Kilroy Realty Corp (NYSE:KRC) reported its fourth-quarter and full-year 2025 financial results, delivering a mixed performance against analyst expectations. The West Coast-focused office and life science real estate investment trust (REIT) posted funds from operations (FFO), a key profitability metric for REITs, that significantly surpassed estimates, while revenue came in slightly below forecasts. The company's forward-looking guidance for 2026, however, projects a notable decline in FFO, which appears to be a focal point for investors.
Earnings and Revenue Versus Estimates
The company's fourth-quarter results presented a clear divergence between top-line performance and bottom-line profitability.
- FFO Per Share: Kilroy reported FFO of $0.97 per diluted share for Q4 2025. This comfortably exceeded the analyst consensus estimate of $0.2879 per share, representing a substantial beat.
- Revenue: Quarterly revenue was $272.2 million, which fell short of the estimated $274.1 million.
- Full-Year Context: For the full year 2025, the company reported FFO of $4.20 per share, down from $4.59 per share in 2024. Annual revenue was $1.11 billion, compared to $1.14 billion in the prior year.
Market Reaction and Forward Guidance
The initial market reaction following the earnings release was negative, with the stock trading lower in after-hours activity. This reaction is likely less about the quarterly earnings beat and more concerned with the company's outlook for the coming year.
Kilroy provided initial FFO guidance for 2026 in a range of $3.25 to $3.45 per diluted share. This forecast is significantly below both the $4.20 per share achieved in 2025 and the current analyst estimate for 2026 FFO of approximately $0.505 per share. It is important to note that a direct comparison here is complicated; the company's provided FFO guidance is a Nareit-defined metric, while the analyst estimate provided in the data may reference a different metric or require clarification. The guidance is based on several key assumptions that indicate ongoing portfolio transition pressures:
- An expected average full-year occupancy rate between 76.0% and 78.0% for the total stabilized portfolio.
- A projected same-property cash net operating income (NOI) change ranging from a decline of 1.5% to flat growth (0.0%).
- An anticipated negative NOI contribution of $23.5 to $25.0 million from development properties, primarily related to the lease-up phase of new projects.
Press Release Highlights
Beyond the financial figures, Kilroy's earnings report emphasized strategic execution amid a challenging office market. Key operational and strategic highlights from the quarter and full year include:
- Leasing Momentum: The company signed approximately 827,000 square feet of leases in Q4, its strongest fourth-quarter volume in six years. Full-year leasing of 2.05 million square feet was the highest since 2019.
- Occupancy Trends: The stabilized portfolio was 81.6% occupied and 83.8% leased at year-end, down from 82.8% occupied at the end of 2024.
- Major Project Leasing: A significant achievement was the leasing of 384,000 square feet at the Kilroy Oyster Point Phase 2 (KOP 2) life science project in South San Francisco during 2025, exceeding its initial goal. This included a full-building lease with UCSF.
- Capital Recycling: The company continued its strategy of selling non-core assets and acquiring strategic ones. Notable Q4 activity included the sale of Sunset Media Center in Los Angeles and the acquisition of the Nautilus life science campus in San Diego.
- Balance Sheet: Kilroy maintained a strong liquidity position of approximately $1.3 billion at year-end.
For a detailed breakdown of future quarterly and annual earnings estimates for Kilroy Realty Corp, you can review the latest analyst projections here.
Disclaimer: This article is for informational purposes only and is not intended as investment advice. The data and analysis presented should not be construed as a recommendation to buy, sell, or hold any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
