EDGAR 10-K Filing

Company CIK: 1025996
Filing Year: 2025
Filename: 1025996_10-K_2025_0001025996-25-000052.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
The Company
Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office, life science, and mixed-use property types in the United States. The Company’s approach to modern business environments is designed to drive creativity and productivity for some of the world’s leading technology, entertainment, life science, and business services companies, and we have been consistently recognized for our leadership in sustainability and building operations. The Company owns, develops, acquires, and manages real estate assets, consisting primarily of premier properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin, which we believe have strategic advantages and strong barriers to entry. The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). We own our interests in all of our real estate assets through Kilroy Realty, L.P. (the “Operating Partnership”) and generally conduct substantially all of our operations through the Operating Partnership.
Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2024:
Number of
Buildings Rentable
Square Feet Number of
Tenants Percentage
Occupied (1)
Stabilized Office Properties (2)
123 17,142,721 428 82.8 %
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(1)Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.
(2)Includes stabilized life science and retail space.
Number of
Properties Number of
Units 2024 Average Occupancy
Stabilized Residential Properties 3 1,001 92.5 %
Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, 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 pursuant to a formal plan to change its use, the intended result of which is a higher economic return on the property. We define a property in the tenant improvement phase as a development or redevelopment property where the project has reached “cold shell condition” and is ready for tenant improvements, which may require additional major base building modifications before being placed in service. Projects in the tenant improvement phase are moved into 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 as the projects or phases of projects are placed in service.
We did not have any properties or undeveloped land held for sale at December 31, 2024. As of December 31, 2024, the following properties were excluded from our stabilized portfolio:
Number of
Properties/Projects Estimated Rentable
Square Feet (1)
In-process redevelopment projects - tenant improvement
2 100,000
In-process development projects - under construction 1 875,000
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(1)Estimated rentable square feet upon completion.
Our stabilized portfolio also excludes our future development pipeline, which, as of December 31, 2024, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.
As of December 31, 2024, all of our properties and development and redevelopment projects, 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 stabilized office property and one future
development project located in Austin, Texas. All of our properties and development 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 December 31, 2024, 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 December 31, 2024, 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.
We own our interests in all of our real estate assets through the Operating Partnership and generally conduct substantially all of our operations through the Operating Partnership, of which we owned an approximate 99.0% common general partnership interest as of December 31, 2024. The remaining approximate 1.0% common limited partnership interest in the Operating Partnership as of December 31, 2024 was owned by non-affiliated investors and a former executive officer and director. With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.
Available Information; Website Disclosure; Corporate Governance Documents
Kilroy Realty Corporation was incorporated in the state of Maryland on September 13, 1996 and Kilroy Realty, L.P. was organized in the state of Delaware on October 2, 1996. Our principal executive offices are located at 12200 W. Olympic Boulevard, Suite 200, Los Angeles, California 90064. Our telephone number at that location is (310) 481-8400. Our website is www.kilroyrealty.com. The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this annual report on Form 10-K or any other report or document we file with or furnish to the SEC. All reports we will file with the SEC are available free of charge via EDGAR through the SEC website at www.sec.gov. All reports that we will file with the SEC will also be available free of charge on our website at www.kilroyrealty.com as soon as reasonably practicable after we file those materials with, or furnish them to, the SEC.
We use our website 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.
The following documents relating to corporate governance are also available on our website under “Investors -Overview -Governance Documents” and available in print to any security holder upon request:
•Corporate Governance Guidelines;
•Code of Business Conduct and Ethics;
•Policies and Procedures Concerning Consideration of Director Candidates;
•Audit Committee Charter;
•Executive Compensation Committee Charter;
•Nominating / Corporate Governance Committee Charter; and
•Corporate Social Responsibility and Sustainability Committee Charter.
You may request copies of any of these documents by writing to:
Attention: Investor Relations
Kilroy Realty Corporation
12200 West Olympic Boulevard, Suite 200
Los Angeles, California 90064
We intend to disclose on our website under “Investors -Overview -Governance Documents” any amendment to, or waiver of, any provisions of our Code of Business Conduct and Ethics applicable to the directors and/or officers of the Company that would otherwise be required to be disclosed under the rules of the Securities and Exchange Commission or the New York Stock Exchange.
Business and Growth Strategies
Growth Strategies. We believe that a number of strategies will enable us to continue to achieve our objectives of long-term sustainable growth in Net Operating Income (defined below) and FFO (defined below), and the maximization of long-term stockholder value, including:
•Operating strategies
•Development and redevelopment strategies
•Capital recycling strategies
•Financing strategies
•Sustainability strategies
“Net Operating Income” is defined as consolidated operating revenues (rental income and other property income) less consolidated operating expenses (property expenses, real estate taxes and ground leases). “FFO” is Funds From Operations available to common stockholders and common unitholders calculated in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“Nareit”). (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Results of Operations” and “-Non-GAAP Supplemental Financial Measures: Funds From Operations” for a reconciliation of these measures to generally accepted accounting principles (“GAAP”) net income available to common stockholders.)
Operating Strategies. We focus on enhancing our long-term sustainable growth in Net Operating Income and FFO from our properties by:
•maximizing cash flows through new and renewal leasing activity;
•managing portfolio credit risk through effective underwriting, including the use of credit enhancements to mitigate individual tenant credit risks;
•maintaining and developing long-term relationships with industry-leading companies in our markets;
•managing operating expenses through the efficient use of internal property management, leasing, marketing, financing, accounting, legal, and construction and development management functions;
•investing in capital improvements to enhance the competitive advantages of our properties in their respective markets and integrating technology, including building management systems, security operation centers, and tenant experience solutions to provide a premium experience to our tenant base while reducing operating costs; and
•attracting and retaining motivated employees to meet our operating and financial goals.
Development and Redevelopment Strategies. We and our predecessors have developed office properties primarily located in California since 1947. As of December 31, 2024, we had two redevelopment projects in the tenant improvement phase totaling approximately 100,000 square feet and one development project under construction totaling approximately 875,000 square feet of office and life science space. Our future development pipeline was comprised of eight potential development sites representing approximately 64 gross acres of undeveloped land on which we believe could develop over 6.0 million square feet of office, life science, residential, and retail space. We execute on our development and redevelopment strategies by:
•developing or redeveloping assets in highly populated, amenity rich, supply-constrained locations that are attractive to a broad array of tenants;
•being the premier provider of modern and collaborative office, life science, and mixed-use projects on the West Coast and in Austin, Texas, with a focus on design and environment;
•maintaining a disciplined approach and commencing development only when appropriate based on market conditions, focusing on pre-leasing, developing in stages / phasing, and cost control;
•self-funding our development and redevelopment activities primarily through internally generated free cash flows and/or selective disposition activity;
We may engage in the additional development and redevelopment of office, life science, and mixed-use properties when market conditions support a favorable risk-adjusted return on such projects. We expect that our significant working relationships with tenants, municipalities, and landowners on the West Coast and in Austin, Texas will give us further access to additional opportunities in the future.
Capital Recycling Strategies. We believe we are well-positioned to acquire and/or dispose of properties due to our extensive experience and proven track record of capital allocation. Against the backdrop of market volatilities, we intend to evaluate opportunities based on:
•submarket dynamics for the property being evaluated, which may include job growth of companies or industries located in that area and/or current or future competitive supply;
•physical characteristics of the property, which help determine the revenue growth potential over time, as well as the capital required to maintain and/or grow that revenue; and
•investment returns, including both the in-place income and the future income, factoring in projections of occupancy and rents over time.
Financing Strategies. Our financing policies and objectives are determined by our board of directors. Our goal is to maintain significant liquidity and a conservative leverage ratio. Our financing strategies include:
•maintaining financial flexibility, including a significant unencumbered asset base;
•maximizing our ability to access a variety of public and private capital sources;
•maintaining a staggered debt maturity schedule to limit risk exposure at any particular point in the capital and credit market cycles;
•completing financing in advance of capital needs;
•managing interest rate exposure by primarily financing on a fixed-rate basis; and
•maintaining an investment grade credit rating.
We utilize multiple sources of capital, including borrowings under our unsecured revolving credit facility and our unsecured term loan facility, proceeds from the issuance of public or private debt or equity securities, and other bank and/or institutional borrowings, and our capital recycling program. There can be no assurance that we will be able to obtain capital as needed on terms favorable to us or at all. (See the discussion under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Factors That May Influence Future Results of Operations” and “Item 1A. Risk Factors.”)
Sustainability Strategies. Our longstanding leadership in sustainability in real estate is globally recognized, and our commitment to sustainable operations remains strong. Our vision is a resilient portfolio that minimizes the environmental impact of our buildings while maximizing the health and productivity of our tenants, employees, and communities, while also delivering compelling returns to stockholders. Our board of directors, through the Corporate Social Responsibility and Sustainability Committee (the “CSR&S Committee”) in conjunction with management, currently oversee and advance the Company’s corporate social responsibility and sustainability initiatives. The CSR&S Committee recognizes that community engagement and sustainable operations benefit our investors, tenants, and other stakeholders and are key to preserving our Company’s value and credibility.
As a result of our commitment to sustainability, we have consistently received high rankings in sustainability performance by the Global Real Estate Sustainability Benchmark (“GRESB”). In 2024, we were proud to earn the highly competitive GRESB 5 Star designation for both our standing assets and development portfolio. We have been recognized with the U.S. EPA ENERGY STAR® Partner of the Year Sustained Excellence Award for the last nine years, and the U.S. EPA’s National Top 100 list of largest green power users. We have also been included on Newsweek’s list of America’s Most Responsible Companies since 2020, and in 2024 Kilroy was awarded the Green Lease Leader of the Decade award.
We manage our properties to offer the maximum degree of utility and operational efficiency to our tenants. Reducing energy use year over year is an ongoing aspect of our operational strategy. We pursue a variety of strategies to drive energy efficiency across the portfolio, such as utility use monitoring, systematic energy auditing, mechanical, lighting, and other building upgrades, optimizing operations and engaging tenants. We collaborate with our tenants on efforts to reduce their energy and water consumption and increase recycling diversion and compost rates. Many of our existing and prospective tenants have ambitious sustainability targets of their own, and we engage with tenants on a range of sustainability topics throughout each year. We aim to incorporate green lease language into all of our new leases, and the majority of our leases also include a cost recovery clause for resource-efficiency related capital expenditures. Green leases (also known as aligned leases, high performance leases or energy efficient leases) aim to align the financial and energy incentives of building owners and tenants so they can work together to save money, conserve resources, and ensure the efficient operation of buildings. We have received the Institute for Market Transformation’s (“IMT’s”) Green Lease Leaders award for 11 consecutive years.
We build our new development and redevelopment projects to Leadership in Energy and Environmental Design (“LEED”) specifications. All of our office and life science new development projects pursue LEED certification, at the Platinum or Gold level. We are actively pursuing LEED Gold certification for one approximately 875,000 square foot office and life science project under construction.
We identify climate change as a risk to our Company, its tenants, and our other stakeholders. These risks may include transitional risks such as policy, market, technology, and reputational concerns, as well as physical risks, and are a focus area for the board of directors and management. Climate-related risks are governed by the board of directors through the CSR&S Committee and by management through a newly established ESG Steering Committee which includes members from Asset Management, Development & Construction, Finance, Accounting, Human Resources, Investments, Leasing, Legal, and Sustainability. We are proud to have achieved carbon neutral operations since 2020. This means that the entirety of our Scope 1 and Scope 2 emissions, and scope 3 downstream leased assets emissions are offset through a combination of energy efficiency measures, onsite and offsite renewables, renewable energy credits (RECs), and verified carbon offsets. Our annual sustainability report includes additional detail on our carbon neutral operations strategy, other voluntary sustainability goals, as well as portfolio-wide energy, carbon, water, and waste data which are subject to a limited assurance process conducted by an independent third party.
Significant Tenants
As of December 31, 2024, our 20 largest tenants in terms of annualized base rental revenues represented approximately 53.6% of our total annualized base rental revenues, defined as annualized monthly contractual rents from existing tenants as of December 31, 2024. 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 to tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue.
For further information on our 20 largest tenants and the composition of our tenant base, see “Item 2. Properties -Significant Tenants.”
Competition
We compete with other developers, owners, operators, and acquirers of office and life science properties, undeveloped land, and other commercial real estate, including mixed-use, and residential real estate, many of which own properties similar to ours in the same submarkets in which our properties are located. For further discussion of the potential impact of competitive conditions on our business, see “Item 1A. Risk Factors.”
Segment and Geographic Financial Information
During 2024 and 2023, we had one reportable segment. See Note 26 “Segments” to our consolidated financial statements included in this report for information regarding our reportable segment. For information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Results of Operations.”
As of December 31, 2024, all of our properties and development 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 stabilized office property and one future development project located in Austin, Texas. As of December 31, 2024, all of our properties and development and redevelopment projects were 100% owned, excluding four office properties owned by three consolidated property partnerships.
Human Capital Resources
As of December 31, 2024, we employed 229 people through the Operating Partnership. We believe our people are our greatest resource and managing and developing talent is our most important responsibility. Our human capital development goals and initiatives demonstrate our commitment to enhancing employee growth, satisfaction, and wellness while maintaining a collaborative and inclusive culture. Our approach is designed to, among other things, attract, retain, develop, and incentivize talented and experienced individuals in the highly competitive employment and commercial real estate markets in which we operate. Several of our human capital development initiatives include the following:
Talent Acquisition and Retention. We are committed to fostering a performance-based culture. As a result, we focus on recruiting and retaining talent based on merit without discrimination on the basis of any legally protected characteristic. We strive to cultivate a culture of engagement and inclusion, and we believe this commitment will allow us to attract and retain a highly qualified workforce to better serve our stakeholders. To emphasize this commitment, we have developed programming to promote workplace diversity and inclusion, and we continue to require mandatory unconscious bias training for all employees. As of December 31, 2024, our workforce was 56% female and 46% was ethnically diverse. In December 2023, we announced the appointment of Angela M. Aman as our new Chief Executive Officer and a director on our Board, effective January 22, 2024. Following her appointment, three of our eight directors (or 38%) are women. In addition, in May 2024, we announced the appointment of Daryl J. Carter as a member of our Board, resulting in 12.5% of our directors being racially or ethnically diverse.
Training and Education. We support the continual growth and development of our employees through various training and education programs throughout their tenure at the Company, offering a portfolio of learning experiences in various modalities to elevate their knowledge, skills, and abilities. During 2024, across all teams and regions, employees participated in various training and developmental opportunities, including virtual workshops, self-paced training, in-person sessions, “lunch and learns,” online webinars, and conferences. We also conducted annual competency-based performance assessments and talent development plans for all employees.
Employee Health and Wellness. The physical and mental health and well-being of our employees is of central importance to our culture. We evaluate our health and ancillary benefits annually to ensure our benefits package is robust and competitive. We are proud to offer a comprehensive health benefits program that provides employees and their families with care and coverage built around their total health. Our offerings include a medical HDHP and two-PPO plans, dental, and vision, with over 90% of the premiums absorbed by the Company. Employees have the option to participate in an HSA with a generous Company contribution, and we offer medical FSA and dependent care FSA options. Our package also includes Company paid group LTD, Life & AD&D, with voluntary employee paid buy-up options. We periodically conduct wellness surveys to help us better tailor our employee health and wellness programs and, during 2024, we added a new fitness reimbursement benefit meant to offset the costs associated with a gym membership or fitness class participation. Our enhanced Employee Assistance Program helps support mental health and wellness and we continue to focus on providing a variety of programming in this area. In addition to offering a 401(k) plan with matching contributions and immediate vesting after 90-days of employment, in 2024, we focused on employee financial wellness by offering a variety of educational events, web workshops, and financial tips, all aimed at helping our employees improve their overall financial well-being.
Competitive Benefits and Compensation. While many companies leverage a mix of competitive salaries and ancillary benefits to attract and retain their people, we have gone beyond those traditional structures and placed more emphasis on offering an expanded comprehensive benefits program as noted above. Additional benefits include enhanced paid pregnancy and parental leave benefits, parental leave coaching, and well-being programming and activities, coordinated by the Company, that align with our core values of Belong, Connect, and Progress.
Strong Communities and Healthy Planet. We are deeply aware that our buildings are part of the larger community and that we thrive when the communities around us thrive. We are proud to make these communities better places to live and work through our volunteerism and philanthropy initiatives. For the second year in a row, our transformed “Month of Service” program delivered a more robust effort dedicated to giving back to the communities in which we operate. The company-wide initiative gave our team enhanced opportunities to connect with local organizations and meaningful causes in the spirit of community enrichment and employee volunteerism. Over 152 employees assisted 18 organizations, dedicating more than 1,200 hours, a 17% increase in number of volunteer hours provided versus 2023.
Environmental Regulations and Potential Liabilities
Government Regulations Relating to the Environment. Many laws and governmental regulations relating to the environment are applicable to our properties, and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently and may adversely affect us.
Existing conditions at some of our properties. Independent environmental consultants have conducted Phase I or similar environmental site assessments on all of our properties. We generally obtain these assessments prior to the acquisition of a property and may later update them as required for subsequent financing of the property, if a property is slated for disposition, or as requested by a tenant. Consultants are required to perform Phase I assessments to American Society for Testing and Materials standards then-existing for Phase I site assessments and typically include a historical review, a public records review, a visual inspection of the surveyed site, and the issuance of a written report. These assessments do not generally include any soil or groundwater sampling or subsurface investigations; however, if a Phase I does recommend that soil or groundwater samples be taken or other subsurface investigations take place, we generally perform such recommended actions. Depending on the age of the property, the Phase I may have included an assessment of asbestos-containing materials or a separate hazardous materials survey may have been conducted. For properties where asbestos-containing materials were identified or suspected, an operations and maintenance plan was generally prepared and implemented.
Historical operations at or near some of our properties, including the presence of underground or above ground storage tanks, various sites uses that involved hazardous substances, the landfilling of hazardous substances and solid waste, and migration of contamination from other sites, may have caused soil or groundwater contamination. In some instances, (i) the prior owners of the affected properties conducted remediation of known contamination in the soils on our properties, (ii) we are required to conduct further environmental clean-up and environmental closure activities at certain properties, or (iii) residual contamination could pose environmental, health, and safety risks if not appropriately addressed. We may need to investigate or remediate contaminated soil, soil gas, landfill gas, and groundwater, and we may also need to conduct landfill closure and post-closure activities, including, for example, the implementation of groundwater and methane monitoring systems and impervious cover, and the costs of such work could exceed projected or budgeted amounts. To protect the health and safety of site occupants and others, we may be required to implement and operate safeguards, including, for example, vapor intrusion mitigation systems and building protection systems to address methane. We may need to modify our methods of construction or face increased construction costs as a result of environmental conditions, and we may face obligations under agreements with governmental authorities with respect to the management of such environmental conditions. If releases from our sites migrate offsite, or if our site redevelopment activities cause or contribute to a migration of hazardous substances, neighbors or others could make claims against us, such as for property damage, personal injury, or cost recovery.
As of December 31, 2024, we had accrued environmental remediation liabilities of approximately $72.0 million recorded on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the remaining costs we estimate we will incur prior to and during the development process. These estimates, which we developed with the assistance of third-party experts, consist primarily of the removal of contaminated soil, treatment of contaminated groundwater in connection with dewatering efforts, performance of environmental closure activities, construction of remedial systems and other related costs that are necessary when we develop new buildings. It is possible that we could incur additional environmental remediation costs in connection with these development projects. However, potential additional environmental costs cannot be reasonably estimated at this time and certain changes in estimates could occur as the site conditions, final project timing, design elements, actual soil conditions, and other aspects of the projects, which may depend upon municipal and other approvals beyond the control of the Company, are determined. See Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information.
Other than the accrued environmental liabilities recorded in connection with certain of our development projects, we are not aware of any such condition, liability, or concern by any other means that would give rise to material environmental liabilities. However, our assessments may have failed to reveal all environmental conditions, liabilities, or compliance concerns; there may be material environmental conditions, liabilities, or compliance concerns that arose at a property after the review was completed; future laws, ordinances, or regulations may impose material additional environmental liability; and environmental conditions at our properties may be affected in the future by tenants, third parties, or the condition of land or operations near our properties, such as the presence of underground storage tanks or migrating plumes. We cannot be certain that costs of future environmental compliance will not have an adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders.
Use of hazardous materials by some of our tenants. Some of our tenants handle hazardous substances and waste on our properties as part of their routine operations. Environmental laws and regulations may subject these tenants, and potentially us, to liability resulting from such activities. We generally require our tenants in their leases to comply with these environmental laws and regulations and to indemnify us for liabilities arising out of or related to their operations and any non-compliance with environmental laws. As of December 31, 2024, other than routine cleaning materials and chemicals used in routine office operations, approximately 1-2% of our tenants handled hazardous substances and/or wastes on approximately 4-5% of the aggregate square footage of our properties as part of their business operations. These tenants are primarily involved in the life sciences business. The hazardous substances and wastes are primarily comprised of diesel fuel for emergency generators and small quantities of lab and light manufacturing chemicals, including, but not limited to, alcohol, ammonia, carbon dioxide, cryogenic gases, dichlorophenol, methane, naturalyte acid, nitrogen, nitrous oxide, and oxygen which are routinely used by life science companies. We are not aware of any material noncompliance, liability, or claim relating to hazardous or
toxic substances or petroleum products in connection with any of our properties, and management does not believe that on-going activities by our tenants will have a material adverse effect on our operations.
Costs related to government regulation and private litigation over environmental matters. Under applicable environmental laws and regulations, we may be liable for the costs of removal, remediation, or disposal of certain hazardous or toxic substances present or released on our properties. These laws could impose liability without regard to whether we are otherwise responsible for, or even knew of, the presence or release of the hazardous materials. Government investigations and remediation actions may have substantial costs, and the presence or release of hazardous substances on a property could result in governmental clean-up actions, personal injury actions, or similar claims by private plaintiffs.
Potential environmental liabilities may exceed our environmental insurance coverage limits, transactional indemnities or holdbacks. We carry what we believe to be commercially reasonable environmental insurance. Our environmental insurance policies are subject to various terms, conditions, and exclusions. Similarly, in connection with some transactions we obtain environmental indemnities and holdbacks that may not be honored by the indemnitors, may be less than the resulting liabilities or may otherwise fail to address the liabilities adequately. Therefore, we cannot provide any assurance that our insurance coverage or transactional indemnities will be sufficient or that our liability, if any, will not have a material adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders.
SUMMARY RISK FACTORS
The following section sets forth a summary of material factors that may adversely affect our business and operations. For a more extensive discussion of these factors, see “1A. Risk Factors” contained in this report.
•Global market, economic, and geopolitical conditions may adversely affect our business, results of operations, liquidity, and financial condition, and those of our tenants.
•Many of our costs, such as operating and general and administrative expenses, interest expense and real estate construction costs, as well as the value of our assets, could be adversely impacted by periods of heightened inflation.
•All of our properties are located in California, Seattle, Washington, and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas.
•Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations, and cash flows.
•Continuing uncertainty in the office leasing market could adversely affect our business, financial condition, results of operations, and cash flows.
•Our performance and the market value of our securities are subject to risks associated with our investments in real estate assets and with trends in the real estate industry.
•We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds, and cash flows.
•Downturns in tenants’ businesses may reduce our revenues and cash flows.
•A large percentage of our tenants operate in a concentrated group of industries and downturns in these industries could adversely affect our financial condition, results of operations, and cash flows.
•We may be unable to renew leases or re-lease available space.
•We are subject to governmental regulations that may affect the development, redevelopment, and use of our properties.
•Epidemics, pandemics or other outbreaks, and restrictions intended to prevent their spread, could adversely impact our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders.
•We face significant competition, which may decrease the occupancy and rental rates of our properties.
•In order to maintain the quality of our properties and successfully compete against other properties, we must periodically spend money to maintain, repair, and renovate our properties, which reduces our cash flows.
•We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties.
•Our business is subject to risks associated with climate change and our sustainability strategies.
•We are subject to environmental and health and safety laws and regulations, and any costs to comply with, or liabilities arising under, such laws and regulations could be material.
•We may be unable to complete acquisitions and successfully operate acquired properties.
•There are significant risks associated with property acquisitions as well as development and redevelopment.
•We face risks associated with the development and operation of mixed-use commercial properties.
•Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition, and disputes between us and our co-venturers, and could expose us to potential liabilities and losses.
•We own certain properties subject to ground leases and other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties, and expose us to the loss of the properties if such agreements are breached by us, terminated, or not renewed.
•Real estate assets are illiquid, and we may not be able to sell our properties when we desire.
•We may invest in securities related to real estate, which could adversely affect our ability to pay dividends and distributions to our security holders.
•We face risks associated with short-term liquid investments.
•Our property taxes could increase due to reassessment or property tax rate changes.
•Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting.
•We face risks associated with perceived or actual security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems or those of our service providers.
•We face risks associated with compliance with ever evolving federal and state laws relating to the handling of information about individuals, which involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition.
•The actual density of our undeveloped land holdings and/or any particular land parcel may not be consistent with our potential density estimates.
•Loss of key executive officers or our inability to successfully transition key executive officers could harm our operations and financial performance, and adversely affect the quoted trading price of our securities.
•We could be adversely affected by labor disputes, strikes, or other union job actions.
•We may not be able to meet our debt service obligations.
•The covenants in the agreements governing the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility, and note purchase agreements may limit our ability to make distributions to the holders of our common stock.
•A downgrade in our credit ratings could materially adversely affect our business and financial condition.
•An increase in interest rates would increase our interest costs on variable rate debt and new debt and could adversely affect our ability to refinance existing debt, conduct development, redevelopment, and acquisition activity and recycle capital.
