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Kilroy Realty Corp.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 27 July 2026: press release. Guidance figures: 1 lowered, 13 kept. The quarter’s numbers.

Key takeaways

  • Net income and FFO declined year over year: Net income available to common stockholders was $19.9 million, or $0.17 per diluted share, against $68.4 million, or $0.57, a year earlier. FFO was $109.3 million, or $0.92 per diluted share. Source
  • Stabilized occupancy 77.0%, down from 77.6%: Stabilized Portfolio occupancy was 77.0%, against 77.6% at March 31. The leased percentage was 81.5%, with 450 basis points of signed leases not yet commenced. Source
  • Re-leasing rents rose on second-generation space: Excluding short-term leasing, GAAP rents rose 21.0% and cash rents 6.1%. Excluding space vacant more than 12 months, the increases were 27.3% GAAP and 15.6% cash. Source
  • Los Angeles occupancy fell to 72.5%: Total Los Angeles occupancy was 72.5%, against 74.8% at March 31. Long Beach fell to 78.5% from 88.1%, while Hollywood and West Hollywood rose to 86.1% from 85.3%. Source
  • Same-property cash NOI up 1.5%: Same Property cash NOI was $176.2 million, up from $173.6 million; the six-month figure rose 1.7%. Same Property average occupancy was 82.0%, against 81.0%. Source
  • Net debt ratio held at 7.0x: Net debt to Company's Share of EBITDAre was 7.0x, the same as the prior quarter; the Adjusted EBITDAre ratio was 7.1x. Fixed charge coverage was 3.1x. Source

“Our second quarter results highlight continuing improvement in commercial real estate fundamentals across our West Coast markets, as we work to capitalize on growing market demand against a backdrop of moderating high-quality supply,”

Angela Aman, Chief Executive Officer

Guidance

AreaPeriodFigureAgainst last quarter
FFO per diluted share SourceFull year 2026$3.49 to $3.63Kept
Net income per diluted share SourceFull year 2026$0.08 to $0.22Kept
Average occupancy SourceFull year 202676.5% to 78.0%Kept
Average occupancy excluding KOP 2 SourceFull year 202680.5% to 81.5%Kept
Same property cash NOI growth SourceFull year 20260.25% to 1.25%Kept
NOI from development properties SourceFull year 2026$(22.5) to $(24.0) millionKept
Non-cash GAAP NOI adjustments SourceFull year 2026$13.0 to $15.0 millionKept
GAAP lease termination fee income SourceFull year 2026$3.0 to $4.5 millionKept
General and administrative and leasing costs SourceFull year 2026$(87.5) to $(89.5) millionKept
Interest income SourceFull year 2026$2.0 to $3.0 millionKept
Gross interest expense SourceFull year 2026$(208.0) to $(209.5) millionKept
Capitalized interest SourceFull year 2026$48.5 to $49.5 millionKept
Total development spending SourceFull year 2026+/- $150.0 millionLowered from $150.0 to $200.0 million
Operating property dispositions SourceFull year 2026$347.5 to $500.0 millionKept

What changed from last quarter

  • Guidance lowered: Total development spending revised to +/- $150.0 million from the prior $150.0 to $200.0 million range; other assumptions kept. Source
  • Guidance kept: FFO per share guidance affirmed at $3.49 to $3.63, the range set in April. Source
  • New: Unsecured revolving credit facility increased to $1.25 billion from $1.10 billion; term loan increased to $250.0 million; maturities extended. Source
  • Ended: Hollywood residential towers, classified as held for sale at March 31, 2026, were sold in April. Source
  • New: Repayment at par of the $200.0 million Series B private placement notes due October 2026. Source

Earnings and per-share results

  • Net income and FFO declined year over year: Net income available to common stockholders was $19.9 million, or $0.17 per diluted share, against $68.4 million, or $0.57, a year earlier. FFO was $109.3 million, or $0.92 per diluted share. Source
  • Revenue fell with fewer termination fees: Revenues were $272.4 million against $289.9 million a year earlier. Lease termination fees were $0.4 million, compared with $10.8 million in the prior-year quarter. Source
  • Net operating income rose from first quarter: Net operating income was $180.3 million, compared with $178.4 million in the first quarter. The NOI margin was 66.2%, against 66.1% in the first quarter. Source
  • Diluted EPS positive after first-quarter loss: Diluted EPS was $0.17, after a $(0.16) loss in the first quarter. Six-month diluted EPS was $0.01. The first-quarter loss included a $61.8 million impairment on the Hollywood residential towers. Source

