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(Mark One)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Kilroy Realty Corporation

Large accelerated filer ☑    Accelerated filer ☐

Non-accelerated filer ☐    Smaller reporting company ☐

Kilroy Realty, L.P.

Large accelerated filer ☐    Accelerated filer ☐

Non-accelerated filer ☑    Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    

Kilroy Realty Corporation Yes  ☐     No   ☑

Kilroy Realty, L.P. Yes  ☐     No   ☑

As of May 2, 2025, 118,280,582 shares of Kilroy Realty Corporation common stock, par value $.01 per share, were outstanding.

 

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2025 of Kilroy Realty Corporation and Kilroy Realty, L.P. Unless stated otherwise or the context otherwise requires, references to “Kilroy Realty Corporation” or the “Company,” “we,” “our,” and “us” mean Kilroy Realty Corporation, a Maryland corporation, and its controlled and consolidated subsidiaries, and references to “Kilroy Realty, L.P.” or the “Operating Partnership” mean Kilroy Realty, L.P., a Delaware limited partnership and its controlled and consolidated subsidiaries.

The Company is a real estate investment trust, or REIT, and the general partner of the Operating Partnership. As of March 31, 2025, the Company owned an approximate 99.0% common general partnership interest in the Operating Partnership. The remaining approximate 1.0% common limited partnership interests are owned by non-affiliated investors. As the sole general partner of the Operating Partnership, the Company exercises exclusive and complete discretion over the Operating Partnership’s day-to-day management and control and can cause it to enter into certain major transactions, including acquisitions, dispositions, and refinancings and cause changes in its line of business, capital structure, and distribution policies.

There are a few differences between the Company and the Operating Partnership that are reflected in the disclosures in this Form 10-Q. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. The Company is a REIT, the only material asset of which is the partnership interests it holds in the Operating Partnership. As a result, the Company generally does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing equity from time to time and guaranteeing certain debt of the Operating Partnership. The Company itself is not directly obligated under any indebtedness, but generally guarantees all of the debt of the Operating Partnership. The Operating Partnership owns substantially all of the assets of the Company either directly or through its subsidiaries, conducts the operations of the Company’s business, and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from equity issuances by the Company, which the Company generally contributes to the Operating Partnership in exchange for units of partnership interest, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness, or through the issuance of units of partnership interest.

Noncontrolling interests, stockholders’ equity, and partners’ capital are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements and, to the extent not held by the Company, as noncontrolling interests in the Company’s financial statements. The differences between stockholders’ equity, partners’ capital, and noncontrolling interests result from the differences in the equity issued by the Company and the Operating Partnership.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

•Combined reports better reflect how management and the analyst community view the business as a single operating unit;

•Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

•Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and

•Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

•consolidated financial statements;

•the following notes to the consolidated financial statements:

◦Note 10, Net Income Available to Common Stockholders Per Share of the Company;

◦Note 11, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;

◦Note 12, Supplemental Cash Flows Information of the Company; and

◦Note 13, Supplemental Cash Flows Information of the Operating Partnership;

•“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

◦—Liquidity and Capital Resources of the Company;” and

◦—Liquidity and Capital Resources of the Operating Partnership.”

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

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

 

 

 

 

(Unaudited; in thousands, except unit and per unit data)

 

Kilroy Realty Corporation (the “Company”) is a self-administered real estate investment trust (“REIT”) active in premier office, life science, and mixed-use property types in the United States. The Company’s approach to modern business environments is designed to drive creativity and productivity for some of the world’s leading technology, entertainment, life science, and business services companies and we have been consistently recognized for our leadership in sustainability and building operations. The Company owns, develops, acquires, and manages real estate assets consisting primarily of premier properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin, which are markets we believe have strategic advantages and strong barriers to entry. The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “KRC.”

