Share-Based and Other Compensation

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stockholder Approved Share-Based Incentive Compensation Plan

As of December 31, 2024, 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 December 31, 2024, approximately 2.6 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.

The Executive Compensation Committee of the Company’s Board of Directors (the “Executive Compensation Committee”) may grant the following share-based awards to eligible individuals, as provided under the 2006 Plan: incentive stock options, nonqualified stock options, restricted stock (nonvested shares), stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units (“RSUs”), profit interest units, performance bonus awards, performance-based awards, and other incentive awards. For each award granted under our share-based incentive compensation programs, the Operating Partnership simultaneously issues to the Company a number of common units equal to the number of shares of common stock ultimately paid by the Company in respect of such awards. The Executive Compensation Committee generally grants awards to certain officers of the Company under the 2006 Plan annually in January and/or February of RSUs that are subject to market and/or performance-based vesting requirements and RSUs that are subject to time-based vesting requirements.

Executive Transitions

On March 30, 2023, John Kilroy, the then Chairman of the Board of Directors and Chief Executive Officer (“CEO”) of the Company and the Operating Partnership, our “former CEO”, announced his retirement effective December 31, 2023, which was subsequently deferred to January 21, 2024 (the “Retirement Date”). Additionally, as previously disclosed, the Company and our former President entered into a separation agreement in 2022 under which he continued to serve as an officer of the Company until the scheduled expiration date of his employment agreement on March 1, 2023.

For our former CEO, the vesting of all unvested share-based compensation awards was accelerated through the Retirement Date and the final number of restricted stock units (“RSUs”) subject to market and/or performance-based vesting requirements vested was based upon a shortened performance period ending on the Retirement Date. Share-based compensation expense for these awards was recognized based on the actual achievement of market and/or performance-based vesting requirements for the shortened performance periods. For our former President, the vesting of all unvested share-based compensation awards was accelerated through March 1, 2023 and the final number of RSUs earned that were subject to market and/or performance-based vesting requirements was based upon the actual achievement of the market and/or performance conditions for a shortened performance period ended on March 1, 2023. For the year ended December 31, 2023, we recognized $27.3 million of stock compensation expense related to the accelerated vesting of awards for our former CEO and former President.

On January 21, 2024, John Kilroy retired as the Company’s CEO while remaining Chair and a member of the Board of Directors through May 22, 2024. On January 22, 2024, Angela Aman joined the Company as CEO and a member of the Board of Directors and was granted 101,627 Time-Based Restricted Stock Units (“RSUs”) with a one-year vesting period.

On July 30, 2024, the Company’s Board of Directors appointed Jeffrey Kuehling to serve as Executive Vice President, Chief Financial Officer (“CFO”), effective August 19, 2024, and he was granted 20,373 Time-Based RSUs with a 1.4-year vesting period. In connection with Mr. Kuehling’s appointment as CFO, Eliott Trencher will continue to serve as the Company’s Executive Vice President, Chief Investment Officer.

2024, 2023, and 2022 Annual Performance-Based RSU Grants

During each of the three years in the period ended December 31, 2024, the Executive Compensation Committee granted awards to certain officers of the Company under the 2006 Plan that are subject to market and/or performance-based vesting requirements (“Performance-Based RSUs”). The Performance-Based RSUs are scheduled to vest at the end of a three year period consisting of calendar years 2024-2026, 2023-2025, and 2022-2024 for the awards granted during the years ended December 31, 2024, 2023, and 2022, respectively. A target number of Performance-Based RSUs were awarded, and the final number of 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 respective awards’ 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 EBITDA ratio for the three year performance period (the “Net Debt to EBITDA Ratio Performance Condition”), and a market measure that applies to the other 50% of the award based upon the relative ranking of the Company’s total stockholder return for the three year performance period compared to the total stockholder returns of an established comparison group of companies over the same period (the “Market Condition”). The 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 Performance-Based RSUs ultimately earned could fluctuate from the target number of Performance-Based RSUs granted based upon the levels of achievement for the FFO Performance Condition, the Net Debt to EBITDA Ratio Performance Condition, the Market Condition, and the extent to which the service vesting condition is satisfied. The estimate of the number of 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 Performance-Based RSU grants are recognized on a straight-line basis over the requisite service period for each participant, which is generally the three year service period, except for our former CEO, whose compensation expense was recognized on an accelerated basis in 2023 due to clauses that rendered a portion of the vesting conditions to be non-substantive and accelerated through his Retirement Date.

