Kilroy Realty Q4 2025 Kilroy Realty Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Kilroy Realty Corp Earnings Call
Speaker #1: Hello everyone, and welcome to the KRC Q4 2025 earnings conference call. My name is Emily and I'll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number 1 on your telephone keypad.
Operator: Hello, everyone, and welcome to the KRC Q4 2025 Earnings Conference Call. My name is Emily, and I'll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now hand over to Doug Bettesworth, Vice President of Corporate Finance, to begin. Please go ahead, Doug.
Operator: Hello, everyone, and welcome to the KRC Q4 2025 Earnings Conference Call. My name is Emily, and I'll be coordinating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad. I will now hand over to Doug Bettesworth, Vice President of Corporate Finance, to begin. Please go ahead, Doug.
Speaker #1: I will now hand over to Doug Bettisworth, Vice President of Corporate Finance, to begin. Please go ahead, Doug.
Speaker #2: Good morning, everyone. Thank you for joining us on the call. With me today are Angela Aman, CEO; Jeffrey Kuehling, EVP, CFO, and Treasurer; and Elliot Trencher, EVP, CIO.
Doug Bettisworth: Good morning, everyone. Thank you for joining us. On the call with me today are Angela Aman, CEO; Jeffrey Kuehling, EVP, CFO, and Treasurer; and Eliott Trencher, EVP, CIO. In addition, Justin Smart, President, and Rob Paratte, EVP, Chief Leasing Officer, will be available for Q&A. Please note that some of the information we will be discussing during this call is forward-looking in nature. Please refer to our supplemental package for a statement regarding the forward-looking information on this call and in the supplemental. This call is being webcast live on our website and will be available for replay for the next eight days. Our earnings release and supplemental package have been filed on a Form 8-K with the SEC, and both are also available on our website. Angela will start the call with a strategic overview and quarterly highlights.
Doug Bettisworth: Good morning, everyone. Thank you for joining us. On the call with me today are Angela Aman, CEO; Jeffrey Kuehling, EVP, CFO, and Treasurer; and Eliott Trencher, EVP, CIO. In addition, Justin Smart, President, and Rob Paratte, EVP, Chief Leasing Officer, will be available for Q&A. Please note that some of the information we will be discussing during this call is forward-looking in nature. Please refer to our supplemental package for a statement regarding the forward-looking information on this call and in the supplemental. This call is being webcast live on our website and will be available for replay for the next eight days. Our earnings release and supplemental package have been filed on a Form 8-K with the SEC, and both are also available on our website. Angela will start the call with a strategic overview and quarterly highlights.
Speaker #2: In addition, Justin Smart, President, and Rob Perot, EVP, Chief Leasing Officer, will be available for Q&A. Please note that some of the information we will be discussing during this call is forward-looking in nature.
Speaker #2: Please refer to our supplemental package for a statement regarding the forward-looking information on this call and in the supplemental. This call is being webcast live on our website and will be available for replay for the next eight days.
Speaker #2: Our earnings release and supplemental package have been filed on a Form 8K with the SEC and both are also available on our website. Angela will start the call with a strategic overview and quarterly highlights.
Speaker #2: Elliot will provide an update on a recent transaction activity and Jeffrey will discuss our financial results and provide you with our 2026 guidance. Then we'll be happy to take your questions.
Doug Bettisworth: Eliott will provide an update on our recent transaction activity, and Jeffrey will discuss our financial results and provide you with our 2026 guidance. Then we'll be happy to take your questions. Angela?
Doug Bettisworth: Eliott will provide an update on our recent transaction activity, and Jeffrey will discuss our financial results and provide you with our 2026 guidance. Then we'll be happy to take your questions. Angela?
Speaker #2: Angela.
Speaker #3: Thanks, Doug. And thank you all for joining today's call. 2025 was a year of meaningful progress and momentum for Kilroy, highlighted by disciplined execution across our entire platform.
Angela Aman: Thanks, Doug, and thank you all for joining today's call. 2025 was a year of meaningful progress and momentum for Kilroy, highlighted by disciplined execution across our entire platform. We remained focused on driving leasing across both our operating and development portfolios, harvesting value through non-core asset sales, monetizing or advancing strategic plans for parcels within our future development pipeline, and thoughtfully redeploying proceeds into select opportunities that have enhanced the long-term growth and durability of our cash flow stream. I'm grateful for the way this team has demonstrated its creativity and discipline while navigating a rapidly improving operational and transactional environment. Q4 leasing totaled approximately 827,000 sq ft, marking our strongest Q4 performance in six years and resulting in total full-year leasing of approximately 2.1 million sq ft, a significant increase on a year-over-year basis.
Angela Aman: Thanks, Doug, and thank you all for joining today's call. 2025 was a year of meaningful progress and momentum for Kilroy, highlighted by disciplined execution across our entire platform. We remained focused on driving leasing across both our operating and development portfolios, harvesting value through non-core asset sales, monetizing or advancing strategic plans for parcels within our future development pipeline, and thoughtfully redeploying proceeds into select opportunities that have enhanced the long-term growth and durability of our cash flow stream. I'm grateful for the way this team has demonstrated its creativity and discipline while navigating a rapidly improving operational and transactional environment. Q4 leasing totaled approximately 827,000 sq ft, marking our strongest Q4 performance in six years and resulting in total full-year leasing of approximately 2.1 million sq ft, a significant increase on a year-over-year basis.
Speaker #3: We remained focused on driving leasing across both our operating and development portfolios, harvesting value through non-core asset sales, monetizing or advancing strategic plans for parcels within our future development pipeline, and thoughtfully redeploying proceeds into select opportunities that have enhanced the long-term growth and durability of our cash flow stream.
Speaker #3: I'm grateful for the way this team has demonstrated its creativity and discipline while navigating a rapidly improving operational and transactional environment. Fourth quarter leasing totaled approximately 827,000 square feet, marking our strongest fourth quarter performance in six years, and resulting in total full-year leasing of approximately 2.1 million square feet, a significant increase on a year-over-year basis.
Speaker #3: Across our markets, we are experiencing the healthiest level of office demand since 2019, with a forward leasing pipeline that has grown by more than 65% over the last year.
Angela Aman: Across our markets, we are experiencing the healthiest level of office demand since 2019, with a forward leasing pipeline that has grown by more than 65% over the last year. New business formation in our innovation-driven West Coast markets has dramatically improved the dynamics for multi-tenant buildings and spec suites, while larger tenants are increasingly reclaiming sublease space for their own operations or reengaging on expansion plans that have been previously deferred. Key leasing highlights in our portfolio during the quarter included: In Hollywood, a 93,000 sq ft new lease with the Fitler Club at Columbia Square to backfill the space recently vacated by NeueHouse following their bankruptcy filing, minimizing downtime and avoiding outsized capital investment on a highly specialized space.
Angela Aman: Across our markets, we are experiencing the healthiest level of office demand since 2019, with a forward leasing pipeline that has grown by more than 65% over the last year. New business formation in our innovation-driven West Coast markets has dramatically improved the dynamics for multi-tenant buildings and spec suites, while larger tenants are increasingly reclaiming sublease space for their own operations or reengaging on expansion plans that have been previously deferred. Key leasing highlights in our portfolio during the quarter included: In Hollywood, a 93,000 sq ft new lease with the Fitler Club at Columbia Square to backfill the space recently vacated by NeueHouse following their bankruptcy filing, minimizing downtime and avoiding outsized capital investment on a highly specialized space.
Speaker #3: New business formation and our innovation-driven West Coast markets have dramatically improved, the dynamics for multi-tenant buildings and spec suites, while larger tenants are increasingly reclaiming sublease space for their own operations, or re-engaging on expansion plans that have been previously deferred.
Speaker #3: Key leasing highlights in our portfolio during the quarter included in with the Fitler Club, at Columbia Hollywood, a $93,000 square foot new lease Square, to backfill the space recently vacated by Neuhaus following their bankruptcy filing.
Speaker #3: Minimizing downtime and avoiding outsized capital investment on a highly specialized space. In West LA, a 79,000-square-foot renewal with Riot Games for the arena building provides several years of ongoing cash flow as we evaluate the highest and best use of the site. Going forward, eight new and renewal lease executions at Maple Plaza, our recent acquisitions, improved the lease rate by 230 basis points during the quarter and further validated our conviction in the growth potential of this asset and the Beverly Hills submarket.
Angela Aman: In West LA, a 79,000sq ft renewal with Riot Games for the Arena building, providing several years of ongoing cash flow as we evaluate the highest and best use of the site going forward. In Beverly Hills, a total of eight new and renewal lease executions at Maple Plaza, our recent acquisition, improving the lease rate by 230 basis points during the quarter and further validating our conviction in the growth potential of this asset and the Beverly Hills submarket. In Seattle, 74,000sq ft of new long-term lease executions at West Eighth, our recently renovated and repositioned project in the Denny Regrade submarket. In San Francisco, additional AI leasing during the quarter and a growing pipeline of AI and other tenants for spec suite space that we currently have under construction in the SoMa submarket.
Angela Aman: In West LA, a 79,000sq ft renewal with Riot Games for the Arena building, providing several years of ongoing cash flow as we evaluate the highest and best use of the site going forward. In Beverly Hills, a total of eight new and renewal lease executions at Maple Plaza, our recent acquisition, improving the lease rate by 230 basis points during the quarter and further validating our conviction in the growth potential of this asset and the Beverly Hills submarket. In Seattle, 74,000sq ft of new long-term lease executions at West Eighth, our recently renovated and repositioned project in the Denny Regrade submarket. In San Francisco, additional AI leasing during the quarter and a growing pipeline of AI and other tenants for spec suite space that we currently have under construction in the SoMa submarket.
Speaker #3: In Seattle, 74,000 square feet of new long-term lease executions at Westgate, our recently renovated and repositioned project in the Denny Regrade submarket. In San Francisco, additional AI leasing during the quarter and a growing pipeline of AI and other tenants for spec suite space that we currently have under construction in the SoMa submarket.
Speaker #3: And importantly, in South San Francisco, 316,000 square feet of lease executions at Kilroy Oyster Point Phase 2, our recently completed premier life science development project, including a 280,000-square-foot full building lease with UCSF, bringing the lease rate at KOP2 to 44%.
Angela Aman: Importantly, in South San Francisco, 316,000sq ft of lease executions at Kilroy Oyster Point Phase Two, our recently completed premier life science development project, including a 280,000sq ft full building lease with UCSF, bringing the lease rate at KOP 2 to 44%. We are thrilled by the momentum we've captured at KOP 2 over the last 2 quarters, demonstrating a meaningful resurgence in life science demand and providing confidence in our pipeline as we move into 2026. Biotech equities have significantly outperformed over the last 6 months, which has led to a reopening of the IPO and follow-on markets. Last week alone, 4 biotech companies completed IPO transactions, collectively raising nearly $1 billion. In addition, M&A activity picked up considerably during 2025, including in the Q4, and expectations for 2026 volume are robust....
Angela Aman: Importantly, in South San Francisco, 316,000sq ft of lease executions at Kilroy Oyster Point Phase Two, our recently completed premier life science development project, including a 280,000sq ft full building lease with UCSF, bringing the lease rate at KOP 2 to 44%. We are thrilled by the momentum we've captured at KOP 2 over the last 2 quarters, demonstrating a meaningful resurgence in life science demand and providing confidence in our pipeline as we move into 2026. Biotech equities have significantly outperformed over the last 6 months, which has led to a reopening of the IPO and follow-on markets. Last week alone, 4 biotech companies completed IPO transactions, collectively raising nearly $1 billion. In addition, M&A activity picked up considerably during 2025, including in the Q4, and expectations for 2026 volume are robust....
Speaker #3: We are thrilled by the momentum we've captured at KOP2 over the last two quarters, demonstrating a meaningful resurgence in life science demand and providing confidence in our pipeline as we move into 2026.
Speaker #3: Biotech equities have significantly outperformed over the last six months, which has led to a reopening of the IPO and follow-on markets. Last week alone, four biotech companies completed IPO transactions collectively raising nearly $1 billion.
Speaker #3: In addition, M&A activity picked up considerably during 2025, including in the fourth quarter, and expectations for 2026 volume are robust. At the same time, the innovation pipeline remains exceptionally active, with more than 50 novel drug therapies anticipated to receive FDA approval in 2026, reflecting continued scientific advancement and investment.
Angela Aman: At the same time, the innovation pipeline remains exceptionally active, with more than 50 novel drug therapies anticipated to receive FDA approval in 2026, reflecting continued scientific advancement and investment. Against this encouraging backdrop, as we have executed on our holistic long-term plan for KOP 2, we've been mindful to create an innovation ecosystem at the project that will support future growth, while also maximizing risk-adjusted returns. We have captured exposure to fast-growing, early-stage biotech companies through our strategic lease execution with MBC Biolabs, a well-established life science incubator in the San Francisco Bay Area, that has the financial wherewithal and scientific expertise to capably vet and support early-stage companies. In addition, we've gained exposure to mid-stage and late-stage life science companies in our spec suites, where our capital investment is specifically designed to be highly reusable by future tenants in the same space.
