Kilroy Realty Corporation

04/28/2026 | Press release | Distributed by Public on 04/28/2026 15:17

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to our consolidated financial statements and should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. The results of operations discussion is combined for the Company and the Operating Partnership because there are no material differences in the results of operations between the two reporting entities.
Forward-Looking Statements
Statements contained in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" that are not historical facts may be forward-looking statements. Forward-looking statements include, among other things, statements or information concerning our plans, objectives, capital resources, portfolio performance, results of operations, projected future occupancy and rental rates, lease expirations, debt maturities, potential investments, strategies such as capital recycling, development and redevelopment activity, projected construction costs, projected construction commencement and completion dates, projected square footage of space that could be constructed on undeveloped land that we own, projected rentable square footage of or number of units in properties under construction or in the development pipeline, anticipated proceeds from capital recycling activity or other dispositions and anticipated dates of those activities or dispositions, projected increases in the value of properties, dispositions, future executive incentive compensation, pending, potential or proposed acquisitions, plans to grow our Net Operating Income and FFO, our ability to re-lease properties at or above current market rates, anticipated market conditions and demographics and other forward-looking financial data, as well as the discussion in "-Factors That May Influence Future Results of Operations," "-Liquidity and Capital Resource of the Company," and "-Liquidity and Capital Resources of the Operating Partnership." Forward-looking statements can be identified by the use of words such as "believes," "expects," "projects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates", or "anticipates" and the negative of these words and phrases and similar expressions that do not relate to historical matters. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results, and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results, or events. Numerous factors could cause actual future performance, results, and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including 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, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants' businesses, including bankruptcy, lack of liquidity or lack of funding, and the impact labor disruptions or strikes, such as episodic strikes in the media industry, may have on our tenants' businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than an employer's office premises; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service, and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment, and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices, or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed, and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement, and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations, or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; risks associated with climate change and our sustainability strategies, and our ability to achieve our sustainability goals; and our ability to maintain our status as a REIT. The factors included in this report are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect the
Company's and the Operating Partnership's business and financial performance, see the discussion below, as well as in "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's and the Operating Partnership's annual report on Form 10-K for the year ended December 31, 2025, and their respective other filings with the SEC. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement that becomes untrue because of subsequent events, new information, or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
Overview and Background
We are a self-administered REIT active in premier office, life science, and mixed-use property types in the United States. We own, manage, develop, and acquire primarily premier office and life science properties in the San Francisco Bay Area, Los Angeles, Seattle, San Diego, and Austin, which are markets we believe have long-term strategic advantages and strong barriers to entry. We own our interests in all of our real estate assets and conduct substantially all of our operations through the Operating Partnership, of which we owned an approximate 99.0% and 99.1% common general partnership interest in as of March 31, 2026 and December 31, 2025, respectively. All of our properties and development and redevelopment projects are 100% owned, excluding four office properties and one future development project owned by the Consolidated Property Partnerships. As of March 31, 2026, all of our properties are held in fee except for the fourteen office buildings that are held subject to long-term ground leases.
Stabilized Portfolio Information
As of March 31, 2026, our stabilized portfolio was comprised of 123 office and life science properties encompassing an aggregate of approximately 17.1 million rentable square feet. This portfolio includes all properties except properties under development and redevelopment or in the tenant improvement phase, undeveloped land, and real estate assets held for sale, if any.
As of March 31, 2026, the following assets were excluded from our stabilized portfolio:
Number of Properties
Number of Units
Properties held for sale (1)
2 393 units
________________________
(1)See Note 2 "Dispositions and Real Estate Held for Sale" to our consolidated financial statements included in this report for additional information.
Our stabilized portfolio also excludes our future development pipeline, which, as of March 31, 2026, was comprised of nine potential development sites.
The following table reconciles the changes in the rentable square feet in our stabilized portfolio of operating properties from December 31, 2025 to March 31, 2026, inclusive of four properties owned by the Consolidated Property Partnerships and excluding our residential portfolio:
Number of
Buildings 		Rentable
Square Feet
Total as of December 31, 2025
121 16,292,164
Completed development properties placed in-service
3 871,738
Dispositions (1)
(1) (39,192)
Remeasurements (2)
- (317)
Total as of March 31, 2026
123 17,124,393
________________________
(1)Excludes Kilroy Sabre Springs, which was classified as held for sale as of December 31, 2025 and not included in the stabilized portfolio.
(2)Represents a recalculation of a property's rentable square footage using updated industry measurement standards.
Occupancy Information
The following table sets forth certain information regarding our stabilized portfolio, excluding our residential portfolio, as of the end of the period presented:
March 31, 2026 December 31, 2025
Region Number of
Buildings 		Rentable
Square Feet 		Occupancy Number of
Buildings 		Rentable
Square Feet 		Occupancy
San Francisco Bay Area (1)
33 6,436,709 75.2 % 30 5,564,971 86.2 %
Los Angeles
52 4,242,385 74.8 % 52 4,242,386 75.1 %
Seattle
10 2,997,307 79.3 % 10 2,997,623 80.0 %
San Diego
27 2,689,017 84.6 % 28 2,728,209 83.7 %
Austin 1 758,975 83.2 % 1 758,975 82.2 %
Total 123 17,124,393 77.6 % 121 16,292,164 81.6 %
________________________
(1)Kilroy Oyster Point Phase 2 ("KOP 2") stabilized during the three months ended March 31, 2026. The total project was 5% occupied and 44% leased as of March 31, 2026.
The following table sets forth the average occupancy of certain property groups within our stabilized portfolio for the periods presented:
Average Occupancy (1)
Three Months Ended March 31,
2026 2025
Stabilized Office & Life Science Portfolio (2)
77.4 % 81.4 %
Same Property Portfolio (3)
82.0 % 81.8 %
Residential Portfolio (4)
95.0 % 95.2 %
________________________
(1)Occupancy percentages reported are calculated as the average of the daily ending occupancy percentages for the period presented. Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.