The 2024 FFO Performance Condition was achieved at 175% of target for one participant and 150% of target for all other participants. The 2023 FFO Performance Condition was achieved at 150% of target for all participants. The number of 2024 and 2023 Performance-Based RSUs ultimately earned could fluctuate from the target number of Performance-Based RSUs granted during 2024 and 2023 based upon the levels of achievement for the Net Debt to EBITDA Ratio Performance Condition, the Market Condition, and the extent to which the service vesting condition is satisfied. The estimate of the number of 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.

The 2022 Performance-Based RSUs completed the performance measurement period and based on the combined results of the 2022 FFO Performance Condition, the Net Debt to EBITDA Ratio Performance Condition, and the Market Condition, the 2022 Performance-Based RSUs achieved at 183.75% of target for all participants.

Each 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 values for the awards with market conditions were calculated using a Monte Carlo simulation pricing model based on the assumptions in the table below. The determination of the fair value of the 2024, 2023, and 2022 Performance-Based RSUs takes into consideration the likelihood of achievement of the 2024, 2023, and 2022 Market Condition and the share price on the grant date of the 2024, 2023, and 2022 Performance-Based RSUs, respectively, as discussed above. The following table summarizes the estimated number of RSUs earned for the 2024 and 2023 Performance-Based RSUs and the actual number of RSUs earned for the 2022 Performance-Based RSUs and the assumptions utilized in the Monte Carlo simulation pricing models:


	2024		2023		2022
Service vesting period	February 1, 2024 - January, 2027		February 6, 2023 - January, 2026		January 28, 2022 - January, 2025
Target RSUs granted	265,205		300,007		193,111
Estimated RSUs earned (1)(2)	416,451		705,267		396,736
Fair Value Assumptions:
Valuation date	February 1, 2024		February 6, 2023		January 28, 2022
Fair value on valuation date (in millions)	$9.5		$12.0		$12.7
Fair value per share on valuation date (3)	$36.00		$40.10		$67.62
Expected share price volatility	34.0	%	35.0	%	36.0	%
Risk-free interest rate	3.98	%	4.12	%	1.35	%

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(1)Estimated RSUs earned for the 2024 Performance-Based RSUs are based on the actual achievement of the 2024 FFO Performance Condition and assumes the target level of achievement for the 2024 Net Debt to EBITDA Ratio Performance Condition and the target level of achievement of the 2024 Market Condition. Estimated RSUs earned for the 2023 Performance-Based RSUs are based on the actual achievement of the 2023 FFO Performance Condition and assume target level achievement of the 2023 Market Condition and maximum level of achievement of the 2023 Net Debt to EBITDA Ratio Performance Condition. The 2022 Performance-Based RSUs earned are based on actual performance of the 2022 Performance Conditions and the 2022 Market Condition.

(2)For one participant, the 2022 and 2023 Market Condition is based on actual performance through the accelerated vesting of January 21, 2024.

(3)For one participant, the fair value per share on the valuation date for their 2024, 2023, and 2022 Performance-Based RSUs is $36.43, $40.43 and $70.00, respectively.

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 1, 2024, February 6, 2023, and January 28, 2022.

Summary of Performance and Market-Measure Based RSUs

A summary of our performance and market-measure based RSU activity from January 1, 2024 through December 31, 2024 is presented below:


	Nonvested RSUs			Vested RSUs	Total RSUs
	Amount	Weighted-Average Fair Value Per Share
Outstanding at January 1, 2024	1,083,086	$	52.47	23,583	1,106,669
Granted	416,451	35.67		354,542	770,993
Vested	(702,187)	53.39		702,187	—
Settled (1)	—	—		(1,032,183)	(1,032,183)
Issuance of dividend equivalents (2)	48,673	34.67		33,150	81,823
Canceled	(17,581)	38.64		(5)	(17,586)
Outstanding as of December 31, 2024 (3)	828,442	$	42.49	81,274	909,716

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(1)Represents vested RSUs that were settled in shares of the Company’s common stock. Total shares settled include 517,475 shares, primarily for one participant, that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the RSUs settled. We accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy tax obligations.

(2)Represents the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

(3)Outstanding RSUs as of December 31, 2024 represent the actual achievement of the FFO performance conditions and assumes target levels for the market and other performance conditions. The number of restricted stock units ultimately earned is subject to change based upon actual performance over the three-year vesting period. Dividend equivalents earned will vest along with the underlying award and are also subject to changes based on the number of RSUs ultimately earned for each underlying award.

A summary of our performance and market-measure based RSU activity for the years ended December 31, 2024, 2023, and 2022 is presented below:


	RSUs Granted			RSUs Vested
Years ended December 31,	Non-Vested RSUs Granted (1)	Weighted-Average Fair Value Per Share		Vested RSUs	Total Vest-Date Fair Value (in thousands)
2024	416,451	$	35.67	(1,089,879)	$	38,364
2023	483,113	$	39.65	(290,570)	$	11,105
2022	310,484	$	63.05	(241,184)	$	15,200

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(1)Non-vested RSUs granted are based on the actual achievement of the FFO performance conditions and assumes target level achievement for the market and other performance conditions.