Angela Aman: At the same time, the innovation pipeline remains exceptionally active, with more than 50 novel drug therapies anticipated to receive FDA approval in 2026, reflecting continued scientific advancement and investment. Against this encouraging backdrop, as we have executed on our holistic long-term plan for KOP 2, we've been mindful to create an innovation ecosystem at the project that will support future growth, while also maximizing risk-adjusted returns. We have captured exposure to fast-growing, early-stage biotech companies through our strategic lease execution with MBC Biolabs, a well-established life science incubator in the San Francisco Bay Area, that has the financial wherewithal and scientific expertise to capably vet and support early-stage companies. In addition, we've gained exposure to mid-stage and late-stage life science companies in our spec suites, where our capital investment is specifically designed to be highly reusable by future tenants in the same space.
Speaker #3: Against this encouraging backdrop, as we have executed on our holistic, long-term plan for KOP2, we've been mindful to create an innovation ecosystem at the project that will support future growth, while also maximizing risk-adjusted returns.
Speaker #3: We have captured exposure to fast-growing, early-stage biotech companies through our strategic lease execution with MBC Biolabs, a well-established life science incubator in the San Francisco Bay Area that has the financial wherewithal and scientific expertise to capably vet and support early-stage companies.
Speaker #3: In addition, we've gained exposure to mid-stage and late-stage life science companies in our spec suites, where our capital investment is specifically designed to be highly reusable by future tenants in the same space.
Speaker #3: And now, with the execution of the full building UCSF lease, we have established a high-quality anchor for the project that has continued to elevate KOP's profile in the market.
Angela Aman: And now, with the execution of the full building UCSF lease, we have established a high-quality anchor for the project that has continued to elevate KOP's profile in the market, while providing long-term cash flow stability through a 16.5-year lease to an institutional tenant with exceptional credit quality. Taken together, these tenants build a promising foundation of long-term leasing prospects for future phases of the project, while also ensuring that tenant credit risk is appropriately managed within phase 2. Across the KOP 2 leasing transactions completed to date, we expect varying occupancy commencement timelines based on the scale and complexity of each tenant's build-out. However, occupancy has already commenced in one of the spec suites, beginning the activation of the campus.
Angela Aman: And now, with the execution of the full building UCSF lease, we have established a high-quality anchor for the project that has continued to elevate KOP's profile in the market, while providing long-term cash flow stability through a 16.5-year lease to an institutional tenant with exceptional credit quality. Taken together, these tenants build a promising foundation of long-term leasing prospects for future phases of the project, while also ensuring that tenant credit risk is appropriately managed within phase 2. Across the KOP 2 leasing transactions completed to date, we expect varying occupancy commencement timelines based on the scale and complexity of each tenant's build-out. However, occupancy has already commenced in one of the spec suites, beginning the activation of the campus.
Speaker #3: While providing long-term cash flow stability through a $16.5-year lease to an institutional tenant with exceptional credit quality. Taken together, these tenants build a promising foundation of long-term leasing prospects for future phases of the project, while also ensuring that tenant credit risk is appropriately managed within Phase 2.
Speaker #3: Across the KOP2 leasing transactions completed to date, we expect varying occupancy commencement timelines based on the scale and complexity of each tenant's build-out. However, occupancy has already commenced in one of the spec suites, beginning the activation of the campus.
Speaker #3: As we move forward, our entire team is focused on accelerating tenant build-out timelines, and we will continue to update you as additional progress is made.
Angela Aman: As we move forward, our entire team is focused on accelerating tenant build-out timelines, and we will continue to update you as additional progress is made. Given our leasing success to date, we have now refined our expectations for total project costs at KOP 2, as reported in our supplemental financial package. With these refinements incorporated, our anticipated yield at KOP 2 is now in the mid-5% range, approximately 100 basis points below our original underwriting. While this is not reflective of where we would begin a new project today, we continue to believe in the exceptional long-term growth and value creation potential of Kilroy Oyster Point. Turning to our broader capital allocation strategy, we successfully paired fourth quarter leasing and operational wins with strategic portfolio repositioning initiatives.
Angela Aman: As we move forward, our entire team is focused on accelerating tenant build-out timelines, and we will continue to update you as additional progress is made. Given our leasing success to date, we have now refined our expectations for total project costs at KOP 2, as reported in our supplemental financial package. With these refinements incorporated, our anticipated yield at KOP 2 is now in the mid-5% range, approximately 100 basis points below our original underwriting. While this is not reflective of where we would begin a new project today, we continue to believe in the exceptional long-term growth and value creation potential of Kilroy Oyster Point. Turning to our broader capital allocation strategy, we successfully paired fourth quarter leasing and operational wins with strategic portfolio repositioning initiatives.
Speaker #3: Given our leasing success to date, we have now refined our expectations for total project costs at KOP2, as reported in our supplemental financial package.
Speaker #3: With these refinements incorporated, our anticipated yield at KOP2 is now in the mid-5% range, approximately 100 basis points below our original underwriting. While this is not reflective of where we would begin a new project today, we continue to believe in the exceptional, long-term growth and value creation potential of Kilroy Oyster Point.
Speaker #3: Turning to our broader capital allocation strategy, we successfully paired fourth-quarter leasing and operational wins with strategic portfolio repositioning initiatives. In December, we completed the sale of Sunset Media Center in Hollywood for $61 million.
Angela Aman: In December, we completed the sale of Sunset Media Center in Hollywood for $61 million, monetizing a mature, capital-intensive asset that no longer met our stringent criteria for incremental investment. In January, we closed on the sale of Kilroy Sabre Springs, or KSS, in the I-15 corridor submarket of San Diego for $125 million. Over the last 10 years, fundamentals in the I-15 corridor have not kept pace with the sustained strength we have observed in clusters such as Del Mar and Torrey Pines. Over time, KSS has experienced significant tenant churn, resulting in higher average vacancy rates and requiring consistently elevated capital investment, impacting both historical and anticipated future returns. In late 2025, we successfully identified a user interested in purchasing the totality of the campus, resulting in a highly efficient execution for both parties.
Angela Aman: In December, we completed the sale of Sunset Media Center in Hollywood for $61 million, monetizing a mature, capital-intensive asset that no longer met our stringent criteria for incremental investment. In January, we closed on the sale of Kilroy Sabre Springs, or KSS, in the I-15 corridor submarket of San Diego for $125 million. Over the last 10 years, fundamentals in the I-15 corridor have not kept pace with the sustained strength we have observed in clusters such as Del Mar and Torrey Pines. Over time, KSS has experienced significant tenant churn, resulting in higher average vacancy rates and requiring consistently elevated capital investment, impacting both historical and anticipated future returns. In late 2025, we successfully identified a user interested in purchasing the totality of the campus, resulting in a highly efficient execution for both parties.
Speaker #3: Monetizing a mature, capital-intensive asset that no longer met our stringent criteria for incremental investment. In January, we closed on the sale of Kilroy Sabre Springs, or KSS, in the I-15 corridor submarket of San Diego for $125 million.
Speaker #3: Over the last 10 years, fundamentals in the I-15 corridor have not kept pace with the sustained strength we have observed in clusters such as Del Mar and Torrey Pines.
Speaker #3: Over time, KSS has experienced significant tenant churn, resulting in higher average vacancy rates and requiring consistently elevated capital investment, impacting both historical and anticipated future returns.
Speaker #3: In late 2025, we successfully identified a user interested in purchasing the totality of the campus, resulting in a highly efficient execution for both parties.
Speaker #3: In addition to these operating portfolio sales, we also entered into an agreement to sell the remaining portion of the Santa Fe Summit land parcel held in our future development pipeline for $86 million in gross sales proceeds.
Angela Aman: In addition to these operating portfolio sales, we also entered into an agreement to sell the remaining portion of the Santa Fe Summit land parcel, held in our future development pipeline for $86 million in gross sales proceeds. With this agreement, commitments for land parcel dispositions under contract represent $165 million in gross proceeds, exceeding our previously communicated goal of $150 million. With respect to capital deployment, during Q4, as momentum continued to build across the life science sector, we further strengthened our platform with the acquisition of Nautilus, a multi-tenant life science campus in Torrey Pines, for $192 million.
Angela Aman: In addition to these operating portfolio sales, we also entered into an agreement to sell the remaining portion of the Santa Fe Summit land parcel, held in our future development pipeline for $86 million in gross sales proceeds. With this agreement, commitments for land parcel dispositions under contract represent $165 million in gross proceeds, exceeding our previously communicated goal of $150 million. With respect to capital deployment, during Q4, as momentum continued to build across the life science sector, we further strengthened our platform with the acquisition of Nautilus, a multi-tenant life science campus in Torrey Pines, for $192 million.
Speaker #3: With this agreement, commitments for land parcel dispositions under contract represent $165 million in gross proceeds, exceeding our previously communicated goal of $150 million. With respect to capital deployment, during the fourth quarter, as momentum continued to build across the life science sector, we further strengthened our platform with the acquisition of Nautilus.
Speaker #3: A multi-tenant life science campus in Torrey Pines for $192 million. This was truly a generational opportunity to enter one of the most supply-constrained and tightly held life science clusters in the country, supported by proximity to a leading talent pool and a world-class innovation ecosystem.
Angela Aman: This was truly a generational opportunity to enter one of the most supply-constrained and tightly held life science clusters in the country, supported by proximity to leading research institutions, a deep talent pool, and a world-class innovation ecosystem. Nautilus provides meaningful scale and is one of the well-amenitized Class A campuses consistently considered for a wide range of active tenant requirements in the market. This acquisition not only strengthens our San Diego presence, but also enhances our platform scale and relevance in the life science sector, positioning Kilroy to capture cutting-edge lab and associated office demand across all of our West Coast markets. I couldn't be any more pleased with the quality and long-term value creation potential of the investments we've sourced over the last six months. Our value-add acquisitions in Beverly Hills and Torrey Pines represent historic opportunities to reshape the portfolio in response to a rapidly evolving environment.
Angela Aman: This was truly a generational opportunity to enter one of the most supply-constrained and tightly held life science clusters in the country, supported by proximity to leading research institutions, a deep talent pool, and a world-class innovation ecosystem. Nautilus provides meaningful scale and is one of the well-amenitized Class A campuses consistently considered for a wide range of active tenant requirements in the market. This acquisition not only strengthens our San Diego presence, but also enhances our platform scale and relevance in the life science sector, positioning Kilroy to capture cutting-edge lab and associated office demand across all of our West Coast markets. I couldn't be any more pleased with the quality and long-term value creation potential of the investments we've sourced over the last six months. Our value-add acquisitions in Beverly Hills and Torrey Pines represent historic opportunities to reshape the portfolio in response to a rapidly evolving environment.
Speaker #3: Nautilus provides meaningful scale and is one of the well-amortized class A campuses, consistently considered for a wide range of active tenant requirements in the market.
Speaker #3: This acquisition not only strengthens our San Diego presence, but also enhances our platform scale and relevance in the life science sector, positioning Kilroy to capture cutting-edge lab and associated office demand across all of our West Coast markets.
Speaker #3: I couldn't be any more pleased with the quality and long-term value creation potential of the investments we've sourced over the last six months. Our value-add acquisitions in Beverly Hills and Torrey Pines represent historic opportunities to reshape the portfolio in response to our rapidly evolving environment.
Speaker #3: As we look forward, it will be imperative that we continue to proactively rationalize our portfolio and concentrate our investments in high-conviction assets that will enhance the durability and growth of our cash flow over time.
Angela Aman: As we look forward, it will be imperative that we continue to proactively rationalize our portfolio and concentrate our investments in high conviction assets that will enhance the durability and growth of our cash flow over time. Accordingly, we will continue to pursue dispositions of non-core assets whose forward returns fall below our cost of capital. And as we evaluate redeployment alternatives, we will be mindful of the signals we are receiving from both the public and private markets, our long-term portfolio construction goals, and balance sheet strength and flexibility. In conclusion, I want to thank the entire Kilroy team for an extraordinary effort during 2025 that drove exceptional results. I'm incredibly grateful to be part of this team, and I'm looking forward with enthusiasm to what we can deliver together in 2026. Eliott?
Angela Aman: As we look forward, it will be imperative that we continue to proactively rationalize our portfolio and concentrate our investments in high conviction assets that will enhance the durability and growth of our cash flow over time. Accordingly, we will continue to pursue dispositions of non-core assets whose forward returns fall below our cost of capital. And as we evaluate redeployment alternatives, we will be mindful of the signals we are receiving from both the public and private markets, our long-term portfolio construction goals, and balance sheet strength and flexibility. In conclusion, I want to thank the entire Kilroy team for an extraordinary effort during 2025 that drove exceptional results. I'm incredibly grateful to be part of this team, and I'm looking forward with enthusiasm to what we can deliver together in 2026. Eliott?
Speaker #3: Accordingly, we will continue to pursue dispositions of non-core assets whose forward returns fall below our cost of capital. And as we evaluate redeployment alternatives, we will be mindful of the signals we are receiving from both the public and private markets, our long-term portfolio construction goals, and balance sheet strength and flexibility.