(2) KOP 2 stabilized during the three months ended March 31, 2026. Excluding KOP 2, the average stabilized portfolio occupancy was 81.4% for the three months ended March 31, 2026.
(3) The same property portfolio includes all properties owned and included in the stabilized portfolio for two comparable reporting periods, i.e., owned and included in the stabilized portfolio as of January 1, 2025 and still owned and included in the stabilized portfolio as of March 31, 2026.
(4) Our 2026 residential portfolio consists of 608 residential units at our One Paseo mixed-use property in San Diego, California. Our 2025 residential portfolio consists of 200 residential units at our Columbia Square Living property and 193 residential units at our Jardine property in Hollywood California, and 608 residential units at our One Paseo mixed-use property in San Diego, California.
Significant Tenants
Refer to our 2025 Annual Report on Form 10-K for information about our 20 largest tenants. There have been no significant changes to these 20 largest tenants outside of the ordinary course of business during the three months ended March 31, 2026.
Factors That May Influence Future Results of Operations
Leasing
Leasing Activity and Changes in Rental Rates
The amount of rental income generated by our properties depends principally on our ability to maintain current occupancy rates and to lease currently available space, including space at newly developed or redeveloped properties and newly acquired properties. The amount of rental income we generate also depends on our ability to maintain or increase rental rates at our properties. Negative trends in one or more of these factors could adversely affect our rental income in future periods. The following tables set forth certain information regarding leasing activity during the three months ended March 31, 2026:
Leases Executed (1)
Quarter 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)
New Renewal New Renewal Total
2nd Gen Leasing (3)
23 11 245,362 44,476 289,838 53 $ 50.63 $ 11.06
1st Gen / Major Repositioning /
In-Process Development & Redevelopment Leasing (4)
4 - 208,081 - 208,081 203 $ 321.52 $ 19.86
Total 27 11 453,443 44,476 497,919
2nd Gen Leasing Change in Rents
Changes in
GAAP Rents (5)
Changes in
Cash Rents (6)
Leases Signed On Space Vacant Less Than or Equal to 12 Months 19.2 % 5.2 %
All Leases Signed (10.6) % (16.8) %
Retention Rate Calculations
Quarter to Date
Retention Rate (7)
18.5 %
Retention Rate, including subtenants (8)
33.4 %
________________________
(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 March 31, 2026, the Company signed 70,154 square feet of short-term leases, comprised of 32,537 square feet of new leasing on vacant space and 37,617 square feet of renewal leasing.
(2)Includes tenant improvements and third-party leasing commissions and excludes tenant-funded tenant improvements and indirect leasing costs.
(3)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.
(4)Represents leases executed at projects in our development and redevelopment portfolios, as well as 1st Gen and Major Repositioning leasing.
(5)Calculated as the change between the expiring GAAP rent and the new GAAP rent for the same space. When necessary, lease structures are modified (adjusted for net leases) for comparability. Space that was vacant when the property was acquired is excluded from these calculations.
(6)Calculated as the change between the expiring cash rent and the new cash rent for the same space. When necessary, lease structures are modified (adjusted for net leases) for comparability. Space that was vacant when the property was acquired is excluded from these calculations.
(7)Calculated as the percentage of square footage renewed by existing tenants divided by the square footage of space renewed by existing tenants and lease expirations during the period. Excludes square footage of short-term leases.
(8)Represents the retention rate, inclusive of leases with subtenants where the Company does not expect to experience downtime in occupancy between leases.
Lease Expirations (1)(2)
The following tables set forth certain information regarding our scheduled lease expirations for our stabilized portfolio, excluding our residential properties, by year and by region for the remainder of 2026 and in 2027:
Year of Lease Expiration Number of
Expiring
Leases
Total
Square Feet
% of Total
Leased Sq. Ft.
Annualized
Base Rent
(in thousands) (3)
% of Total
Annualized
Base Rent (3)
Annualized Base
Rent per Sq. Ft. (3)
Month-to-Month 55 21,169 N/A N/A N/A N/A
Remainder of 2026 52 741,015 5.6 % $ 36,656 4.8 % $ 49.47
2027 69 1,076,406 8.2 % 40,685 5.3 % 37.80
2028 73 1,268,281 9.6 % 78,270 10.2 % 61.71
2029 67 1,456,335 11.1 % 76,254 9.9 % 52.36
2030 68 1,726,703 13.1 % 104,294 13.6 % 60.40
Thereafter 168 6,888,642 52.4 % 432,529 56.2 % 62.79
Total 497 13,157,382 100.0 % $ 768,688 100.0 % $ 58.42
Year Region
Number of
Expiring Leases
Total
Square Feet 		% of Total
Leased Sq. Ft.
Annualized
Base Rent
(in thousands) (3)
% of Total
Annualized
Base Rent (3)
Annualized Base Rent
per Sq. Ft. (3)
2026 San Francisco Bay Area 8 215,972 1.7 % $ 15,161 2.1 % $ 70.20
Los Angeles
31 334,062 2.5 % 14,192 1.8 % 42.48
Seattle 9 163,443 1.2 % 6,938 0.9 % 42.45
San Diego 4 27,538 0.2 % 365 - % 13.25
Austin - - - % - - % -
Total 52 741,015 5.6 % $ 36,656 4.8 % $ 49.47
2027 San Francisco Bay Area 6 33,449 0.3 % $ 1,596 0.2 % $ 47.71
Los Angeles
46 837,351 6.4 % 29,829 3.9 % 35.62
Seattle
11 136,180 1.0 % 5,676 0.7 % 41.68
San Diego
6 69,426 0.5 % 3,584 0.5 % 51.62
Austin - - - % - - % -
Total 69 1,076,406 8.2 % $ 40,685 5.3 % $ 37.80
________________________
(1)Represents all in-place leases as of March 31, 2026, excluding intercompany leases.
