Executive Summary

Q3 2025 delivered solid execution: Revenue $279.7M, GAAP diluted EPS $1.31, and FFO/share $1.08; revenue and FFO/share exceeded S&P consensus, while EPS benefited from a $110.5M gain on sale . Revenue beat by ~$7.6M and FFO/share beat by ~0.11 versus S&P Global consensus; GAAP EPS beat was largely driven by the asset sale and non-cash items (see Results vs Estimates) *.
Guidance raised: FY25 Nareit FFO/share up to $4.18–$4.24 (from $4.05–$4.15), with higher non‑cash NOI adjustments, slightly higher average occupancy, and increased capitalized interest; management reiterated flexibility on capital recycling and Flower Mart re‑entitlement timeline .
Leasing momentum: ~552K sf signed in Q3 (highest third‑quarter activity in six years), weighted occupancy improved to 81.0% from 80.8% on early rent commencement (~200K sf); KOP2 reached 84K sf signed and is positioned to exceed the 100K sf year-end target .
Capital markets/portfolio: Issued $400M 5.875% notes due 2035 and redeemed $400M 2025 notes; acquired Maple Plaza (Beverly Hills) for $205.3M and sold a 4‑building Silicon Valley campus for $365.0M, supporting balance sheet strength and portfolio repositioning .
Near‑term stock narrative catalysts: FY25 FFO guidance raise, KOP2 lease‑up progress, improving West Coast office/life science demand (AI-driven activity in San Francisco SOMA), and visible capital recycling; watch for FY25/Q4 occupancy trajectory given accelerated Q3 commencements and a bankruptcy-related move‑out in Q4 (Noy House) .

What Went Well and What Went Wrong

What Went Well

Leasing/occupancy momentum: “We signed over 550,000 square feet of new and renewal leases… highest third quarter of leasing activity and strongest YTD performance in six years,” with occupancy ticking up to 81.0% (vs 80.8% in Q2) aided by ~200K sf early rent commencements .
KOP2 progress: 84K sf signed (Color 24K, MBC BioLabs 44K, Acadia 16K), with management “well positioned to exceed” 100K sf by year‑end; CFO framed 2026 NOI/FFO run-rate impacts, signaling a path to becoming a growth contributor .
Guidance raised: FY25 Nareit FFO/share to $4.18–$4.24; management cited incremental non‑cash income (early occupancies and straight-line bad debt reversal), higher same property NOI, and capitalized interest adjustments as drivers .

What Went Wrong

Leasing spreads still negative on cash: Q3 GAAP +5.0% but cash −9.6% on second‑generation leasing (ex‑short-term); Q2 GAAP −11.2%/cash −15.2%, Q1 GAAP −15.8%/cash −23.0%, reflecting ongoing market rent reset pressure .
Year-over-year revenue/FFO softness: Q3 revenue down vs Q3’24 ($279.7M vs $289.9M) and FFO/share declined to $1.08 from $1.17, pointing to persistent demand normalization and higher expenses versus the prior year .
Near-term occupancy headwind: Q4 assumptions reflect bankruptcy-related move‑out (Noy House, ~95K sf) at Columbia Square; while high-quality build‑out attracts interest, downtime risk remains until backfilled .

Financial Results

Core P&L and REIT Metrics (USD Millions, per share; periods oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$270.8	$289.9	$279.7
GAAP Diluted EPS ($)	$0.33	$0.57	$1.31
FFO per share – diluted ($)	$1.02	$1.13	$1.08

Margins and Operating Mix

Metric	Q1 2025	Q2 2025	Q3 2025
Net Operating Income Margin (%)	66.5%	65.8%	67.5%
Weighted Avg Occupied (%)	81.4%	80.8%	81.0%
Weighted Avg Leased (%)	83.9%	83.5%	83.3%

Leasing KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
SF Signed (Total)	~248K	~423K	~552K
GAAP Rent Change (2nd Gen, ex-short-term)	−15.8%	−11.2%	+5.0%
Cash Rent Change (2nd Gen, ex-short-term)	−23.0%	−15.2%	−9.6%
Short-term Leasing SF	~4K	~77K	~129K
Retention Rate (Quarter to Date)	N/A	N/A	60.2%
Net Debt / Company’s Share of EBITDAre (x)	6.6x	6.6x	6.4x

