Kilroy Realty Corporation (NYSE:KRC) is included in our list of Real Estate Investing for Beginners: 10 Best Stocks to Buy. Evercore ISI Lowers its Price Target on Kilroy Realty Corporation (KRC) to $42 and Keeps an In Line Rating On February 10, 2026, Evercore ISI analyst Steve Sakwa lowered his price target on Kilroy Realty Corporation (NYSE:KRC)  to $42 from $46 previously and kept an In Line rating. The firm said 2026 guidance came with “no real surprises,” though it flagged that the trajectory into ...

Core Viewpoint - Kilroy Realty's ability to maintain its 27-year dividend streak is at risk due to unsustainable cash flow and high payout ratios, necessitating reliance on debt or asset sales to support dividend payments [1] Financial Performance - In 2024, Kilroy Realty generated $541.1 million in operating cash flow but incurred $501.0 million in capital expenditures, resulting in only $40.2 million in free cash flow [1] - The company paid out $256.3 million in dividends, leading to a concerning free cash flow payout ratio of 638% [1] - The earnings payout ratio stands at approximately 121%, indicating that dividends exceed both free cash flow and net income [1] Debt and Balance Sheet - As of Q3 2025, Kilroy Realty's total debt was $4,591.1 million, with a debt-to-equity ratio of 0.84x, which is manageable for a REIT [1] - Cash on hand decreased from $510.2 million at the end of 2023 to $165.7 million by the end of 2024, a decline of 67.5%, but recovered to $372.4 million in Q3 2025 [1] Leasing Activity - Kilroy Realty signed 552,000 square feet of leases in Q3 2025, including a significant 280,000-square-foot lease to UCSF Health, which enhances revenue stability [1] Dividend Sustainability - The current financial structure is strained, with free cash flow not covering the dividend, leading to reliance on external financing or asset sales [1] - Strong leasing momentum and institutional-grade tenants provide some cushion, but the dividend's sustainability from operations alone is questionable [1]

Core Viewpoint - Commercial real estate stocks have experienced significant declines due to concerns about reduced demand for office space stemming from the increased use of artificial intelligence tools [1][4]. Group 1: Stock Performance - CBRE Group Inc. shares fell 8.8%, marking a two-day decline of 20%, the worst since 2020 [1]. - Other notable declines include Jones Lang LaSalle Inc. down 7.6%, Cushman & Wakefield Ltd. down 12%, and Newmark Group Inc. down 4.2% [1]. - An index tracking office real estate companies retreated by 4.2%, with major decliners including SL Green Realty Corp., Cousins Properties Inc., Kilroy Realty Corp., and BXP Inc. [2]. Group 2: Market Sentiment - Concerns regarding AI's impact on office space demand have been present for some time, but recent selloffs have intensified [2]. - Analysts describe the current market environment as a "ready fire aim" scenario, where investors react sharply to even minor earnings misses due to fears of AI disruption [3]. - The selloff is part of a broader trend referred to as the "AI scare trade," affecting various sectors including software, private credit, and logistics [3][4]. Group 3: Analyst Insights - Analysts have noted that the market is pricing in potential mass job losses in office-using sectors due to AI advancements [4]. - Some analysts caution that the recent steep selling may be an overreaction and could be misjudging the actual risks involved [5].