(2)Includes 100% of annualized base rent of the Consolidated Property Partnerships.
(3)Represents annualized monthly contractual base rents from existing tenants in occupancy, including the impact of straight-lined rent escalations and the amortization of free rent periods and excluding the impact of the following: amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above / below-market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Amounts represent percentage of total portfolio annualized contractual base rental revenue.
Adjusting for leases that have been backfilled or released to a subtenant as of March 31, 2026 but not yet commenced, the remaining 2026, 2027, and 2028 expirations would be 727,003, 988,946, and 1,241,431 square feet, respectively.
Our rental rates and occupancy are impacted by general economic conditions, including the pace of regional economic growth and capital availability. Therefore, we cannot guarantee that leases will be renewed or that available space will be re-leased at rental rates equal to or above current rates.
Capital Recycling Program
Our capital recycling program plays a central role in reshaping our portfolio for long-term performance and cash flow durability. By disposing of select non-core or non-strategic assets, often in markets where growth prospects have moderated, as well as undeveloped land in our portfolio, we can redeploy capital into opportunities that can realize higher returns. Refer to "Liquidity and Capital Resources of the Operating Partnership" for further discussion of our capital recycling program.
Development and Redevelopment Programs
Stabilized Development Project
During the three months ended March 31, 2026, we completed and added the following development project to our stabilized portfolio:
•Kilroy Oyster Point (Phase 2), South San Francisco, California. In June 2021, we commenced construction on Phase 2 of this 39-acre life science campus situated on the waterfront in South San Francisco and progressed the property to the tenant improvement phase during the first quarter of 2025. The second phase 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 5% occupied and 44% leased.
Future Development Pipeline
As of March 31, 2026, our future development pipeline included the following projects:
Future Development Pipeline Location
Approx. Developable Square Feet / Residential Units (1)
Total Costs (2)
(in millions)
San Francisco Bay Area
Flower Mart San Francisco CBD 2,300,000 $ 713.1
Kilroy Oyster Point - Phases 3 and 4 South San Francisco 875,000 - 1,000,000 254.9
1900 Broadway (3)
Other Peninsula
251,000 67.6
Los Angeles
1633 26th Street (4)
West Los Angeles 190,000 16.1
Seattle
SIX0 Lake Union / Denny Regrade 925,000 and 650 units 201.8
San Diego
Santa Fe Summit (4)
56 Corridor 600,000 - 650,000 117.4
2045 Pacific Highway Little Italy / Point Loma 275,000 61.1
Kilroy East Village East Village 1,100 units 68.0
Austin
Stadium Tower Stadium District / Domain 493,000 75.4
TOTAL: $ 1,575.4
________________________
(1)Project scope, including the estimated developable square feet or number of residential units, could change materially from estimates provided due to one or more of the following: significant changes in the economy, market conditions, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes, or project design.
(2)Represents costs incurred, including accrued liabilities in accordance with GAAP.
(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%.
(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 2026.
Fluctuations in our development activities, including a slowdown in development activities, could cause fluctuations in the average development asset balances qualifying for interest and other carrying costs and internal cost capitalization under GAAP in future periods, resulting in higher interest and other expenses. The following table sets forth our capitalized interest and other capitalized costs for our development and redevelopment properties and capital improvement projects in the stabilized portfolio:
Three Months Ended March 31,
2026 2025
(in thousands)
Capitalized Interest
Average Qualifying Costs (1)
$ 1,255,177 $ 1,866,242
Capitalized Interest $ 13,991 $ 20,548
Other Capitalized Costs
Capitalized Internal Overhead Costs (2)
$ 3,977 $ 4,634
Other Capitalized Development Costs (3)
$ 3,190 $ 4,974
________________________
(1)The average qualifying costs for the three months ended March 31, 2026 includes costs incurred for KOP 2 prior to stabilization.
(2)Primarily represents compensation costs capitalized to construction and development and redevelopment projects.
(3)Represents incidental property operating and carry costs capitalized to development and redevelopment projects.
Inflation
The majority of the Company's leases require tenants to reimburse the Company for the tenant's proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company's exposure to increases in operating costs resulting from inflation. The Company's exposure to inflationary impacts is sensitive to fluctuations in the occupancy levels at its properties.
Results of Operations
Net Operating Income
Management internally evaluates the operating performance and financial results of our stabilized portfolio based on Net Operating Income. We define "Net Operating Income" as revenues less lease termination fees and consolidated operating expenses (property expenses, real estate taxes, and ground 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. 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.
Management further evaluates Net Operating Income by evaluating the performance from the following property groups:
•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 March 31, 2026, including our residential property in San Diego, California;
•Re/Development Properties - includes the results generated by certain of our in-process development and redevelopment projects, expenses for certain of our future development projects, and the results generated by the two stabilized redevelopment properties that were added to the stabilized portfolio in the third quarter of 2025 and the one property added to the stabilized portfolio in the first quarter of 2026;
•Acquisition Properties - includes the results, from the date of acquisition through the periods presented, of the following:
◦One property acquired in the third quarter of 2025; and
◦One property, comprised of four buildings, acquired in the fourth quarter of 2025; and
•Disposition and Held for Sale Properties - includes the results of the following:
◦One property disposed of in the second quarter of 2025;
◦One property, comprised of four buildings, disposed of in the third quarter of 2025;
◦One property disposed of in the fourth quarter of 2025;
◦Two properties, comprised of four buildings, disposed of in the first quarter of 2026; and
◦Two residential properties, totaling 393 residential units, classified as held for sale as of March 31, 2026.
The following table sets forth certain information regarding the property groups within our stabilized portfolio as of March 31, 2026:
Group # of Buildings Rentable
Square Feet
Same Property Portfolio 113 15,613,635
Re/Development Properties (1)
5 972,226
Acquisition Properties 5 538,532
Total Stabilized Portfolio (2)
123 17,124,393
________________________
(1)Excludes development projects in the tenant improvement phase, our in-process development projects, and future development projects.