Speaker #3: In conclusion, I want to thank the entire Kilroy team for an extraordinary effort during 2025 that drove exceptional results. I'm incredibly grateful to be part of this team, and I'm looking forward with enthusiasm to what we can deliver together in 2026.
Speaker #1: Thanks, Angela. 2025 was a very active year for Kilroy on the capital allocation front. Starting with dispositions, we closed or entered into contracts on roughly $755 million of sales, broken down as follows.
Eliott Trencher: Thanks, Angela. 2025 was a very active year for Kilroy on the capital allocation front. Starting with dispositions, we closed or entered into contracts on roughly $755 million of sales, broken down as follows: approximately $465 million of operating property sales across three transactions, a $125 million operating property sale that closed in January, and $165 million of land sales under contract across three transactions. To give a little more color on the four operating properties sold in 2025 and January 2026, occupancy was 79%, rents were approximately 15% above market, weighted average remaining lease term was 2.5 years, and the CapEx to NOI ratio was over 30%.
Eliott Trencher: Thanks, Angela. 2025 was a very active year for Kilroy on the capital allocation front. Starting with dispositions, we closed or entered into contracts on roughly $755 million of sales, broken down as follows: approximately $465 million of operating property sales across three transactions, a $125 million operating property sale that closed in January, and $165 million of land sales under contract across three transactions. To give a little more color on the four operating properties sold in 2025 and January 2026, occupancy was 79%, rents were approximately 15% above market, weighted average remaining lease term was 2.5 years, and the CapEx to NOI ratio was over 30%.
Speaker #1: Approximately $465 million of operating property sales across three transactions, a $125 million operating property sale that closed in January, and $165 million of land sales under contract across three transactions.
Speaker #1: To give a little more color on the four operating properties sold in 2025—in January 2026, occupancy was 79%, rents were approximately 15% above market, the weighted average remaining lease term was 2.5 years, and the CAPEX-to-NOI ratio was over 30%.
Speaker #1: All of this translated into some of the lowest forward-looking returns in the portfolio and highlights the strategic rationale behind our decision to sell. Turning to land sales, as Angela mentioned, we put the remaining 17 acres of Santa Fe Summit under contract with a residential developer for $86 million, and the transaction is expected to close upon approvals for development.
Eliott Trencher: All of this translated into some of the lowest forward-looking returns in the portfolio and highlights the strategic rationale behind our decision to sell. Turning to land sales, as Angela mentioned, we put the remaining 17 acres of Santa Fe Summit under contract with a residential developer for $86 million, and the transaction is expected to close upon approvals for development. Unlike the 5-acre portion we put under contract earlier in 2025, the 17 acres require a change in zoning to accommodate residential, which we currently estimate to be complete in 2028. As a reminder, we continue to anticipate the 5-acre portion will close in 2026 to $38 million in gross proceeds.
Eliott Trencher: All of this translated into some of the lowest forward-looking returns in the portfolio and highlights the strategic rationale behind our decision to sell. Turning to land sales, as Angela mentioned, we put the remaining 17 acres of Santa Fe Summit under contract with a residential developer for $86 million, and the transaction is expected to close upon approvals for development. Unlike the 5-acre portion we put under contract earlier in 2025, the 17 acres require a change in zoning to accommodate residential, which we currently estimate to be complete in 2028. As a reminder, we continue to anticipate the 5-acre portion will close in 2026 to $38 million in gross proceeds.
Speaker #1: Unlike the five-acre portion we put under contract earlier in 2025, the 17 acres require a change in zoning to accommodate residential, which we currently estimate will be complete in 2028.
Speaker #1: As a reminder, we continue to anticipate the five-acre portion will close in 2026 with $38 million in gross proceeds. Now that we have three land sites under contract, we will look for additional opportunities to repurpose land and/or non-core properties to a higher and better use in order to position them for sale.
Eliott Trencher: Now that we have 3 land sites under contract, we will look for additional opportunities to repurpose land and or noncore properties to a higher and better use in order to position them for sale. Shifting to acquisitions, over the last 12 months, we closed on 2 significant investments, Nautilus, which Angela discussed, and Maple Plaza in Beverly Hills, which we talked about last quarter. These projects represent compelling opportunities to scale in high barrier, high growth submarkets, which are leading the fundamental recovery in their respective regions. We have been underwriting deals in these submarkets for many years, patiently waiting for the right time to establish a presence. A host of factors came together over the last several months, and our patience paid off as we were fortunate to acquire these trophy projects at compelling risk-adjusted terms.
Eliott Trencher: Now that we have 3 land sites under contract, we will look for additional opportunities to repurpose land and or noncore properties to a higher and better use in order to position them for sale. Shifting to acquisitions, over the last 12 months, we closed on 2 significant investments, Nautilus, which Angela discussed, and Maple Plaza in Beverly Hills, which we talked about last quarter. These projects represent compelling opportunities to scale in high barrier, high growth submarkets, which are leading the fundamental recovery in their respective regions. We have been underwriting deals in these submarkets for many years, patiently waiting for the right time to establish a presence. A host of factors came together over the last several months, and our patience paid off as we were fortunate to acquire these trophy projects at compelling risk-adjusted terms.
Speaker #1: Shifting to acquisitions, over the last 12 months, we closed on two significant investments: Nautilus, which Angela discussed, and Maple Plaza in Beverly Hills, which we talked about last quarter.
Speaker #1: These projects represent compelling opportunities to scale and high-barrier, high-growth submarkets, which are leading the fundamental recovery in their respective regions. We have been underwriting deals in these submarkets for many years, patiently waiting for the right time to establish a presence.
Speaker #1: A host of factors came together over the last several months, and our patience paid off as we were fortunate to acquire these trophy projects at compelling, risk-adjusted terms.
Speaker #1: Turning to Nautilus, San Diego is one of the primary life science hubs in the country, and Torrey Pines is the heart of the region.
Eliott Trencher: Turning to Nautilus, San Diego is one of the primary life science hubs in the country, and Torrey Pines is the heart of the region. Torrey has the highest rents and lowest vacancy rates among all the submarkets in San Diego. Unlike several other life science clusters across the country, there is no new supply under construction, and over the last several years, the only new deliveries have come from demolishing and reconstructing existing buildings. Torrey Pines has both height and density restrictions that make it incredibly difficult to add net square footage, so inventory has essentially stayed the same over the last 20 years. The four-building Nautilus campus has been well-maintained and invested in, with on-site food, fitness, and outdoor amenities, making it appealing to a wide variety of innovative life science companies. The campus has historically performed very well, averaging 94% occupancy over the last 10 years.
Eliott Trencher: Turning to Nautilus, San Diego is one of the primary life science hubs in the country, and Torrey Pines is the heart of the region. Torrey has the highest rents and lowest vacancy rates among all the submarkets in San Diego. Unlike several other life science clusters across the country, there is no new supply under construction, and over the last several years, the only new deliveries have come from demolishing and reconstructing existing buildings. Torrey Pines has both height and density restrictions that make it incredibly difficult to add net square footage, so inventory has essentially stayed the same over the last 20 years. The four-building Nautilus campus has been well-maintained and invested in, with on-site food, fitness, and outdoor amenities, making it appealing to a wide variety of innovative life science companies. The campus has historically performed very well, averaging 94% occupancy over the last 10 years.
Speaker #1: Torrey has the highest rents and lowest vacancy rates among all of the submarkets in San Diego. Unlike several other life science clusters across the country, there is no new supply under construction, and over the last several years, the only new deliveries have come from demolishing and reconstructing existing buildings.
Speaker #1: Torrey Pines has both height and density restrictions, which make it incredibly difficult to add net square footage. So, inventory has essentially stayed the same over the last 20 years.
Speaker #1: The four-building Nautilus campus has been well-maintained and invested in, with on-site food, fitness, and outdoor amenities, making it appealing to a wide variety of innovative life science companies.
Speaker #1: The campus has historically performed very well, averaging 94% occupancy over the last 10 years. However, a late 2025 move-out brought occupancy to 75% when we closed the acquisition.
Eliott Trencher: However, a late 2025 move-out brought occupancy to 75% when we closed the acquisition. The purchase price of $192 million, or approximately $825 per square foot, compares very favorably with other comparable trades in the submarket and is well below estimated replacement costs of $1,400 to $1,500 per square foot. Our business plan is to add additional spec suites to accelerate the lease up of the remaining vacancy and continue to drive rent growth via the amenity offering at the campus and the overall appeal of the neighborhood. We expect stabilized yields in the upper single digits and unlevered IRRs in the low double digits. In summary, in 2025, we demonstrated the ability to raise capital via strategic dispositions and redeploy it into compelling opportunities.
Eliott Trencher: However, a late 2025 move-out brought occupancy to 75% when we closed the acquisition. The purchase price of $192 million, or approximately $825 per square foot, compares very favorably with other comparable trades in the submarket and is well below estimated replacement costs of $1,400 to $1,500 per square foot. Our business plan is to add additional spec suites to accelerate the lease up of the remaining vacancy and continue to drive rent growth via the amenity offering at the campus and the overall appeal of the neighborhood. We expect stabilized yields in the upper single digits and unlevered IRRs in the low double digits. In summary, in 2025, we demonstrated the ability to raise capital via strategic dispositions and redeploy it into compelling opportunities.
Speaker #1: $192 million, or approximately $825 per square foot. The purchase price compares very favorably with other comparable trades in the submarket and is well below estimated replacement cost of $1,400 to $1,500 per square foot.
Speaker #1: Our business plan is to add additional spec suites to accelerate the lease-up of the remaining vacancy and continue to drive rent growth via the amenity offering at the campus and the overall appeal of the neighborhood.
Speaker #1: We expect stabilized yields in the upper single digits and unlevered IRRs in the low double digits. In summary, in 2025, we demonstrated the ability to raise capital via strategic dispositions and redeploy it into compelling opportunities.
Speaker #1: As we look forward to 2026, our top investment priority is to capitalize on the recovering leasing environment and improving capital markets, and sell $300 million within the disciplined approach we have employed in the operating portfolio, using the same process as in the past.
Eliott Trencher: As we look forward to 2026, our top investment priority is to capitalize on the recovering leasing environment and improving capital markets, and sell $300 million within the operating portfolio using the same disciplined approach we have employed in the past. As proceeds are raised, we will thoughtfully and strategically evaluate all of our alternatives with the continued goal of maximizing shareholder value. With that, I will turn the call over to Jeffrey.
Eliott Trencher: As we look forward to 2026, our top investment priority is to capitalize on the recovering leasing environment and improving capital markets, and sell $300 million within the operating portfolio using the same disciplined approach we have employed in the past. As proceeds are raised, we will thoughtfully and strategically evaluate all of our alternatives with the continued goal of maximizing shareholder value. With that, I will turn the call over to Jeffrey.
Speaker #1: As proceeds are, we will thoughtfully and strategically evaluate all of our alternatives to continue toward our goal of maximizing shareholder value.
Speaker #1: With that, I will turn the call over to Geoffrey.
Jeffrey Kuehling: Thanks, Eliott. As we look back on the year, our consistent execution across the platform has strengthened our financial performance and positioned us well for the year ahead. Turning to our financial results, FFO was $0.97 per diluted share in Q4. Occupancy ended the year at 81.6%, representing a 60 basis point sequential improvement as we successfully accelerated rent commencement dates on recently leased space. In addition, occupancy benefited from recent capital recycling activity, which had a net positive impact of approximately 30 basis points during the quarter. Cash same-property NOI growth was -7.2% in Q4, primarily reflecting a sizable restoration fee recognized in Q4 of 2024, which detracted 350 basis points from current year growth.
Jeffrey Kuehling: Thanks, Eliott. As we look back on the year, our consistent execution across the platform has strengthened our financial performance and positioned us well for the year ahead. Turning to our financial results, FFO was $0.97 per diluted share in Q4. Occupancy ended the year at 81.6%, representing a 60 basis point sequential improvement as we successfully accelerated rent commencement dates on recently leased space. In addition, occupancy benefited from recent capital recycling activity, which had a net positive impact of approximately 30 basis points during the quarter. Cash same-property NOI growth was -7.2% in Q4, primarily reflecting a sizable restoration fee recognized in Q4 of 2024, which detracted 350 basis points from current year growth.
Speaker #2: Thanks, Eliott. As we look back on the year, our consistent execution across the platform has strengthened our financial performance and positioned us well for the year ahead.
Speaker #2: Turning to our financial results , FFO was $0.97 per diluted share in the fourth quarter . Occupancy ended the year at 81.6% , representing a 60 basis points sequential improvement .
Speaker #2: We have successfully accelerated rent commencement dates on recently leased space. In addition, occupancy benefited from recent capital recycling activity, which had a net positive impact of approximately 30 basis points during the quarter.
Speaker #2: Cash . Same property NOI growth was -7.2% in the fourth quarter . Primarily reflecting a sizable restoration fee recognized in the fourth quarter of 2020 , for which detracted 350 basis points from current year growth .
