurchases under it[240](index=240&type=chunk) [Non-GAAP Supplemental Financial Measure: Funds From Operations (FFO)](index=70&type=section&id=Non-GAAP%20Supplemental%20Financial%20Measure%3A%20Funds%20From%20Operations%20%28FFO%29) Funds From Operations (FFO) (in thousands) | Period | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **FFO** | **$135,891** | **$132,587** | **$258,201** | **$266,310** | [Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to market risk disclosures have occurred since the 2024 Annual Report on Form 10-K - There have been no material changes to the market risk information previously disclosed in the 2024 Annual Report on Form 10-K[259](index=259&type=chunk) [Controls and Procedures](index=72&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures for both entities were effective as of June 30, 2025, with no material changes to internal control - Management concluded that the disclosure controls and procedures for both the Company and the Operating Partnership were effective as of June 30, 2025[261](index=261&type=chunk)[264](index=264&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting[262](index=262&type=chunk)[265](index=265&type=chunk) [PART II – OTHER INFORMATION](index=73&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=73&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) The company is subject to routine litigation, with no legal proceedings expected to materially affect its financial condition or operations - As of June 30, 2025, the company is not involved in any legal proceedings expected to have a material adverse effect[267](index=267&type=chunk) [Risk Factors](index=73&type=section&id=Item%201A.%20RISK%20FACTORS) No material changes to risk factors have been reported since the 2024 Annual Report on Form 10-K - No material changes to risk factors from the 2024 Annual Report on Form 10-K have been reported[268](index=268&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company reported no unregistered sales of equity securities, with common stock purchases solely for tax withholding on vested employee awards Purchases of Equity Securities by the Issuer - Q2 2025 | Period | Total Shares Purchased | Weighted Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 6,205 | $31.89 | | May 2025 | 0 | N/A | | June 2025 | 0 | N/A | | **Total** | **6,205** | **$31.89** | - The shares purchased were remitted to the company to satisfy tax withholding obligations related to vested restricted stock units[271](index=271&type=chunk)

Financial Data and Key Metrics Changes - FFO for the quarter was $1.13 per diluted share, including approximately $0.11 per share of one-time items [10] - Cash same property NOI growth in the second quarter was 4.50%, with one-time items contributing 3.00% [10] - Occupancy at the end of the second quarter was 80.8%, down from 81.4% at the end of the first quarter [10][11] Business Line Data and Key Metrics Changes - The company is under contract to sell land at 20 Sixth Street in Los Angeles for $41 million, and completed the sale of 501 Santa Monica for $40 million [6][7] - The Flower Mart project remains the largest investment in the future development pipeline, currently entitled for a 2,300,000 square foot primarily office project [3][4] - GAAP releasing spreads were negative 11.2% in the second quarter, while cash releasing spreads were negative 15.2% [13] Market Data and Key Metrics Changes - The company expects a modest decline in occupancy in the third quarter, primarily due to the addition of two redevelopment projects [12] - The spread between leased and occupied space increased to 2.70%, a 100 basis point improvement year over year [13] - The company is seeing a widening of the types of buyers evaluating office assets, indicating growing conviction in the West Coast office recovery [21] Company Strategy and Development Direction - The company aims to monetize non-income producing land and concentrate investments in areas with robust demand drivers [5][6] - The strategy includes selling operating properties valued favorably relative to expectations for fundamentals [5] - The company is actively working on redesigning the Flower Mart project to allow for a broader mix of uses and earlier development phases [3][4] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about positive net absorption in the fourth quarter, supported by significant lease commencements [12] - The company is closely monitoring the impact of AI on office space requirements, noting both job losses and new job creation [44][46] - Management has raised the 2025 FFO outlook to a range of $4.05 to $4.15 per share, reflecting updated expectations for capitalization at the Flower Mart [14][15] Other Important Information - The company has a total buyback authorization of approximately $400 million, which has not yet been utilized [22] - The company is under contract to sell a four-building campus in Silicon Valley for $365 million, with occupancy expected to decline significantly by 2026 [7][8] Q&A Session Summary Question: Can you talk about the type of buyers and valuation discussions? - Management noted a variety of buyers including institutional and high net worth individuals, with depth across different types of opportunities [18][19] Question: Can you provide more detail on KOP2 activity? - Management expressed encouragement regarding leasing activity at KOP, with a focus on life science and healthcare tenants [24][25] Question: How do you view the impact of AI on office space? - Management highlighted the dual dynamics of job losses in traditional tech and new job creation driven by AI, with a positive outlook for markets like San Francisco [44][46] Question: What is the status of the Flower Mart project? - Management indicated ongoing constructive discussions with the city regarding project modifications, with expectations for updates in the coming quarters [60][62] Question: How is the company addressing lease expirations for 2026? - Management acknowledged a focus on addressing lease expirations, with expectations for some larger vacates in the first half of 2026 [32][33]