(2)Excludes our residential property, measured in units.
Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025
The following table summarizes our Net Operating Income for our total portfolio:
Three Months Ended March 31, Dollar
Change 		Percentage
Change
2026 2025
($ in thousands)
Reconciliation of Net (Loss) Income Available to Common Stockholders to Net Operating Income, as defined:
Net (Loss) Income Available to Common Stockholders $ (19,267) $ 39,008 $ (58,275) (149.4) %
Net (loss) income attributable to noncontrolling common units of the Operating Partnership (185) 375 (560) (149.3) %
Net income attributable to noncontrolling interests in consolidated property partnerships 4,779 4,298 481 11.2 %
Net (loss) income $ (14,673) $ 43,681 $ (58,354) (133.6) %
Lease termination fees (398) (506) 108 (21.3) %
General and administrative expenses 20,699 16,901 3,798 22.5 %
Leasing costs 3,010 2,873 137 4.8 %
Depreciation and amortization 94,344 87,119 7,225 8.3 %
Interest income (954) (1,134) 180 (15.9) %
Interest expense 38,511 31,148 7,363 23.6 %
Other (income) expense
(389) 157 (546) (347.8) %
Gains on sales of depreciable operating properties (23,525) - (23,525) (100.0) %
Impairment of real estate assets 61,778 - 61,778 100.0 %
Net Operating Income $ 178,403 $ 180,239 $ (1,836) (1.0) %
The following tables summarize our Net Operating Income for our total portfolio for the three months ended March 31, 2026 and 2025:
Three Months Ended March 31,
2026 2025
Same
Property 		Re/
Develop-
ment 		Acquisi-
tion
Disposi-
tion &
Held for
Sale
Total Same
Property 		Re/
Develop-
ment 		Acquisi-
tion
Disposi-
tion &
Held for
Sale
Total
(in thousands)
Operating revenues:
Rental income $ 248,043 $ 629 $ 9,815 $ 6,445 $ 264,932 $ 243,605 $ 155 $ - $ 21,978 $ 265,738
Other property income 3,974 316 214 219 4,723 3,774 256 - 570 4,600
Total 252,017 945 10,029 6,664 269,655 247,379 411 - 22,548 270,338
Property and related expenses:
Property expenses 52,257 1,640 2,758 2,628 59,283 52,151 392 - 6,171 58,714
Real estate taxes 23,425 2,828 1,260 1,269 28,782 24,396 802 - 3,167 28,365
Ground leases 3,187 - - - 3,187 3,020 - - - 3,020
Total 78,869 4,468 4,018 3,897 91,252 79,567 1,194 - 9,338 90,099
Net Operating Income (Loss) $ 173,148 $ (3,523) $ 6,011 $ 2,767 $ 178,403 $ 167,812 $ (783) $ - $ 13,210 $ 180,239
Three Months Ended March 31, 2026 as compared to the Three Months Ended March 31, 2025
Same Property Re/Development Acquisition Disposition &
Held for Sale 		Total
Dollar
Change 		Percent
Change 		Dollar Change Dollar Change Dollar Change Dollar Change
($ in thousands)
Operating revenues:
Rental income $ 4,438 1.8 % $ 474 $ 9,815 $ (15,533) $ (806)
Other property income 200 5.3 % 60 214 (351) 123
Total 4,638 1.9 % 534 10,029 (15,884) (683)
Property and related expenses:
Property expenses 106 0.2 % 1,248 2,758 (3,543) 569
Real estate taxes (971) (4.0) % 2,026 1,260 (1,898) 417
Ground leases 167 5.5 % - - - 167
Total (698) (0.9) % 3,274 4,018 (5,441) 1,153
Net Operating Income Impact $ 5,336 3.2 % $ (2,740) $ 6,011 $ (10,443) $ (1,836)
Net Operating Income decreased $1.8 million, or 1.0%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily resulting from:
•A decrease of $10.4 million, attributable to the Disposition and Held for Sale Properties; and
•A decrease of $2.7 million, attributable to the Re/Development Properties, primarily due to one development property added to the stabilized portfolio in the first quarter of 2026, which resulted in the cessation of cost capitalization.
Partially offset by:
•An increase of $6.0 million, attributable to the Acquisition Properties; and
•An increase of $5.3 million, or 3.2%, attributable to the Same Property Portfolio, which was driven by the following activity:
•An increase in total operating revenues of $4.6 million, or 1.9%, primarily due to a(n):
•$3.1 million increase in straight-line rent, primarily due to a $6.0 million increase from newly commenced leases with rent abatements, partially offset by aging leases where cash rent now exceeds GAAP rent on a straight-line basis;
•$1.9 million increase in revenue associated with tenant creditworthiness considerations that resulted in higher non-recurring charges in 2025;
•$0.8 million increase in revenues from recoverable operating expenses;
•$0.7 million increase in transient parking income and residential income; and
•$0.3 million increase in settlement and restoration fee income.
Partially offset by:
•$2.1 million decrease in net base rent, primarily due to the above-mentioned $6.0 million increase in abated rent, mainly in the San Francisco Bay Area and Seattle regions, partially offset by a $3.6 million increase from higher rates and a $0.3 million increase due to increased occupancy; and
•$0.1 million decrease in amortization of deferred income and tenant funded improvements, mainly resulting from tenant move outs.
•A decrease in property and related expenses of $0.7 million, or 0.9%, primarily due to a(n):
•$1.0 million decrease in real estate taxes, primarily due to a net increase in refunds of $1.4 million received in 2026, partially offset by a $0.4 million increase resulting from higher assessed property values.
Partially offset by:
•$0.3 million increase in property expenses and ground rent expense.
Lease Termination Fees
Lease termination fees decreased $0.1 million, or 21.3%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to a lease termination fee recognized for one tenant in 2025 in the Seattle region.