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Nareit FFO/share – diluted ($)	FY 2025	$4.05–$4.15	$4.18–$4.24	Raised
Same Property Cash NOI Growth (%)	FY 2025	(1.0%)–(2.0%)	(0.75%)–(1.25%)	Raised (less negative)
Avg Full-Year Occupancy (%)	FY 2025	80.5%–81.5%	80.75%–81.25%	Slightly raised
GAAP Lease Termination Fee Income ($)	FY 2025	±$13M	±$12M	Lowered
Non‑Cash GAAP NOI Adjustments ($)	FY 2025	$4M–$6M	$11M–$12M	Raised materially
G&A and Leasing Costs ($)	FY 2025	$83M–$85M	$83M–$85M	Maintained
Interest Income ($)	FY 2025	±$4.5M	±$7M	Raised
Capitalized Interest ($)	FY 2025	$81M–$83M	$84M–$85M	Raised
Total Development Spending ($)	FY 2025	$100M–$200M	$150M–$200M	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
AI/Technology demand (SF SOMA)	Signed 93K sf to Harvey AI in Q2; rising tour activity	SF office demand ~9M sf (post‑pandemic high); SOMA tour activity up 170% YoY; focus on spec suites/fast occupancy	Accelerating
Life science leasing (KOP2)	TI phase; pipeline building	84K sf signed (Color, MBC BioLabs, Acadia); positioned to exceed 100K sf by YE; robust pipeline	Improving
Regional trends (SF, Seattle, San Diego, Austin)	Mixed; recovery signs	Broad‑based momentum; major leases (Tubi HQ at 201 Third); Austin POST amenity signed; Bellevue leases	Broadening
Capital recycling	Q2 sold 501 Santa Monica ($40M); classified SV campus held for sale ($365M)	Closed SV campus sale ($365M); acquired Maple Plaza ($205.3M); active land monetization ($79M under contract)	Executing
Flower Mart re‑entitlement	Ongoing; capitalized interest through YE25	Submitted four scenarios; cap interest assumed through June 2026; gaining process clarity	Progressing
Tariffs/macro, financing	Cost of capital improving but still discounted; selective acquisitions	Issued $400M notes (5.875% due 2035); redeemed $400M 2025 notes	Strengthening balance sheet

Management Commentary

“As we enter the final stretch of the year, Kilroy Realty Corporation is capitalizing on accelerating momentum across our West Coast office and life science markets… In the city of San Francisco alone, office demand has reached a post‑pandemic high of nearly 9 million square feet…” — Angela Aman, CEO .
“FFO for the quarter was $1.08 per diluted share, which includes approximately $0.03 per share of one-time items… occupancy improved modestly, ending at 81%… [due to] earlier-than-anticipated rent commitments totaling approximately 200,000 square feet.” — Jeffrey Kuehling, CFO .
“We’re pleased to report… 84,000 square feet [at KOP2]… we are well positioned to exceed our previously communicated goal of 100,000 square feet of lease executions at the project by year end 2025.” — Angela Aman, CEO .
“During the quarter, we completed… the sale of a four-building campus in Silicon Valley for gross sales proceeds of $365 million and the acquisition of Maple Plaza… for $205 million.” — Angela Aman, CEO .
“We raised our 2025 FFO outlook to a range of $4.18 to $4.24 per share… driven by additional non-cash income, updated same property NOI, and interest capitalization adjustments.” — Jeffrey Kuehling, CFO .

Q&A Highlights

2026 expirations/retention: Remaining 2026 expirations reduced to ~970K sf from ~1.9M sf at start of 2025 (~40% retention); focus shifts to new leasing to offset move‑outs; spec suites accelerate lease-to-occupancy timelines .
SF market dynamics: Larger tenants touring; sublease space coming off market (~2M sf); demand prioritizes “impactful space” tied to return‑to‑office; AI touring ~1.5M sf .
KOP2 economics: Rents broadly in line with underwriting; higher TI levels (especially for spec labs); too early to frame total project yields at ~10% leased .
Flower Mart: Submitted multiple development scenarios; cap interest through June 2026 pending entitlement progress; too early for partner discussions until path clarified .
Austin POST amenity: Signed a nationally recognized operator; expected to enhance 6th Street corridor vibrancy and demand at Indeed Tower .

