third quarter 2026
Filed Oct 22, 2026Kilroy Realty Corporation reported third-quarter revenues of $271.6 million, FFO of $104.6 million, or $0.88 per diluted share, and signed approximately 815,000 square feet of leases.
Leasing activity, re-leasing spreads and leased occupancy improved sequentially, but revenue, GAAP net income, FFO, same-property cash NOI and FAD were below the prior-year quarter, while leverage was higher year over year.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenues, three months ended September 30, 2026GAAP | $271.6M | – | – |
| Rental income, three months ended September 30, 2026GAAP | $266.8M | – | – |
| Other property income, three months ended September 30, 2026GAAP | $4.85M | – | – |
| Net income available to common stockholders, three months ended September 30, 2026GAAP | $15.5M | – | – |
| Net income available to common stockholders per share, diluted, three months ended September 30, 2026GAAP | $0.13 per diluted share | – | – |
| Net operating income, three months ended September 30, 2026non-GAAP | $173.2M | – | – |
| Net operating income margin, three months ended September 30, 2026non-GAAP | 63.8% | – | – |
| Same Property Cash Net Operating Income, three months ended September 30, 2026non-GAAP | $170.6M | – | (1.5)% |
| Funds From Operations, three months ended September 30, 2026non-GAAP | $104.6M | – | – |
| Funds From Operations per common share/unit, diluted, three months ended September 30, 2026non-GAAP | $0.88 per diluted share | – | – |
| Funds Available for Distribution, three months ended September 30, 2026non-GAAP | $62.81M | – | – |
| EBITDAre, three months ended September 30, 2026non-GAAP | $153.0M | – | – |
| Company's Share of Adjusted EBITDAre, three months ended September 30, 2026non-GAAP | $145.0M | – | – |
| Stabilized Portfolio period-end occupancyother | 76.9% | – | – |
| Stabilized Portfolio period-end leased percentageother | 83.0% | – | – |
| Stabilized Portfolio period-end occupancy excluding KOP 2other | 80.7% | – | – |
| Stabilized Portfolio period-end leased percentage excluding KOP 2other | 84.8% | – | – |
| Cash and cash equivalents as of September 30, 2026GAAP | $94.30M | – | – |
| Total debt as of September 30, 2026other | $4.41B | – | – |
| Net debt as of September 30, 2026non-GAAP | $4.32B | – | – |
| Net Debt to Company's Share of EBITDAre Rationon-GAAP | 7.2x | – | – |
| Nine-month total revenues ended September 30, 2026GAAP | $814.0M | – | – |
| Nine-month net income available to common stockholders ended September 30, 2026GAAP | $16.14M | – | – |
| Nine-month Funds From Operations ended September 30, 2026non-GAAP | $322.8M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| San Francisco Bay AreaOccupied percentage was 75.3% and leased percentage was 82.7% at September 30, 2026, compared with 75.3% occupied and 81.3% leased at June 30, 2026. | 44.3% YTD NOI | – | – |
| Los AngelesOccupied percentage was 72.2% and leased percentage was 78.5% at September 30, 2026, compared with 72.5% occupied and 77.2% leased at June 30, 2026. | 16.1% YTD NOI | – | – |
| SeattleOccupied percentage was 79.5% and leased percentage was 84.9% at September 30, 2026, compared with 78.9% occupied and 82.7% leased at June 30, 2026. | 17.1% YTD NOI | – | – |
| San DiegoOccupied percentage was 83.4% and leased percentage was 86.7% at September 30, 2026, compared with 84.1% occupied and 85.6% leased at June 30, 2026. | 17.4% YTD NOI | – | – |
| AustinOccupied percentage was 84.0% and leased percentage was 90.4% at September 30, 2026, compared with 84.0% occupied and 88.8% leased at June 30, 2026. | 5.1% YTD NOI | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
full year 2026 outlook
- NoteNareit Funds From Operations per common share/unit – diluted: $3.55 to $3.59
- NoteNet income available to common stockholders per share - diluted: $0.23 to $0.27
- NoteWeighted average common shares outstanding - diluted: 117,500
- NoteNet income available to common stockholders: $26,607 to $31,375
- NoteFunds From Operations: $423,160 to $427,928
- NoteAverage full year occupancy: 77.00% to 77.50%
- NoteAverage full year occupancy excluding KOP 2: 80.75% to 81.25%
- NoteSame Property Cash Net Operating Income growth: 0.75% to 1.00%
- NoteNOI from Development Properties: +/- $(21.0) million
- NoteNon-Cash GAAP NOI adjustments: $13.0 to $14.0 million
- NoteGAAP lease termination fee income: $1.1 to $1.5 million
- NoteGeneral and administrative and Leasing costs: $(89.5) to $(90.5) million
- NoteInterest income: +/- $3.0 million
- NoteGross interest expense: $(207.5) to $(208.5) million
- NoteCapitalized interest: $49.0 to $49.5 million
- NoteTotal development spending: +/- $150.0 million
- NoteOperating property dispositions: $347.5 to $500.0 million
Capital returns
- The Board of Directors declared and paid a regular quarterly cash dividend on its common stock of $0.54 per share, equivalent to an annual rate of $2.16 per share.