Portfolio Overview - As of December 31, 2025, the stabilized portfolio included 121 office properties with a total of 16,292,164 rentable square feet and an occupancy rate of 81.6%[25] - The stabilized residential properties consisted of 3 properties with 1,001 units and an occupancy rate of 94.1%[26] - The company’s properties are concentrated in California, the Seattle Metropolitan Area, and the Austin Metropolitan Area, making it susceptible to regional economic conditions and natural disasters[66] - As of December 31, 2025, approximately 18.4% of the total square footage of the company's stabilized office properties was unoccupied[77] - The company’s stabilized office properties portfolio consists of 121 buildings with a total rentable area of 16,292,164 square feet and an occupancy rate of 81.6%[173] - The stabilized residential properties portfolio includes 3 properties with 1,001 units and an average occupancy rate of 94.1%[175] Financial Performance - For the year ended December 31, 2025, approximately 98.3% of the company's revenues were derived from rental income[74] - The company reported a revenue of $1.5 billion, representing a 4.1% increase year-over-year[1] - The company reported a total of 1,132,425 square feet occupied across various properties, with an overall occupancy rate of 100.0%[185] - The company achieved a net operating income of $1,192,476,993, which is a 3.4% increase from the prior year[184] - The company reported a total annualized rent of $143,766,633.32 across its properties, with an overall increase of 3.7% in rental income per square foot[185] Tenant Composition - Technology companies accounted for 51% of the office portfolio's annualized base rental revenues as of December 31, 2025[42] - The company’s 20 largest tenants represented approximately 53.7% of total annualized base rental revenues as of December 31, 2025[42] - 51% of the company's tenants operated in the technology industry, with 19% in life science and healthcare, and 9% in professional and business services as of December 31, 2025[76] Lease and Occupancy Risks - Significant job losses in key industries such as technology and life sciences may decrease demand for office space, negatively impacting market rental rates and property values[60] - The company may face challenges in renewing leases or re-leasing available space, which could impact revenue generation[60] - The financial condition of tenants may be adversely affected, leading to potential defaults under leases due to bankruptcy or operational failures[60] - The company may face increased operating costs, including insurance premiums, utilities, and real estate taxes, which could adversely affect its financial performance[72] - The company may experience longer lease negotiation periods due to tenants being more selective and pursuing space efficiencies[70] Environmental and Regulatory Compliance - The company accrued approximately $70.0 million in environmental remediation liabilities for certain development projects as of December 31, 2025[49] - The company achieved a GRESB 5 Star designation for standing investments in 2025 and was named the Regional Sector Leader in the Americas for development[36] - The company has maintained carbon neutral operations since 2020, offsetting all Scope 1, Scope 2, and Scope 3 emissions[41] - The company is subject to risks associated with climate change, which could lead to increased operating costs and decreased demand for properties in affected areas[86] - The company may incur substantial costs to comply with governmental regulations, which could adversely affect its financial condition[79] Debt and Capital Structure - As of December 31, 2025, the company had approximately $4.6 billion in aggregate principal amount of indebtedness, with $601.3 million expected to be paid during the year ending December 31, 2026[122] - Total debt represented 50.8% of the company's total market capitalization as of December 31, 2025[122] - The company may not be able to meet its debt service obligations, which could adversely affect its financial performance and operations[125] - Rising interest rates could increase interest costs on variable rate debt, adversely affecting cash flows and the ability to make distributions to stockholders[64] - The company is required to distribute at least 90% of its taxable income to maintain its REIT status, which may limit its ability to fund future capital needs from operating cash flows[134] Future Development and Growth - The company estimates that its eight potential future development sites could provide approximately 6.0 million square feet of potential density[95] - The company is exploring strategic acquisitions to bolster its portfolio, with a target of adding properties worth $500 million[184] - The company plans to expand its market presence with new developments in California, targeting a 9.1% increase in rental income[184] - Future guidance indicates a projected revenue growth of 8% for the next fiscal year, driven by increased occupancy and new leases[184] - The company’s future development pipeline consists of eight potential future development sites as of December 31, 2025[177] Cybersecurity and Operational Risks - The company’s cybersecurity program is overseen by the Audit Committee, which regularly interacts with the executive team to manage cybersecurity risks[162] - Cybersecurity incidents could lead to unauthorized access to sensitive information, disrupt business operations, and result in regulatory actions[111] - The company relies on third-party service providers for essential operations, exposing it to risks from potential security breaches and disruptions[108] - Labor disputes or strikes involving service providers could materially disrupt operations and increase costs[120] - The loss of key executive officers could harm the company's operations and financial performance, affecting relationships with investors and tenants[119]

Financial Data and Key Metrics Changes - The company reported FFO of $0.97 per diluted share in Q4 2025, with occupancy ending the year at 81.6%, reflecting a 60 basis point sequential improvement [24] - Cash same-property NOI growth was negative 7.2% in Q4, primarily due to a sizable restoration fee recognized in Q4 2024, which detracted 350 basis points from current year growth [24] - The 2026 FFO guidance range is set at $3.25-$3.45 per diluted share, with an expected average occupancy of 76%-78%, a decline of 390 basis points at the midpoint compared to 2025 [26][27] Business Line Data and Key Metrics Changes - Fourth quarter leasing totaled approximately 827,000 sq ft, marking the strongest performance in six years, leading to a full-year leasing total of approximately 2.1 million sq ft, a significant year-over-year increase [4][5] - Key leasing highlights included a 93,000 sq ft lease with the Fitler Club in Hollywood and a 316,000 sq ft lease with UCSF at Kilroy Oyster Point Phase Two, indicating strong demand in the life sciences sector [6][8] Market Data and Key Metrics Changes - The company experienced the healthiest level of office demand since 2019, with a forward leasing pipeline growing by over 65% in the last year [6] - In San Francisco, premium sublease space is nearly gone, with 47% of the overall availability not transacted since 2021, indicating a recovery in the market [44][60] Company Strategy and Development Direction - The company is focused on disciplined execution across its platform, including driving leasing, monetizing non-core assets, and redeploying capital into high-quality opportunities [4][15] - The acquisition of Nautilus for $192 million strengthens the company's presence in the life sciences sector, positioning it to capture demand across West Coast markets [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the leasing environment, particularly in San Francisco, where new business formation is driving demand [81] - The company anticipates a robust M&A environment in the life sciences sector, with expectations for continued growth in leasing activity [8][9] Other Important Information - The company completed approximately $755 million in sales, including $465 million from operating properties and $165 million from land sales, indicating a strategic approach to capital allocation [17] - The anticipated yield at Kilroy Oyster Point Phase Two is now in the mid-5% range, reflecting adjustments based on leasing activity and market conditions [11] Q&A Session Summary Question: Can you discuss the UCSF anchor lease and its late commencement? - Management noted that the UCSF lease is part of a new development project in shell condition, requiring time for build-out and space planning [34][35] Question: What are the expectations for retention on the 1.05 million sq ft expiring in 2026? - Management expects substantial move-outs from this pool but has already backfilled about 140,000 sq ft and anticipates additional renewals [50][51] Question: What is the competitive landscape for KOP and potential monetization? - Management remains confident in the long-term growth potential of KOP and believes it has created significant value in phase one, with future phases dependent on achieving favorable yields [76][77]

