Our earnings release and supplemental package have been filed on a Form 8-K with the SEC, and both are also available on our website. Jeffrey will discuss our financial results and provide you with our 2026 guidance. Across our markets, we are experiencing the healthiest level of office demand since 2019, with a forward leasing pipeline that has grown by more than 65% over the last year. In West LA, a 79,000 sq ft renewal with Riot Games for the Arena building, providing several years of ongoing cash flow as we evaluate the highest invest use of the site going forward.

In San Francisco, additional AI leasing during the quarter and a growing pipeline of AI and other tenants for spec suite space that we currently have under construction in the SoMa submarket. We are thrilled by the momentum we've captured at KOP2 over the last 2 quarters, demonstrating a meaningful resurgence in life science demand and providing confidence in our pipeline as we move into 2026. At the same time, 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. In addition, we've gained exposure to mid-stage and late-stage life science companies in our spec suites, where our capital investment is specifically designed to be highly reusable by future tenants in the same space.

With these refinements incorporated, our anticipated yield at KOP2 is now in the mid-5% range, approximately 100 basis points below our original underwriting. While this is not reflective of where we would begin a new project today, we continue to believe in the exceptional long-term growth and value creation potential of Kilroy Oyster Point. Turning to our broader capital allocation strategy, we successfully paired fourth quarter leasing and operational wins with strategic portfolio repositioning initiatives. In December, we completed the sale of Sunset Media Center in Hollywood for $61 million, monetizing a mature, capital-intensive asset that no longer met our stringent criteria for incremental investment.

What went well
  • Fourth-quarter leasing reached approximately 827,000 sq ft, the strongest fourth quarter in six years, capping full-year 2025 leasing of about 2.1 million sq ft and a forward leasing pipeline that grew more than 65% year-over-year.
  • Kilroy Oyster Point Phase 2 executed 316,000 sq ft of leases in the quarter, including a 280,000 sq ft full-building, 16.5-year lease with UCSF, lifting the project's lease rate to 44% and establishing an institutional-credit anchor tenant.
  • Backfilled the former NeueHouse space in Hollywood with a 93,000 sq ft lease to the Fitler Club (minimal downtime and capital) and added notable leases including a 79,000 sq ft Riot Games renewal, eight leases at Maple Plaza (+230 bps lease rate), and 74,000 sq ft at West 8th in Seattle.
  • Advanced capital recycling with roughly $755 million of 2025 sales closed or contracted, land sales under contract of $165 million (exceeding the $150 million goal), and value-add acquisitions of Nautilus in Torrey Pines for $192 million (about $825 per sq ft) and Maple Plaza in Beverly Hills.
  • Excluding two unique LA transactions, GAAP rents on leases signed would have risen 16.2% and cash rents would have declined only 2.6%, comparing favorably to recent quarters.
What went wrong
  • Fourth-quarter FFO fell to $0.97 per diluted share, and cash same-property NOI growth was negative 7.2%, hurt by a sizable prior-year restoration fee (-350 bps), lower average occupancy in base rent (-190 bps), and weaker net recoveries (-140 bps).
  • Initial 2026 FFO guidance of $3.25-$3.45 per share (midpoint $3.35) represented a steep decline from 2025's roughly $4.20, driven almost entirely by Kilroy Oyster Point Phase 2 carry costs beginning to flow through earnings.
  • 2026 average occupancy was guided to 76%-78%, down about 390 basis points at the midpoint, as Kilroy Oyster Point Phase 2 entered the stabilized pool in January 2026 and several large tenant move-outs were expected in the first half of 2026.
  • Management refined the expected stabilized yield at Kilroy Oyster Point Phase 2 to the mid-5% range, roughly 100 basis points below the original underwriting.
  • Newly acquired Nautilus was only 75% occupied at closing after a late-2025 move-out (versus a historical average near 94%), and Flower Mart carry costs were still set to begin once capitalization ceases in mid-2026.

More on Kilroy Realty Corp

Reported 2026-02-10 · figures from the Kilroy Realty Corp Q4 2025 earnings call.

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