Asked about the expected yield for 1900 Broadway and the required rents for the unleased space to achieve that yield.

Elliot Trencher reiterated expected stabilized yields in the low to mid-9% range. Angela Aman added that the 60% pre-leasing provides a strong rent comp, and nearby Crossing 900's recent re-leasing at 60% cash rent spreads provides additional data points for premium rents in the highly amenitized submarket. “stabilized yield on this project, we think, is in the low to mid-9% range, which we think is very compelling. There's going to be good growth at this project over time as well, again, in one of the strongest submarkets in the Kilroy portfolio.”

Asked about the high percentage of net leases in the signed-not-commenced pool and the possibility of keeping Flower Mart as a development project, potentially mixed-use with multifamily.

Angela Aman clarified the net lease skew is a mix issue, not a trend. For Flower Mart, she stated they are exploring a broader mix of uses, including residential, and maintaining flexibility to maximize shareholder value. The market evolution in San Francisco will dictate the optimal execution path. “We're exploring a broader mix of uses that would allow us, as you mentioned, to add more residential into the projects. We just have to see how the market continues to evolve and what the project ultimately looks like to decide what the right or optimal execution path is.”

Inquired about factors driving the higher end of disposition guidance and whether LA would see a similar AI-driven demand effect as San Francisco.

Elliot Trencher stated the higher end reflects continued opportunistic sales if compelling opportunities arise, not targeting specific markets. Angela Aman clarified that AI is not expected to be a huge driver in LA, with spillover benefits seen more in the Pacific Northwest. LA's AI demand is concentrated in specific submarkets like Culver City, but broader demand across industries is also present. “I don't think we're mentioning it to suggest it's going to be a huge driver of demand in the L.A. market. We've certainly seen a lot more San Francisco native companies or AI native companies, leasing space, particularly in the Pacific Northwest.”

KRC

Kilroy Realty (KRC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Real Estate· Apr 28, 2026

Source: earnings call transcript

Executive summary

Kilroy Realty Corporation Q1 FY26 — Strong Leasing, Strategic Dispositions, and AI-Driven Demand

Kilroy Realty delivered a robust first quarter, driven by record leasing activity fueled by intensifying return-to-office trends and significant AI-driven demand across its West Coast markets. The company strategically recycled capital through dispositions, exceeding its full-year target, and opportunistically repurchased shares while investing in a new pre-leased development. Management maintains a balanced capital allocation approach, prioritizing balance sheet strength amidst market volatility.

Highlights

Strongest Q1 leasing results since 2017 with total productivity of approximately 568,000 square feet, more than double prior year.
Increased full-year average occupancy guidance by 25 basis points at the midpoint.
Signed but not yet commenced leases represent nearly $78 million of contractually obligated annualized base rent.
Successfully executed $350 million in year-to-date operating property dispositions, exceeding original full-year goal.
Opportunistically repurchased $73 million of stock at an average price of $30.80 per share.

Concerns

Overall GAAP leasing spreads were negative 10.6% and cash spreads negative 16.8% due to two specific San Francisco leases on space vacant for over 12 months.
Flower Mart expense capitalization is now expected to cease late in Q4 2026, impacting future earnings by approximately $1 million in quarterly operating expenses and $7 million in quarterly capitalized interest.
Anticipate an occupancy drop in Q2 FY26 due to the pace of scheduled move-outs.

Guidance & targets

Category	Target	Timeline	Confidence
FFO per diluted share	$3.49 to $3.63 high materiality	FY26	High
Cash same-property NOI growth	25 to 125 basis points high materiality	FY26	High
Operating asset dispositions	Raised top end of range medium materiality	FY26	High
Flower Mart expense capitalization cessation	Late in the fourth quarter medium materiality	Q4 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
San Francisco - Soma Submarket Significant momentum at 201 Third, capturing demand from large and small format users, including Tobi and RVI. All 5 recently constructed spec suites leased by completion. 201 Third lease rate improved: 26% (YE 2024) to >80% (Q1 2026)	—	—	—	—
Redwood City - Crossing 900 Completed a direct lease with a current subtenant, generating significant cash base rent increase. Asset has remained 100% leased since delivery in 2015. 27,000 sq ft direct lease completedCash base rent increase: >40%Re-leasing since Q4 2023: >80,000 sq ftCash rent spreads on re-leasing: up nearly 60%	—	—	—	—
Seattle - Denny Regrade Submarket Momentum accelerated at recently repositioned West 8 project, following 74,000 sq ft of new leases in Q4 2025. Renovations and amenities resonate with tenants. New leases signed at West 8 YTD: 76,000 sq ft (43,000 sq ft GM in Q1, 33,000 sq ft SoFi in Q2)	—	—	—	—
Los Angeles Portfolio Leasing activity improved meaningfully over the last year, reflecting gradual market improvement and portfolio repositioning. Arrow in Long Beach seeing pickup in tour activity, Blackwelder and Culver City seeing acceleration, Maple Plaza surpassing expectations. Trailing 12-month productivity: up approximately 66%	—	up approximately 66%	—	—
Life Sciences - KOP 2 Outperforming broader South San Francisco market. Future pipeline remains robust for remaining lease-up and full building opportunity. 38,000 sq ft lease with Alima PharmaceuticalsProject leased: 49%	—	—	—	—