Annual 2024, 2023, and 2022 Time-Based RSU Grants

During each of the three years in the period ended December 31, 2024, the Executive Compensation Committee granted awards to certain officers of the Company under the 2006 Plan that are subject to time-based vesting requirements (“Time-Based RSUs”). The annual Time-Based RSUs are scheduled to vest in three equal annual installments over the periods listed below. Compensation expense for the annual 2024, 2023, and 2022 Time-Based RSUs is recognized on a straight-line basis over the requisite service period, which is generally the explicit service period. However, our former CEO had a shorter service period for his 2023 and 2022 Time-Based RSUs due to clauses that render a portion of the vesting conditions to be non-substantive as well as the accelerated vesting of these awards through his Retirement Date. Each 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 fair value of the Time-Based RSUs is based on the Company’s closing share price on the NYSE on the respective fair valuation dates as detailed in the table below:


	2024 Time-Based RSU Grant (1)		2023 Time-Based RSU Grant		2022 Time-Based RSU Grant
Service vesting period	February 1, 2024 - January 5, 2027		February 6, 2023 - January 5, 2026		January 28, 2022 - January 5, 2025
RSUs granted	236,389		217,059		158,170
Fair value on valuation date (in millions)	$	8.3	$	8.6	$	10.0
Weighted average fair value per share	$	35.20	$	39.65	$	63.05
Date of valuation	February 1, 2024		February 6, 2023		January 28, 2022

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(1)Excludes initial Time-Based RSUs granted to the Company’s current CEO and CFO in 2024, as mentioned above.

Summary of Time-Based RSUs

A summary of our time-based RSU activity from January 1, 2024 through December 31, 2024 is presented below:


	Nonvested RSUs			Vested RSUs	Total RSUs
	Amount	Weighted Average Fair Value Per Share
Outstanding at January 1, 2024	401,310	$	43.86	483,443	884,753
Granted	385,718	36.12		—	385,718
Vested	(250,952)	47.15		250,952	—
Settled (1)	—	—		(516,154)	(516,154)
Issuance of dividend equivalents (2)	28,519	32.97		30,216	58,735

Forfeited	(27,169)	40.42		—	(27,169)
Canceled (3)	—	—		(5,772)	(5,772)
Outstanding as of December 31, 2024	537,426	$	36.37	242,685	780,111

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(1)Represents vested RSUs that were settled in shares of the Company’s common stock. Total shares settled include 229,447 shares, primarily for one participant, that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the RSUs settled. We accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy tax obligations.

(2)Represents the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

(3)For shares vested but not yet settled, we accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy minimum statutory tax-withholding requirements related to either the settlement or vesting of RSUs in accordance with the terms of the 2006 Plan.

A summary of our time-based RSU activity for the years ended December 31, 2024, 2023, and 2022 is presented below:


	RSUs Granted			RSUs Vested
Year ended December 31,	Non-Vested RSUs Issued	Weighted-Average Grant Date Fair Value Per Share		Vested RSUs	Total Vest-Date Fair Value (1) (in thousands)
2024	385,718	$	36.12	(281,168)	$	10,878
2023	247,017	$	38.12	(343,334)	$	12,425
2022	177,099	$	62.58	(294,867)	$	19,890

____________________

(1) Total fair value of RSUs vested was calculated based on the quoted closing share price of the Company’s common stock on the NYSE on the day of vesting. Excludes the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

Share-Based Compensation Cost Recorded During the Period

The total compensation cost for all share-based compensation programs was $24.4 million, $43.7 million, and $34.8 million for the years ended December 31, 2024, 2023, and 2022, respectively. Share-based compensation costs for the year ended December 31, 2023 includes $27.3 million of accelerated share-based compensation costs for our former CEO and former President as discussed above. Of the total share-based compensation costs, $6.8 million, $6.9 million, and $6.4 million was capitalized as part of real estate assets for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, there was approximately $23.4 million of total unrecognized compensation cost related to nonvested incentive awards granted under share-based compensation arrangements. Such amount is based in part upon the estimated future outcome of the performance metrics as of December 31, 2024, and the actual compensation cost ultimately recognized could increase or decrease from this estimate based upon actual performance results. These costs are expected to be recognized over a weighted-average period of 1.7 years. The remaining compensation cost related to these nonvested RSU awards had been recognized in periods prior to December 31, 2024. The $23.4 million of unrecognized compensation costs does not reflect the future compensation cost related to share-based awards that were granted subsequent to December 31, 2024.