Kilroy Realty Corporation Q4 FY2025 earnings call

Key Highlights

• Strong leasing performance in 4Q with 827k sq ft leased, full-year at 2.1 million sq ft, marking strongest 4Q in 6 years. Forward leasing pipeline up over 65% y-o-y.
• Leasing highlights across markets: 93k sq ft lease in Hollywood, backfill in Columbia Square, renewal with Riot Games in West L.A., multiple leases at Maple Plaza in Beverly Hills, etc.
• Portfolio repositioning: Sold noncore assets and acquired Nautilus in Torrey Pines, strengthening life science platform.
• Capital allocation: Disposed of noncore assets and redeployed capital into high-quality opportunities.

In the fourth quarter, leasing totaled approximately 827,000 square feet, with full-year leasing at ~2.1 million square feet. Asset sales included the sale of Sunset Media Center in Hollywood for $61 million, Kilroy Sabre Springs in San Diego for $125 million, and part of the Santa Fe Summit land parcel for $86 million. The company acquired Nautilus, a multi-tenant life science campus in Torrey Pines for $192 million.

2026 Guidance

• FFO guidance: $3.25 to $3.45 per diluted share, midpoint $3.35.
• Occupancy: 76%-78% average, excluding KOP 2, 80%-81.5%.
• NOI: Cash same-property NOI growth flat to -1.5% excluding KOP 2.
• Dispositions: Expect ~$325M of operating dispositions in 2026.

• Tenant churn and higher vacancy rates in some assets impacting returns.
• Market dynamics affecting leasing spreads and occupancy.
• Uncertainties in capital recycling and redeployment of proceeds.

Q: Congrats on the leasing at KOP 2. Talked about UCSF anchor lease and late commencement.

A: UCSF lease is in shell condition, multiple user groups, team focused on accelerating occupancy.

Q: Commentary on mid-5% yield on KOP 2.

A: Cash stabilized yield number, TIs reflected in new costs.

Q: Leasing highlights across markets, impact of sublease in SF.

A: SF recovery, sublease space nearly gone, strong leasing in Bellevue, Seattle, LA, etc.

Q: Retention expectations on ~1.05M sq ft expiring in 2026.

A: Already backfilled ~140k sq ft, expect another 50-100k sq ft renewal, 300k sq ft signed but not commenced.

Q: KOP 2 yield and remaining space rents.

A: Rents around same ballpark, can push higher on remaining vacancy.

Q: Mark-to-market in target markets.

A: L.A. and SF ~10% above market, SD and WA ~5% below, Austin ~15% below.

Q: IPO and M&A in life science and KOP 2 pipeline.

A: Tour activity consistent, pipeline remains strong.

Q: Debt maturities and plans for disposition proceeds.

A: Flexibility in retiring debt, evaluate acquisitions, share buybacks, debt reduction.

Q: Pipeline breakout and growth.

A: Pipeline grown consistently, broad-based across markets, early-stage to late-stage deals evolving.