KRC operating KPIs by quarter

KRC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Square feet Leasing productivity	~568K sq ft Against this backdrop, our team's disciplined execution drove our strongest first quarter leasing results since 2017 and total productivity of approximately 568,000 square feet, more than double our first quarter performance last year, positioning us to increase our full year average occupancy guidance by 25 basis points at the midpoint. Source: earnings call transcript	~376K sq ft During the second quarter, we executed approximately 376,000 square feet of new and renewal leases, bringing year-to-date leasing volume to roughly 944,000 square feet, an increase of more than 40% versus the first 6 months of 2025. Source: earnings call transcript	—
Occupancy rate	77.6% As a result, portfolio occupancy ended the quarter at 77.6%, excluding KOP 2, the first quarter occupancy would have been 81.5%, down only 10 basis points despite our previously communicated first quarter move-outs. Source: earnings call transcript	77% Portfolio occupancy, including KOP 2, ended the quarter at 77%, down 60 basis points from the prior quarter despite 2 previously communicated, largely about that negatively impacted occupancy by approximately 140 basis points. Source: earnings call transcript	-0.6 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Land sales under contract $165M Q1 FY26

Roughly half expected to close late 2026 or early 2027.

Signed-not-commenced leasing backlog (Annualized Base Rent) $78M Q1 FY26

Contractually obligated annualized base rent to be realized over coming years, providing significant visibility on future growth.

Signed-not-commenced leasing backlog (Square Feet) 1M Q1 FY26

Total square footage of signed but not commenced leases.

Deals & partnerships

Lane Partners Development of 1900 Broadway, a 250,000 sq ft office project Total anticipated cost $330M-$350M

Joint venture to develop a premier substantially pre-leased Class A office asset in downtown Redwood City. Anchor tenant Cooley signed a 20-year lease for 145,000 sq ft (60% of building).

Cooley 20-year lease for office space 20 years

Executed concurrently with closing on the 1900 Broadway joint venture.

Alima Pharmaceuticals Lease for life science space

38,000 square foot lease executed subsequent to quarter end at KOP 2.

General Motors New lease for office space

43,000 square foot lease signed in Q1 FY26 at West 8 in Seattle.

SoFi New lease for office space

33,000 square foot lease signed in early Q2 FY26 at West 8 in Seattle.

RVI Expansion lease for office space

62,000 square foot expansion lease signed this quarter, following a 93,000 sq ft lease in Q2 2025.

Not stated Sale of Kilroy Sabre Springs office property $125M

Office property in San Diego, sold in Q1 FY26.

Not stated Sale of Delmar Tech Center office property $21M

40,000 square foot building in Del Mar submarket of San Diego, sold in Q1 FY26.

Not stated Sale of two Hollywood residential assets (Columbia Square Living and Jarden) $202M

Sold subsequent to quarter end. These towers were developed by Kilroy as part of Columbia Square and Online project. Lack of synergies with office and demand for high-quality apartments drove sale.

Capital programs

1900 Broadway Development Joint venture closed, pre-leased $330M to $350M

Funding: Equity investment prefunded through land parcel sales

Start: Next year (groundbreaking)

Benefit:250,000 square foot office project, 60% pre-leased (145,000 sq ft)

Premier substantially pre-leased Class A office asset in downtown Redwood City. Kilroy's share will be 97% upon completion. Stabilized yields expected in the low to mid-9% range.

Flower Mart Project Redesign and Entitlement Underway

Benefit:Flexibility to develop a broader mix of uses, amend development agreement, create special use district

Working with the city of San Francisco to redesign and reimagine the project, maintaining and building upon current approvals. Expense capitalization to cease late Q4 2026.

Risks & headwinds

Delay in Flower Mart project redesign and entitlement approval Through Q4 FY26

Expense capitalization will cease late Q4 2026, leading to approximately $1 million of quarterly operating expenses and $7 million of quarterly capitalized interest impacting earnings.