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

Our stabilized portfolio includes all of our properties with the exception of development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, undeveloped land, and real estate assets held for sale, if any. We define redevelopment properties as those properties for which we expect to spend significant development and construction costs pursuant to a formal plan to change its use, the intended result of which is a higher economic return on the property. We define a property in the tenant improvement phase as a development or redevelopment property where the project has reached “cold shell condition” and is ready for tenant improvements, which may require additional major base building modifications before being placed in service. Projects in the tenant improvement phase are moved into our stabilized portfolio once the project reaches the earlier of 95% occupancy or one year from the date of the cessation of major base building construction activities. Costs capitalized to construction in progress for development and redevelopment properties are transferred to land and improvements, buildings and improvements, and deferred leasing costs on our consolidated balance sheets as the projects or phases of projects are placed in service. We did not have any properties or undeveloped land held for sale at March 31, 2025.

Our stabilized portfolio of operating properties was comprised of the following properties at March 31, 2025:

________________________

(1)Represents economic occupancy for space where we have achieved revenue recognition for the associated lease agreements.

(2)Includes stabilized life science and retail space.

As of March 31, 2025, the following development and redevelopment properties were excluded from our stabilized portfolio:

________________________

(1)Estimated rentable square feet upon completion.

Our stabilized portfolio excludes our future development pipeline, which, as of March 31, 2025, was comprised of eight future development sites, representing approximately 64 gross acres of undeveloped land.

As of March 31, 2025, all of our properties and development and redevelopment projects, and all of our business was conducted in the state of California, with the exception of ten stabilized office properties and one future development project located in the state of Washington, and one stabilized office property and one future development project located in Austin, Texas. All of our properties, and development and redevelopment projects are 100% owned, excluding the following four office properties owned by the following three consolidated property partnerships:

________________________

(1)The remaining interests in all three property partnerships were owned by unrelated third parties.

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

As of March 31, 2025, the Company owned an approximate 99.0% common general partnership interest in the Operating Partnership. The remaining approximate 1.0% common limited partnership interest in the Operating Partnership as of March 31, 2025 was owned by non-affiliated investors. Both the general and limited common partnership interests in the Operating Partnership are denominated in common units. Generally, the number of common units held by the Company is equivalent to the number of outstanding shares of the Company’s common stock, and the rights of all the common units to quarterly distributions and payments in liquidation mirror those of the Company’s common stockholders. The common limited partners have certain redemption rights as provided in the Operating Partnership’s Seventh Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”). With the exception of the Operating Partnership and our consolidated property partnerships, all of our subsidiaries are wholly-owned.

The accompanying interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. However, the results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The interim financial statements for the Company and the Operating Partnership should be read in conjunction with the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2024.

Commencing January 1, 2025, the Company began presenting a new line item, “Other income (expense)”, which includes tax expenses, acquisition and disposition expenses, and income or expenses related to environmental and sustainability initiatives, which were previously included in general and administrative expenses. Historical amounts for general and administrative expenses and other income (expense) have been revised to conform with the current period presentation.

The Operating Partnership is a variable interest entity (“VIE”) that is consolidated by the Company as the primary beneficiary, as the Operating Partnership is a limited partnership in which the common limited partners do not have substantive kick-out or participating rights. At March 31, 2025, the consolidated financial statements of the Company included three VIEs in addition to the Operating Partnership: 100 First LLC, 303 Second LLC, and one entity established during the third quarter of 2024 to facilitate a potential future Section 1031 Exchange. At March 31, 2025, the Company and the Operating Partnership were determined to be the primary beneficiaries of these three VIEs since we had the ability to control the activities that most significantly impact each of the VIEs’ economic performance. As of March 31, 2025, the three VIEs’ total assets, liabilities, and noncontrolling interests included on our consolidated balance sheet were approximately $430.9 million (of which $353.0 million related to real estate held for investment), approximately $20.7 million, and approximately $166.4 million, respectively.

Revenues, income, and net assets generated by 100 First LLC and 303 Second LLC may only be used to settle their contractual obligations, which primarily consist of operating expenses, capital expenditures, and required distributions.

