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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 1-12675 (Kilroy Realty Corporation)
Commission File Number: 000-54005 (Kilroy Realty, L.P.)
KILROY REALTY CORPORATION
KILROY REALTY, L.P.
(Exact name of registrant as specified in its charter)
Kilroy Realty CorporationMaryland95-4598246
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Kilroy Realty, L.P.Delaware95-4612685
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)

12200 W. Olympic Boulevard, Suite 200, Los Angeles, California, 90064
(Address of principal executive offices) (Zip Code)

(310) 481-8400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each className of each exchange on which registeredTicker Symbol
Kilroy Realty CorporationCommon Stock, $.01 par valueNew York Stock ExchangeKRC
Securities registered pursuant to Section 12(g) of the Act:
RegistrantTitle of each class
Kilroy Realty, L.P.Common Units Representing Limited Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Kilroy Realty Corporation    Yes  ☑    No   ☐
Kilroy Realty, L.P.         Yes  ☑    No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Kilroy Realty Corporation     Yes  ☑    No   ☐
Kilroy Realty, L.P.         Yes  ☑    No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Kilroy Realty Corporation
Large accelerated filer ☑    Accelerated filer ☐
Non-accelerated filer ☐    Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Kilroy Realty, L.P.
Large accelerated filer ☐    Accelerated filer ☐
Non-accelerated filer ☑    Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Kilroy Realty Corporation Yes  ☐     No   ☑
Kilroy Realty, L.P. Yes  ☐     No   ☑
As of April 21, 2023, 117,120,962 shares of Kilroy Realty Corporation common stock, par value $.01 per share, were outstanding.
 


EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2023 of Kilroy Realty Corporation and Kilroy Realty, L.P. Unless stated otherwise or the context otherwise requires, references to “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” mean Kilroy Realty Corporation, a Maryland corporation, and its controlled and consolidated subsidiaries, and references to “Kilroy Realty, L.P.” or the “Operating Partnership” mean Kilroy Realty, L.P., a Delaware limited partnership and its controlled and consolidated subsidiaries.
The Company is a real estate investment trust, or REIT, and the general partner of the Operating Partnership. As of March 31, 2023, the Company owned an approximate 99.0% common general partnership interest in the Operating Partnership. The remaining approximate 1.0% common limited partnership interests are owned by non-affiliated investors and certain directors and officers of the Company. As the sole general partner of the Operating Partnership, the Company exercises exclusive and complete discretion over the Operating Partnership’s day-to-day management and control and can cause it to enter into certain major transactions, including acquisitions, dispositions, and refinancings and cause changes in its line of business, capital structure and distribution policies.
There are a few differences between the Company and the Operating Partnership that are reflected in the disclosures in this Form 10-Q. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. The Company is a REIT, the only material asset of which is the partnership interests it holds in the Operating Partnership. As a result, the Company generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time and guaranteeing certain debt of the Operating Partnership. The Company itself is not directly obligated under any indebtedness, but generally guarantees all of the debt of the Operating Partnership. The Operating Partnership owns substantially all of the assets of the Company either directly or through its subsidiaries, conducts the operations of the Company’s business and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Company, which the Company generally contributes to the Operating Partnership in exchange for units of partnership interest, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness or through the issuance of units of partnership interest.
Noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and, to the extent not held by the Company, as noncontrolling interests in the Company’s financial statements. The differences between stockholders’ equity, partners’ capital and noncontrolling interest result from the differences in the equity issued by the Company and the Operating Partnership.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:
•Combined reports better reflect how management and the analyst community view the business as a single operating unit;
•Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;
•Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
•Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:
•consolidated financial statements;
•the following notes to the consolidated financial statements:
◦Note 8, Net Income Available to Common Stockholders Per Share of the Company;
◦Note 9, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;
◦Note 10, Supplemental Cash Flow Information of the Company; and
◦Note 11, Supplemental Cash Flow Information of the Operating Partnership;
i

•“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
◦—Liquidity and Capital Resources of the Company;” and
◦—Liquidity and Capital Resources of the Operating Partnership.”
This report also includes separate sections under “Part I – Financial Information, Item 4. Controls and Procedures” and separate Exhibit 31 and Exhibit 32 certifications for the Company and the Operating Partnership to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

Available Information

We use our website (www.kilroyrealty.com) as a routine channel of distribution of company information, including press releases, presentations, and supplemental information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
ii

KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
QUARTERLY REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2023
TABLE OF CONTENTS
 
  Page
PART I – FINANCIAL INFORMATION
Item 1.
  
 
Item 1.
Item 2.  
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) OF KILROY REALTY CORPORATION

KILROY REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share data)
 March 31, 2023December 31, 2022
ASSETS
REAL ESTATE ASSETS:  
Land and improvements$1,738,242 $1,738,242 
Buildings and improvements8,335,285 8,302,081 
Undeveloped land and construction in progress1,788,542 1,691,860 
Total real estate assets held for investment11,862,069 11,732,183 
Accumulated depreciation and amortization(2,294,202)(2,218,710)
Total real estate assets held for investment, net9,567,867 9,513,473 
CASH AND CASH EQUIVALENTS476,358 347,379 
MARKETABLE SECURITIES (Note 7)23,288 23,547 
CURRENT RECEIVABLES, NET15,926 20,583 
DEFERRED RENT RECEIVABLES, NET457,870 452,200 
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET238,184 250,846 
RIGHT OF USE GROUND LEASE ASSETS126,277 126,530 
PREPAID EXPENSES AND OTHER ASSETS, NET63,622 62,429 
TOTAL ASSETS$10,969,392 $10,796,987 
LIABILITIES AND EQUITY
LIABILITIES:
Secured debt, net (Notes 2 and 7)$241,547 $242,938 
Unsecured debt, net (Notes 2 and 7)4,171,029 4,020,058 
Accounts payable, accrued expenses and other liabilities418,902 392,360 
Ground lease liabilities124,837 124,994 
Accrued dividends and distributions (Note 12)64,461 64,285 
Deferred revenue and acquisition-related intangible liabilities, net195,629 195,959 
Rents received in advance and tenant security deposits80,565 81,432 
Total liabilities5,296,970 5,122,026 
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY:
Stockholders’ Equity:
Common stock, $.01 par value, 280,000,000 shares authorized, 117,120,962 and 116,878,031 shares issued and outstanding
1,171 1,169 
Additional paid-in capital5,175,402 5,170,760 
Retained earnings257,079 265,118 
Total stockholders’ equity5,433,652 5,437,047 
Noncontrolling Interests (Notes 1 and 3):
Common units of the Operating Partnership53,386 53,524 
Noncontrolling interests in consolidated property partnerships185,384 184,390 
Total noncontrolling interests238,770 237,914 
Total equity5,672,422 5,674,961 
TOTAL LIABILITIES AND EQUITY$10,969,392 $10,796,987 





See accompanying notes to consolidated financial statements.
1

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except share and per share data)
 
 Three Months Ended March 31,
 20232022
REVENUES  
Rental income (Note 5)$290,104 $263,208 
Other property income2,698 2,293 
Total revenues292,802 265,501 
EXPENSES  
Property expenses53,780 45,424 
Real estate taxes28,228 25,870 
Ground leases2,369 1,826 
General and administrative expenses (Note 4)23,936 22,781 
Leasing costs1,372 1,013 
Depreciation and amortization93,676 88,660 
Total expenses203,361 185,574 
OTHER INCOME (EXPENSES)   
Interest and other income, net1,460 81 
Interest expense (Note 2)(25,671)(20,625)
      Total other expenses(24,211)(20,544)
NET INCOME65,230 59,383 
Net income attributable to noncontrolling common units of the Operating Partnership(560)(516)
Net income attributable to noncontrolling interests in consolidated property partnerships(8,062)(5,739)
Total income attributable to noncontrolling interests(8,622)(6,255)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$56,608 $53,128 
Net income available to common stockholders per share – basic (Note 8)$0.48 $0.45 
Net income available to common stockholders per share – diluted (Note 8)$0.48 $0.45 
Weighted average common shares outstanding – basic (Note 8)117,059,329 116,650,228 
Weighted average common shares outstanding – diluted (Note 8)117,406,518 117,060,094 

























See accompanying notes to consolidated financial statements.
2

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited; in thousands, except share and per share/unit data)


Common StockTotal
Stock-
holders’
Equity		Noncontrolling InterestsTotal
Equity
Number of
Shares		Common
Stock		Additional
Paid-in
Capital		Retained Earnings
BALANCE AS OF DECEMBER 31, 2022116,878,031 $1,169 $5,170,760 $265,118 $5,437,047 $237,914 $5,674,961 
Net income56,608 56,608 8,622 65,230 
Issuance of share-based compensation awards1,365 1,365 1,365 
Non-cash amortization of share-based compensation (Note 4)11,566 11,566 11,566 
Settlement of restricted stock units for shares of common stock445,973 4 (4)— — 
Repurchase of common stock and restricted stock units(203,042)(2)(8,361)(8,363)(8,363)
Distributions to noncontrolling interests in consolidated property partnerships— (7,068)(7,068)
Adjustment for noncontrolling interest76 76 (76)— 
Dividends declared per common share and common unit ($0.54 per share/unit)
(64,647)(64,647)(622)(65,269)
BALANCE AS OF MARCH 31, 2023117,120,962 $1,171 $5,175,402 $257,079 $5,433,652 $238,770 $5,672,422 


Common StockTotal
Stock-
holders’
Equity		Noncontrolling InterestsTotal
Equity
Number of
Shares		Common
Stock		Additional
Paid-in
Capital		Retained Earnings
BALANCE AS OF DECEMBER 31, 2021116,464,169 $1,165 $5,155,232 $283,663 $5,440,060 $249,810 $5,689,870 
Net income 53,128 53,128 6,255 59,383 
Issuance of share-based compensation awards1,942 1,942 1,942 
Non-cash amortization of share-based compensation6,598 6,598 6,598 
Settlement of restricted stock units for shares of common stock 459,050 5 (5)— — 
Repurchase of common stock and restricted stock units(207,139)(3)(13,991)(13,994)(13,994)
Distributions to noncontrolling interests in consolidated property partnerships— (14,842)(14,842)
Adjustment for noncontrolling interest192 192 (192)— 
Dividends declared per common share and common unit ($0.52 per share/unit)
(62,598)(62,598)(598)(63,196)
BALANCE AS OF MARCH 31, 2022116,716,080 $1,167 $5,149,968 $274,193 $5,425,328 $240,433 $5,665,761 
















See accompanying notes to consolidated financial statements.
3

KILROY REALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
 
 Three Months Ended March 31,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$65,230 $59,383 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate assets and leasing costs91,671 87,001 
Depreciation of non-real estate furniture, fixtures and equipment2,005 1,659 
Revenue reversals (recoveries) for doubtful accounts, net (Note 5)2,438 (1,311)
Non-cash amortization of share-based compensation awards10,043 5,256 
Non-cash amortization of deferred financing costs and debt discounts1,355 821 
Non-cash amortization of net below market rents(3,033)(2,892)
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements(4,998)(4,261)
Straight-line rents(7,913)(13,847)
Amortization of right of use ground lease assets253 356 
Net change in other operating assets2,849 2,657 
Net change in other operating liabilities22,236 43,837 
Net cash provided by operating activities182,136 178,659 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Expenditures for development and redevelopment properties and undeveloped land(100,457)(112,314)
Expenditures for operating properties and other capital assets(20,891)(17,027)
Expenditures for acquisitions of development properties and undeveloped land— (40,033)
Net cash used in investing activities(121,348)(169,374)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings on unsecured debt (Note 2)150,000 — 
Financing costs(1,228)(318)
Repurchase of common stock and restricted stock units(8,363)(13,994)
Distributions to noncontrolling interests in consolidated property partnerships(7,060)(14,834)
Dividends and distributions paid to common stockholders and common unitholders(63,735)(61,161)
Principal payments and repayments of secured debt (1,423)(1,369)
Net cash provided by (used in) financing activities68,191 (91,676)
Net increase (decrease) in cash and cash equivalents and restricted cash128,979 (82,391)
Cash and cash equivalents and restricted cash, beginning of period347,379 427,083 
Cash and cash equivalents and restricted cash, end of period$476,358 $344,692 



















See accompanying notes to consolidated financial statements.
4



ITEM 1: FINANCIAL STATEMENTS (UNAUDITED) OF KILROY REALTY, L.P.

KILROY REALTY, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except unit data)
 
 March 31, 2023December 31, 2022
ASSETS
REAL ESTATE ASSETS:
Land and improvements$1,738,242 $1,738,242 
Buildings and improvements8,335,285 8,302,081 
Undeveloped land and construction in progress1,788,542 1,691,860 
Total real estate assets held for investment11,862,069 11,732,183 
Accumulated depreciation and amortization(2,294,202)(2,218,710)
Total real estate assets held for investment, net9,567,867 9,513,473 
CASH AND CASH EQUIVALENTS476,358 347,379 
MARKETABLE SECURITIES (Note 7)23,288 23,547 
CURRENT RECEIVABLES, NET15,926 20,583 
DEFERRED RENT RECEIVABLES, NET457,870 452,200 
DEFERRED LEASING COSTS AND ACQUISITION-RELATED INTANGIBLE ASSETS, NET238,184 250,846 
RIGHT OF USE GROUND LEASE ASSETS126,277 126,530 
PREPAID EXPENSES AND OTHER ASSETS, NET63,622 62,429 
TOTAL ASSETS$10,969,392 $10,796,987 
LIABILITIES AND CAPITAL
LIABILITIES:
Secured debt, net (Notes 2 and 7)$241,547 $242,938 
Unsecured debt, net (Notes 2 and 7)4,171,029 4,020,058 
Accounts payable, accrued expenses and other liabilities418,902 392,360 
Ground lease liabilities124,837 124,994 
Accrued distributions (Note 12)64,461 64,285 
Deferred revenue and acquisition-related intangible liabilities, net195,629 195,959 
Rents received in advance and tenant security deposits80,565 81,432 
Total liabilities5,296,970 5,122,026 
COMMITMENTS AND CONTINGENCIES (Note 6)
CAPITAL:
Common units, 117,120,962 and 116,878,031 held by the general partner and 1,150,574
held by common limited partners issued and outstanding
5,487,038 5,490,571 
Noncontrolling interests in consolidated property partnerships (Note 1)185,384 184,390 
Total capital5,672,422 5,674,961 
TOTAL LIABILITIES AND CAPITAL$10,969,392 $10,796,987 















See accompanying notes to consolidated financial statements.
5

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except unit and per unit data)

Three Months Ended March 31,
20232022
REVENUES
Rental income (Note 5)$290,104 $263,208 
Other property income2,698 2,293 
Total revenues292,802 265,501 
EXPENSES
Property expenses53,780 45,424 
Real estate taxes28,228 25,870 
Ground leases2,369 1,826 
General and administrative expenses (Note 4)23,936 22,781 
Leasing costs1,372 1,013 
Depreciation and amortization93,676 88,660 
Total expenses203,361 185,574 
OTHER INCOME (EXPENSES)
Interest and other income, net1,460 81 
Interest expense (Note 2)(25,671)(20,625)
Total other expenses(24,211)(20,544)
NET INCOME65,230 59,383 
Net income attributable to noncontrolling interests in consolidated property partnerships and subsidiaries(8,062)(5,739)
NET INCOME AVAILABLE TO COMMON UNITHOLDERS$57,168 $53,644 
Net income available to common unitholders per unit – basic (Note 9) $0.48 $0.45 
Net income available to common unitholders per unit – diluted (Note 9)$0.48 $0.45 
Weighted average common units outstanding – basic (Note 9)118,209,903 117,800,802 
Weighted average common units outstanding – diluted (Note 9)118,557,092 118,210,668 



























See accompanying notes to consolidated financial statements.
6

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
(Unaudited; in thousands, except unit and per unit data)
Partners’ CapitalNoncontrolling Interests in Consolidated Property Partnerships
Number of
Common
Units		Common
Units		Total
Capital
BALANCE AS OF DECEMBER 31, 2022118,028,605 $5,490,571 $184,390 $5,674,961 
Net income57,168 8,062 65,230 
Issuance of share-based compensation awards1,365 1,365 
Non-cash amortization of share-based compensation (Note 4)11,566 11,566 
Settlement of restricted stock units445,973 — — 
Repurchase of common units and restricted stock units(203,042)(8,363)(8,363)
Distributions to noncontrolling interests in consolidated property partnerships(7,068)(7,068)
Distributions declared per common unit ($0.54 per unit)
(65,269)(65,269)
BALANCE AS OF MARCH 31, 2023118,271,536 $5,487,038 $185,384 $5,672,422 


Partners’ CapitalNoncontrolling Interests in Consolidated Property Partnerships
Number of
Common
Units		Common
Units		Total
Capital
BALANCE AS OF DECEMBER 31, 2021117,614,743 $5,493,806 $196,064 $5,689,870 
Net income53,644 5,739 59,383 
Issuance of share-based compensation awards1,942 1,942 
Non-cash amortization of share-based compensation6,598 6,598 
Settlement of restricted stock units459,050 — — 
Repurchase of common units and restricted stock units(207,139)(13,994)(13,994)
Distributions to noncontrolling interests in consolidated property partnerships(14,842)(14,842)
Distributions declared per common unit ($0.52 per unit)
(63,196)(63,196)
BALANCE AS OF MARCH 31, 2022117,866,654 $5,478,800 $186,961 $5,665,761 


























See accompanying notes to consolidated financial statements.
7

KILROY REALTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

 Three Months Ended March 31,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$65,230 $59,383 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate assets and leasing costs91,671 87,001 
Depreciation of non-real estate furniture, fixtures and equipment2,005 1,659 
Revenue reversals (recoveries) for doubtful accounts, net (Note 5)2,438 (1,311)
Non-cash amortization of share-based compensation awards10,043 5,256 
Non-cash amortization of deferred financing costs and debt discounts1,355 821 
Non-cash amortization of net below market rents(3,033)(2,892)
Non-cash amortization of deferred revenue related to tenant-funded tenant improvements(4,998)(4,261)
Straight-line rents(7,913)(13,847)
Amortization of right of use ground lease assets253 356 
Net change in other operating assets2,849 2,657 
Net change in other operating liabilities22,236 43,837 
Net cash provided by operating activities182,136 178,659 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Expenditures for development and redevelopment properties and undeveloped land(100,457)(112,314)
Expenditures for operating properties and other capital assets(20,891)(17,027)
Expenditures for acquisitions of development properties and undeveloped land— (40,033)
Net cash used in investing activities(121,348)(169,374)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings on unsecured debt (Note 2)150,000 — 
Financing costs(1,228)(318)
Repurchase of common units and restricted stock units(8,363)(13,994)
Distributions to noncontrolling interests in consolidated property partnerships(7,060)(14,834)
Distributions paid to common unitholders(63,735)(61,161)
Principal payments and repayments of secured debt(1,423)(1,369)
Net cash provided by (used in) financing activities68,191 (91,676)
Net increase (decrease) in cash and cash equivalents and restricted cash128,979 (82,391)
Cash and cash equivalents and restricted cash, beginning of period347,379 427,083 
Cash and cash equivalents and restricted cash, end of period$476,358 $344,692 
 



















See accompanying notes to consolidated financial statements.
8

KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization, Ownership and Basis of Presentation

Organization and Ownership

Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office, life science and mixed-use submarkets in the United States. We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin, Texas, which we believe have strategic advantages and strong barriers to entry. Class A real estate encompasses attractive and efficient buildings of high quality that are attractive to tenants, are well-designed and constructed with above-average material, workmanship and finishes and are well-maintained and managed. We qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “KRC.”