Financial Data and Key Metrics Changes - FFO for the quarter was $1.13 per diluted share, including approximately $0.11 per share of one-time items [10] - Cash same property NOI growth in the second quarter was 4.50%, with one-time items contributing 3.00% [10] - Occupancy at the end of the second quarter was 80.8%, down from 81.4% at the end of the first quarter [10] Business Line Data and Key Metrics Changes - The company is under contract to sell land at 20 Sixth Street in Los Angeles for $41 million, which is approximately $20 million per acre [6] - The sale of 501 Santa Monica was completed for $40 million, slightly over $500 per square foot [7] - A four-building campus in Silicon Valley is under contract for $365 million, with current occupancy at 89% expected to drop to 65% in 2026 [8] Market Data and Key Metrics Changes - The company has seen a resurgence in office demand in San Francisco, which is encouraging for future developments [3] - The spread between leased and occupied space increased to 270 basis points, a 100 basis point improvement year over year [12] - GAAP releasing spreads were negative 11.2% in the second quarter, while cash releasing spreads were negative 15.2% [12] Company Strategy and Development Direction - The company aims to monetize non-income producing land and concentrate investments in areas with robust demand drivers [5] - The Flower Mart project is the largest investment in the future development pipeline, requiring a redesign to maximize value [3] - The company is focused on maintaining flexibility in its development plans to respond to market conditions [4] Management's Comments on Operating Environment and Future Outlook - Management expects a modest decline in occupancy in the third quarter but is optimistic about positive net absorption in the fourth quarter [11] - The company raised its 2025 FFO outlook to a range of $4.05 to $4.15 per share, reflecting updated expectations for capitalization at the Flower Mart [13] - Management acknowledges the impact of AI on office space requirements, noting both job losses and new job creation in the tech sector [42][45] Other Important Information - The company has a total buyback authorization of approximately $400 million, which has not yet been utilized [22] - The company is actively evaluating its future land bank for monetization opportunities [81] Q&A Session Summary Question: Can you talk about the type of buyers and valuation discussions? - Management noted a variety of buyers including institutional and owner-users, with good depth in the bidding pool [17][20] Question: Can you provide more detail on KOP2 activity? - Management reported active lease negotiations for about 100,000 square feet primarily with life science and healthcare tenants [24][25] Question: How do you view the impact of AI on office space? - Management sees AI as a growth strategy for companies, with new job creation expected in markets like San Francisco [42][45] Question: What is the status of the Flower Mart project? - Management is in ongoing discussions with the city for flexibility in entitlements and expects to provide updates in future calls [60][91]

分组1 - Kilroy Realty (KRC) reported quarterly funds from operations (FFO) of $1.13 per share, exceeding the Zacks Consensus Estimate of $1.01 per share, and showing an increase from $1.1 per share a year ago, resulting in an FFO surprise of +11.88% [1] - The company achieved revenues of $289.89 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 7.52%, compared to $280.73 million in the same quarter last year [2] - Over the last four quarters, Kilroy Realty has exceeded consensus FFO estimates three times and topped consensus revenue estimates three times as well [2] 分组2 - The stock has underperformed the market, losing about 8.3% since the beginning of the year, while the S&P 500 has gained 8.6% [3] - The current consensus FFO estimate for the upcoming quarter is $1.00 on revenues of $270.62 million, and for the current fiscal year, it is $3.96 on revenues of $1.08 billion [7] - The Zacks Industry Rank indicates that the REIT and Equity Trust - Other sector is currently in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

[Q2 2025 Financial and Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20and%20Operational%20Highlights) [CEO Statement and Key Business Updates](index=1&type=section&id=CEO%20Statement%20and%20Key%20Business%20Updates) CEO Angela Aman reported strong Q2 2025 with accelerated leasing momentum and significant capital recycling, reflecting improved institutional interest in West Coast office assets - Leasing momentum accelerated, leading to over **400,000 square feet of lease executions**[4](index=4&type=chunk) - Significant progress in capital recycling through land monetization and dispositions of non-strategic operating properties[4](index=4&type=chunk) - Institutional interest in West Coast office assets continues to improve[4](index=4&type=chunk) [Summary of Financial Results and Operational Metrics](index=1&type=section&id=Summary%20of%20Financial%20Results%20and%20Operational%20Metrics) Kilroy Realty reported increased Q2 2025 revenues, net income, and FFO, with 423,000 sq ft of leases, a $40.0 million disposition, and a $365.0 million campus held for sale | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change (%) | | :-------------------------------- | :------------------ | :------------------ | :------------- | | Revenues | $289.9 | $280.7 | +3.27% | | Net Income Available to Common Stockholders | $68.4 | $49.2 | +38.9% | | Net Income Available to Common Stockholders (per diluted share) | $0.57 | $0.41 | +39.0% | | Funds From Operations (FFO) | $135.9 | $132.6 | +2.5% | | FFO (per diluted share) | $1.13 | $1.10 | +2.7% | - Stabilized