Estimates Context

Actuals versus S&P Global consensus (periods oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	Actual: $270.8 vs Est: $276.8*	Actual: $289.9 vs Est: $269.7*	Actual: $279.7 vs Est: $272.1*
GAAP EPS ($)	Actual: $0.33 vs Est: $0.294*	Actual: $0.57 vs Est: $0.299*	Actual: $1.31 vs Est: $0.276*
FFO/share – diluted ($)	Actual: $1.02 vs Est: $1.023*	Actual: $1.13 vs Est: $0.994*	Actual: $1.08 vs Est: $0.975*

Values marked with * are retrieved from S&P Global via GetEstimates.

Why: Q3 GAAP EPS beat was driven by a $110.5M gain on sale; CFO also cited ~$0.03/share one-time items (tax appeals, reversal of straight-line bad debt). FFO/share and revenue beats reflect earlier-than-expected rent commencements and improved same‑property NOI .

Segment/Regional Portfolio Snapshot (Occupancy; Q3 2025 vs Q3 2024)

Region	Occupied Q3 2025	Occupied Q3 2024
Los Angeles	74.0%	76.7%
San Diego	82.8%	87.9%
San Francisco Bay Area	85.7%	91.1%
Seattle	80.6%	80.4%
Austin	82.2%	74.2%
Weighted Avg	81.0%	84.3%

KPIs and Capital Actions

KPI/Action	Q3 2025 Detail
Early rent commencements	~200K sf advanced from Q4 to Q3
Leased vs Occupied spread	230 bps embedded growth (leases signed not yet commenced)
KOP2 quarterly op ex and taxes	~$5M in Q3; capitalized interest ~$10M (quarterly run-rate for 2026 pre-occupancy)
Debt issuance	$400M 5.875% senior notes due 2035; redemption of $400M 4.375% notes due Oct 2025
Acquisition	Maple Plaza (Beverly Hills), 306K sf, $205.3M; 72.3% occupied, 79.3% leased
Disposition	Silicon Valley campus, 4 buildings, 663K sf, $365.0M proceeds

Key Takeaways for Investors

Guidance momentum: FY25 FFO/share raised; non‑cash NOI adjustments and capitalized interest provide tailwinds; monitor Q4 occupancy given Q3 pull‑forward and specific move‑outs (near-term noise, medium-term visibility) .
Leasing trajectory: Strong SF SOMA and broader West Coast demand (AI, tech, biotech); spec suites and speed‑to‑occupancy are differentiators; negative cash spreads narrowing sequentially .
KOP2: Leases signed and pipeline improving; near-term drag as project enters stabilized pool in 2026 (op ex/taxes/interest through P&L) before becoming a net growth contributor; watch lease commencements cadence .
Balance sheet/capital recycling: Opportunistic dispositions and selective acquisitions (Maple Plaza) at attractive basis; new notes bolster liquidity and maturity profile; target at least $150M land monetization near term .
Regional mix: Austin and Seattle pockets show resilience; Los Angeles and San Diego mixed; SF recovery building (touring, sublease removal) supports medium-term pricing power .
Trading setup: Narrative catalysts include KOP2 exceeding 100K sf by YE, continued AI-driven leasing, and further land/disposition announcements; risk factors include cash rent pressure, move‑outs, and timing of Flower Mart entitlements .
Estimate revisions: Expect upward adjustments to FFO/share and revenue for FY25 given beats and guidance raise; GAAP EPS likely seen as non‑recurring due to gain on sale (normalize to underlying FFO/NOI trend) *.

Note: All actual financials and operating metrics are cited from company filings and transcripts. S&P Global consensus estimates are marked with * and derived via GetEstimates.

KILROY REALTY CORP (KRC)·Q3 2025 Earnings Summary