•Our growth depends on external sources of capital that are outside of our control and the inability to obtain capital on terms that are acceptable to us, or at all, could adversely affect our financial condition and results of operations.
•Our organizational structure includes approval rights for limited partners and restrictions that may delay, deter or prevent a change of control.
•We may issue additional common units and shares of capital stock without unitholder or stockholder approval, as applicable, which may dilute unitholder or stockholder investment and decrease the quoted trading price per share of the Company’s common stock.
•The board of directors may change investment and financing policies without stockholder or unitholder approval.
•Loss of the Company’s REIT status would have significant adverse consequences to us and the value of the Company’s common stock.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
The following section sets forth material factors that may adversely affect our business and operations. The following factors, as well as the factors discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Factors That May Influence Future Results of Operations” and other information contained in this report, should be considered in evaluating us and our business.
Risks Related to our Business and Operations
Global market, economic, and geopolitical conditions may adversely affect our business, results of operations, liquidity, and financial condition, and those of our tenants. Our business may be adversely affected by global market, economic and geopolitical conditions, including general global economic and political uncertainty and dislocations in the credit markets. If these conditions become more volatile or worsen, our business, results of operations, liquidity and financial condition, and those of our tenants may be adversely affected as a result of the following consequences, among others:
•our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from our acquisition and development activities, and increase our future interest expense;
•the financial condition of our tenants, many of which are technology; life science and healthcare; finance, insurance and real estate; media and professional business, and other service firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures, or for other reasons;
•significant job losses in the technology; life science and healthcare; finance, insurance and real estate; media and professional business and other service firm industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;
•reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and
•one or more lenders under the Operating Partnership’s unsecured revolving credit facility could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
Many of our costs, such as operating and general and administrative expenses, interest expense, and real estate construction costs, as well as the value of our assets, could be adversely impacted by periods of heightened inflation. While inflation has moderated in 2024, the consumer price index was at significantly elevated levels for most of the year. Federal policies, volatile commodity prices and geopolitical conflicts may have exacerbated, and may continue to exacerbate, increases in the consumer price index.
A sustained or further increase in inflation could have an adverse impact on our operating expenses incurred in connection with, among others, the property-related contracted services such as repairs and maintenance, janitorial, utilities, security, and insurance. Our operating expenses, with the exception of ground lease rental expenses, may be recoverable through our lease arrangements. In general, the office and life science properties are leased to tenants on a triple net, modified net, full service gross, or modified gross basis. Under a triple net lease, the tenants pay their proportionate share of real estate taxes, operating costs, and utility costs. A modified net lease is similar to a triple net lease, except the tenants are obligated to pay their proportionate share of certain operating expenses directly to the service provider. Under a full service gross lease, we are obligated to pay the tenant’s proportionate share of real estate taxes, insurance, and operating expenses up to the amount incurred during the “base year,” which is typically the tenant’s first year of occupancy. The tenant pays its proportionate share of increases in expenses above the base year. A modified gross lease is similar to a full service gross lease, except tenants are obligated to pay their proportionate share of certain operating expenses, usually electricity, directly to the service provider. At December 31, 2024, 46% of our properties were leased to tenants on a triple net basis, 27% were leased to tenants on a
modified gross basis, 21% of our properties were leased to tenants on a full service gross basis, and 6% of our properties were leased to tenants on a modified net basis, in each case as a percentage of our annualized base rental revenue.
During inflationary periods, we expect to recover some increases in operating expenses from our tenants through our existing lease structures. As a result, we do not believe that inflation would result in a material adverse effect on our net operating income and operating cash flows at the property level. However, there can be no assurance that our tenants would be able to absorb these expense increases and be able to continue to pay us their portion of operating expenses, capital expenditures, and rent. Also, due to rising costs, our tenants may be unable to continue operating their businesses altogether. Alternatively, our tenants may decide to relocate to areas with lower rent and operating expenses where we may not currently own properties, and our tenants may cease to lease properties from us. Such adverse impacts on our tenants may cause increased vacancies, which may add pressure to lower rents and increase our expenditures for re-leasing. If we are unable to retain our tenants or withstand increases in operating expenses, capital expenditures, and leasing costs, we may be unable to meet our financial expectations, which may adversely affect our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders.
Our general and administrative expenses consist primarily of compensation costs, technology services, and professional service fees. Rising inflation rates may require us to provide compensation increases beyond historical annual increases, which may increase our compensation costs. Similarly, technology services and professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation may increase our general and administrative expenses over time and may adversely impact our results of operations and cash flows.
Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings, which consist of borrowings under our unsecured revolving credit facility and unsecured term loan facility. As of December 31, 2024, we had no borrowings under our unsecured revolving credit facility and $200.0 million outstanding under our unsecured term loan facility. However, the increases in long-term interest rates has recently and may continue to increase our financing costs over time, as we incur new debt or refinance existing debt. Increases in interest rates increase our interest costs, which reduce our cash flows and impact our ability to make distributions to stockholders. For more information, see “Item 1A. Risk Factors-Risks Related to our Indebtedness-An increase in interest rates would increase our interest costs on variable rate debt and new debt and could adversely affect our ability to refinance existing debt, conduct development, redevelopment and acquisition activity and recycle capital.”
In addition, historically, during periods of increasing interest rates, real estate valuations have generally decreased as a result of rising capitalization rates, which tend to be positively correlated with interest rates. Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio and result in the decline of the quoted trading price of our securities and market capitalization, as well as lower sales proceeds from future dispositions. Although the extent of any prolonged periods of higher interest rates remains unknown at this time, negative impacts to our cost of capital may adversely affect our future business plans and growth, including our development and redevelopment activities, at least in the near term.
We have long-term lease agreements with our tenants, and we believe that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation on non-recoverable costs, such as general and administrative expenses and interest expense. However, the impact of the current elevated rate of inflation may not be adequately offset by some of our annual rent escalations, and it is possible that the resetting of rents from our renewal and re-leasing activities would not fully offset the impact of the current inflation rate. As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our lease contracts, we may not adequately mitigate the impact of inflation, which may adversely affect our business, financial condition, results of operations, and cash flows.
Additionally, inflation may have a negative effect on the construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor, and services from third-party contractors and suppliers. We rely on a number of third-party suppliers and contractors to supply raw materials, skilled labor, and services for our construction projects. Certain increases in the costs of
construction materials can often be managed in our development and redevelopment projects through either general budget contingencies built into our overall construction costs estimates for each of our projects or guaranteed maximum price construction contracts, which stipulate a maximum price for certain construction costs and shift inflation risk to our construction general contractors. However, no assurance can be given that our budget contingencies would accurately account for potential construction cost increases given the current severity of inflation and variety of contributing factors or that our general contractors would be able to absorb such increases in costs and complete our construction projects timely, within budget, or at all.
We have not encountered significant difficulty collaborating with our third-party suppliers and contractors and obtaining materials and skilled labor, and we have not experienced significant delays or increases in overall project costs due to the factors discussed above. While we do not rely on any single supplier or vendor for the majority of our materials and skilled labor, we may experience difficulties obtaining necessary materials from suppliers or vendors whose supply chains might become impacted by economic or political changes, shortages of shipping containers and/or means of transportation, or difficulties obtaining adequate skilled labor from third-party contractors in a tightening labor market. It is uncertain whether we would be able to source the essential commodities, supplies, materials and skilled labor timely or at all without incurring significant costs or delays, particularly during times of economic uncertainty resulting from events outside of our control, including, but not limited to, federal policies and the ongoing or future geopolitical conflicts.
Higher construction costs could adversely impact our investments in real estate assets and expected yields on our development and redevelopment projects, which may make otherwise lucrative investment opportunities less profitable to us. Our reliance on a number of third-party suppliers and contractors may also make such investment opportunities unattainable if we are unable to sufficiently fund our projects due to significant cost increases, or are unable to obtain the resources and materials to do so reasonably due to disrupted supply chains. As a result, our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders could be adversely affected over time.
All of our properties are located in California, Seattle, Washington, and Austin, Texas and we may therefore be susceptible to adverse economic conditions and regulations, as well as natural disasters, in those areas. Because all of our properties are concentrated in California, Seattle, Washington, and Austin, Texas, we may be exposed to greater economic risks than if we owned a more geographically dispersed portfolio. Further, within California, our properties are concentrated in Los Angeles, San Diego County, and the San Francisco Bay Area, exposing us to risks associated with those specific areas. We are susceptible to adverse developments in the economic and regulatory environments of California, Seattle, Washington, and Austin, Texas (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation, and other factors), as well as adverse weather conditions and natural disasters that occur in those areas (such as earthquakes, wind, landslides, droughts, fires, floods, and other events). For example, many of our assets are in zones that have been impacted by drought and, as such, face the risk of increased water costs and potential fines and/or penalties for high consumption. In addition, California is also regarded as more litigious and more highly regulated and taxed than many other states, which may reduce demand for office space in California.
Potential casualty losses, such as earthquake losses, may adversely affect our financial condition, results of operations, and cash flows. We carry comprehensive liability, fire, extended coverage, rental loss, and terrorism insurance covering all of our properties. Management believes the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage, and industry practice. We do not carry insurance for generally uninsurable losses such as loss from riots or acts of God. In addition, all of our West Coast properties are located in earthquake-prone areas. We carry earthquake insurance on our properties in an amount and with deductibles that management believes are commercially reasonable. However, the amount of our earthquake insurance coverage may not be sufficient to cover losses from earthquakes. We may also discontinue earthquake insurance on some or all of our properties in the future if the cost of premiums for earthquake insurance exceeds the value of the coverage discounted for the risk of loss. If we experience a loss that is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. Further, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if the properties were irreparable.
Any adverse developments in the economy or real estate market in California and the surrounding region, or in Seattle, Washington, or Austin, Texas or any decrease in demand for office space resulting from the California or Seattle, Washington, or Austin, Texas regulatory or business environment could impact our ability to generate revenues sufficient to meet our operating expenses or other obligations, which would adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations, and to pay dividends and distributions to our security holders.
Continuing uncertainty in the office leasing market could adversely affect our business, financial condition, results of operations, and cash flows. Office tenants are still active in the leasing markets but are more selective in making rental decisions, and both relocating and renewing tenants are pursuing space efficiencies, which may be accompanied by reductions in the amount of space they are leasing due to the impact of hybrid work and/or a desire to manage real estate expenses. As a result, we are experiencing longer lease negotiation periods prior to signing deals. Our office tenants may elect to not renew their leases, or to renew them for less space than they currently occupy or for shorter terms, which could increase vacancy, place downward pressure on occupancy, rental rates and income, and property valuations. The need to reconfigure leased office space, either in response to evolving tenant needs or for other reasons, may impact space requirements and also may require us to spend increased amounts for tenant improvements. If substantial reconfiguration of the tenant’s space is required, the tenant may find it more advantageous to relocate than to renew its lease and renovate the existing space. For more information, see “-We may be unable to renew leases or re-lease available space,” below. All of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, ability to satisfy our debt service obligations, or make distributions to stockholders.
Our performance and the market value of our securities are subject to risks associated with our investments in real estate assets and with trends in the real estate industry. Our economic performance and the value of our real estate assets and, consequently the market value of the Company’s securities, are subject to the risk that our properties may not generate revenues sufficient to meet our operating expenses or other obligations. A deficiency of this nature would adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations, and to pay dividends and distributions to our security holders.
Events and conditions applicable to owners and operators of real estate that are beyond our control and could impact our economic performance and the value of our real estate assets may include:
•local oversupply or reduction in demand for office, mixed-use, or other commercial space, which may result in decreasing rental rates and greater concessions to tenants;
•inability to collect rent from tenants;
•vacancies or inability to rent space on favorable terms or at all;
•inability to finance property development and acquisitions on favorable terms or at all;
•increased operating costs, including insurance premiums, utilities, and real estate taxes;
•costs of complying with changes in governmental regulations;
•the relative illiquidity of real estate investments;
•declines in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing;
•changing submarket demographics;
•changes in space utilization by our tenants due to technology, economic conditions, and business culture, including a shift away from in-person work environments to flexible work arrangements and remote work;
•the development of harmful mold or other airborne toxins or contaminants that could damage our properties or expose us to third-party liabilities; and
•property damage resulting from seismic activity or other natural disasters.
We depend upon significant tenants, and the loss of a significant tenant could adversely affect our financial condition, results of operations, ability to borrow funds, and cash flows. As of December 31, 2024, our 20 largest tenants represented approximately 53.6% of total annualized base rental revenues. See further discussion on the composition of our tenants by industry and our largest tenants under “Item 2. Properties -Significant Tenants.”
Our financial condition, results of operations, ability to borrow funds, and cash flows would be adversely affected if any of our significant tenants fails to renew its lease(s), renew its lease(s) on terms less favorable to us, becomes bankrupt or insolvent, or is otherwise unable to satisfy its lease obligations.
Downturns in tenants’ businesses may reduce our revenues and cash flows. For the year ended December 31, 2024, we derived approximately 98.5% of our revenues from rental income. A tenant may experience a downturn in its business, which may weaken its financial condition and result in its failure to make timely rental payments or result in defaults under our leases. In the event of default by a tenant, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
The bankruptcy or insolvency of a major tenant also may adversely affect the income produced by our properties. If any tenant becomes a debtor in a case under federal bankruptcy law, we cannot evict the tenant solely because of the bankruptcy. In addition, the bankruptcy court might permit the tenant to reject and terminate its lease with us. Our claim against the tenant for unpaid and future rent could be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease. Therefore, our claim for unpaid rent would likely not be paid in full. Any losses resulting from the bankruptcy of any of our existing tenants could adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
A large percentage of our tenants operate in a concentrated group of industries and downturns in these industries could adversely affect our financial condition, results of operations and cash flows. As of December 31, 2024, as a percentage of our annualized base rental revenue for the stabilized portfolio, 54% of our tenants operated in the technology industry, 17% in the life science and health care industries, 9% in the professional, business, and other services industries, 7% in the media industry, 6% in the finance, insurance, and real estate industries, and 7% in other industries. As we continue our development and potential acquisition activities in markets populated by knowledge and creative based tenants in the technology and media industries, our tenant mix could become more concentrated, further exposing us to risks associated with those industries. For a further discussion of the composition of our tenants by industry, see “Item 2. Properties -Significant Tenants.” An economic downturn in any of these industries, or in any industry in which a significant number of our tenants currently or may in the future operate, could negatively impact the financial condition of such tenants and cause them to fail to make timely rental payments or default on lease obligations, fail to renew their leases or renew their leases on terms less favorable to us, become bankrupt or insolvent, or otherwise become unable to satisfy their obligations to us. As a result, a downturn in an industry in which a significant number of our tenants operate could adversely affect our financial condition, results of operations, and cash flows.
We may be unable to renew leases or re-lease available space. Most of our income is derived from the rent earned from our tenants. We had office space representing approximately 17.2% of the total square footage of our stabilized office properties that was not occupied as of December 31, 2024. In addition, leases representing approximately 5.2% and 14.0% of the leased rentable square footage of our properties are scheduled to expire in 2025 and 2026, respectively. Above market in-place rental rates on some of our properties may force us to renew or re-lease expiring leases at rates below current lease rates. We cannot provide any assurance that leases will be renewed, available space will be re-leased, or that our rental rates will be equal to or above the current rental rates. If the average rental rates for our properties decrease, existing tenants do not renew their leases, or available space is not re-leased, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders could be adversely affected. For additional information on our scheduled lease expirations, see “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations -Factors That May Influence Future Results of Operations.”
We are subject to governmental regulations that may affect the development, redevelopment, and use of our properties. Our properties are subject to regulation under federal laws, such as the Americans with Disabilities Act of 1990 (the “ADA”), pursuant to which all public accommodations must meet federal requirements related to access and use by disabled persons, and state and local laws addressing earthquake, fire and life safety requirements. Although we believe that our properties substantially comply with requirements under applicable governmental regulations, none of our properties have been audited or investigated for compliance by any regulatory agency. If we were not in compliance with material provisions of the ADA or other regulations affecting our properties, we might be required to take remedial action, which could include making modifications or renovations to our properties. Federal, state, or local governments may also enact future laws and regulations that could require us to make significant modifications or renovations to our properties. If we were to incur substantial costs to comply with the ADA or any other regulations, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders could be adversely affected.
Our properties are subject to land use rules and regulations that govern our development, redevelopment, and use of our properties, such as Title 24 of the California Code of Regulations (“Title 24”), which prescribes building energy efficiency standards for residential and nonresidential buildings in the State of California. If we were not in compliance with material provisions of Title 24 or other regulations affecting our properties, we might be required to take remedial action, which could include making modifications or renovations to our properties. Changes in the existing land use rules and regulations and approval process that restrict or delay our ability to develop, redevelop, or use our properties (such as potential restrictions on the use and/or density of new developments, water use, and other uses and activities) or that prescribe additional standards could have a material adverse effect on our financial position, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Epidemics, pandemics or other outbreaks, and restrictions intended to prevent their spread, could adversely impact our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders. Epidemics, pandemics, or other outbreaks of an illness, disease, or virus that affect the markets in which we conduct our business and where our tenants are located, and actions taken to contain or prevent their further spread, could have significant adverse impacts on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, and to pay dividends and distributions to security holders in a variety of ways that are difficult to predict. Epidemics, pandemics, or other outbreaks of an illness, disease, or virus could result in significant governmental measures being implemented to control the spread of such illness, disease, or virus, including quarantines, restrictions on travel, “shelter in place” rules, stay-at-home orders, density limitations, social distancing measures, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that may continue, which could adversely affect our ability and their respective abilities to adequately manage our respective businesses. If any such restrictions remain in place for an extended period of time, we may experience reductions in rents from our tenants. Although we will continue to be actively engaged in rent collection efforts related to uncollected rent, as well as working with certain tenants who request rent deferrals (particularly those occupying retail space), we can provide no assurance that such efforts or our efforts in future periods will be successful. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in this “Risk Factors” section.
We face significant competition, which may decrease the occupancy and rental rates of our properties. We compete with several developers, owners and operators of office, undeveloped land and other commercial real estate, including mixed-use and residential real estate, many of which own properties similar to ours in the same submarkets in which our properties are located but which have lower occupancy rates than our properties. Therefore, our competitors have an incentive to decrease rental rates until their available space is leased. If our competitors offer space at rental rates below the rates currently charged by us for comparable space, we may be pressured to reduce our rental rates below those currently charged in order to retain tenants when our tenant leases expire. As a result, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our
ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected.
In order to maintain the quality of our properties and successfully compete against other properties, we must periodically spend money to maintain, repair, and renovate our properties, which reduces our cash flows. If our properties are not as attractive to current and prospective tenants in terms of rent, services, condition, or location as properties owned by our competitors, we could lose tenants or suffer lower rental rates. As a result, we may from time to time be required to make significant capital expenditures to maintain the competitiveness of our properties. There can be no assurances that any such expenditure would result in higher occupancy or higher rental rates or deter existing tenants from relocating to properties owned by our competitors.
We may not be able to rebuild our existing properties to their existing specifications if we experience a substantial or comprehensive loss of such properties. In the event that we experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its existing specifications. Further, reconstruction or improvement of such property could potentially require significant upgrades to meet zoning and building code requirements or be subject to environmental and other legal restrictions.
Our business is subject to both physical and regulatory risks associated with climate change. Climate change could trigger changes in precipitation, temperature, and air quality, and cause increases in both the frequency and severity of extreme weather events and natural disasters (including, but not limited to, storms, flooding, drought, wildfires, and extreme temperatures), all of which may result in physical damage to, or a decrease in demand for, our properties located in the areas affected by these conditions. As our properties are concentrated in West Coast markets of the United States and in Austin, Texas, should the impact of climate change be severe or occur for lengthy periods of time in such markets, our financial condition and results or operations could be adversely affected. Climate change may also have indirect effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable or at all, or by increasing the cost of energy or water. Many of the markets in which we operate are in the process of developing policies which are aimed at improving the energy efficiency of and/or reducing carbon emissions from the built environment. Regulations, such as Building Emissions Performance Standards, could result in increased operating costs at our properties (for example, capital required to upgrade HVAC equipment to improve energy efficiency) or in our inability to operate the buildings as currently intended or at all. We work to mitigate both the physical and regulatory risks associated with climate change in a number of ways, which are further explained in the Sustainability Strategies section. There can be no assurance that our strategies to mitigate the risks associated with climate change will be successful and/or that climate change will not have a material adverse effect on our properties, operations, or business.
We are subject to environmental and health and safety laws and regulations, and any costs to comply with, or liabilities arising under, such laws and regulations could be material. As an owner, operator, manager, acquirer, and developer of real properties, we are subject to environmental and health and safety laws and regulations. Certain of these laws and regulations impose joint and several liability, without regard to fault, for investigation and clean-up costs on current and former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. At some of our properties, there are asbestos-containing materials, or tenants routinely handle hazardous substances as part of their operations. In addition, historical operations and conditions, including the presence of underground storage tanks, various site uses that involved hazardous substances, the landfilling of hazardous substances and solid waste, and migration of contamination from other sites, have caused soil or groundwater contamination at or near some of our properties. Although we believe that the prior owners of the affected properties or other persons may have conducted remediation of known contamination at many of these properties, not all such contamination has been remediated, further clean-up or environmental closure activities at certain of these properties is or may be required, and residual contamination could pose environmental, health, and safety risks if not appropriately addressed. We may need to investigate or remediate contaminated soil, soil gas, landfill gas, and groundwater, and we may also need to conduct landfill closure and post-closure activities, including, for example, the implementation of groundwater and methane monitoring systems and impervious cover, and the costs of such work could exceed projected or budgeted amounts. To protect the health and safety of site occupants and others, we may be required to implement and operate safeguards, including, for example, vapor intrusion mitigation systems and building protection systems to address methane. We may need to modify our methods of construction or face increased construction costs as a result of environmental conditions, and we may face obligations under agreements with governmental authorities with respect to the management of such environmental conditions. If releases from our sites migrate offsite, or if our site redevelopment activities cause or
contribute to a migration of hazardous substances, neighbors or others could make claims against us, such as for property damage, personal injury, cost recovery, or natural resources damage. As of December 31, 2024, we had accrued environmental remediation liabilities of approximately $72.0 million on our consolidated balance sheets in connection with certain of our in-process and future development projects. The accrued environmental remediation liabilities represent the costs we estimate we will incur when we commence development at various development acquisition sites. These estimates, which we developed with the assistance of third-party experts, consist primarily of the removal of contaminated soil, performing environmental closure activities, construction remedial systems, and other related costs since we are required to dispose of any existing contaminated soil, and sometimes perform other environmental closure or remedial activities, when we develop new office properties at these sites. It is possible that we could incur additional environmental remediation costs in connection with future development projects. However, potential additional environmental costs cannot be reasonably estimated at this time and certain changes in estimates could occur as the site conditions, final project timing, design elements, actual soil conditions, and other aspects of the projects, which may depend upon municipal and other approvals beyond the control of the Company, are determined. Unknown or unremediated contamination or compliance with existing or new environmental or health and safety laws and regulations could require us to incur costs or liabilities that could be material. See “Item 1. Business -Environmental Regulations and Potential Liabilities” and Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report.
We may be unable to complete acquisitions and successfully operate acquired properties. We continually evaluate the market of available properties and may continue to acquire office or mixed-use properties and undeveloped land when strategic opportunities exist. Our ability to acquire properties on favorable terms and successfully operate them is subject to various risks, including the following:
•we may potentially be unable to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded and private REITs, institutional investment funds, and other real estate investors;
•even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price;
•even if we enter into agreements for the acquisition of a desired property, we may be unable to complete such acquisitions because they remain subject to customary conditions to closing, including the completion of due diligence investigations to management’s satisfaction;
•we may be unable to finance acquisitions on favorable terms or at all;
•we may spend more than budgeted amounts in operating costs or to make necessary improvements or renovations to acquired properties;
•we may lease acquired properties at economic lease terms different than projected;
•we may acquire properties that are subject to liabilities for which we may have limited or no recourse; and
•we may be unable to complete an acquisition after making a nonrefundable deposit and incurring certain other acquisition-related costs.
If we cannot finance property acquisitions on favorable terms or operate acquired properties to meet financial expectations, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders could be adversely affected.
There are significant risks associated with property acquisitions as well as development and redevelopment. We may be unable to successfully complete and operate acquired, developed, and redeveloped properties, and it is possible that:
•we may be unable to lease acquired, developed, or redeveloped properties on lease terms projected at the time of acquisition, development, or redevelopment, or within budgeted timeframes;
•the operating expenses at acquired, developed, or redeveloped properties may be greater than projected at the time of acquisition, development, or redevelopment, resulting in our investment being less profitable than we expected;
•we may not commence or complete development or redevelopment properties on schedule or within budgeted amounts or at all;
•we may not be able to develop or redevelop the estimated square footage and other features of our development and redevelopment properties;
•we may suspend development or redevelopment projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs, or increases in overall costs when the development or redevelopment project is restarted;
•we may expend funds on and devote management’s time to acquisition, development, or redevelopment properties that we may not complete and as a result we may lose deposits or fail to recover expenses already incurred;
•we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy, and other required governmental permits and authorizations;
•we may encounter delays or unforeseen cost increases associated with building materials or construction services resulting from trade tensions, disruptions, tariffs, duties or restrictions, or an outbreak of an epidemic or pandemic;
•we may encounter delays, refusals, unforeseen cost increases, and other impairments resulting from third-party litigation; and
•we may fail to obtain the financial results expected from properties we acquire, develop, or redevelop.