Leasing and occupancy

  • Stabilized occupancy 77.0%, down from 77.6%: Stabilized Portfolio occupancy was 77.0%, against 77.6% at March 31. The leased percentage was 81.5%, with 450 basis points of signed leases not yet commenced. Source
  • Excluding KOP 2, occupancy was 80.8%: Excluding Kilroy Oyster Point Phase 2, occupancy was 80.8% and leased was 83.3%, with 250 basis points of signed leases not yet commenced. Source
  • Leasing of 376,000 square feet signed: New leasing on previously vacant space was 226,000 square feet, new leasing on occupied space 7,000 and renewals 143,000. About 40,000 square feet was short-term leasing. Source
  • Re-leasing rents rose on second-generation space: Excluding short-term leasing, GAAP rents rose 21.0% and cash rents 6.1%. Excluding space vacant more than 12 months, the increases were 27.3% GAAP and 15.6% cash. Source

“In addition, we continued to enhance our strategic focus and financial flexibility, closing on approximately $200.0 million of previously announced residential dispositions and recasting and expanding our unsecured credit facilities.”

Angela Aman, Chief Executive Officer

Regional occupancy

  • Bay Area occupancy 75.3%, San Francisco CBD 81.3%: Total Bay Area occupancy was 75.3%, against 75.2% at March 31. San Francisco CBD was 81.3% occupied and South San Francisco was 47.9% occupied. Source
  • Los Angeles occupancy fell to 72.5%: Total Los Angeles occupancy was 72.5%, against 74.8% at March 31. Long Beach fell to 78.5% from 88.1%, while Hollywood and West Hollywood rose to 86.1% from 85.3%. Source
  • Seattle and San Diego occupancy eased: Seattle occupancy was 78.9%, against 79.3% at March 31. San Diego occupancy was 84.1%, against 84.6%, and Austin rose to 84.0% from 83.2%. Source

Same-property results and costs

  • Same-property cash NOI up 1.5%: Same Property cash NOI was $176.2 million, up from $173.6 million; the six-month figure rose 1.7%. Same Property average occupancy was 82.0%, against 81.0%. Source
  • Same-property cash revenue up 3.2%: Same Property total cash operating revenues were $256.3 million, against $251.0 million. Base rent rose 1.0%, and tenant reimbursements fell 0.2%. Source
  • G&A expense lower than first quarter: General and administrative expenses were $18.9 million, down from $20.7 million in the first quarter and $18.5 million a year earlier. Source
  • Non-same-property cash NOI loss narrowed: Non-Same Property Cash NOI was $(0.7) million, against $(13.6) million a year earlier, based on the reconciliation of Same Property cash NOI. Source

Balance sheet and shareholder returns

  • Net debt ratio held at 7.0x: Net debt to Company's Share of EBITDAre was 7.0x, the same as the prior quarter; the Adjusted EBITDAre ratio was 7.1x. Fixed charge coverage was 3.1x. Source
  • Quarterly dividend held at $0.54: The regular quarterly dividend was $0.54 per share, paid July 8 to holders of record June 30, annualizing to $2.16. Source
  • Second-generation capital spending rose: Second-generation capital expenditures were $28.1 million, against $18.7 million in the first quarter and $34.0 million a year earlier, including tenant improvements and leasing commissions. Source
  • Funds available for distribution fell: Funds available for distribution were $83.6 million, down from $91.1 million in the first quarter. The FAD payout ratio was 75.8%. Source

Development pipeline and contracts

  • KOP 2 stabilized in first quarter: KOP 2 covers 871,738 square feet with a $1,175 million total estimated investment. At June 30, 2026 it was 7% occupied and 49% leased. Source
  • Future pipeline cash costs $1,530 million: Cash costs incurred across the future development pipeline were $1,530 million at June 30, 2026, spanning nine sites from San Francisco to Austin. Source
  • Development sites under contract for sale: Sites at 1633 26th Street and Santa Fe Summit PA1 and PA2 are under contract, with anticipated sales prices totaling $165.0 million. Source

Coming up, as management said on 27 July 2026

  • Development sites close on entitlements: Development sites under contract are anticipated to close upon receipt of residential entitlements and permits, in phases beginning in late 2026. Source
  • Delayed-draw term loan capacity: The additional $50.0 million of term loan capacity can be drawn on a delayed-draw basis through June 11, 2027. Source
  • 1900 Broadway construction in 2027: The 1900 Broadway project is 58% pre-leased, with construction expected in 2027 and delivery scheduled for 2030. Source

Risks management discussed

  • External: Guidance excludes the effect of events outside company control, because their timing and size are not known when guidance is given. Source
  • Operational: Guidance for development-related NOI and capitalized interest depends on continued capitalization of the Flower Mart project through December 2026. Source

Earlier plans management reported on

  • Not stated: Management stated that all current assumptions remain consistent with April 2026 except total development spending. Source
  • Not stated: The April document moved the Flower Mart capitalization assumption from June 2026 to December 2026.

Other quarters

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.