- The dividend was paid on October 14, 2026 to stockholders of record on September 30, 2026.
- FFO / FAD Payout Ratio was 60.6% / 101.0% for the three months ended September 30, 2026.
What drove it
- The Company signed approximately 815,000 square feet of leases during the quarter, including 345,000 square feet of new leasing on previously vacant space, 127,000 square feet of new leasing on currently occupied space and 343,000 square feet of renewal leasing.
- Second Generation leasing signed during the quarter delivered GAAP rent growth of 30.6% and cash rent growth of 9.7% from prior levels, excluding short-term leasing.
- For leases signed on space vacant less than or equal to 12 months, GAAP and cash rent growth was 37.9% and 13.9%, respectively.
- Leased occupancy rose sequentially in every reported region, with the total Stabilized Portfolio leased percentage increasing to 83.0% from 81.5%.
- Leases signed but not yet commenced totaled 1,402,563 square feet with $100,701 of Annualized Base Rent as of September 30, 2026.
- The Company entered into an agreement to sell the land at Kilroy East Village for $19.5 million in gross sales proceeds, with closing anticipated during the fourth quarter.
Concerns
- Total revenues were $271.6 million compared with $279.7 million for the quarter ended September 30, 2025.
- Same Property Cash Net Operating Income was $170,618 compared with $173,139, with a reported change of (1.5)%.
- Stabilized Portfolio period-end occupancy was 76.9%, compared with 81.0% at September 30, 2025.
- Funds Available for Distribution was $62,806 and the FAD payout ratio was 101.0% for the quarter.
- Net Debt to Company's Share of EBITDAre Ratio was 7.2x, compared with 6.4x at September 30, 2025.
- KOP 2 was 7% occupied and 49% leased as of September 30, 2026.
What to watch
- Conversion of the 1,402,563 square feet of leases signed but not yet commenced into revenue recognition, including 250,650 square feet estimated for commencement in Q4 2026.
- Stabilized Portfolio occupancy, which was 76.9% at September 30, 2026, and average full-year occupancy guidance of 77.00% to 77.50%.
- KOP 2 leasing and occupancy, which was 49% leased and 7% occupied as of September 30, 2026.
- Same Property Cash NOI growth against the updated full-year guidance range of 0.75% to 1.00%.
- The anticipated fourth-quarter closing of the Kilroy East Village land sale for $19.5 million in gross sales proceeds.
- The $146,470 of total debt shown in the first debt-maturity bucket and the $249,125 shown in the second debt-maturity bucket.
Balance sheet and cash flow
- Cash and cash equivalents were $94,301 as of September 30, 2026.
- Restricted cash was $250 as of September 30, 2026.
- Unsecured debt, net was $3,748,263 and secured debt, net was $588,777 as of September 30, 2026.
- Unsecured line of credit was $40,000 as of September 30, 2026.
- Total debt was $4,410,595 and net debt was $4,316,294 as of September 30, 2026.