General and Administrative Expenses
General and administrative expenses increased $3.8 million, or 22.5%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to an increase in compensation expense of $2.7 million resulting from increased headcount and a reduction in the amount of labor capitalized to development and redevelopment properties and capital improvement projects.
Depreciation and Amortization
Depreciation and amortization increased $7.2 million, or 8.3%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the following:
•An increase of $7.5 million attributable to a full quarter of expense related to the Acquisition Properties;
•An increase of $4.6 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
•An increase of $1.2 million attributable to the Same Property Portfolio, primarily due to revenue recognition commencing for one tenant in the Seattle region in the third quarter of 2025.
Partially offset by:
•A decrease of $6.1 million attributable to the Disposition and Held for Sale Properties.
Interest Income
Interest income decreased $0.2 million, or 15.9%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to lower average interest rates on our interest-bearing accounts.
Interest Expense
The following table sets forth our gross interest expense and capitalized interest:
Three Months Ended March 31,
2026 2025 Dollar Change
Percentage
Change
($ in thousands)
Gross interest expense $ 52,502 $ 51,696 $ 806 1.6 %
Capitalized interest
(13,991) (20,548) 6,557 (31.9) %
Interest expense $ 38,511 $ 31,148 $ 7,363 23.6 %
Average Qualifying Costs $ 1,255,177 $ 1,866,242 $ (611,065) (32.7) %
Weighted Average Interest and Loan Fee Amortization Rate 4.46 % 4.40 % 0.06 %
Gross interest expense, before the effect of capitalized interest, increased $0.8 million, or 1.6%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to an increase in the weighted average interest rate for the three months ended March 31, 2026.
Capitalized interest decreased $6.6 million, or 31.9%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the stabilization of the one development property added to the stabilized portfolio during the three months ended March 31, 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 IA. Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2025.
Liquidity and Capital Resources of the Company
In this "Liquidity and Capital Resources of the Company" section, the term the "Company" refers only to Kilroy Realty Corporation on an unconsolidated basis and excludes the Operating Partnership and all other subsidiaries. As the sole general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes, and the Company does not have significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities and the revenues and expenses of the Company and the Operating Partnership are substantially the same on their respective financial statements. The section entitled "Liquidity and Capital Resources of the Operating Partnership" should be read in conjunction with this section to understand the liquidity and capital resources of the Company on a consolidated basis and how the Company is operated as a whole.
Our liquidity, access to capital, and ability to execute our business strategy are subject to a variety of risks and uncertainties. Our ability to obtain financing, raise capital through dispositions or joint ventures, recycle capital through tax-deferred transaction structures, fund development activity, or pursue acquisition opportunities will depend on a number of factors, many of which are outside of our control. These factors include conditions in the public and private capital markets, interest rate and inflation trends, the availability and cost of debt and equity financing, the demand for our properties, the timing and pricing of potential dispositions, the performance of our development projects, and broader macroeconomic and geopolitical conditions.
Distributions from the Operating Partnership are the Company's primary source of capital. The Company believes the Operating Partnership's sources of working capital, specifically its cash flows from operations, borrowings available under its unsecured revolving credit facility, and funds from its capital recycling program, including strategic ventures, are adequate for it to make its distribution payments to the Company to make dividend payments to its common stockholders for the next twelve months. The unavailability of capital could adversely affect the Operating Partnership's ability to make distributions to the Company, which would in turn adversely affect the Company's ability to pay cash dividends to its stockholders.
The Company is a well-known seasoned issuer and the Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company and the Operating Partnership of certain securities in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing, and capital needs. When the Company receives proceeds from the sales of its securities, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership.
Liquidity Highlights
As of March 31, 2026, we had approximately $192.9 million in cash and cash equivalents and $1.1 billion available under our unsecured revolving credit facility. We believe that our available liquidity makes us well positioned to navigate any additional future uncertainties.
Distribution Requirements
The Company is required to distribute 90% of its taxable income (subject to certain adjustments and excluding net capital gains) on an annual basis to maintain qualification as a REIT for federal income tax purposes. As a result of these distribution requirements, the Operating Partnership cannot rely on retained earnings to fund its on-going operations to the same extent as other companies whose parent companies are not REITs. In addition, the Company may be required to use borrowings under the Operating Partnership's revolving credit facility, if necessary, to meet REIT distribution requirements and maintain its REIT status. The Company may also need to raise capital to fund the Operating Partnership's working capital needs, as well as potential developments of new or existing properties or acquisitions.
The Company intends to continue to make, but has not committed to making, regular quarterly cash distributions to common stockholders. All such distributions are at the discretion of the Board of Directors. The Company considers market factors and its performance in addition to REIT requirements in determining its distribution levels. Amounts accumulated for distribution to stockholders are invested primarily in interest-bearing accounts and short-term interest-bearing securities, which is consistent with the Company's intention to maintain its qualification as a REIT. Such investments may include, for example, obligations of the Government National Mortgage Association, other governmental agency securities, certificates of deposit, and interest-bearing bank deposits.
On February 24, 2026, the Board of Directors declared a regular quarterly cash dividend of $0.54 per share of common stock. The regular quarterly cash dividend was payable to stockholders of record on March 31, 2026 and a corresponding cash distribution of $0.54 per Operating Partnership unit was payable to holders of the Operating Partnership's common limited partnership interests of record on March 31, 2026, including those owned by the Company. The total cash quarterly dividends and distributions paid on April 8, 2026 were $63.4 million.
The covenants contained within certain of our unsecured debt obligations generally prohibit the Company from making distribution payments during an event of default except to the extent that such payments result in distributions sufficient to (i) maintain our qualification as a REIT for federal and state income tax purposes, and (ii) avoid the payment of federal or state income or excise tax.