Jeffrey Kuehling: Base rent detracted 190 basis points due to a year-over-year decline in average occupancy, while net recoveries detracted 140 basis points, impacted by the change in occupancy and real estate tax appeal wins recognized in 2024. Leasing spreads in the Q4 were negatively impacted by two unique transactions in the LA market. First, we executed a renewal with Riot Games for their arena space, allowing us to maintain occupancy and preserve cash flow over the next several years while we evaluate the highest and best use for the property and explore upzoning. Second, we executed a new lease for the former NeueHouse space in Hollywood, where we were able to quickly release a dynamic and complex space to a well-capitalized and reputable sponsor.
Jeffrey Kuehling: Base rent detracted 190 basis points due to a year-over-year decline in average occupancy, while net recoveries detracted 140 basis points, impacted by the change in occupancy and real estate tax appeal wins recognized in 2024. Leasing spreads in the Q4 were negatively impacted by two unique transactions in the LA market. First, we executed a renewal with Riot Games for their arena space, allowing us to maintain occupancy and preserve cash flow over the next several years while we evaluate the highest and best use for the property and explore upzoning. Second, we executed a new lease for the former NeueHouse space in Hollywood, where we were able to quickly release a dynamic and complex space to a well-capitalized and reputable sponsor.
Speaker #2: Base rent detracted 190 basis decline points due to year in average year over occupancy , while net detracted points 140 basis impacted recoveries by the change in occupancy and real estate tax appeal .
Speaker #2: Wins recognized in 2024 . Leasing spreads in the fourth quarter negatively were impacted by two unique transactions in the LA market . First , we executed a renewal with REIT games for their arena space , allowing us to maintain occupancy and preserve cash flow over the next several years while we evaluate the highest and best use of the property and explore upselling .
Speaker #2: Second, we executed a new lease for the former NeueHouse space in Hollywood, where we were able to quickly release a dynamic and complex space to a well-known and reputable sponsor.
Jeffrey Kuehling: The long-term nature of the lease, minimal downtime, and moderate capital investment resulted in a strong net effective rent, albeit at a lower face rate than the prior tenant. Excluding these two deals, GAAP rents on leases signed would have increased 16.2%, and cash rents would have decreased only 2.6% from prior levels, comparing very favorably to spreads reported in recent quarters. Now let's discuss 2026 guidance. Our 2026 FFO guidance range is $3.25 to $3.45 per diluted share, representing a midpoint of $3.35. 2026 average occupancy is expected to range between 76% and 78%, reflecting a year-over-year decline of 390 basis points at the midpoint of the range. The decrease is almost entirely driven by KOP 2, which entered the stabilized portfolio in January 2026.
Jeffrey Kuehling: The long-term nature of the lease, minimal downtime, and moderate capital investment resulted in a strong net effective rent, albeit at a lower face rate than the prior tenant. Excluding these two deals, GAAP rents on leases signed would have increased 16.2%, and cash rents would have decreased only 2.6% from prior levels, comparing very favorably to spreads reported in recent quarters. Now let's discuss 2026 guidance. Our 2026 FFO guidance range is $3.25 to $3.45 per diluted share, representing a midpoint of $3.35. 2026 average occupancy is expected to range between 76% and 78%, reflecting a year-over-year decline of 390 basis points at the midpoint of the range. The decrease is almost entirely driven by KOP 2, which entered the stabilized portfolio in January 2026.
Speaker #2: The long term nature of the lease , minimal downtime and moderate capital investment resulted in a strong net effective rent , albeit at a lower rate than the tenant prior .
Speaker #2: Excluding these two , deal's that runs on leases signed would have increased 16.2% and cash rents would have decreased only 2.6% from prior levels .
Speaker #2: Comparing very favorably to spreads reported in recent quarters . Now let's discuss the 2026 guidance . Our 2026 FFO guidance range is 3.25 to 345 per diluted share , representing a midpoint of 3.35 2026 average occupancy is expected to range between 76 and 78% , reflecting a year over year decline of 390 basis points .
Speaker #2: At the midpoint of the range. The decrease is almost entirely driven by Cop Two, which entered the stabilized portfolio in January 2026. Excluding Cop Two, 2026 average occupancy is expected to range between 80% and 81.5%, roughly in line with 2025 average occupancy at the midpoint.
Jeffrey Kuehling: Excluding KOP two, 2026 average occupancy is expected to range between 80 and 81.5%, roughly in line with 2025 average occupancy at the midpoint. As a reminder, 2026 lease expirations are front half weighted and several larger tenant move-outs are expected to weigh on portfolio occupancy during the first half of the year. Cash same-property NOI growth, which excludes KOP two, is projected to be flat to -1.5%. At the midpoint of the range, base rent is expected to contribute approximately 50 basis points to growth, while net recoveries are expected to detract approximately 125 basis points. Non-cash GAAP NOI adjustments are expected to range between $12 and 14 million, up from a little over $8 million in 2025, as recent new leasing activity takes occupancy across the portfolio.
Jeffrey Kuehling: Excluding KOP two, 2026 average occupancy is expected to range between 80 and 81.5%, roughly in line with 2025 average occupancy at the midpoint. As a reminder, 2026 lease expirations are front half weighted and several larger tenant move-outs are expected to weigh on portfolio occupancy during the first half of the year. Cash same-property NOI growth, which excludes KOP two, is projected to be flat to -1.5%. At the midpoint of the range, base rent is expected to contribute approximately 50 basis points to growth, while net recoveries are expected to detract approximately 125 basis points. Non-cash GAAP NOI adjustments are expected to range between $12 and 14 million, up from a little over $8 million in 2025, as recent new leasing activity takes occupancy across the portfolio.
Speaker #2: As a reminder, 2026 lease expirations are front-half weighted, and several larger tenant move-outs are expected to weigh on portfolio occupancy during the first half of the year.
Speaker #2: Cash . Same property NOI excludes projected Cop growth , which flat to to be is two , -1.5% at the midpoint of the range .
Speaker #2: Base rent is expected to contribute approximately 50 basis points to growth, while net recoveries are expected to detract approximately 125 basis points.
Speaker #2: Noncash GAAP NOI adjustments are expected to range between $12 and $14 million, up from a little over $8 million in 2025, as recent new leasing activity takes occupancy across the portfolio.
Jeffrey Kuehling: Our guidance for NOI from development properties and capitalized interest are primarily driven by 2 projects, KOP 2 and Flower Mart, which we'll cover together. KOP 2 expense capitalization ceased at the end of January 2026, following the 1-year anniversary of substantial completion of the base building components. As a result, operating expenses and real estate taxes at KOP 2, which totaled approximately $5 million per quarter, and capitalized interest, which totaled approximately $10 million per quarter, will begin flowing through earnings beginning in February 2026. The carry costs for KOP 2 will slowly moderate as tenants take occupancy over the course of the year. As Angela previously mentioned, we have updated KOP 2's total estimated costs in the supplemental to reflect leases executed to date and prevailing market leasing economics for the remainder of the project.
Jeffrey Kuehling: Our guidance for NOI from development properties and capitalized interest are primarily driven by 2 projects, KOP 2 and Flower Mart, which we'll cover together. KOP 2 expense capitalization ceased at the end of January 2026, following the 1-year anniversary of substantial completion of the base building components. As a result, operating expenses and real estate taxes at KOP 2, which totaled approximately $5 million per quarter, and capitalized interest, which totaled approximately $10 million per quarter, will begin flowing through earnings beginning in February 2026. The carry costs for KOP 2 will slowly moderate as tenants take occupancy over the course of the year. As Angela previously mentioned, we have updated KOP 2's total estimated costs in the supplemental to reflect leases executed to date and prevailing market leasing economics for the remainder of the project.
Speaker #2: Our guidance N.Y. from for development properties and capitalized interest are primarily driven by two projects , AOP two and Flower Mart , which I'll cover together Coch2 expense capitalization ceased at the end of January 2026 , following the one year anniversary of substantial completion of the base building components .
Speaker #2: As a result , operating expenses and real estate taxes at Cop two , which totaled approximately 5 million per quarter in capitalized interest , which totaled approximately 10 million per quarter , will begin flowing through beginning earnings in February 2026 .
Speaker #2: The carry costs for Clk2 will moderate as tenants take occupancy over the course of the year. As Angela previously mentioned, we have updated our total estimated costs in the supplemental to reflect leases executed to date and prevailing market leasing for the remainder of the economics for the project.
Jeffrey Kuehling: Finally, as a reminder, the project will not enter the same property pool until 2028. With respect to the Flower Mart project, our assumptions remained unchanged from last quarter. We continue to assume that capitalization will cease at the end of June 2026, at which point approximately $1 million of quarterly operating expenses, and real estate taxes and $7 million of quarterly capitalized interest expense will begin impacting earnings. The NOI impact of KOP 2 and Flower Mart represents the majority of our guidance for NOI from development properties, which is expected to range from -$23.5 million to -$25 million. In addition, our capitalized interest guidance of $32 million to $34 million reflects our Q4 capitalized interest run rate, adjusted for KOP 2 and Flower Mart, as previously detailed.
Jeffrey Kuehling: Finally, as a reminder, the project will not enter the same property pool until 2028. With respect to the Flower Mart project, our assumptions remained unchanged from last quarter. We continue to assume that capitalization will cease at the end of June 2026, at which point approximately $1 million of quarterly operating expenses, and real estate taxes and $7 million of quarterly capitalized interest expense will begin impacting earnings. The NOI impact of KOP 2 and Flower Mart represents the majority of our guidance for NOI from development properties, which is expected to range from -$23.5 million to -$25 million. In addition, our capitalized interest guidance of $32 million to $34 million reflects our Q4 capitalized interest run rate, adjusted for KOP 2 and Flower Mart, as previously detailed.
Speaker #2: And finally , as a reminder , the project will not enter the same property pool until 2028 , with to the Flower Mart assumptions remained unchanged from last quarter .
Speaker #2: We continue to assume that capitalization will cease at the end of June 2026 , at which point approximately 1 million of quarterly operating expenses and real estate taxes , and 7 million of quarterly capitalized interest expense will begin impacting earnings .
Speaker #2: The NOI impact of Cope2 and Flower Mart represents the majority of our guidance for NOI from development properties, which is expected to range from -$23.5 million to -$25 million.
Speaker #2: In addition, our capitalized interest guidance of $32 million to $34 million reflects our fourth quarter capitalized interest run rate, for Mart.
Speaker #2: Adjusted Flower previously detailed. In addition, and in last night's release, we also provided guidance for GAAP lease termination fee income, interest income, and combined G&A leasing costs.
Jeffrey Kuehling: In addition, in last night's release, we also provided line item guidance for GAAP lease termination fee income, interest income, and combined G&A leasing costs. Please note that while our G&A and leasing cost guidance reflects a year-over-year increase, 2026 levels remain below our historical averages. As it relates to capital recycling activity, we expect to complete approximately $325 million of operating dispositions in 2026, which includes the $125 million disposition of Kilroy Sabre Springs reported last night. As Angela and Eliott highlighted, we will take a balanced and disciplined approach to capital allocation, evaluating all available options to maximize shareholder value, while also prioritizing balance sheet strength and flexibility. In closing, we head into 2026 with the same disciplined execution that has guided our progress this year.
Jeffrey Kuehling: In addition, in last night's release, we also provided line item guidance for GAAP lease termination fee income, interest income, and combined G&A leasing costs. Please note that while our G&A and leasing cost guidance reflects a year-over-year increase, 2026 levels remain below our historical averages. As it relates to capital recycling activity, we expect to complete approximately $325 million of operating dispositions in 2026, which includes the $125 million disposition of Kilroy Sabre Springs reported last night. As Angela and Eliott highlighted, we will take a balanced and disciplined approach to capital allocation, evaluating all available options to maximize shareholder value, while also prioritizing balance sheet strength and flexibility. In closing, we head into 2026 with the same disciplined execution that has guided our progress this year.
Speaker #2: Please note that while our DNA and leasing cost guidance reflects a year-over-year increase, 2026 levels remain below our historical averages.
Speaker #2: As it relates to capital recycling activity, we expect to complete approximately $325 million of operating dispositions in 2026, which includes the $125 million disposition of Kilroy Strings reported last night.
Speaker #2: As Angela and Elliot highlighted , we will take a balanced and disciplined approach to capital allocation , evaluating all available options to maximize shareholder value , while also prioritize prioritizing balance sheet strength and flexibility .
Speaker #2: In closing , we head into 2026 with the same disciplined execution that has guided our progress this year . Our focus on leasing , monetizing non-core assets , and redeploying capital into high quality strengthen durability opportunities to the of our cash flows and the flexibility of our platform .
Jeffrey Kuehling: Our focus on leasing, monetizing non-core assets, and redeploying capital into high-quality opportunities to strengthen the durability of our cash flows and the flexibility of our platform. With that, we're happy to answer any of your questions. Operator?
Jeffrey Kuehling: Our focus on leasing, monetizing non-core assets, and redeploying capital into high-quality opportunities to strengthen the durability of our cash flows and the flexibility of our platform. With that, we're happy to answer any of your questions. Operator?