We own our interests in all of our real estate assets through Kilroy Realty, L.P. (the “Operating Partnership”). We generally conduct substantially all of our operations through the Operating Partnership. Unless stated otherwise or the context indicates otherwise, the terms “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” refer to Kilroy Realty Corporation and its consolidated subsidiaries and the term “Operating Partnership” refers to Kilroy Realty, L.P. and its consolidated subsidiaries. The descriptions of our business, employees, and properties apply to both the Company and the Operating Partnership.

Our stabilized portfolio of operating properties was comprised of the following properties at March 31, 2023:
Number of
Buildings		Rentable
Square Feet		Number of
Tenants
Percentage 
Occupied (1)
Percentage Leased
Stabilized Office Properties (2)
119 16,206,299 403 89.6 %91.6 %
________________________
(1)Represents economic occupancy.
(2)Includes stabilized life science and retail space.
Number of
Projects		Number of
Units		2023 Average Occupancy
Stabilized Residential Properties3 1,001 93.4 %

Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction, or in the tenant improvement phase, redevelopment properties under construction, undeveloped land and real estate assets held for sale. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs on the existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property. We define properties in the tenant improvement phase as office and life science properties that we are developing or redeveloping where the project has reached cold shell condition and is ready for tenant improvements, which may require additional major base building construction before being placed in service. Projects in the tenant improvement phase are added to our stabilized portfolio once the project reaches the earlier of 95% occupancy or one year from the date of the cessation of major base building construction activities. Costs capitalized to construction in progress for development and redevelopment properties are transferred to land and improvements, buildings and improvements, and deferred leasing costs on our consolidated balance sheets at the historical cost of the property as the projects or phases of projects are placed in service.

As of March 31, 2023, the following properties were excluded from our stabilized portfolio:

Number of
Properties/Projects
Estimated Rentable
Square Feet (1)
In-process development projects - tenant improvement1734,000 
In-process development projects - under construction2946,000 
In-process redevelopment projects - under construction2100,000 
________________________
(1)Estimated rentable square feet upon completion.

9
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



We did not have any properties held for sale at March 31, 2023. Our stabilized portfolio also excludes our future development pipeline, which as of March 31, 2023 was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.

As of March 31, 2023, all of our properties, development projects and redevelopment projects were owned and all of our business was conducted in the state of California with the exception of ten stabilized office properties and one future development project located in the state of Washington, and one development project in the tenant improvement phase and one future development project in Austin, Texas. All of our properties, development projects and redevelopment projects are 100% owned, excluding four office properties owned by three consolidated property partnerships. Two of the three consolidated property partnerships, 100 First Street Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”), each owned one office property in San Francisco, California through subsidiary REITs. As of March 31, 2023, the Company owned a 56% common equity interest in both 100 First LLC and 303 Second LLC. The third consolidated property partnership, Redwood City Partners, LLC (“Redwood LLC”) owned two office properties in Redwood City, California. As of March 31, 2023, the Company owned an approximate 93% common equity interest in Redwood LLC. The remaining interests in all three property partnerships were owned by unrelated third parties.

Ownership and Basis of Presentation

The consolidated financial statements of the Company include the consolidated financial position and results of operations of the Company, the Operating Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. The consolidated financial statements of the Operating Partnership include the consolidated financial position and results of operations of the Operating Partnership, 303 Second LLC, 100 First LLC, Redwood LLC and all of our wholly-owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

As of March 31, 2023, the Company owned an approximate 99.0% common general partnership interest in the Operating Partnership. The remaining approximate 1.0% common limited partnership interest in the Operating Partnership as of March 31, 2023 was owned by non-affiliated investors and certain of our executive officers and directors. Both the general and limited common partnership interests in the Operating Partnership are denominated in common units. Generally, the number of common units held by the Company is equivalent to the number of outstanding shares of the Company’s common stock, and the rights of all the common units to quarterly distributions and payments in liquidation mirror those of the Company’s common stockholders. The common limited partners have certain redemption rights as provided in the Operating Partnership’s Seventh Amended and Restated Agreement of Limited Partnership, as amended, the “Partnership Agreement”. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.

The accompanying interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The interim financial statements for the Company and the Operating Partnership should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2022.


10
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




Variable Interest Entities
The Operating Partnership is a variable interest entity (“VIE”) that is consolidated by the Company as the primary beneficiary as the Operating Partnership is a limited partnership in which the common limited partners do not have substantive kick-out or participating rights. At March 31, 2023, the consolidated financial statements of the Company included two VIEs in addition to the Operating Partnership: 100 First LLC and 303 Second LLC. At March 31, 2023, the Company and the Operating Partnership were determined to be the primary beneficiaries of these two VIEs since we had the ability to control the activities that most significantly impact each of the VIEs’ economic performance. As of March 31, 2023, the two VIEs’ total assets, liabilities and noncontrolling interests included on our consolidated balance sheet were approximately $439.0 million (of which $358.6 million related to real estate held for investment), approximately $29.2 million and approximately $180.5 million, respectively. Revenues, income and net assets generated by 100 First LLC and 303 Second LLC may only be used to settle their contractual obligations, which primarily consist of operating expenses, capital expenditures and required distributions.

At December 31, 2022, the consolidated financial statements of the Company included two VIEs in addition to the Operating Partnership: 100 First LLC and 303 Second LLC. At December 31, 2022, the Company and the Operating Partnership were determined to be the primary beneficiaries of these two VIEs since we had the ability to control the activities that most significantly impact each of the VIEs’ economic performance. At December 31, 2022, the impact of consolidating the VIEs increased the Company’s total assets, liabilities and noncontrolling interests on our consolidated balance sheet by approximately $438.7 million (of which $362.7 million related to real estate held for investment), approximately $31.5 million and approximately $179.4 million, respectively.

2.    Secured and Unsecured Debt of the Operating Partnership

The Company generally guarantees all of the Operating Partnership’s unsecured debt obligations including the unsecured revolving credit facility, the unsecured term loan facility and all of the unsecured senior notes.

Unsecured Revolving Credit Facility and Term Loan Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of March 31, 2023 and December 31, 2022:
March 31, 2023December 31, 2022
(in thousands)
Outstanding borrowings$— $— 
Remaining borrowing capacity
1,100,000 1,100,000 
Total borrowing capacity (1)
$1,100,000 $1,100,000 
Interest rate (2)
5.87 %5.20 %
Facility fee-annual rate (3)
0.200%
Maturity date (4)
July 31, 2025
________________________
(1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $500.0 million under an accordion feature under the terms of the unsecured revolving credit facility.
(2)Our unsecured revolving credit facility interest rate was calculated using a contractual rate of Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% (“Adjusted SOFR”) and a margin of 0.900% based on our credit rating as of March 31, 2023 and December 31, 2022.
(3)Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of March 31, 2023 and December 31, 2022, $4.8 million and $5.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the respective maturity dates presented of our unsecured revolving credit facility.
(4)The maturity date may be extended by two six-month periods, at the Company’s option.

11
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



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

In January 2023, the Operating Partnership entered into the first amendment to its existing unsecured term loan facility agreement to (i) exercise the accordion feature under the term loan agreement to provide for $100.0 million of additional term loan commitments and (ii) increase the borrowing capacity under the accordion feature to provide additional term loan commitments or add one or more tranches of term loans up to an aggregate amount of $650.0 million. In March 2023, the Operating Partnership further amended the unsecured term loan facility agreement to exercise the accordion feature to provide for $20.0 million of additional term loan commitments, bringing the total borrowing capacity of the unsecured term loan facility to $520.0 million.

The following table summarizes the balance and terms of our unsecured term loan facility as of March 31, 2023 and December 31, 2022:

March 31, 2023December 31, 2022
(in thousands)
Outstanding borrowings$350,000 $200,000 
Remaining borrowing capacity170,000 200,000 
Total borrowing capacity (1)
$520,000 $400,000 
Interest rate (2)
5.77 %5.23 %
Undrawn facility fee-annual rate (3)
0.200%
Maturity date (4)
October 3, 2024
____________________
(1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $130.0 million and $100.0 million as of March 31, 2023 and December 31, 2022, respectively, under an accordion feature under the terms of the unsecured term loan facility.
(2)Our unsecured term loan facility interest rate was calculated using a contractual rate of Adjusted SOFR plus a margin of 0.950% based on our credit rating as of March 31, 2023 and December 31, 2022.
(3)Our undrawn facility fee is paid on a quarterly basis and is calculated based on the remaining borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of March 31, 2023 and December 31, 2022, $4.6 million and $4.5 million, respectively, of unamortized deferred financing costs remained to be amortized through the maturity date of our unsecured term loan facility.
(4)The maturity date may be extended by two twelve-month periods, at the Company’s option.

Debt Covenants and Restrictions

The unsecured revolving credit facility, unsecured term loan facility, the unsecured senior notes, including the private placement notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a maximum ratio of secured debt to total asset value, a minimum unsecured debt ratio and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We were in compliance with all of our debt covenants as of March 31, 2023.

12
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




Debt Maturities

The following table summarizes the stated debt maturities and scheduled amortization payments for all outstanding debt as of March 31, 2023:

Year
(in thousands)
Remaining 2023$4,352 
2024 (1)
781,006 
2025406,246 
2026401,317 
2027249,125 
2028400,000 
Thereafter2,200,000 
Total aggregate principal value (2)
$4,442,046 
________________________ 
(1)Includes the $350.0 million outstanding as of March 31, 2023 on the unsecured term loan facility maturing on October 3, 2024, for which the Company has two twelve-month extension options.
(2)Includes gross principal balance of outstanding debt before the effect of the following at March 31, 2023: $23.4 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes and secured debt and $6.1 million of unamortized discounts for the unsecured senior notes.

Capitalized Interest and Loan Fees

The following table sets forth gross interest expense, including debt discount and deferred financing cost amortization, net of capitalized interest, for the three months ended March 31, 2023 and 2022. The interest expense capitalized was recorded as a cost of development and redevelopment and increased the carrying value of undeveloped land and construction in progress.

Three Months Ended March 31,
20232022
(in thousands)
Gross interest expense$43,402 $39,723 
Capitalized interest and deferred financing costs (17,731)(19,098)
Interest expense$25,671 $20,625 

3.    Noncontrolling Interests on the Company’s Consolidated Financial Statements

Common Units of the Operating Partnership

The Company owned an approximate 99.0% common general partnership interest in the Operating Partnership as of March 31, 2023, December 31, 2022 and March 31, 2022. The remaining approximate 1.0% common limited partnership interest as of March 31, 2023, December 31, 2022 and March 31, 2022 was owned by non-affiliated investors and certain of our executive officers and directors in the form of noncontrolling common units. There were 1,150,574 common units outstanding held by these investors, executive officers and directors as of March 31, 2023, December 31, 2022 and March 31, 2022.

The noncontrolling common units may be redeemed by unitholders for cash. Except under certain circumstances, we, at our option, may satisfy the cash redemption obligation with shares of the Company’s common stock on a one-for-one basis. If satisfied in cash, the value for each noncontrolling common unit upon redemption is the amount equal to the average of the closing quoted price per share of the Company’s common stock, par value $0.01 per share, as reported on the NYSE for the ten trading days immediately preceding the applicable redemption date. The aggregate value upon redemption of the then-outstanding noncontrolling common units was $34.7 million and $44.7 million as of March 31, 2023 and December 31, 2022, respectively. This redemption value does not necessarily represent the amount that would be distributed with respect to each noncontrolling common unit in the event of our termination or liquidation. In the event of our termination or liquidation, it is expected in most cases that each common unit would be entitled to a liquidating distribution equal to the liquidating distribution payable in respect of each share of the Company’s common stock.

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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




4.    Share-Based Compensation

Stockholder Approved Share-Based Incentive Compensation Plan

As of March 31, 2023, we maintained one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan, as amended (the “2006 Plan”). The Company has a currently effective registration statement registering 10.7 million shares of our common stock for possible issuance under our 2006 Plan. As of March 31, 2023, approximately 1.0 million shares were available for grant under the 2006 Plan. The calculation of shares available for grant is presented after taking into account a reserve for a sufficient number of shares to cover the vesting and payment of 2006 Plan awards that were outstanding on that date, including performance-based vesting awards at (i) levels actually achieved for the performance conditions (as defined below) for which the performance period has been completed and (ii) at maximum levels for the other performance and market conditions (as defined below) for awards still in a performance period.

Executive Transitions

On March 30, 2023, our Chief Executive Officer (“CEO”) announced his retirement effective December 31, 2023. Additionally, as previously disclosed, the Company and our former President entered into a separation agreement in 2022 under which he continued to serve as an officer of the Company until the scheduled expiration date of his employment agreement on March 1, 2023.

For our CEO, the vesting of all unvested share-based compensation awards will be accelerated through December 31, 2023 and the final number of any restricted stock units (“RSUs”) subject to market and/or performance-based vesting requirements that vest will be based upon a shortened performance period ending on December 31, 2023. Share-based compensation expense for these awards will be recognized based on our current assumption of the achievement of market and/or performance-based vesting requirements for the shortened performance periods. For our former President, the vesting of all unvested share-based compensation awards was accelerated through March 1, 2023 and the final number of RSUs earned that were subject to market and/or performance-based vesting requirements was based upon the actual achievement of the market and/or performance conditions for a shortened performance period ending on March 1, 2023. For the three months ended March 31, 2023, we recognized $4.5 million of stock compensation expense related to the accelerated vesting of awards for our CEO and former President.

2023 Share-Based Compensation Grants

In February 2023, the Executive Compensation Committee of the Company’s Board of Directors awarded 517,066 restricted stock units to certain officers of the Company under the 2006 Plan, which included 300,007 RSUs (at the target level of performance) that are subject to market and/or performance-based vesting requirements (the “2023 Performance-Based RSUs”) and 217,059 RSUs that are subject to time-based vesting requirements (the “2023 Time-Based RSUs”).

2023 Performance-Based RSU Grant

The 2023 Performance-Based RSUs are scheduled to vest at the end of a three year period (consisting of calendar years 2023-2025), except for our CEO, whose RSUs are scheduled to vest on his announced retirement date of December, 31, 2023. A target number of 2023 Performance-Based RSUs were awarded, and the final number of 2023 Performance-Based RSUs that vest (which may be more or less than the target number) will be based upon (1) during the first calendar year of the three year performance measurement period, the achievement of pre-set FFO per share goals that applies to 100% of the Performance-Based RSUs awarded (the “FFO Performance Condition”) and (2) a performance measure that applies to 50% of the award based upon a measure of the Company’s average debt to EBITDA ratio for the three year performance period (the “Debt to EBITDA Ratio Performance Condition”) and a market measure that applies to the other 50% of the award based upon the relative ranking of the Company’s total stockholder return for the three year performance period compared to the total stockholder returns of an established comparison group of companies over the same period (the “Market Condition”). The 2023 Performance-Based RSUs are also subject to a three year service vesting provision (the “service vesting condition”) and are scheduled to cliff vest on the date the final vesting percentage is determined following the end of the three year performance period under the awards. The number of 2023 Performance-Based RSUs ultimately earned could fluctuate from the target number of 2023 Performance-Based RSUs granted based upon the levels of achievement for the FFO Performance Condition, the Debt to EBITDA Ratio Performance Condition, the Market Condition, and the extent to which the service vesting condition
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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



is satisfied. The estimate of the number of 2023 Performance-Based RSUs earned is evaluated quarterly during the performance period based on our estimate for each of the performance conditions measured against the applicable goals.

Compensation expense for the 2023 Performance-Based RSU grant is recognized on a straight-line basis over the requisite service period for each participant, which is generally the three year service period, except for our CEO, whose compensation expense is recognized on an accelerated basis through his announced retirement date of December 31, 2023. During the three months ended March 31, 2023, we recognized $1.1 million of compensation expense for the 2023 Performance-Based RSU grant assuming the target level of achievement for both the FFO Performance Condition and Debt to EBITDA Ratio Performance Condition. In the event we achieve a lower level of performance or fail to meet the FFO performance condition, we would reverse a portion or all of the $1.1 million of compensation expense.

Each 2023 Performance-Based RSU represents the right to receive one share of our common stock in the future, subject to, and as modified by the Company’s level of achievement of the applicable performance and market conditions. The fair value of the portion of the award subject to the Debt to EBITDA Ratio Performance Condition was calculated using the closing price of the Company’s common stock on the valuation date noted below. The fair value of the portion of the award subject to the Market Condition was calculated using a Monte Carlo simulation pricing model based on the assumptions in the table below, which resulted in the following grant date fair value per share.

Fair Value Assumptions
Valuation dateFebruary 6, 2023
Fair value per share on valuation date (1)
$40.10
Expected share price volatility35.0%
Risk-free interest rate4.12%
________________________ 
(1)For one participant, the fair value per share on the valuation date for their 2023 Performance-Based RSUs is $40.43.

The computation of expected volatility was based on a blend of the historical volatility of our shares of common stock over a period of twice the remaining performance period as of the grant date and implied volatility data based on the observed pricing of six month publicly-traded options on shares of our common stock. The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury STRIP securities in effect at February 6, 2023.

The fair value of the 2023 Performance-Based RSU grant as of the valuation date noted above, based on a target level of achievement, was $12.0 million. For the three months ended March 31, 2023, we recorded compensation expense based upon the grant date fair value per share for each component multiplied by the estimated number of RSUs to be earned.

2023 Time-Based RSU Grant

The 2023 Time-Based RSUs are scheduled to vest in three equal annual installments beginning on January 5, 2023 through January 5, 2026. Compensation expense for the 2023 Time-Based RSUs is recognized on a straight-line basis over the requisite service period, which is generally the explicit service period except for our CEO, whose compensation expense is recognized on an accelerated basis through his announced retirement date of December 31, 2023. Each 2023 Time-Based RSU represents the right to receive one share of our common stock in the future, subject to continued employment through the applicable vesting date, unless accelerated upon separation of employment, provided certain conditions are met. The total grant date fair value of the 2023 Time-Based RSU awards was $8.6 million, which was based on the $39.65 closing share price of the Company’s common stock on the NYSE on the February 6, 2023 grant date.

2022 and 2021 Performance-Based RSUs

Compensation cost for the 2022 performance-based RSUs for the three months ended March 31, 2023 assumes the 2022 Debt to EBITDA Ratio Performance Condition is met at 125% of the target level of achievement (175.0% for our CEO). Compensation cost for the 2021 performance-based RSUs for the three months ended March 31, 2023 assumes the 2021 Debt to EBITDA Ratio Performance Condition is met at 150% of the target level of achievement (175.0% for our CEO).


15
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Share-Based Compensation Cost Recorded During the Period

The total compensation cost for all share-based compensation programs was $11.6 million and $6.6 million for the three months ended March 31, 2023 and 2022, respectively. Share-based compensation costs for the three months ended March 31, 2023 include $4.5 million of accelerated share-based compensation costs for our CEO and former President as discussed above. Of the total share-based compensation costs, $1.5 million and $1.3 million was capitalized as part of the real estate assets for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there was approximately $38.0 million of total unrecognized compensation cost related to nonvested RSUs granted under share-based compensation arrangements. Such amount is based in part upon the estimated future outcome of the performance metrics as of March 31, 2023, and the actual compensation cost ultimately recognized could increase or decrease from this estimate based upon actual performance results. These costs are expected to be recognized over a weighted-average period of 1.7 years, which includes the shortened vesting period for our CEO due to his announced retirement on December 31, 2023. The remaining compensation cost related to these nonvested RSU awards had been recognized in periods prior to March 31, 2023.

