KILROY REALTY CORP

Previous wording

Statements contained in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are not historical facts may be forward-looking statements. Forward-looking statements include, among other things, statements or information concerning our plans, objectives, capital resources, portfolio performance, results of operations, projected future occupancy and rental rates, lease expirations, debt maturities, potential investments, strategies such as capital recycling, development and redevelopment activity, projected construction costs, projected construction commencement and completion dates, projected square footage of space that could be constructed on undeveloped land that we own, projected rentable square footage of or number of units in properties under construction or in the development pipeline, anticipated proceeds from capital recycling activity or other dispositions and anticipated dates of those activities or dispositions, projected increases in the value of properties, dispositions, future executive incentive compensation, pending, potential or proposed acquisitions, plans to grow our Net Operating Income and FFO, our ability to re-lease properties at or above current market rates, anticipated market conditions and demographics and other forward-looking financial data, as well as the discussion in “—Factors That May Influence Future Results of Operations,” “—Liquidity and Capital Resources of the Company,” and “—Liquidity and Capital Resources of the Operating Partnership.” Forward-looking statements can be identified by the use of words such as “believes,” “expects,” “projects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates”, or “anticipates” and the negative of these words and phrases and similar expressions that do not relate to historical matters. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including actual and potential tariffs and periods of heightened inflation, and their effect on us and 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, whi…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Statements contained in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are not historical facts may be forward-looking statements. Forward-looking statements include, among other things, statements or information concerning our plans, objectives, capital resources, portfolio performance, results of operations, projected future occupancy and rental rates, lease expirations, debt maturities, potential investments, strategies such as capital recycling, development and redevelopment activity, projected construction costs, projected construction commencement and completion dates, projected square footage of space that could be constructed on undeveloped land that we own, projected rentable square footage of or number of units in properties under construction or in the development pipeline, anticipated proceeds from capital recycling activity or other dispositions and anticipated dates of those activities or dispositions, projected increases in the value of properties, dispositions, future executive incentive compensation, pending, potential or proposed acquisitions, plans to grow our Net Operating Income and FFO, our ability to re-lease properties at or above current market rates, anticipated market conditions and demographics and other forward-looking financial data, as well as the discussion in “—Factors That May Influence Future Results of Operations,” “—Liquidity and Capital Resources of the Company,” and “—Liquidity and Capital Resources of the Operating Partnership.” Forward-looking statements can be identified by the use of words such as “believes,” “expects,” “projects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates”, or “anticipates” and the negative of these words and phrases and similar expressions that do not relate to historical matters. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including actual and potential tariffs and periods of heightened inflation, and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the states of California, Texas, and Washington; risks associated w…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

(2) Kilroy Oyster Point Phase 2 (“KOP 2”) stabilized during the three and six months ended June 30, 2026. Excluding KOP 2, the average stabilized portfolio occupancy was 81.4% for the three and six months ended June 30, 2026.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(1)Includes 100% of the Consolidated Property Partnerships. Excludes leases with a lease term of less than one year (i.e. short-term leases). During the three months ended June 30, 2026, the Company signed 40,147 square feet of short-term leases, comprised of 32,128 square feet of new leasing on vacant space and 8,019 square feet of renewal leasing. During the six months ended June 30, 2026, the Company signed 110,289 square feet of short-term leases, comprised of 64,557 square feet of new leasing on vacant space and 45,732 square feet of renewal leasing.

Current wording

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

Previous wording

(3)Represents leases executed at properties in the stabilized portfolio during the period, excluding short-term leases. Excludes leases executed at space that was vacant when the property was acquired and space not previously leased at recently completed development projects that have been added to the stabilized portfolio (“1st Gen”) and 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 (“Major Repositioning”). Tenant improvement and leasing commission capital expenditures for projects classified as Major Repositioning are captured in 2nd Gen Capital Expenditures.

Current wording

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

Previous wording

Adjusting for leases that have been backfilled or re-leased to a subtenant as of June 30, 2026 but not yet commenced, the remaining 2026, 2027, and 2028 expirations would be 248,421, 1,015,123, and 1,297,768 square feet, respectively.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(4)Subject to signed purchase and sale agreements and non-refundable deposits as of the date of this filing. Both development sites are anticipated to close upon receipt of residential entitlements and permits, which is expected to occur beginning in phases in late 2026.

Current wording

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

Previous wording

(1)The average qualifying costs for the six months ended June 30, 2026 includes costs incurred for KOP 2 prior to stabilization in Q1 2026.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

•Same Property Portfolio – 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, 2025 and still owned and included in the stabilized portfolio as of June 30, 2026, including our residential property in San Diego, California;

Current wording

•Same Property Portfolio – includes the consolidated results of all properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2025 and still owned and included in the stabilized portfolio as of September 30, 2026, including our residential property in San Diego, California;

Previous wording

•Re/Development Properties – includes the results generated by certain of our in-process development and redevelopment projects, expenses for certain of our future development projects, and the results generated by the two stabilized redevelopment properties that were added to the stabilized portfolio in the third quarter of 2025 and the one property added to the stabilized portfolio in the first quarter of 2026;

Current wording

•Re/Development Properties – includes the results generated by certain of our in-process development and redevelopment projects, expenses for certain of our future development projects, and the results generated by the two stabilized redevelopment properties that were added to the stabilized portfolio in the third quarter of 2025 and the one development property added to the stabilized portfolio in the first quarter of 2026;

Previous wording

Net Operating Income decreased $10.5 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily resulting from:

Current wording

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

Previous wording

•A decrease of $6.8 million attributable to the Re/Development Properties, primarily due to one development property with limited occupancy added to the stabilized portfolio in the first quarter of 2026, which resulted in the cessation of cost capitalization.