Speaker #2: With that, we're happy to answer any of your questions. Operator.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by two to remove yourself from the queue. Our first question today comes from Jana Galan with Bank of America. Jana, please go ahead.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by two to remove yourself from the queue. Our first question today comes from Jana Galan with Bank of America. Jana, please go ahead.
Speaker #3: Thank you . We will now begin the question and answer session . If you would like to ask a question today , please do so now by pressing star , followed by the number one on your telephone keypad .
Speaker #3: If you change your mind or you feel like your question has already been answered, you can press star followed by two to remove yourself from the queue.
Speaker #3: Our first question today comes from Jenna Galen with Bank of America. Jenna, please go ahead. Hi.
Jana Galan: Hi, thank you for taking my question, and congrats on the leasing at KOP two. I was hoping if you could talk to the UCSF, sorry, University of California, San Francisco, anchor lease and kind of the late commencement on that. Is that due to kind of significant tenant build out or waiting out other lease expirations? And maybe if you can kind of help us think about further, you know, going from leasing to occupancy on that asset.
Jana Galan: Hi, thank you for taking my question, and congrats on the leasing at KOP two. I was hoping if you could talk to the UCSF, sorry, University of California, San Francisco, anchor lease and kind of the late commencement on that. Is that due to kind of significant tenant build out or waiting out other lease expirations? And maybe if you can kind of help us think about further, you know, going from leasing to occupancy on that asset.
Speaker #4: Thank you for taking my question, and congrats on the leasing at COP Two. I was hoping if you could talk to the UCSF-US.
Speaker #4: Sorry . University of California , San Francisco , anchor lease and kind of the commencement on late that . Is that due to kind of significant kind of build out or out other lease waiting expirations ?
Speaker #4: And you can kind maybe if of help about further , you know , going from leasing to occupancy on that asset . Sure .
Angela Aman: Sure. Thanks for the question. We appreciate it. We are thrilled about the progress that we've made at KOP this year. As you remember, we originally put out a goal of 100,000 sq ft of lease executions during 2025 and exceeded that goal by almost 4 times. So we're really pleased with the progress we made. As you point out, the UCSF lease was an important part of getting to that level. Remember that, you know, this is a brand-new development project, so the building that they're taking, you know, is currently in shell condition, and we have multiple user groups that'll be moving into that facility. It's just gonna take time from a space planning and build out perspective.
Angela Aman: Sure. Thanks for the question. We appreciate it. We are thrilled about the progress that we've made at KOP this year. As you remember, we originally put out a goal of 100,000 sq ft of lease executions during 2025 and exceeded that goal by almost 4 times. So we're really pleased with the progress we made. As you point out, the UCSF lease was an important part of getting to that level. Remember that, you know, this is a brand-new development project, so the building that they're taking, you know, is currently in shell condition, and we have multiple user groups that'll be moving into that facility. It's just gonna take time from a space planning and build out perspective.
Speaker #4: Thanks for .
Speaker #5: The question . We appreciate it . We are thrilled about the progress that we've made at Cop this year . As you remember , we originally put out a goal of 100,000ft² of lease executions during that goal 2025 and exceeded by almost four times .
Speaker #5: So we're really pleased with the progress we made . As you point out , the UCSF lease was an important part of getting to that , to that level .
Speaker #5: Remember that this is a brand new development project . So the building that they're taking is currently in shell condition , and we have multiple user groups that will be moving in to that facility .
Speaker #5: It's just going to take time from a space planning and build-out perspective. As I mentioned in my prepared remarks, our entire team is focused on accelerating and doing everything we can.
Angela Aman: As I mentioned in my prepared remarks, our entire team is focused on accelerating and doing everything we can, and that's in our power... to accelerate occupancy commencement timelines, not only on the UCSF lease, but on all the leases we've signed at KOP as we move forward, and getting tenants into occupancy and rent commenced as quickly as possible.
Angela Aman: As I mentioned in my prepared remarks, our entire team is focused on accelerating and doing everything we can, and that's in our power... to accelerate occupancy commencement timelines, not only on the UCSF lease, but on all the leases we've signed at KOP as we move forward, and getting tenants into occupancy and rent commenced as quickly as possible.
Speaker #5: And that's in our power to accelerate occupancy . Commencement timelines only on the , not UCSF lease , but on all the leases we've Cop .
Speaker #5: As we move forward and get tenants into occupancy, rent commences as quickly as possible.
Jana Galan: Thank you. And then just to clarify, on the same store, other than the addition of KOP II, is there anything else we should think about in terms of acquisitions, dispositions?
Jana Galan: Thank you. And then just to clarify, on the same store, other than the addition of KOP II, is there anything else we should think about in terms of acquisitions, dispositions?
Speaker #4: Thank you . And then just to clarify , on the same store , other than the additions of Cop two , is there anything else we should think about in terms of acquisitions , dispositions ?
Angela Aman: Well, what I would say, KOP II, as Jeffrey mentioned in his remarks, doesn't go into the same property pool until 2028, though it is entering the stabilized portfolio, and as a result, our total portfolio occupancy statistics beginning in January. So there's a bit of a disconnect there, but that asset won't come into the, the same property pool until 2028. I would say at this point in time, nothing. You know, as we think about the $300 million of operating property dispositions that we communicated as part of guidance, I wouldn't note anything material as it relates to changes in the same property pool that we think needs to be called out.
Angela Aman: Well, what I would say, KOP II, as Jeffrey mentioned in his remarks, doesn't go into the same property pool until 2028, though it is entering the stabilized portfolio, and as a result, our total portfolio occupancy statistics beginning in January. So there's a bit of a disconnect there, but that asset won't come into the, the same property pool until 2028. I would say at this point in time, nothing. You know, as we think about the $300 million of operating property dispositions that we communicated as part of guidance, I wouldn't note anything material as it relates to changes in the same property pool that we think needs to be called out.
Speaker #5: Well, what I would say, top two is Jeffrey mentioned in his remarks, it doesn't go into the same property pool until 2028, though it is entering the stabilized portfolio.
Speaker #5: And as a result , our total portfolio occupancy statistics beginning in January . So there's a bit of a disconnect there . But that asset won't come into the same pool until 2028 .
Speaker #5: I would say at this point in time , nothing . As we think about the $300 million of operating property dispositions that we communicated as part of guidance , I would note anything material as it relates to changes in the same property pool that we think need to be called out .
Operator: Thank you. Our next question comes from the line of Nick Yulico with Scotiabank. Nick, please go ahead.
Operator: Thank you. Our next question comes from the line of Nick Yulico with Scotiabank. Nick, please go ahead.
Speaker #3: Our you . Thank next question comes from the line of Nick Scotiabank . Nick , please Yulico , go ahead .
Nicholas Yulico: Thank you. So, Angela, I appreciate the, the commentary on, you know, the mid 5%, yield now on KOP II. Can you, can you just unpack that a little bit? I just want to be clear if that's a, you know, a gap or a cash yield, and, and how we should think about the, the TIs. I wasn't sure if that was kind of already built into the new, cost you happened to set.
Nick Yulico: Thank you. So, Angela, I appreciate the, the commentary on, you know, the mid 5%, yield now on KOP II. Can you, can you just unpack that a little bit? I just want to be clear if that's a, you know, a gap or a cash yield, and, and how we should think about the, the TIs. I wasn't sure if that was kind of already built into the new, cost you happened to set.
Speaker #6: Thank you . So , Angela , I appreciate the commentary on , you know , the mid 5% yield . Now on cop two .
Speaker #6: Can you just unpack that a little bit? I just want to be clear if that's, you know, a gap or a cash yield.
Speaker #6: And how would you think about the TIs? I wasn't sure if that was kind of already built into the new cost you have in this update.
Angela Aman: Yeah. Thanks, Nick. That's a cash stabilized yield number. And as it relates to TIs, yes, we've reflected all of the transactions that have been signed to date. And as Jeffrey mentioned in his remarks, we've also incorporated our estimates of prevailing market leasing economics for the remaining vacancy of the project.
Angela Aman: Yeah. Thanks, Nick. That's a cash stabilized yield number. And as it relates to TIs, yes, we've reflected all of the transactions that have been signed to date. And as Jeffrey mentioned in his remarks, we've also incorporated our estimates of prevailing market leasing economics for the remaining vacancy of the project.
Speaker #5: Yeah . Thanks , Nick . That's a cash stabilized yield number . And as it relates to tis , yes , we've reflected all of the transactions that have been signed to date .
Speaker #5: And, as Jeffrey mentioned in his remarks, we've also incorporated our estimates of prevailing market leasing economics for the remaining vacancy at the project.
Nicholas Yulico: Okay, great. Thanks. And then, I guess the second question is on leasing. It's maybe for Rob, if you could just touch a little bit on sort of key highlights across markets and, particularly, I'd say, you know, like in San Francisco, you know, how sublease is that an impact, you know, competitive impact versus your portfolio? And then just a little bit more about sort of what drove the leasing at West Eighth in Seattle. Thanks.
Nick Yulico: Okay, great. Thanks. And then, I guess the second question is on leasing. It's maybe for Rob, if you could just touch a little bit on sort of key highlights across markets and, particularly, I'd say, you know, like in San Francisco, you know, how sublease is that an impact, you know, competitive impact versus your portfolio? And then just a little bit more about sort of what drove the leasing at West Eighth in Seattle. Thanks.
Speaker #6: Okay . Great . Thanks . And then I guess just second question is on leasing , if maybe for Rob , if you could just touch a little bit on sort of key markets I'd say , know , like in highlights and you particularly Francisco , you know , how sublease is that is that , is that an impact .
Speaker #6: You know, competitive impact versus your portfolio. And then just a little bit more about, sort of, what drove the leasing at West Eighth in Seattle.
Speaker #6: Thanks .
Robert Paratte: Hey, Nick. Sure. Why don't we start with what you finished with, which is West Eighth and Seattle and the Bellevue market. Bellevue is clearly a leader in the country in terms of not only demand and tenants in the market right now, but also, we're really excited about the rental growth. We've seen the net effective rental growth. I would say, unrelated to the growth and the rental increase in Bellevue, we're seeing a similar phenomenon starting to happen in Seattle, and we're really pleased over the last 90 days with the new tenant activity that we're seeing at West Eighth. Our team up there is very busy, you know, working on several fronts on West Eighth.
Rob Paratte: Hey, Nick. Sure. Why don't we start with what you finished with, which is West Eighth and Seattle and the Bellevue market. Bellevue is clearly a leader in the country in terms of not only demand and tenants in the market right now, but also, we're really excited about the rental growth. We've seen the net effective rental growth. I would say, unrelated to the growth and the rental increase in Bellevue, we're seeing a similar phenomenon starting to happen in Seattle, and we're really pleased over the last 90 days with the new tenant activity that we're seeing at West Eighth. Our team up there is very busy, you know, working on several fronts on West Eighth.
Speaker #7: Hey , Nick . Sure . Why don't we start with what you finished with ? With which is West eighth . And Seattle and Bellevue Market .
Speaker #7: Bellevue is clearly a leader in the country in terms of not only demand and tenants in the market right now, but also we're really excited about the rental growth.
Speaker #7: We've seen the net effect of rental growth . I would say unrelated to the growth and the rental increase in Bellevue . We're seeing a similar phenomenon starting to happen in Seattle , and we're really pleased over the last 90 days with the new tenant activity that we're seeing at West Eighth , and we're our team up there is very busy .
Speaker #7: Working, you know, on several fronts on West Eighth. So, the renovation that we did there really is paying off and creating, you know, a sense of that.
Robert Paratte: So, the renovation that we did really is paying off and creating, you know, a sense of that it's a special project and a great location. In fact, underscored by the fact we did a law firm deal in the quarter that moved from the CBD to West Eighth. So we're very excited about that. I would say one of the things, you know, we've been through the San Francisco recovery cycle before. I think one of the things that's most amazing about San Francisco is the recovery that's going on. And I'd say a couple of things. Sublease space, the really good premium sublease space is really virtually gone. There's still some, but there are not big contiguous blocks of space like we had a year, two years and a half ago.
Rob Paratte: So, the renovation that we did really is paying off and creating, you know, a sense of that it's a special project and a great location. In fact, underscored by the fact we did a law firm deal in the quarter that moved from the CBD to West Eighth. So we're very excited about that. I would say one of the things, you know, we've been through the San Francisco recovery cycle before. I think one of the things that's most amazing about San Francisco is the recovery that's going on. And I'd say a couple of things. Sublease space, the really good premium sublease space is really virtually gone. There's still some, but there are not big contiguous blocks of space like we had a year, two years and a half ago.
Speaker #7: It's a special project and a great location. In fact, that's underscored by the fact we did a law firm deal in the quarter that moved from the CBD to West Eighth.
Speaker #7: So we're very excited about that . I would say one of the things , you know , we've been through the San Francisco recovery cycle before , I think one of the things that's most amazing about San Francisco is the recovery that's going on .