5.    Rental Income and Future Minimum Rent

Our rental income is primarily comprised of payments defined under leases and are subject to scheduled fixed increases. Additionally, rental income includes variable payments for tenant reimbursements of property-related expenses and payments based on a percentage of tenant’s sales.

The table below sets forth the allocation of rental income between fixed and variable payments and net collectability reversals or recoveries for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
(in thousands)
Fixed lease payments$245,835 $224,816 
Variable lease payments46,707 37,081 
Net collectability (reversals) recoveries (1)
(2,438)1,311 
Total rental income$290,104 $263,208 
_____________________
(1)Represents adjustments to rental income related to our assessment of the collectability of amounts due under leases with our tenants, including recognition of deferred rent balances associated with tenants restored from a cash basis of revenue recognition to an accrual basis of revenue recognition and allowances for uncollectible receivables and leases deemed not probable of collection.

We have operating leases with tenants that expire at various dates through 2048 and are subject to scheduled fixed increases. Generally, the leases grant tenants renewal options. Leases also provide for additional rents based on certain operating expenses. Future contractual minimum rent under operating leases, which includes amounts contractually due from leases that are on a cash basis of reporting due to creditworthiness considerations, as of March 31, 2023 for future periods is summarized as follows:
Year Ending(in thousands)
Remaining 2023$605,426 
2024803,728 
2025784,671 
2026732,810 
2027667,417 
2028621,716 
Thereafter1,861,469 
Total (1)
$6,077,237 
_____________________
(1)Excludes residential leases and leases with a term of one year or less.



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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




6.    Commitments and Contingencies

General

As of March 31, 2023, we had commitments of approximately $561.2 million, excluding our ground lease commitments, for contracts and executed leases directly related to our operating, development and redevelopment properties.

Environmental Matters

As of March 31, 2023, we had accrued environmental remediation liabilities of approximately $78.3 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects.

7.    Fair Value Measurements and Disclosures

Assets and Liabilities Reported at Fair Value

The only assets we record at fair value on our consolidated financial statements are the marketable securities related to our Deferred Compensation Plan. The following table sets forth the fair value of our marketable securities as of March 31, 2023 and December 31, 2022:
Fair Value (Level 1) (1)
March 31, 2023December 31, 2022
Description(in thousands)
Marketable securities (2)
$23,288 $23,547 
________________________
(1)    Based on quoted prices in active markets for identical securities.
(2)    The marketable securities are held in a limited rabbi trust.

Financial Instruments Disclosed at Fair Value

The following table sets forth the carrying value and the fair value of our other financial instruments as of March 31, 2023 and December 31, 2022:
March 31, 2023December 31, 2022
Carrying
Value
Fair
Value (1)
Carrying
Value
Fair
Value (1)
(in thousands)
Liabilities
Secured debt, net $241,547 $229,667 $242,938 $225,847 
Unsecured debt, net $4,171,029 $3,414,708 $4,020,058 $3,500,420 
________________________
(1)Fair value calculated using Level 2 inputs, which are based on model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




8.    Net Income Available to Common Stockholders Per Share of the Company

The following table reconciles the numerator and denominator in computing the Company’s basic and diluted per-share computations for net income available to common stockholders for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022
 (in thousands, except share and per share amounts)
Numerator:
Net income available to common stockholders$56,608 $53,128 
Allocation to participating securities (1)
(364)(413)
Numerator for basic and diluted net income available to common stockholders$56,244 $52,715 
Denominator:  
Basic weighted average vested shares outstanding117,059,329 116,650,228 
Effect of dilutive securities347,189 409,866 
Diluted weighted average vested shares and common stock equivalents outstanding117,406,518 117,060,094 
Basic earnings per share:  
Net income available to common stockholders per share$0.48 $0.45 
Diluted earnings per share:  
Net income available to common stockholders per share$0.48 $0.45 
________________________ 
(1)Participating securities include certain time-based RSUs and vested market measure-based RSUs.

Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common shares, including stock options and RSUs are considered in our diluted earnings per share calculation for the three months ended March 31, 2023 and 2022. Certain market measure-based RSUs are not included in dilutive securities for the three months ended March 31, 2023 and 2022, as not all performance metrics had been met by the end of the applicable reporting periods. See Note 4 “Share-Based Compensation” for additional information regarding share-based compensation.

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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




9.    Net Income Available to Common Unitholders Per Unit of the Operating Partnership

The following table reconciles the numerator and denominator in computing the Operating Partnership’s basic and diluted per-unit computations for net income available to common unitholders for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022
 (in thousands, except unit and per unit amounts)
Numerator:
Net income available to common unitholders$57,168 $53,644 
Allocation to participating securities (1)
(364)(413)
Numerator for basic and diluted net income available to common unitholders$56,804 $53,231 
Denominator:  
Basic weighted average vested units outstanding118,209,903 117,800,802 
Effect of dilutive securities347,189 409,866 
Diluted weighted average vested units and common unit equivalents outstanding118,557,092 118,210,668 
Basic earnings per unit:
Net income available to common unitholders per unit$0.48 $0.45 
Diluted earnings per unit:  
Net income available to common unitholders per unit$0.48 $0.45 
________________________ 
(1)Participating securities include certain time-based RSUs and vested market measure-based RSUs.

    Share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. The impact of potentially dilutive common units, including stock options and RSU are considered in our diluted earnings per share calculation for the three months ended March 31, 2023 and 2022. Certain market measure-based RSUs are not included in dilutive securities for the three months ended March 31, 2023 and 2022, as not all performance metrics had been met by the end of the applicable reporting periods. See Note 4 “Share-Based Compensation” for additional information regarding share-based compensation.

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KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




10.    Supplemental Cash Flow Information of the Company

Supplemental cash flow information follows (in thousands):
Three Months Ended March 31,
20232022
SUPPLEMENTAL CASH FLOWS INFORMATION:  
Cash paid for interest, net of capitalized interest of $16,467 and $18,029 as of March 31, 2023 and 2022, respectively
$8,980 $4,736 
Cash paid for amounts included in the measurement of ground lease liabilities$1,704 $1,532 
NON-CASH INVESTING TRANSACTIONS:  
Accrual for expenditures for operating properties and development and redevelopment properties$81,706 $47,101 
Tenant improvements funded directly by tenants$4,329 $1,908 
NON-CASH FINANCING TRANSACTIONS: 
Accrual of dividends and distributions payable to common stockholders and common unitholders
(Note 12)		$64,461 $61,951 

The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the three months ended March 31, 2023 and 2022.
Three Months Ended March 31,
20232022
(in thousands)
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:  
Cash and cash equivalents at beginning of period $347,379 $414,077 
Restricted cash at beginning of period— 13,006 
Cash and cash equivalents and restricted cash at beginning of period$347,379 $427,083 
Cash and cash equivalents at end of period $476,358 $331,685 
Restricted cash at end of period— 13,007 
Cash and cash equivalents and restricted cash at end of period$476,358 $344,692 

11.    Supplemental Cash Flow Information of the Operating Partnership:

Supplemental cash flow information follows (in thousands):
 Three Months Ended March 31,
 20232022
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for interest, net of capitalized interest of $16,467 and $18,029 as of March 31, 2023 and 2022, respectively
$8,980 $4,736 
Cash paid for amounts included in the measurement of ground lease liabilities$1,704 $1,532 
NON-CASH INVESTING TRANSACTIONS:
Accrual for expenditures for operating properties and development and redevelopment properties$81,706 $47,101 
Tenant improvements funded directly by tenants$4,329 $1,908 
NON-CASH FINANCING TRANSACTIONS:
Accrual of distributions payable to common unitholders (Note 12)$64,461 $61,951 

20
KILROY REALTY CORPORATION AND KILROY REALTY, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)




The following is a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the three months ended March 31, 2023 and 2022.
Three Months Ended March 31,
20232022
(in thousands)
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:  
Cash and cash equivalents at beginning of period $347,379 $414,077 
Restricted cash at beginning of period— 13,006 
Cash and cash equivalents and restricted cash at beginning of period$347,379 $427,083 
Cash and cash equivalents at end of period $476,358 $331,685 
Restricted cash at end of period— 13,007 
Cash and cash equivalents and restricted cash at end of period$476,358 $344,692 

12.    Subsequent Events

On April 12, 2023, aggregate dividends, distributions and dividend equivalents of $64.4 million were paid to common stockholders, common unitholders and RSU holders of record on March 31, 2023.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

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 Resource 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 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; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote work and flexible work arrangements that allow work from remote locations other than the 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; 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
22

Operations” in the Company’s and the Operating Partnership’s annual report on Form 10-K for the year ended December 31, 2022 and their respective other filings with the SEC. All forward-looking statements are based on information that was available and speak only as of the dates on which they were 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 submarkets in the United States. We own, develop, acquire and manage real estate assets, consisting primarily of Class A properties in Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin, Texas, which we believe have strategic advantages and strong barriers to entry. We own our interests in all of our real properties through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership. We owned an approximate 99.0% general partnership interest in the Operating Partnership as of March 31, 2023, December 31, 2022 and March 31, 2022. As of March 31, 2023, all of our properties are held in fee except for the fourteen office buildings that are held subject to long-term ground leases for the land.

Factors That May Influence Future Results of Operations

Development and Redevelopment Programs

We believe that a portion of our long-term future growth will continue to come from the completion of our in-process development and redevelopment projects and, subject to market conditions, executing on our future development pipeline, including expanding entitlements. Over the past several years, we increased our focus on development and redevelopment opportunities and expanded our future development pipeline through targeted acquisitions of development opportunities on the West Coast and in Austin, Texas.

We have a proactive planning process by which we continually evaluate the size, timing, costs and scope of our development and redevelopment programs and, as necessary, scale activity to reflect the economic conditions and the real estate fundamentals that exist in our submarkets. We expect to execute on our development and redevelopment programs with prudence and will be pursuing opportunities with attractive economic returns in strategic locations with proximity to public transportation or transportation access and retail amenities and in markets with strong fundamentals and visible demand. We plan to develop in phases, as appropriate, and we generally favor starting projects with pre-leasing activity.

In-Process Development Projects - Tenant Improvement

As of March 31, 2023, the following project was in the tenant improvement phase:

•Indeed Tower, Austin CBD, Austin, Texas. We acquired this project upon core/shell completion in June 2021. This project encompasses approximately 734,000 square feet of office space at a total estimated investment of $690.0 million and is 74% leased to 13 tenants with 42% of the space leased to Indeed, Inc. through 2034. We currently expect this project to reach stabilization in the fourth quarter of 2023.

In-Process Development Projects - Under Construction

As of March 31, 2023, we had two projects in our in-process development pipeline that were under construction:

•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. The second phase encompasses approximately 875,000 square feet of office space across three buildings at a total estimated investment of $940.0 million.

•9514 Towne Centre Drive, University Towne Center, San Diego, California. In September 2021, we commenced construction on this project, which is comprised of approximately 71,000 square feet of office space at a total estimated investment of $60.0 million. The building is 100% leased.

23

In-Process Redevelopment - Under Construction

As of March 31, 2023, we had two redevelopment projects under construction:

•4690 Executive Drive, University Towne Center, San Diego, California. In March 2022, we began the phased redevelopment of this property, comprised of approximately 52,000 square feet for life science use with total estimated redevelopment costs of $25.0 million, inclusive of the depreciated basis of the building. The building was previously 100% leased to Sorrento Therapeutics, which declared Chapter 11 bankruptcy in February 2023. Subsequent to March 31, 2023, they rejected this lease.

•4400 Bohannon Drive, Menlo Park, California. In December 2022, we began the redevelopment of this property, comprised of approximately 48,000 square feet, for life science use with total estimated redevelopment costs of $55.0 million, inclusive of the depreciated basis of the building.

Future Development Pipeline

As of March 31, 2023, our future development pipeline included eight future projects located in Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin with an aggregate cost basis of approximately $1.3 billion at which we believe we could develop more than 6.5 million rentable square feet for a total estimated investment of approximately $7.0 billion to $8.0 billion, depending on successfully obtaining entitlements and market conditions.

The following table sets forth information about our future development pipeline.
Future Development PipelineLocation
Approx. Developable Square Feet (1)
Total Costs
as of 3/31/2023
($ in millions) (2)
Greater Los Angeles
1633 26th StreetWest Los Angeles190,000$14.8 
San Diego County
Santa Fe Summit South / North56 Corridor600,000 - 650,000109.6 
2045 Pacific HighwayLittle Italy275,00056.4 
Kilroy East VillageEast VillageTBD67.1 
San Francisco Bay Area
Kilroy Oyster Point - Phases 3 and 4South San Francisco875,000 - 1,000,000220.5 
Flower MartSOMA2,300,000551.6 
Greater Seattle
SIX0 - Office & ResidentialDenny Regrade925,000182.7 
Austin
Stadium TowerStadium District / Domain493,00065.7 
Total:$1,268.4 
________________________
(1)The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design.
(2)Represents cash paid and costs incurred, including accrued liabilities in accordance with GAAP, as of March 31, 2023.

Fluctuations in our development activities could cause fluctuations in the average development asset balances qualifying for interest and other carrying cost and internal cost capitalization in future periods. During the three months ended March 31, 2023 and 2022, we capitalized interest on in-process development projects and future development pipeline projects with an average aggregate cost basis of approximately $1.8 billion and $2.0 billion, respectively, as it was determined these projects qualified for interest and other carrying cost capitalization under GAAP. In the event of an extended cessation of development activities, such projects may potentially no longer qualify for capitalization of interest or other carrying costs. For the three months ended March 31, 2023 and 2022, we capitalized $17.7 million and $19.1 million, respectively, of interest to our qualifying development and redevelopment projects. For the three months ended March 31, 2023 and 2022, we capitalized $4.6 million and $5.3 million, respectively, of internal costs to our qualifying development and redevelopment projects.
24

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 recycling the proceeds generated into capital used to fund new operating and development acquisitions, to finance development and redevelopment expenditures, to repay long-term debt and for other general corporate purposes. As part of this strategy, we attempt to enter into transactions intended to qualify as like-kind exchanges pursuant to Section 1031 of the Code (“Section 1031 Exchanges”) and other tax deferred transaction structures, when possible, to defer some or all of the taxable gains on the sales, if any, for federal and state income tax purposes. See the “Liquidity and Capital Resources of the Operating Partnership – Liquidity Sources” section for further discussion of our capital recycling activities.

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 for some potential buyers due to the current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales. We cannot assure that we will dispose of any additional properties, enter into any additional strategic ventures, or that we will be able to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange or be able to use other tax deferred structures in connection with our strategy. See the “Liquidity and Capital Resources of the Operating Partnership – Liquidity Sources” section for further information.

Acquisitions. As part of our growth strategy, which is highly dependent on market conditions and business cycles, among other factors, we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment opportunities as well as value-add and strategic operating properties and land. 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, entertainment and professional services.  Against the backdrop of market volatility, we expect to manage a strong balance sheet and selectively evaluate opportunities that we believe have the potential to either add immediate Net Operating Income to our portfolio or play a strategic role in our future growth.

In connection with our growth strategy, we often have one or more potential acquisitions of properties and/or undeveloped land under consideration that are in varying stages of negotiation and due diligence review, or under contract, at any point in time. However, we cannot provide assurance that we will enter into any agreements to acquire properties or undeveloped land, or that the potential acquisitions contemplated by any agreements we may enter into in the future will be completed. In addition, acquisitions are subject to various risks and uncertainties and we may be unable to complete an acquisition after making a nonrefundable deposit or incurring acquisition-related costs.

Incentive Compensation. Our Executive Compensation Committee determines compensation, including cash bonuses and equity incentives, for our executive officers, as defined in Rule 16 under the Exchange Act. For 2023, the annual cash bonus program was structured to allow the Executive Compensation Committee to evaluate a variety of key quantitative and qualitative metrics at the end of the year and make a determination based on the Company’s and management’s overall performance. Our Executive Compensation Committee also grants equity incentive awards from time to time that include performance-based and/or market-measure based vesting requirements and time-based vesting requirements. As a result, accrued incentive compensation and compensation expense for future awards may be affected by our operating and development performance, financial results, stock price, performance against applicable performance-based vesting goals, market conditions, liquidity measures and other factors. Consequently, we cannot predict the amounts that will be recorded in future periods related to such incentive compensation.

As of March 31, 2023, there was approximately $38.0 million of total unrecognized compensation cost related to outstanding nonvested RSUs granted under share-based compensation arrangements. Such amount is based in part upon the estimated future outcome of the performance metrics as of March 31, 2023, and the actual compensation cost ultimately recognized could increase or decrease from this estimate based upon actual performance results. The costs are expected to be recognized over a weighted-average period of 1.7 years, which includes the shortened vesting period for our Chief Executive Officer due to his announced retirement on December 31, 2023. The $38.0 million of unrecognized compensation cost does not reflect the future compensation cost for any potential share-based awards that may be issued subsequent to March 31, 2023. Share-based compensation expense for potential future awards could be affected by our operating and development performance, financial results, stock price, performance against applicable performance-based vesting goals, market conditions and other factors. For additional information regarding our equity incentive awards, see Note 4 “Share-Based Compensation” to our consolidated financial statements included in this report.


25

Information on Leases Commenced and Executed

Leasing Activity and Changes in Rental Rates. The amount of net rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space, newly developed or redeveloped properties, newly acquired properties with vacant space, and space available from unscheduled lease terminations. The amount of rental income we generate also depends on our ability to maintain or increase rental rates in our submarkets. 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 months ended March 31, 2023.

For Leases Commenced (1)

Quarter to Date
Number of Leases (2)
Rentable Square Feet (2)
Weighted Average Lease Term (in months)
TI/LC per
Sq. Ft. (3)
TI/LC per Sq. Ft. / Year
Changes in
Rents (4)
Changes in
Cash Rents (5)
NewRenewalNewRenewal
2nd Generation (7)
6934,634116,59542$23.33 $6.66 19.1 %5.4 %


For Leases Executed (1)(6)

Quarter to Date
Number of Leases (2)
Rentable Square Feet (2)
Weighted Average Lease Term (in months)
TI/LC per
Sq. Ft. (3)
TI/LC per Sq. Ft. / Year
Changes in
Rents (4)
Changes in
Cash Rents (5)
Retention Rates (8)
NewRenewalNewRenewal
2nd Generation (7)
128169,861116,59553$58.09 $13.15 4.2 %(4.4)%25.1 %
________________________
(1)Includes 100% of consolidated property partnerships.
(2)Represents leasing activity for leases that commenced or were signed during the period in the stabilized portfolio, net of month-to-month leases.
(3)Tenant improvements and leasing commissions per square foot exclude tenant-funded tenant improvements.
(4)Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Space that was vacant when the property was acquired is excluded from our change in rents calculations to provide a more meaningful market comparison.
(5)Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Space that was vacant when the property was acquired is excluded from our change in rents calculations to provide a more meaningful market comparison.
(6)During the three months ended March 31, 2023, 9 new leases totaling 157,317 rentable square feet were signed but not commenced.
(7)Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream. Includes leases for which re-leasing timing was impacted by the COVID-19 pandemic.
(8)Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.

As of March 31, 2023, we believe that the weighted average cash rental rates for our total stabilized portfolio are approximately 5-10% below the current average market rental rates. Individual properties within any particular submarket presently may be leased either above, below, or at the current market rates within that submarket, and the average rental rates for individual submarkets may be above, below, or at the average cash rental rate or our portfolio.