At December 31, 2024, the consolidated financial statements of the Company included three VIEs in addition to the Operating Partnership: 100 First LLC, 303 Second LLC, and one entity established during the third quarter of 2024 to facilitate a potential future Section 1031 Exchange. At December 31, 2024, the Company and the Operating Partnership were determined to be the primary beneficiaries of these three VIEs since we had the ability to control the activities that most significantly impact each of the VIEs’ economic performance. At December 31, 2024, the impact of consolidating the VIEs increased the Company’s total assets, liabilities, and noncontrolling interests on our consolidated balance sheet by approximately $435.5 million (of which $357.3 million related to real estate held for investment), approximately $18.0 million, and approximately $169.4 million, respectively.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topic 740): Improvements to Tax Disclosures.” The ASU is effective for annual periods beginning after December 15, 2024. The Company does not currently anticipate that the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The ASU is effective for annual periods beginning after December 15, 2026. The Company is currently evaluating whether the guidance will have a material impact on our consolidated financial statements or notes to our consolidated financial statements.

Prepaid expenses and other assets, net consisted of the following at March 31, 2025 and December 31, 2024:

			March 31, 2025						December 31, 2024
			(in thousands)
Furniture, fixtures and other long-lived assets, net			$	25,783					$	26,316
Prepaid expenses, net			27,963						8,470
Deferred financing costs, net (1)			11,806						12,692
Other assets			4,357						4,457
Total prepaid expenses and other assets, net			$	69,909					$	51,935

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(1)Refer to Note 3 “Secured and Unsecured Debt of the Operating Partnership” for a discussion of the deferred financing costs for the unsecured revolving credit facility.

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

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(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, 2025 and December 31, 2024. We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $500.0 million under an accordion feature pursuant to the terms of the unsecured revolving credit facility.

(2)Our unsecured revolving credit facility interest rate was calculated using the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment of 0.10% (“Adjusted SOFR”) and a margin of 1.100% based on our credit rating as of March 31, 2025 and December 31, 2024. We may be entitled to a temporary 0.01% reduction in the interest rate provided we meet certain sustainability goals with respect to the ongoing reduction of greenhouse gas emissions.

(3)Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility in 2024. These costs are included in prepaid expenses and other assets, net on our consolidated balance sheets, and remained to be amortized through the maturity date of our unsecured revolving credit facility.

(4)The maturity date may be extended by two six-month periods, at the Operating Partnership’s election.

			2024 Term Loan Facility
			March 31, 2025						December 31, 2024
			(in thousands)
Outstanding borrowings			$	200,000					$	200,000
Remaining borrowing capacity			—						—
Total borrowing capacity (1)			$	200,000					$	200,000
Interest rate (2)			5.62		%				5.70		%
Unamortized deferred financing costs (3)			$	824					$	1,229
Maturity date (4)			October 3, 2025

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(1)We may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $130.0 million as of March 31, 2025 and December 31, 2024, under an accordion feature pursuant to the terms of the 2024 Term Loan Facility.

(2)Our 2024 Term Loan Facility interest rate was calculated using Adjusted SOFR plus a margin of 1.200% based on our credit rating as of March 31, 2025 and December 31, 2024.

(3)We incurred debt origination and legal costs in connection with the amendment and restatement of the unsecured revolving credit facility in 2024, and remained to be amortized through the maturity date of the 2024 Term Loan Facility.

(4)The maturity date may be extended by two 12-month periods, at the Operating Partnership’s election.

The unsecured revolving credit facility, unsecured term loan facility, unsecured senior notes, including the private placement notes, and certain other secured debt arrangements contain covenants and restrictions requiring us to meet certain financial ratios and reporting requirements. Some of the more restrictive financial covenants include a maximum ratio of total debt to total asset value, a minimum fixed-charge coverage ratio, a maximum ratio of secured debt to total asset value, a minimum unsecured debt ratio, and a minimum unencumbered asset pool debt service coverage ratio. Noncompliance with one or more of the covenants and restrictions could result in the full principal balance of the associated debt becoming immediately due and payable. We were in compliance with all of our financial covenants as of March 31, 2025.