Speaker #7: And I'd say a things sublease couple of space , the really good premium sublease space is really virtually gone . There's still some , but it's there are not big contiguous blocks of space like we had a year or two year and a half ago .
Robert Paratte: So that's a positive sign, and I think if you really look at it, yes, people can say there's 32% availability, but, and I want to emphasize this, 47% of that availability has not transacted since 2021. So I'm going to say that again. 47% hasn't transacted since 2021 of that 32% vacancy. And that's a really important metric because our product, our office buildings in San Francisco, don't, are not impacted by that. We've had activity on all fronts. So we see the San Francisco recovery as really having the clearest signs of a recovery of a market. And Silicon Valley also had a very, very strong 2025 Q4, and a lot of that is driven by Fortune 100 companies.
Rob Paratte: So that's a positive sign, and I think if you really look at it, yes, people can say there's 32% availability, but, and I want to emphasize this, 47% of that availability has not transacted since 2021. So I'm going to say that again. 47% hasn't transacted since 2021 of that 32% vacancy. And that's a really important metric because our product, our office buildings in San Francisco, don't, are not impacted by that. We've had activity on all fronts. So we see the San Francisco recovery as really having the clearest signs of a recovery of a market. And Silicon Valley also had a very, very strong 2025 Q4, and a lot of that is driven by Fortune 100 companies.
Speaker #7: So that's a positive sign . And I think if you really look at it , yes , people can say there's 32% availability , but and I want to emphasize this , 47% of that has not availability transacted since 2021 .
Speaker #7: So I'm going that to say again , 47% hasn't transacted since 2021 . Of that , 32% vacancy . And that's a really important metric because our product , our office buildings in San Francisco don't are not impacted by that .
Speaker #7: We've had activity on all fronts. So we see the San Francisco recovery as really having the clearest signs of a recovery of a market.
Speaker #7: And Silicon Valley also had a very, very strong 2025 fourth quarter. And a lot of that is driven by Fortune 100 companies.
Robert Paratte: So, I think you're seeing diversity in the market in San Francisco and the Bay Area, meaning types of tenants and also the large tenants. We get a lot of questions over earnings calls about when are the large tenants coming back. They're back in the market now. LA, we are continuing. The Fitler Club lease was a major lease in the Hollywood submarket. We're really happy to have that. Fitler is a members-only lifestyle social club sponsored by Dean Adler and Associates, so very strong sponsorship. We had other opportunities to do other leasing there, but Fitler saw the benefit of the space that NeueHouse freed up. So that was a very exciting December to get that started and closed very quickly.
Rob Paratte: So, I think you're seeing diversity in the market in San Francisco and the Bay Area, meaning types of tenants and also the large tenants. We get a lot of questions over earnings calls about when are the large tenants coming back. They're back in the market now. LA, we are continuing. The Fitler Club lease was a major lease in the Hollywood submarket. We're really happy to have that. Fitler is a members-only lifestyle social club sponsored by Dean Adler and Associates, so very strong sponsorship. We had other opportunities to do other leasing there, but Fitler saw the benefit of the space that NeueHouse freed up. So that was a very exciting December to get that started and closed very quickly.
Speaker #7: So I think you're seeing diversity in the market in San Francisco and the Bay Area, meaning types of tenants and also the large tenants.
Speaker #7: We get a question over a lot of earnings calls about when some of the large tenants are coming back. They're back in the market now in L.A.
Speaker #7: We are continuing. You know, the Fitler Club lease was a major lease in the Hollywood submarket. We're really happy to have that.
Speaker #7: Fitler is a members-only lifestyle social club sponsored by Adler and Associates, so a very strong sponsorship. We had other opportunities to do other leasing there, but Fitler saw the benefit of the space that NeueHouse freed up.
Speaker #7: So that was a very exciting December to get that started . And closed very quickly . Other parts of Los Angeles and the West Side are tour activity is improving and we expect to see that continue .
Robert Paratte: Other parts of Los Angeles on the west side, our tour activity is improving, and we expect to see that continue. Culver City's continued to do well. We're seeing net effective rent growth in Long Beach. For us at Kilroy, in our specific markets, we're you know very excited, and Maple Plaza has sort of led our leasing, you know, since we acquired it. San Diego, again, great success story. Wish we had more space at One Paseo, which we don't, and very excited to get our hands on Nautilus, and we're underway right now working on several, you know, potential deals there. San Diego, you know, continues to be a great market for us. And lastly, Austin. We continue to have activity in the space we have remaining.
Rob Paratte: Other parts of Los Angeles on the west side, our tour activity is improving, and we expect to see that continue. Culver City's continued to do well. We're seeing net effective rent growth in Long Beach. For us at Kilroy, in our specific markets, we're you know very excited, and Maple Plaza has sort of led our leasing, you know, since we acquired it. San Diego, again, great success story. Wish we had more space at One Paseo, which we don't, and very excited to get our hands on Nautilus, and we're underway right now working on several, you know, potential deals there. San Diego, you know, continues to be a great market for us. And lastly, Austin. We continue to have activity in the space we have remaining.
Speaker #7: So Culver City's continue to do well . We're seeing net effective rent growth in Long Beach . So for us at Kilroy , in our specific markets , we're , you very excited in Maple Plaza has sort of led our leasing , you know , since we acquired it San Diego again great success story .
Speaker #7: Wish we had more space at One Paseo, which we don't. And very excited to get our hands on Nautilus. And we're underway right now on working on several.
Speaker #7: You know , potential deals there . So know Diego , you San be a , continues to great market for lastly us . And , Austin , we continue to have activity on the space we have remaining .
Robert Paratte: We don't have that much left, and we're going to be fine there. You know, rates have held, so we're continuing on our program there in Austin.
Rob Paratte: We don't have that much left, and we're going to be fine there. You know, rates have held, so we're continuing on our program there in Austin.
Speaker #7: We don't have that much left . And we're going to be fine there . You know , rates have held . So we're continuing on our our program there in Austin .
Operator: Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Steve, please go ahead. Your line is now open.
Operator: Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Steve, please go ahead. Your line is now open.
Speaker #3: Thank you . Our next question comes from Steve Sakwa with Evercore ISI . Steve , please go ahead . Your line is now open .
Stephen Thomas Sakwa: Yeah, thanks. Good morning.
Steve Sakwa: Yeah, thanks. Good morning.
Operator: Morning.
Angela Aman: Morning.
Speaker #8: Yeah . Thanks . Good morning . Good morning . You guys have a little over high . You have a little over 1,000,000ft , I guess now expiring in 26 .
Stephen Thomas Sakwa: You guys have a little over 1 million feet, I guess, now expiring in 2026. Can you just remind us what your kind of broad retention expectations are on that, kind of 1.05 million? And as you think about new leasing activity, you know, is there kind of a pipeline that you could sort of quantify of leases that are set to commence in 2026? How do we think about, you know, kind of the, I guess, retention and the new leases starting?
Steve Sakwa: You guys have a little over 1 million feet, I guess, now expiring in 2026. Can you just remind us what your kind of broad retention expectations are on that, kind of 1.05 million? And as you think about new leasing activity, you know, is there kind of a pipeline that you could sort of quantify of leases that are set to commence in 2026? How do we think about, you know, kind of the, I guess, retention and the new leases starting?
Speaker #8: Can you just remind us what your kind of broad retention expectations are on that kind of million 50 ? And as you think about new leasing activity , you know , is there kind of a pipeline that you could sort of quantify of , of leases that are that are set to commence in 26 ?
Speaker #8: How do we think about , kind of guess , retention and the new starting the I leases
Angela Aman: Sure. Thanks, Steve. You're right, the current lease expiration schedule shows just over 1 million sq ft of remaining 2026 expirations. We had mentioned on last quarter's call that we expect substantial move-outs from that pool, and we continue to believe that's right. There is a footnote on that page of the supplemental that points out that we've already backfilled about 140,000 sq ft of that 1.05 million. So we've made some progress already on backfilling it with additional tenants, including some subtenants, where there won't be downtime between those leases. There's a small additional, I would probably say, expect another, you know, somewhere between 50,000 and 100,000 sq ft of potential renewal out of that pool.
Angela Aman: Sure. Thanks, Steve. You're right, the current lease expiration schedule shows just over 1 million sq ft of remaining 2026 expirations. We had mentioned on last quarter's call that we expect substantial move-outs from that pool, and we continue to believe that's right. There is a footnote on that page of the supplemental that points out that we've already backfilled about 140,000 sq ft of that 1.05 million. So we've made some progress already on backfilling it with additional tenants, including some subtenants, where there won't be downtime between those leases. There's a small additional, I would probably say, expect another, you know, somewhere between 50,000 and 100,000 sq ft of potential renewal out of that pool.
Speaker #5: Thanks , ? Sure . current lease expiration schedule shows just over 1,000,000ft² of remaining 2026 expirations . We had mentioned on last quarter's call that we expect substantial move outs from that .
Speaker #5: Steve .
Speaker #5: That pool. And we continue to believe, right? There is a footnote on that page of the supplemental that points out that we've already backfilled about 140,000 ft² of that, you know, 1.5 million.
Speaker #5: So we've made some progress already on backfilling it with additional tests, including some subtenants where there won't be downtime between those leases.
Speaker #5: There's a small additional I would probably say I expect another somewhere between 50 and 100,000ft² of potential renewals out of that But the biggest driver of addressing that vacancy is really going to come from the sign , but not yet commenced .
Angela Aman: But the biggest driver of addressing that vacancy is really going to come from the signed, but not yet commenced pool. We've got probably 300,000sq ft sitting there that's contractually obligated already, and where we have high confidence we can get them into occupancy over the course of 2026. So that cuts that lease expiration number by more than half, I believe, and, you know, that gets us to sort of the commentary about the forward-looking pipeline. I mentioned in my script, our pipeline, as we sit here today, is about 65% higher than it was a year ago, including, you know, the later stage part of the pipeline, where we've got great visibility and activity there to get additional leases closed over the next couple of quarters, which can have an impact on 2026 occupancy.
Angela Aman: But the biggest driver of addressing that vacancy is really going to come from the signed, but not yet commenced pool. We've got probably 300,000sq ft sitting there that's contractually obligated already, and where we have high confidence we can get them into occupancy over the course of 2026. So that cuts that lease expiration number by more than half, I believe, and, you know, that gets us to sort of the commentary about the forward-looking pipeline. I mentioned in my script, our pipeline, as we sit here today, is about 65% higher than it was a year ago, including, you know, the later stage part of the pipeline, where we've got great visibility and activity there to get additional leases closed over the next couple of quarters, which can have an impact on 2026 occupancy.
Speaker #5: Pool. We've got probably 300,000 ft² sitting there. That's contractually obligated already. And where we have high confidence we can get them into occupancy over the course of 2026.
Speaker #5: So that cuts expiration lease by more than half . I believe . And you know , that gets us to sort of the commentary about the forward looking pipeline .
Speaker #5: I mentioned in my script, our pipeline, as we sit here today, is about 65% higher than it was a year ago.
Speaker #5: Including, you know, the later stage part of the pipeline where we've got great visibility and activity there to get additional leases closed over the next couple of quarters, which can have an impact on 2026 occupancy.
Angela Aman: So, we feel very optimistic about the occupancy guidance we put out. We're going to push really hard to meet or exceed that guidance and think that there's a pretty clear path to doing it, particularly given Rob's commentary about the recovery we're seeing across our markets and most importantly, in our most significant market, which is San Francisco.
Angela Aman: So, we feel very optimistic about the occupancy guidance we put out. We're going to push really hard to meet or exceed that guidance and think that there's a pretty clear path to doing it, particularly given Rob's commentary about the recovery we're seeing across our markets and most importantly, in our most significant market, which is San Francisco.
Speaker #5: So, we feel very optimistic about the occupancy guidance we put out. We're going to push really hard to meet or exceed that guidance and think that there's a pretty clear path to doing it, particularly given Rob's commentary about the recovery.
Speaker #5: We're seeing across our markets . And most importantly , in our most significant market , which is San Francisco .
Stephen Thomas Sakwa: Okay, great. Just kind of second question, I appreciate the, the color on the, KOP 2 yield at, mid-5s. I know you don't want to provide, you know, details on individual leases, but for the space that's left to lease, does that imply net rents are kind of equal to what you did on kind of the leasing thus far? Does it, imply rents go up or go down? Just how do we think about rents on the remaining space compared to kind of what's been leased thus far?
Steve Sakwa: Okay, great. Just kind of second question, I appreciate the, the color on the, KOP 2 yield at, mid-5s. I know you don't want to provide, you know, details on individual leases, but for the space that's left to lease, does that imply net rents are kind of equal to what you did on kind of the leasing thus far? Does it, imply rents go up or go down? Just how do we think about rents on the remaining space compared to kind of what's been leased thus far?
Speaker #8: Okay , great . And just kind of second question , I appreciate the the color on the Cope2 yield at mid fives . I know you don't want to provide details on individual leases , but for the space that's left to lease , does that imply net rents are kind of to what equal you did on the leasing thus far .