Portfolio was **80.8% occupied** and **83.5% leased** at June 30, 2025[6](index=6&type=chunk) - Signed approximately **423,000 square feet of leases**, including **225,000 sq ft of new leasing** on previously vacant space[6](index=6&type=chunk) - Completed the sale of 501 Santa Monica Boulevard for **$40.0 million**[6](index=6&type=chunk) - Classified a four-building campus in Silicon Valley (**663,000 sq ft**) as Held for Sale, with an expected sale price of **$365.0 million**[6](index=6&type=chunk) - Declared and paid a regular quarterly cash dividend of **$0.54 per share**[7](index=7&type=chunk) [FFO Guidance and Outlook](index=2&type=section&id=FFO%20Guidance%20and%20Outlook) FFO per share guidance for 2025 increased to $4.05-$4.15, reflecting improved Same Property Cash NOI growth and GAAP lease termination fee income | Metric | May 2025 Assumptions | July 2025 Assumptions | | :------------------------------------------ | :------------------- | :-------------------- | | Nareit FFO per common share/unit – diluted | $3.85 - $4.05 | $4.05 - $4.15 | | Same Property Cash NOI growth | (1.5%) to (3.0%) | (1.0%) to (2.0%) | | Average full year occupancy | 80% to 82% | 80.5% to 81.5% | | GAAP lease termination fee income | +/- $3 million | +/- $13 million | - Guidance estimates reflect management's views on current and future market conditions, including rental rates, occupancy levels, and earnings impact of events[12](index=12&type=chunk) - Guidance does not include potential future acquisitions, dispositions, capital markets activity, impairment charges, or events outside the Company's control[12](index=12&type=chunk) [Corporate Data & Financial Highlights](index=4&type=section&id=Corporate%20Data%20%26%20Financial%20Highlights) [Company Background](index=4&type=section&id=Company%20Background) Kilroy Realty is a publicly traded REIT specializing in premier office and life science properties across West Coast markets and Austin, with a 16.4 million sq ft stabilized portfolio - Kilroy Realty Corporation (NYSE: KRC) is a publicly traded real estate investment trust (REIT) and member of the S&P MidCap 400 Index[20](index=20&type=chunk) - The Company owns, develops, acquires, and manages real estate assets primarily consisting of premier properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin[20](index=20&type=chunk) | Metric | Value (as of 6/30/2025) | | :-------------------------------- | :---------------------- | | Stabilized Office & Life Science Space | 16.4 million square feet | | Number of Buildings | 118 | | Occupied Portfolio | 80.8% | | Leased Portfolio | 83.5% | | Residential Units | 1,001 | | Average Residential Occupancy (Q2 2025) | 93.8% | [Financial Highlights](index=5&type=section&id=Financial%20Highlights) Kilroy Realty reported increased Q2 2025 revenues to $289.9 million, net income to $68.4 million, and FFO per diluted share to $1.13, with 80.8% portfolio occupancy | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Revenues | $289,892 | $280,731 | +3.26% | | Net Income Available to Common Stockholders | $68,449 | $49,211 | +38.90% | | Net Income Available to Common Stockholders per diluted share | $0.57 | $0.41 | +39.02% | | Funds From Operations (FFO) | $135,891 | $132,587 | +2.49% | | FFO per common share – diluted | $1.13 | $1.10 | +2.73% | | Dividends declared per common share | $0.54 | $0.54 | 0.00% | | Net Operating Income Margin | 65.8% | 67.0% | -1.20 pp | | Period End Occupancy Percentage | 80.8% | 83.7% | -2.90 pp | | Period End Leased Percentage | 83.5% | 85.4% | -1.90 pp | - Net Debt to Company's Share of EBITDAre Ratio increased to **6.6x** in Q2 2025 from **6.4x** in Q2 2024[24](index=24&type=chunk) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Kilroy Realty's total assets decreased by 5.86% and liabilities by 10.75% as of June 30, 2025, with assets held for sale increasing to $255.8 million | Metric | 6/30/2025 ($ in thousands) | 6/30/2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :------------------------- | :------------------------- | :------------- | | Total Assets | $10,867,832 | $11,543,756 | -5.86% | | Total Liabilities | $5,274,388 | $5,909,498 | -10.75% | | Total Equity | $5,593,444 | $5,634,258 | -0.72% | | Real estate and other assets held for sale, net | $255,795 | $0 | N/A | | Cash and cash equivalents | $193,129 | $835,893 | -76.99% | | Unsecured debt, net | $4,002,507 | $4,519,796 | -11.45% | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Kilroy Realty's Q2 2025 operations show a 3.26% revenue increase and a 45.87% net income rise, supported by a property sale gain and reduced interest expense | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Total revenues | $289,892 | $280,731 | +3.26% | | Total expenses | $196,736 | $199,378 | -1.32% | | Interest income | $512 | $10,084 | -94.92% | | Interest expense | $30,844 | $36,763 | -16.11% | | Gain on sale of depreciable operating property | $16,554 | $0 | N/A | | Net Income | $79,568 | $54,547 | +45.87% | | Net Income Available To Common Stockholders | $68,449 | $49,211 | +38.90% | - The company began presenting 'Other income (expense)' from January 1, 2025, which includes tax expenses, acquisition/disposition expenses, and environmental/sustainability related income/expenses[31](index=31&type=chunk) [Funds From Operations & Funds Available for Distribution](index=6&type=section&id=Funds%20From%20Operations%20%26%20Funds%20Available%20for%20Distribution) Q2 2025 FFO increased by 2.49% to $135.9 million, but FAD decreased by 9.44% to $103.9 million, driven by higher recurring capital expenditures | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Funds From Operations (FFO) | $135,891 | $132,587 | +2.49% | | FFO per common share/unit – diluted | $1.13 | $1.10 | +2.73% | | Funds Available for Distribution (FAD) | $103,889 | $114,834 | -9.53% | | Recurring tenant improvements, leasing commissions, and capital expenditures | ($34,040) | ($22,069) | +54.26% | | Straight-line rents, net | $3,354 | ($634) | N/A | [Supplemental Income Statement Detail](index=7&type=section&id=Supplemental%20Income%20Statement%20Detail) Q2 2025 supplemental income shows cash lease termination fee income increased to $10.6 million, other revenues rose, and straight-line rents turned positive | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Base rent | $201,955 | $202,649 | -0.34% | | Tenant reimbursements | $48,035 | $49,427 | -2.82% | | Other revenues | $19,967 | $13,819 | +44.49% | | Straight-line rents, net | ($3,354) | $634 | N/A | | Cash lease termination fee income | $10,588 | $2,465 | +329.13% | | Total Revenues | $289,892 | $280,731 | +3.26% | [Net Operating Income](index=8&type=section&id=Net%20Operating%20Income) Kilroy Realty's Q2 2025 Cash NOI increased by 3.64% to $187.1 million and NOI by 1.48% to $190.8 million, driven by higher cash operating revenues | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Total cash operating revenues | $275,417 | $271,746 | +1.35% | | Total cash operating expenses | $88,281 | $91,181 | -3.00% | | Cash Net Operating Income | $187,136 | $180,565 | +3.64% | | Net Operating Income | $190,779 | $187,996 | +1.48% | | Lease termination fees | $10,754 | $1,451 | +641.14% | - Starting January 1, 2025, lease termination fees are excluded from NOI and Cash NOI calculations to provide a more indicative measure of operating performance[39](index=39&type=chunk) [Same Property Net Operating Income Analysis (Cash Basis)](index=8&type=section&id=Same%20Property%20Net%20Operating%20Income%20Analysis%20(Cash%20Basis)) Same Property Cash NOI increased by 4.5% to $178.6 million in Q2 2025, driven by higher cash operating revenues, despite average occupancy decreasing to 80.5% | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Total cash operating revenues | $262,974 | $258,745 | +1.63% | | Total cash operating expenses | $84,368 | $87,873 | -4.00% | | Cash Net Operating Income | $178,606 | $170,872 | +4.53% | | Average Occupancy | 80.5% | 83.2% | -2.70 pp | - The Same Property Portfolio includes 116 properties, representing **99.4% of the Stabilized Portfolio** and **95.5% of the Total Portfolio**[43](index=43&type=chunk) [EBITDAre](index=9&type=section&id=EBITDAre) Kilroy Realty reported Q2 2025 EBITDAre increased by 1.70% to $181.5 million, and Adjusted EBITDAre grew by 4.12% to $167.4 million, reflecting improved operating performance | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Net Income Available to Common Stockholders | $68,449 | $49,211 | +38.90% | | EBITDAre | $181,500 | $178,461 | +1.70% | | Company's share of EBITDAre | $167,914 | $170,860 | -1.72% | | Company's share of Adjusted EBITDAre | $167,402 | $160,776 | +4.12% | - Starting January 1, 2025, the company began adjusting for taxes in its EBITDAre calculation, which are included in 'Other income (expense)' on the Consolidated Statement of Operations[47](index=47&type=chunk) [Portfolio Data](index=10&type=section&id=Portfolio%20Data) [Stabilized Portfolio Occupancy Overview by Region](index=10&type=section&id=Stabilized%20Portfolio%20Occupancy%20Overview%20by%20Region) Stabilized portfolio occupancy was 80.8% and leased 83.5% as of June 30, 2025, with regional variations; residential properties maintained 93.8% average occupancy | Region | Occupied at 6/30/2025 | Occupied at 3/31/2025 | Leased at 6/30/2025 | Leased at 3/31/2025 | | :------------------------ | :-------------------- | :-------------------- | :------------------ | :------------------ | | Total Stabilized Portfolio | 80.8% | 81.4% | 83.5% | 83.9% | | Los Angeles | 74.4% | 72.7% | 76.4% | 75.8% | | San Diego | 85.0% | 87.5% | 86.5% | 88.7% | | San Francisco Bay Area | 84.8% | 86.8% | 86.9% | 87.1% | | Seattle | 78.5% | 78.6% | 84.6% | 85.1% | | Austin | 79.9% | 76.4% | 83.2% | 81.5% | | Total Residential Properties | 93.8% | 95.2% | N/A | N/A | - University Towne Center in San Diego and several properties in Silicon Valley, South San Francisco, and Other Peninsula maintained **100% occupancy**[51](index=51&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - Culver City in Los Angeles had the lowest occupancy at **30.5%**, though it improved from **15.2%** in the prior quarter[51](index=51&type=chunk) [Information on Leases Executed](index=12&type=section&id=Information%20on%20Leases%20Executed) Kilroy Realty executed 345,943 sq ft of leases in Q2 2025, with Second Generation GAAP and cash rents decreasing by 11.2% and 15.2%, and a retention rate of 32.5% | Lease Type | of Leases (QTD) | Square Feet (QTD) | Weighted Average Lease Term (Mo.) | TI/LC Per Sq.Ft. | Changes in GAAP Rents | Changes in Cash Rents | | :---------------------------------------------------------------- | :---------------- | :------------------ | :------------------------ | :--------------- | :-------------------- | :-------------------- | | 2nd Gen Leasing | 29 | 282,479 | 54 | $46.69 | (11.2)% | (15.2)% | | 1st Gen / Major Repositioning / In-Process Development & Redevelopment Leasing | 5 | 63,464 | 139 | $147.86 | N/A | N/A | | Total | 34 | 345,943 | N/A | N/A | N/A | N/A | | Retention Rate Metric | Quarter to Date | Year to Date | | :-------------------------------- | :-------------- | :----------- | | Retention Rate | 32.5% | 25.2% | | Retention Rate, including subtenants | 35.0% | 34.4% | - During Q2 2025, **13 new leases** totaling **123,963 square feet** were signed and commenced[67](index=67&type=chunk) [Stabilized Portfolio Capital Expenditures](index=13&type=section&id=Stabilized%20Portfolio%20Capital%20Expenditures) Total Second Generation Capital Expenditures for Q2 2025 amounted to $34.0 million, a significant increase driven by higher tenant improvements and leasing commissions | Capital Expenditure Type | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Second Generation Capital Improvements | $13,548 | $10,029 | +35.09% | | Second Generation Tenant