The following table summarizes the stated debt maturities and scheduled amortization payments for all outstanding debt as of March 31, 2025:

Year			(in thousands)
Remaining 2025 (1)			$	604,707
2026			401,317
2027			249,125
2028			400,000
2029			475,000
2030			500,000
Thereafter			2,000,000
Total aggregate principal value			4,630,149
Less: unamortized net discounts and deferred financing costs (2)			(32,307)
Total debt, net			$	4,597,842

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(1)Includes the $200.0 million outstanding as of March 31, 2025 on the 2024 Term Loan Facility, for which the Company has two 12-month extension options.

(2)Includes $24.2 million of unamortized deferred financing costs for the unsecured term loan facility, unsecured senior notes, and secured debt, and $8.1 million of unamortized discounts for the unsecured senior notes. Excludes unamortized deferred financing costs on the unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

The following table sets forth gross interest expense and capitalized interest for the three months ended March 31, 2025 and 2024. The interest expense capitalized was recorded as a cost of development and redevelopment and increased the carrying value of undeveloped land and construction in progress currently under construction.

			Three Months Ended March 31,
			2025						2024
			(in thousands)
Gross interest expense			$	51,696					$	58,678
Capitalized interest			(20,548)						(19,807)
Interest expense			$	31,148					$	38,871

Under our at-the-market (“ATM”) stock offering program, which commenced in March 2024, we may offer and sell shares of our common stock having an aggregate gross sales price up to $500.0 million from time to time in “at-the-market” offerings. In connection with the 2024 ATM Program, the Company may also, at its discretion, enter into forward equity sale agreements. The use of forward equity sale agreements allows the Company to lock in a share price on the sale of shares of our common stock at the time an agreement is executed, but defer settling the forward equity sale agreements and receiving the proceeds from the sale of shares until a later date. The Company did not have any outstanding forward equity sale agreements to be settled at March 31, 2025. Since commencement of our current at-the-market program, we have not completed any sales of common stock.

Under our 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. Since commencement of our current share repurchase program, we have not completed any common stock repurchases.

The Company owned an approximate 99.0% common general partnership interest in the Operating Partnership as of March 31, 2025 and December 31, 2024. The remaining approximate 1.0% common limited partnership interest as of March 31, 2025 and December 31, 2024 was owned by non-affiliated investors in the form of noncontrolling common units. There were 1,150,574 common units outstanding held by these investors as of March 31, 2025 and December 31, 2024.

The noncontrolling common units may be redeemed by unitholders for cash. Except under certain circumstances, we, at our option, may satisfy the cash redemption obligation with shares of the Company’s common stock on a one-for-one basis. If satisfied in cash, the value for each noncontrolling common unit upon redemption is the amount equal to the average of the closing quoted price per share of the Company’s common stock, par value $0.01 per share, as reported on the NYSE for the ten trading days immediately preceding the applicable redemption date. The aggregate value upon redemption of the then-outstanding noncontrolling common units was $39.4 million and $46.8 million as of March 31, 2025 and December 31, 2024, respectively. This redemption value does not necessarily represent the amount that would be distributed with respect to each noncontrolling common unit in the event of our termination or liquidation. In the event of our termination or liquidation, it is generally expected that each common unit would be entitled to a liquidating distribution equal to the liquidating distribution payable in respect of each share of the Company’s common stock.

As of March 31, 2025, we maintained one share-based incentive compensation plan, the Kilroy Realty 2006 Incentive Award Plan, as amended (the “2006 Plan”). The Company has a currently effective registration statement registering 12.6 million shares of our common stock for possible issuance under our 2006 Plan. As of March 31, 2025, approximately 1.9 million shares were available for grant under the 2006 Plan. The calculation of shares available for grant is presented after taking into account a reserve for a sufficient number of shares to cover the vesting and payment of 2006 Plan awards that were outstanding on that date, including performance-based vesting awards at (i) levels actually achieved for the performance conditions (as defined below) for which the performance period has been completed, and (ii) at maximum levels for the other performance and market conditions (as defined below) for awards still in a performance period.

