Kilroy Realty Corporation

Q2 FFO was $0.92 per diluted share, including a $5.9 million bankruptcy settlement benefit from 2023, or $0.05 per share. Portfolio occupancy, including KOP Phase 2, ended the quarter at 77%, down 60 basis points from the prior quarter, while cash same-property NOI increased 1.5% in the quarter. GAAP re-leasing spreads were 21% and cash re-leasing spreads were 6.1%; excluding leases on space vacant longer than 12 months, spreads improved to 27.3% GAAP and 15.6% cash. Year-to-date, leasing volume was roughly 944,000 square feet, more than 40% above the first half of 2025. Management reaffirmed full-year FFO guidance of $3.49 to $3.63 per diluted share and same-property NOI growth guidance of 25 to 125 basis points.

Angela Aman framed the quarter as evidence of a broadening recovery across Kilroy’s innovation-heavy markets, driven by stronger new business formation, AI-related demand, and shrinking shadow supply. She emphasized that tenants are showing more urgency to renew early and secure space, especially in high-quality assets where availability is tightening. Her tone was constructive and confident, but she repeatedly noted that the recovery is still uneven and that the company is being disciplined on capital and leasing execution.

Jeffrey Kuehling highlighted that Q2 FFO of $0.92 per share included a $0.05 per share one-time settlement benefit, and that same-property NOI grew 1.5% despite some year-over-year noise from prior-period items. He said the balance sheet was strengthened by an amended and extended credit facility, raising the revolver from $1.1 billion to $1.25 billion, increasing the term loan from $200 million to $250 million, extending maturities to July 2030 and July 2031, and improving pricing by 20 basis points. He also noted that the company repaid $200 million of private placement notes in July, and that liquidity is about $1.6 billion.

Analysts focused on the durability of the leasing recovery, the outlook for 2027 expirations, the Flower Mart development path, and how much of the signed-but-not-yet-commenced pipeline will translate into 2026 versus 2027 occupancy. Management said the pipeline is increasingly broad-based, with more renewal activity and strong demand for move-in-ready space, but reiterated that near-term guidance depends largely on capital recycling and the timing of commencements. On Flower Mart, management said it expects to finish the city process later in Q4 and that a mixed-use outcome is increasingly likely, while on KOP Phase 2 they pointed to a sharp rise in touring activity from 317,000 square feet in Q1 to over 800,000 square feet in Q2.