If one or more of these events were to occur in connection with our acquired properties, undeveloped land, or development or redevelopment properties under construction, we could be required to recognize an impairment loss. These events could also have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
While we historically have acquired, developed, and redeveloped office properties in California and Seattle markets, over the past three years we have acquired properties in Austin, Texas, where we currently have one stabilized office property and one future development project. We may in the future acquire, develop, or redevelop properties for other uses and expand our business to other geographic regions where we expect the development or acquisition of property to result in favorable risk-adjusted returns on our investment.
We face risks associated with the development and operation of mixed-use commercial properties. We currently operate, and in the future may develop, properties either alone or through joint ventures that are known as “mixed-use” developments. This means that in addition to the development of office space, the project may also include space for residential, retail or other commercial purposes. Generally, we have less experience developing and managing non-office/life science real estate. As a result, if a development project includes non-office/life science space, we may develop that space ourselves or seek to partner with a third-party developer with more experience. If we do not partner with such a developer, or if we choose to develop the space ourselves, we would be exposed to
specific risks associated with the development and ownership of non-office/life science real estate. In addition, if we elect to participate in the development through a joint venture, we may be exposed to the risks associated with the failure of the other party to complete the development as expected, which could require that we identify another joint venture partner and/or complete the project ourselves (including providing any necessary financing). In the case of residential properties, these risks include competition for prospective tenants from other operators whose properties may be perceived to offer a better location or better amenities or whose rent may be perceived as a better value given the quality, location, and amenities that the tenant seeks. With residential properties, we will also compete against apartments, condominiums, and single-family homes that are for sale or rent. Because we have less experience with residential properties, we retain third parties to manage these properties. As such, we are dependent on these third parties and their key personnel to provide services to us, and we may not find a suitable replacement if the management agreement is terminated, or if key personnel leave or otherwise become unavailable to us.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers' financial condition, and disputes between us and our co-venturers, and could expose us to potential liabilities and losses. In addition to the 100 First LLC and 303 Second LLC strategic ventures and the Redwood City Partners, LLC venture, we may continue to co-invest in the future with third parties through partnerships, joint ventures, or other entities, or through acquiring non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture, or other entity, which may subject us to risks that may not be present with other methods of ownership, including the following:
•we would not be able to exercise sole decision-making authority regarding the property, partnership, joint venture, or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity’s ability to transfer or sell its assets;
•partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, which could delay construction or development of a property or increase our financial commitment to the partnership or joint venture;
•partners or co-venturers may pursue economic or other business interests, policies or objectives that are competitive or inconsistent with ours;
•if we become a limited partner or non-managing member in any partnership or limited liability company, and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity;
•disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business; and
•we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.
We own certain properties subject to ground leases and other restrictive agreements that limit our uses of the properties, restrict our ability to sell or otherwise transfer the properties and expose us to the loss of the properties if such agreements are breached by us, terminated, or not renewed. As of December 31, 2024, we owned fourteen office buildings located on various land parcels and in various regions, which we lease individually on a long-term basis, and we may in the future invest in additional properties that are subject to ground leases or other similar restrictive arrangements. As of December 31, 2024, we had approximately 2.3 million aggregate rentable square feet, or 13.6% of our total stabilized portfolio located on these leased parcels. Many of these ground leases and other restrictive agreements impose significant limitations on our use of the subject property, restrict our ability to sell or otherwise transfer our interests in the property, or restrict our leasing of the property. These restrictions may limit our ability to timely sell or exchange the properties, impair the properties’ value, or negatively impact our ability to find suitable tenants for the properties. In addition, if we default under the terms of any particular lease, we may lose the ownership rights to the property subject to the lease. Upon expiration of a lease, we may not be able to renegotiate a new lease on favorable terms, if at all. The loss of the ownership rights to these properties or an increase of rental expense could have a material adverse effect on our financial condition, results of operations, cash
flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Real estate assets are illiquid, and we may not be able to sell our properties when we desire. Our investments in our properties are relatively illiquid, limiting our ability to sell our properties quickly in response to changes in economic or other conditions. In addition, the Code generally imposes a 100% prohibited transaction tax on the Company on profits derived from sales of properties held primarily for sale to customers in the ordinary course of business, which effectively limits our ability to sell properties other than on a selected basis. These restrictions on our ability to sell our properties could have a material adverse effect on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We may invest in securities related to real estate, which could adversely affect our ability to pay dividends and distributions to our security holders. We may purchase securities issued by entities that own real estate and may, in the future, also invest in mortgages. In general, investments in mortgages are subject to several risks, including:
•borrowers may fail to make debt service payments or pay the principal when due;
•the value of the mortgaged property may be less than the principal amount of the mortgage note securing the property; and
•interest rates payable on the mortgages may be lower than our cost for the funds used to acquire these mortgages.
Owning these securities may not entitle us to control the ownership, operation, and management of the underlying real estate. In addition, we may have no control over the distributions with respect to these securities, which could adversely affect our ability to pay dividends and distributions to our security holders.
We face risks associated with short-term liquid investments. From time to time, we have significant cash balances that we invest in a variety of short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include (either directly or indirectly):
•direct obligations issued by the U.S. Treasury;
•obligations issued or guaranteed by the U.S. government or its agencies;
•taxable municipal securities;
•obligations (including certificates of deposit) of banks and thrifts;
•commercial paper and other instruments consisting of short-term U.S. dollar denominated obligations issued by corporations and banks;
•repurchase agreements collateralized by corporate and asset-backed obligations;
•both registered and unregistered money market funds; and
•other highly rated short-term securities.
Investments in these securities and funds are not insured against loss of principal. Under certain circumstances we may be required to redeem all or part of our investment, and our right to redeem some or all of our investment may be delayed or suspended. In addition, there is no guarantee that our investments in these securities or funds will be redeemable at par value. A decline in the value of our investment or a delay or suspension of our right to redeem may have a material adverse effect on our results of operations or financial condition.
Our property taxes could increase due to reassessment or property tax rate changes. We are required to pay state and local taxes on our properties. In addition, the real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change. For example, under a current California law commonly referred to as “Proposition 13,” property tax reassessment generally occurs as a result of a “change in ownership” of a property, as specifically defined for purposes of those rules. Because the property taxing authorities may not determine whether there has been a “change in ownership” or the actual reassessed value of a property for a period of time after a transaction has occurred, we may not know the impact of a potential reassessment for a considerable amount of time following a particular transaction or construction of a new property. Therefore, the amount of property taxes we are required to pay could increase substantially from the property taxes we currently pay or have paid in the past, including on a retroactive basis. In addition, from time to time voters and lawmakers have announced initiatives to repeal or amend Proposition 13 to eliminate its application to commercial property and/or introduce split tax roll legislation. Such initiatives, if successful, would increase the assessed value and/or tax rates applicable to commercial property in California, including our properties. An increase in the assessed value of our properties or our property tax rates could adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting. The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements, or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, or otherwise adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We face risks associated with perceived or actual security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems or those of our service providers. We face risks associated with perceived or actual security breaches, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, IT bugs or malfunctions, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems or those of our service providers. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, especially given the use of more advanced hacking tools and techniques and use of artificial intelligence. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems), and, in some cases, may be critical to the operations of certain of our tenants. In addition, we rely on accounting, financial, operational, management and other IT systems that may be provided by third-party service providers. Many of these third-party IT systems are essential to our operations, and certain third parties have access to IT systems that we use for the operations of our business.
Security breaches could expose us to liability under various laws and regulations across jurisdictions and increase the risk of litigation and governmental investigation. Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted breach notification and other requirements in the event that information or IT systems subject to such laws is accessed or acquired by unauthorized persons and additional regulations regarding the use, access, accuracy, and security of such data and IT systems are possible. We are subject to laws in all states that require notification. Complying with such numerous and complex regulations in the event of unauthorized access would be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability.
There can be no assurance that controls and efforts to maintain the security and integrity of our and third-party IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. For example, we cannot guarantee that our or third-party systems do not contain exploitable defects or bugs that result in a breach of, or disruption to, our systems. Like other businesses, we and our third-party
service providers have been and expect to continue to be subject to attacks that result in unauthorized access, mishandling or misuse, computer viruses or malware, cyber attacks and other events of varying degrees. Any perceived or actual cybersecurity incident or attack or other disruption or failure in these IT systems, or other systems or infrastructure upon which we rely, could result in unauthorized access to, and misappropriation of, confidential, sensitive, proprietary, or personal information in our possession or control.
Historically, these events have not adversely affected our operations or business and were not individually or in the aggregate material. However, in the future, if events such as these (or other disruptions involving our or third-party IT networks and related systems) occur, or are perceived to occur, this could, among other things:
•result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally identifiable and account information;
•result in disclosure of information that could be used to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;
•result in unauthorized access to or changes to our financial accounting and reporting systems and related data;
•result in the theft of funds;
•result in our inability to maintain building systems relied on by our tenants;
•require significant management attention and resources to remedy any damage that results;
•subject us to regulatory penalties, private actions or claims for breach of contract, damages, credits, penalties, or terminations of leases or other agreements;
•increase our costs of operations; or
•damage our reputation among our tenants, investors, and others.
These events could have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We face risks associated with compliance with ever evolving federal and state laws relating to the handling of information about individuals, which involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition. As part of our normal business activities, we collect, use, store, and otherwise process certain personal information, including personal information specific to business and residential tenants, investors, service providers, and our employees. We and our service providers are subject to a variety of federal and state data privacy laws, rules, regulations, industry standards, and other requirements, including those that apply generally to the handling of information about individuals, and those that are specific to certain industries, sectors, contexts, or locations. These requirements, and their application, interpretation, and amendment are constantly evolving and developing.
For example, in the United States, the Federal Trade Commission, and state regulators enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws.
In addition, many states have adopted new or modified privacy and security laws and regulations that apply to our business. The California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act, imposes obligations on businesses that process personal information of California residents. Among other things, the CCPA requires disclosures to such residents about the data collection, use, and disclosure practices of covered businesses, provides such individuals expanded rights to access, delete, and correct their personal information, and opt-out of certain sales or transfers of personal information, and provides such individuals with a private right of action and statutory damages for certain data breaches.
The enactment of the CCPA is prompting a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws. Other states have passed laws that will subject us to additional compliance and operational costs that will go into effect in 2025 and beyond, and other states are considering similar legislation regarding the collection, sharing, use, and other processing of information related to individuals for marketing purposes or otherwise. Further, in order to comply with the varying state laws around data breaches, we must maintain adequate security measures, which require significant investments in resources and ongoing attention.
Our business is also gradually seeing the use of artificial intelligence to complement our decision making in order to improve our services and tailor our interactions. In recent years, the use of these methods has come under increased regulatory scrutiny. New laws, guidance, and/or decisions in this area may limit our ability to use our artificial intelligence models, or require us to make changes to our operations that may decrease our operational efficiency, result in an increase to operating costs, and/or hinder our ability to improve our services. For example, in October 2023, the President of the United States issued an executive order on the Safe, Secure and Trustworthy Development and Use of AI, emphasizing the need for transparency, accountability, and fairness in the development and use of AI. Any actual or perceived failure to comply with evolving regulatory frameworks around the development and use of AI, machine learning, and automated decision making could adversely affect our business, results of operations, and financial condition.
While we have taken commercially reasonable steps to comply with applicable data privacy and security laws, these laws are in some cases relatively new and the interpretation and application of these laws are uncertain. Any failure or perceived failure by us to comply with applicable data privacy and security laws could result in proceedings or actions against us by governmental entities or others, subject us to fines, penalties, judgments, and negative publicity, require us to change our business practices, increase our costs of operations, and adversely affect our business.
The actual density of our undeveloped land holdings and/or any particular land parcel may not be consistent with our potential density estimates. As of December 31, 2024, we estimate that our eight future development sites, representing approximately 64 gross acres of undeveloped land, provide more than 6.0 million square feet of potential density. We caution you not to place undue reliance on the potential density estimates for our undeveloped land holdings and/or any particular land parcel because they are based solely on our estimates, using data currently available to us, and our business plans as of December 31, 2024. The actual density of our undeveloped land holdings and/or any particular land parcel may differ substantially from our estimates based on numerous factors, including our inability to obtain necessary zoning, land use and other required entitlements, as well as building, occupancy, and other required governmental permits and authorizations, and changes in the entitlement, permitting, and authorization processes that restrict or delay our ability to develop, redevelop, or use undeveloped land holdings at anticipated density levels. Moreover, we may strategically choose not to develop, redevelop, or use our undeveloped land holdings to their maximum potential density or may be unable to do so as a result of factors beyond our control, including our ability to obtain capital on terms that are acceptable to us, or at all, to fund our development and redevelopment activities. We can provide no assurance that the actual density of our undeveloped land holdings and/or any particular land parcel will be consistent with our potential density estimates. For additional information on our development program, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Factors That May Influence Future Results of Operations.”
Loss of key executive officers or our inability to successfully transition key executive officers could harm our operations and financial performance, and adversely affect the quoted trading price of our securities. Many of our key executive personnel have extensive experience and strong reputations in the real estate industry and have been instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, and arranging necessary financing. In particular, the extent and nature of the relationships that these individuals have developed with financial institutions and existing and prospective tenants is critically important to the success of our business. The loss of services of one or more members of our executive or senior management team, our inability to attract and retain highly qualified personnel, or our inability to smoothly implement any transition of new members of our executive team, could adversely affect our business, divert the attention of other members of our senior leadership team, diminish our investment opportunities, and weaken our relationships with investors, lenders, tenants and industry personnel, which could adversely impact our results of operations.
We could be adversely affected by labor disputes, strikes, or other union job actions. If workers providing services at our properties were to engage in a strike or other work stoppage or interruption, our business, results of operations, financial condition, and liquidity could be materially adversely affected. Although we believe that our relations with our service providers are good, if disputes with our service providers arise or if workers providing services at our properties engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or at our properties or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition, and liquidity.
Some of our tenants employ the services of writers, directors, actors, and other talent as well as trade employees and others who are subject to collective bargaining agreements in the entertainment industry. If expiring collective bargaining agreements cannot be renewed, then it is possible that the affected unions could take action in the form of strikes or work stoppages. Such actions, including episodic strikes in the entertainment industry, as well as higher costs or operating complexities in connection with these collective bargaining agreements or a significant labor dispute, could have an adverse effect on our tenants’ businesses by causing delays in production, added costs or by reducing profit margins, which in turn could adversely affect our ability to collect rent from those tenants and potentially the markets in which our properties are located.
Risks Related to Our Indebtedness
We may not be able to meet our debt service obligations. As of December 31, 2024, we had approximately $4.6 billion aggregate principal amount of indebtedness, of which $606.2 million in principal payments, before the consideration of extension options, is expected to be paid during the year ending December 31, 2025. Our total debt at December 31, 2024 represented 49.0% of our total market capitalization (which we define as the aggregate of our long-term debt and the market value of the Company’s common stock and the Operating Partnership’s common units of limited partnership interest, or common units, based on the closing price per share of the Company’s common stock as of that date). For the calculation of our market capitalization and additional information on debt maturities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources of the Company -Capitalization” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources of the Operating Partnership -Liquidity Uses.”
Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital, and capital expenditures, depends on our ability to generate cash flows in the future. Our cash flows are subject to general economic, industry, financial, competitive, operating, legislative, regulatory, environmental, and other factors, many of which are beyond our control.
The instruments and agreements governing some of our outstanding indebtedness (including borrowings under the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility, and note purchase agreements) contain provisions that require us to repurchase for cash or repay that indebtedness under specified circumstances or upon the occurrence of specified events (including upon the acquisition by any person or group of more than a specified percentage of the aggregate voting power of all the Company’s issued and outstanding voting stock, upon certain changes in the composition of a majority of the members of the Company’s board of directors, if the Company or one of its wholly-owned subsidiaries ceases to be the sole general partner of the Operating Partnership, or if the Company ceases to own, directly or indirectly, at least 60% of the voting equity interests in the
Operating Partnership), and our future debt agreements and debt securities may contain similar provisions or may require that we repay or repurchase or offer to repurchase for cash the applicable indebtedness under specified circumstances or upon the occurrence of specified changes of control of the Company or the Operating Partnership or other events. We may not have sufficient funds to pay our indebtedness when due (including upon any such required repurchase, repayment, or offer to repurchase), and we may not be able to arrange for the financing necessary to make those payments or repurchases on favorable terms or at all. In addition, our ability to make required payments on our indebtedness when due (including upon any such required repurchase, repayment, or offer to repurchase) may be limited by the terms of other debt instruments or agreements. Our failure to pay amounts due in respect of any of our indebtedness when due would generally constitute an event of default under the instrument governing that indebtedness, which could permit the holders of that indebtedness to require the immediate repayment of that indebtedness in full and, in the case of secured indebtedness, could allow them to sell the collateral securing that indebtedness and use the proceeds to repay that indebtedness. Moreover, any acceleration of or default in respect of any of our indebtedness could, in turn, constitute an event of default under other debt instruments or agreements, thereby resulting in the acceleration and required repayment of that other indebtedness. Any of these events could materially adversely affect our ability to make payments of principal and interest on our indebtedness when due and could prevent us from making those payments altogether.
We cannot assure you that our business will generate sufficient cash flows from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs, including cash distributions to stockholders necessary to maintain the Company’s REIT qualification. Additionally, if we incur additional indebtedness in connection with future acquisitions or for any other purpose, our debt service obligations could increase.
We may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
•our financial condition, results of operations, and market conditions at the time; and
•restrictions in the agreements governing our indebtedness.
As a result, we may not be able to refinance our indebtedness on commercially reasonable terms or at all. If we do not generate sufficient cash flows from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations. Accordingly, if we cannot service our indebtedness, we may have to take actions such as seeking additional equity financing, delaying capital expenditures, or entering into strategic acquisitions and alliances. Any of these events or circumstances could have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders. In addition, foreclosures could create taxable income without accompanying cash proceeds, which could require us to borrow or sell assets to raise the funds necessary to pay amounts due on our indebtedness and to meet the REIT distribution requirements discussed below, even if such actions are not on favorable terms.
The covenants in the agreements governing the Operating Partnership’s unsecured revolving credit facility, unsecured term loan facility, and note purchase agreements may limit our ability to make distributions to the holders of our common stock. The Operating Partnership’s $1.1 billion unsecured revolving credit facility, $200.0 million unsecured term loan facility, and note purchase agreements contain financial covenants that could limit the amount of distributions payable by us on our common stock and any preferred stock we may issue in the future. We rely on cash distributions we receive from the Operating Partnership to pay distributions on our common stock and any preferred stock we may issue in the future and to satisfy our other cash needs. The agreements governing the unsecured revolving credit facility and the note purchase agreements provide that, if the Operating Partnership fails to pay any principal of, or interest on, any borrowings or other amounts payable under such agreement when due or during any other event of default under such revolving credit facility and the unsecured private placement notes, the Operating Partnership may make only those partnership distributions that result in distributions to us in an amount sufficient to permit us to make distributions 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. Any limitation on our ability to make distributions to our
stockholders, whether as a result of these provisions in the unsecured revolving credit facility, the unsecured term loan facility, the note purchase agreements or otherwise, could have a material adverse effect on the market value of our common stock.
A downgrade in our credit ratings could materially adversely affect our business and financial condition. The credit ratings assigned to the Operating Partnership’s debt securities and any preferred stock we may issue in the future could change based upon, among other things, our results of operations, and financial condition. These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot make assurances that any rating will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, these credit ratings do not apply to our common stock and are not recommendations to buy, sell, or hold our common stock or any other securities. If any of the credit rating agencies that have rated the Operating Partnership’s debt securities or any preferred stock we may issue in the future downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a so-called “watch list” for a possible downgrading or lowering or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on our costs and availability of capital, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
An increase in interest rates would increase our interest costs on variable rate debt and new debt and could adversely affect our ability to refinance existing debt, conduct development, redevelopment and acquisition activity, and recycle capital. As of December 31, 2024, we had a $1.1 billion unsecured revolving credit facility and a $200.0 million unsecured term loan facility, each bearing interest at a variable rate on any amount drawn and outstanding. As of December 31, 2024, there was no amount outstanding under our unsecured revolving credit facility and $200.0 million was outstanding under our unsecured term loan facility. However, we may borrow on the unsecured revolving credit facility, borrow additional amounts under the accordion feature of the unsecured term loan facility, or incur additional variable rate debt in the future. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Although the Federal Reserve began lowering interest rates in the second half of 2024, it may may increase rates in the future in an effort to curb inflation. Further interest rate increases would increase our interest costs for any variable rate debt and for new debt, which could in turn make the financing of any development, redevelopment, and acquisition activity costlier. Rising interest rates could also limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to recycle capital and our portfolio promptly in response to changes in economic or other conditions.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities, and we may in the future mitigate this risk through the use of derivative instruments, including interest rate swap agreements or other interest rate hedging agreements, including swaps, caps, and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risks that counter parties may fail to honor their obligations, that we could incur significant costs associated with the settlement of these agreements, that the amount of income we earn from hedging transactions may be limited by federal tax provisions governing REITs, that these agreements may cause us to pay higher interest rates on our debt obligations than would otherwise be the case and that underlying transactions could fail to qualify as highly-effective cash flow hedges under the accounting guidance. As a result, failure to hedge effectively against interest rate risk, if we choose to engage in such activities, could adversely affect our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations, and to pay dividends and distributions to our security holders.
Risks Related to Our Organizational Structure
Our growth depends on external sources of capital that are outside of our control and the inability to obtain capital on terms that are acceptable to us, or at all, could adversely affect our financial condition and results of operations. The Company is required under the Code to distribute at least 90% of its taxable income (subject to certain adjustments and excluding any net capital gain), and the Operating Partnership is required to make distributions to the Company to allow the Company to satisfy these REIT distribution requirements. Because of these distribution requirements, the Operating Partnership is required to make distributions to the Company, and we
may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flows. Consequently, management relies on third-party sources of capital to fund our capital needs. We may not be able to obtain financing on favorable terms or at all. Any additional debt we incur will increase our leverage. Access to third-party sources of capital depends, in part, on general market conditions and the availability of credit, the market’s perception of our growth potential, our current and expected future earnings, our cash flows and cash distributions, the quoted trading price of our securities, and our credit rating. If we cannot obtain capital from third-party sources, our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders may be adversely affected.
Our common limited partners have limited approval rights, which may prevent us from completing a change of control transaction that may be in the best interests of all our security holders. The Company may not withdraw as the Operating Partnership’s general partner or transfer its general partnership interest in the Operating Partnership without the approval of the holders of at least 60% of the units representing common partnership interests, including the common units held by the Company in its capacity as the Operating Partnership’s general partner. In addition, the Company may not engage in a merger, consolidation, or other combination or the sale of substantially all of its assets or such similar transaction, without the approval of the holders of 60% of the common units, including the common units held by the Company in its capacity as the Operating Partnership’s general partner. The right of our common limited partners to vote on these transactions could limit our ability to complete a change of control transaction that might otherwise be in the best interest of all our security holders.
There are restrictions on the ownership of the Company’s capital stock that limit the opportunities for a change of control at a premium to existing security holders. Provisions of the Maryland General Corporation Law, the Company’s charter and bylaws and the Operating Partnership’s partnership agreement may delay, deter, or prevent a change of control of the Company, or the removal of existing management. Any of these actions might prevent our security holders from receiving a premium for their shares of common stock or common units over the then-prevailing market price of the shares of our common stock.
In order for the Company to qualify as a REIT under the Code, its stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of the Company’s stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made). The Company’s charter contains restrictions on the ownership and transfer of its capital stock that are intended to assist the Company in complying with these requirements and continuing to qualify as a REIT. No single stockholder may own, either actually or constructively, absent a waiver from the board of directors, more than 7.0% (by value or by number of shares, whichever is more restrictive) of the Company’s outstanding common stock.
The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than the applicable ownership limit of a particular class of the Company’s capital stock could, nevertheless, cause that individual or entity, or another individual or entity, to constructively own stock in excess of, and thereby subject such stock to, the applicable ownership limit.
The board of directors may waive the ownership limits if it is satisfied that the excess ownership would not jeopardize the Company’s REIT status and if it believes that the waiver would be in our best interests. The board of directors has waived the ownership limits with respect to our former CEO, John Kilroy, members of his family and some of their affiliated entities. These named individuals and entities may own either actually or constructively, in the aggregate, up to 19.6% of our outstanding common stock, excluding common units that are exchangeable into shares of common stock.
If anyone acquires shares in excess of any ownership limits without a waiver, the transfer to the transferee will be void with respect to the excess shares, the excess shares will be automatically transferred to a trust for the benefit of a qualified charitable organization, and the purported transferee or owner will have no rights with respect to those excess shares.
The Company’s charter contains provisions that may delay, deter, or prevent a change of control transaction. The following provisions of the Company’s charter may delay or prevent a change of control over us, even if a change of control might be beneficial to our security holders, deter tender offers that may be beneficial to our security holders, or limit security holders’ opportunity to receive a potential premium for their shares and/or units if an investor attempted to gain shares beyond the Company’s ownership limits or otherwise to effect a change of control:
•the Company’s charter authorizes the board of directors to issue up to 30,000,000 shares of the Company’s preferred stock, including convertible preferred stock, without stockholder approval. The board of directors may establish the preferences, rights, and other terms, including the right to vote and the right to convert into common stock any shares issued. The issuance of preferred stock could delay or prevent a tender offer or a change of control even if a tender offer or a change of control was in our security holders’ interest; and
•the Company’s charter states that any director, or the entire board of directors, may be removed from office at any time, but only for cause and then only by the affirmative vote of the holders of at least two thirds of the votes of the Company’s capital stock entitled to be cast in the election of directors.