Improvements & Leasing Commissions | $20,492 | $12,040 | +70.20% | | Total Second Generation Capital Expenditures | $34,040 | $22,069 | +54.26% | | Total Major Repositioning Capital Expenditures | $702 | $9,940 | -92.94% | | Total First Generation Capital Expenditures | $5,834 | $3,773 | +54.63% | - The Average Capital Expenditures to Average NOI Ratio for the trailing five quarters was **14.0%**[70](index=70&type=chunk) [Stabilized Portfolio Lease Expirations](index=14&type=section&id=Stabilized%20Portfolio%20Lease%20Expirations) Kilroy Realty's stabilized portfolio faces significant lease expirations, with 10.0% of leased square footage expiring in 2026 and 7.7% in 2027, with varying ABR per sq ft - Adjusting for leases backfilled or renewed but not yet commenced, 2025, 2026, and 2027 expirations would be reduced by **90,492**, **1,272**, and **5,875 square feet**, respectively[74](index=74&type=chunk) [Stabilized Portfolio Lease Expiration Summary](index=14&type=section&id=Stabilized%20Portfolio%20Lease%20Expiration%20Summary) Lease expiration summary shows 2.4% of leased square footage expires in 2025 ($16.98 million ABR), with the largest portion (61.4%) in 2030 and Beyond | Year | % of Total Leased Sq. Ft. | Annualized Base Rent ($ in thousands) | ABR per Sq. Ft. | | :--- | :------------------------ | :------------------------------------ | :-------------- | | 2025 | 2.4% | $16,980 | $52.88 | | 2026 | 10.0% | $60,747 | $46.61 | | 2027 | 7.7% | $39,109 | $38.95 | | 2028 | 8.9% | $72,687 | $62.17 | | 2029 | 9.6% | $68,648 | $54.40 | | 2030 and Beyond | 61.4% | $499,264 | $62.08 | [Stabilized Portfolio Lease Expiration Schedule by Region](index=14&type=section&id=Stabilized%20Portfolio%20Lease%20Expiration%20Schedule%20by%20Region) Regional lease expiration data shows San Francisco Bay Area has the highest ABR per sq ft for 2025 and 2028, with Los Angeles having the largest sq ft expiring in 2027 | Year | Region | Total Square Feet | % of Total Leased Sq. Ft. | Annualized Base Rent ($ in thousands) | ABR per Sq. Ft. | | :--- | :------------- | :---------------- | :------------------------ | :------------------------------------ | :-------------- | | 2025 | Los Angeles | 67,982 | 0.5% | $2,817 | $41.44 | | 2025 | San Francisco Bay Area | 93,381 | 0.6% | $6,332 | $67.81 | | 2026 | Los Angeles | 532,611 | 4.1% | $20,487 | $38.46 | | 2026 | San Francisco Bay Area | 316,514 | 2.4% | $20,241 | $63.95 | | 2027 | Los Angeles | 728,021 | 5.5% | $26,635 | $36.59 | | 2028 | San Francisco Bay Area | 737,225 | 5.6% | $49,555 | $67.22 | | 2030 and Beyond | San Francisco Bay Area | 3,025,608 | 23.1% | $230,127 | $76.06 | [Top 20 Tenants](index=15&type=section&id=Top%2020%20Tenants) Kilroy Realty's top 20 tenants account for 54.6% of ABR and 41.0% of rentable square feet, with a weighted average remaining lease term of 5.9 years | Metric | Value | | :----------------------------------------- | :---- | | Total Annualized Base Rental Revenue (Top 20) | $412,420k | | Percentage of Total Annualized Base Rental Revenue | 54.6% | | Total Rentable Square Feet (Top 20) | 6,727,939 | | Percentage of Total Rentable Square Feet | 41.0% | | Weighted Average Remaining Lease Term (Years) | 5.9 | - The largest tenant, a global technology company, contributes **5.9% of total ABR** and occupies **849,826 square feet** across Seattle and San Diego, with significant lease expirations in 2032-2033 and 2037[77](index=77&type=chunk) - Stripe, Inc. (San Francisco Bay Area) is the third-largest tenant, contributing **4.4% of total ABR** with a lease expiring in 2034[77](index=77&type=chunk) [Tenant Industry Diversification](index=15&type=section&id=Tenant%20Industry%20Diversification) Tenant industry diversification is based on NAICS, with major technology, life science, and media companies among top tenants suggesting a diversified portfolio - Tenant industry diversification is based on the North American Industry Classification System (NAICS)[82](index=82&type=chunk) - The data includes **100% of consolidated property partnerships** and is based on square footage of all in-place leases in the Stabilized Portfolio[82](index=82&type=chunk) [2025 Operating Property Acquisitions](index=16&type=section&id=2025%20Operating%20Property%20Acquisitions) Kilroy Realty completed no operating property acquisitions in Q1 or Q2 2025 - No operating property acquisitions were made in Q1 or Q2 2025[83](index=83&type=chunk) [2025 Property Dispositions, Held for Sale, and Development Pipeline Under Contract](index=17&type=section&id=2025%20Property%20Dispositions,%20Held%20for%20Sale,%20and%20Development%20Pipeline%20Under%20Contract) Kilroy Realty disposed of one property for $40.0 million in Q2 2025, classified a $365.0 million campus as Held for Sale, and has two development sites under contract for $79.0 million | Category | Property | Submarket | Square Feet / Acreage | Sales Price / Anticipated Sales Price ($ in millions) | | :----------------------------------------- | :-------------------------------- | :---------------- | :-------------------- | :---------------------------------------------------- | | Operating Property Dispositions (Q2 2025) | 501 Santa Monica Boulevard | West Los Angeles | 78,509 | $40.0 | | Operating Properties Held for Sale | Silicon Valley Campus | Silicon Valley | 663,460 | $365.0 | | Development Pipeline - Under Contract | 1633 26th Street | West Los Angeles | 2 acres | $41.0 | | Development Pipeline - Under Contract | Santa Fe Summit | 56 Corridor | 5 acres | $38.0 | | Total Anticipated Proceeds | N/A | N/A | N/A | $444.0 | - The sale of the Silicon Valley Campus is expected to close late in Q3 2025[6](index=6&type=chunk) - Development pipeline transactions are subject to non-refundable deposits and are anticipated to close in 2026 upon receipt of entitlements[84](index=84&type=chunk) [Consolidated Ventures (Noncontrolling Property