Current wording

•A decrease of $4.0 million attributable to the Re/Development Properties, primarily due to one development property with limited occupancy added to the stabilized portfolio in the first quarter of 2026, which resulted in the cessation of cost capitalization, and a decrease in recoverable operating expenses due to low occupancy; and

Previous wording

•An increase of $5.5 million attributable to the Same Property Portfolio, which was driven by the following activity:

Current wording

•A decrease of $4.1 million attributable to the Same Property Portfolio, which was driven by the following activity:

Previous wording

•An increase in total operating revenues of $2.9 million, primarily due to a(n):

Current wording

•An increase in total operating revenues of $1.9 million, primarily due to a(n):

Previous wording

•$0.5 million increase in revenues primarily due to parking and residential income.

Current wording

•$0.9 million increase in revenues primarily due to parking and residential income;

Previous wording

•$0.4 million increase in reimbursement revenues, primarily due to an increase in recoverable operating expenses.

Current wording

•$0.9 million increase in reimbursement revenues, primarily due to an increase in recoverable operating expenses;

Previous wording

•$3.8 million increase in settlement income;

Current wording

•$0.5 million increase in settlement income.

Previous wording

•$3.7 million increase in base rent attributable to $2.2 million from increased occupancy and $1.5 million from higher rates;

Current wording

•$0.9 million decrease in base rent attributable to $0.7 million from lower average occupancy levels and $0.2 million from lower rental rates; and

Previous wording

•$1.9 million decrease in amortization of deferred income and tenant funded improvements, mainly resulting from tenant move outs;

Current wording

•$0.1 million decrease in amortization of deferred income and tenant funded improvements, mainly resulting from tenant move outs.

Previous wording

•An increase in property and related expenses of $2.7 million, primarily due to a(n):

Current wording

•An increase in property and related expenses of $6.1 million, primarily due to a(n):

Previous wording

•Approximately $2.3 million increase in property expenses, primarily due to an increase in utilities and contract services; and

Current wording

•Approximately $3.6 million increase in property expenses, primarily due to an increase in utilities, contract services and security;

Previous wording

•$0.7 million decrease in real estate taxes, primarily due to an increase in refunds of $1.4 million received in 2026, offset partially by a $0.7 million increase resulting from higher assessed property values.

Current wording

•$2.3 million increase in real estate taxes, primarily due to $1.6 million of lower property tax refunds received in 2026 and a $0.6 million increase resulting from higher assessed property values; and

Previous wording

•$0.4 million increase in ground lease expense.

Current wording

•$0.2 million increase in ground lease expense.

Previous wording

•An increase of $5.6 million attributable to the Re/Development Properties, primarily due to the one property added to the stabilized portfolio in the first quarter of 2026; and

Current wording

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

Previous wording

Leasing costs increased $0.7 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to an increase in leasing deal costs and leasing overhead during the six months ended June 30, 2026.

Current wording

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

Previous wording

Depreciation and amortization increased $5.9 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to the following:

Current wording

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

Previous wording

•An increase of $7.3 million attributable to a full quarter of expense related to the Acquisition Properties;

Current wording

•An increase of $5.5 million attributable to a full quarter of expense related to the Acquisition Properties;

Previous wording

•An increase of $2.6 million attributable to the Same Property Portfolio, primarily due to revenue recognition commencing for two tenants in the Seattle region in third quarter of 2025 and first quarter of 2026, and four tenants in the Los Angeles region during the first quarter of 2026.

Current wording

•An increase of $1.1 million attributable to the Same Property Portfolio, primarily due to revenue recognition commencing for three tenants in the Seattle region in the third quarter of 2025, fourth quarter of 2025, and first quarter of 2026.

Previous wording

Interest income increased $0.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to higher average balances maintained in interest-bearing accounts.

Current wording

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

Previous wording

Gross interest expense, before the effect of capitalized interest, increased $1.1 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to additional loan fee amortization for the three months ended June 30, 2026.

Current wording

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

Previous wording

Capitalized interest decreased $9.7 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to the stabilization of the one development property added to the stabilized portfolio during the first quarter of 2026, at which point we stopped capitalizing interest. Capitalized interest will vary based on the current status of active development or redevelopment projects and our future development pipeline. For additional information about the potential impact of inflation on our interest expense and construction costs, and the impact on our business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy our debt service obligations, refer to “Part I, Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025.

Current wording

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

Previous wording

Net income attributable to noncontrolling interests in consolidated property partnerships decreased $5.8 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to lease termination fee income attributable from one tenant in the second quarter of 2025. The amounts reported for the three months ended June 30, 2026 and 2025 are comprised of the share of net income attributable to noncontrolling interests for 100 First LLC, 303 Second LLC, and Redwood LLC. See Note 1 “Organization, Ownership, and Basis of Presentation” to our consolidated financial statements included in this report for additional information.

Current wording

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

Previous wording

Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025

Current wording

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

Previous wording

Net Operating Income decreased $12.3 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily resulting from:

Current wording

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