The board of directors may change investment and financing policies without stockholder or unitholder approval. Our board of directors determines our major policies, including policies and guidelines relating to our acquisition, development and redevelopment activities, leverage, financing, growth, operations, indebtedness, capitalization, and distributions to our security holders. Our board of directors may amend or revise these and other policies and guidelines from time to time without stockholder or unitholder approval. Accordingly, our stockholders and unitholders will have limited control over changes in our policies and those changes could adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We are not limited in our ability to incur debt. Our financing policies and objectives are determined by the board of directors. Our goal is to limit our dependence on leverage and maintain a conservative ratio of debt to total market capitalization. However, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. As of December 31, 2024, we had approximately $4.6 billion aggregate principal amount of indebtedness outstanding, which represented 49.0% of our total market capitalization. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources of the Company -Capitalization” for a calculation of our market capitalization. These ratios may be increased or decreased without the consent of our unitholders or stockholders. Increases in the amount of debt outstanding would result in an increase in our debt service costs, which could adversely affect cash flows and our ability to pay dividends and distributions to our security holders. Higher leverage also increases the risk of default on our obligations and limits our ability to obtain additional financing in the future.
We may issue additional common units and shares of capital stock without unitholder or stockholder approval, as applicable, which may dilute unitholder or stockholder investment. The Company may issue shares of our common stock, preferred stock, or other equity or debt securities without stockholder approval, including the issuance of shares to satisfy REIT dividend distribution requirements. Similarly, the Operating Partnership may offer its common or preferred units for contributions of cash or property without approval by our stockholders or the Operating Partnership’s unitholders. Existing security holders have no preemptive rights to acquire any of these securities, and any issuance of equity securities under these circumstances may dilute a unitholder’s or stockholder’s investment.
Sales of a substantial number of shares of the Company’s securities, or the perception that this could occur, could result in decreasing the quoted trading price per share of the Company’s common stock and of the Operating Partnership’s publicly-traded notes. Management cannot predict whether future issuances of shares of the Company’s common stock, or the availability of shares for resale in the open market will result in decreasing the market price per share of the Company’s common stock. As of December 31, 2024, 118,046,674 shares of the Company’s common stock were issued and outstanding.
As of December 31, 2024, the Company had reserved for future issuance the following shares of common stock: 1,150,574 shares issuable upon the exchange, at the Company’s option, of the Operating Partnership’s common units; approximately 2.6 million shares remained available for grant under our 2006 Incentive Award Plan (see Note 16 “Share-Based and Other Compensation” to our consolidated financial statements included in this report); approximately 0.8 million shares issuable upon settlement of time-based RSUs; and a maximum of 1.4 million shares contingently issuable upon settlement of RSUs subject to the achievement of market and/or performance conditions. The Company has a currently effective registration statement registering 12.6 million shares of our common stock for possible issuance under our 2006 Incentive Award Plan. The Company has a currently effective registration statement registering 783,192 shares of our common stock for possible issuance to and resale by certain holders of the Operating Partnership’s common units. Consequently, if and when the shares are issued, they may be freely traded in the public markets.
Risks Related to Taxes and the Company’s Status as a REIT
Loss of the Company’s REIT status would have significant adverse consequences to us and the value of the Company’s common stock. The Company currently operates in a manner that is intended to allow it to qualify as a REIT for federal income tax purposes under the Code. If the Company were to lose its REIT status, the Company would face adverse tax consequences that would substantially reduce the funds available for distribution to its stockholders for each of the years involved because:
•the Company would not be allowed a deduction for dividends paid to its stockholders in computing the Company’s taxable income and would be subject to regular U.S. federal corporate income tax;
•the Company could be subject to increased state and local taxes;
•the Company could be subject to the one percent excise tax on stock repurchases imposed by the 2022 Inflation Reduction Act; and
•unless entitled to relief under statutory provisions, the Company could not elect to be taxed as a REIT for four taxable years following the year during which the Company was disqualified.
In addition, if the Company failed to qualify as a REIT, it would not be required to make distributions to its stockholders. As a result of all these factors, the Company’s failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and could adversely affect the value and the quoted trading price of the Company’s common stock.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Code is greater in the case of a REIT that, like the Company, holds its assets through a partnership. The determination of various factual matters and circumstances not entirely within our control may affect the Company’s ability to continue to qualify as a REIT. For example, to qualify as a REIT, at least 95% of the Company’s gross income in any year must be derived from qualifying sources. Also, the Company must make distributions to its stockholders aggregating annually at least 90% of the Company’s net taxable income (subject to certain adjustments and excluding any net capital gains). Furthermore, we own a direct or indirect interest in certain subsidiaries that have elected to be taxed as REITs for U.S. federal income tax purposes under the Code. Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests. To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements. The failure of a subsidiary REIT to qualify as a REIT could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT. In addition, legislation, new regulations, administrative interpretations, or court decisions may adversely affect the Company’s security holders or the Company’s ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments. Although management believes that we are organized and operate in a manner to permit the Company to continue to qualify as a REIT, we cannot provide assurances that the Company has qualified or will continue to qualify as a REIT for tax purposes. We have not requested and do not plan to request a ruling from the Internal Revenue Service (“IRS”) regarding the Company’s qualification as a REIT.
To maintain the Company’s REIT status, we may be forced to borrow funds during unfavorable market conditions. To qualify as a REIT, the Company generally must distribute to its stockholders at least 90% of the Company’s net taxable income each year (subject to certain adjustments and excluding any net capital gains), and the Company will be subject to regular corporate income taxes to the extent that it distributes less than 100% of its net capital gains or distributes at least 90%, but less than 100%, of its net taxable income each year. In addition, the Company will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions it pays in any calendar year are less than the sum of 85% of its ordinary income, 95% of its net capital gains, and 100% of its undistributed income from prior years. To maintain the Company’s REIT status and avoid the payment of federal income and excise taxes, the Operating Partnership may need to borrow funds and distribute or loan the proceeds to the Company so it can meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from differences in timing between the actual receipt of income and inclusion of income for federal income tax purposes, or the effect of nondeductible capital expenditures, the creation of reserves, or required debt or amortization payments.
If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable or if we are unable to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis. When possible and appropriate, we enter into Section 1031 Exchanges. It is possible that the qualification of a transaction as a Section 1031 Exchange could be successfully challenged and determined to be currently taxable or that we may be unable to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange. In such case, our taxable income and the Company’s earnings and profits could increase. This could increase the dividend income to the Company’s stockholders by reducing any return of capital they received. In some circumstances, the Company may be required to pay additional dividends or, in lieu of that, corporate income tax, possibly including interest and penalties. As a result, we may be required to borrow funds in order to pay additional dividends or taxes and the payment of such taxes could cause us to have less cash available to distribute to the Company’s stockholders. In addition, if a Section 1031 Exchange was later determined to be taxable, we may be required to amend our tax returns for the applicable year in question, including any information reports we sent the Company’s stockholders. Moreover, Section 1031 of the Code permits exchanges of real property only. It is possible that additional legislation could be enacted that could further modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or not possible for us to dispose of properties on a tax deferred basis.
Dividends payable by REITs, including the Company, generally do not qualify for the reduced tax rates available for some dividends. “Qualified dividends” payable to U.S. stockholders that are individuals, trusts, and estates generally are subject to tax at preferential rates. Subject to limited exceptions, dividends payable by REITs are not eligible for these reduced rates and are taxable at ordinary income tax rates. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts, and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including the shares of our capital stock. However, non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026.
The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for federal income tax purposes. A REIT’s net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business, unless a sale or disposition qualifies under certain statutory safe harbors, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments. To qualify as a REIT for federal income tax purposes, the Company must continually satisfy tests concerning, among other things, the sources of its income, the nature and diversification of
its assets, the amounts it distributes to its stockholders and the ownership of its capital stock. If the Company fails to comply with one or more of the asset tests at the end of any calendar quarter, the Company must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing its REIT qualification and suffering adverse tax consequences. In order to meet these tests, we may be required to forego investments we might otherwise make or to liquidate otherwise attractive investments. Thus, compliance with the REIT requirements may hinder our performance and reduce amounts available for distribution to the Company’s stockholders.
Legislative or regulatory action could adversely affect our stockholders or us. In recent years, numerous legislative, judicial, and administrative changes have been made to the federal income tax laws applicable to investments in REITs and similar entities. Additional changes to tax laws are likely to continue to occur in the future, and any such changes may adversely impact the Company’s ability to qualify as a REIT, its tax treatment as a REIT, our ability to comply with contractual obligations or the tax treatment of our stockholders and limited partners. Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
General
Our stabilized portfolio of operating properties was comprised of the following properties at December 31, 2024:
Number of
Buildings Rentable
Square Feet Number of
Tenants Percentage
Occupied (1)
Stabilized Office Properties (2)
123 17,142,721 428 82.8 %
_______________________
(1)Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.
(2)Includes stabilized life science and retail space.
Number of
Properties Number of Units 2024 Average Occupancy
Stabilized Residential Properties 3 1,001 92.5 %
Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, 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 pursuant to a formal plan to change its use, the intended result of which is a higher economic return on the property. We define a property in the tenant improvement phase as a development or redevelopment property where the project has reached “cold shell condition” and is ready for tenant improvements, which may require additional major base building modifications before being placed in service. Projects in the tenant improvement phase are moved into 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 as the projects or phases of projects are placed in service.
We did not have any properties or undeveloped land held for sale at December 31, 2024. As of December 31, 2024, the following properties were excluded from our stabilized portfolio:
Number of
Properties/Projects Estimated Rentable
Square Feet (1)
In-process redevelopment projects - tenant improvement 2 100,000
In-process development projects - under construction 1 875,000
________________________
(1)Estimated rentable square feet upon completion.
Our stabilized portfolio also excludes our future development pipeline, which as of December 31, 2024, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.
As of December 31, 2024, all of our properties and development and redevelopment projects, 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 stabilized office property and one future development project located in Austin, Texas. All of our properties and development and redevelopment projects are 100% owned, excluding four office properties owned by three consolidated property partnerships.
We own our interests in all of our real estate assets through the Operating Partnership. All our properties are held in fee, except for the fourteen office buildings that are held subject to five long-term ground leases for the land (see Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information regarding our ground lease obligations).
In general, the office properties are leased to tenants on a full service gross, modified gross, or triple net basis. Under a full service gross lease, we are obligated to pay the tenant’s proportionate share of real estate taxes, insurance, and operating expenses up to the amount incurred during the tenant’s first year of occupancy (“Base Year”). The tenant pays its pro-rata share of increases in expenses above the Base Year. A modified gross lease is similar to a full service gross lease, except tenants are obligated to pay their proportionate share of certain operating expenses, usually electricity, directly to the service provider. In addition, some office and life science properties, primarily in Seattle and Austin and certain properties in certain submarkets in the San Francisco Bay Area, San Diego, and Los Angeles, are leased to tenants on a triple net basis, pursuant to which the tenants pay their proportionate share of real estate taxes, operating costs, and utility costs. At December 31, 2024, 46% of our properties were leased to tenants on a triple net basis, 27% of our properties were leased to tenants on a modified gross basis, and 21% of our properties were leased to tenants on a full service gross basis, and 6% of our properties were leased to tenants on a modified net basis, in each case as a percentage of our annualized base rental revenue.
We believe that all of our properties are well maintained and do not require significant capital improvements. As of December 31, 2024, all of our stabilized office properties, excluding our three residential properties, were managed through internal property managers.
Office Properties
The following table sets forth certain information relating to each of the stabilized office properties owned as of December 31, 2024.
Property Location No. of
Buildings Year Built/
Renovated Rentable
Square Feet Percentage
Occupied at
12/31/2024 (1)
Annualized
Base Rent
(in $000’s) (2)
Annualized Rent Per Square Foot (2)
Los Angeles
3101-3243 La Cienega Boulevard,
Culver City, California 19 2008-2017 166,207 18.6 % $ 1,682 $ 54.52
2240 East Imperial Highway,
El Segundo, California 1 1983/ 2008 122,870 100.0 % 3,713 30.21
2250 East Imperial Highway,
El Segundo, California 1 1983 298,728 46.2 % 4,653 34.03
2260 East Imperial Highway,
El Segundo, California 1 1983/ 2012 298,728 100.0 % 9,026 30.21
909 North Pacific Coast Highway,
El Segundo, California 1 1972/ 2005 244,880 72.2 % 6,725 38.03
999 North Pacific Coast Highway,
El Segundo, California 1 1962/ 2003 138,389 48.7 % 2,137 34.64
1350 Ivar Avenue,
Los Angeles, California 1 2020 16,448 100.0 % 1,005 61.10
1355 Vine Street,
Los Angeles, California 1 2020 183,129 100.0 % 10,882 59.42
1375 Vine Street,
Los Angeles, California 1 2020 159,236 100.0 % 9,805 61.58
1395 Vine Street,
Los Angeles, California 1 2020 2,575 100.0 % 161 62.65
1500 North El Centro Avenue,
Los Angeles, California 1 2016 113,447 63.6 % 4,872 67.54
1525 North Gower Street,
Los Angeles, California 1 2016 9,610 100.0 % 650 67.61
1575 North Gower Street,
Los Angeles, California 1 2016 264,430 98.3 % 15,990 61.52
6115 West Sunset Boulevard,
Los Angeles, California 1 1938/ 2015 26,238 23.8 % 390 62.49
6121 West Sunset Boulevard,
Los Angeles, California 1 1938/ 2015 93,418 100.0 % 4,605 49.29
6255 West Sunset Boulevard,
Los Angeles, California 1 1971/ 1999 325,772 59.0 % 9,768 52.92
3750 Kilroy Airport Way,
Long Beach, California 1 1989 10,718 100.0 % 128 33.52
Property Location No. of
Buildings Year Built/
Renovated Rentable
Square Feet Percentage
Occupied at
12/31/2024 (1)
Annualized
Base Rent
(in $000’s) (2)
Annualized Rent Per Square Foot (2)
3760 Kilroy Airport Way,
Long Beach, California 1 1989 166,761 80.4 % 4,967 37.04
3780 Kilroy Airport Way,
Long Beach, California 1 1989 221,452 96.6 % 7,977 38.03
3800 Kilroy Airport Way,
Long Beach, California 1 2000 192,476 93.5 % 5,934 32.97
3840 Kilroy Airport Way,
Long Beach, California 1 1999 138,441 77.6 % 4,446 41.40
3880 Kilroy Airport Way,
Long Beach, California 1 1987/ 2013 96,923 51.9 % 1,655 32.93
3900 Kilroy Airport Way,
Long Beach, California 1 1987 130,935 87.3 % 2,791 38.06
8560 West Sunset Boulevard,
West Hollywood, California 1 1963/ 2007 76,359 93.6 % 5,854 82.70
8570 West Sunset Boulevard,
West Hollywood, California 1 2002/ 2007 49,276 99.0 % 3,203 66.03
8580 West Sunset Boulevard,
West Hollywood, California 1 2002/ 2007 6,875 - % - -
8590 West Sunset Boulevard,
West Hollywood, California 1 2002/ 2007 56,750 99.7 % 3,407 60.19
12100 West Olympic Boulevard,
Los Angeles, California 1 2003 155,679 74.1 % 8,590 74.51
12200 West Olympic Boulevard,
Los Angeles, California 1 2000 154,544 32.0 % 973 69.00
12233 West Olympic Boulevard,
Los Angeles, California 1 1980/ 2011 156,746 54.0 % 3,231 40.69
12312 West Olympic Boulevard,
Los Angeles, California 1 1950/ 1997 78,900 100.0 % 3,919 49.66
2100/2110 Colorado Avenue,
Santa Monica, California 3 1992/ 2009 104,853 55.4 % 4,580 78.79
501 Santa Monica Boulevard,
Santa Monica, California 1 1974 78,509 65.0 % 4,038 80.93
Subtotal/Weighted Average -
Los Angeles 53 4,340,302 75.0 % $ 151,757 $ 48.25
San Diego
12225 El Camino Real,
Del Mar, California 1 1998 58,401 100.0 % $ 2,543 $ 43.55
12235 El Camino Real,
Del Mar, California 1 1998 53,751 100.0 % 2,627 48.87
12340 El Camino Real,
Del Mar, California 1 2002/ 2022 109,307 100.0 % - -
12390 El Camino Real,
Del Mar, California 1 2000 73,238 100.0 % 4,237 57.85
12770 El Camino Real,
Del Mar, California 1 2016 75,035 100.0 % 4,226 56.33
12780 El Camino Real,
Del Mar, California 1 2013 140,591 100.0 % 7,137 50.77
12790 El Camino Real,
Del Mar, California 1 2013 87,944 100.0 % 4,940 56.18
12830 El Camino Real,
Del Mar, California 1 2021 196,444 100.0 % 14,419 73.40
12860 El Camino Real,
Del Mar, California 1 2021 92,042 100.0 % 6,621 71.93
12348 High Bluff Drive,
Del Mar, California 1 1999 39,192 51.5 % 926 45.90
12400 High Bluff Drive,
Del Mar, California 1 2004/ 2022 216,518 100.0 % 15,576 71.94
12707 High Bluff Drive,
Del Mar, California 1 2017 59,245 93.5 % 3,428 61.87
12777 High Bluff Drive,
Del Mar, California 1 2017 44,486 100.0 % 2,319 52.14
Property Location No. of
Buildings Year Built/
Renovated Rentable
Square Feet Percentage
Occupied at
12/31/2024 (1)
Annualized
Base Rent
(in $000’s) (2)
Annualized Rent Per Square Foot (2)
3579 Valley Centre Drive,
Del Mar, California 1 1999 54,960 94.7 % 3,085 59.30
3611 Valley Centre Drive,
Del Mar, California 1 2000 132,425 100.0 % 7,337 55.41
3661 Valley Centre Drive,
Del Mar, California 1 2001 131,662 100.0 % 4,205 33.71
3721 Valley Centre Drive,
Del Mar, California 1 2003 117,777 90.3 % 6,003 56.46
3811 Valley Centre Drive,
Del Mar, California 1 2000 118,912 100.0 % 6,782 57.03
3745 Paseo Place,
Del Mar, California 1 2019 95,871 86.3 % 5,876 71.00
13480 Evening Creek Drive North,
San Diego, California 1 2008 143,401 56.7 % 4,139 50.90
13500 Evening Creek Drive North,
San Diego, California 1 2004 137,660 100.0 % 6,267 45.53
13520 Evening Creek Drive North,
San Diego, California 1 2004 146,701 74.2 % 4,861 44.65
2100 Kettner Boulevard,
San Diego, California 1 2022 212,423 30.2 % 4,469 69.83
2305 Historic Decatur Road,
Point Loma, California 1 2009 107,456 88.3 % 4,536 47.84
9455 Towne Centre Drive,
UTC, California 1 2021 160,444 100.0 % 7,822 48.76
9514 Towne Centre Drive,
UTC, California 1 2023 70,616 100.0 % 5,220 73.92
Subtotal/Weighted Average -
San Diego 26 2,876,502 89.2 % $ 139,601 $ 54.57
San Francisco Bay Area
4100 Bohannon Drive,
Menlo Park, California 1 1985 47,643 100.0 % $ 2,640 $ 55.41
4200 Bohannon Drive,
Menlo Park, California 1 1987 43,600 69.4 % 1,477 48.78
4300 Bohannon Drive,
Menlo Park, California 1 1988 63,430 63.5 % 2,526 62.77
4500 Bohannon Drive,
Menlo Park, California 1 1990 63,429 100.0 % 4,074 64.23
4600 Bohannon Drive,
Menlo Park, California 1 1990 48,413 100.0 % 2,600 53.71
4700 Bohannon Drive,
Menlo Park, California 1 1989 63,429 100.0 % 3,513 55.39
1290-1300 Terra Bella Avenue,
Mountain View, California 1 1961 114,175 100.0 % 7,445 65.21
680 East Middlefield Road,
Mountain View, California 1 2014 171,676 100.0 % 7,763 45.22
690 East Middlefield Road,
Mountain View, California 1 2014 171,215 100.0 % 7,729 45.14
1701 Page Mill Road,
Palo Alto, California 1 2015 128,688 100.0 % 8,461 65.75
3150 Porter Drive,
Palo Alto, California 1 1998 36,886 100.0 % 3,277 88.83
900 Jefferson Avenue,
Redwood City, California 1 2015 228,226 100.0 % 13,468 59.01
900 Middlefield Road,
Redwood City, California 1 2015 119,616 100.0 % 10,236 85.92
100 Hooper Street,
San Francisco, California 1 2018 417,914 95.5 % 23,646 59.33
100 First Street,
San Francisco, California 1 1988 480,457 93.6 % 30,940 71.62
303 Second Street,
San Francisco, California 1 1988 784,658 73.5 % 51,919 91.47
Property Location No. of
Buildings Year Built/
Renovated Rentable
Square Feet Percentage
Occupied at
12/31/2024 (1)
Annualized
Base Rent
(in $000’s) (2)
Annualized Rent Per Square Foot (2)
201 Third Street,
San Francisco, California 1 1983 346,538 25.5 % 6,081 72.01
360 Third Street,
San Francisco, California 1 2013 436,357 66.6 % 25,489 88.08
250 Brannan Street,
San Francisco, California 1 1907/ 2001 100,850 100.0 % 10,323 102.36
301 Brannan Street,
San Francisco, California 1 1909/ 1989 82,834 100.0 % 7,391 89.23
333 Brannan Street,
San Francisco, California 1 2016 185,602 100.0 % 17,688 95.30
345 Brannan Street,
San Francisco, California 1 2015 110,050 99.7 % 10,551 96.16
350 Mission Street,
San Francisco, California 1 2016 455,340 99.7 % 24,076 53.09
345 Oyster Point Boulevard,
South San Francisco, California 1 2001 40,410 100.0 % 2,192 54.24
347 Oyster Point Boulevard,
South San Francisco, California 1 1998 39,780 100.0 % 2,158 54.24
349 Oyster Point Boulevard,
South San Francisco, California 1 1999 65,340 100.0 % 4,265 65.27
350 Oyster Point Boulevard,
South San Francisco, California 1 2021 234,892 100.0 % 18,167 77.34
352 Oyster Point Boulevard,
South San Francisco, California 1 2021 232,215 100.0 % 18,062 77.78
354 Oyster Point Boulevard,
South San Francisco, California 1 2021 193,472 100.0 % 15,048 77.78
505 North Mathilda Avenue,
Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50
555 North Mathilda Avenue,
Sunnyvale, California 1 2014 212,322 100.0 % 9,449 44.50
599 North Mathilda Avenue,
Sunnyvale, California 1 2000 76,031 - % - -
605 North Mathilda Avenue,
Sunnyvale, California 1 2014 162,785 100.0 % 7,244 44.50
Subtotal/Weighted Average -
San Francisco 33 6,170,595 87.4 % $ 369,347 $ 68.89
Seattle
601 108th Avenue North East,
Bellevue, Washington 1 2000 490,738 98.7 % $ 20,410 $ 42.60
10900 North East 4th Street,
Bellevue, Washington 1 1983 428,557 89.7 % 13,681 37.60
2001 West 8th Avenue,
Seattle, Washington 1 2009 535,395 19.5 % 4,913 47.65
333 Dexter Ave North,
Seattle, Washington 1 2022 618,766 100.0 % 31,809 51.41
701 North 34th Street,
Seattle, Washington 1 1998 141,860 44.8 % 2,194 34.52
801 North 34th Street,
Seattle, Washington 1 1998 173,615 100.0 % 5,789 33.34
837 North 34th Street,
Seattle, Washington 1 2008 112,487 85.6 % 2,269 23.57
320 Westlake Avenue North,
Seattle, Washington 1 2007 184,644 96.1 % 8,079 45.52
321 Terry Avenue North,
Seattle, Washington 1 2013 135,755 100.0 % 5,417 39.90
401 Terry Avenue North,
Seattle, Washington 1 2003 174,530 100.0 % 7,008 40.15
Subtotal/Weighted Average -
Seattle 10 2,996,347 80.5 % $ 101,569 $ 42.57
Austin
200 W. 6th Street,
Austin CBD, Texas 1 2023 758,975 74.7 % $ 25,283 $ 44.58
Property Location No. of
Buildings Year Built/
Renovated Rentable
Square Feet Percentage
Occupied at
12/31/2024 (1)
Annualized
Base Rent
(in $000’s) (2)
Annualized Rent Per Square Foot (2)
Subtotal/Weighted Average -
Austin 1 758,975 74.7 % $ 25,283 $ 44.58
TOTAL/WEIGHTED AVERAGE 123 17,142,721 82.8 % $ 787,557 $ 56.18
____________________
(1)Based on all leases at the respective properties in effect as of December 31, 2024. Includes month-to-month leases and leases with a lease term of less than one year as of December 31, 2024. Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements..
(2)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 to tenant-funded tenant improvements, amortization of above/below market rent, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Excludes month-to-month leases, vacant space, and leases with a lease term of less than one year, as of December 31, 2024. Includes 100% of annualized base rent of consolidated property partnerships.
In-Process Redevelopment Projects
As of December 31, 2024, the following redevelopment projects were in the tenant improvement phase:
Construction Start Date Estimated
Stabilization Date (2)
Estimated Rentable Square Feet % Leased Total Project Occupied (3)
TENANT IMPROVEMENT (1)
Location
Office / Life Science
San Francisco Bay Area
4400 Bohannon Drive Other Peninsula 4Q 2022 3Q 2025 48,000 -% -%
San Diego
4690 Executive Drive University Towne Center 1Q 2022 3Q 2025 52,000 -% -%
TOTAL: 100,000 -% -%
____________________
(1)Represents projects that have reached “cold shell condition” and are ready for tenant improvements, which may require additional major base building modifications before being placed in service.