Partnerships)](index=17&type=section&id=Consolidated%20Ventures%20(Noncontrolling%20Property%20Partnerships)) Consolidated ventures showed strong Q2 2025 performance, with Cash NOI increasing by 28.1% to $25.7 million and Net Income more than doubling to $27.7 million, driven by lease termination fees | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :----------------------------------------- | :----------------------- | :----------------------- | :------------- | | Total cash operating revenues | $35,022 | $28,640 | +22.28% | | Cash Net Operating Income | $25,719 | $20,074 | +28.12% | | Net Operating Income | $25,483 | $21,097 | +20.79% | | Lease termination fees | $10,724 | $135 | +7843.70% | | Net Income | $27,733 | $13,691 | +102.56% | - Kilroy Realty holds ownership percentages of **56%** in two San Francisco properties and **93%** in a Redwood City property within these ventures[85](index=85&type=chunk) [Development](index=18&type=section&id=Development) [Stabilized Development & Redevelopment Projects](index=18&type=section&id=Stabilized%20Development%20%26%20Redevelopment%20Projects) No development or redevelopment projects reached stabilization in Q1 or Q2 2025 - No projects were stabilized in Q1 or Q2 2025[92](index=92&type=chunk) [In-Process Development & Redevelopment Projects](index=18&type=section&id=In-Process%20Development%20%26%20Redevelopment%20Projects) Kilroy Realty has three in-process development projects totaling 975,000 sq ft with an estimated $1.11 billion investment, all currently 0% occupied | Project | Location | Estimated Rentable Square Feet | Total Estimated Investment ($ in millions) | % Leased | % Occupied | Estimated Stabilization Date | | :-------------------------------- | :---------------- | :----------------------------- | :----------------------------------------- | :------- | :--------- | :--------------------------- | | Kilroy Oyster Point - Phase 2 | South San Francisco | 875,000 | $1,025 | 0% | 0% | 1Q 2026 | | 4400 Bohannon Drive | Other Peninsula | 48,000 | $55 | 0% | 0% | 3Q 2025 | | 4690 Executive Drive | University Towne Center | 52,000 | $30 | 47% | 0% | 3Q 2025 | | Total | N/A | 975,000 | $1,110 | 3% | 0% | N/A | - Projects are in 'cold shell condition' and ready for tenant improvements, which may require additional major base building construction[93](index=93&type=chunk) [Future Development Pipeline](index=19&type=section&id=Future%20Development%20Pipeline) Kilroy Realty's future development pipeline includes significant projects across West Coast markets and Austin, with $1.402 billion in cash costs incurred as of June 30, 2025 | Location | Project | Approx. Developable Square Feet / Resi Units | Total Cash Costs Incurred as of 6/30/2025 ($ in millions) | | :---------------- | :-------------------------------- | :----------------------------------------- | :-------------------------------------------------------- | | Los Angeles | 1633 26th Street | 190,000 | $15 | | San Diego | Santa Fe Summit | 600,000 - 650,000 | $116 | | San Diego | 2045 Pacific Highway | 275,000 | $57 | | San Diego | Kilroy East Village | 1,100 units | $68 | | San Francisco Bay Area | Kilroy Oyster Point - Phases 3 and 4 | 875,000 - 1,000,000 | $233 | | San Francisco Bay Area | Flower Mart | 2,300,000 | $642 | | Seattle | SIX0 | 925,000 and 650 units | $195 | | Austin | Stadium Tower | 493,000 | $76 | | Total | N/A | N/A | $1,402 | - Project scope and estimates are subject to change due to market conditions, tenant demands, construction costs, and regulatory processes[95](index=95&type=chunk) - 1633 26th Street and a portion of Santa Fe Summit are under contract for sale, anticipated to close in 2026 upon receipt of entitlements[96](index=96&type=chunk) [Debt & Capitalization Data](index=20&type=section&id=Debt%20%26%20Capitalization%20Data) [Capital Structure](index=20&type=section&id=Capital%20Structure) Kilroy Realty's total debt was $4.63 billion (53.0% of market cap) as of June 30, 2025, with unsecured debt at $4.03 billion (4.02% rate) and secured debt at $603.6 million (5.13% rate) | Metric | Amount ($ in thousands) | % of Total Market Capitalization | | :------------------------------------------------ | :---------------------- | :------------------------------- | | Unsecured Debt | $4,025,000 | 46.1% | | Secured Debt | $603,595 | 6.9% | | Total Debt | $4,628,595 | 53.0% | | Equity and Noncontrolling Interest in Operating Partnership | $4,098,154 | 47.0% | | Total Market Capitalization | $8,726,749 | 100.0% | | Weighted Average Stated Rate (Unsecured Debt) | 4.02% | N/A | | Weighted Average Stated Rate (Secured Debt) | 5.13% | N/A | | Weighted Average Stated Rate (Total Debt) | 4.17% | N/A | - The unsecured revolving credit facility had no outstanding balance as of June 30, 2025[100](index=100&type=chunk) - Several senior notes (2028, 2032, 2033) are designated as green bonds[101](index=101&type=chunk) [Debt Maturities](index=21&type=section&id=Debt%20Maturities) Kilroy Realty has a well-laddered debt maturity schedule, with 9% of total debt maturing in both 2025 ($403.2 million at 4.37%) and 2026 ($401.3 million at 4.06%) | Year | Total Debt ($ in thousands) | Weighted Average Stated Rate | % of Total Debt | | :--- | :-------------------------- | :--------------------------- | :-------------- | | 2025 | $403,153 | 4.37% | 9% | | 2026 | $401,317 | 4.06% | 9% | | 2027 | $449,125 | 4.55% | 9% | | 2028 | $400,000 | 4.75% | 9% | | 2029 | $475,000 | 4.12% | 10% | | 2030 | $500,000 | 3.05% | 11% | | 2031 | $350,000 | 4.27% | 8% | | 2032 | $425,000 | 2.50% | 9% | | 2033 | $450,000 | 2.65% | 9% | | 2034 | $375,000 | 5.90% | 8% | | 2036 | $400,000 | 6.25% | 9% | - The maturity date of the unsecured term loan assumes the exercise of two 12-month extensions[104](index=104&type=chunk) [Debt Covenants & Leverage Ratios](index=21&type=section&id=Debt%20Covenants%20%26%20Leverage%20Ratios) Kilroy Realty shows strong debt covenant compliance, with total debt to asset value at 33-35% and