Mitigation:Working with the city of San Francisco on an alternative approval process to increase long-term flexibility and optionality for a broader mix of uses.

Negative GAAP and cash leasing spreads Q1 FY26

GAAP spreads of negative 10.6% and cash spreads of negative 16.8% for Q1 FY26.

Mitigation:Primarily driven by two capital-light San Francisco leases on space vacant for longer than 12 months, generating attractive net effective rent outcomes. Spreads on space vacant for less than 12 months were positive (GAAP +19.2%, cash +5.3%).

Anticipated portfolio occupancy drop Q2 FY26

Occupancy expected to drop in Q2 FY26.

Mitigation:Due to the pace of scheduled move-outs, Q2 is the biggest move-out quarter for 2026. Management expects the bulk of remaining 2026 expirations (740,000 sq ft) to be move-outs.

What to watch in Q2 FY26

Flower Mart expense capitalization

Late Q4 FY26

Current Capitalized through Q4 FY26

Target Cessation of capitalization

Why it matters

Cessation will impact earnings by $1M quarterly operating expenses and $7M quarterly capitalized interest, affecting FFO.

With respect to Flow Mart, as Angela discussed, we are now assuming that expense capitalization will cease late in the fourth quarter, at that point, a little less than $1 million of quarterly operating expenses and real estate taxes along with $7 million of quarterly capitalized interest will begin impacting earnings.

Find out whether KRC delivers this. Inve re-checks your case every morning.

Q&A highlights

Seeking more detail on leasing demand and recovery progress in LA and San Diego, contrasting with San Francisco's recent positive response.

Rob Paratte confirmed increased activity (tours, proposals, deals) across the portfolio, including LA and San Diego. Noted 24 deals signed in LA in Q1, with growing pipeline. Emphasized "flight to quality" benefiting Kilroy's high-quality assets. Mentioned 400,000 sq ft of tours at Nautilus and successful spec suite program in Del Mar.

“what we're seeing is this continued flight to quality. There's a world of haves and have nots. So the recovery is not the same for all owners or all properties. And we're benefiting from having these high-quality assets in L.A., San Diego, et cetera.”

asked by Manus [indiscernible] · answered by A. Paratte

2 min read 6 chapters

Detailed narrative

West Coast Market Resurgence and AI Impact

Fundamentals across West Coast markets have significantly improved, driven by intensified return-to-office momentum, abated space rationalization, and the burgeoning AI ecosystem. This has led to increased space requirements from rapidly scaling new companies and established players, particularly in San Francisco, which is experiencing broad-based demand and positive net absorption, with Q1 leasing exceeding 3 million square feet, over 10% above pre-pandemic averages.

Strong Leasing Performance and Future Growth Visibility

The company achieved its strongest first-quarter leasing results since 2017, with total productivity of approximately 568,000 square feet, more than double the prior year. This performance led to an increase in full-year average occupancy guidance by 25 basis points at the midpoint. Signed but not yet commenced leases now represent nearly $78 million of contractually obligated annualized base rent, providing significant visibility into future growth.

Strategic Capital Recycling and Redeployment

Kilroy continued its strategy of raising attractively priced capital through dispositions of noncore assets, selling $146 million in Q1 and an additional $202 million post-quarter end, totaling $350 million year-to-date. Proceeds were redeployed into opportunistic share repurchases ($73 million) and debt repayment, as well as high-caliber, infill multi-tenant investments totaling $765 million, enhancing the portfolio's durability and growth profile.

1900 Broadway Joint Venture Development

The company formed a joint venture to develop 1900 Broadway, a 250,000 square foot Class A office project in downtown Redwood City, already 60% pre-leased for 20 years. This project, with an anticipated total cost of $330 million to $350 million and expected stabilized yields in the low to mid-9% range, leverages Kilroy's market insight and relationships, with equity investment largely prefunded by land parcel sales.

Flower Mart Project Redesign and Entitlement

The Flower Mart project in San Francisco is undergoing a redesign and re-entitlement process with the city to allow for a broader mix of uses and amend existing development agreements. This alternative approval process will extend expense capitalization through Q4 2026, after which approximately $1 million of quarterly operating expenses and $7 million of quarterly capitalized interest will begin impacting earnings.

The company is committed to maximizing shareholder value through this process.

Market-Specific Momentum

San Francisco's Soma submarket, particularly at 201 Third, saw lease rates improve from 26% to over 80%, driven by AI companies and a successful spec suites program. Seattle's Denny Regrade submarket also accelerated with 76,000 square feet of new leases year-to-date. Los Angeles experienced meaningful improvement in leasing activity, with trailing 12-month productivity up 66%, benefiting from portfolio repositioning.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.