(2)For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. Redevelopment will occur in phases based on existing lease expiration dates and timing of the tenant improvement build-out.
(3)Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.
In-Process Development Projects
As of December 31, 2024, the following development project was under construction:
Construction Start Date Estimated Stabilization Date (1)
Estimated Rentable Square Feet % Leased
UNDER CONSTRUCTION Location
Office / Life Science
San Francisco Bay Area
Kilroy Oyster Point - Phase 2 South San Francisco 2Q 2021 1Q 2026 875,000 -%
TOTAL: 875,000 -%
____________________
(1)For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope.
Future Development Pipeline
The following table sets forth certain information relating to our future development pipeline as of December 31, 2024.
Future Development Pipeline Location Approx. Developable Square
Feet / Resi Units (1)
Los Angeles
1633 26th Street West Los Angeles 190,000
San Diego
Santa Fe Summit South / North 56 Corridor 600,000 - 650,000
2045 Pacific Highway Little Italy 275,000
Kilroy East Village East Village 1,100 units
San Francisco Bay Area
Kilroy Oyster Point - Phases 3 and 4 South San Francisco 875,000 - 1,000,000
Flower Mart SOMA 2,300,000
Seattle
SIX0 Denny Regrade 925,000 and 650 units
Austin
Stadium Tower Stadium District / Domain 493,000
____________________
(1)Represents developable office/life science square feet and/or residential units. 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, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes, or project design.
Significant Tenants
The following table sets forth information about our 20 largest tenants based upon annualized base rental revenues, as defined below, as of December 31, 2024.
Tenant Name (1)
Region Annualized
Base Rental Revenue(2)
Rentable Square
Feet(2)
Percentage
of Total
Annualized
Base Rental
Revenue(2)
Percentage
of Total
Rentable
Square Feet Year(s) of
Significant
Lease
Expiration(s)(3)
Weighted Average Remaining
Lease
Term (Years)
(in thousands)
1 Global technology company Seattle / San Diego $ 44,851 849,826 5.7% 5.0% 2032 - 2033 / 2037 8.6
2 Cruise LLC San Francisco Bay Area 35,449 374,618 4.5% 2.2% 2031 6.9
3 Stripe, Inc. San Francisco Bay Area 33,110 425,687 4.2% 2.5% 2034 9.5
4 Adobe Systems, Inc. San Francisco Bay Area / Seattle 27,897 522,879 3.5% 3.1% 2027 / 2031 6.4
5 LinkedIn Corporation / Microsoft Corporation San Francisco Bay Area 26,142 587,429 3.3% 3.4% 2026 1.7
6 Salesforce, Inc. San Francisco Bay Area / Seattle 24,706 472,988 3.1% 2.8% 2029 - 2030 / 2032 5.4
7 Okta, Inc. San Francisco Bay Area 24,206 293,001 3.1% 1.7% 2028 3.8
8 DoorDash, Inc. San Francisco Bay Area 23,842 236,759 3.0% 1.4% 2032 7.1
9 Netflix, Inc. Los Angeles 21,854 361,388 2.8% 2.1% 2032 7.6
10 Cytokinetics, Inc. San Francisco Bay Area 18,167 234,892 2.3% 1.4% 2033 8.8
11 Box, Inc. San Francisco Bay Area 16,853 287,680 2.1% 1.7% 2028 3.5
12 Neurocrine Biosciences,
Inc. (4)
San Diego 16,365 299,064 2.1% 1.7% 2025 / 2029 / 2031 5.7
13 DIRECTV, LLC Los Angeles 16,085 532,956 2.0% 3.1% 2026 - 2027 2.7
14 Synopsys, Inc. San Francisco Bay Area 15,492 342,891 2.0% 2.0% 2030 5.7
15 Viacom International, Inc. Los Angeles 13,718 220,330 1.7% 1.3% 2028 4.0
16 Indeed, Inc. Austin 13,430 330,394 1.7% 1.9% 2034 10.0
17 Sony Interactive Entertainment, LLC San Francisco Bay Area 13,059 127,760 1.7% 0.7% 2030 5.3
18 Amazon.com (5)
Seattle 12,921 340,705 1.6% 2.0% 2025 / 2030 4.3
19 Riot Games, Inc. Los Angeles 12,893 205,978 1.6% 1.2% 2026 / 2031 3.6
20 Tandem Diabetes Care, Inc. San Diego 12,409 143,850 1.6% 0.8% 2035 10.3
Total $ 423,449 7,191,075 53.6% 42.0% 6.0
_____________________
(1)Includes subsidiaries of tenant listed.
(2)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 to 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, vacant space. ad leases with a lease term of less than one year, as of December 31, 2024. Includes 100% of the annualized base rental revenues of consolidated property partnerships.
(3)We define significant lease expirations as those with space expiring greater than 25,000 rentable square feet.
(4)The 2025 lease expiration represents 26,043 rentable square feet expiring on June 30, 2025.
(5)The 2025 lease expiration represents 56,398 rentable square feet that expired on January 15, 2025.
The following pie chart sets forth the composition of our tenant base by industry as a percentage of our annualized base rental revenue based on the North American Industry Classification System as of December 31, 2024.
Our markets are dynamic and populated with innovative and creative tenants, including, but not limited to, technology, entertainment and digital media companies. While technology companies comprise 54% of our office portfolio base rent, technology is a broad concept that encompasses diverse industries, including software, social media, hardware, cloud computing, internet media, and technology services.
Lease Expirations
The following table sets forth a summary of our lease expirations for our stabilized portfolio, excluding our residential properties, for each of the next ten years beginning with 2025, assuming that none of the tenants exercise renewal options or termination rights. See further discussion of our lease expirations under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Factors that May Influence Future Results of Operations”.
Lease Expirations
Year of Lease
Expiration # of Expiring Leases Total Square Feet % of Total Leased
Square Feet Annualized Base
Rent (000’s)(1) (2)
% of Total
Annualized
Base Rent (1)
Annualized Rent
per Square Foot (1)
2025 67 715,573 5.2 % $ 30,212 3.8 % $ 42.22
2026 74 1,934,525 14.0 % 93,174 11.8 % 48.16
2027 77 1,095,562 7.9 % 44,802 5.7 % 40.89
2028 58 1,160,992 8.4 % 71,467 9.1 % 61.56
2029 49 1,213,765 8.9 % 66,518 8.5 % 54.80
2030 55 1,661,615 12.0 % 98,690 12.5 % 59.39
2031 47 2,261,711 16.4 % 145,974 18.5 % 64.54
2032 17 1,125,182 8.2 % 74,380 9.4 % 66.10
2033 11 995,693 7.2 % 58,538 7.4 % 58.79
2034 19 710,620 5.1 % 47,932 6.2 % 67.45
2035 and beyond 19 919,502 6.7 % 55,870 7.1 % 60.76
Total (3)
493 13,794,740 100.0 % $ 787,557 100.0 % $ 57.09
____________________
(1)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 to 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.
(2)Includes 100% of annualized based rent of consolidated property partnerships..
(3)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 December 31, 2024, space leased under month-to-month leases, storage leases, vacant space, leases with a lease term of less than one year, intercompany leases, and future lease renewal options not executed as of December 31, 2024.
Secured Debt
As of December 31, 2024, the Operating Partnership had three outstanding mortgage notes payable which were secured by certain of our properties. Our secured debt represents an aggregate principal indebtedness of approximately $606.7 million. See additional information regarding our secured debt in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Liquidity Sources,” Notes 9 and 10 to our consolidated financial statements and “Schedule III-Real Estate and Accumulated Depreciation,” included in this report.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We and our properties are subject to routine litigation incidental to our business. These matters are generally covered by insurance. As of December 31, 2024, we were not a defendant in, and our properties were 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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
None.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR KILROY REALTY CORPORATION’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “KRC.” As of the date this report was filed, there were approximately 84 registered holders of the Company’s common stock. The following table illustrates dividends declared during 2024 and 2023 as reported on the NYSE.
2024 Per Share Common
Stock Dividends
Declared
First quarter $ 0.5400
Second quarter 0.5400
Third quarter 0.5400
Fourth quarter 0.5400
2023 Per Share Common
Stock Dividends
Declared
First quarter $ 0.5400
Second quarter 0.5400
Third quarter 0.5400
Fourth quarter
0.5400
The Company pays distributions to common stockholders quarterly each January, April, July, and October, at the discretion of the board of directors. Distribution amounts depend on our FFO, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and such other factors as the board of directors deems relevant.
The Company did not purchase any equity securities during the three month period leading up to December 31, 2024.
MARKET FOR KILROY REALTY, L.P.’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is no established public trading market for the Operating Partnership’s common units. As of the date this report was filed, there were 19 holders of record of common units (including through the Company’s general partnership interest).
The following table reports the distributions per common unit declared during the years ended December 31, 2024 and 2023.
2024 Per Unit Common
Unit Distribution
Declared
First quarter $ 0.5400
Second quarter 0.5400
Third quarter 0.5400
Fourth quarter 0.5400
2023 Per Unit Common
Unit Distribution
Declared
First quarter $ 0.5400
Second quarter 0.5400
Third quarter 0.5400
Fourth quarter 0.5400
PERFORMANCE GRAPH
The following line graph compares the change in cumulative stockholder return on shares of the Company’s common stock to the cumulative total return of the FTSE Nareit All Equity REITs Index, the Standard & Poor’s (“S&P”) 500 Index, and the S&P Composite 1500 - Office REITs Index for the five-year period ended December 31, 2024. We include the S&P Composite 1500 - Office REITs Index because management believes it provides additional information to investors about our performance relative to a more specific peer group. The S&P Composite 1500 - Office REITs Index is a published and widely recognized index that comprises 11 office equity REITs, including us. The graph assumes an investment of $100 in us and each of the indices on December 31, 2019 and, as required by the SEC, the reinvestment of all distributions. The return shown on the graph is not necessarily indicative of future performance.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. 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 7. 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, and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses;
•our ability to re-lease property at or above current market rates;
•reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer’s office premises;
•costs to comply with government regulations, including environmental remediation;
•the availability of cash for distribution and debt service, and exposure to risk of default under debt obligations;
•increases in interest rates and our ability to manage interest rate exposure;
•changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment, and acquisition opportunities and refinance existing debt;
•a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices, or obtain or maintain debt financing, and which may result in write-offs or impairment charges;
•significant competition, which may decrease the occupancy and rental rates of properties;
•potential losses that may not be covered by insurance;
•the ability to successfully complete acquisitions and dispositions on announced terms;
•the ability to successfully operate acquired, developed, and redeveloped properties;
•the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts;
•delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, governmental permits and authorizations for our development and redevelopment properties;
•increases in anticipated capital expenditures, tenant improvement, and/or leasing costs;
•defaults on leases for land on which some of our properties are located;
•adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes;
•risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers;
•environmental uncertainties and risks related to natural disasters;
•risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; and
•our ability to maintain our status as a REIT.
The factors included in this report are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect the Company’s and the Operating Partnership’s business and financial performance, see the discussion below as well as in “Item 1A. Risk Factors,” and in our respective other filings with the SEC. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
Company Overview
We are a self-administered REIT active in premier office, life science, and mixed-use property types in the United States. We own, develop, acquire, and manage real estate assets, consisting primarily of premier properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle and Austin, which are markets that we believe have strategic advantages and strong barriers to entry. We own our interests in all of our real estate assets through the Operating Partnership and 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 both December 31, 2024 and 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 (see Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for additional information regarding our ground lease obligations).
2024 Operating and Development Highlights
Throughout 2024, we remained focused on creating value for our stockholders through leasing, and development and redevelopment activities. We also continued to maintain a strong balance sheet and elevate our leadership position in environmental, social, and corporate governance operations.
Leasing. During 2024, we achieved our highest annual leasing volume since 2019. We executed new and renewal leases totaling 1.4 million square feet within our stabilized portfolio, excluding short-term leases, with an increase in GAAP rents of 8.2% and a decrease in cash rents of 4.5%. Our stabilized office portfolio was 82.8% occupied and 84.9% leased as of December 31, 2024.
Development. We continued to execute on our development and redevelopment program during 2024. We had two redevelopment projects in the tenant improvement phase and one development project under construction. See “-Factors that May Influence Future Operations” for additional information regarding our development program.
Financing. In 2024, we issued $400.0 million of new debt at a stated interest rate of 6.250% and we amended and restated the terms of the unsecured revolving credit facility to maintain its borrowing capacity and extend the maturity date to July 31, 2028. Additionally, we repaid $320.0 million on the 2022 Term Loan Facility and repaid in full the $403.7 million aggregate principal amount outstanding of our 3.450% senior notes due 2024 at maturity.
Refer to our 2024 Financing Highlights in “-Liquidity and Capital Resources of the Operating Partnership” for a list of financing transactions completed in 2024 and Note 10 “Secured and Unsecured Debt of the Operating Partnership” to our consolidated financial statements included in this report for additional information regarding our debt and capital market activity.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the reporting periods.
Certain accounting policies are considered to be critical accounting policies. Critical accounting policies are those policies that require our management team to make significant estimates and/or assumptions about matters that are uncertain at the time the estimates and/or assumptions are made or where we are required to make significant judgments and assumptions with respect to the practical application of accounting principles in our business operations. Critical accounting policies are by definition those policies that are material to our financial statements and for which the impact of changes in estimates, assumptions, and judgments could have a material impact to our financial statements.
The following critical accounting policies discussion reflects what we believe are the most significant estimates, assumptions, and judgments used in the preparation of our consolidated financial statements. This discussion of our critical accounting policies is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates, assumptions, and judgments. For further discussion of our significant accounting policies, see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report.
Revenue Recognition
Rental revenue for office, life science, retail, and residential operating properties is our principal source of revenue. We recognize revenue from base rent (fixed lease payments), additional rent (variable lease payments, which consist of amounts due from tenants for common area maintenance, real estate taxes, and other recoverable costs), parking, and other lease-related revenue once all of the following criteria are met: (i) the agreement has been fully executed and delivered, (ii) services have been rendered, (iii) the amount is fixed or determinable, and (iv) payment has been received or the collectability of substantially all of the amount due is probable. Minimum annual rental revenues are recognized in rental revenues on a straight-line basis over the non-cancellable term of the related lease.
Base Rent
The timing of when we commence rental revenue recognition for office, life science, and retail properties depends largely on our conclusion as to whether we are or the tenant is the owner of tenant improvements at the leased property for accounting purposes. When we conclude that we are the owner of tenant improvements for accounting purposes, we record the cost to construct the tenant improvements as an asset and commence rental revenue recognition when the tenant takes possession of or controls the finished space, which is generally when tenant improvements being recorded as our assets are substantially complete. In certain instances, when we conclude that the tenant is the owner of certain tenant improvements for accounting purposes, rental revenue recognition begins when the tenant takes possession or controls the physical use of the leased space. The determination of who owns the tenant improvements is made on a lease-by-lease basis and has a significant effect on the timing of commencement of revenue recognition. Further, we may deliver leased space in phases, rather than for an entire building or project, resulting in various revenue commencement dates for a particular lease, which involves significant judgment surrounding when the tenant takes possession of or controls each respective phase, building, or project.
The determination of whether we are or the tenant is the owner of tenant improvements for accounting purposes is subject to significant judgment. In making that determination, we consider numerous factors and perform a detailed evaluation of each individual lease. No one factor is determinative in reaching a conclusion. The factors we evaluate include, but are not limited to, the following:
•whether the lease agreement requires landlord approval of how the tenant improvement allowance is spent prior to installation of the tenant improvements;
•whether the lease agreement requires the tenant to provide evidence to the landlord supporting the cost and what the tenant improvement allowance was spent on prior to payment by the landlord for such tenant improvements;
•whether the tenant improvements are unique to the tenant or reusable by other tenants;
•whether the tenant is permitted to alter or remove the tenant improvements without the consent of the landlord or without compensating the landlord for any lost utility or diminution in fair value; and
•whether the ownership of the tenant improvements remains with the landlord or remains with the tenant at the end of the lease term.
When we conclude that we are the owner of tenant improvements for accounting purposes using the factors discussed above, we record the cost to construct the tenant improvements, including costs paid for or reimbursed by the tenants, as our capital asset. During the years ended December 31, 2024, 2023, and 2022, we capitalized $3.5 million, $7.1 million, and $22.8 million, respectively, of tenant-funded tenant improvements. The amount of tenant-funded tenant improvements recorded in any given year varies based upon the mix of specific leases executed and/or commenced during the reporting period. For these tenant-funded tenant improvements, we record the amount funded by or reimbursed by tenants as deferred revenue, which is amortized and recognized as rental income on a straight-line basis over the term of the related lease beginning upon substantial completion of the leased premises. The determination of who owns the tenant improvements has a significant impact on the amount of non-cash rental revenue that we record related to the amortization of deferred revenue for tenant-funded tenant improvements. For the years ended December 31, 2024, 2023, and 2022, we recognized $19.1 million, $20.7 million and $19.3 million, respectively, of non-cash rental revenue related to the amortization of deferred revenue recorded in connection with tenant-funded tenant improvements.
When we conclude that the tenant is the owner of certain tenant improvements for accounting purposes, we record our contribution towards those tenant-owned improvements as a lease incentive, which is included in deferred leasing costs and acquisition-related intangible assets, net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the related lease beginning upon substantial completion of the leased premises.
For residential properties, we commence revenue recognition upon lease commencement. Residential rental revenue is recognized on a straight-line basis over the term of the related lease, which is generally one year, net of any concessions.
When a lease is amended, we determine whether (i) an additional right of use not included in the original lease is being granted as a result of the modification, and (ii) there is an increase in the lease payments that is commensurate with the standalone price for the additional right of use. If both of these conditions are met, the amendment is accounted for as a separate lease contract. If either of those conditions are not met, the amendment is accounted for as a lease modification. Most of our lease amendments are accounted for as modifications of our operating leases, which requires us to reassess both the lease term and fixed lease payments, including any prepaid or deferred rent receivables relating to the original lease, as a part of the lease payments for the modified lease.
Termination options in some of our leases allow the tenant to terminate the lease, in part or in whole, prior to the end of the lease term under certain circumstances. Termination options generally require advance notification from the tenant, and payment of a termination fee that reimburses us for a portion of the remaining rent under the
original lease term and the net book value of lease inception costs such as commissions, tenant improvements, and lease incentives. Termination fee income, included in rental income, is recognized on a straight-line basis from the date of the executed termination agreement through the revised lease expiration when the amount of the fee is determinable and collectability of the fee is probable. This fee income is reduced on a straight-line basis by any deferred rent receivable related to the lease.
Generally, our leases require the tenant to restore the leased space to standard office condition upon the expiration of the lease. In some circumstances, tenants may negotiate to pay us a restoration fee in lieu of restoring the space. Restoration fee income, included in rental income, is recognized on a straight-line basis from the date of the executed restoration fee agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is probable.
When tenants declare bankruptcy, we may be able to collect some portion of their past-due rents through the bankruptcy process, whether through applying security deposit balances, drawing on tenants’ letters of credit, or through bankruptcy settlements. We recognize any amounts collected through the bankruptcy process when cash is received.
Additional Rent - Reimbursements from Tenants
Additional rent, consisting of amounts due from tenants for common area maintenance, real estate taxes, and other recoverable costs, is recognized in rental income in the period the recoverable costs are incurred. Additional rent where we pay the associated costs directly to third-party vendors and are reimbursed by our tenants are recognized and recorded on a gross basis, with the associated expense recognized in property expenses or real estate taxes.
Calculating additional rent requires an in-depth analysis of the complex terms of each underlying lease. Examples of judgments and estimates used when determining the amounts recoverable include:
•estimating the final expenses, net of accruals, that are recoverable;
•estimating the fixed and variable components of operating expenses for each building;
•conforming recoverable expense pools to those used in establishing the base year or base allowance for the applicable underlying lease; and
•concluding whether an expense or capital expenditure is recoverable pursuant to the terms of the underlying lease.
During the year, we accrue estimated additional rent in the period in which the recoverable costs are incurred based on our best estimate of the amounts to be recovered. Throughout the year, we perform analyses to match additional rent with reimbursable costs incurred to date. Additionally, during the fourth quarter of each year we perform preliminary reconciliations and, if a change in estimate is warranted, an adjustment is recorded to reflect the revised estimate. Subsequent to year end, we perform final detailed reconciliations and analyses on a lease-by-lease basis and bill or refund each tenant for any cumulative annual adjustments in the first and second quarters of each year for the previous year’s activity. Our historical experience for the years ended December 31, 2023 and 2022 has been that our final reconciliation and billing process resulted in final amounts that approximated the total annual additional rent recognized.
Uncollectible Lease Receivables and Allowances for Tenant and Deferred Rent Receivables
Current tenant receivables consist primarily of amounts due for contractual lease payments and reimbursements of common area maintenance expenses, property taxes, and other costs recoverable from tenants. Deferred rent receivables represent the amount by which the cumulative straight-line rental revenue recorded to date exceeds cash rents billed to date under the lease agreement.
We carry our current and deferred rent receivables net of allowances for amounts that may not be collected. These allowances are increased or decreased through rental income, and our determination of the adequacy of the Company’s allowances for tenant receivables includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection. Such assessment involves using a methodology that incorporates a specific identification analysis and an aging analysis, considering the current economic and business environment, including factors such as the age and nature of the receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations, and the status of negotiations of any disputes with the tenant. This determination is performed on a quarterly basis and requires significant judgment and estimates about matters that are uncertain at the time the estimates are made, including the creditworthiness of specific tenants, specific industry trends and conditions, and general economic trends and conditions. Since these factors are beyond our control, actual results can differ from our estimates, and such differences could be material.
For leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the non-cancellable lease term and, for some tenants, may include an offsetting partial allowance for uncollectible accounts related to current tenant and deferred rent receivables that exhibit a certain level of collection risk based on the results of the assessment described above. For leases that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, including deferred revenue, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination. If the collectability determination subsequently changes to being probable of collection for leases for which revenue is recorded based on cash received from the tenant, we resume recognizing revenue, including deferred revenue, on a straight-line basis and recognize incremental revenue related to the reinstatement of cumulative deferred rent receivable and deferred revenue balances as if revenue had been recorded on a straight-line basis since the inception of the lease.
For the years ended December 31, 2024, 2023, and 2022, we recorded a net reduction to rental revenues for direct write-offs associated with transitioning certain tenants to a cash basis of reporting and an allowance for uncollectible accounts for both current tenant receivables and deferred rent receivables of approximately 0.4%, 1.1% (of which 0.5% related to one tenant), and 0.2% of total revenues, respectively. Additional amounts may potentially be restored in future periods as circumstances warrant, consistent with our accounting policies. In the event our estimates were not consistent with actual collections and we had to change our allowances by 1% of revenue from continuing operations, the potential impact to our net income available to common stockholders would be approximately $11.4 million, $11.3 million and $11.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Acquisitions
Acquisitions of operating properties and development and redevelopment opportunities generally do not meet the definition of a business and are accounted for as asset acquisitions, as substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. For these asset acquisitions, we record the acquired tangible and intangible assets and assumed liabilities based on each asset’s and liability’s relative fair value at the acquisition date of the total purchase price plus any capitalized acquisition costs, including costs incurred during negotiation. When applicable, we record the acquired tangible and intangible assets and assumed liabilities of acquisitions of operating properties and development and redevelopment opportunities that meet the accounting criteria to be accounted for as business combinations at fair value at the acquisition date.
We assess and consider fair value based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates that we deem appropriate. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an acquisition generally include, but are not limited to: (i) land and improvements, buildings and improvements, undeveloped land, and construction in progress, and (ii) identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market operating leases and ground leases, acquired
in-place lease values, and tenant relationships, if any. Any debt assumed and equity (including common units of the Operating Partnership) issued in connection with a property acquisition is recorded at relative fair value on the date of acquisition.
The fair value of land and improvements is derived from comparable sales of land and improvements within the same submarket and/or region. The fair value of buildings and improvements, tenant improvements, and leasing costs considers the value of the property as if it was vacant as well as current replacement costs and other relevant market rate information.
The fair value of the above-market or below-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term, and (ii) management’s estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease for above-market operating leases and the initial non-cancellable term plus the term of any below-market fixed rate renewal options, if applicable, for below-market operating leases. Our below-market operating leases generally do not include fixed rate or below-market renewal options. The amounts recorded for above-market operating leases are included in deferred leasing costs and acquisition-related intangible assets, net on the balance sheet and are amortized on a straight-line basis as a reduction of rental income over the remaining term of the applicable leases. The amounts recorded for below-market operating leases are included in deferred revenue and acquisition-related intangible liabilities, net on the balance sheet and are amortized on a straight-line basis as an increase to rental income over the remaining term of the applicable leases plus the term of any below-market fixed rate renewal options, if applicable. The amortization of a below-market ground lease obligation is recorded as an increase to ground lease expense in the consolidated statements of operations for the periods presented. The amortization of an above-market ground lease obligation is recorded as a decrease to ground lease expense in the consolidated statements of operations for the periods presented. If a lease were to be terminated prior to its contractual expiration, amortization of the related above-market or below-market lease intangible would be accelerated through the termination date.
The fair value of acquired in-place leases is derived based on management’s assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. This fair value is based on a variety of considerations, including, but not necessarily limited to: (i) the value associated with lost rental revenue from existing leases during the assumed lease-up period; (ii) the value associated with avoiding the cost of originating the acquired in-place leases; and (iii) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period. Factors we consider in performing these analyses include an estimate of the carrying costs during the expected lease-up periods, current market conditions, and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance, and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand at market rates. In estimating costs to execute similar leases, we consider leasing commissions, legal, and other related expenses. The amount recorded for acquired in-place leases is included in deferred leasing costs and acquisition-related intangible assets, net on the balance sheet and amortized as an increase to depreciation and amortization expense over the remaining term of the applicable leases. Fully amortized intangible assets are written off each quarter. If a lease were to be terminated or if termination were determined to be likely prior to its contractual expiration (for example resulting from bankruptcy), amortization of the related unamortized in-place lease intangible would be accelerated.