Financial Data and Key Metrics Changes - The company reported FFO of $0.97 per diluted share in Q4 2025, with occupancy ending the year at 81.6%, reflecting a 60 basis point sequential improvement [24] - Cash same-property NOI growth was negative 7.2% in Q4, primarily due to a sizable restoration fee recognized in Q4 2024, which detracted 350 basis points from current year growth [24] - The 2026 FFO guidance range is set at $3.25-$3.45 per diluted share, with average occupancy expected to decline to 76%-78% [26][27] Business Line Data and Key Metrics Changes - Fourth quarter leasing totaled approximately 827,000 sq ft, marking the strongest performance in six years, leading to full-year leasing of approximately 2.1 million sq ft, a significant year-over-year increase [4][5] - Key leasing highlights included a 93,000 sq ft lease with the Fitler Club in Hollywood and a 316,000 sq ft lease with UCSF at Kilroy Oyster Point Phase Two [6][8] Market Data and Key Metrics Changes - The company experienced the healthiest level of office demand since 2019, with a forward leasing pipeline growing by more than 65% over the last year [6] - In San Francisco, premium sublease space is nearly gone, with 47% of the 32% availability not transacted since 2021, indicating a recovery in the market [42][60] Company Strategy and Development Direction - The company is focused on driving leasing across its operating and development portfolios while monetizing non-core assets and redeploying proceeds into select opportunities [4][15] - The acquisition of Nautilus for $192 million strengthens the company's presence in the life science sector, positioning it to capture demand across West Coast markets [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the leasing environment, particularly in San Francisco, where new business formation is driving demand [81] - The company anticipates a robust M&A environment in the life science sector, with expectations for continued growth in leasing activity [8][9] Other Important Information - The company successfully completed the sale of several non-core assets, including the Sunset Media Center for $61 million and Kilroy Sabre Springs for $125 million, exceeding its goal for land parcel dispositions [12][13][14] - The anticipated yield at Kilroy Oyster Point Phase Two is now in the mid-5% range, approximately 100 basis points below the original underwriting [11] Q&A Session Summary Question: Can you discuss the UCSF anchor lease and its late commencement? - Management indicated that the UCSF lease is part of a new development project in shell condition, requiring time for build-out and space planning [34][35] Question: What are the retention expectations for the 1.05 million sq ft expiring in 2026? - Management expects substantial move-outs from this pool but has already backfilled about 140,000 sq ft and anticipates an additional 50,000-100,000 sq ft in potential renewals [50][51] Question: What is the competitive landscape for KOP and potential monetization? - Management remains committed to the long-term growth potential of KOP, emphasizing the value created in phase one and the strategic leasing efforts in phase two [76][77]