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

During the three months ended March 31, 2023, we saw an increase in physical occupancy at our properties and commitments by large corporations to in-office work by mandating a minimum number of days employees must work in the office. However, we believe that economic uncertainty and hybrid/remote working arrangements have impacted the timing and volume of leasing and will likely continue to do so in the future. Additionally, decreased demand (including as a result of remote work), increased competition (including sublease space available from our tenants) and other negative trends or unforeseeable events that impair our ability to timely renew or re-lease space could have negative effects on our future financial condition, results of operations, and cash flows.

26


Scheduled Lease Expirations. The following tables set forth certain information regarding our lease expirations for our stabilized portfolio for the remainder of 2023 and the next five years and by region for the remainder of 2023 and in 2024.

Lease Expirations (1)
Year of Lease ExpirationNumber of
Expiring
Leases		Total Square Feet% of Total Leased Sq. Ft.
Annualized Base Rent (2)(3)
% of Total Annualized Base Rent (2)
Annualized Base Rent per Sq. Ft. (2)
(in thousands)
Remainder of 2023 (4)
46 1,169,807 8.1 %$59,404 7.3 %$50.78 
202476 1,130,967 7.8 %54,555 6.7 %48.24 
202563 687,480 4.8 %33,148 4.1 %48.22 
202659 1,957,235 13.7 %91,545 11.3 %46.77 
202763 1,114,900 7.8 %46,177 5.7 %41.42 
202840 1,081,203 7.6 %67,752 8.4 %62.66 
Total347 7,141,592 49.8 %$352,581 43.5 %$49.37 

Year
Region# of
Expiring Leases		Total
Square Feet		% of Total
Leased Sq. Ft.
Annualized
Base Rent (2)(3)
% of Total
Annualized
Base Rent (2)
Annualized Rent
per Sq. Ft. (2)
(in thousands)
2023 (4)
Greater Los Angeles31 352,000 2.5 %$18,810 2.3 %$53.44 
San Diego County5 134,366 0.9 %5,798 0.7 %43.15 
San Francisco Bay Area7 296,300 2.1 %17,423 2.1 %58.80 
Greater Seattle3 387,141 2.6 %17,373 2.2 %44.88 
Total46 1,169,807 8.1 %$59,404 7.3 %$50.78 
2024Greater Los Angeles46 573,413 4.0 %$25,110 3.1 %$43.79 
San Diego County9 57,303 0.3 %3,199 0.4 %55.83 
San Francisco Bay Area11 269,858 1.9 %18,040 2.2 %66.85 
Greater Seattle10 230,393 1.6 %8,206 1.0 %35.62 
Total76 1,130,967 7.8 %$54,555 6.7 %$48.24 
________________________ 
(1)For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of March 31, 2023, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of March 31, 2023.
(2)Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures, including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”
(3)Includes 100% of annualized base rent of consolidated property partnerships.
(4)Adjusting for leases executed as of March 31, 2023 but not yet commenced, the 2023 and 2024 expirations would be reduced by 71,920 and 6,253 square feet, respectively.

In addition to the 1.7 million rentable square feet, or 10.4%, of currently available space in our stabilized portfolio, leases representing approximately 8.1% and 7.8% of the occupied square footage of our stabilized portfolio are scheduled to expire during the remainder of 2023 and in 2024, respectively. The leases scheduled to expire during the remainder of 2023 and in 2024 represent approximately 2.3 million rentable square feet or 14.0% of our total annualized base rental revenue. Adjusting for leases executed as of March 31, 2023 but not yet commenced, the remaining 2023 and 2024 expirations would be 1,097,887 and 1,124,714 square feet, respectively.
Sublease Space. Of our leased space as of March 31, 2023, approximately 1.7 million rentable square feet, or 10.4% of the square footage in our stabilized portfolio, was available for sublease, primarily in the San Francisco Bay Area region. Of the 10.4% of available sublease space in our stabilized portfolio as of March 31, 2023, approximately 7.6% was vacant space, and the remaining 2.8% was occupied. Of the approximately 1.7 million rentable square feet available for sublease as of March 31, 2023, approximately 30,908 rentable square feet representing two leases are scheduled to expire in 2023, and approximately 224,615 rentable square feet representing seven leases are scheduled to expire in 2024.
27

Stabilized Portfolio Information

As of March 31, 2023, our stabilized portfolio was comprised of 119 office and life science properties encompassing an aggregate of approximately 16.2 million rentable square feet and 1,001 residential units. Our stabilized portfolio includes all of our properties with the exception of development properties currently committed for construction, under construction or in the tenant improvement phase, redevelopment projects under construction, undeveloped land and real estate assets held for sale. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs on the existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property. We define properties in the tenant improvement phase as office and life science properties that we are developing or redeveloping where the project has reached cold shell condition and is ready for tenant improvements, which may require additional major base building construction before being placed in service. Projects in the tenant improvement phase are added to our stabilized portfolio once the project reaches the earlier of 95% occupancy or one year from the date of the cessation of major base building construction activities. Costs capitalized to construction in progress for development and redevelopment properties are transferred to land and improvements, buildings and improvements, and deferred leasing costs on our consolidated balance sheets at the historical cost of the property as the projects or phases of projects are placed in service.

We did not have any properties held for sale at March 31, 2023. Our stabilized portfolio also excludes our future development pipeline, which as of March 31, 2023 was comprised of eight potential development sites, representing approximately 64 gross acres of undeveloped land on which we believe we have the potential to develop more than 6.5 million rentable square feet, depending upon economic conditions.

As of March 31, 2023, the following properties were excluded from our stabilized portfolio:
Number of
Properties/Projects
Estimated Rentable
Square Feet (1)
In-process development projects - tenant improvement1734,000 
In-process development projects - under construction2946,000 
In-process redevelopment projects - under construction2100,000 
________________________
(1)Estimated rentable square feet upon completion.

The following table reconciles the changes in the rentable square feet in our stabilized office portfolio of operating properties from March 31, 2022 to March 31, 2023:
 Number of
Buildings		Rentable
Square Feet
Total as of March 31, 2022118 15,221,912 
Completed development and redevelopment properties placed in-service4 1,149,273 
Properties transferred to development and redevelopment(2)(92,003)
Dispositions(1)(96,085)
Remeasurement— 23,202 
Total as of March 31, 2023 (1)
119 16,206,299 
________________________
(1)Includes four properties owned by consolidated property partnerships (see Note 1 “Organization, Ownership and Basis of Presentation” to our consolidated financial statements included in this report for additional information).

Occupancy Information

The following table sets forth certain information regarding our stabilized portfolio:
RegionNumber of
Buildings		Rentable Square Feet
Occupancy at (1) 
3/31/202312/31/20229/30/2022
Greater Los Angeles53 4,344,361 80.8 %85.2 %84.5 %
San Diego County23 2,698,031 85.9 %86.2 %86.3 %
San Francisco Bay Area33 6,163,729 94.7 %95.5 %93.8 %
Greater Seattle10 3,000,178 95.3 %97.7 %97.7 %
Total Stabilized Office Portfolio119 16,206,299 89.6 %91.6 %90.8 %

28

Average Occupancy
Three Months Ended March 31,
20232022
Stabilized Office Portfolio (1)
89.9 %91.4 %
Same Store Portfolio (2)
90.5 %91.6 %
Residential Portfolio (3)
93.4 %93.7 %
________________________
(1)Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and exclude occupancy percentages of properties held for sale. Represents economic occupancy.
(2)Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2022 and still owned and stabilized as of March 31, 2023 and exclude our residential portfolio. See discussion under “Results of Operations” for additional information.
(3)Our residential portfolio consists of our 200-unit residential tower and 193-unit Jardine project in Hollywood, California and 608 residential units at our One Paseo mixed-use project in Del Mar, California.

Significant Tenants

The following table sets forth information about our 15 largest tenants based upon annualized base rental revenues, as defined below, as of March 31, 2023.
Tenant NameRegion
Annualized Base Rental
Revenue (1) (2)
Rentable Square FeetPercentage of Total Annualized Base Rental RevenuePercentage of Total Rentable Square FeetYear(s) of Lease Expiration
(in thousands)
Global technology companyGreater Seattle /
San Diego County		$39,631 779,210 4.9 %4.8 %2032 - 2033
Cruise LLCSan Francisco Bay Area35,449 374,618 4.4 %2.3 %2031
Stripe, Inc.San Francisco Bay Area33,110 425,687 4.1 %2.6 %2034
Amazon.com (3)
Greater Seattle31,437 709,276 3.9 %4.4 %2023 / 2029 - 2030
Salesforce, Inc. / Tableau Software, LLCSan Francisco Bay Area /
Greater Seattle		30,100 613,497 3.7 %3.8 %2024 / 2029 - 2032
LinkedIn Corporation / Microsoft CorporationSan Francisco Bay Area29,752 663,460 3.7 %4.1 %2024 / 2026
Adobe Systems, Inc.San Francisco Bay Area /
Greater Seattle		27,897 523,416 3.4 %3.2 %2027 / 2031
DoorDash, Inc.San Francisco Bay Area23,842 236,759 2.9 %1.5 %2032
Riot Games, Inc. (4)
Greater Los Angeles22,967 340,584 2.8 %2.1 %2023 - 2024 / 2031
Okta, Inc.San Francisco Bay Area22,387 273,371 2.8 %1.7 %2028
Netflix, Inc.Greater Los Angeles21,854 361,388 2.7 %2.2 %2032
Box, Inc.San Francisco Bay Area20,390 341,441 2.5 %2.1 %2028
Cytokinetics, Inc.San Francisco Bay Area18,167 234,892 2.2 %1.4 %2033
DIRECTV, LLCGreater Los Angeles16,085 532,956 2.0 %3.3 %2026 - 2027
Synopsys, Inc.San Francisco Bay Area15,492 342,891 1.9 %2.1 %2030
Total$388,560 6,753,446 47.9 %41.6 %
________________________
(1)Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Excludes month-to-month leases and vacant space as of March 31, 2023.
(2)Includes 100% of the annualized base rental revenues of consolidated property partnerships.
(3)The 2023 lease expiration represents 375,479 rentable square feet expiring on April 30, 2023.
(4)The 2023 lease expiration represents 6,416 rentable square feet expiring on July 31, 2023 and 158,371 rentable square feet expiring on November 30, 2023.
29

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 consolidated operating revenues (rental income and other property income) less consolidated operating expenses (property expenses, real estate taxes and ground leases).

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 to understand the core operations of our properties excluding corporate and financing-related costs and non-cash depreciation and amortization. Net Operating Income is an unlevered operating performance metric of our properties and allows for a useful comparison of the operating performance of individual assets or groups of assets. This measure thereby provides an operating perspective not immediately apparent from GAAP income from operations or 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 income from operations or net income.

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

•Same Store Properties – includes the consolidated results of all of the office 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, 2022 and still owned and included in the stabilized portfolio as of March 31, 2023, including our three residential properties in Hollywood and Del Mar, California;

•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 following stabilized development properties:

◦One office building that was added to the stabilized portfolio in the second quarter of 2022; and
◦Three office buildings that were added to the stabilized portfolio in the third quarter of 2022; and

•Disposition Properties – includes the results of one property disposed of in the third quarter of 2022.

The following table sets forth certain information regarding the property groups within our stabilized office portfolio as of March 31, 2023:
Group# of BuildingsRentable
Square Feet
Same Store Properties11515,056,915 
Stabilized Development Properties (1)
4 1,149,384 
Total Stabilized Portfolio11916,206,299 
________________________
(1)Excludes development projects in the tenant improvement phase, our in-process development and redevelopment projects and future development projects.

30

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

The following table summarizes our Net Operating Income, as defined, for our total portfolio for the three months ended March 31, 2023 and 2022.
 Three Months Ended March 31,Dollar
Change		Percentage
Change
 20232022
 ($ in thousands)
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
Net Income Available to Common Stockholders$56,608 $53,128 $3,480 6.6 %
Net income attributable to noncontrolling common units of the Operating Partnership560 516 44 8.5 %
Net income attributable to noncontrolling interests in consolidated property partnerships8,062 5,739 2,323 40.5 %
Net income$65,230 $59,383 $5,847 9.8 %
Unallocated expense (income):
General and administrative expenses23,936 22,781 1,155 5.1 %
Leasing costs1,372 1,013 359 35.4 %
Depreciation and amortization93,676 88,660 5,016 5.7 %
Interest and other income, net(1,460)(81)(1,379)NM*
Interest expense25,671 20,625 5,046 24.5 %
Net Operating Income, as defined$208,425 $192,381 $16,044 8.3 %
________________________ 
* Percentage not meaningful.

The following tables summarize our Net Operating Income, as defined, for our total portfolio for the three months ended March 31, 2023 and 2022.
Three Months Ended March 31,
 20232022
Same StoreDevelopmentDispositionTotalSame StoreDevelopmentDisposition Total
(in thousands)
Operating revenues:
Rental income$263,255 $26,849 $— $290,104 $249,720 $12,388 $1,100 $263,208 
Other property income2,409 289 — 2,698 2,015 272 6 2,293 
Total265,664 27,138 — 292,802 251,735 12,660 1,106 265,501 
Property and related expenses:
Property expenses50,717 3,063 — 53,780 43,559 1,469 396 45,424 
Real estate taxes24,577 3,651 — 28,228 24,497 1,309 64 25,870 
Ground leases1,854 515 — 2,369 1,738 88 — 1,826 
Total77,148 7,229 — 84,377 69,794 2,866 460 73,120 
Net Operating Income,
as defined		$188,516 $19,909 $— $208,425 $181,941 $9,794 $646 $192,381 

31

 Three Months Ended March 31, 2023 as compared to the Three Months Ended March 31, 2022
Same StoreDevelopmentDispositionTotal
Dollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent ChangeDollar ChangePercent Change
 ($ in thousands)
Operating revenues:
Rental income$13,535 5.4 %$14,461 116.7 %$(1,100)(100.0)%$26,896 10.2 %
Other property income394 19.6 %17 6.3 %(6)(100.0)%405 17.7 %
Total13,929 5.5 %14,478 114.4 %(1,106)(100.0)%27,301 10.3 %
Property and related expenses:
Property expenses7,158 16.4 %1,594 108.5 %(396)(100.0)%8,356 18.4 %
Real estate taxes80 0.3 %2,342 178.9 %(64)(100.0)%2,358 9.1 %
Ground leases116 6.7 %427 485.2 %— — %543 29.7 %
Total7,354 10.5 %4,363 152.2 %(460)(100.0)%11,257 15.4 %
Net Operating Income, as defined$6,575 3.6 %$10,115 103.3 %$(646)(100.0)%$16,044 8.3 %

Net Operating Income increased $16.0 million, or 8.3%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 resulting from:

•An increase in Net Operating Income of $6.6 million attributable to the Same Store Properties, which was driven by the following activity:

•An increase in total operating revenues of $13.9 million primarily due to:

•$4.0 million net increase primarily due to new leases and renewals at higher rates;

•$6.6 million increase in the tenant reimbursement component of rental income primarily due to higher reimbursable operating expenses; and

•$3.3 million net increase in non-recurring revenue related to tenant restoration fees and revenue adjustments for tenant creditworthiness considerations;

•An increase in property and related expenses of $7.4 million primarily due to the following:

•$5.9 million increase in property and related expenses including utilities, insurance, security, janitorial, and various other recurring expenses predominately related to our tenants’ continued return to the office and cost increases; and

•$1.5 million increase in property expenses due to an increase in certain non-reimbursable expenses;

•An increase in Net Operating Income of $10.1 million attributable to the Development Properties, of which $5.4 million was contributed by Indeed Tower primarily due to a full quarter of revenue recognition on the leased space to Indeed, Inc.; partially offset by

•A decrease in Net Operating Income of $0.6 million attributable to the Disposition Properties.


32

Other Expenses and Income

General and Administrative Expenses

General and administrative expenses increased $1.2 million, or 5.1%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 due to an increase in share-based compensation expense of $4.7 million, which was driven by the accelerated vesting of awards for the previously announced departure of our President on March 1, 2023 and the March 30, 2023 announcement of our CEO’s retirement on December 31, 2023, partially offset by a decrease of $3.5 million, primarily from corporate cost-cutting measures.

Depreciation and Amortization

Depreciation and amortization increased $5.0 million, or 5.7%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to the following:

•An increase of $4.1 million attributable to the Development Properties; and

•An increase of $1.2 million attributable to the Same Store Properties; partially offset by

•A decrease of $0.3 million attributable to the Disposition Properties.

Interest Expense

The following table sets forth our gross interest expense, including debt discounts and deferred financing cost amortization, and capitalized interest, including capitalized debt discounts and deferred financing cost amortization, for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
 20232022Dollar
Change
Percentage
Change 
 (in thousands)
Gross interest expense$43,402 $39,723 $3,679 9.3 %
Capitalized interest and deferred financing costs(17,731)(19,098)1,367 (7.2)%
Interest expense$25,671 $20,625 $5,046 24.5 %

Gross interest expense, before the effect of capitalized interest and deferred financing costs, increased $3.7 million, or 9.3%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to increases in the average outstanding debt balance for the three months ended March 31, 2023.

Capitalized interest and deferred financing costs decreased $1.4 million, or 7.2%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to a decrease in the average development asset balances qualifying for interest capitalization during the three months ended March 31, 2023. During the three months ended March 31, 2023 and 2022, we capitalized interest on in-process development and redevelopment projects and future development pipeline projects with an average aggregate cost basis of approximately $1.8 billion and $2.0 billion, respectively. In the event of an extended cessation of development or redevelopment activities to get any of these projects ready for its intended use, such projects could potentially no longer qualify for capitalization of interest or other carrying costs.

Net Income Attributable to Noncontrolling Interests in Consolidated Property Partnerships

Net income attributable to noncontrolling interests in consolidated property partnerships increased $2.3 million or 40.5% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to a non-recurring restoration fee recognized at one property held in a consolidated property partnership in 2023. The amounts reported for the three months ended March 31, 2023 and 2022 are comprised of the noncontrolling interest’s share of net income for 100 First Street Member, LLC (“100 First LLC”) and 303 Second Street Member, LLC (“303 Second LLC”) and the noncontrolling interest's share of net income for Redwood City Partners, LLC (“Redwood LLC”).

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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.

The Company’s business is operated primarily through the Operating Partnership. 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 flow from operations and borrowings available under its unsecured revolving credit facility and unsecured term loan facility and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company and, in turn, for the Company to make its dividend payments to its common stockholders for the next twelve months. Cash flows from operating activities generated by the Operating Partnership for the three months ended March 31, 2023 were sufficient to cover the Company’s payment of cash dividends to its stockholders. However, there can be no assurance that the Operating Partnership’s sources of capital will continue to be available at all or in amounts sufficient to meet its needs, including its ability to make distributions to the Company. 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 of its preferred stock, common stock, depositary shares, warrants and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case 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 of all of these types 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.

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.

Liquidity Highlights

As of March 31, 2023, we had approximately $476.4 million in cash and cash equivalents. During March 2023, we increased the total borrowing capacity of the unsecured term loan facility to $520.0 million and borrowed an additional $150.0 million. As of the date of this report, we had $1.1 billion available under our unsecured revolving credit facility and $170.0 million available under our unsecured term loan facility. Excluding our unsecured term loan facility, for which we have two twelve-month extension options, our next debt maturity occurs in December 2024. We believe that our available liquidity demonstrates a strong balance sheet and makes us well positioned to navigate any additional future uncertainties. In addition, the Company is a well-known seasoned issuer and has historically been able to raise capital on a timely basis in the public markets, as well as the private markets. Any future financings, however, will depend on market conditions for both capital raises and the investment of such proceeds, and there can be no assurances that we will successfully obtain such financings.