The determination of the fair value of any debt assumed in connection with a property acquisition is estimated by discounting the future cash flows using market interest rates available for the issuance of debt with similar terms and remaining maturities.
The determination of the fair value of the acquired tangible and intangible assets and assumed liabilities of acquisitions requires us to make significant judgments and assumptions about the numerous inputs discussed above. The use of different assumptions in these fair value calculations could significantly affect the reported amounts of the allocation of our acquisition related assets and liabilities and the related depreciation and amortization expense recorded for such assets and liabilities. In addition, because the value of above and below market leases are
amortized as either a reduction or increase to rental income, respectively, our judgments for these intangibles could have a significant impact on our reported rental revenues and results of operations.
Transaction costs associated with our acquisitions, including costs incurred during negotiation, are capitalized as part of the purchase price of the acquisition. During the years ended December 31, 2024 and 2022, we capitalized $0.2 million of acquisition costs, respectively. We did not capitalize any acquisition costs during the year ended December 31, 2023.
Evaluation of Asset Impairment
We evaluate our real estate assets, including land held for future development, for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a given asset may not be recoverable. We evaluate our real estate assets for impairment on a property-by-property basis. Indicators we use to determine whether an impairment evaluation is necessary include:
•low occupancy levels, forecasted low occupancy levels or near term lease expirations at a specific property;
•current period operating or cash flow losses combined with a historical pattern or future projection of potential continued operating or cash flow losses at a specific property;
•deterioration in rental rates for a specific property as evidenced by sudden significant rental rate decreases or continuous rental rate decreases over numerous quarters, which could signal a continued decrease in future cash flows for that property;
•deterioration of a given rental submarket as evidenced by significant increases in market vacancy and/or negative absorption rates or continuous increases in market vacancy and/or negative absorption rates over numerous quarters, which could signal a decrease in future cash flows for properties within that submarket;
•significant increases in property sales yields, continuous increases in property sales yields over several quarters, or recent property sales at a loss within a given submarket, each of which could signal a decrease in the market value of properties;
•significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay;
•evidence of material physical damage to the property; and
•default by a significant tenant when any of the other indicators above are present.
When we evaluate for potential impairment our real estate assets to be held and used, as well as land held for future development for potential impairment, we first evaluate whether there are any indicators of impairment.
If any impairment indicators are present for a specific real estate asset, we then perform an undiscounted cash flow analysis and compare the net carrying amount of the real estate asset to the real estate asset’s estimated undiscounted future cash flows over the anticipated holding period. If the estimated undiscounted future cash flows are less than the net carrying amount of the real estate asset, we perform an impairment loss calculation. Our impairment loss calculation compares the net carrying amount of the real estate asset to the real estate asset’s estimated fair value, which may be based on estimated discounted future cash flow calculations or third-party valuations or appraisals, and we recognize an impairment loss to the extent that the asset’s net carrying amount exceeds the asset’s estimated fair value. If we recognize an impairment loss, the estimated fair value of the real estate asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis would be depreciated (amortized) over the remaining useful life of that asset. If a real estate asset is designated as held for sale, it is carried at the lower of the net carrying value or estimated fair value less costs to sell, and depreciation ceases.
Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and property fair values, including determining our estimated holding period and selecting the discount or capitalization rate that reflects the risk inherent in future cash flows. Estimating projected cash flows is highly subjective as it requires assumptions related to future rental rates, credit loss, average lease term, lease-up timeframes, renewal probability, lease reimbursement type, tenant allowances, leasing commissions, operating expenditures, property taxes, capital improvements, development costs, construction completion date, stabilization date, and occupancy levels. We are also required to make a number of assumptions relating to future economic and market events and prospective operating trends. Determining the appropriate capitalization rate also requires significant judgment and is typically based on many factors, including the prevailing rate for the market or submarket, as well as the quality and location of the properties. Further, capitalization rates can fluctuate resulting from a variety of factors in the overall economy or within regional markets. If the actual net cash flows or actual market capitalization rates significantly differ from our estimates, the impairment evaluation for an individual asset could be materially affected.
For each property where such an indicator occurred and/or for properties within a given submarket where such an indicator occurred, we completed an impairment evaluation. After completing this process, we determined that for each of the operating properties evaluated, undiscounted cash flows over the holding period were in excess of carrying value and, therefore, we did not record any impairment losses for these properties for the years ended December 31, 2024, 2023, and 2022.
Cost Capitalization and Depreciation
We capitalize all costs clearly associated with development and redevelopment activities, capital improvements, and tenant improvements as project costs, including internal compensation costs related to those activities. For the years ended December 31, 2024, 2023, and 2022, we capitalized $12.1 million, $15.8 million and $19.9 million, respectively, of internal costs to our qualifying development and redevelopment projects. In addition, for development and redevelopment projects, we also capitalize the following costs during periods in which activities necessary to prepare the project for its intended use are in progress: pre-construction costs essential to the development of the property, interest costs based on the weighted average interest rate of our outstanding indebtedness for the period, real estate taxes, and insurance. For the years ended December 31, 2024, 2023, and 2022, we capitalized $8.6 million $6.8 million, and $6.9 million of internal costs to our qualifying capital improvement projects in the stabilized portfolio.
Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. Expenditures that meet one or more of the following criteria generally qualify for capitalization:
•Provide benefit in future periods;
•Extend the useful life of the asset beyond our original estimates; and
•Increase the quality of the asset beyond our original estimates.
We define redevelopment properties as those properties for which we expect to spend significant development and construction costs pursuant to a formal plan to change its use, the intended result of which is a higher economic return on the property.
We define a property in the tenant improvement phase as a development or redevelopment property where the project has reached “cold shell condition” and is ready for tenant improvements, which may require additional major base building modifications before being placed in service. Projects in the tenant improvement phase are moved into 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.
For office, life science, and retail development and redevelopment properties, the date the capitalization period ends is based on property-specific leasing activity:
•For properties that are pre-leased, we cease capitalization when revenue recognition has commenced on the leased space, which is upon substantial completion of tenant improvements deemed to be the Company’s asset for accounting purposes.
•For properties that are not pre-leased, we may not immediately build out the tenant improvements. Therefore, we cease capitalization and begin depreciation on the portion of the property for which revenue recognition has commenced on the leased space, but in any event, no later than one year after the cessation of major base building construction activities. Revenue recognition commences on leased space upon substantial completion of the tenant improvements deemed to be the Company’s asset for accounting purposes. We also cease capitalization when activities necessary to prepare the property for its intended use have been suspended.
For residential development properties, we cease capitalization when the property is substantially complete and available for occupancy.
Once major base building construction activities have ceased and the development or redevelopment property (or phases thereof) have been placed in service, the costs capitalized to construction in progress are transferred to land and improvements, buildings and improvements, and deferred leasing costs on our consolidated balance sheets as the historical cost of the property.
Amounts capitalized are depreciated or amortized over estimated useful lives determined by management. We depreciate buildings and improvements based on the estimated useful life of the asset, and we amortize tenant improvements over the shorter of the estimated useful life or estimated remaining life of the related lease. All capitalized costs are depreciated or amortized using the straight-line method. Our historical experience has demonstrated that we have not had material write-offs of assets and that our depreciation and amortization estimates have been reasonable and appropriate.
Share-Based Incentive Compensation Accounting
At December 31, 2024, the Company had one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan, which is described more fully in Note 16 “Share-Based and Other Compensation” to our consolidated financial statements included in this report. The Executive Compensation Committee determines compensation for executive officers, as defined in Rule 16 under the Exchange Act. Compensation cost for all share-based awards, including options, requires an estimate of fair value on the grant date and compensation cost is recognized on a straight-line basis over the service vesting period, which represents the requisite service period. The grant date fair value for compensation programs that contain market conditions, like modifiers based on total stockholder return (a “market condition”), are performed using complex pricing valuation models that require the input of assumptions, including judgments to estimate expected stock price volatility, expected life, and forfeiture rate. Specifically, the grant date fair value of share-based compensation programs that include market conditions are calculated using a Monte Carlo simulation pricing model. Additionally, certain of our market condition share-based compensation programs also contain pre-defined financial performance conditions, including FFO per share and debt to EBITDA ratio goals which can impact the number of restricted stock units ultimately earned. This variability relating to the level of the performance condition achieved requires management’s judgment and estimates, which impacts compensation cost recognized for these awards during the performance period. As of December 31, 2024, the performance condition for certain of our outstanding market condition share-based compensation programs has been met and compensation cost for these awards is no longer variable. For these awards, although the number of restricted stock units ultimately earned remains variable subject to the ultimate achievement level of the market condition, compensation cost is no longer variable for these awards as the market condition was already taken into consideration as part of the grant date fair value calculation. As of December 31, 2024, there are certain outstanding share-based compensation awards where the achievement of the performance condition is yet unknown as the award is still within its performance measurement period. For these awards, compensation cost and the number of restricted stock units ultimately earned remains variable and compensation cost for these awards is recorded based on our most recent estimate of the probable achievement of the performance conditions through the requisite service period. Changes to compensation cost resulting from changes in the estimated level of achievement of the performance
conditions are recorded as cumulative adjustments in the period the change in the estimated level of achievement of the performance conditions is determined.
For the years ended December 31, 2024, 2023, and 2022 we recorded approximately $12.5 million, $33.2 million, and $18.9 million, respectively, of compensation cost related to programs that were subject to estimates and judgments. If the valuation of the grant date fair value for such programs changed by 10%, the potential impact to our net income available to common stockholders would be approximately $0.8 million, $2.9 million, and $1.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Factors That May Influence Future Results of Operations
Acquisitions
During the year ended December 31, 2024, we acquired one operating property, comprised of two buildings, in one transaction for a cash purchase price of $35.0 million. 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 core, value-add and strategic operating properties and land. We historically have focused 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. We generally finance our acquisitions through proceeds from the issuance of debt and equity securities, borrowings under our unsecured revolving credit facility, proceeds from our capital recycling program, the assumption of existing debt, and cash flows from operations.
In connection with our growth strategy, we may 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.
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, from identifying new redevelopment opportunities and executing on our future development pipeline. Our future development pipeline may also expand in the future through targeted acquisitions of development opportunities on the West Coast and in Austin, Texas, subject to market conditions.
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, retail amenities, and in markets with strong fundamentals and visible demand. We generally plan to develop projects in phases, as appropriate, and we favor starting projects with significant pre-leasing activity.
In-Process Redevelopment - Tenant Improvement
As of December 31, 2024, we had two redevelopment projects in the tenant improvement phase:
•4690 Executive Drive, University Towne Center, San Diego, California. In March 2022, we began the phased redevelopment of this property and completed base building components and moved the building to the tenant improvement phase during the third quarter of 2024. This project is comprised of approximately 52,000 square feet of life science space with a total estimated investment of $25.0 million, inclusive of the depreciated basis of the building. We expect this property to be added to the stabilized portfolio in the third quarter of 2025.
•4400 Bohannon Drive, Menlo Park, California. In December 2022, we began the redevelopment of this property in the Other Peninsula submarket and completed base building components and moved the building to the tenant improvement phase during the third quarter of 2024. This project is comprised of approximately 48,000 square feet of life science space with a total estimated investment of $55.0 million,
inclusive of the depreciated basis of the building. We expect this property to be added to the stabilized portfolio in the third quarter of 2025.
In-Process Development - Under Construction
As of December 31, 2024, we had one development project 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 and life science space across three buildings with a total estimated investment of $1.0 billion. In January 2025, we progressed this project to the tenant improvement phase upon receiving a temporary certificate of occupancy.
Future Development Pipeline
As of December 31, 2024, our future development pipeline included eight future projects located in Los Angeles, San Diego, the San Francisco Bay Area, Seattle and Austin with an aggregate cost basis of approximately $1.4 billion, at which we believe we could develop more than 6.0 million rentable square feet of office space.
The following table sets forth information about our future development pipeline:
Future Development Pipeline Location Approx. Developable Square
Feet / Residential Units (1)
Total Costs
as of 12/31/2024
($ in millions)(2)
Los Angeles
1633 26th Street West Los Angeles 190,000 $ 15.1
San Diego
Santa Fe Summit South / North 56 Corridor 600,000 - 650,000 116.2
2045 Pacific Highway Little Italy 275,000 61.1
Kilroy East Village East Village 1,100 units 67.9
San Francisco Bay Area
Kilroy Oyster Point - Phases 3 and 4 South San Francisco 875,000 - 1,000,000 246.7
Flower Mart SOMA 2,300,000 664.8
Greater Seattle
SIX0
Denny Regrade 925,000 and 650 units 197.3
Austin
Stadium Tower Stadium District / Domain 493,000 75.9
TOTAL: $ 1,445.0
________________________
(1)Represents developable office/life science square feet and/or residential units. The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: significant changes in the economy, market conditions, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes, or project design.
(2)Represents cash paid and costs incurred, including accrued liabilities in accordance with GAAP, as of December 31, 2024.
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. A slowdown in development activities could result in fewer projects qualifying for interest capitalization under GAAP, resulting in higher interest expense. During the year ended December 31, 2024, we capitalized interest on in-process development and redevelopment projects and future development pipeline projects with an average aggregate cost basis of approximately $1.9 billion, as it was determined these projects qualified for interest and other carrying cost capitalization under GAAP. For the year ended December 31, 2024, we capitalized $82.5 million of interest to our qualifying development and redevelopment projects. For the year ended December 31, 2024, we capitalized $12.1 million of internal costs to our qualifying development and redevelopment projects and $8.6 million of internal costs to our qualifying capital improvement projects in the stabilized portfolio.
Capital Recycling Program
We continuously evaluate opportunities for the potential disposition of non-core properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of using the proceeds generated to acquire new operating and development properties, to finance development and redevelopment expenditures, to repay long-term debt and for other general corporate purposes. As part of this strategy, we may 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 due to current economic and market conditions) and our ability to absorb or 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 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.
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 2024, the annual cash bonus program was structured to allow the Executive Compensation Committee to evaluate the Company’s performance against pre-established goals under 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, 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 December 31, 2024, there was approximately $23.4 million of total unrecognized compensation costs 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 December 31, 2024, 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. The $23.4 million of unrecognized compensation cost does not reflect the future compensation costs for any share-based awards that may be granted subsequent to December 31, 2024. Share-based compensation expense for potential future awards could be affected by our operating and development performance, financial results, stock price, market conditions, and other factors. For additional information regarding our equity incentive awards, see Note 16 “Share-Based and Other Compensation” to our consolidated financial statements included in this report.
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 at our properties. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity during the year ended December 31, 2024.
For Leases Commenced (1)
Year to Date Number of Leases
Rentable Square Feet
Weighted Average Lease Term
(in months)
TI/LC per
Sq. Ft. (2)
TI/LC per Sq. Ft. /
Year (2)
Changes
in
Rents (3)
Changes in
Cash
Rents (4)
New Renewal New Renewal
2nd Generation (5)
53 49 392,651 466,780 62 $ 57.32 $ 11.09 19.5 % 4.2 %
1st Gen / Major Repositioning /
In-Process Development & Redevelopment Leasing (6)
10 - 107,029 - 141 $ 158.27 $ 13.47
Total 63 49 499,680 466,780
For Leases Executed (1)(7)
Year to Date Number of Leases
Rentable Square Feet
Weighted Average Lease Term (in months)
TI/LC per
Sq. Ft. (2)
TI/LC per Sq. Ft. / Year (2)
Changes
in
Rents (3)
Changes in
Cash
Rents (4)
Retention Rates (8)
New Renewal New Renewal
2nd Gen Leasing (5)
66 49 885,179 466,780 65 $ 50.03 $ 9.24 8.2 % (4.5) % 30.9 %
1st Gen / Major Repositioning /
In-Process Development & Redevelopment
Leasing (6)
10 - 65,328 - 99 $ 126.93 $ 15.39
Total 76 49 950,507 466,780
________________________
(1) Includes 100% of consolidated property partnerships.
(2) Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
(3) Calculated as the change between the expiring GAAP rent and the new GAAP rent 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.
(4) Calculated as the change between the expiring cash rent and the new cash rent 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) Represents leases commenced or executed at properties in the stabilized portfolio during the period, excluding leases with a lease term of less than one year. Excludes leases commenced at space not previously leased at recently completed development projects that have been added to the stabilized portfolio and at space in the stabilized portfolio for which we are incurring significant non-recurring capital expenditures to reposition and is expected to result in additional revenue generated when re-leased.
(6) Represents leases commenced or executed at space not previously leased, recently completed development projects that have been added to the stabilized portfolio, at space in the stabilized portfolio for which we are incurring significant non-recurring capital expenditures to reposition and is expected to result in additional revenue generated when re-leased, and at projects in our development and redevelopment portfolios.
(7) During the year ended December 31, 2024, 33 new leases totaling 700,504 rentable square feet were signed but not commenced.
(8) Calculated as the percentage of space either renewed by existing tenants at lease expiration or termination.
Scheduled Lease Expirations. The following tables set forth certain information regarding our lease expirations for our stabilized portfolio, excluding our residential properties, for the next five years and by region for the next two years.
Lease Expirations (1)(2)
Year of Lease Expiration Number of
Expiring
Leases Total
Square Feet % of Total
Leased Sq. Ft. Annualized
Base Rent (3)
% of Total
Annualized
Base Rent (3)
Annualized Base Rent
per Sq. Ft. (3)
(in thousands)
2025 (4)
67 715,573 5.2 % $ 30,212 3.8 % $ 42.22
2026 (4)
74 1,934,525 14.0 % 93,174 11.8 % 48.16
2027 77 1,095,562 7.9 % 44,802 5.7 % 40.89
2028 58 1,160,992 8.4 % 71,467 9.1 % 61.56
2029 49 1,213,765 8.9 % 66,518 8.5 % 54.80
Total 325 6,120,417 44.4 % $ 306,173 38.9 % $ 50.02
Year Region Number of
Expiring Leases Total
Square Feet % of Total
Leased
Sq. Ft. Annualized
Base Rent (3)
% of Total
Annualized
Base Rent (3)
Annualized
Rent
per Sq. Ft. (3)
(in thousands)
2025 (4)
Los Angeles
36 215,751 1.6 % $ 9,367 1.2 % $ 43.42
San Diego
16 209,322 1.5 % 8,090 1.0 % 38.65
San Francisco Bay Area 6 106,773 0.8 % 7,755 1.0 % 72.63
Seattle
9 183,727 1.3 % 5,000 0.6 % 27.21
Austin
- - - % - - % -
Total 67 715,573 5.2 % $ 30,212 3.8 % $ 42.22
2026 (4)
Los Angeles
30 521,726 3.8 % $ 21,705 2.8 % $ 41.60
San Diego
12 165,150 1.2 % 9,158 1.2 % 55.45
San Francisco Bay Area 19 948,962 6.8 % 49,748 6.2 % 52.42
Seattle
13 298,687 2.2 % 12,563 1.6 % 42.06
Austin
- - - % - - % -
Total 74 1,934,525 14.0 % $ 93,174 11.8 % $ 48.16
_____________________
(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 December 31, 2024, space leased under month-to-month leases, storage leases, vacant space, leases with a lease term of less than one year, intercompany leases, and future lease renewal options not executed as of December 31, 2024.
(2) Includes 100% of annualized base rent of consolidated property partnerships.
(3) 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 to 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.”
(4) Adjusting for leasing transactions executed as of December 31, 2024 but not yet commenced, the 2025 and 2026 expirations would be reduced by 127,744 and 430,644 square feet, respectively.
In addition to the 2.9 million rentable square feet, or 17.2%, of currently available space in our stabilized portfolio, leases representing approximately 5.2% and 14.0% of the occupied square footage of our stabilized portfolio are scheduled to expire during 2025 and 2026, respectively. The leases scheduled to expire in 2025 and 2026 represent approximately 2.7 million rentable square feet, or 15.6%, of our total annualized base rental revenue. Adjusting for leases executed as of December 31, 2024 but not yet commenced, the remaining 2025 and 2026 expirations would be 587,829 and 1,503,881 square feet, respectively.
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.
Sublease Space. Of our occupied space as of December 31, 2024, approximately 1.7 million rentable square feet, or 9.9%, of the square footage in our stabilized portfolio, was available for sublease, primarily in the San Francisco Bay Area. Of the approximately 1.7 million rentable square feet available for sublease as of December 31, 2024, approximately 18,663 rentable square feet representing one lease scheduled to expire in 2025, and approximately 79,795 rentable square feet representing four leases are scheduled to expire in 2026.
Stabilized Portfolio Information
As of December 31, 2024, our stabilized portfolio was comprised of 123 office, life science, and mixed-use properties encompassing an aggregate of approximately 17.1 million rentable square feet and 1,001 residential units. Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, 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 pursuant to a formal plan to change its use, the intended result of which is a higher economic return on the property. We define a property in the tenant improvement phase as a development or redevelopment property where the project has reached “cold shell condition” and is ready for tenant improvements, which may require additional major base building modifications before being placed in service. Projects in the tenant improvement phase are moved into 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 as the projects or phases of projects are placed in service.
We did not have any properties or undeveloped land held for sale at December 31, 2024. Our stabilized portfolio also excludes our future development pipeline, which, as of December 31, 2024, was comprised of eight potential development sites, representing approximately 64 gross acres of undeveloped land, on which we believe we could develop more than 6.0 million rentable square feet of office space.
As of December 31, 2024, the following properties were excluded from our stabilized portfolio:
Number of
Properties/Projects Estimated Rentable
Square Feet (1)
In-process redevelopment projects - tenant improvement 2 100,000
In-process development projects - under construction 1 875,000
________________________
(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 December 31, 2023 to December 31, 2024:
Number of
Buildings Rentable
Square Feet
Total as of December 31, 2023 (1)
121 17,044,128
Acquisitions 2 103,731
Remeasurement - (5,138)
Total as of December 31, 2024 (1)
123 17,142,721
________________________
(1)Includes four properties owned by consolidated property partnerships (see Note 2 “Basis of Presentation and Significant Accounting Policies” 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:
Stabilized Portfolio Occupancy
Region Number of
Buildings Rentable
Square Feet Occupancy at (1)
12/31/2024 12/31/2023 12/31/2022
Los Angeles
53 4,340,302 75.0 % 79.0 % 85.2 %
San Diego
26 2,876,502 89.2 % 88.6 % 86.2 %
San Francisco Bay Area 33 6,170,595 87.4 % 91.0 % 95.5 %
Seattle
10 2,996,347 80.5 % 83.4 % 97.7 %
Austin
1 758,975 74.7 % 64.9 % - %
Total Stabilized Office Portfolio 123 17,142,721 82.8 % 85.0 % 91.6 %
Average Occupancy
Year Ended December 31,
2024 2023
Stabilized Portfolio (1)
83.9 % 87.3 %
Same Store Portfolio (2)
84.4 % 87.4 %
Residential Portfolio (3)
92.5 % 92.8 %
_____________________
(1) Occupancy percentages reported are based on our stabilized portfolio as of the end of the period presented and exclude occupancy percentages of properties held for sale. Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.
(2) Occupancy percentages reported are based on properties owned and stabilized as of January 1, 2023 and still owned and stabilized as of December 31, 2024 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.
Results of Operations
Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023
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 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 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, 2023 and still owned and included in the stabilized portfolio as of December 31, 2024, 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 third quarter of 2023; and
◦One office building that was added to the stabilized portfolio in the fourth quarter of 2023;
•Acquisition Properties - includes the results, from the date of acquisition through the periods presented, for the one property acquired in the third quarter of 2024;
The following table sets forth certain information regarding the property groups within our stabilized office portfolio as of December 31, 2024.
Group # of Buildings Rentable
Square Feet
Same Store Properties 119 16,209,399
Stabilized Development and Redevelopment Properties (1)
2 829,591
Acquisition Properties 2 103,731
Total Stabilized Portfolio 123 17,142,721
________________________
(1)Excludes development and redevelopment projects in the tenant improvement phase, our in-process development and redevelopment projects, and future development projects.
The following table summarizes our Net Operating Income, as defined, for our total portfolio for the years ended December 31, 2024 and 2023.
Year Ended December 31, Dollar
Change Percentage
Change
2024 2023
($ in thousands)
Reconciliation of Net Income Available to Common Stockholders to Net Operating Income, as defined:
Net Income Available to Common Stockholders $ 210,969 $ 212,241 $ (1,272) (0.6) %
Net income attributable to noncontrolling common units of the Operating Partnership 2,062 2,083 (21) (1.0) %
Net income attributable to noncontrolling interests in consolidated property partnerships 19,923 23,964 (4,041) (16.9) %
Net income $ 232,954 $ 238,288 $ (5,334) (2.2) %
Unallocated expense (income):
General and administrative expenses 72,066 93,434 (21,368) (22.9) %
Leasing costs 8,764 6,506 2,258 34.7 %
Depreciation and amortization 356,182 355,278 904 0.3 %
Interest income
(37,752) (22,592) (15,160) 67.1 %
Interest expense 145,287 114,216 31,071 27.2 %
Gain on sales of long-lived assets (5,979) - (5,979) 100.0 %
Net Operating Income, as defined $ 771,522 $ 785,130 $ (13,608) (1.7) %
The following tables summarize our Net Operating Income, as defined, for our total portfolio for the years ended December 31, 2024 and 2023.
