Kilroy Realty Sells $350M in Non-Core Assets, Forms $330M–$350M Office JV in Redwood City

Kilroy Realty Corporation (NYSE: KRC) reported first-quarter 2026 financial results on April 27, 2026, highlighted by approximately $350 million in year-to-date asset sales, a new office joint venture in Redwood City, California, and the company's strongest first-quarter leasing volume since 2017.

Q1 2026 Financial Results

Kilroy Realty Corporation posted revenues of $270.1 million for the quarter ended March 31, 2026, essentially flat compared to $270.8 million in the same period a year earlier. The company recorded a net loss available to common stockholders of $(19.3) million, or $(0.16) per diluted share, compared to net income of $39.0 million, or $0.33 per diluted share, in Q1 2025. Funds from operations (FFO) totaled $108.8 million, or $0.91 per diluted share, down from $122.3 million, or $1.02 per diluted share, in the prior-year quarter.

As of March 31, 2026, Kilroy's stabilized portfolio — totaling approximately 17.1 million square feet of primarily office and life science space — was 77.6% occupied and 82.3% leased, reflecting 470 basis points of leases signed but not yet commenced. Excluding Kilroy Oyster Point Phase 2 (KOP 2), the stabilized portfolio was 81.5% occupied and 84.3% leased.

Leasing Activity Reaches Strongest Q1 Since 2017

Kilroy signed approximately 568,000 square feet of leases during the first quarter, comprising 406,000 square feet of new leasing on previously vacant space, 80,000 square feet of new leasing on currently occupied space, and 82,000 square feet of renewal leasing. Approximately 70,000 square feet of the total represented short-term leasing.

GAAP and cash rents on second-generation leases signed during the quarter — excluding short-term leasing — decreased 10.6% and 16.8%, respectively, from prior levels. However, excluding leases signed on space vacant for more than 12 months, GAAP and cash rents increased 19.2% and 5.2%, respectively.

"I am pleased to report on a remarkably strong quarter of execution across all facets of our business. First-quarter leasing activity, which totaled 568,000 square feet, represented the Company's strongest first-quarter performance since 2017, as we continued to capitalize on accelerating momentum across the West Coast," said Angela Aman, Chief Executive Officer. "In addition, we remained active on the capital allocation front, selling approximately $350 million of non-core and non-strategic properties year-to-date, while prudently allocating capital to debt repayments, opportunistic share repurchases, and a substantially pre-leased development project in one of the Company's best-performing submarkets."

Capital Recycling: ~$350M in Non-Core Asset Dispositions

Kilroy completed several dispositions in the first quarter as part of its capital recycling strategy. In January, the company sold Kilroy Sabre Springs, an approximately 428,000-square-foot, three-building office campus located in the I-15 Corridor submarket of San Diego, for gross sales proceeds of $124.5 million. In March, Kilroy sold Del Mar Tech Center, an approximately 39,000-square-foot office property in the Del Mar submarket of San Diego, for gross sales proceeds of $21.0 million.

Additionally, during the first quarter, Kilroy entered into an agreement to sell two residential towers in the Hollywood submarket of Los Angeles — the 200-unit Columbia Square Living tower and the 193-unit Jardine tower — and classified both properties as held for sale. The combined sale closed in April for gross sales proceeds of $202.0 million.

Kilroy's full-year 2026 operating property disposition guidance was updated to a range of $347.5 million to $500.0 million.

Office JV Formation: 1900 Broadway in Redwood City

In February, Kilroy acquired an interest in 1900 Broadway, a fully entitled land site in Downtown Redwood City, California, capable of supporting a 251,000-square-foot office building. The development is structured as a joint venture, with Kilroy's ownership interest expected to reach 97% at the time of delivery.

Concurrent with closing, Kilroy signed a 20-year office lease with Cooley LLP, a global law firm, for approximately 145,000 square feet, bringing the project to 58% pre-leased. Total project costs are expected to range from $330.0 million to $350.0 million. Construction is anticipated to commence in 2027, with delivery scheduled for 2030.

The Cooley LLP lease is included within the approximately 406,000 square feet of new leasing on previously vacant space reported for the first quarter.

Additional Capital Actions

During the first quarter, Kilroy repurchased approximately 2.4 million shares of common stock at a weighted average price of $30.80 per share, for an aggregate purchase price of $72.7 million. In April, the company repaid the outstanding $50.0 million of 4.300% Private Placement Senior Notes Series A due July 2026, at par.

The company's board declared and paid a regular quarterly cash dividend of $0.54 per common share, equivalent to an annualized rate of $2.16 per share, paid on April 8, 2026 to stockholders of record as of March 31, 2026.

Updated Full-Year 2026 Guidance

Kilroy updated its full-year 2026 Nareit-defined FFO per share guidance to a range of $3.49 to $3.63 per diluted share, up from the prior range of $3.25 to $3.45. Key updated assumptions include average full-year occupancy of 76.5% to 78.0% (80.5% to 81.5% excluding KOP 2), same-property cash NOI growth of 0.25% to 1.25% (improved from the prior range of negative 1.50% to flat), and gross interest expense of $208.0 million to $209.5 million. Capitalized interest guidance was revised upward to $48.5 million to $49.5 million, reflecting the continued capitalization of the company's Flower Mart project through December 2026, previously assumed to end in June 2026.

Kilroy's management is scheduled to discuss first-quarter results during an earnings conference call on April 28, 2026, beginning at 10:00 a.m. Pacific Time.

Kilroy Realty Corporation is a publicly traded real estate investment trust (REIT) and member of the S&P MidCap 400 Index, with operations in the San Francisco Bay Area, Los Angeles, Seattle, San Diego, and Austin. As of March 31, 2026, the company also held 608 residential units in San Diego, with a quarterly average occupancy of 95.0%.