Capitalization
As of March 31, 2026, our total debt as a percentage of total market capitalization was 58.3%, as shown in the following table:
Shares / Units
Aggregate
Principal
Amount or
$ Value
Equivalent
(in thousands)
% of Total
Market
Capitalization
Debt: (1) (2)
2024 Term Loan Facility due 2026 (3)
$ 200,000 2.5 %
Unsecured Senior Notes Series A & B due 2026 (4)
250,000 3.2 %
Unsecured Senior Notes Series A & B due 2027 & 2029 250,000 3.2 %
Unsecured Senior Notes due 2031 350,000 4.4 %
Unsecured Senior Notes due 2028 (5)
400,000 5.0 %
Unsecured Senior Notes due 2029 400,000 5.0 %
Unsecured Senior Notes due 2030 500,000 6.3 %
Unsecured Senior Notes due 2032 (5)
425,000 5.4 %
Unsecured Senior Notes due 2033 (5)
450,000 5.7 %
Unsecured Senior Notes due 2035 400,000 5.0 %
Unsecured Senior Notes due 2036 400,000 5.0 %
Secured debt 598,842 7.6 %
Total debt $ 4,623,842 58.3 %
Equity and Noncontrolling Interests in the Operating Partnership: (6)
Common limited partnership units outstanding (7)
1,133,562 $ 31,978 0.4 %
Shares of common stock outstanding 116,278,807 3,280,225 41.3 %
Total Equity and Noncontrolling Interests in the Operating Partnership $ 3,312,203 41.7 %
Total Market Capitalization $ 7,936,045 100.0 %
________________________
(1) Represents gross aggregate principal amount due at maturity before the effect of the following at March 31, 2026: $23.8 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes, and secured debt and $10.6 million of unamortized discounts for the unsecured senior notes.
(2) As of March 31, 2026, there was no outstanding balance on the unsecured revolving credit facility.
(3) The maturity date may be extended by a 12-month period, at the Operating Partnership's election.
(4) In April 2026, repaid the outstanding $50.0 million of 4.300% Private Placement Senior Notes Series A due July 2026, at par. Refer to Note 16 "Subsequent Events" to our consolidated financial statements included in this report for additional information.
(5) Green bond.
(6) Value based on closing price per share of our common stock of $28.21, as of March 31, 2026.
(7) Includes common units of the Operating Partnership not owned by the Company. Excludes noncontrolling interests in consolidated property partnerships.
Liquidity and Capital Resources of the Operating Partnership
In this "Liquidity and Capital Resources of the Operating Partnership" section, the terms "we," "our," and "us" refer to the Operating Partnership or the Operating Partnership and the Company together, as the context requires.
General
Our primary liquidity sources and uses are as follows:
Liquidity Sources
•Net cash flows from operations;
•Proceeds from our capital recycling program, including the disposition of assets and the formation of strategic ventures;
•Proceeds from additional secured or unsecured debt financings;
•Borrowings under the Operating Partnership's unsecured revolving credit facility; and
•Proceeds from equity or preferred equity securities.
Liquidity Uses
•Debt service and principal payments, including debt maturities, debt repurchases, and redemptions;
•Capital expenditures, tenant improvements, and leasing costs;
•Development and redevelopment costs;
•Operating property or undeveloped land acquisitions;
•Distributions to common security holders; and
•Repurchases and redemptions of outstanding common stock of the Company.
General Strategy
Our general strategy is to maintain a conservative balance sheet with a strong credit profile and to maintain a capital structure that allows for financial flexibility and diversification of capital resources. We manage our capital structure to reflect a long-term investment approach and utilize multiple sources of capital to meet our long-term capital requirements. We believe that our current projected liquidity requirements for the next twelve-month period, as set forth above under the caption "-Liquidity Uses," will be satisfied using a combination of the liquidity sources listed above, although there can be no assurance in this regard. We believe our disciplined capital structure and staggered debt maturities provide us with financial flexibility and enhance our ability to obtain additional sources of liquidity if necessary, and, therefore, we are well-positioned to refinance or repay maturing debt and to pursue our strategy of seeking attractive acquisition opportunities, which we may finance, as necessary, with future public and private issuances of debt and equity securities, although there can be no assurance in this regard.
Liquidity Sources
Unsecured Revolving Credit Facility and Term Loan Facility
The following table summarizes the balance and terms of our unsecured revolving credit facility:
Unsecured Revolving Credit Facility
March 31, 2026 December 31, 2025
($ 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)
4.88 % 5.07 %
Annual facility fee (3)
0.25%
Unamortized deferred financing costs (3)
$ 8,264 $ 9,150
Maturity date (4)
July 31, 2028
________________________
(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 March 31, 2026 and December 31, 2025. We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $500.0 million under an accordion feature pursuant to the terms of the unsecured revolving credit facility.
(2)Our unsecured revolving credit facility interest rate was calculated using the Secured Overnight Financing Rate ("SOFR") plus a SOFR adjustment of 0.10% (together "Adjusted SOFR") and a margin of 1.100% based on our credit rating as of March 31, 2026 and December 31, 2025. We may be entitled to a temporary 0.01% reduction in the interest rate, provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.
(3)Our annual facility fee is paid on a quarterly basis and is calculated based on total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility in 2024. These costs are included in Prepaid expenses and other assets, net on our consolidated balance sheets, and will continue to be amortized through the maturity date.
(4)The maturity date may be extended by two six-month periods, at the Operating Partnership's election.
The Operating Partnership intends to borrow under the unsecured revolving credit facility from time to time for general corporate purposes, including to finance development and redevelopment expenditures, to fund potential acquisitions, to repay long-term debt, and to supplement cash balances in response to market conditions.
The following table summarizes the balance and terms of our 2024 Term Loan Facility:
2024 Term Loan Facility
March 31, 2026 December 31, 2025
($ in thousands)
Outstanding borrowings (1)
$ 200,000 $ 200,000
Interest rate (2)
4.97 % 5.02 %
Unamortized deferred financing costs (3)
$ 186 $ 277
Maturity date (4)
October 3, 2026
____________________
(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, 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 March 31, 2026 and December 31, 2025.
