Kilroy Realty(US:KRC)2026-02-11 00:50Portfolio 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]