In February 2025, the Executive Compensation Committee of the Company’s Board of Directors awarded 535,398 restricted stock units to certain officers of the Company under the 2006 Plan, which included 308,671 RSUs (at the target level of performance) that are subject to time, market, and/or performance-based vesting requirements (the “2025 Performance-Based RSUs”) and 226,727 RSUs that are subject to time-based vesting requirements (the “2025 Time-Based RSUs”). Each RSU granted is entitled to earn dividend equivalents in the form of RSUs that vest upon vesting of the underlying RSU award.

The 2025 Performance-Based RSUs are scheduled to vest at the end of a three year period (consisting of calendar years 2025-2027. A target number of 2025 Performance-Based RSUs were awarded, and the final number of 2025 Performance-Based RSUs that vest (which may be more or less than the target number) will be based upon (i) during the first calendar year of the three year performance measurement period, the achievement of pre-set FFO per share goals that applies to 100% of the Performance-Based RSUs awarded (the “FFO Performance Condition”), and (ii) a performance measure that applies to 50% of the award based upon a measure of the Company’s average net debt to EBITDAre ratio for the three year performance period (the “Net Debt to EBITDAre Ratio Performance Condition”), and a market measure that applies to the other 50% of the award based upon the relative ranking of the Company’s total stockholder return for the three year performance period compared to the total stockholder returns of an established comparison group of companies over the same period (the “Market Condition”). The 2025 Performance-Based RSUs are also subject to a three year service vesting provision (the “service vesting condition”) and are scheduled to cliff vest on the date the final vesting percentage is determined following the end of the three year performance period under the awards. The number of 2025 Performance-Based RSUs ultimately earned could fluctuate from the target number of 2025 Performance-Based RSUs granted based upon the levels of achievement for the FFO Performance Condition, the Net Debt to EBITDAre Ratio Performance Condition, the Market Condition, and the extent to which the service vesting condition is satisfied. The estimate of the number of 2025 Performance-Based RSUs earned is evaluated quarterly during the performance period based on our estimate for each of the performance conditions measured against the applicable goals.

Compensation expense for the 2025 Performance-Based RSUs is recognized on a straight-line basis over the requisite service period for each participant, which is generally the three year service period. During the three months ended March 31, 2025, we recognized $0.4 million of compensation expense for the 2025 Performance-Based RSUs assuming the 2025 FFO Performance Condition is met at 100% of target level of achievement (100% for our CEO) and the 2025 Net Debt to EBITDAre Ratio Performance Condition is met at 100% of the target level of achievement. In the event we achieve a lower level of performance or fail to meet the FFO Performance Condition, we would reverse a portion or all of the $0.4 million of compensation expense.

Each 2025 Performance-Based RSU represents the right to receive one share of our common stock in the future subject to, and as modified by, the Company’s level of achievement of the applicable performance and market conditions. The fair value of the portion of the award subject to the Net Debt to EBITDAre Ratio Performance Condition was calculated using the closing price of the Company’s common stock on the valuation date noted below. The fair value of the portion of the award subject to the Market Condition was calculated using a Monte Carlo simulation pricing model based on the assumptions in the table below, which resulted in the following grant date fair value per share.

________________________ 

(1)For one participant, the fair value per share on the valuation date for their 2025 Performance-Based RSUs is $38.93.

The computation of expected volatility was based on a blend of the historical volatility of our shares of common stock over a period of twice the remaining performance period as of the grant date and implied volatility data based on the observed pricing of six month publicly-traded options on shares of our common stock. The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury STRIP securities in effect at February 14, 2025.

The fair value of the 2025 Performance-Based RSU grant as of the valuation date noted above, based on a target level of achievement, was $11.2 million. For the three months ended March 31, 2025, we recorded compensation expense based upon the grant date fair value per share for each component multiplied by the estimated number of RSUs to be earned.