fixed charge coverage ratios exceeding 1.5x; Net Debt to EBITDAre was 6.6x | Covenant | Requirement | Actual Performance (as of 6/30/2025) | | :----------------------------------------- | :---------- | :----------------------------------- | | Total debt to total asset value | less than 60% | 33% (Unsecured Credit), 35% (Unsecured Senior Notes) | | Fixed charge coverage ratio | greater than 1.5x | 3.4x (Unsecured Credit), 5.5x (Unsecured Senior Notes) | | Unencumbered asset pool value to unsecured debt | greater than 150% | 301% | | Net debt to Company's share of EBITDAre Ratio | N/A | 6.6x | | Net debt to Company's share of Adjusted EBITDAre Ratio | N/A | 6.7x | | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | | :----------------------------------------- | :----------------------- | :----------------------- | | Net debt | $4,435,466 | $4,322,539 | | Trailing 12-months Company's share of EBITDAre | $674,686 | $673,269 | | Trailing 12-months Company's share of Adjusted EBITDAre | $658,562 | $632,284 | [Non-GAAP Supplemental Measures](index=22&type=section&id=Non-GAAP%20Supplemental%20Measures) [Management Statements on Non-GAAP Supplemental Measures](index=22&type=section&id=Management%20Statements%20on%20Non-GAAP%20Supplemental%20Measures) Management provides statements on non-GAAP measures (NOI, EBITDAre, FFO, FAD) as useful supplements to GAAP for evaluating performance and liquidity, with lease termination fees excluded from NOI starting 2025 - Non-GAAP measures like NOI, EBITDAre, FFO, and FAD provide useful supplemental information for investors to understand the Company's financial condition and results of operations[107](index=107&type=chunk)[109](index=109&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Commencing January 1, 2025, lease termination fees are excluded from NOI metrics as they are non-recurring, providing a more indicative measure of operating performance[108](index=108&type=chunk) - These non-GAAP measures should not be viewed as alternatives to GAAP measures, as they exclude significant economic costs and activities[111](index=111&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) [Definitions & Reconciliations](index=24&type=section&id=Definitions%20%26%20Reconciliations) [Definitions Included in Supplemental](index=24&type=section&id=Definitions%20Included%20in%20Supplemental) This section defines key financial and operational terms, including Annualized Base Rent, Capital Expenditures, Payout Ratios, Lease Types, NOI Margin, and portfolio classifications, with rollforwards for Same Property and Stabilized Portfolios - Annualized Base Rent is defined as annualized monthly contractual rents from existing tenants, excluding certain non-cash adjustments[123](index=123&type=chunk) - The Same Property Portfolio includes properties owned and stabilized for two comparable reporting periods, excluding undeveloped land, development projects, and properties held for sale[142](index=142&type=chunk) Same Property Portfolio Rollforward (as of 6/30/2025) | Metric | Number of Buildings | Square Feet | | :----------------------------------------- | :------------------ | :---------- | | Same Property Portfolio as of 12/31/2024 | 119 | 16,209,399 | | Stabilized Development and Redevelopment Properties Added | 2 | 829,591 | | Dispositions and Properties Held for Sale | (5) | (741,969) | | Remeasurements | — | (5,261) | | Same Property Portfolio as of 6/30/2025 | 116 | 16,291,760 | Stabilized Portfolio Rollforward (as of 6/30/2025) | Metric | Number of Buildings | Square Feet | | :----------------------------------------- | :------------------ | :---------- | | Stabilized Portfolio as of 12/31/2024 | 123 | 17,142,721 | | Dispositions and Properties Held for Sale | (5) | (741,969) | | Remeasurements | — | (5,261) | | Stabilized Portfolio as of 6/30/2025 | 118 | 16,395,491 | [Reconciliation of Net Income Available to Common Stockholders to Same Property Cash Net Operating Income](index=26&type=section&id=Reconciliation%20of%20Net%20Income%20Available%20to%20Common%20Stockholders%20to%20Same%20Property%20Cash%20Net%20Operating%20Income) This reconciliation details adjustments from Net Income Available to Common Stockholders to Same Property Cash NOI, showing $68.4 million in Net Income adjusted to $178.6 million in Same Property Cash NOI for Q2 2025 | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | | :----------------------------------------- | :----------------------- | :----------------------- | | Net Income Available to Common Stockholders | $68,449 | $49,211 | | Net Income | $79,568 | $54,547 | | Depreciation and amortization | $87,625 | $87,151 | | Interest expense | $30,844 | $36,763 | | Lease termination fees (subtracted) | ($10,754) | ($1,451) | | Net Operating Income | $190,779 | $187,996 | | Cash Net Operating Income | $187,136 | $180,565 | | Non-Same Property Net Cash Operating Income | ($8,530) | ($9,693) | | Same Property Cash Net Operating Income | $178,606 | $170,872 | - Lease termination fees are excluded from Net Operating Income, Cash Net Operating Income, and Same Property Cash Net Operating Income starting January 1, 2025[155](index=155&type=chunk) [Reconciliation of Historical Net Income Available to Common Stockholders to Company's Share of Adjusted EBITDAre](index=27&type=section&id=Reconciliation%20of%20Historical%20Net%20Income%20Available%20to%20Common%20Stockholders%20to%20Company's%20Share%20of%20Adjusted%20EBITDAre) This section reconciles historical Net Income Available to Common Stockholders to the Company's Share of Adjusted EBITDAre for Q1 2024, Q4 2023, and Q3 2023, detailing adjustments for interest, depreciation, and noncontrolling interests | Metric | Q1 2024 ($ in thousands) | Q4 2023 ($ in thousands) | Q3 2023 ($ in thousands) | | :----------------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Net Income Available to Common Stockholders | $49,920 | $47,284 | $52,762 | | Interest expense | $38,871 | $32,325 | $29,837 | | Depreciation and amortization | $88,031 | $86,016 | $85,224 | | EBITDAre | $182,602 | $171,387 | $173,798 | | Company's share of EBITDAre | $173,942 | $163,059 | $165,408 | | Company's share of Adjusted EBITDAre | $160,752 | $152,363 | $158,393 | [Reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution](index=27&type=section&id=Reconciliation%20of%20GAAP%20Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Funds%20Available%20for%20Distribution) This reconciliation shows adjustments from GAAP Net Cash Provided by Operating Activities to FAD, with Q2 2025 GAAP Net Cash of $143.7 million adjusted to FAD of $103.9 million after recurring capital expenditures | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | | :----------------------------------------- | :----------------------- | :----------------------- | | GAAP Net Cash Provided by Operating Activities | $143,746 | $88,693 | | Recurring tenant improvements, leasing commissions and capital expenditures | ($34,040) | ($22,069) | | Depreciation of non-real estate furniture, fixtures and equipment | ($1,382) | ($1,562) | | Net changes in operating assets and liabilities | $9,245 | $55,471 | | Funds Available for Distribution | $103,889 | $114,834 | [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) [Disclaimer on Forward-Looking Information](index=28&type=section&id=Disclaimer%20on%20Forward-Looking%20Information) This section disclaims that the report contains forward-looking statements subject to inherent uncertainties and risks, which could cause actual results to differ materially, and cautions readers not to rely on them as predictions of future performance - The report contains forward-looking statements concerning lease expirations, debt maturities, potential investments, development, dispositions, and financial data[159](index=159&type=chunk) - Forward-looking statements are based on current expectations, beliefs, and assumptions, but are not guarantees of future performance[159](index=159&type=chunk) - Actual performance, results, and events may vary materially due to numerous unpredictable factors, including global economic conditions, real estate market risks, tenant defaults, interest rate changes, and regulatory compliance[159](index=159&type=chunk) - Kilroy Realty Corporation assumes no obligation to update any forward-looking statement unless required by federal securities laws[159](index=159&type=chunk)

Company Overview - Kilroy Realty Corporation (KRC) has a stabilized portfolio of 17,142,721 square feet[8] - The portfolio consists of 123 properties[8] - The portfolio is 82.8% leased and 84.9% occupied[8] - The top 10 tenants by ABR account for 35.5% of ABR and 26.1% of RSF[8] West Coast Recovery & Leasing Performance - Several major companies like AT&T, Amazon, and J.P.Morgan are mandating a five-day return to office starting January 2025, impacting cities like Los Angeles, Seattle, San Francisco, and San Diego[22] - As of December 31, 2024, approximately 410 basis points of portfolio vacancy was concentrated in recently developed or repositioned assets[43] - KRC invested $25 million in a repositioning project for West8 in Seattle, completed in September 2024, with remaining vacancy of approximately 418,000 square feet as of December 31, 2024[44] Life Science Opportunity - KRC's operating life science portfolio covers 3.3 million square feet[47] - The pro forma life science portfolio for under construction projects is 2.4 million square feet[47] - The West Coast attracts approximately 40% of U.S life science venture capital funding[50] Financial Strength - As of December 31, 2024, the weighted average stated interest rate on debt was 4.17%[61] - As of December 31, 2024, the weighted average maturity of debt was 5.5 years[61] - As of December 31, 2024, the unencumbered portfolio percentage was 90%[61]

Portfolio Overview - Kilroy Realty Corporation's portfolio encompasses 17.1 million square feet[6] - The portfolio's leased percentage is 81.4%, while the stabilized portfolio is 83.9%, with a difference of 250 basis points[6] Tenant and Credit Profile - 35.6% of Annual Base Rent (ABR) comes from tenants with investment-grade credit ratings, representing 25.6% of rentable square footage (RSF)[7] - The company has tenants with credit ratings of AA+/Aaa accounting for 5.7% of ABR and 5.0% of RSF[7] - Tenants with BBB/Baa2 ratings represent 4.5% of ABR and 2.2% of RSF[7] Financial Strength - The weighted average stated interest rate on debt is 4.16%[72] - The weighted average maturity of debt is 5.4 years[72] - The unencumbered portfolio percentage is 90%[72] - Net debt to adjusted EBITDA is 6.9x[72] - Fixed charge coverage is 3.3x[72] ESG Achievements and Recognition - Kilroy achieved Carbon Neutral Operations from 2020-2024[90] - The company received the Fitwel Excellence Award for Most Certifications of All Time from 2019-2022[90] - Kilroy was recognized as an Energy Star Partner of the Year from 2014-2024, with Sustained Excellence from 2016-2024[90] - Newsweek listed Kilroy on America's Most Responsible Companies from 2020-2025[90] - GRESB awarded Kilroy a 5-Star Designation for Standing Assets and Development from 2015-2024[90] - Kilroy is a member of the US EPA Green Power Partnership and a National Top 100 Green Power User from 2021-2024[90] - Calvert Research and Management recognized Kilroy as a Top 10 Most Sustainable US REIT from 2020-2023[91] - Kilroy has been a Green Lease Leader from 2014-2024, achieving Gold Level from 2018-2024 and Champion of the Decade in 2024[93]

Core Insights - The article emphasizes the investment philosophy of acquiring shares in great companies when they face temporary difficulties, as articulated by Warren Buffett [1]. Group 1 - The quote from Warren Buffett highlights the strategy of buying strong companies during challenging times, suggesting that such moments present unique investment opportunities [1].