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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 and is required to pay income tax at regular corporate rates to the extent it distributes less than 100% of its taxable income (including capital gains). 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 continue to raise capital in the equity markets 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 make, regular quarterly cash distributions to common stockholders, and through the Operating Partnership, to common unitholders from the Operating Partnership’s cash flow from operating activities. All such distributions are at the discretion of the Board of Directors. As the Company intends to maintain distributions at a level sufficient to meet the REIT distribution requirements and minimize its obligation to pay income and excise taxes, it will continue to evaluate whether the current levels of distribution are appropriate to do so throughout 2023. In addition, in the event the Company is unable to successfully complete Section 1031 Exchanges to defer some or all of the taxable gains related to property dispositions (or in the event additional legislation is enacted that further modifies or repeals laws with respect to Section 1031 Exchanges), the Company may be required to distribute a special dividend to its common stockholders and common unitholders in order to minimize or eliminate income taxes on such gains. 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 February 16, 2023, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share. The regular quarterly cash dividend is payable to stockholders of record on March 31, 2023 and a corresponding cash distribution of $0.54 per Operating Partnership unit is payable to holders of the Operating Partnership’s common limited partnership interests of record on March 31, 2023, including those owned by the Company. The total cash quarterly dividends and distributions paid on April 12, 2023 were $63.9 million.

Debt Covenants

The covenants contained within certain of our unsecured debt obligations generally prohibit the Company from paying dividends during an event of default in excess of an amount which results in distributions to us in an amount sufficient to permit us to pay dividends to our stockholders that we reasonably believe are necessary to (a) maintain our qualification as a REIT for federal and state income tax purposes and (b) avoid the payment of federal or state income or excise tax.

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Capitalization

As of March 31, 2023, our total debt as a percentage of total market capitalization was 53.7%, which was calculated based on the closing price per share of the Company’s common stock of $32.40 on March 31, 2023 as shown in the following table:
Shares/Units at 
March 31, 2023		Aggregate
Principal
Amount or
$ Value
Equivalent		% of Total
Market
Capitalization
($ in thousands)
Debt: (1)(2)
Unsecured Term Loan Facility$350,000 4.2 %
Unsecured Senior Notes due 2024425,000 5.1 %
Unsecured Senior Notes due 2025400,000 4.8 %
Unsecured Senior Notes Series A & B due 2026250,000 3.1 %
Unsecured Senior Notes due 2028400,000 4.8 %
Unsecured Senior Notes due 2029400,000 4.8 %
Unsecured Senior Notes Series A & B due 2027 & 2029250,000 3.1 %
Unsecured Senior Notes due 2030500,000 6.0 %
Unsecured Senior Notes due 2031350,000 4.2 %
Unsecured Senior Notes due 2032425,000 5.1 %
Unsecured Senior Notes due 2033450,000 5.5 %
Secured debt242,046 3.0 %
Total debt$4,442,046 53.7 %
Equity and Noncontrolling Interests in the Operating Partnership: (3)
Common limited partnership units outstanding (4)
1,150,574$37,279 0.5 %
Shares of common stock outstanding117,120,9623,794,719 45.8 %
Total Equity and Noncontrolling Interests in the Operating Partnership$3,831,998 46.3 %
Total Market Capitalization$8,274,044 100.0 %
________________________ 
(1)    Represents gross aggregate principal amount due at maturity before the effect of the following at March 31, 2023: $23.4 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes and secured debt and $6.1 million of unamortized discounts for the unsecured senior notes.
(2)    As of March 31, 2023, there was no outstanding balance on the unsecured revolving credit facility.
(3)    Value based on closing price per share of our common stock of $32.40 as of March 31, 2023.
(4)    Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.




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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 flow from operations;
•Borrowings under the Operating Partnership’s unsecured revolving credit facility and unsecured term loan facility;
•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; and
•Proceeds from public or private issuance of debt, equity or preferred equity securities.

Liquidity Uses

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

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 conservative leverage 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.



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Liquidity Sources

Unsecured Revolving Credit Facility and Term Loan Facility

The following table summarizes the balance and terms of our unsecured revolving credit facility as of March 31, 2023 and December 31, 2022:
March 31, 2023December 31, 2022
(in thousands)
Outstanding borrowings$— $— 
Remaining borrowing capacity1,100,000 1,100,000 
Total borrowing capacity (1)
$1,100,000 $1,100,000 
Interest rate (2)
5.87 %5.20 %
Facility fee-annual rate (3)
0.200%
Maturity date (4)
July 31, 2025
________________________
(1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $500.0 million under an accordion feature under the terms of the unsecured revolving credit facility.
(2)Our unsecured revolving credit facility interest rate was calculated using a contractual rate of Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% (“Adjusted SOFR”) and a margin of 0.900% based on our credit rating as of March 31, 2023 and December 31, 2022.
(3)Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of March 31, 2023 and December 31, 2022, $4.8 million and $5.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the respective maturity dates presented of our unsecured revolving credit facility.
(4)The maturity date may be extended by two six-month periods, at the Company’s option.

We intend to borrow under the unsecured revolving credit facility as necessary for general corporate purposes, to finance development and redevelopment expenditures, to fund potential acquisitions and to potentially repay long-term debt to supplement cash balances given uncertainties and volatility in market conditions.

In January 2023, the Operating Partnership entered into the first amendment to its existing unsecured term loan facility agreement to (i) exercise the accordion feature under the term loan agreement to provide for $100.0 million of additional term loan commitments and (ii) increase the borrowing capacity under the accordion feature to provide additional term loan commitments or add one or more tranches of term loans up to an aggregate amount of $650.0 million. In March 2023, the Operating Partnership further amended the unsecured term loan facility agreement to exercise the accordion feature to provide for $20.0 million of additional term loan commitments, bringing the total borrowing capacity of the unsecured term loan facility to $520.0 million.

The following table summarizes the balance and terms of our unsecured term loan facility as of March 31, 2023 and December 31, 2022:

March 31, 2023December 31, 2022
(in thousands)
Outstanding borrowings$350,000 $200,000 
Remaining borrowing capacity170,000 200,000 
Total borrowing capacity (1)
$520,000 $400,000 
Interest rate (2)
5.77 %5.23 %
Undrawn facility fee-annual rate (3)
0.200%
Maturity date (4)
October 3, 2024
____________________
(1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $130.0 million and $100.0 million as of March 31, 2023 and December 31, 2022, respectively, under an accordion feature under the terms of the unsecured term loan facility.
(2)Our unsecured term loan facility interest rate was calculated using a contractual rate of Adjusted SOFR plus a margin of 0.950% based on our credit rating as of March 31, 2023 and December 31, 2022.
(3)Our undrawn facility fee is paid on a quarterly basis and is calculated based on the remaining borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of March 31, 2023 and December 31, 2022, $4.6 million and $4.5 million, respectively, of unamortized deferred financing costs remained to be amortized through the maturity date of our unsecured term loan facility.
(4)The maturity date may be extended by two twelve-month periods, at the Company’s option.


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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 properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of recycling the proceeds generated from the disposition of less strategic or core assets into capital used to finance development and redevelopment expenditures, to fund new acquisitions, to repay long-term debt and for other general corporate purposes. As part of this strategy, we attempt to enter into Section 1031 Exchanges, when possible, to defer some or all of the taxable gains on the sales, if any, for federal and state income tax purposes.

Any potential future disposition transactions and the timing of any potential future capital recycling 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 for some potential buyers due to current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales. In addition, we cannot assure you that we will dispose of any additional properties, or that we will be able to identify and complete the acquisitions of suitable replacement properties to effect Section 1031 Exchanges to defer some or all of the taxable gains related to our capital recycling program. In the event we are unable to complete dispositions as planned, we may raise capital through other sources of liquidity including our available unsecured revolving credit facility, our unsecured term loan facility or the public or private issuance of unsecured debt.

Shelf Registration Statement

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 of its preferred stock, common stock, depository shares and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case 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 of all of these types 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. Capital raising could be more challenging under current market conditions as uncertainty related to interest rates, inflation rates, economic outlook, geopolitical events (including the military conflict between Russia and Ukraine) and other factors have contributed and may continue to contribute to significant volatility and negative pressures in financial markets. 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.

39

Unsecured and Secured Debt

The aggregate principal amount of the unsecured and secured debt of the Operating Partnership outstanding as of March 31, 2023 was as follows:
Aggregate Principal
 Amount Outstanding
(in thousands)
Unsecured Term Loan Facility$350,000 
Unsecured Senior Notes due 2024425,000 
Unsecured Senior Notes due 2025400,000 
Unsecured Senior Notes Series A & B due 2026250,000 
Unsecured Senior Notes due 2028400,000 
Unsecured Senior Notes due 2029400,000 
Unsecured Senior Notes Series A & B due 2027 & 2029250,000 
Unsecured Senior Notes due 2030500,000 
Unsecured Senior Notes due 2031350,000 
Unsecured Senior Notes due 2032425,000 
Unsecured Senior Notes due 2033450,000 
Secured Debt242,046 
Total Unsecured and Secured Debt (1)
4,442,046 
Less: Unamortized Net Discounts and Deferred Financing Costs (2)
(29,470)
Total Debt, Net$4,412,576 
________________________ 
(1)As of March 31, 2023, there was no outstanding balance on the unsecured revolving credit facility.
(2)Includes $23.4 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes and secured debt and $6.1 million of unamortized discounts for the unsecured senior notes. Excludes unamortized deferred financing costs on the unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

Debt Composition

The composition of the Operating Partnership’s aggregate debt balances between secured and unsecured and fixed-rate and variable-rate debt as of March 31, 2023 and December 31, 2022 was as follows:
 
Percentage of Total Debt (1)
Weighted Average Interest Rate (1)
 
March 31, 2023 (2)
December 31, 2022
March 31, 2023 (2)
December 31, 2022
Secured vs. unsecured:
Unsecured94.6 %94.3 %3.8 %3.7 %
Secured5.4 %5.7 %3.9 %3.9 %
Variable-rate vs. fixed-rate:
Variable-rate7.9 %4.7 %5.8 %5.2 %
Fixed-rate (3)
92.1 %95.3 %3.7 %3.7 %
Stated rate (3)
3.8 %3.7 %
GAAP effective rate (4)
3.9 %3.8 %
GAAP effective rate including debt issuance costs4.1 %4.0 %
________________________
(1)    As of the end of the period presented.
(2)    As of March 31, 2023, there was no outstanding balance on the unsecured revolving credit facility.
(3)    Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs.
(4)    Includes the impact of amortization of any debt discounts/premiums, excluding deferred financing costs.


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Liquidity Uses

Contractual Obligations

Refer to our 2022 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 three months ended March 31, 2023.

Other Liquidity Uses

Development

The following table summarizes our development spending directly related to our operating, development and redevelopment properties as of March 31, 2023:

Development PhaseNumber of Projects
Total Estimated Investment (1)
Total Costs
Incurred
Remaining Investment (2)
Remaining Costs
 to be Spent in 2023
(in millions)
Stabilized
Development2$675 $652 $23 $5to$10
Redevelopment245 42 3 1to5
Tenant Improvement (3)
Development1690 641 49 20to25
Under Construction
Development21,000 466 534 200to225
Redevelopment253 15 38 15to20
Total:9$2,463 $1,816 $647 $241to$285
________________________
(1)    For redevelopment projects, represents the incremental cost of redevelopment and excludes the existing depreciated basis of the buildings under redevelopment.
(2)    Includes costs related to estimated tenant improvements.
(3)    Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.

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 unsecured term loan 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.

Debt Maturities

We believe our conservative leverage, staggered debt maturities, unsecured term loan facility and our unsecured revolving credit facility provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we believe 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. However, we can provide no assurance that we will have access to the public or private debt or equity markets in the future on favorable terms or at all. Excluding our unsecured term loan facility maturing in October 2024, for which we have two twelve-month extension options, our next debt maturity occurs in December 2024. We may, however, repurchase our outstanding debt (including our unsecured senior notes) from time to time prior to maturity (depending on prevailing market conditions, our liquidity, contractual restrictions and other factors) through cash purchases, open-market purchases, privately negotiated transactions, tender offers or otherwise.


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Potential Future Acquisitions

As discussed in the section “Factors That May Influence Future Results of Operations - Acquisitions,” we continue to evaluate strategic opportunities and remain a disciplined buyer of development and redevelopment opportunities as well as value-add and strategic operating properties, 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, entertainment and professional services. We expect that any material acquisitions will be funded with borrowings under the unsecured revolving credit facility and unsecured term loan 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.

We cannot provide assurance that we will enter into any agreements to acquire properties or undeveloped land, or that potential acquisitions contemplated by any agreements we may enter into in the future will be completed.

Share Repurchases

As of March 31, 2023, 4,935,826 shares remained eligible for repurchase under a share repurchase program approved by the Company’s Board of Directors in 2016. Under this program, repurchases may be made in open market transactions at prevailing prices or through privately negotiated transactions. We may elect to repurchase shares of our common stock under this program in the future depending upon various factors, including market conditions, the trading price of our common stock and our other uses of capital. This program does not have a termination date and repurchases may be discontinued at any time. We intend to fund repurchases, if any, primarily with the proceeds from property dispositions.

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. Additionally, due to the uncertainty around current economic market conditions and companies utilizing hybrid/remote work arrangements, there may be a continued lower level of leasing activity as compared to historical trends.


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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 macro economy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for office 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 (including the military conflict between Russia and Ukraine) and other factors (refer to “Part I, Item IA. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 for additional information). These events could result in the following:


•Decreases 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. In the event that the Operating Partnership’s credit ratings are downgraded, we may incur higher borrowing costs and may experience difficulty in obtaining additional financing or refinancing existing indebtedness.

Debt Covenants

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. Key existing financial covenants and their covenant levels include:
Unsecured Revolving Credit Facility, Unsecured Term Loan Facility and
Private Placement Notes (as defined in the applicable Credit Agreements):		Covenant LevelActual Performance
as of March 31, 2023
Total debt to total asset valueless than 60%28%
Fixed charge coverage ratiogreater than 1.5x3.9x
Unsecured debt ratiogreater than 1.67x3.47x
Unencumbered asset pool debt service coveragegreater than 1.75x4.59x
Unsecured Senior Notes due 2024, 2025, 2028, 2029, 2030, 2032 and 2033
(as defined in the applicable Indentures):		 
Total debt to total asset valueless than 60%37%
Interest coveragegreater than 1.5x8.2x
Secured debt to total asset valueless than 40%2%
Unencumbered asset pool value to unsecured debtgreater than 150%278%

The Operating Partnership was in compliance with all of its debt covenants as of March 31, 2023. Our current expectation is that the Operating Partnership will continue to meet the requirements of its debt 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.


43

Consolidated Historical Cash Flow Summary

The following summary discussion of our consolidated historical cash flow 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 flow for the periods presented below. Changes in our cash flow include changes in cash and cash equivalents and restricted cash. Our historical cash flow activity for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 is as follows:
 Three Months Ended March 31,
 20232022Dollar
Change		Percentage
Change
 ($ in thousands)
Net cash provided by operating activities$182,136 $178,659 $3,477 1.9 %
Net cash used in investing activities(121,348)(169,374)48,026 (28.4)%
Net cash provided by (used in) financing activities68,191 (91,676)159,867 (174.4)%
Net increase (decrease) in cash and cash equivalents $128,979 $(82,391)$211,370 (256.5)%

Operating Activities

Our cash flows from operating activities depends 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 projects and related financing activities, and other general and administrative costs. Our net cash provided by operating activities increased by $3.5 million, or 1.9%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily as result of an increase in cash Net Operating Income generated from stabilized development properties in our Development Portfolio and from our Same Store Portfolio and net changes in other operating liabilities related to the timing of expenditures. See additional information under the caption “—Results of Operations.”

Investing Activities

Our cash flows from investing activities is generally used to fund development and operating property acquisitions, expenditures for development and redevelopment projects, and recurring and nonrecurring capital expenditures for our operating properties, net of proceeds received from dispositions of real estate assets. During the three months ended March 31, 2023, our net cash used in investing activities decreased by $48.0 million or 28.4% compared the three months ended March 31, 2022 primarily due to the acquisition of a development property during the three months ended March 31, 2022. We did not complete any acquisitions during the three months ended March 31, 2023.

Financing Activities

Our cash flows from financing activities is principally impacted by our capital raising activities, net of dividends and distributions paid to common and preferred security holders. During the three months ended March 31, 2023, we had net cash provided by financing activities of $68.2 million compared to net cash used in financing activities of $91.7 million for the three months ended March 31, 2022 primarily as a result of borrowing $150.0 million on the unsecured term loan facility during the three months ended March 31, 2023.
44

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

We calculate FFO 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 extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. 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.

However, FFO should not be viewed as an alternative measure of our operating performance because 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 for the three months ended March 31, 2023 and 2022:
 Three Months Ended March 31,
 20232022
 (in thousands)
Net income available to common stockholders$56,608 $53,128 
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership560 516 
Net income attributable to noncontrolling interests in consolidated property partnerships8,062 5,739 
Depreciation and amortization of real estate assets91,671 87,001 
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships(10,942)(8,618)
Funds From Operations (1)(2)
$145,959 $137,766 
________________________
(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 $5.2 million and $4.3 million for the three months ended March 31, 2023 and 2022, respectively.

45

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, 2022, and is incorporated herein by reference. There have been no material changes for the three months ended March 31, 2023, 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, 2022.

ITEM 4.    CONTROLS AND PROCEDURES

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 March 31, 2023, 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, our 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 March 31, 2023, 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.

46

PART II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We and our properties are subject to routine litigation incidental to our business. These matters are generally covered by insurance. As of March 31, 2023, we are not a defendant in, and our properties are not subject to, any legal proceedings that we believe, if determined adversely to us, would have a material adverse effect upon our financial condition, results of operations or cash flows.

ITEM 1A.    RISK FACTORS

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, 2022.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Recent Sales of Unregistered Securities: None.

(b) Use of Proceeds from Registered Securities: None.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers:

The table below reflects our purchases of common stock during each of the three months in the three-month period ended
March 31, 2023.
Period
Total Number of Shares of Stock Purchased (1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) that May Yet be Purchased Under the Plans or Programs
January 1, 2023 - January 31, 2023113,538 $40.52 — — 
February 1, 2023 - February 28, 202385,441 41.00 — — 
March 1, 2023 - March 31, 20234,063 31.52 — — 
Total203,042 $40.54 — — 
________________________
(1)Represents shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

None.

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ITEM 6.     EXHIBITS
 
Exhibit
Number		Description
3.(i)1
3.(i)2
3.(i)3
3.(i)4
3.(i)5
3.(ii)1
3.(ii)2
10.1*†
10.2*
10.3*
31.1*
31.2*
31.3*
31.4*
32.1*
32.2*
32.3*
32.4*
101.1
The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the quarter ended March 31, 2023, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Equity (unaudited), (iv) Consolidated Statements of Capital (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited).(1)
104.1*
Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
_______________
*Filed herewith.
†Management contract or compensatory plan or arrangement.
(1)Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.

48

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 27, 2023.
 KILROY REALTY CORPORATION
By:/s/ John Kilroy
 John Kilroy
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Eliott Trencher
 Eliott Trencher
Executive Vice President,
Chief Financial Officer
and Chief Investment Officer
(Principal Financial Officer)
By:/s/ Merryl E. Werber
 Merryl E. Werber
Senior Vice President,
Chief Accounting Officer and Controller
(Principal Accounting Officer)
 
49

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 27, 2023.
 KILROY REALTY, L.P.
BY:KILROY REALTY CORPORATION
Its general partner
By:/s/ John Kilroy
 John Kilroy
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Eliott Trencher
 Eliott Trencher
Executive Vice President,
Chief Financial Officer
and Chief Investment Officer
(Principal Financial Officer)
By:/s/ Merryl E. Werber
 Merryl E. Werber
Senior Vice President,
Chief Accounting Officer and Controller
(Principal Accounting Officer)
 

50
Exhibit 10.1
image_0.jpg

March 3, 2023
Eliott Trencher
12200 West Olympic Boulevard, Suite 200
Los Angeles, CA 90064
Dear Eliott,
This letter sets forth the terms of our agreement relative to your continued employment with Kilroy Realty Corporation, a Maryland corporation (the “Company”), and Kilroy Realty, L.P., a Delaware limited partnership (the “Operating Partnership”). This letter shall be effective as of the date hereof (the “Effective Date”) and, as of the Effective Date, supersedes and replaces any prior agreements regarding your employment with the Company and/or the Operating Partnership.
1. Position/Title:During the Term (as defined below), you will be employed as Executive Vice President, Chief Financial Officer and Chief Investment Officer, and you will have duties and authorities consistent with your position as Chief Financial Officer. You acknowledge and agree, however, that from time to time and at any time the Company and the Operating Partnership may reassign the title of Chief Investment Officer to another executive; provided that any such reassignment shall not reduce your then-current Base Salary or target level of Annual Cash Award.

2. Term:The term of your employment under this letter (the “Term”) begins on the Effective Date and will end March 1, 2026, provided that on March 1, 2026 and each March 1 thereafter the Term will be extended for an additional 12 months unless either the Company or you provides notice to the other party at least 90 days before the March 1 extension date electing not to extend the Term further as of that March 1, and in all cases your employment and the Term are subject to earlier termination as provided herein.

3. Base Salary:Effective as of January 1, 2023 and continuing during the Term, the Company will pay you a base salary at the annual rate of $500,000. Your annual base salary shall be reviewed by the Executive Compensation Committee (the “Committee”) of the board of directors of the


Company (the “Board”) each year of the Term, beginning in 2024, and may be increased above, but may not be reduced below, the then-current rate of such base salary.

4. Bonus and Equity Awards:During the Term, you will be considered for an annual cash award (the “Annual Cash Award”) and annual equity or equity-based awards (the “Annual Stock Incentive”). The annual target incentive opportunity for the Annual Cash Award for a particular fiscal year of the Company that ends during the Term shall be not less than One Hundred Percent (100%) of the base salary paid to you by the Company for that fiscal year. The grant date fair value (as determined by the Company based on its financial reporting methodology) for the Annual Stock Incentive award(s) granted to you for a particular fiscal year of the Company during the Term will be determined by the Committee in its discretion. The payment and/or vesting requirements applicable to any Annual Cash Award or Annual Stock Incentive will be determined in the Company’s sole discretion, and may include time- and service-based vesting conditions and/or performance-based vesting conditions (which may include corporate, business unit or division, financial, strategic, individual or other objectives). Any Annual Cash Award earned pursuant to this Section 4 shall be subject to your continued employment with the Company through the payment date of the award and paid between January 1 and March 15 of the year following the year for which such Annual Cash Award was earned; provided, however, that if the Committee shall determine that it is administratively impracticable, which may include inability of the Company to gain certification of its financial statements, to make such Annual Cash Award payment by March 15, any such payment shall be made as soon as reasonably practicable after such period and in no event later than December 31 of the year following the year for which such Annual Cash Award was earned.

5. Benefits:
All employee and executive benefit plans and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time, to the extent such plans are generally available to other senior executives or employees of the Company, subject

2

to the eligibility and other requirements of such plans and programs.
Notwithstanding anything contained in this Agreement to the contrary, the terms and conditions of that certain Indemnification Agreement, dated December 16, 2021, entered into by and between you, the Company and the Operating Partnership, as it may be subsequently amended (the “Indemnification Agreement”), shall continue in full force and effect and in accordance with its terms, and nothing in this Agreement shall be construed as superseding or replacing the terms of the Indemnification Agreement.
6. Vacation:During the Term, you will accrue vacation at a rate of four weeks per year, all subject to the Company’s applicable vacation policies as in effect from time to time.

7. Severance:
You or the Company may terminate your employment (and the Term) at any time and for any reason, with or without cause. However, if your employment is terminated during the Term either (i) by the Company without Cause (and other than due to your death or Disability) or (ii) by you for Good Reason, you shall receive your earned and accrued (and unpaid) base salary and vacation pay as of such termination of employment (the effective date of such termination of employment, the “Date of Termination”, and such earned and accrued (and unpaid) base salary and vacation pay, the “Accrued Compensation”) as well as (subject to the release condition below) the following severance payments ("the Severance Benefits"):
•Severance pay equal, in the aggregate, to the sum of (a) one times your annual rate of base salary from the Company as in effect immediately prior to the Date of Termination plus (b) one times your target Annual Cash Award amount as in effect immediately prior to the Date of Termination, with such amount to be paid, subject to Section 13 of this Agreement, in a single lump sum on or within five business days following the date that is 60 days after the Date of Termination;
•All equity awards held by you at termination which vest based on time shall become fully
3

•vested and all other terms of such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;
•Unless otherwise expressly provided for in an applicable award agreement, any performance objectives upon which the earning of performance-based restricted stock, RSUs, and other equity awards and other long-term incentive awards (including cash awards) is conditioned shall be deemed to have been met at the greater of (A) target level al the Date of Termination, or (B) actual performance and reasonably anticipated performance at the date of termination, and such amounts shall become fully vested and non-forfeitable as a result of termination of employment at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;
•The Company will pay or reimburse you for your premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for you (and, if applicable, your eligible dependents) as in effect immediately prior to the Date of Termination, to the extent that you elect such continued coverage; provided that the Company’s obligation to make any payment or reimbursement pursuant to this section shall, subject to Section 13 of this Agreement, commence with continuation coverage for the month following the month in which your “separation from service” (as defined in Section 13 of this Agreement) occurs and shall cease with continuation coverage for the eighteenth (18th) month following the month in which your separation from service occurs (or, if earlier, shall cease upon the first to occur of the date you become eligible for coverage under the health plan of a future employer, the date the Company ceases to offer group medical coverage to its active executive employees, or the date the
4

Company is no longer obligated to provide COBRA coverage to you). To the extent you elect COBRA coverage, you shall notify the Company in writing of such election prior to such coverage taking effect and complete any other continuation coverage enrollment procedures the Company may then have in place.

All other rights under any other compensatory or benefit plan, including any deferrals, shall be governed by such plan. To the extent that Annual Cash Awards had not yet been paid for the prior fiscal year, you shall be entitled to any Annual Cash Award that you earned for such prior fiscal year as though you had remained employed through the actual payment date.

If the Company enters into or amends or renews employment or severance arrangements (exclusive of renewals of contracts that exist on the date of this letter) that generally provide the Company’s officers with similarly-situated or less senior positions (exclusive of arrangements with any officers holding more senior positions) with severance benefits that, in the aggregate in the case of each officer, are more beneficial to the officer than the aggregate level of your Severance Benefits provided for above, your Severance Benefits shall be adjusted to reflect the level of severance benefits generally provided to officers with similarly-situated positions (or, if no officer with a similarly-situated position, the officer with the most senior officer position below your position who receives such other arrangement).

8. Cause; Death; Disability:
If your employment terminates due to Cause, by you for any reason other than for Good Reason, due to your death or disability, or for any reason upon or after the end of the Term, you will receive your Accrued Compensation as of the date of termination and no additional amounts other than what you are entitled to pursuant to the terms of any Company benefit plans. (other than what you are entitled to pursuant to the terms of any Company benefit plans and, if the termination was due to your death or Disability, as provided in the next sentence). If your employment terminates due to your death or Disability, you will be entitled to: (a) a pro-rated Annual Cash Award for the year in which your employment terminates, to be calculated and paid at the same time as though your employment had not terminated (but in all cases paid not


5

later than March 15 of the year following the year in which your employment terminates) and pro-rated based on the portion of the year that you were actually employed with the Company; and (b) to the extent that Annual Cash Awards had not yet been paid for the prior fiscal year, any Annual Cash Award that you earned for such prior fiscal year as though you had remained employed through the actual payment date.
For purposes of this Agreement, “Cause” shall mean:
•You commit (or you enter a plea of guilty, nolo contendere, or a similar plea to) a felony or a crime involving moral turpitude;
•you engage in any act of theft, fraud, embezzlement or misappropriation against the Company or its subsidiaries or affiliates;
•you breach your Non-Competition, Non-Solicitation and Non-Disclosure agreement with the Company, dated July 19, 2017 and as the same may be amended from time to time (the “Confidentiality Agreement”), in any material respect;
•you willfully fail to substantially perform your duties or to follow the directive of an officer to whom you directly or indirectly report (other than, in each case, such failure resulting from your incapacity due to physical or mental illness), which failure is not remedied within 30 calendar days after written demand for substantial performance is delivered by the Company (except in no case shall multiple notices be required for the same or similar conduct or failures); or
•you breach in any material respect any policy of the Company (or any of its subsidiaries or affiliates) which is applicable to you.

No act, or failure to act, on the part of you shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company.
6

For purposes of this Agreement, “Disability” means your disability within the meaning of Internal Revenue Code Section 409A.

9. Good Reason:
For purposes of this Agreement, “Good Reason” shall mean, without your express written consent, the occurrence of any of the following circumstances unless, if correctable, such circumstances are fully corrected within 30 days of the notice of termination given in respect thereof which notice must be given within 90 days of the occurrence:
•a material reduction by the Company in your annual rate of base salary from the Company or in the target level of your Annual Cash Award;
•a material diminution of your position with the Company (for clarity, you no longer serving as Chief Investment Officer shall not constitute Good Reason);
•a breach by the Company in any material respect of the terms of this letter;

•the failure of the Company to obtain a satisfactory agreement from any successor to the Company to fully assume the Company’s obligations and to perform under this Agreement; or
•a material relocation by the Company of your principal place of employment with the Company.
Notwithstanding the foregoing, you will not be entitled to any of the termination payments or benefits provided in Section 7 as a result of a termination of your employment by you for Good Reason unless such termination becomes effective within 90 days following the expiration of the 30 day cure period described above.
10. Release of Claims:Notwithstanding anything to the contrary above, you agree as a condition precedent to receipt of any termination payments and benefits provided for in Section 7 herein (other than Accrued Compensation), that you must timely execute, deliver to the Company, and not revoke, a general release of claims in a form
7

provided by the Company (“General Release”). Such General Release shall be provided to you not later than five (5) business days after the Date of Termination (for clarity, in circumstances for which you may be eligible to receive the severance benefits provided in Section 7) and you shall execute, and deliver to the Company, the General Release within 21 days (or 45 days, if 45 days is required pursuant to applicable law) of the date you receive the General Release. In the event the General Release (and the expiration of any revocation rights provided therein) could become effective in one of two (2) of your taxable years depending on when you execute and deliver the release, any payment conditioned on execution of the release shall not be made earlier than the first business day of the later of such tax years.

11. Covenants:You agree that the Confidentiality Agreement continues in effect and that you have not breached the Confidentiality Agreement.

12. Governing Law/ Arbitration:This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of California, without regard to conflicts of law principles. Any dispute or controversy arising under or in connection with this Agreement or your employment or any other relationship between you and the Company or the Operating Partnership shall be settled exclusively by final and binding arbitration in Los Angeles, California by three arbitrators in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration, available at www.adr.org. You agree that either you, the Company, or the Operating Partnership may bring and pursue grievances, disputes, claims or causes of action against the other only in their individual capacities, and may not represent other individuals or their interests or bring, pursue, or act as a plaintiff, class member, class representative, or named plaintiff in any purported class or representative proceeding. This section does not apply to any proceeding that cannot be waived or compelled to arbitration under this agreement as a matter of law (including the Federal Arbitration Act). Either party may initiate arbitration by delivering a written request to arbitrate to the other party. You shall not be required to pay any cost or expense of the arbitration that you would not be required to pay if the
8

matter had been heard in court. The arbitrators shall decide all issues submitted by the parties and may not decide any issue not submitted. The arbitrator is authorized to award any remedy or relief that would have been available to the parties, in their individual capacity, had the matter been heard in court. The decision of the arbitrators shall be in writing and shall provide the reasons for the arbitrators’ award unless the parties otherwise agree in writing. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and you hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Southern District of California, (ii) any of the courts of the State of California, or (iii) any other court having jurisdiction. The Company and you further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and you hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and you hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
13. Tax Withholding; Section 409A:
All compensation provided in this Agreement is subject to applicable tax withholding. Except for such withholding, you will be responsible for all tax liabilities with respect to such compensation. In addition, the following provisions shall apply to such compensation:
(i) Anything in this Agreement to the contrary notwithstanding, to the maximum extent permitted by applicable law, amounts payable to you pursuant to Section 7 shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). However, if (A) on the date of termination of your employment with the Company or a subsidiary, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) you are determined to be
9

a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations Section 1.409A-1(b)(9)(iii), if applicable, and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code, as a result of such termination, you would receive any payment that, absent the application of this Section 13(i), would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be made prior to (and such payment shall be made on or within five (5) business days following) the date that is the earliest of (1) six (6) months and one day after your termination date, (2) your death or (3) such other date (the “Delay Period”) as will cause such payment not to be subject to such interest and additional tax (with a catchup payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment). In particular, with respect to any lump sum payment otherwise required hereunder, in the event of any delay in the payment date as a result of Code Section 409A(a)(2)(A)(i) and (B)(i), the Company will adjust the payments to reflect the deferred payment date by crediting interest thereon at the prime rate in effect at the time such amount first becomes payable, as quoted by the Company’s principal bank.
(ii) To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under Code Section 409A provided on account of a “separation from service.” and such benefits are not otherwise exempt from Code Section 409A, you shall pay the cost of such benefits during the Delay Period, and the Company shall reimburse you, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to you, the Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.
(iii) In addition, other provisions of this Agreement or any other such plan notwithstanding, the Company shall have no right to accelerate any such payment or to make

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any such payment as the result of any specific event except to the extent permitted under Section 409A.
(iv) For purposes of Section 409A of the Code, each payment made after termination of your employment, including each health insurance continuation payment or reimbursement, will be considered one of a series of separate payments.
(v) To the extent any cash payments to be made to you upon a termination of your employment would be deemed to be nonqualified deferred compensation under Code Section 409A, then with respect to such cash payments, a termination of employment shall not be deemed to have occurred unless such termination is also a “separation from service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement with respect to such cash payments, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
(vi) Any amount that you are entitled to be reimbursed under this Agreement that may be treated as taxable compensation will be reimbursed to you as promptly as practical and in any event not later than sixty (60) days after the end of the calendar year in which the expenses are incurred; provided, that, you shall have provided a reimbursement request to the Company no later than thirty (30) days prior to the date the reimbursement is due. The amount of the expenses eligible for reimbursement during any calendar year will not affect the amount of expenses eligible for reimbursement in any other calendar year, except as may be required pursuant to an arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code.
(vii) The Company shall not be obligated to reimburse you for any tax penalty or interest or provide a gross-up in connection with any tax liability you may incur under Section 409A of the Code.
(viii) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date
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of payment within the specified period shall be within the sole discretion of the Company.
(ix) Unless this Agreement provides a specified and objectively determinable payment schedule to the contrary, to the extent that any payment of base salary or other compensation is to be paid for a specified continuing period of time beyond the date of termination of your employment in accordance with the Company’s payroll practices (or other similar term), the payments of such base salary or other compensation shall be made on a monthly basis.
14. Integration and Severability:
This Agreement cancels and supersedes any and all prior agreements and understandings (whether written or oral) between the parties hereto with respect to your employment by the Company, any parent or predecessor company, and the Company’s subsidiaries, but excluding (1) existing written award agreements evidencing the terms and conditions of equity awards granted by the Company under the Plan, (2) the Confidentiality Agreement, and (3) the Indemnification Agreement.
If any section of this agreement is deemed to be unenforceable for any reason, this agreement will still be fully enforceable as to any and all other provisions.
[The remainder of this page has intentionally been left blank. The signature page follows.]

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IN WITNESS WHEREOF, you and the Company have executed this Agreement as of the Effective Date.
KILROY REALTY CORPORATION
a Maryland Corporation
By:/s/ Heidi R. Roth
Name: Heidi R. Roth
Title: EVP, Chief Administrative Officer and Secretary
By:/s/ Lauren N. Stadler
Name: Lauren N. Stadler
Title: SVP, Corporate Counsel
KILROY REALTY, L.P. ,
a Delaware Limited Partnership
By: KILROY REALTY CORPORATION,
a Maryland Corporation,
Its:General Partner
By:/s/ Heidi R. Roth
Name: Heidi R. Roth
Title: EVP, Chief Administrative Officer and Secretary
By:/s/ Lauren N. Stadler
Name: Lauren N. Stadler
Title: SVP, Corporate Counsel
EXECUTIVE
/s/ Eliott Trencher
Eliott Trencher
Exhibit 10.2
AMENDMENT NO. 1 TO
TERM LOAN AGREEMENT
This AMENDMENT NO. 1 TO TERM LOAN AGREEMENT, dated as of January 27, 2023 (this “Amendment No. 1”), is by and among KILROY REALTY, L.P., a limited partnership organized and existing under the laws of the State of Delaware (“Borrower”), JPMORGAN CHASE BANK, N.A., as agent for the Banks defined below (in such capacity, together with its successors in such capacity, “Administrative Agent”), JPMORGAN CHASE BANK, N.A., in its individual capacity and not as Administrative Agent, and the other lenders signatory hereto (said lenders signatory hereto, each a “Bank” and collectively, the “Banks”). Reference is made to that certain Term Loan Agreement, dated as of October 3, 2022, by and among the Borrower, the Banks referenced therein and the Administrative Agent (such agreement, the “Credit Agreement”). Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.
RECITALS
WHEREAS, the Borrower has requested that the Banks make certain amendments to the Credit Agreement to provide for New Term Loan Commitments and the Banks are willing to make such changes as set forth herein;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. As of the Amendment Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby amended as follows:
1.1Term Loan Commitments. The aggregate Term Loan Commitments are increased by $100,000,000 to $500,000,000.
1.2Commitments. Schedule 1A to the Credit Agreement is hereby deleted in its entirety and Schedule 1A to this Amendment No. 1 is substituted in place thereof.
1.3Increase of Term Loan Commitments by Increasing Banks.
(a)Each of JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. (“WFB”), The Bank of Nova Scotia, Bank of America, N.A., PNC Bank, National Association and KeyBank National Association (the “Increasing Banks”) hereby agrees to increase its Term Loan Commitment (collectively, the “Amendment No. 1 Incremental Commitments”) such that Amendment No. 1 Incremental Commitments and the Term Loan Commitments of each Increasing Bank (immediately after giving effect to this Amendment No. 1) shall be the amount set forth on Schedule 1A to this Amendment No. 1. On the Amendment Effective Date, the Banks’ interests in the outstanding Term Loans shall be reallocated in accordance with each Bank’s Term Loan Commitments (after giving effect to this Amendment No. 1), and each Bank waives its rights to reimbursement pursuant to Section 2.13 of the Credit Agreement in connection with such reallocation.