The 2025 Time-Based RSUs are scheduled to vest in three equal annual installments beginning on January 5, 2026 through January 5, 2028. Compensation expense for the 2025 Time-Based RSUs is recognized on a straight-line basis over the requisite service period, which is generally the explicit service period. Each 2025 Time-Based RSU represents the right to receive one share of our common stock in the future, subject to continued employment through the applicable vesting date, unless accelerated upon separation of employment, provided certain conditions are met. The total grant date fair value of the 2025 Time-Based RSU awards was $7.9 million, which was based on the $34.91 closing share price of the Company’s common stock on the NYSE on the February 14, 2025 grant date.

Consistent with the 2025 Performance-Based RSU grant discussed above, the final number of 2024 and 2023 Performance-Based RSUs that vest will be based upon (i) the FFO Performance Condition that applies to 100% of the Performance-Based RSUs awarded as determined at the end of the first calendar year of the performance measurement period, and (ii) the Net Debt to EBITDA Ratio Performance Condition that applies to 50% of the award and the Market Condition that applies to the other 50% of the award, both of which are based on the full three-year performance measurement period. The 2024 FFO Performance Condition was achieved at 175% of the target level of achievement for one participant and 150% for all other participants. The 2023 FFO Performance Condition was achieved at 150% of the target level of achievement for all participants.

Compensation cost for the 2024 Performance-Based RSUs for the three months ended March 31, 2025 assumes the 2024 Net Debt to EBITDA Ratio Performance Condition is met at 100% of the target level of achievement. Compensation cost for the 2023 performance-based RSUs for the three months ended March 31, 2025 assumes the 2023 Net Debt to EBITDA Ratio Performance Condition is met at 150% of the target level of achievement.

The total compensation cost for all share-based compensation programs was $5.2 million and $4.7 million for the three months ended March 31, 2025 and 2024, respectively. Of the total share-based compensation costs, $1.2 million and $1.3 million were capitalized as part of real estate assets for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, there was approximately $37.2 million of total unrecognized compensation cost related to nonvested RSUs granted under share-based compensation arrangements. Such amount is based in part upon the estimated future outcome of the performance metrics as of March 31, 2025, and the actual compensation cost ultimately recognized could increase or decrease from this estimate based upon actual performance results. These costs are expected to be recognized over a weighted-average period of 2.2 years. The remaining compensation cost related to these nonvested RSU awards had been recognized in periods prior to March 31, 2025.

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

The table below sets forth the allocation of rental income between fixed and variable payments and net collectability reversals for the three months ended March 31, 2025 and 2024:

_____________________

(1)Represents adjustments to rental income related to our assessment of the collectability of amounts due under leases with our tenants, including recognition of deferred rent balances associated with tenants moved to / restored from a cash basis of revenue recognition and allowances for uncollectible receivables.

We have operating leases with tenants that expire at various dates through 2055 and may be subject to scheduled fixed increases and future renewal options. Generally, the leases grant tenants renewal options. Leases also provide for additional rents based on certain operating expenses. Future contractual minimum rent under operating leases, which includes amounts contractually due from leases that are on a cash basis of reporting due to creditworthiness considerations, as of March 31, 2025 for future periods is summarized as follows:

_____________________

(1)Excludes residential leases and leases with a term of one year or less.

As of March 31, 2025, we had commitments of approximately $155.8 million, excluding our ground lease commitments, for contracts and executed leases directly related to our operating and development and redevelopment properties.

As of March 31, 2025 and December 31, 2024, we had the following accrued environmental remediation liabilities in connection with certain of our in-process and future development projects, and the following asset retirement obligations associated with certain of our stabilized portfolio properties and in-process and future development projects:

The only assets we record at fair value on a recurring basis in our consolidated financial statements are the marketable securities related to our Deferred Compensation Plan. The following table sets forth the fair value of our Deferred Compensation Plan assets as of March 31, 2025 and December 31, 2024:

			Fair Value (Level 1) (1)
			March 31, 2025						December 31, 2024
Description			(in thousands)
Deferred Compensation Plan assets (2)			$	29,187					$	27,965

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(1)    Based on quoted prices in active markets for identical securities.

(2)    The Deferred Compensation Plan assets are held in a limited rabbi trust.

The following table sets forth the carrying value and the fair value of our other financial instruments as of March 31, 2025 and December 31, 2024: