{"url_path":"/sec/krc/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-11","source_url":"https://www.sec.gov/Archives/edgar/data/1025996/0001628280-26-007051-index.html","accession_number":"0001628280-26-007051","cik":"0001025996","ticker":"KRC","issuer_name":"KILROY REALTY CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1025996/0001628280-26-007051-index.html","primary_entity_key":"0001025996","primary_entity_name":"KILROY REALTY CORP"},"word_count":822,"has_tables":true,"body_markdown":"ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK\n\nThe primary market risk we face is interest rate risk. We seek to mitigate this risk by following established risk management policies and procedures. These policies include maintaining prudent amounts of debt, including a greater amount of fixed-rate debt as compared to variable-rate debt in our portfolio, and may include the periodic use of derivative instruments. Information about our changes in interest rate risk exposures from December 31, 2024 to December 31, 2025 is incorporated herein by reference from “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership.”\n\nInterest Rate Risk\n\nAs of December 31, 2025, 4.3% of our total outstanding debt of $4.6 billion (before the effects of debt discounts and deferred financing costs) was subject to variable interest rates. The remaining 95.7% bore interest at fixed rates. All of our interest rate sensitive financial instruments are held for purposes other than trading purposes. In general, interest rate fluctuations applied to our variable-rate debt will impact our future earnings and cash flows. Conversely, interest rate fluctuations applied to our fixed-rate debt will generally not impact our future earnings and cash flows, unless such instruments mature or are otherwise terminated and need to be refinanced. However, interest rate fluctuations will impact the fair value of the fixed-rate debt instruments.\n\nWe generally determine the fair value of our secured debt, unsecured debt, unsecured revolving credit facility, and unsecured term loan facility by performing discounted cash flow analyses using an appropriate market discount rate. We calculate the market rate by obtaining period-end benchmark interest rates for maturities that correspond to the maturities of our fixed-rate debt and then adding an appropriate credit spread based on information obtained from third-party financial institutions. These credit spreads take into account factors, including, but not limited to, our credit rating, the tenure of the debt, amortization period, whether the debt is secured or unsecured, and the loan-to-value ratio of the debt to the collateral, amongst other factors. These calculations are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flows. We calculate the market rate of our unsecured revolving credit facility and unsecured term loan facility by obtaining the period-end SOFR, adding a SOFR adjustment of 0.10% (together “Adjusted SOFR”) and then adding an appropriate credit spread based on our credit ratings, and the amended terms of our unsecured revolving credit facility and unsecured term loan facility agreements.\n\nWe determine the fair value of each of our publicly traded unsecured senior notes based on their quoted trading price at the end of the reporting period, if such prices are available. See Note 18 “Fair Value Measurements and Disclosures” and Note 2 “Basis of Presentation and Significant Accounting Policies” in the consolidated financial statements included in this report for additional information on the fair value of our financial assets and liabilities as of December 31, 2025 and December 31, 2024.\n\nAt December 31, 2025, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $200.0 million, which was indexed to Adjusted SOFR plus a spread of 1.200% (weighted average interest rate of 5.02%). At December 31, 2024, the total outstanding balance of our variable-rate debt was comprised of borrowings on our unsecured term loan facility of $200.0 million, which was indexed to Adjusted SOFR plus a spread of 1.200% (weighted average interest rate of 5.70%). There was no outstanding balance on our $1.1 billion unsecured revolving credit facility at December 31, 2025; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 1.100% (weighted average interest rate of 5.07%). As of December 31, 2024, there was no outstanding balance on our unsecured revolving credit facility; however, it was available for borrowing at the following variable rate: Adjusted SOFR plus a spread of 1.100% (weighted average interest rate of 5.69%). Assuming no changes in the outstanding balance of our existing variable-rate debt as of December 31, 2025, a 100 basis-point increase in the Adjusted SOFR rate would have increased our projected annual interest expense, before the effect of capitalization, by approximately $2.0 million.\n\nThe total carrying value of our fixed-rate debt was approximately $4.4 billion as of December 31, 2025 and 2024. The total estimated fair value of our fixed-rate debt was approximately $4.2 billion and $4.1 billion as of December 31, 2025 and 2024, respectively. For sensitivity purposes, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $190.3 million, or 4.5%, as of\n\n78\n\nDecember 31, 2025. Comparatively, a 100 basis-point increase in the discount rate equates to a decrease in the total fair value of our fixed-rate debt of approximately $181.7 million, or 4.5%, as of December 31, 2024."}