Speaker #8: Does it imply rents go up? Would rents go down? Just how do we think about rents on the remaining space compared to kind of what's been leased thus far?
Angela Aman: Yeah, I think, you know, I think they're generally around the same ballpark, but we do believe, given the momentum we've demonstrated at the project, that we can push higher on the remaining vacancy. When you think about what we have left from a composition perspective at KOP 2, we have about half of the multi-tenant building remaining. That likely is going to be a combination of those remaining spec suites, where we sort of already know what that capital looks like, and some shell space that we'll be talking to additional tenants that are in conversations with already. And then at least one full building remaining.
Angela Aman: Yeah, I think, you know, I think they're generally around the same ballpark, but we do believe, given the momentum we've demonstrated at the project, that we can push higher on the remaining vacancy. When you think about what we have left from a composition perspective at KOP 2, we have about half of the multi-tenant building remaining. That likely is going to be a combination of those remaining spec suites, where we sort of already know what that capital looks like, and some shell space that we'll be talking to additional tenants that are in conversations with already. And then at least one full building remaining.
Speaker #5: Yeah , I think , you know , I think they're generally around the ballpark , same but we do believe given the momentum we've demonstrated at the projects that we can push higher on the remaining vacancy , when you think about what we have left from a composition perspective at Cope2 , we have about half of the building multi-tenant remaining .
Speaker #5: That likely is going to be a combination of those remaining spec suites where we sort of already know what that capital looks like, and some shell space that we will be talking to additional tenants about or are in conversations with.
Speaker #5: Already. And then that leaves one full building remaining. And what I would say about the full building vacancy that we have remaining is that it is the most prominent building within phase two of the project, and arguably within the entire KOP phases one through two ecosystem.
Angela Aman: What I would say about the full building vacancy that we have remaining is that it is the most prominent building within phase two of the project and arguably within the entire KOP ecosystem, phases one through five. It has some of the best views of the project, and we think we have a real opportunity there to appropriately push rate while also prioritizing, you know, near-term occupancy. So that's kind of how we're seeing the remaining vacancy and our expectations for how that'll play out.
Angela Aman: What I would say about the full building vacancy that we have remaining is that it is the most prominent building within phase two of the project and arguably within the entire KOP ecosystem, phases one through five. It has some of the best views of the project, and we think we have a real opportunity there to appropriately push rate while also prioritizing, you know, near-term occupancy. So that's kind of how we're seeing the remaining vacancy and our expectations for how that'll play out.
Speaker #5: Five. It has views of some of the best of the project, and we really think we have opportunity there to appropriately push rate, while also prioritizing near-term occupancy.
Speaker #5: So that's kind of how we're seeing the remaining vacancy, and our expectations for how that will play out.
Operator: Thank you. Our next question comes from Blaine Heck with Wells Fargo. Blaine, please go ahead.
Operator: Thank you. Our next question comes from Blaine Heck with Wells Fargo. Blaine, please go ahead.
Speaker #3: Thank you . Our next question comes from Blaine . Heck with Wells Fargo . Blaine , please go ahead .
Robert Paratte: Yeah, great, thanks. Just following up on the leasing environment, I was hoping you guys could give us an update on the mark-to-market in each of your target markets and whether you've seen any change in that metric recently, especially in Los Angeles, where you have a pretty large proportion of your expirations over the next two years.
Blaine Heck: Yeah, great, thanks. Just following up on the leasing environment, I was hoping you guys could give us an update on the mark-to-market in each of your target markets and whether you've seen any change in that metric recently, especially in Los Angeles, where you have a pretty large proportion of your expirations over the next two years.
Speaker #7: Great . Yeah . Thanks . Just following up on the leasing environment . I was hoping you guys could give us an update on the mark to market in each of your target markets .
Speaker #7: And whether you've seen any change in that metric recently, especially in Los Angeles, where you have a pretty large proportion of your expirations over the next two years.
Angela Aman: Yeah, Eliott will give some more specific commentary on mark to market. But what I would say, specifically, when you think about the Los Angeles market, is that that is a market in which we have been clear over the course of the last 18 to 24 months, that we had portfolio repositioning work to do. And it's the market where we've completed the most of the portfolio repositioning work by selling an asset in Santa Monica, by now selling Sunset Media Center in Hollywood, and by buying Maple Plaza, which Rob mentioned earlier has been a real driver of activity and success within the Los Angeles market. When we look at how spreads are trending across the market, I would say we are seeing rents comp up in Beverly Hills.
Angela Aman: Yeah, Eliott will give some more specific commentary on mark to market. But what I would say, specifically, when you think about the Los Angeles market, is that that is a market in which we have been clear over the course of the last 18 to 24 months, that we had portfolio repositioning work to do. And it's the market where we've completed the most of the portfolio repositioning work by selling an asset in Santa Monica, by now selling Sunset Media Center in Hollywood, and by buying Maple Plaza, which Rob mentioned earlier has been a real driver of activity and success within the Los Angeles market. When we look at how spreads are trending across the market, I would say we are seeing rents comp up in Beverly Hills.
Speaker #5: Yeah , it will give some more specific commentary on mark to market , but what I would say specifically , when you think about the Los Angeles market , is that that is a market in which we have been clear over the course of the had 18 to 24 months that we last portfolio repositioning work to do , the market and it's where we've completed the most of the portfolio repositioning work by selling an asset in Santa Monica .
Speaker #5: By now selling Sunset Media Center in Hollywood, and by buying Maple Plaza, which Rob mentioned earlier, has been a real driver of activity and success within the Los Angeles market.
Speaker #5: When we look at how spreads are trending across the market, I would say we are seeing rents comp up in Beverly Hills.
Angela Aman: You know, not huge numbers, but certainly above prior rents and, and marginally above where we underwrote rents for that project. We're seeing rents comp up nicely in Long Beach, where we've got a significant amount of activity. So despite, you know, sort of pressure on the Los Angeles market overall, our portfolio is doing much better than it did a year ago, in part because of the capital recycling activity that we've completed, and because now we've got opportunities within the Los Angeles market, in submarkets where there is a lot of activity and where our in-place rents are reasonably compelling.
Angela Aman: You know, not huge numbers, but certainly above prior rents and, and marginally above where we underwrote rents for that project. We're seeing rents comp up nicely in Long Beach, where we've got a significant amount of activity. So despite, you know, sort of pressure on the Los Angeles market overall, our portfolio is doing much better than it did a year ago, in part because of the capital recycling activity that we've completed, and because now we've got opportunities within the Los Angeles market, in submarkets where there is a lot of activity and where our in-place rents are reasonably compelling.
Speaker #5: You know , not huge numbers , but above certainly prior rents and marginally above where we rents for that underwrote project . We're seeing rents come up nicely in in Long Beach , where we've got a significant amount of activity .
Speaker #5: So despite , you know , sort of pressure on the Los Angeles market overall , our portfolio is doing much better than it did a year ago , in part because of the capital recycling activity that we've completed .
Speaker #5: And because now we got opportunities within the Los Angeles market and submarkets, where there is a lot of activity and in-place where rents are reasonably compelling.
Eliott Trencher: ... Hey, Blaine. So if we look at it market by market, LA and San Francisco are about 10% above market. San Diego and Washington were about 5% below market, and then, Austin is about 15% below market.
Eliott Trencher: ... Hey, Blaine. So if we look at it market by market, LA and San Francisco are about 10% above market. San Diego and Washington were about 5% below market, and then, Austin is about 15% below market.
Speaker #1: Is . So if we look at it market by market , LA and San Francisco are about 10% above market . San Diego and Washington were about 5% below market .
Speaker #1: And then Austin is about 15% below market.
Anthony Paolone: Okay, great. That's very helpful. Second question. Angela, can you just comment a little bit about where each of your markets are politically, which of them you think are providing the best environments for businesses and their employees, and what specific improvement you've seen in the time that you've been at Kilroy?
Blaine Heck: Okay, great. That's very helpful. Second question. Angela, can you just comment a little bit about where each of your markets are politically, which of them you think are providing the best environments for businesses and their employees, and what specific improvement you've seen in the time that you've been at Kilroy?
Speaker #7: Okay , great . That's very helpful . Second question , Angela , can you just comment a little bit about where each of your markets are politically ?
Speaker #7: Which of them do you think are providing the best environments for businesses and their employees, and what specific improvements have you seen in the time that you've been at Kilroy?
Angela Aman: Yeah, I mean, San Francisco clearly has had, you know, the biggest story and the biggest momentum, over the course of the last couple of years. The new mayor, the board of supervisors, have really been working together, to put forward, I think, policies that are, yes, good for the business environment, but good for the community at large within that market. We've seen a real change in approach, to, you know, how they're interacting with businesses and interacting with developers, in particular in the city.
Angela Aman: Yeah, I mean, San Francisco clearly has had, you know, the biggest story and the biggest momentum, over the course of the last couple of years. The new mayor, the board of supervisors, have really been working together, to put forward, I think, policies that are, yes, good for the business environment, but good for the community at large within that market. We've seen a real change in approach, to, you know, how they're interacting with businesses and interacting with developers, in particular in the city.
Speaker #5: Yeah , I mean , San Francisco clearly has had , you know , the biggest story and the biggest momentum over the course of the last couple of years , the new mayor , the Board of Supervisors have really been working together to put forward , I think , policies that are , yes , good for the business environment but good for the community at large .
Speaker #5: Within that market, we've seen a real change in approach to how they're interacting with businesses, and interacting with developers in particular in the city.
Angela Aman: And, you know, that's sort of been, you know, the thread behind a lot of the work we're doing at Flower Mart right now, is to, to engage with the city in a way that we think can really, help, you know, get a project off the ground in the Central SoMa district as, as quickly as possible, and do so in a way, from an execution standpoint, that can be best for the community at large. So that's clearly the market where we've seen the most momentum, and additional progress over the last couple of years, without question.
Angela Aman: And, you know, that's sort of been, you know, the thread behind a lot of the work we're doing at Flower Mart right now, is to, to engage with the city in a way that we think can really, help, you know, get a project off the ground in the Central SoMa district as, as quickly as possible, and do so in a way, from an execution standpoint, that can be best for the community at large. So that's clearly the market where we've seen the most momentum, and additional progress over the last couple of years, without question.
Speaker #5: And , you know , that's sort of been , you know , the thread behind a lot of the work we're doing at Flower Mart right now is to to engage with the city in a way that we think can really help , you know , get a project off the ground in the Soma central district as quickly as possible .
Speaker #5: And do so in a way, from an execution standpoint, that can be best for the community at large. So that's clearly the market where we've seen the most momentum and additional progress over the last couple of years.
Speaker #5: Without question .
Operator: Thank you. Our next question comes from Seth Bergey with Citigroup. Seth, please go ahead.
Operator: Thank you. Our next question comes from Seth Bergey with Citigroup. Seth, please go ahead.
Speaker #3: Thank you. Our next question comes from Seth Bowie with Citigroup. Seth, please go ahead.
Seth Eugene Bergey: Hey, thanks for taking my question. Angela, I think in your prepared remarks, you talked a little bit about kind of the IPO market and, M&A environment for life science. I was wondering, just with KOP, too, if you could comment a little bit more on, you know, any changes in, in the number of tours that have gone on, you know, and just anything specifically within the pipeline as it relates to life science.
Seth Bergey: Hey, thanks for taking my question. Angela, I think in your prepared remarks, you talked a little bit about kind of the IPO market and, M&A environment for life science. I was wondering, just with KOP, too, if you could comment a little bit more on, you know, any changes in, in the number of tours that have gone on, you know, and just anything specifically within the pipeline as it relates to life science.
Speaker #6: Hey , thanks for taking my question , Angela . I think in your prepared remarks , you talked a little bit about kind of the IPO market and M&A environment for life science .
Speaker #6: I was wondering , just with if you could comment a little bit on any , you know , changes more the number of have gone tours that , you know , on and just anything specifically within the pipeline as it relates to life science ?
Angela Aman: Yeah, I'll ask Rob to jump in here a little bit. But what I would say is, you know, I think the leasing progress we made during 2025 clearly demonstrates that the team at KOP has been exceptionally active and busy, you know, fielding requests and tour activity and prospects from all the tenants we closed last year, but certainly a much broader set behind that. We feel really good about the pipeline at KOP as we head into 2026, particularly for the remaining vacancy within the multi-tenant building. Feel like we've got great momentum and visibility behind continued leasing there. And as I mentioned, then we'll have the one full building to go and really feel great about how that project or that building sits within the broader project.
Angela Aman: Yeah, I'll ask Rob to jump in here a little bit. But what I would say is, you know, I think the leasing progress we made during 2025 clearly demonstrates that the team at KOP has been exceptionally active and busy, you know, fielding requests and tour activity and prospects from all the tenants we closed last year, but certainly a much broader set behind that. We feel really good about the pipeline at KOP as we head into 2026, particularly for the remaining vacancy within the multi-tenant building. Feel like we've got great momentum and visibility behind continued leasing there. And as I mentioned, then we'll have the one full building to go and really feel great about how that project or that building sits within the broader project.