(b)From and after the Amendment Effective Date, WFB shall be deemed to be a Bank for all purposes of the Credit Agreement, and each reference to the Banks in the Credit Agreement shall be deemed to include the WFB. Without limiting the generality of the foregoing, WFB confirms its appointment of JPMorgan Chase Bank, N.A., as the Administrative Agent in accordance with Section 11 of the Credit Agreement.
(c)WFB (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment No. 1 and to consummate the transactions contemplated hereby and to become a Bank under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to become a Bank and makes all representations and warranties required to be made by Banks pursuant to the Credit Agreement on the Closing Date on the Amendment Effective Date, including those set forth in Section 7.7 and Section 7.13 of the Credit Agreement, (iii) from and after the Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Bank thereunder and, to the extent of its Term Loan Commitment, shall have the obligations of a Bank thereunder, (iv) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.1 of the Credit Agreement, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment No. 1, and (v) it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment No. 1; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent or any other Bank and their Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Bank.
1.4Amendments to Section 1.1. Section 1.1 of the Credit Agreement is amended by:
(a)inserting the following new definitions after the definition of “Agreement”:
“Amendment No. 1” means that certain Amendment No. 1 to Term Loan Agreement, dated as of January 27, 2023, by and among the Borrower, the Administrative Agent and the Lenders signatory thereto.
“Amendment No. 1 Effective Date” means January 27, 2023.
“Amendment No. 1 Incremental Commitments” has the meaning set forth in Amendment No. 1.
and



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(b)restating the definition of “Term Loan Amount” in its entirety to read as follows:
“Term Loan Amount” means the sum of the Term Loan Commitments, which amount as of the Amendment No. 1 Effective Date is Five Hundred Million and 00/100 Dollars ($500,000,000) (as adjusted pursuant to Sections 2.11 and 9.17).
1.5Amendment to Section 2.1. Section 2.1 of the Credit Agreement is restated in its entirety to read as follows:
Section 2.1    Commitments to Lend. Each Term Loan Bank severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time in up to four (4) Borrowings during the Term Loan Commitment Period as requested by the Borrower in accordance with Section 2.2 in an amount not to exceed its Term Loan Commitment; provided that (i) if the Borrower does not make Borrowings of Term Loans in an aggregate principal amount of at least fifty percent (50%) of the Amendment No. 1 Incremental Commitments as in effect on the Amendment No. 1 Effective Date on or prior to April 3, 2023 then the Amendment No. 1 Incremental Commitments shall be reduced in accordance with Section 2.9, (ii) all Borrowings of Term Loans shall be made no later than the last day of the Term Loan Commitment Period, (iii) the aggregate principal amount of any such Borrowing of Term Loans shall not exceed the amount of the unused total Term Loan Commitments on the date of such Borrowing of Term Loans, and (iv) the principal amount of Term Loans made by any Term Loan Bank to the Borrower shall not exceed such Term Loan Bank’s Term Loan Commitment. The Term Loan Commitments of the Term Loan Banks to make the Term Loans (other than the New Term Loan Commitments, which shall be governed by Section 9.17) shall expire on the last day of the Term Loan Commitment Period (regardless of the failure of the Borrower to fully utilize the Term Loan Commitments) and the Term Loan Amount shall be reduced by the amount of such expired Term Loan Commitments. If the Term Loan Amount shall be increased in accordance with Section 9.17, each Term Loan Bank whose Term Loan Commitment shall have been increased in accordance therewith or who shall have become a Term Loan Bank hereunder, severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate principal amount of Term Loans by such Term Loan Bank at any one time outstanding shall not exceed the amount of its Term Loan Commitment. The aggregate amount of Term Loans to be made hereunder shall not exceed the Term Loan Amount. Each Borrowing under this Section 2.1 shall be in an aggregate principal amount of at least (i) with respect to the Term Loan Commitments in effect on the Amendment No. 1 Effective Date, $20,000,000, and (ii) otherwise, $10,000,000, or an integral multiple of $500,000 in excess thereof and shall be made from the several Term Loan Banks ratably

3


in proportion to their respective Term Loan Commitments. Any Term Loans that are repaid may not be reborrowed.
1.6Amendment to Section 2.9. Section 2.9 of the Credit Agreement is restated in its entirety to read as follows:
Section 2.9    Mandatory Termination or Reduction. On April 3, 2023, if the Borrower has not made Borrowings of the Term Loans in an aggregate principal amount of at least equal to fifty percent (50%) of the Amendment No. 1 Incremental Commitments as in effect on the Amendment No. 1 Effective Date, then the Amendment No. 1 Incremental Commitments will be reduced, automatically and without further action by any party, to two times the Borrowing of Term Loans made during the period commencing on the Amendment No. 1 Effective Date and terminating on April 3, 2023, and the Amendment No. 1 Incremental Commitments and Term Loan Amount shall be reduced by the amount of such reduction (for example, if the Borrower has made only $25,000,000 of additional Borrowings of Term Loans by April 3, 2023, then the available unused Amendment No. 1 Incremental Commitments shall be permanently reduced from $100,000,000 to $50,000,000 on such date). If requested by the Administrative Agent, the Borrower shall deliver to the Administrative Agent those notices required by Section 2.11(d) that are necessary pursuant to Section 2.9 to reflect the reductions in the unused Amendment No. 1 Incremental Commitments described in the preceding sentence.
1.7Amendment to Section 9.17(a). The first sentence of Section 9.17(a) of the Credit Agreement is restated in its entirety to read as follows:
“At any time prior to the Term Loan Maturity Date, provided no Event of Default shall have occurred and then be continuing, the Borrower may, elect to request the establishment of one or more new term loan commitments (the “New Term Loan Commitments” or the “Incremental Commitments”), by up to an aggregate amount not to exceed $250,000,000 for all Incremental Commitments (so that after giving effect to all Incremental Commitments, including, without limitation, the Amendment No. 1 Incremental Commitments, the sum of the principal amount of Term Loans made hereunder and pursuant to Section 2.1 plus the unused amount of Term Loan Commitments does not exceed $650,000,000).
1.8Request under Section 9.17(a) of Credit Agreement.
(a)The Administrative Agent and the Banks party hereto hereby waive the requirement under Section 9.17(a) of the Credit Agreement that the Borrower provide written notice to the Administrative Agent of its request for New Term Loan Commitments.
(b)This Amendment No. 1 is and shall be deemed to be for all purposes of the Credit Agreement the partial exercise by the Borrower of its rights under Section 9.17(a) of the Credit Agreement (as amended by this Amendment No. 1) to request an increase of the Term Loan Commitments. From and after the Amendment Effective Date, the Borrower shall be able to request additional Incremental Commitments of up to $150,000,000 pursuant to Section 9.17 of the Credit Agreement.


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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
In order to induce the Banks and the Administrative Agent to enter into this Amendment No. 1, the Borrower represents and warrants to each Bank and the Administrative Agent that the following statements are true, correct and complete:
(i)    the Borrower is duly organized, validly existing and in good standing as a limited partnership under the laws of the State of Delaware and has all powers and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and carry on its business as now conducted or as it presently proposes to conduct and has been duly qualified and is in good standing in every jurisdiction in which the failure to be so qualified and/or in good standing is likely to have a Material Adverse Effect;
(ii)    the Borrower has the organizational power and authority to execute, deliver and carry out the terms and provisions of each of this Amendment No. 1, the Credit Agreement as amended by this Amendment No. 1 and any Notes issued pursuant to Section 3D below (the “New Notes”) and has taken all necessary action to authorize the execution and delivery on behalf of the Borrower and the performance by the Borrower of this Amendment No. 1, the Credit Agreement as amended by this Amendment No. 1 and the New Notes. The Borrower has duly executed and delivered this Amendment No. 1 and the New Notes, and each of this Amendment No. 1, the Credit Agreement as amended by this Amendment No. 1 and the New Notes constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors rights generally, or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law;
(iii)    neither the execution, delivery or performance by or on behalf of the Borrower of this Amendment No. 1 and the Credit Agreement as amended by this Amendment No. 1, nor compliance by the Borrower with the terms and provisions hereof and thereof nor the consummation of the transactions contemplated by this Amendment No. 1 and the Credit Agreement as amended by this Amendment No. 1, (a) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to Borrower except to the extent such contravention is not likely to have a Material Adverse Effect, or (b) will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower pursuant to the terms of any material indenture, mortgage, deed of trust, or other agreement or other instrument to which the Borrower (or of any partnership of which the Borrower is a partner) is a party or by which it or any of its property or assets is bound or to which it is subject except to the extent such conflict or breach is not likely to have a Material Adverse Effect, or (c) will conflict with or result in a breach of any organizational document of any Subsidiary, the certificate of limited partnership, partnership agreement or other organizational document of Borrower, or the General Partner’s articles of incorporation or by-laws;
(iv)    the representations and warranties made or deemed made by the Borrower in any Loan Document are true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materiality”, “Material Adverse Effect” or a similar

5


qualifier, in which case it is true and correct in all respects) on the Amendment Effective Date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materiality”, “Material Adverse Effect” or a similar qualifier, in which case it shall be true and correct in all respects) on and as of such earlier date);
(v)    no event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment No. 1 that would constitute a Default or Event of Default; and
(vi)    there have been no changes to the organizational documents of the Borrower and the General Partner since October 3, 2022, other than amendments or amendments and restatements, as applicable, that have been delivered to the Administrative Agent prior to the Amendment Effective Date.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Except as set forth below, Section 1 of this Amendment No. 1 shall become effective only upon the satisfaction of the following conditions precedent (the “Amendment Effective Date”):
A. The Borrower, the Administrative Agent, the Banks constituting the Required Banks, and each of the Increasing Banks under the Credit Agreement shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent, and the General Partner shall have executed and delivered to the Administrative Agent the Reaffirmation of Guaranty attached to this Amendment No. 1 (which may include delivery of a signed signature page of this Amendment No. 1 by facsimile or other means of electronic transmission (e.g., “pdf”)).
B. The Administrative Agent shall have received all reasonable out-of-pocket costs and expenses for which invoices have been presented (including the reasonable fees and expenses of a single legal counsel for the Administrative Agent and the Banks for which the Borrower agrees it is responsible pursuant to Section 9.3 of the Credit Agreement), incurred in connection with this Amendment No. 1.
C. The Administrative Agent shall have received a secretary’s certificate of the General Partner and the Borrower certifying as to authorizing resolutions and incumbency of officers with respect to this Amendment No. 1 and the transactions contemplated hereby.
D. Execution and delivery to the Administrative Agent by the Borrower of amended and restated Notes in favor of any Increasing Bank (or a new Note in favor of WFB) which requests such Notes, in each case reflecting such Increasing Bank’s Term Loan Commitments (as set forth on Schedule 1A hereto).
E. Delivery to the Administrative Agent by Latham & Watkins LLP, as counsel to the Borrower, of a customary opinion addressed to the Increasing Banks and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent.


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F. Payment by the Borrower of any agreed upon compensation to the Increasing Banks and the Administrative Agent in connection with this Amendment No. 1 and the Amendment No. 1 Incremental Commitments of the Increasing Banks.
G. The conditions set forth in Section 9.17(g) of the Credit Agreement shall have been satisfied and the Administrative Agent shall have received a certificate dated the Amendment Effective Date and executed by the chief financial officer, controller, treasurer or vice president-corporate finance of the Borrower that such conditions have been satisfied and that as of the last day of the most recent calendar quarter for which financial statements have been delivered pursuant to Section 5.1, the Borrower would have been in compliance with the financial covenants set forth in Section 5.8 after giving pro forma effect to the New Term Loan Commitments and any Borrowings and the use of proceeds thereof.
H. Upon satisfaction of the foregoing conditions, the Administrative Agent shall deliver written notice to the Borrower and the Banks of the Amendment Effective Date.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan Documents.
(i)    On and after the effective date of this Amendment No. 1, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment No. 1. This Amendment No. 1 shall be deemed to be a “Loan Document” under the Credit Agreement.
(ii)    Except as specifically amended by this Amendment No. 1, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.
(iii)    The execution, delivery and performance of this Amendment No. 1 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under the Credit Agreement or any of the other Loan Documents.
B. Headings. Section and subsection headings in this Amendment No. 1 are included herein for convenience of reference only and shall not constitute a part of this Amendment No. 1 for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT NO. 1 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW THAT WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THE STATE OF NEW YORK).


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D.Counterparts; Effectiveness. This Amendment No. 1 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment No. 1 (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 3 hereof) shall become effective upon the execution of a counterpart hereof by the Borrower and the Banks. Delivery of an executed counterpart of a signature page of this Amendment No. 1 by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment No. 1. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment No. 1 and/or any document to be signed in connection with this Amendment No. 1 and the transactions contemplated hereby shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be. As used herein, “Electronic Signatures” means any electronic symbol or process attached to, or associated with, any contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
E. Jurisdictions; Immunities; Waiver of Jury Trial. The provisions of Section 9.9(b) and Section 9.12 of the Credit Agreement shall apply to this Amendment No. 1 and are hereby incorporated by reference.
[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
BORROWER:
KILROY REALTY, L.P., a Delaware limited
partnership
By:Kilroy Realty Corporation, a Maryland
corporation, its general partner
By:/s/ Tyler H. Rose
Name:Tyler H. Rose
Title: President and Secretary
By:/s/ Taylor Friend
Name:Taylor Friend
Title: Senior Vice President, Finance and
Treasurer


ADMINISTRATIVE AGENT AND BANK:
JPMORGAN CHASE BANK, N.A., as
Administrative Agent and as a Bank
By:/s/ Delia Rodillas
Name:Delia Rodillas
Title:Vice President


BANK OF AMERICA, N.A.
By:/s/ Helen Chan
Name:Helen Chan
Title:Vice President



PNC BANK, NATIONAL ASSOCIATION
By:/s/ David C. Drouillard
Name:David C. Drouillard
Title:Senior Vice President


BARCLAYS BANK PLC
By:/s/ Warren Veech III
Name:Warren Veech III
Title:Vice President


MUFG UNION BANK, N.A.
By:/s/ Kathryn Gilliland
Name:Kathryn Gilliland
Title:Director


SUMITOMO MITSUI BANKING CORPORATION
By:/s/ Irlen Mak
Name:Irlen Mak
Title:Director


COMERICA BANK
By:/s/ Ariel Zeidner
Name:Ariel Zeidner
Title:AVP


KEYBANK, NATIONAL ASSOCIATION
By:/s/ Michael P. Szuba
Name:Michael P. Szuba
Title:Senior Vice President


THE BANK OF NOVA SCOTIA
By:/s/ Chelsea McCune
Name:Chelsea McCune
Title:Director, Corporate Banking - U.S. Real
Estate, Gaming & Leisure


THE BANK OF NEW YORK MELLON
By:/s/ Cody Mainc
Name:Cody Mainc
Title:Vice President


WELLS FARGO BANK, N.A.
By:/s/ Cristina Johnnie
Name:Cristina Johnnie
Title:Vice President


Reaffirmation of Guaranty


    The undersigned Kilroy Realty Corporation (the “Guarantor”) hereby (a) acknowledges the foregoing Amendment No. 1, (b) reaffirms its guaranty of the Guaranteed Obligations (as defined in the Guaranty dated as of October 3, 2022 executed and delivered by the Guarantor) under or in connection with the Credit Agreement, as modified by this Amendment No. 1, in accordance with such Guaranty executed and delivered by the Guarantor, and (c) confirms that such Guaranty shall remain in full force and effect after giving effect to this Amendment No. 1.

[Signature Page Follows]




GUARANTOR:
KILROY REALTY CORPORATION
By:/s/ Tyler H. Rose
Name:Tyler H. Rose
Title: President and Secretary
By:/s/ Taylor Friend
Name:Taylor Friend
Title: Senior Vice President, Finance and
Treasurer






Schedule 1A

Term Loan Commitments and Amendment No. 1 Incremental Commitments

LenderInitial Term Loan CommitmentAmendment No. 1 Incremental CommitmentTerm Loan Commitment
JPMorgan Chase Bank, N.A.$40,000,000.00$10,000,000.00$50,000,000.00
Bank of America, N.A.$40,000,000.00$10,000,000.00$50,000,000.00
PNC Bank, National Association$40,000,000.00$10,000,000.00$50,000,000.00
U.S. Bank National Association$40,000,000.00$0.00$40,000,000.00
The Bank of Nova Scotia$40,000,000.00$20,000,000.00$60,000,000.00
The Bank of New York Mellon$32,000,000.00$0.00$32,000,000.00
Bank of the West, a California Banking Corporation$32,000,000.00$0.00$32,000,000.00
Barclays Bank PLC$32,000,000.00$0.00$32,000,000.00
KeyBank National Association$32,000,000.00$10,000,000.00$42,000,000.00
Sumitomo Mitsui Banking Corporation$32,000,000.00$0.00$32,000,000.00
Associated Bank, National Association$15,000,000.00$0.00$15,000,000.00
MUFG Union Bank, N.A.$15,000,000.00$0.00$15,000,000.00
Comerica Bank$10,000,000.00$0.00$10,000,000.00
Wells Fargo Bank, N.A.$0.00$40,000,000.00$40,000,000.00
TOTAL$400,000,000.00$100,000.000.00$500,000.000.00
Exhibit 10.3
AMENDMENT NO. 2 TO
TERM LOAN AGREEMENT
This AMENDMENT NO. 2 TO TERM LOAN AGREEMENT, dated as of March 6, 2023 (this “Amendment No. 2”), is by and among KILROY REALTY, L.P., a limited partnership organized and existing under the laws of the State of Delaware (“Borrower”), JPMORGAN CHASE BANK, N.A., as agent for the Banks defined below (in such capacity, together with its successors in such capacity, “Administrative Agent”), JPMORGAN CHASE BANK, N.A., in its individual capacity and not as Administrative Agent, and the other lenders signatory hereto (said lenders signatory hereto, each a “Bank” and collectively, the “Banks”). Reference is made to that certain Term Loan Agreement, dated as of October 3, 2022 (as amended by that certain Amendment No. 1 to Term Loan Agreement dated as of January 27, 2023, and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower, the Banks referenced therein and the Administrative Agent. Capitalized terms used herein without definition shall have the same meanings as set forth in the Credit Agreement, as amended hereby.
RECITALS
WHEREAS, the Borrower has requested that the Banks make certain amendments to the Credit Agreement to provide for New Term Loan Commitments and the Banks are willing to make such changes as set forth herein;
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. As of the Amendment No. 2 Effective Date (as defined in Section 3 hereof), the Credit Agreement is hereby amended as follows:
1.1Term Loan Commitments. The aggregate Term Loan Commitments are increased by $20,000,000 to $520,000,000.
1.2Commitments. Schedule 1A to the Credit Agreement is hereby deleted in its entirety and Schedule 1A to this Amendment No. 2 is substituted in place thereof.
1.3Increase of Term Loan Commitment by Increasing Bank. BMO Harris Bank N.A., a national banking association, as successor in interest to Bank of the West (the “Increasing Bank”) hereby agrees to increase its Term Loan Commitment (the “Amendment No. 2 Incremental Commitments”) such that the Amendment No. 2 Incremental Commitments, the Amendment No. 1 Incremental Commitments and the Term Loan Commitments of the Increasing Bank (immediately after giving effect to this Amendment No. 2) shall be the amount set forth on Schedule 1A to this Amendment No. 2. On the Amendment No. 2 Effective Date, the Banks’ interests in the outstanding Term Loans shall be reallocated in accordance with each Bank’s Term Loan Commitments (after giving effect to this Amendment No. 2), and each Bank waives its rights to reimbursement pursuant to Section 2.13 of the Credit Agreement in connection with such reallocation.



