Kilroy Realty Corp (NYSE:KRC) Reports Mixed Q3 2025 Results with Strong Leasing Momentum

Kilroy Realty Corp (NYSE:KRC) reported third quarter financial results that presented a mixed financial picture, with funds from operations declining year-over-year while leasing activity showed signs of momentum in key development projects.

Financial Performance Versus Expectations

The real estate investment trust reported quarterly revenues of $279.7 million for the third quarter of 2025, representing a 3.5% decrease from the $289.9 million recorded in the same period last year. Despite this decline, the company's top-line performance exceeded analyst expectations of $274.6 million.

The earnings picture was more complex, with net income available to common stockholders showing significant improvement while the key REIT metric of funds from operations (FFO) experienced a decline:

• Net income reached $156.2 million, or $1.31 per diluted share, compared to $52.4 million, or $0.44 per diluted share, in Q3 2024
• FFO came in at $130.6 million, or $1.08 per diluted share, down from $140.4 million, or $1.17 per diluted share, in the prior year period
• The company's FFO per share of $1.08 substantially exceeded the analyst estimate of $0.46 per share

Leasing and Portfolio Metrics

Kilroy's stabilized portfolio showed an occupancy rate of 81.0% with 83.3% leased at quarter-end, indicating 230 basis points of signed leases that have not yet commenced. The company executed approximately 552,000 square feet of leases during the quarter, consisting of:

• 237,000 square feet of new leasing on previously vacant space
• 315,000 square feet of renewal leasing
• 129,000 square feet of short-term leasing, primarily renewal activity

Rental rates showed mixed performance, with GAAP rents on leases signed during the quarter increasing 5.0% while cash rents decreased 9.6% from prior levels on second generation leasing, excluding short-term leasing.

Strategic Developments and Capital Activity

The company highlighted significant progress at its Kilroy Oyster Point Phase 2 development, where it has now signed 84,000 square feet of leases, positioning the company to exceed its previously communicated goal of 100,000 square feet of lease executions by year-end 2025. Recent tenants at the property include Color, MBC BioLabs, and Acadia Pharmaceuticals.

Kilroy also engaged in substantial capital recycling during the quarter:

• Completed the acquisition of Maple Plaza, a 306,000 square foot office property in Beverly Hills, for $205.3 million
• Sold a four-building, approximately 663,000 square foot campus in Silicon Valley for gross proceeds of $365.0 million
• Successfully completed a public offering of $400 million of 5.875% 10-year unsecured senior notes
• Fully redeemed $400 million of 4.375% unsecured senior notes due October 2025

Updated Guidance and Market Reaction

The company raised its full-year 2025 FFO per share guidance to a range of $4.18 to $4.24, up from the previous range of $4.05 to $4.15. This updated outlook compares to analyst estimates of $1.39 for full-year revenue and reflects management's confidence in the company's operational trajectory.

Market reaction to the earnings release has been notably positive, with shares rising approximately 4.65% in after-market trading following the announcement. This suggests investors are focusing on the better-than-expected FFO performance and improved guidance rather than the year-over-year decline in revenues and FFO.

Balance Sheet and Dividend

Kilroy maintained its quarterly dividend of $0.54 per share, equivalent to an annual rate of $2.16 per share. The company's balance sheet activities during the quarter demonstrated proactive management of its capital structure, extending debt maturities while taking advantage of market opportunities.

For detailed earnings estimates and future projections, view the complete earnings analysis for KRC.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or recommendation to buy or sell any security. Investors should conduct their own research and consult with financial advisors before making investment decisions.