(3)We incurred debt origination and legal costs in connection with the amendment and restatement of the 2024 Term Loan Facility in 2024, which will continue to be amortized through the maturity date. Additionally, in connection with extending the maturity date in September 2025, we incurred additional costs that will continue to be amortized through the extended maturity date of the 2024 Term Loan Facility.
(4)The maturity date may be extended by a 12-month period, at the Operating Partnership's election.
Capital Recycling Program
As discussed in the section "Factors That May Influence Future Results of Operations - Capital Recycling Program," we continuously evaluate opportunities for the potential disposition of non-core properties and undeveloped land in our portfolio, or the formation of strategic ventures, with the intent of using the proceeds generated to acquire new operating and development properties, finance development and redevelopment expenditures, repay long-term debt, and for other general corporate purposes.
In connection with our capital recycling strategy, during the three months ended March 31, 2026, we completed the sale of two operating properties to unaffiliated third parties for gross proceeds totaling approximately $145.5 million. As of March 31, 2026, we had two residential properties, comprised of 393 residential units, classified as held for sale, with a gross sales price of $202.0 million. The sale of these properties closed in April 2026. The timing of any potential future disposition or strategic venture transactions will depend on market conditions and other factors, including, but not limited to, our capital needs, the
availability of financing for potential buyers (which has been and may continue to be constrained due to current economic and market conditions), and our ability to absorb or defer some or all of the taxable gains on the sales.
Shelf Registration Statement
The Company and the Operating Partnership have an effective shelf registration statement that provides for the public offering and sale from time to time by the Company and the Operating Partnership of certain securities in unlimited amounts. The Company evaluates the capital markets on an ongoing basis for opportunities to raise capital, and, as circumstances warrant, the Company and the Operating Partnership may issue securities in one or more offerings at any time and from time to time on an opportunistic basis, depending upon, among other things, market conditions, available pricing, and capital needs. When the Company receives proceeds from the sales of its preferred or common stock, it generally contributes the net proceeds from those sales to the Operating Partnership in exchange for corresponding preferred or common partnership units of the Operating Partnership. The Operating Partnership may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under its unsecured revolving credit facility and unsecured term loan facility, to develop new or redevelop existing properties, to make acquisitions of properties or portfolios of properties, or for general corporate purposes.
At-The-Market Stock Offering Program
Under the 2024 ATM Program, which commenced in March 2024, we may offer and sell shares of the Company's common stock having an aggregate gross sales price of up to $500.0 million from time to time in "at-the-market" offerings. In connection with the 2024 ATM Program, the Company may also, at its discretion, enter into forward equity sale agreements. The use of forward equity sale agreements allows the Company to fix a share price on the sale of shares of our common stock at the time an agreement is executed but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. The Company did not have any outstanding forward equity sale agreements to be settled at March 31, 2026. Since commencement of the 2024 ATM Program, we have not completed any sales of common stock.
Liquidity Uses
Contractual Obligations
Refer to our 2025 Annual Report on Form 10-K for a discussion of our contractual obligations. There have been no material changes outside of the ordinary course of business to these contractual obligations during the three months ended March 31, 2026, with the exception of the additional development commitments for 1900 Broadway. As of March 31, 2026, we have committed to contribute $225.0 million to $245.0 million toward this project through 2030, of which, $20.0 million to $30.0 million is expected to be spent in 2026.
Other Liquidity Uses
Potential Future Leasing Costs and Capital Improvements
The amounts we incur for tenant improvements and leasing costs depend on leasing activity in each period. Tenant improvements and leasing costs generally fluctuate in any given period depending on factors such as the type and condition of the property, the term of the lease, the type of the lease, the involvement of external leasing agents, and overall market conditions, including the level of inflation. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to maintain our properties and may be impacted by inflationary pressures on the cost of construction materials.
Development
We believe we may spend between $100.0 million to $150.0 million on development projects throughout the remainder of 2026. The ultimate timing of these expenditures may fluctuate given construction progress and leasing status of the projects, or as a result of events outside our control, such as delays or increased costs as a result of heightened inflation and market conditions. We expect that any material additional development activities will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, or strategic venture opportunities. We cannot provide assurance that development projects will be completed on the terms, for the amounts, or on the timelines currently contemplated, or at all.
Potential Future Acquisitions
As discussed in the section "-Factors That May Influence Future Results of Operations - Capital Recycling Program," we continue to evaluate strategic opportunities and remain a disciplined buyer of core, value-add, and strategic operating properties and land, dependent on market conditions and business cycles, among other factors. We focus on growth opportunities primarily in markets populated by knowledge and creative-based tenants in a variety of industries, including technology, media, healthcare, life sciences, and professional services. We expect that any material acquisitions will be funded with borrowings under the unsecured revolving credit facility, the public or private issuance of debt or equity securities, the disposition of assets under our capital recycling program, the formation of strategic ventures, or through the assumption of existing debt, although there can be no assurance in this regard.
Debt Composition
The composition of the Operating Partnership's aggregate debt balances between secured and unsecured and fixed-rate and variable-rate debt was as follows:
Percentage of Total Debt (1) (2)
Weighted Average Interest Rate (1) (2)
March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025
Secured vs. unsecured:
Unsecured 87.0 % 87.0 % 4.1 % 4.1 %
Secured 13.0 % 13.0 % 5.1 % 5.1 %
Variable-rate vs. fixed-rate:
Variable-rate 4.3 % 4.3 % 5.0 % 5.0 %
Fixed-rate (3)
95.7 % 95.7 % 4.2 % 4.2 %
Stated rate 4.3 % 4.3 %
Effective rate (3)
4.5 % 4.6 %
________________________
(1) As of the end of the period presented.
(2) As of March 31, 2026 and December 31, 2025, there was no outstanding balance on the unsecured revolving credit facility.