Year Ended December 31,
2024 2023
Same Store
Development
Acquisition
Total Same Store
Development
Acquisition
Total
(in thousands)
Operating revenues:
Rental income $ 1,064,169 $ 52,367 $ 1,579 $ 1,118,115 $ 1,074,752 $ 42,985 $ - $ 1,117,737
Other property income 15,175 2,339 - 17,514 10,988 969 - 11,957
Total 1,079,344 54,706 1,579 1,135,629 1,085,740 43,954 - 1,129,694
Property and related expenses:
Property expenses 234,210 9,033 198 243,441 221,448 7,516 - 228,964
Real estate taxes 98,799 10,041 111 108,951 99,359 6,509 - 105,868
Ground leases 8,041 3,674 - 11,715 7,588 2,144 - 9,732
Total 341,050 22,748 309 364,107 328,395 16,169 - 344,564
Net Operating Income,
as defined $ 738,294 $ 31,958 $ 1,270 $ 771,522 $ 757,345 $ 27,785 $ - $ 785,130
Year Ended December 31, 2024 as compared to the Year Ended December 31, 2023
Same Store Development Acquisition Total
Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change Dollar Change Percent Change
($ in thousands)
Operating revenues:
Rental income $ (10,583) (1.0) % $ 9,382 21.8 % $ 1,579 100.0 % $ 378 - %
Other property income 4,187 38.1 % 1,370 141.4 % - - % 5,557 46.5 %
Total (6,396) (0.6) % 10,752 24.5 % 1,579 100.0 % 5,935 0.5 %
Property and related expenses:
Property expenses 12,762 5.8 % 1,517 20.2 % 198 100.0 % 14,477 6.3 %
Real estate taxes (560) (0.6) % 3,532 54.3 % 111 100.0 % 3,083 2.9 %
Ground leases 453 6.0 % 1,530 71.4 % - - % 1,983 20.4 %
Total 12,655 3.9 % 6,579 40.7 % 309 100.0 % 19,543 5.7 %
Net Operating Income,
as defined $ (19,051) (2.5) % $ 4,173 15.0 % $ 1,270 100.0 % $ (13,608) (1.7) %
Net Operating Income decreased $13.6 million, or 1.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily resulting from:
•A decrease of $19.1 million, or 2.5%, attributable to the Same Store Properties which was driven by the following activity:
•A decrease in rental income of $10.6 million, or 1.0%, primarily due to the following:
•$25.9 million decrease in straight-line rent due to the burn-off of $4.0 million in abated rent and aging leases mainly in the San Francisco and San Diego regions;
•$2.9 million decrease in below market leases resulting from tenant move outs, and
•$1.1 million decrease in contractual parking due to lower occupancy; partially offset by
•$0.6 million increase in net base rent primarily due to a $21.4 million increase from higher rates and the above-mentioned $4.0 million increase due to the burn-off of abated rent, net of a $24.8 million decrease in lease expirations;
•$2.8 million increase in revenue associated with revenues deemed uncollectible;
•$5.7 million increase in termination fees primarily due to two tenants exercising early termination options, one in the Seattle region and one in the San Diego region; and
•$10.2 million increase in recoverable operating expenses of which $5.3 million is attributable to an approximately 455,000 square foot building in the San Francisco Bay Area that was previously tenant-managed becoming landlord-managed;
•An increase in other property income of $4.2 million, or 38.1%, primarily due to a $3.9 million increase in transient parking income in the Seattle region and a $0.3 million increase in ancillary other property income;
•An increase in property and related expenses of $12.8 million, or 5.8%, primarily due to higher insurance, janitorial, contract services, security, repairs and maintenance and internal property management expenses due to cost increases, which includes $5.3 million related to an approximately 455,000 square foot building in the San Francisco Bay Area that was previously tenant-managed becoming landlord-managed;
•A decrease of $0.6 million, or 0.6% in real estate taxes primarily due to a $2.6 million increase in property tax refunds;
•An increase of $0.5 million, or 6.0% in ground lease expense primarily due to a scheduled remeasurement of one of our ground leases in 2024;
•An increase of $4.2 million, or 15.0%, attributable to the Development Properties; and
•An increase of $1.3 million, or 100.0%, attributable to the Acquisition Properties.
Other Expenses and Income
General and Administrative Expenses
General and administrative expenses decreased $21.4 million, or 22.9%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to a decrease in share-based compensation expense related to the retirement of our former CEO.
Leasing Costs
Leasing costs increased $2.3 million, or 34.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an increase in leasing overhead during the year ended December 31, 2024. See the “Factors that May Influence Future Results of Operations - Information on Leases Commenced and Executed” and “Liquidity and Capital Resources of the Operating Partnership - Liquidity Uses” sections for further information.
Depreciation and Amortization
Depreciation and amortization increased by approximately $0.9 million, or 0.3%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to the following:
•An increase of $6.0 million attributable to the Development Properties; and
•An increase of $1.1 million attributable to the Acquisition Properties; partially offset by
•A decrease of $6.2 million attributable to the Same Store Properties primarily due to an in-place lease intangible asset becoming fully amortized at one property in the second quarter of 2023.
Interest Income
Interest income increased $15.2 million, or 67.1%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to carrying higher balances on our interest bearing accounts.
Interest Expense
The following table sets forth our gross interest expense and capitalized interest for the years ended December 31, 2024 and 2023:
Year Ended December 31, Dollar
Change Percentage
Change
2024 2023
($ in thousands)
Gross interest expense $ 227,748 $ 192,983 $ 34,765 18.0 %
Capitalized interest expense (82,461) (78,767) (3,694) 4.7 %
Interest expense $ 145,287 $ 114,216 $ 31,071 27.2 %
Gross interest expense, before the effect of capitalized interest, increased $34.8 million, or 18.0%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to an increase in the average outstanding debt balance and an increase in the weighted average interest rate for the year ended December 31, 2024.
Capitalized interest increased $3.7 million, or 4.7%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to an increase in the weighted average interest rate during the year ended December 31, 2024. Capitalized interest will vary based on the current status active development projects and our future development pipeline. For additional information about the potential impact of inflation on our interest expense and construction costs and the impact on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, refer to “Part I, Item IA. Risk Factors”.
Net Income Attributable to Noncontrolling Interests in Consolidated Property Partnerships
Net income attributable to noncontrolling interests in consolidated property partnerships decreased $4.0 million, or 16.9%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to lower rental income in the consolidated property partnerships. The amounts reported for the years ended December 31, 2024 and 2023 are comprised of the noncontrolling interest’s share of net income for 100 First Member, LLC and 303 Second Street Member, LLC and the noncontrolling interest’s share of net income for Redwood City Partners, LLC. See Note 12 “Noncontrolling Interests on the Company’s Consolidated Financial Statements” to our consolidated financial statements included in this report for additional information.
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Results of Operations” in our Form 10-K for the year ended December 31, 2023 for a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022.
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 flows from operations and borrowings available under its unsecured revolving credit facility and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company to make its dividend payments to its common stockholders for the next twelve months. Cash flows from operating activities generated by the Operating Partnership for the year ended December 31, 2024 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 December 31, 2024, we had approximately $165.7 million in cash and cash equivalents and $1.1 billion available under our unsecured revolving credit facility. In January 2024, the Operating Partnership issued $400.0 million aggregate principal amount of unsecured senior notes in a registered public offering at an interest rate of 6.250%. In March 2024, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility to maintain the existing $1.1 billion borrowing capacity and extend the maturity date to July 31, 2028, repaid $200.0 million on its existing $520.0 million unsecured term loan facility (the “2022 Term Loan Facility”), and extended the maturity date on an aggregate principal amount of $200.0 million of the remaining $320.0 million by 12 months to October 3, 2025. In September 2024, the Operating Partnership repaid the $120.0 million outstanding on the 2022 Term Loan Facility. In December 2024, the Operating Partnership repaid the $403.7 million aggregate principal amount outstanding of its 3.450% unsecured senior notes at maturity. Excluding our unsecured term loan facility, for which we have two twelve-month extension options, our next debt maturity of $400.0 million occurs in October 2025. 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.
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 raise capital to fund the Operating Partnership’s working capital needs, as well as potential developments of new or existing properties or acquisitions.
The Company intends to continue to make, but has not committed to make, regular quarterly cash distributions to common stockholders, and through the Operating Partnership, to common unitholders from the Operating Partnership’s cash flows from operating activities. All such distributions are at the discretion of the Board of Directors. In 2024, the Company’s distributions exceeded 100% of its taxable income, resulting in a return of capital to its stockholders (see Note 25 “Tax Treatment of Distributions” to our consolidated financial statements included in this report for additional information). 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 2025. In addition, in the event the Company completes additional dispositions in the future and 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 December 5, 2024, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share of common stock. The regular quarterly cash dividend is payable to stockholders of record on December 31, 2024 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 December 31, 2024, including those owned by the Company. The total cash quarterly dividends and distributions paid on January 8, 2025 were $64.4 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.
Capitalization
As of December 31, 2024, our total debt as a percentage of total market capitalization was 49.0%, which was calculated based on the closing price per share of the Company’s common stock of $40.45 on December 31, 2024 as shown in the following table:
Shares/Units at
December 31, 2024
Aggregate
Principal
Amount or
$ Value
Equivalent % of Total
Market
Capitalization
($ in thousands)
Debt: (1)(2)
Unsecured Term Loan Facility due 2025 (3)
$ 200,000 2.1 %
Unsecured Senior Notes due 2025 400,000 4.2 %
Unsecured Senior Notes Series A & B due 2026 250,000 2.7 %
Unsecured Senior Notes due 2028 (4)
400,000 4.2 %
Unsecured Senior Notes due 2029 400,000 4.2 %
Unsecured Senior Notes Series A & B due 2027 & 2029 250,000 2.7 %
Unsecured Senior Notes due 2030 500,000 5.3 %
Unsecured Senior Notes due 2031 350,000 3.7 %
Unsecured Senior Notes due 2032 (4)
425,000 4.5 %
Unsecured Senior Notes due 2033 (4)
450,000 4.8 %
Unsecured Senior Notes due 2036
400,000 4.2 %
Secured debt 606,688 6.4 %
Total debt 4,631,688 49.0 %
Equity and Noncontrolling Interests in the Operating Partnership: (5)
Common limited partnership units outstanding (6)
1,150,574 46,541 0.5 %
Shares of common stock outstanding 118,046,674 4,774,988 50.5 %
Total Equity and Noncontrolling Interests in the Operating Partnership 4,821,529 51.0 %
Total Market Capitalization $ 9,453,217 100.0 %
_____________________
(1)Represents gross aggregate principal amount due at maturity before the effect of the following at December 31, 2024: $25.5 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $8.4 million of unamortized discounts for the unsecured senior notes.
(2)As of December 31, 2024, there was no outstanding balance on the unsecured revolving credit facility.
(3)The maturity date may be extended by two 12-month periods, at the Operating Partnership’s option.
(4)Green bond.
(5)Value based on closing price per share of our common stock of $40.45 as of December 31, 2024.
(6)Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.
Liquidity and Capital Resources of the Operating Partnership
In this “Liquidity and Capital Resources of the Operating Partnership” section, the terms “we,” “our,” and “us” refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.
General
Our primary liquidity sources and uses are as follows:
Liquidity Sources
•Net cash flows from operations;
•Borrowings under the Operating Partnership’s unsecured revolving credit 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 improvements, 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.
2024 Capital and Financing Transactions
We continue to be active in the capital markets to finance potential acquisitions and our development activity, as well as our continued desire to extend our debt maturities. This was primarily a result of the following activity:
•During the first quarter of 2024, amended our unsecured term revolving credit facility to extend the maturity date to July 31, 2028. In connection with amending and restating the unsecured revolving credit facility, the Operating Partnership repaid $200.0 million of its existing $520.0 million unsecured term loan facility (the “2022 Term Loan Facility”) and extended the maturity date on $200.0 million of the remaining $320.0 million principal balance by 12 months to October 3, 2025 (the “2024 Term Loan Facility”); and
•During the first quarter of 2024, issued $400.0 million aggregate principal amount of unsecured senior notes in a registered public offering.
Liquidity Sources
Unsecured Revolving Credit Facility and Term Loan Facilities
In March 2024, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility. The amendment and restatement maintained the $1.1 billion borrowing capacity and extended the maturity date of the unsecured revolving credit facility to July 31, 2028.
The following table summarizes the balance and terms of our unsecured revolving credit facility as of December 31, 2024 and 2023:
December 31, 2024 December 31, 2023
(in thousands)
Outstanding borrowings $ - $ -
Remaining borrowing capacity (1)
1,100,000 1,100,000
Total borrowing capacity (1)
$ 1,100,000 $ 1,100,000
Interest rate (2)
5.69 % 6.38 %
Facility fee-annual rate (3)
0.250% 0.200%
Maturity date (4)
July 31, 2028 July 31, 2025
______________________
(1)Remaining and total borrowing capacity are further reduced by the amount of our outstanding letters of credit which total approximately $5.2 million as of December 31, 2024 and December 31, 2023. 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 pursuant to the terms of the unsecured revolving credit facility.
(2)Our unsecured revolving credit facility interest rate was calculated using the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% (“Adjusted SOFR”) and a margin of 1.100% and 0.900% based on our credit rating as of December 31, 2024 and 2023, respectively. We may be entitled to a temporary 0.01% reduction in the interest rate provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.
(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 in connection with the amendment and restatement of the unsecured revolving credit facility. As of December 31, 2024 and 2023, $12.7 million and $3.2 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 maturity date of our unsecured revolving credit facility.
(4)The maturity date may be extended by two six-month periods, at the Operating Partnership’s election.
The Operating Partnership intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, including to finance development and redevelopment expenditures, to fund potential acquisitions, to repay long-term debt, and to supplement cash balances in response to market conditions.
In connection with amending and restating the unsecured revolving credit facility, the Operating Partnership repaid $200.0 million of its existing $520.0 million unsecured term loan facility (the “2022 Term Loan Facility”) and extended the maturity date on $200.0 million of the remaining $320.0 million principal balance by 12 months to October 3, 2025 (the “2024 Term Loan Facility”). The following table summarizes the balance and terms of our 2024 Term Loan Facility as of December 31, 2024:
2024 Term Loan Facility
December 31, 2024
(in thousands)
Outstanding borrowings $ 200,000
Remaining borrowing capacity -
Total borrowing capacity (1)
$ 200,000
Interest rate (2)
5.70 %
Maturity date (3)
October 3, 2025
_______________
(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 as of December 31, 2024, under an accordion feature pursuant to the terms of the 2024 Term Loan Facility.
(2)Our 2024 Term Loan Facility interest rate was calculated using Adjusted SOFR plus a margin of 1.200% based on our credit rating as of December 31, 2024. Additionally, we incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility. As of December 31, 2024, $1.2 million of unamortized deferred financing costs, inclusive of unamortized initial issuance costs transferred from the 2022 Term Loan Facility, remained to be amortized through the maturity date of the 2024 Term Loan Facility.
(3)The maturity date may be extended by two 12-month periods, at the Operating Partnership’s election.
In September 2024, the Operating Partnership repaid the $120.0 million outstanding on its 2022 Term Loan Facility. The following table summarizes the balance and terms of our 2022 Term Loan Facility as of December 31, 2023:
2022 Term Loan Facility
December 31, 2023
(in thousands)
Outstanding borrowings $ 520,000
Remaining borrowing capacity -
Total borrowing capacity
$ 520,000
Interest rate (1)
6.41 %
Undrawn facility fee-annual rate (2)
0.200%
Maturity date
October 3, 2024
______________________
(1)Our 2022 Term Loan Facility interest rate was calculated using Adjusted SOFR plus a margin of 0.950% based on our credit rating as of December 31, 2023.
(2)Our undrawn facility fee was paid on a quarterly basis and was calculated based on the remaining borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2023, $2.3 million of unamortized deferred financing costs remained to be amortized through the maturity date of our 2022 Term Loan Facility.
Capital Recycling Program
As discussed in the section “Factors That May Influence Future Results of Operations - Capital Recycling Program,” we continuously evaluate opportunities for the potential disposition of non-core properties and undeveloped land in our portfolio or the formation of strategic ventures with the intent of using the proceeds generated to acquire new operating and development properties, to finance development and redevelopment expenditures, to repay long-term debt, and for other general corporate purposes. As part of this strategy, we may attempt to enter into 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.
The timing of any potential future disposition or strategic venture transactions will depend on market conditions and other factors, including, but not limited to, our capital needs, the availability of financing for potential buyers (which has been and may continue to be constrained due to current economic and market conditions), and our ability to defer some or all of the taxable gains on the sales. We cannot assure you that we will dispose of any additional properties, enter into any additional strategic ventures, or that we will be able to effect a Section 1031 Exchange or be able to use other tax deferred structures in connection with our strategy. 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 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, 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.
At-The-Market Stock Offering Program
In March 2024, the Company terminated its prior at-the-market (“ATM”) stock offering program and commenced a new at-the-market stock offering program (the “2024 ATM Program”), under which we may currently offer and sell shares of our common stock having an aggregate gross sales price up to $500.0 million from time to time in “at-the-market” offerings. In connection with the 2024 ATM Program, the Company may also, at its discretion, enter into forward equity sale agreements. The use of forward equity sale agreements allows the Company to lock in a share price on the sale of shares of our common stock at the time an agreement is executed, but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. The Company did not complete any sales of common stock under either program during the years ended December 31, 2024 and 2023.
Issuance of $400.0 million Unsecured Senior Notes Due 2036
In January 2024, the Operating Partnership issued $400.0 million aggregate principal amount of unsecured senior notes in a registered public offering. The outstanding balance of the unsecured senior notes is included in unsecured debt, net of an initial issuance discount of $4.5 million, on our consolidated balance sheets. The unsecured senior notes, which are scheduled to mature on January 15, 2036, require semi-annual interest payments each January and July based on a stated annual interest rate of 6.250%. The Operating Partnership may redeem the notes at any time, either in whole or in part, subject to the payment of an early redemption premium with respect to redemptions prior to October 15, 2035. On or after October 15, 2035, the Operating Partnership may redeem the notes at any time, either in whole or in part, at par.
The aggregate principal amount of the unsecured and secured debt of the Operating Partnership outstanding as of December 31, 2024 was as follows:
Aggregate Principal
Amount Outstanding
(in thousands)
Unsecured Term Loan Facility due 2025 (1)
$ 200,000
Unsecured Senior Notes due 2025 400,000
Unsecured Senior Notes Series A & B due 2026 250,000
Unsecured Senior Notes due 2028 (2)
400,000
Unsecured Senior Notes due 2029 400,000
Unsecured Senior Notes Series A & B due 2027 & 2029 250,000
Unsecured Senior Notes due 2030 500,000
Unsecured Senior Notes due 2031 350,000
Unsecured Senior Notes due 2032 (2)
425,000
Unsecured Senior Notes due 2033 (2)
450,000
Unsecured Senior Notes due 2036
400,000
Secured Debt 606,688
Total Unsecured and Secured Debt (3)
4,631,688
Less: Unamortized Net Discounts and Deferred Financing Costs (4)
(33,923)
Total Debt, Net $ 4,597,765
________________________
(1)The maturity date may be extended by two 12-month periods, at the Operating Partnership’s option.
(2)Green bond.
(3)As of December 31, 2024, there was no outstanding balance on the unsecured revolving credit facility.
(4)Includes $25.5 million of unamortized deferred financing costs on the unsecured term loan facility, unsecured senior notes, and secured debt and $8.4 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 December 31, 2024 and 2023 was as follows:
Percentage of Total Debt (1)(2)
Weighted Average Interest Rate (1)(2)
December 31, 2024
December 31, 2023 December 31, 2024
December 31, 2023
Secured vs. unsecured:
Unsecured 86.9 % 87.7 % 4.0 % 4.0 %
Secured 13.1 % 12.3 % 5.1 % 5.1 %
Variable-rate vs. fixed-rate:
Variable-rate 4.3 % 10.5 % 5.7 % 6.4 %
Fixed-rate (3)
95.7 % 89.5 % 4.1 % 3.8 %
Stated rate (3)
4.2 % 4.1 %
GAAP effective rate (4)
4.2 % 4.1 %
GAAP effective rate including debt issuance costs 4.5 % 4.3 %
________________________
(1)As of the end of the period presented.
(2)As of December 31, 2024 and 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.
Liquidity Uses
Contractual Obligations
The following table provides information with respect to our contractual obligations as of December 31, 2024. The table: (i) indicates the maturities and scheduled principal repayments of our secured and unsecured debt outstanding as of December 31, 2024; (ii) indicates the scheduled interest payments of our fixed-rate and variable-rate debt as of December 31, 2024; (iii) provides information about the minimum commitments due in connection with our ground lease obligations and other lease and contractual commitments; and (iv) provides estimated in-process and recently completed development commitments as of December 31, 2024. Note that the table: (i) does not reflect our available debt maturity extension options; (ii) reflects gross aggregate principal amounts before the effect of unamortized discounts/premiums; and (iii) does not reflect potential future leasing costs associated with space that has not yet been leased.
Payment Due by Period
Less than
1 Year
(2025)
2-3 Years
(2026-2027)
4-5 Years
(2028-2029)
More than
5 Years
(After 2029)
Total
(in thousands)
Principal payments: secured debt (1)
$ 6,246 $ 225,442 $ - $ 375,000 $ 606,688
Principal payments: unsecured debt (2)
600,000 425,000 875,000 2,125,000 4,025,000
Interest payments: fixed-rate debt (3)
177,154 301,490 248,491 347,854 1,074,989
Interest payments: variable-rate debt (4)
8,641 - - - 8,641
Ground lease obligations (5)
6,772 13,659 13,738 367,744 401,913
Lease and other contractual commitments (6)
80,203 915 - - 81,118
In-process and recently completed development commitments (7)
45,787 44,000 - - 89,787
Total $ 924,803 $ 1,010,506 $ 1,137,229 $ 3,215,598 $ 6,288,136
_____________________
(1)Represents gross aggregate principal amount before the effect of deferred financing costs of approximately $8.5 million as of December 31, 2024.
(2)Represents gross aggregate principal amount before the effect of the unamortized discount and deferred financing costs of approximately $8.4 million and $17.0 million as of December 31, 2024. As of December 31, 2024, there was no outstanding balance on our unsecured revolving credit facility.
(3)As of December 31, 2024, 95.7% of our debt was contractually fixed. The information in the table above reflects our projected interest rate obligations for these fixed-rate payments based on the contractual interest rates on an accrual basis and scheduled maturity dates.
(4)As of December 31, 2024, 4.3% of our debt bore interest at variable rates which was incurred under the 2024 Term Loan Facility. The variable interest rate payments are based on the contractual rate of Adjusted SOFR plus a margin of 1.2% as of December 31, 2024. The information in the table above reflects our projected interest rate obligations for those variable-rate payments based on the outstanding principal balance as of December 31, 2024, the scheduled payment interest payment dates and the contractual maturity date.
(5)Reflects minimum lease payments through the contractual lease expiration date before the impact of extension options. See Note 19 “Commitments and Contingencies” to our consolidated financial statements included in this report for further information about our ground lease obligations.
(6)Amounts represent cash commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements, and for other contractual commitments. The timing of these expenditures may fluctuate.
(7)Amounts represent commitments under signed leases for pre-leased development and redevelopment projects and contractual commitments for projects in the tenant improvement phase and under construction as of December 31, 2024. The timing of these expenditures may fluctuate based on the ultimate progress of construction. We may start additional construction in 2025 (see “-Development” for additional information).
Other Liquidity Uses
Development
We believe we may spend between $100 million to $200 million on development projects throughout 2025. The ultimate timing of these expenditures may fluctuate given construction progress and leasing status of the projects, or as a result of events outside our control, such as delays or increased costs as a result of heightened inflation and market conditions. We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, or strategic venture opportunities. We cannot provide assurance that development projects will be completed on the terms, for the amounts, or on the timelines currently contemplated, or at all.
Repayment of $425.0 million Unsecured Senior Notes Due 2024
During the year ended December 31, 2023, the Company completed open-market repurchases of $21.3 million of the Operating Partnership’s 3.450% $425.0 million unsecured senior notes due December 15, 2024 at a discount, leaving an aggregate remaining principal balance of $403.7 million. In December 2024, the Company repaid the aggregate remaining principal balance of $403.7 million senior notes on the maturity date.
Debt Maturities
We believe our conservative leverage, staggered debt maturities, 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. In March 2024, the Operating Partnership amended and restated the terms of its unsecured revolving credit facility to maintain the existing $1.1 billion borrowing capacity and extend the maturity date to July 31, 2028, repaid $200.0 million on its existing $520.0 million unsecured term loan facility (the “2022 Term Loan Facility”) and extended the maturity date on an aggregate principal amount of $200.0 million of the remaining $320.0 million by 12 months to October 3, 2025. In September 2024, the Operating Partnership repaid the $120.0 million outstanding on the 2022 Term Loan Facility. In December 2024, the Operating Partnership repaid the $403.7 million aggregate principal amount outstanding on its outstanding 3.450% unsecured senior notes at maturity. Our next debt maturity of $400.0 million occurs in October 2025. We may, however, repurchase certain of 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.
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 core, value-add and strategic operating properties, and land, dependent on market conditions and business cycles, among other factors. We focus on growth opportunities primarily in markets populated by knowledge and creative based tenants in a variety of industries, including technology, media, healthcare, life sciences, entertainment, and professional services. We expect that any material acquisitions will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, the formation of strategic ventures or through the assumption of existing debt, although there can be no assurance in this regard.