1.4Amendments to Section 1.1. Section 1.1 of the Credit Agreement is amended by:
(a)inserting the following new definitions after the definition of “Amendment No. 1”:
“Amendment No. 2” means that certain Amendment No. 2 to Term Loan Agreement, dated as of March 6, 2023, by and among the Borrower, the Administrative Agent and the Lenders signatory thereto.
“Amendment No. 2 Effective Date” means March 6, 2023.
“Amendment No. 2 Incremental Commitments” has the meaning set forth in Amendment No. 1.
and

(b)restating the definition of “Term Loan Amount” in its entirety to read as follows:
“Term Loan Amount” means the sum of the Term Loan Commitments, which amount as of the Amendment No. 2 Effective Date is Five Hundred Twenty Million and 00/100 Dollars ($520,000,000) (as adjusted pursuant to Sections 2.11 and 9.17).
1.5Amendment to Section 2.1. Section 2.1 of the Credit Agreement is restated in its entirety to read as follows:
Section 2.1    Commitments to Lend. Each Term Loan Bank severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time in up to four (4) Borrowings during the Term Loan Commitment Period as requested by the Borrower in accordance with Section 2.2 in an amount not to exceed its Term Loan Commitment; provided that (i) if the Borrower does not make Borrowings of Term Loans in an aggregate principal amount of at least fifty percent (50%) of the sum of the Amendment No. 1 Incremental Commitments plus the Amendment No. 2 Incremental Commitments as in effect on the Amendment No. 2 Effective Date on or prior to April 3, 2023 then the Amendment No. 1 Incremental Commitments and the Amendment No. 2 Incremental Commitments shall be reduced in accordance with Section 2.9, (ii) all Borrowings of Term Loans shall be made no later than the last day of the Term Loan Commitment Period, (iii) the aggregate principal amount of any such Borrowing of Term Loans shall not exceed the amount of the unused total Term Loan Commitments on the date of such Borrowing of Term Loans, and (iv) the principal amount of Term Loans made by any Term Loan Bank to the Borrower shall not exceed such Term Loan Bank’s Term Loan Commitment. The Term Loan Commitments of the Term Loan Banks to make the Term Loans (other than the New Term Loan Commitments, which shall be governed by Section 9.17) shall expire on the last day of the Term Loan Commitment Period (regardless of

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the failure of the Borrower to fully utilize the Term Loan Commitments) and the Term Loan Amount shall be reduced by the amount of such expired Term Loan Commitments. If the Term Loan Amount shall be increased in accordance with Section 9.17, each Term Loan Bank whose Term Loan Commitment shall have been increased in accordance therewith or who shall have become a Term Loan Bank hereunder, severally agrees, on the terms and conditions set forth in this Agreement, to make Term Loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate principal amount of Term Loans by such Term Loan Bank at any one time outstanding shall not exceed the amount of its Term Loan Commitment. The aggregate amount of Term Loans to be made hereunder shall not exceed the Term Loan Amount. Each Borrowing under this Section 2.1 shall be in an aggregate principal amount of at least (i) with respect to the Term Loan Commitments in effect on the Amendment No. 1 Effective Date, $20,000,000, and (ii) otherwise, $10,000,000, or an integral multiple of $500,000 in excess thereof and shall be made from the several Term Loan Banks ratably in proportion to their respective Term Loan Commitments. Any Term Loans that are repaid may not be reborrowed.
1.6Amendment to Section 2.9. Section 2.9 of the Credit Agreement is restated in its entirety to read as follows:
Section 2.9    Mandatory Termination or Reduction. On April 3, 2023, if the Borrower has not made Borrowings of the Term Loans in an aggregate principal amount of at least equal to fifty percent (50%) of the sum of the Amendment No. 1 Incremental Commitments plus the Amendment No. 2 Incremental Commitments as in effect on the Amendment No. 2 Effective Date, then the Amendment No. 1 Incremental Commitments and the Amendment No. 2 Incremental Commitments will be reduced, automatically and without further action by any party, to two times the Borrowing of Term Loans made during the period commencing on the Amendment No. 2 Effective Date and terminating on April 3, 2023, and the Amendment No. 1 Incremental Commitments and the Amendment No. 2 Incremental Commitments and Term Loan Amount shall be reduced by the amount of such reduction (for example, if the Borrower has made only $25,000,000 of additional Borrowings of Term Loans by April 3, 2023, then the available unused Amendment No. 1 Incremental Commitments and the Amendment No. 2 Incremental Commitments shall be permanently reduced from $120,000,000 to $50,000,000 on such date). If requested by the Administrative Agent, the Borrower shall deliver to the Administrative Agent those notices required by Section 2.11(d) that are necessary pursuant to Section 2.9 to reflect the reductions in the unused Amendment No. 1 Incremental Commitments and the Amendment No. 2 Incremental Commitments described in the preceding sentence.
1.7Request under Section 9.17(a) of Credit Agreement.
(c)The Administrative Agent and the Banks party hereto hereby waive the requirement under Section 9.17(a) of the Credit Agreement that the Borrower provide written notice to the Administrative Agent of its request for New Term Loan Commitments.


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(d)This Amendment No. 2 is and shall be deemed to be for all purposes of the Credit Agreement the partial exercise by the Borrower of its rights under Section 9.17(a) of the Credit Agreement to request an increase of the Term Loan Commitments. From and after the Amendment No. 2 Effective Date, the Borrower shall be able to request additional Incremental Commitments of up to $130,000,000 pursuant to Section 9.17 of the Credit Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
In order to induce the Banks and the Administrative Agent to enter into this Amendment No. 2, the Borrower represents and warrants to each Bank and the Administrative Agent that the following statements are true, correct and complete:
(i)    the Borrower is duly organized, validly existing and in good standing as a limited partnership under the laws of the State of Delaware and has all powers and all material governmental licenses, authorizations, consents and approvals required to own its property and assets and carry on its business as now conducted or as it presently proposes to conduct and has been duly qualified and is in good standing in every jurisdiction in which the failure to be so qualified and/or in good standing is likely to have a Material Adverse Effect;
(ii)    the Borrower has the organizational power and authority to execute, deliver and carry out the terms and provisions of each of this Amendment No. 2, the Credit Agreement as amended by this Amendment No. 2 and any Notes issued pursuant to Section 3D below (the “New Notes”) and has taken all necessary action to authorize the execution and delivery on behalf of the Borrower and the performance by the Borrower of this Amendment No. 2, the Credit Agreement as amended by this Amendment No. 2 and the New Notes. The Borrower has duly executed and delivered this Amendment No. 2 and the New Notes, and each of this Amendment No. 2, the Credit Agreement as amended by this Amendment No. 2 and the New Notes constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except as enforceability may be limited by applicable insolvency, bankruptcy or other laws affecting creditors rights generally, or general principles of equity, whether such enforceability is considered in a proceeding in equity or at law;
(iii)    neither the execution, delivery or performance by or on behalf of the Borrower of this Amendment No. 2 and the Credit Agreement as amended by this Amendment No. 2, nor compliance by the Borrower with the terms and provisions hereof and thereof nor the consummation of the transactions contemplated by this Amendment No. 2 and the Credit Agreement as amended by this Amendment No. 2, (a) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to Borrower except to the extent such contravention is not likely to have a Material Adverse Effect, or (b) will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower pursuant to the terms of any material indenture, mortgage, deed of trust, or other agreement or other instrument to which the Borrower (or of any partnership of which the Borrower is a partner) is a party or by which it or any of its property or assets is bound or to which it is subject except to the extent such conflict or breach is not likely to have a Material Adverse Effect, or (c) will conflict with or result in a breach of any organizational document of any Subsidiary, the

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certificate of limited partnership, partnership agreement or other organizational document of Borrower, or the General Partner’s articles of incorporation or by-laws;
(iv)    the representations and warranties made or deemed made by the Borrower in any Loan Document are true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materiality”, “Material Adverse Effect” or a similar qualifier, in which case it is true and correct in all respects) on the Amendment No. 2 Effective Date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materiality”, “Material Adverse Effect” or a similar qualifier, in which case it shall be true and correct in all respects) on and as of such earlier date);
(v)    no event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment No. 2 that would constitute a Default or Event of Default; and
(vi)    there have been no changes to the organizational documents of the Borrower and the General Partner since October 3, 2022, other than amendments or amendments and restatements, as applicable, that have been delivered to the Administrative Agent prior to the Amendment No. 2 Effective Date.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Except as set forth below, Section 1 of this Amendment No. 2 shall become effective only upon the satisfaction of the following conditions precedent (the “Amendment No. 2 Effective Date”):
A.The Borrower, the Administrative Agent, the Banks party hereto (comprising the Required Banks), and the Increasing Bank under the Credit Agreement shall have indicated their consent hereto by the execution and delivery of the signature pages hereof to the Administrative Agent, and the General Partner shall have executed and delivered to the Administrative Agent the Reaffirmation of Guaranty attached to this Amendment No. 2 (which may include delivery of a signed signature page of this Amendment No. 2 by facsimile or other means of electronic transmission (e.g., “pdf”)).
B.The Administrative Agent shall have received all reasonable out-of-pocket costs and expenses for which invoices have been presented (including the reasonable fees and expenses of a single legal counsel for the Administrative Agent and the Banks for which the Borrower agrees it is responsible pursuant to Section 9.3 of the Credit Agreement), incurred in connection with this Amendment No. 2.

C.The Administrative Agent shall have received a secretary’s certificate of the General Partner and the Borrower certifying as to authorizing resolutions and incumbency of officers with respect to this Amendment No. 2 and the transactions contemplated hereby.


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D.Execution and delivery to the Administrative Agent by the Borrower of amended and restated Notes in favor of the Increasing Bank if it requests such Notes, in each case reflecting the Increasing Bank’s Term Loan Commitment (as set forth on Schedule 1A hereto).
E.Delivery to the Administrative Agent by Latham & Watkins LLP, as counsel to the Borrower, of a customary opinion addressed to the Increasing Bank and the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent.
F.Payment by the Borrower of any agreed upon compensation to the Increasing Bank and the Administrative Agent in connection with this Amendment No. 2 and the Amendment No. 2 Incremental Commitments of the Increasing Bank.
G.The conditions set forth in Section 9.17(g) of the Credit Agreement shall have been satisfied and the Administrative Agent shall have received a certificate dated the Amendment No. 2 Effective Date and executed by the chief financial officer, controller, treasurer or vice president-corporate finance of the Borrower that such conditions have been satisfied and that as of the last day of the most recent calendar quarter for which financial statements have been delivered pursuant to Section 5.1, the Borrower would have been in compliance with the financial covenants set forth in Section 5.8 after giving pro forma effect to the New Term Loan Commitments and any Borrowings and the use of proceeds thereof.
H.Upon satisfaction of the foregoing conditions, the Administrative Agent shall deliver written notice to the Borrower and the Banks of the Amendment No. 2 Effective Date.
SECTION 4. MISCELLANEOUS
A.Reference to and Effect on the Credit Agreement and the Other Loan Documents.
(i)    On and after the effective date of this Amendment No. 2, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Amendment No. 2. This Amendment No. 2 shall be deemed to be a “Loan Document” under the Credit Agreement.
(ii)    Except as specifically amended by this Amendment No. 2, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.
(iii)    The execution, delivery and performance of this Amendment No. 2 shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Bank under the Credit Agreement or any of the other Loan Documents.

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B.Headings. Section and subsection headings in this Amendment No. 2 are included herein for convenience of reference only and shall not constitute a part of this Amendment No. 2 for any other purpose or be given any substantive effect.
C.Applicable Law. THIS AMENDMENT NO. 2 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW THAT WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THE STATE OF NEW YORK).
D.Counterparts; Effectiveness. This Amendment No. 2 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment No. 2 (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 3 hereof) shall become effective upon the execution of a counterpart hereof by the Borrower and the Banks. Delivery of an executed counterpart of a signature page of this Amendment No. 2 by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment No. 2. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment No. 2 and/or any document to be signed in connection with this Amendment No. 2 and the transactions contemplated hereby shall be deemed to include Electronic Signatures (as defined below), deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be. As used herein, “Electronic Signatures” means any electronic symbol or process attached to, or associated with, any contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
E.Jurisdictions; Immunities; Waiver of Jury Trial. The provisions of Section 9.9(b) and Section 9.12 of the Credit Agreement shall apply to this Amendment No. 2 and are hereby incorporated by reference.
[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.
BORROWER:
KILROY REALTY, L.P., a Delaware limited
partnership
By:Kilroy Realty Corporation, a Maryland
corporation, its general partner
By:/s/ Eliott Trencher
Name:Eliott Trencher
Title: Executive Vice President, Chief Investment
Officer and Chief Financial Officer
By:/s/ Taylor Friend
Name:Taylor Friend
Title: Senior Vice President, Finance and
Treasurer




ADMINISTRATIVE AGENT AND BANK:

JPMORGAN CHASE BANK, N.A., as
Administrative Agent and as a Bank
By:/s/ Delia Rodillas
Name:Delia Rodillas
Title:Vice President



BANK OF AMERICA, N.A.
By:/s/ Helen Chan
Name:Helen Chan
Title:Vice President




PNC BANK, NATIONAL ASSOCIATION
By:/s/ David C. Drouillard
Name:David C. Drouillard
Title:Senior Vice President




BMO HARRIS BANK N.A.,
a national banking association
successor in interest to
BANK OF THE WEST
By:/s/ Sarah J. Burns
Name:Sarah J. Burns
Title:Vice President



BARCLAYS BANK PLC
By:/s/ Warren Veech III
Name:Warren Veech III
Title:VP Bank Debt Management



MUFG UNION BANK, N.A.
By:/s/ Kathryn Gilliland
Name:Kathryn Gilliland
Title:Director


SUMITOMO MITSUI BANKING CORPORATION
By:/s/ Mary Harold
Name:Mary Harold
Title:Executive Director



COMERICA BANK
By:/s/ Charles Weddell
Name:Charles Weddell
Title:Senior Vice President


KEYBANK, NATIONAL ASSOCIATION
By:/s/ Michael P. Szuba
Name:Michael P. Szuba
Title:Senior Vice President


THE BANK OF NOVA SCOTIA
By:/s/ Chelsea McCune
Name:Chelsea McCune
Title:Director, Corporate Banking
U.S. Real Estate, Gaming & Leisure


THE BANK OF NEW YORK MELLON
By:/s/ Cody Mainc
Name:Cody Mainc
Title:Vice President


ASSOCIATED BANK, NATIONAL
ASSOCIATION
By:/s/ Mitchell Vega
Name:Mitchell Vega
Title:Senior Vice President


WELLS FARGO BANK, N.A.
By:/s/ Cristina Johnnie
Name:Cristina Johnnie
Title:Vice President


Reaffirmation of Guaranty


    The undersigned Kilroy Realty Corporation (the “Guarantor”) hereby (a) acknowledges the foregoing Amendment No. 2, (b) reaffirms its guaranty of the Guaranteed Obligations (as defined in the Guaranty dated as of October 3, 2022 executed and delivered by the Guarantor) under or in connection with the Credit Agreement, as modified by this Amendment No. 2, in accordance with such Guaranty executed and delivered by the Guarantor, and (c) confirms that such Guaranty shall remain in full force and effect after giving effect to this Amendment No. 2.

[Signature Page Follows]




GUARANTOR:
KILROY REALTY CORPORATION
By:/s/ Eliott Trencher
Name:Eliott Trencher
Title: Executive Vice President, Chief Investment
Officer and Chief Financial Officer
By:/s/ Taylor Friend
Name:Taylor Friend
Title: Senior Vice President, Finance and
Treasurer






Schedule 1A

Term Loan Commitments, Amendment No. 1 Incremental Commitments and
Amendment No. 2 Incremental Commitments

LenderInitial Term Loan CommitmentAmendment No. 1 Incremental CommitmentAmendment No. 2 Incremental CommitmentsTerm Loan Commitment
JPMorgan Chase Bank, N.A.$40,000,000.00$10,000,000.00$0.00$50,000,000.00
Bank of America, N.A.$40,000,000.00$10,000,000.00$0.00$50,000,000.00
PNC Bank, National Association$40,000,000.00$10,000,000.00$0.00$50,000,000.00
U.S. Bank National Association$40,000,000.00$0.00$0.00$40,000,000.00
The Bank of Nova Scotia$40,000,000.00$20,000,000.00$0.00$60,000,000.00
The Bank of New York Mellon$32,000,000.00$0.00$0.00$32,000,000.00
BMO Harris Bank N.A., a national banking association (successor in interest to Bank of the West)$32,000,000.00$0.00$20,000,000.00$52,000,000.00
Barclays Bank PLC$32,000,000.00$0.00$0.00$32,000,000.00
KeyBank National Association$32,000,000.00$10,000,000.00$0.00$42,000,000.00
Sumitomo Mitsui Banking Corporation$32,000,000.00$0.00$0.00$32,000,000.00
Associated Bank, National Association$15,000,000.00$0.00$0.00$15,000,000.00
MUFG Union Bank, N.A.$15,000,000.00$0.00$0.00$15,000,000.00
Comerica Bank$10,000,000.00$0.00$0.00$10,000,000.00
Wells Fargo Bank, N.A.$0.00$40,000,000.00$0.00$40,000,000.00
TOTAL$400,000,000.00$100,000.000.00$20,000,000.00$520,000.000.00
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John Kilroy, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ John Kilroy
John Kilroy
Chief Executive Officer
Date: April 27, 2023


Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eliott Trencher, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Kilroy Realty Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Eliott Trencher
Eliott Trencher
Executive Vice President, Chief Financial Officer and
Chief Investment Officer
Date: April 27, 2023


Exhibit 31.3
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John Kilroy, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ John Kilroy
John Kilroy
Chief Executive Officer
Kilroy Realty Corporation, sole general partner of
  Kilroy Realty, L.P.
Date: April 27, 2023


Exhibit 31.4
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Eliott Trencher, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Kilroy Realty, L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Eliott Trencher
Eliott Trencher
Executive Vice President, Chief Financial Officer and
Chief Investment Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
Date: April 27, 2023


Exhibit 32.1
Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation (the “Company”) hereby certifies, to his knowledge, that:

(i)the accompanying quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John Kilroy
John Kilroy
Chief Executive Officer
Date:April 27, 2023

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of the Company or Kilroy Realty, L.P. under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation (the “Company”) hereby certifies, to his knowledge, that:

(i)the accompanying quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Eliott Trencher
Eliott Trencher
Executive Vice President, Chief Financial Officer and
Chief Investment Officer
Date:April 27, 2023

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of the Company or Kilroy Realty, L.P. under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.3

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation, the sole general partner of Kilroy Realty, L.P. (the “Operating Partnership”), hereby certifies, to his knowledge, that:

(i)the accompanying quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended March 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

/s/ John Kilroy
John Kilroy
Chief Executive Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
Date:April 27, 2023

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of Kilroy Realty Corporation or the Operating Partnership under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.4

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Kilroy Realty Corporation, the sole general partner of Kilroy Realty, L.P. (the “Operating Partnership”), hereby certifies, to his knowledge, that:

(i)the accompanying quarterly Report on Form 10-Q of the Operating Partnership for the quarter ended March 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership.

/s/ Eliott Trencher
Eliott Trencher
Executive Vice President, Chief Financial Officer and
Chief Investment Officer
Kilroy Realty Corporation, sole general partner of
Kilroy Realty, L.P.
Date:April 27, 2023

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, is not being filed as part of the Report or as a separate disclosure document, and is not being incorporated by reference into any filing of Kilroy Realty Corporation or the Operating Partnership under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, (whether made before or after the date of the Report) irrespective of any general incorporation language contained in such filing. The signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.