Financial Data and Key Metrics Changes - The company reported FFO of $0.97 per diluted share in Q4 2025, with occupancy ending the year at 81.6%, reflecting a 60 basis point sequential improvement [22][24] - Cash same-property NOI growth was negative 7.2% in Q4, primarily due to a sizable restoration fee recognized in Q4 2024, which detracted 350 basis points from current year growth [22][24] - The anticipated yield at Kilroy Oyster Point Phase Two (KOP2) is now in the mid-5% range, approximately 100 basis points below the original underwriting [10][24] Business Line Data and Key Metrics Changes - Fourth quarter leasing totaled approximately 827,000 sq ft, marking the strongest fourth quarter performance in six years, resulting in total full-year leasing of approximately 2.1 million sq ft, a significant year-over-year increase [3][4] - Key leasing highlights included a 93,000 sq ft new lease with the Fitler Club in Hollywood and a 316,000 sq ft lease with UCSF at KOP2, bringing the lease rate at KOP2 to 44% [4][6] Market Data and Key Metrics Changes - The company experienced the healthiest level of office demand since 2019, with a forward leasing pipeline that has grown by more than 65% over the last year [4][5] - In San Francisco, premium sublease space is virtually gone, indicating a positive sign for the market recovery [41][42] Company Strategy and Development Direction - The company is focused on driving leasing across its operating and development portfolios, monetizing non-core asset sales, and redeploying proceeds into select opportunities to enhance long-term growth [3][10] - The company plans to capitalize on the recovering leasing environment and improving capital markets, targeting $300 million in operating portfolio dispositions in 2026 [21][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the leasing pipeline, indicating that the pipeline is about 65% higher than a year ago, with high confidence in getting tenants into occupancy over 2026 [49][50] - The company noted that the innovation pipeline remains exceptionally active, with more than 50 novel drug therapies anticipated to receive FDA approval in 2026, reflecting continued scientific advancement and investment [8][9] Other Important Information - The company successfully completed the sale of Sunset Media Center for $61 million and Kilroy Sabre Springs for $125 million, monetizing mature, capital-intensive assets [10][11] - The acquisition of Nautilus for $192 million strengthens the company's presence in the life science sector and positions it to capture cutting-edge lab and office demand [12][13] Q&A Session Summary Question: Inquiry about the UCSF anchor lease and its late commencement - Management clarified that the UCSF lease is part of a new development project currently in shell condition, requiring time for space planning and build-out [31][33] Question: Clarification on KOP2 yield and tenant improvements - The mid-5% yield is a cash stabilized yield, and all transactions signed to date have been reflected in the new cost estimates [37][38] Question: Update on leasing activity and competitive impact in San Francisco - Management noted that premium sublease space is nearly gone, and the recovery in San Francisco is evident with significant tenant activity and expansion-focused leases [41][42][80] Question: Retention expectations for expiring leases in 2026 - Management expects substantial move-outs from the 1.05 million sq ft of expiring leases, with progress already made in backfilling some of that space [48][49] Question: Market conditions and tenant space needs - Management indicated that new business formation and growth, particularly in AI, are driving demand for office space, with many tenants discussing expansion [78][79]

Kilroy Realty Supplemental Financial Report Q4 2025 Where Innovation Works KILROY REALTY CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS --------------- LOS ANGELES, February 9, 2026 - Kilroy Realty Corporation (NYSE: KRC) ("Kilroy" or the "Company") today reported financial results for the fourth quarter and full year ended December 31, 2025. "Our strong performance in the fourth quarter capped off an exceptional year of execution by the entire Kilroy Team," said Angela Aman, Chief Execu ...

Core Viewpoint - Kilroy Realty (KRC) reported a revenue of $272.19 million for the quarter ended December 2025, reflecting a year-over-year decline of 5% but exceeding the Zacks Consensus Estimate by 0.58% [1] Financial Performance - Earnings per share (EPS) for the quarter was $0.97, compared to $0.50 a year ago, indicating a significant improvement [1] - The EPS surprise was -1.12% against the consensus estimate of $0.98 [1] - Net earnings per share (diluted) was reported at $0.10, falling short of the average estimate of $0.28 based on two analysts [4] Revenue Breakdown - Rental income was reported at $267.36 million, slightly above the two-analyst average estimate of $266.45 million [4] - Other property income was $4.82 million, exceeding the two-analyst average estimate of $4.37 million [4] - The year-over-year change in other property income was -4% [4] Stock Performance - Kilroy Realty shares have returned -12.2% over the past month, contrasting with the Zacks S&P 500 composite's -0.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

分组1 - Kilroy Realty (KRC) reported quarterly funds from operations (FFO) of $0.97 per share, missing the Zacks Consensus Estimate of $0.98 per share, and down from $1.2 per share a year ago, representing an FFO surprise of -1.12% [1] - The company posted revenues of $272.19 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 0.58%, but down from year-ago revenues of $286.38 million [2] - Kilroy Realty shares have underperformed the market, losing about 6.3% since the beginning of the year compared to the S&P 500's gain of 1.3% [3] 分组2 - The current consensus FFO estimate for the coming quarter is $0.88 on revenues of $269.06 million, and for the current fiscal year, it is $3.36 on revenues of $1.08 billion [7] - The Zacks Industry Rank for REIT and Equity Trust - Other is currently in the bottom 25% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]