(3) Includes the impact of an unused facility fee, amortization of deferred financing costs, and amortization of discounts.
Share Repurchase Program
Under our current share repurchase program, which commenced in February 2024 (the "Share Repurchase Program"), we are authorized to repurchase shares of the Company's common stock having an aggregate gross purchase price of up to $500.0 million. Under the Share Repurchase Program, repurchases may be made from time to time using a variety of methods, which may include open market purchases and privately negotiated transactions. The specific timing, price, and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The Share Repurchase Program does not have a termination date and repurchases may be discontinued at any time. During the three months ended March 31, 2026, we repurchased 2,357,739 shares of common stock at a weighted average price of $30.80 per common share for an aggregate purchase price of $72.7 million. As of March 31, 2026, we are authorized to repurchase shares of the Company's common stock having an aggregate gross purchase price of up to $427.3 million.
Factors That May Influence Future Sources of Capital and Liquidity of the Company and the Operating Partnership
We continue to evaluate sources of financing for our business activities, including borrowings under the unsecured revolving credit facility, the unsecured term loan facility, issuance of public and private equity securities, unsecured debt and fixed-rate secured mortgage financing, proceeds from the disposition of selective assets through our capital recycling program, and the formation of strategic ventures. However, our ability to obtain new financing or refinance existing borrowings on favorable terms could be impacted by various factors, including the state of the macroeconomy, the state of the credit and equity markets, significant tenant defaults, a decline in the demand for commercial real estate properties, a decrease in market rental rates or market values of real estate assets in our submarkets, the amount of our future borrowings and uncertainty related to interest rates, inflation rates, geopolitical events, and other factors (refer to "Part I, Item IA. Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2025 for additional information). These events could result in the following:
•A decrease in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;
•An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and
•A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership's ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.
In addition to the factors noted above, the Operating Partnership's credit ratings are subject to ongoing evaluation by credit rating agencies and may be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.
Financial Covenants and Restrictions
The unsecured revolving credit facility, unsecured term loan facility, unsecured senior notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. The Operating Partnership was in compliance with all of its financial covenants as of March 31, 2026. Our current expectation is that the Operating Partnership will continue to meet the requirements of its financial covenants in both the short and long term. However, in the event of an economic slowdown or continued volatility in the credit markets, there is no certainty that the Operating Partnership will be able to continue to satisfy all the covenant requirements.
Consolidated Historical Cash Flows Summary
The following summary discussion of our consolidated historical cash flows is based on the consolidated statements of cash flows in Item 1. "Financial Statements" and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Changes in our cash flows include changes in cash and cash equivalents. Our historical cash flow activity is as follows:
Three Months Ended March 31,
2026 2025 Dollar
Change 		Percentage
Change
($ in thousands)
Net cash provided by operating activities $ 150,695 $ 136,921 $ 13,774 10.1 %
Net cash provided by (used in) investing activities
15,048 (76,660) 91,708 (119.6) %
Net cash used in financing activities
(152,155) (79,240) (72,915) 92.0 %
Net increase (decrease) in cash and cash equivalents
$ 13,588 $ (18,979) $ 32,567 (171.6) %
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 and redevelopment projects and related financing activities, and other general and administrative costs. See additional information under the caption "-Results of Operations." Our net cash provided by operating activities increased by $13.8 million, or 10.1%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the timing of outflows related to annual insurance premium payments, as well as an increase in accrued property taxes payable during the three months ended March 31, 2026.
Investing Activities
Our cash flows from investing activities are generally used to fund development and operating property acquisitions, expenditures for development and redevelopment projects, recurring and nonrecurring capital expenditures for our operating properties, and include net proceeds received from dispositions of real estate assets. We had net cash provided by investing activities of $15.0 million for the three months ended March 31, 2026 as compared to net cash used in investing activities of $76.7 million for the three months ended March 31, 2025, primarily due to the net proceeds received from the dispositions of our two operating properties during the three months ended March 31, 2026, partially offset by a $34.6 million payment in connection with a newly formed consolidated subsidiary, which includes the acquisition of a 1.1-acre land parcel for a future development project. We did not dispose of any operating properties during the three months ended March 31, 2025.
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. Our net cash used in financing activities increased by $72.9 million, or 92.0%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to the common stock repurchases made during the three months ended March 31, 2026 under our current Share Repurchase Program.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. We base our estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from these estimates.
In our Annual Report on Form 10-K for the year ended December 31, 2025, we identified certain critical accounting policies that affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not made any material changes to our critical accounting policies and estimates during the period covered by this report.
Non-GAAP Supplemental Financial Measure: Funds From Operations ("FFO")
We calculate FFO available to common stockholders and common unitholders in accordance with the 2018 Restated White Paper on FFO approved by the Board of Governors of Nareit. The White Paper defines FFO as net income or loss (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. The reconciling items include amounts to adjust earnings from consolidated partially-owned entities and equity in earnings of unconsolidated affiliates to FFO. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.
We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing, and investing activities than the required GAAP presentations alone would provide.
FFO should not be viewed as an alternative measure of our operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.
The following table presents our FFO:
Three Months Ended March 31,
2026 2025
(in thousands)
Net (loss) income available to common stockholders
$ (19,267) $ 39,008
Adjustments:
Net (loss) income attributable to noncontrolling common units of the Operating Partnership
(185) 375
Net income attributable to noncontrolling interests in consolidated property partnerships 4,779 4,298
Depreciation and amortization of real estate assets 92,885 85,735
Gains on sales of depreciable operating properties (23,525) -
Impairment of real estate assets 61,778 -
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships (7,619) (7,106)
Funds From Operations (1) (2)
$ 108,846 $ 122,310
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(1) Reported amounts are attributable to common stockholders, common unitholders, and restricted stock unitholders.
(2) FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $3.2 million and $3.7 million for the three months ended March 31, 2026 and 2025, respectively.
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