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
In February 2024, the Company’s Board of Directors approved a new share repurchase program (the “Share Repurchase Program”) that authorizes the repurchase of shares of the Company’s common stock having an aggregate gross purchase price of up to $500.0 million. The Share Repurchase Program supersedes and replaces the Company’s existing share repurchase program. Under the Share Repurchase Program, repurchases may be made from time to time using a variety of methods, which may include open market purchases and privately negotiated transactions. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions and other considerations. The Share Repurchase Program does not have a termination date and repurchases may be discontinued at any time. We did not repurchase any common stock under the Share Repurchase Program during the year ended December 31, 2024.
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.
For the year ended December 31, 2024, we spent approximately $92.6 million on capital improvements, tenant improvements, and leasing commissions for properties within our stabilized portfolio, excluding capital improvements on major repositioning projects and all costs for development and redevelopment properties. The amount we ultimately spend for 2025 will depend on leasing activity during 2025.
The following table sets forth our historical actual capital expenditures and tenant improvements and leasing commissions for deals commenced, excluding tenant-funded tenant improvements, for renewed and re-tenanted space within our stabilized portfolio for each of the years ended December 31, 2024, 2023 and 2022 on a per square foot basis.
Year Ended December 31,
2024 2023 2022
Office Properties:(1)
Capital Expenditures:
Capital expenditures per square foot $ 2.39 $ 2.09 $ 2.26
Tenant Improvement and Leasing Commissions (2)
Replacement tenant square feet (3)
392,651 512,626 580,943
Tenant improvements per square foot commenced $ 71.99 $ 68.15 $ 56.25
Leasing commissions per square foot commenced $ 19.67 $ 20.71 $ 19.78
Total per square foot $ 91.66 $ 88.86 $ 76.03
Renewal tenant square feet 466,780 568,443 290,138
Tenant improvements per square foot commenced $ 18.84 $ 11.08 $ 12.53
Leasing commissions per square foot commenced $ 9.60 $ 12.81 $ 15.90
Total per square foot $ 28.44 $ 23.89 $ 28.43
Total per square foot per year $ 11.09 $ 9.12 $ 9.63
Average remaining lease term (in years) 5.2 6.0 6.3
_____________________
(1)Excludes development properties and includes 100% of consolidated property partnerships.
(2)Includes tenants with lease terms of 12 months or longer. Excludes leases for month-to-month and recently completed development and redevelopment properties that have been added to the stabilized portfolio. Also excludes tenant improvement and leasing commission capital expenditures for leasing classified as major repositioning.
(3)Excludes leases for which the space was vacant when the property was acquired by the Company. Excludes tenant improvement and leasing commission capital expenditures for leasing classified as major repositioning.
Capital expenditures per square foot increased in 2024 as compared to 2023, primarily due to common area upgrades at two properties in 2024. We currently anticipate capital expenditures per square foot for 2025 to be consistent with 2024 levels. Replacement tenant improvements and leasing commissions per square foot increased in 2024 as compared to 2023, primarily due to a large lease with a long term that commenced in the San Francisco Bay Area in 2024. Renewal tenant improvements and leasing commissions per square foot increased in 2024 as compared to 2023, primarily due to a large lease with a long term that renewed in the Seattle region in 2024. Costs incurred for tenant improvement and leasing commissions in 2025 will depend upon the current economic environment, market conditions in each of our submarkets, and actual leasing activity.
Distribution Requirements
For a discussion of our dividend and distribution requirements, see “Liquidity and Capital Resources of the Company -Distribution Requirements.”
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, and other factors (refer to “Part I, Item IA. Risk Factors” of this report 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 Credit Facility and Term Loan Facility and Private Placement Notes
(as defined in the applicable Credit Agreements):
Covenant Level Actual Performance
as of December 31, 2024
Total debt to total asset value less than 60% 33%
Fixed charge coverage ratio greater than 1.5x 3.3x
Unsecured debt ratio greater than 1.67x 3.09x
Unencumbered asset pool debt service coverage greater than 1.75x 3.62x
Unsecured Senior Notes due 2025, 2028, 2029, 2030, 2032, 2033 and 2036
(as defined in the applicable Indentures):
Total debt to total asset value less than 60% 35%
Interest coverage greater than 1.5x 5.2x
Secured debt to total asset value less than 40% 5%
Unencumbered asset pool value to unsecured debt greater than 150% 301%
The Operating Partnership was in compliance with all of its debt covenants as of December 31, 2024. 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.
Consolidated Historical Cash Flows Summary
The following summary discussion of our consolidated historical cash flows is based on the consolidated statements of cash flows in Item 15. “Exhibits and Financial Statement Schedules” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Changes in our cash flows include changes in cash and cash equivalents and restricted cash. Our historical cash flow activity for the year ended December 31, 2024 as compared to the year ended December 31, 2023, is as follows:
Year Ended December 31,
2024 2023 Dollar
Change Percentage
Change
($ in thousands)
Net cash provided by operating activities $ 541,149 $ 602,589 $ (61,440) (10.2) %
Net cash used in investing activities (225,044) (800,400) 575,356 (71.9) %
Net cash (used in) provided by financing activities (660,578) 360,595 (1,021,173) (283.2) %
Net (decrease) increase in cash and cash equivalents $ (344,473) $ 162,784 $ (507,257) (311.6) %
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. See additional information under the caption “-Results of Operations.” Our net cash provided by operating activities decreased by $61.4 million, or 10.2%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due a $35.8 million reduction in payables, a one time payment of $16.6 million for a payment of an accrued retirement liability associated with our former CEO, and lower operating cash flow.
Investing Activities
Our cash flows from investing activities are 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. Our net cash used in investing activities decreased by $575.4 million, or 71.9%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, primarily due to the maturity of certificates of deposit during the year ended December 31, 2024.
Financing Activities
Our cash flows from financing activities are principally impacted by our capital raising activities, net of dividends and distributions paid to common stockholders and common unitholders. During the year ended December 31, 2024, we had net cash used in financing activities of $660.6 million as compared to net cash provided by financing activities of $360.6 million during the year ended December 31, 2023, primarily due to the $723.7 million repayments of unsecured debt offset by the $400.0 million issuance of the 6.250% unsecured senior notes due 2036. during the year ended December 31, 2024.
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 depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.
We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.
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 years ended December 31, 2024, 2023, 2022, 2021, and 2020:
Year ended December 31,
2024 2023 2022 2021 2020
(in thousands)
Net income available to common stockholders $ 210,969 $ 212,241 $ 232,615 $ 628,144 $ 187,105
Adjustments:
Net income attributable to noncontrolling
common units of the Operating Partnership 2,062 2,083 2,283 6,163 2,869
Net income attributable to noncontrolling
interests in consolidated property partnerships 19,923 23,964 24,595 24,603 17,319
Depreciation and amortization of real estate
assets 349,828 348,064 350,665 303,799 290,353
Gains on sales of depreciable real estate - - (17,329) (463,128) (35,536)
Funds From Operations attributable to
noncontrolling interests in consolidated property
partnerships (31,149) (35,236) (36,198) (37,267) (28,754)
Funds From Operations (1) (2)
$ 551,633 $ 551,116 $ 556,631 $ 462,314 $ 433,356
____________________
(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 $19.1 million, $20.7 million, $19.3 million, $16.5 million and $22.5 million for the years ended December 31, 2024, 2023, 2022, 2021, and 2020, respectively.
The following table presents our weighted average shares of common stock and common units outstanding for the years ended December 31, 2024, 2023, 2022, 2021, and 2020:
Year Ended December 31,
2024 2023 2022 2021 2020
Weighted average shares of common stock
outstanding 117,649,111 117,160,173 116,806,575 116,429,130 113,241,341
Weighted average common units outstanding 1,150,574 1,150,574 1,150,574 1,150,574 1,854,165
Effect of participating securities - nonvested shares
and restricted stock units 928,857 584,125 628,375 769,123 1,137,265
Total basic weighted average shares / units
outstanding 119,728,542 118,894,872 118,585,524 118,348,827 116,232,771
Effect of dilutive securities - shares issuable under
executed forward equity sale agreements, stock
options and contingently issuable shares 507,876 346,082 413,472 519,513 478,281
Total diluted weighted average shares / units
outstanding 120,236,418 119,240,954 118,998,996 118,868,340 116,711,052
Inflation
The majority of the Company’s leases require tenants to pay for recoveries and escalation charges based upon the tenant’s proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company’s exposure to increases in operating costs resulting from inflation. The Company’s exposure to inflationary impacts is sensitive to fluctuations in the occupancy levels at its properties. Refer to “Part I, Item IA. Risk Factors” included in this report for additional information about the potential impact of inflation on our interest expense and construction costs and the impact on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations.
New Accounting Pronouncements
For a discussion of new accounting pronouncements see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report.
Effective for the annual period beginning January 1, 2024, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 amends Accounting Standards Codification (“ASC”) 280 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted this ASU in the current period and determined it did not have a material impact on our consolidated financial statements and disclosures.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk we face is interest rate risk. We seek to mitigate this risk by following established risk management policies and procedures. These policies include maintaining prudent amounts of debt, including a greater amount of fixed-rate debt as compared to variable-rate debt in our portfolio, and may include the periodic use of derivative instruments. Information about our changes in interest rate risk exposures from December 31, 2023 to December 31, 2024 is incorporated herein by reference from “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources of the Operating Partnership.”
Interest Rate Risk
As of December 31, 2024, 4.3% of our total outstanding debt of $4.6 billion (before the effects of debt discounts and deferred financing costs) was subject to variable interest rates. The remaining 95.7% bore interest at fixed rates. All of our interest rate sensitive financial instruments are held for purposes other than trading purposes. In general, interest rate fluctuations applied to our variable-rate debt will impact our future earnings and cash flows. Conversely, interest rate fluctuations applied to our fixed-rate debt will generally not impact our future earnings and cash flows, unless such instruments mature or are otherwise terminated and need to be refinanced. However, interest rate fluctuations will impact the fair value of the fixed-rate debt instruments.
We generally determine the fair value of our secured debt, unsecured debt, unsecured revolving credit facility and unsecured term loan facility by performing discounted cash flow analyses using an appropriate market discount rate. We calculate the market rate by obtaining period-end benchmark interest rates for maturities that correspond to the maturities of our fixed-rate debt and then adding an appropriate credit spread based on information obtained from third-party financial institutions. These credit spreads take into account factors, including, but not limited to, our credit rating, the tenure of the debt, amortization period, whether the debt is secured or unsecured, and the loan-to-value ratio of the debt to the collateral, amongst other factors. These calculations are significantly affected by the assumptions used, including the discount rate, credit spreads and estimates of future cash flows. We calculate the market rate of our unsecured revolving credit facility and unsecured term loan facility by obtaining the period-end SOFR, adding a SOFR adjustment of 0.10% (“Adjusted SOFR”) and then adding an appropriate credit spread based on our credit ratings, and the amended terms of our unsecured revolving credit facility and unsecured term loan facility agreements.
We determine the fair value of each of our publicly traded unsecured senior notes based on their quoted trading price at the end of the reporting period, if such prices are available. See Note 20 “Fair Value Measurements and Disclosures” and Note 2 “Basis of Presentation and Significant Accounting Policies” in the consolidated financial statements included in this report for additional information on the fair value of our financial assets and liabilities as of December 31, 2024 and December 31, 2023.
At December 31, 2024, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $200.0 million, which was indexed to Adjusted SOFR plus a spread of 1.200% (weighted average interest rate of 5.7%). At December 31, 2023, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $520.0 million, which was indexed to Adjusted SOFR plus a spread of 0.950% (weighted average interest rate of 6.41%). There was no outstanding balance on our $1.1 billion unsecured revolving credit facility at December 31, 2024; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 1.100% (weighted average interest rate of 5.69%). As of December 31, 2023, there was no outstanding balance on our unsecured revolving credit facility; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 0.900% (weighted average interest rate of 6.38%). Assuming no changes in the outstanding balance of our existing variable-rate debt as of December 31, 2024, a 100 basis-point increase in the Adjusted SOFR rate would have increased our projected annual interest expense, before the effect of capitalization, by approximately $2.0 million.
The total carrying value of our fixed-rate debt was approximately $4.4 billion as of December 31, 2024 and 2023. The total estimated fair value of our fixed-rate debt was approximately $4.1 billion and $4.0 billion as of December 31, 2024 and 2023, respectively. For sensitivity purposes, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $181.7 million, or 4.5%, as of
December 31, 2024. Comparatively, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $180.7 million, or 4.5%, as of December 31, 2023.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the index included at Item 15. “Exhibits and Financial Statement Schedules.”

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. 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 December 31, 2024, 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.
Changes in Internal Control Over Financial Reporting
There have been no changes that occurred during the most recent year 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.
Management’s Report on Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is supported by written policies and procedures and by an appropriate segregation of responsibilities and duties. The Company has used the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess our internal control over financial reporting. Based upon this assessment, management concluded that internal control over financial reporting operated effectively as of December 31, 2024.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, has audited the Company’s financial statements and has issued a report on the effectiveness of the Company’s internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Kilroy Realty Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Kilroy Realty Corporation and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 13, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 13, 2025
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 December 31, 2024, 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.
Changes in Internal Control Over Financial Reporting
There have been no changes that occurred during the most recent year 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.
Management’s Report on Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer of the Operating Partnership’s general partner and effected by the board of directors, management, and other personnel of its general partner to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is supported by written policies and procedures and by an appropriate segregation of responsibilities and duties. The Operating Partnership has used the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess our internal control over financial reporting. Based upon this assessment, management concluded that internal control over financial reporting operated effectively as of December 31, 2024.
Deloitte & Touche LLP, the Operating Partnership’s independent registered public accounting firm, has audited the Operating Partnership’s financial statements and has issued a report on the effectiveness of the Operating Partnership’s internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Kilroy Realty, L.P.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Kilroy Realty, L.P. and subsidiaries (the “Operating Partnership”) as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Operating Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Operating Partnership and our report dated February 13, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Operating Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Operating Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Los Angeles, California
February 13, 2025

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
(a).None
(b).During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2025.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2025.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2025.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2025.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2025.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(i) and (ii) Financial Statements and Schedules
The following consolidated financial information is included as a separate section of this annual report on Form 10-K:
Report of Independent Registered Public Accounting Firm - Kilroy Realty Corporation
F - 2
Consolidated Balance Sheets as of December 31, 2024 and 2023 - Kilroy Realty Corporation
F - 4
Consolidated Statements of Operations for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty Corporation
F - 5
Consolidated Statements of Equity for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty Corporation
F - 6
Consolidated Statements of Cash Flows for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty Corporation
F - 7
Report of Independent Registered Public Accounting Firm - Kilroy Realty, L.P.
F - 8
Consolidated Balance Sheets as of December 31, 2024 and 2023 - Kilroy Realty, L.P.
F - 10
Consolidated Statements of Operations for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty, L.P.
F - 11
Consolidated Statements of Capital for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty, L.P.
F - 12
Consolidated Statements of Cash Flows for the Years ended December 31, 2024, 2023, and 2022 - Kilroy Realty, L.P.
F - 13
Notes to Consolidated Financial Statements
F - 14
Schedule II - Valuation and Qualifying Accounts
F - 58
Schedule III - Real Estate and Accumulated Depreciation
F - 59
All other schedules are omitted because the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements and notes thereto.
(3) Exhibits
Exhibit
Number Description
3.(i)1 Articles of Amendment and Restatement of Kilroy Realty Corporation (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 21, 2020)
3.(i)2 Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
3.(i)3 Amendment to the Certificate of Limited Partnership of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
3.(ii)1 Ninth Amended and Restated Bylaws of Kilroy Realty Corporation (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on June 4, 2024)
3.(ii)2 Seventh Amended and Restated Agreement of Limited Partnership of Kilroy Realty, L.P. dated August 15, 2012, as amended (previously filed by Kilroy Realty Corporation on Form 10-Q for the quarter ended June 30, 2014)
4.(vi)1 Description of Capital Stock of Kilroy Realty Corporation (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2023)
4.(vi)2 Description of Common Units Representing Limited Partnership Interests of Kilroy Realty, L.P. Corporation (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2019)
4.1 Kilroy Realty Corporation Form of Certificate for Common Stock (previously filed by Kilroy Realty Corporation as an exhibit to the Registration Statement on Amendment No. 3 to Form S-11 (No. 333-15553))
4.2 Registration Rights Agreement, dated January 31, 1997 (previously filed by Kilroy Realty Corporation as an exhibit to the Registration Statement on Amendment No. 3 to Form S-11 (No. 333-15553))
4.3 Form of Certificate for Partnership Units of Kilroy Realty, L.P. (previously filed by Kilroy Realty, L.P., as an exhibit to the General Form for Registration of Securities on Form 10 as filed with the Securities and Exchange Commission on August 18, 2010)
4.4 Registration Rights Agreement, dated July 31, 2012 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2012)
4.5 Indenture, dated March 1, 2011, by and among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit to the Registration Statement on Form S-3 as filed with the Securities and Exchange Commission on October 2, 2013)
4.6 Supplemental Indenture, dated July 5, 2011, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit to the Registration Statement on Form S-3 as filed with the Securities and Exchange Commission on October 2, 2013)
4.7 Officers’ Certificate pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “4.25% Senior Notes due 2029,” including the form of 4.25% Senior Notes due 2029 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on August 6, 2014)
4.8 Officers’ Certificate, dated September 16, 2015, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “4.375% Senior Notes due 2025,” including the form of 4.375% Senior Notes due 2025 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on September 16, 2015)
4.9 Officers’ Certificate, dated November 29, 2018, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, as amended and supplemented, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “4.750% Senior Notes due 2028,” including the form of 4.750% Senior Note due 2028 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on November 29, 2018)
4.10 Officers’ Certificate, dated September 17, 2019, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, as amended and supplemented, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “3.050% Senior Notes due 2030,” including the form of 3.050% Senior Note due 2030 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on September 17, 2019)
4.11 Officers’ Certificate, dated August 12, 2020, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, as amended and supplemented, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “2.500% Senior Notes due 2032,” including the form of 2.500% Senior Note due 2032 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on August 18, 2020)
4.12 Officers’ Certificate, dated October 7, 2021, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, as amended and supplemented, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “2.650% Senior Notes due 2033,” including the form of 2.650% Senior Note due 2033 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on October 7, 2021)
4.13 Officers’ Certificate, dated January 12, 2024, pursuant to Sections 102, 201, 301 and 303 of the Indenture dated March 1, 2011, as amended and supplemented, among Kilroy Realty, L.P., as issuer, Kilroy Realty Corporation, as guarantor, and U.S. Bank National Association, as trustee, establishing a series of securities entitled “6.250% Senior Notes due 2036,” including the form of 6.250% Senior Note due 2036 and the form of related guarantee (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on January 12, 2024)
4.14 The Company is party to agreements in connection with long-term debt obligations, none of which individually exceeds ten percent of the total assets of the Company on a consolidated basis. Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Company agrees to furnish copies of these agreements to the Commission upon request
10.1 License Agreement by and among the Registrant and the other persons named therein (previously filed by Kilroy Realty Corporation as an exhibit to the Registration Statement on Amendment No. 4 to Form S-11 (No. 333-15553))
10.2† Kilroy Realty Corporation Stock Award Deferral Program (previously filed by Kilroy Realty Corporation as an exhibit to Form 8-K as filed with the Securities and Exchange Commission on January 2, 2008)
10.3† Form of Indemnification Agreement of Kilroy Realty Corporation with certain officers and directors (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2009)
10.4† Form of Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2013)
10.5† Form of Stock Award Deferral Program Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended June 30, 2013)
10.6† Form of Performance-Vest Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2014)
10.7† Form of Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2014)
10.8† Form of Restricted Stock Unit Agreement for Non-Employee Members of the Board of Directors (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2014)
10.9† Form of Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2015)
10.10† Form of Restricted Stock Unit Agreement for Non-Employee Members of the Board of Directors (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2015)
10.11† Amended and Restated Employment Agreement and Non-Competition Agreement by and between Kilroy Realty Corporation, Kilroy Realty, L.P. and Justin W. Smart effective as of January 28, 2016 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2016)
10.12† Amended and Restated Employment Agreement and Non-Competition Agreement by and between Kilroy Realty Corporation, Kilroy Realty, L.P. and Heidi R. Roth effective as of January 28, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P. as an exhibit on Form 10-Q for the quarter ended March 31, 2021)
10.13†* Kilroy Realty Corporation Director Compensation Policy effective as of May 22, 2024
10.14† Employment Agreement, as amended and restated December 27, 2018, by and between Kilroy Realty Corporation, Kilroy Realty, L.P. and John B. Kilroy, Jr. (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 31, 2018)
10.15† Form of Restricted Stock Unit Agreement for 2006 Incentive Award Plan (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2018)
10.16 Note Purchase Agreement dated September 14, 2016 (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on September 14, 2016)
10.17 Amendment to Note Purchase Agreement dated May 11, 2018 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 14, 2018)
10.18 Promissory Note, dated November 29, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.19 Loan Agreement, dated November 29, 2016, by and between KR WMC, LLC and Massachusetts Mutual Life Insurance Company (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.20 Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated November 29, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.21 Assignment of Leases and Rents, dated November 29, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.22 Recourse Guaranty Agreement, dated November 29, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.23 Environmental Indemnification Agreement, dated November 29, 2016 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2017)
10.24† Kilroy Realty Corporation 2007 Deferred Compensation Plan, as amended and restated effective January 1, 2017 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-K for the year ended December 31, 2016)
10.25 General Partner Guaranty Agreement, dated February 17, 2017 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 10-Q for the quarter ended March 31, 2017)
10.26† Kilroy Realty 2006 Incentive Award Plan (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 24, 2023)
10.27 Note Purchase Agreement dated May 11, 2018 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on May 14, 2018)
10.28 Note Purchase Agreement dated April 28, 2020 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on April 30, 2020)
10.29 General Partner Guaranty Agreement dated April 28, 2020 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on April 30, 2020)
10.30 Fourth Amended and Restated Guaranty dated as of March 6, 2024 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2024)
10.31 Fourth Amended and Restated Credit Agreement dated as of March 6, 2024 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2024)
10.32 Term Loan Agreement dated October 3, 2022 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2022)
10.34 Guaranty Agreement dated October 3, 2022 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2022)
10.35 Amendment No. 1 to Term Loan Agreement dated January 27, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2023)
10.36 Amendment No. 2 to Term Loan Agreement dated March 6, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2023)
10.37 Amendment No. 3 to Term Loan Agreement dated as of March 15, 2024 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2024)
10.38 Term Loan Agreement dated as of March 6, 2024 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2024)
10.39 Guaranty dated as of March 6, 2024 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2024)
10.40† Employment Agreement by and between Kilroy Realty Corporation, Kilroy Realty, L.P. and Eliott Trencher effective as of March 3, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended March 31, 2023)
10.41 Promissory Note dated as of July 20, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended September 30, 2023)
10.42 Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of July 20, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended September 30, 2023)
10.43 Guaranty dated as of July 20, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended September 30, 2023)
10.44 Multipurpose Side Letter dated of as July 20, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-Q for the quarter ended September 30, 2023)
10.45† Employment Agreement dated as of December 13, 2023 by and between Angela Aman, Kilroy Realty Corporation and Kilroy Realty, L.P. (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 14, 2023)
10.46† Transition Agreement dated as of December 13, 2023 by and between John B. Kilroy, Jr., Kilroy Realty Corporation and Kilroy Realty, L.P. (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on December 14, 2023)
10.47 Underwriting Agreement dated as of January 9, 2024 (previously filed by Kilroy Realty Corporation and Kilroy Realty, L.P., as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on January 12, 2024)
10.48† Form of Performance-Vest Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2023)
10.49† Form of Restricted Stock Unit Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2023)
10.50† Kilroy Realty Annual Bonus Plan (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2023)
10.51† Form of Non-Disclosure Agreement (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2023)
10.52 Employment Agreement, dated as of July 30, 2024, between Kilroy Realty Corporation, Kilroy Realty, L.P., and Jeffrey Kuehling (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on July 31, 2024)
10.53 Amendment to Employment Agreement, dated as of July 30, 2024, between Kilroy Realty Corporation, Kilroy Realty, L.P., and Eliott Trencher (previously filed by Kilroy Realty Corporation as an exhibit on Form 8-K as filed with the Securities and Exchange Commission on July 31, 2024)
19.1* Kilroy Realty Corporation Insider Trading Policy effective as of December 5, 2024
21.1* List of Subsidiaries of Kilroy Realty Corporation
21.2* List of Subsidiaries of Kilroy Realty, L.P.
23.1* Consent of Deloitte & Touche LLP for Kilroy Realty Corporation
23.2* Consent of Deloitte & Touche LLP for Kilroy Realty, L.P.
24.1* Power of Attorney (included on the signature page of this Form 10-K)
31.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty Corporation
31.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty Corporation
31.3* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Kilroy Realty, L.P.
31.4* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Kilroy Realty, L.P.
32.1* Section 1350 Certification of Chief Executive Officer of Kilroy Realty Corporation
32.2* Section 1350 Certification of Chief Financial Officer of Kilroy Realty Corporation
32.3* Section 1350 Certification of Chief Executive Officer of Kilroy Realty, L.P.
32.4* Section 1350 Certification of Chief Financial Officer of Kilroy Realty, L.P.
97.1 Kilroy Realty Corporation Clawback Policy effective as of September 6, 2023 (previously filed by Kilroy Realty Corporation as an exhibit on Form 10-K for the year ended December 31, 2023)
101.1* The following Kilroy Realty Corporation and Kilroy Realty, L.P. financial information for the year ended December 31, 2024, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Changes in Equity, (iv) Consolidated Statements of Capital, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements(1)
104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101.1)
* 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.