- In July, the Company repaid the outstanding $200.0 million of 4.350% Private Placement Senior Notes Series B due October 2026, at par.
- Funds Available for Distribution was $62,806 for the three months ended September 30, 2026.
- Recurring capital expenditures were $47,038 for the third quarter of 2026, including $38,587 of tenant improvements and leasing commissions.
Analysis
Third-quarter results showed stronger leasing execution but weaker reported earnings and property operating results than the prior-year quarter. Revenue was $271.6 million versus $279.7 million, while net income available to common stockholders was $15.5 million, or $0.13 per diluted share, versus $156.2 million, or $1.31 per diluted share. FFO was $104.6 million, or $0.88 per diluted share, versus $130.6 million, or $1.08 per diluted share. The prior-year quarter included $110,484 of gains on sales of depreciable operating properties, while no such gains were recorded in the third quarter of 2026.
Portfolio fundamentals improved sequentially on a leasing basis. The Stabilized Portfolio was 83.0% leased at September 30, 2026, up from 81.5% at June 30, 2026, while occupancy was 76.9% compared with 77.0%. Excluding KOP 2, leased occupancy was 84.8%, compared with 83.3% at June 30, 2026. The Company signed approximately 815,000 square feet during the quarter, and 1,402,563 square feet of signed leases had not yet commenced at quarter end. This pipeline included $100,701 of Annualized Base Rent.
Pricing on executed Second Generation leases was a principal positive. GAAP rents increased 30.6% and cash rents increased 9.7% from prior levels on all qualifying Second Generation leases, excluding short-term leasing. The corresponding changes for space vacant less than or equal to 12 months were 37.9% and 13.9%. However, current cash property results remained pressured: Same Property Cash NOI was $170,618 compared with $173,139 in the prior-year quarter, a reported decline of (1.5)%, and NOI margin was 63.8% versus 67.5%.
Capital allocation centered on debt repayment, dividends and planned dispositions. The Company repaid $200.0 million of 4.350% Private Placement Senior Notes Series B due October 2026 at par in July. Total debt was $4,410,595, cash and cash equivalents were $94,301, and the Net Debt to Company's Share of EBITDAre Ratio was 7.2x. The Company paid a $0.54 per-share quarterly dividend, while FAD of $62,806 produced an FAD payout ratio of 101.0%. The Company also expects the Kilroy East Village land sale, with $19.5 million in gross sales proceeds, to close in the fourth quarter.
Management narrowed full-year 2026 Nareit FFO per diluted share guidance to $3.55 to $3.59 from $3.49 to $3.63. The updated assumptions call for average full-year occupancy of 77.00% to 77.50%, Same Property Cash NOI growth of 0.75% to 1.00%, and GAAP lease termination fee income of $1.1 to $1.5 million. The guide also incorporates higher general and administrative and leasing costs of $(89.5) to $(90.5) million and lower lease termination fee income than the July assumptions. The central operating question is whether the lease commencement pipeline and positive leasing spreads can support the updated occupancy and same-property NOI assumptions.
Management, verbatim
Momentum in our West Coast markets continued to accelerate in the third quarter, with over 800,000 square feet of long-term leases signed, representing one of the Company’s highest quarterly leasing volumes since 2019.
Angela Aman, Chief Executive Officer
The breadth of activity was particularly notable, as we recorded sequential leased occupancy gains across all five of our regions and strong re-leasing spreads, driven by activity from a wide variety of users and industries.
Angela Aman, Chief Executive Officer
Looking ahead, our high-quality portfolio, solid balance sheet, and nimble approach position us well to capitalize on the real-time fundamental improvements we are seeing across our regions.
Angela Aman, Chief Executive Officer
Not in the filing
stated, not guessed- Operating cash flow for the third quarter ended September 30, 2026 was not included in the provided filing text.
- Free cash flow was not included in the provided filing text.
- Share repurchases were not reported in the provided filing text.
- Segment revenue by geographic region was not reported in the provided filing text.
- Gross margin was not reported in the provided filing text.
- Actual full-year 2026 results required to assess the updated full-year guidance against reported actual results were not reported.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.