Speaker #5: Yeah, I'll ask Rob to jump in here a little bit. But what I would say is, I think the leasing progress we made during 2025 clearly demonstrates that the team at KRC has been exceptionally active and busy.
Speaker #5: You know, fielding requests and tours, activity and prospects from all the tenants. We closed last year, but certainly a much broader set than that.
Speaker #5: We feel really good about the pipeline at COP as we head into 2026, particularly for the remaining vacancy within the multi-tenant building.
Speaker #5: Feel like we've got great momentum and visibility behind continued leasing there. And as I mentioned, then we'll have the one full building to go, and really feel great about how that project, or that building, fits within the broader project.
Angela Aman: So we're feeling great about not only what we accomplished, but about the pipeline from here, and I'll let Rob add to that.
Angela Aman: So we're feeling great about not only what we accomplished, but about the pipeline from here, and I'll let Rob add to that.
Speaker #5: So we're feeling great about not only what we accomplished, but about the pipeline from here. And I'll let Rob add to that.
Robert Paratte: Hi, Seth. I don't have much to add to what Angela said. You know, our pipeline has remained consistent overall, and even though we've executed the 300+ thousand feet we did, there are. You know, the pipeline has refilled, and so our team there, boots on the ground, are responding, you know, via paper to proposals and things like that. Our tour activity continues to be consistent in terms of, you know, every week, every other week, someone new is coming to the market. And, you know, the remarks I made last quarter hold through today, that the project's really attracting a lot of attention, Bay Area wide from a variety of users. So, you know, we're excited about what we see on the pipeline in 2026, and we're completely focused, as we were in 2025, on executing.
Rob Paratte: Hi, Seth. I don't have much to add to what Angela said. You know, our pipeline has remained consistent overall, and even though we've executed the 300+ thousand feet we did, there are. You know, the pipeline has refilled, and so our team there, boots on the ground, are responding, you know, via paper to proposals and things like that. Our tour activity continues to be consistent in terms of, you know, every week, every other week, someone new is coming to the market. And, you know, the remarks I made last quarter hold through today, that the project's really attracting a lot of attention, Bay Area wide from a variety of users. So, you know, we're excited about what we see on the pipeline in 2026, and we're completely focused, as we were in 2025, on executing.
Speaker #1: Hi, said. I don't have much to add.
Speaker #7: Add to what Angela .
Speaker #1: Said . You know , our pipeline has remained consistent overall , and even though we've executed the 300 plus thousand feet , we did , there are you know , the pipeline has refilled and so our team there , boots on the ground are responding , you know , via paper to proposals and things like that .
Speaker #1: Our tour activity continues to be consistent in terms of , you know , every week , every other week , someone new is coming to the market and , you know , the remarks I made last quarter hold true today that the really attracting a lot of projects attention , Bay area wide from a variety of users .
Speaker #1: So, you know, we're excited about what we see on the pipeline in '26. And we're completely focused, as we were in '25, on executing.
Seth Eugene Bergey: Thanks. And then maybe moving towards your guidance. You know, I think your guidance implies, you know, kind of $175 million of dispositions that you haven't announced. You know, just kind of as you kind of look across the portfolio, are those kind of targeted in specific markets? And, you know, just as the markets kind of continue to recover, can you talk a little bit about what type of capital is in the market that's interested in buying? You know, and just the bro- the depth of the, the buyer pool and how that's changed at all.
Seth Bergey: Thanks. And then maybe moving towards your guidance. You know, I think your guidance implies, you know, kind of $175 million of dispositions that you haven't announced. You know, just kind of as you kind of look across the portfolio, are those kind of targeted in specific markets? And, you know, just as the markets kind of continue to recover, can you talk a little bit about what type of capital is in the market that's interested in buying? You know, and just the bro- the depth of the, the buyer pool and how that's changed at all.
Speaker #6: Thanks . And then maybe moving towards your guidance , I think your guidance implies kind of 175 million of haven't announced . dispositions that you You know , kind of just as you kind of look across the portfolio , are those kind of targeted and specific markets and , you know , just as the markets kind of continue to recover .
Speaker #6: Can you talk a little bit about what type of capital is in the market that's interested in buying, you know, and just the depth of the buyer pool and how that's changed at all?
Eliott Trencher: Hey, Seth, it's Eliott. So the buyer pool has definitely improved. We've seen more capital. We've touched on prior calls, how we're seeing more institutional capital come in, and some of the results of that is that transaction size is able to grow. I think San Francisco is the best example of this, where deal size continues to creep up in a good way. So we think we have a lot of options for what that means, and we're gonna keep using the same sort of approach that we have in the past, is evaluate the entire portfolio, project forward where we think returns are gonna be at by asset, and look for where we think we can get the most efficient pricing. So that, that's our plan for 2026.
Eliott Trencher: Hey, Seth, it's Eliott. So the buyer pool has definitely improved. We've seen more capital. We've touched on prior calls, how we're seeing more institutional capital come in, and some of the results of that is that transaction size is able to grow. I think San Francisco is the best example of this, where deal size continues to creep up in a good way. So we think we have a lot of options for what that means, and we're gonna keep using the same sort of approach that we have in the past, is evaluate the entire portfolio, project forward where we think returns are gonna be at by asset, and look for where we think we can get the most efficient pricing. So that, that's our plan for 2026.
Speaker #1: Hey, Seth, it's Elliott. So, the...
Speaker #2: The buyer .
Speaker #1: Pool has definitely improved. We've seen more capital, as we touched on prior calls. We're seeing more institutional capital come in, and some of the results of that are that transaction size is able to grow.
Speaker #1: I think San Francisco is the best example of this, where deal size continues to creep up in a good way. So we think we have a lot of options for what that means.
Speaker #1: going to keep using the same sort of that we have approach in the past , evaluate the entire portfolio , project forward , where we think returns are going to be asset by asset , and look for where we think we can get the most pricing .
Speaker #1: That's efficient. So our plan for '26.
Angela Aman: Yeah. I mean, I think Eliott said it really well. We're seeing significant renewed institutional appetite and interest in West Coast commercial assets. In particular, I would say appetite in residential assets has continued, you know, over the course of the last couple of years. We've got a number of different opportunities available to us, and we're gonna be opportunistic as we execute going forward.
Angela Aman: Yeah. I mean, I think Eliott said it really well. We're seeing significant renewed institutional appetite and interest in West Coast commercial assets. In particular, I would say appetite in residential assets has continued, you know, over the course of the last couple of years. We've got a number of different opportunities available to us, and we're gonna be opportunistic as we execute going forward.
Speaker #5: Elliot, I think, yeah, I mean, said it really well. We're seeing significant renewed institutional appetite and interest in West Coast commercial assets in particular.
Speaker #5: I would say appetite and residential assets have continued , you know , over the course of the last couple of years , we've got a number of different opportunities available to us , and we're going to be opportunistic as we execute going forward .
Operator: Thank you. Our next question comes from Anthony Paolone with J.P. Morgan. Please go ahead. Your line is now open.
Operator: Thank you. Our next question comes from Anthony Paolone with J.P. Morgan. Please go ahead. Your line is now open.
Speaker #3: You. Our next question comes from Anthony Paolone with J.P. Morgan. Please go ahead. Your line is now open.
Anthony Paolone: Great, thanks. Hey, I was wondering if you'd help on page 29 of the supplemental. If we think about year-end 2026, after you do the land sales and Flower Mart comes out and so forth, like, what's left that you'll be capitalizing against at the end of this year?
Anthony Paolone: Great, thanks. Hey, I was wondering if you'd help on page 29 of the supplemental. If we think about year-end 2026, after you do the land sales and Flower Mart comes out and so forth, like, what's left that you'll be capitalizing against at the end of this year?
Speaker #9: Great . Thanks . I was wondering if you could help on on page 29 of the supplemental . If we think year end 2026 , after you do the land sales and Flower Mart comes out .
Speaker #9: And so forth, like, what's left that you'll be capitalizing against at the end of this year?
Robert Paratte: Yeah. Hey, Tony, this is Jeffrey. So when we give the cap interest guidance for this year, we've effectively said, anything that we're capitalizing on in Q4, we're gonna continue to keep capitalizing on. So the primary pieces of that are the future phases of KOP 3 and 4. So we've disclosed the, the big movers for Flower Mart in KOP 2 seasoning, and that was contemplated in Q4's actual results. And then as we look forward into 2026, there's no real changes to those assumptions.
Jeffrey Kuehling: Yeah. Hey, Tony, this is Jeffrey. So when we give the cap interest guidance for this year, we've effectively said, anything that we're capitalizing on in Q4, we're gonna continue to keep capitalizing on. So the primary pieces of that are the future phases of KOP 3 and 4. So we've disclosed the, the big movers for Flower Mart in KOP 2 seasoning, and that was contemplated in Q4's actual results. And then as we look forward into 2026, there's no real changes to those assumptions.
Speaker #2: Yeah . Hey , Tony , this is Jeffrey . So interest cap guidance for this year , we've effectively said anything that we're capitalizing on Q4 , we're going to continue to keep capitalizing on .
Speaker #2: So the primary pieces of that are the future phases of copy three and four. So we've disclosed the movers for Flower Mart and copy two season.
Speaker #2: And that was contemplated in Q4 as actual results. And then, as we look forward into 2026, there's no real changes to those assumptions.
Angela Aman: Yeah, I mean, the capitalized interest guidance this year really is Flower Mart and KOP. There's effectively nothing else being capitalized or assumed to be capitalized in 2026.
Angela Aman: Yeah, I mean, the capitalized interest guidance this year really is Flower Mart and KOP. There's effectively nothing else being capitalized or assumed to be capitalized in 2026.
Speaker #5: Yeah , I mean , the capitalized interest guidance this year really is Flower Mart . And copy . There's effectively nothing else being capitalized or assumed to be capitalized in 2026 .
Anthony Paolone: Okay, so all these other ones stay in there with the exception of the sales?
Anthony Paolone: Okay, so all these other ones stay in there with the exception of the sales?
Speaker #9: Okay. So all these other ones stay in there, with the exception of the sales.
Angela Aman: Yeah, I mean, we may be holding them, but because we're not actively pursuing development of some of these parcels as we assess highest and best use and other things, we're not capitalizing on them. So some of them will be sold, and when they're sold, because we're not capitalizing on them, that will all be upside. You know, we'll be removing sort of a drag that's sitting within that NOI from development guidance we got.
Angela Aman: Yeah, I mean, we may be holding them, but because we're not actively pursuing development of some of these parcels as we assess highest and best use and other things, we're not capitalizing on them. So some of them will be sold, and when they're sold, because we're not capitalizing on them, that will all be upside. You know, we'll be removing sort of a drag that's sitting within that NOI from development guidance we got.
Speaker #5: Yeah , I mean , we we may be holding them , but because we're not actively pursuing development of some of these parcels as we assess highest and best use and other things , we're not capitalizing on them .
Speaker #5: So some of them will be sold . And when they're sold , because we're not capitalizing on them , that will all be We'll upside .
Speaker #5: Be a removing sort of drag on that sitting within that NOI from development guidance. We got.
Operator: Thank you. The next question comes from Vikram Malhotra with Mizuho. Please go ahead. Your line is now open.
Operator: Thank you. The next question comes from Vikram Malhotra with Mizuho. Please go ahead. Your line is now open.
Speaker #3: Thank you. The next question comes from Vikram Malhotra with Mizuho. Please go ahead, your line is now open.
Vikram Malhotra: Morning. Thanks for taking the question. I guess just, you know, first one, going back to, you know, KOP, just curious on two things. Sort of you look at the pipeline you mentioned, you know, what, what are the competitive spaces that you're sort of, you know, pitching against? And is there a point at which you'd maybe perhaps considering monetizing KOP in terms of a potential sale?
Vikram Malhotra: Morning. Thanks for taking the question. I guess just, you know, first one, going back to, you know, KOP, just curious on two things. Sort of you look at the pipeline you mentioned, you know, what, what are the competitive spaces that you're sort of, you know, pitching against? And is there a point at which you'd maybe perhaps considering monetizing KOP in terms of a potential sale?
Speaker #10: Morning . Thanks for taking the I guess just , first one , going back to copy . Just curious on two things . Sort of .
Speaker #10: You look at the pipeline , you mentioned . You know , what are the competitive spaces that you're sort of , you know , pitching against .
Speaker #10: And is there a point at which you'd maybe, perhaps, consider monetizing copy in terms of a potential sale?
Angela Aman: Well, yeah, I'll take the last question first, and then I reiterate what I said in my prepared remarks. We continue to be big believers in the long-term growth and value creation potential of this project. I believe we've created a tremendous amount of value in phase one. Appreciate the 5.5% yield on phase two is a challenging number in the context of the current market. But we fully believe that with the leases we're signing today, over time, we're also gonna create a ton of value in phase two, and future phases of KOP will be dependent on us getting to yields that make sense on future development and being substantially pre-leased and de-risked. So we feel great when we think about the campus overall.
Angela Aman: Well, yeah, I'll take the last question first, and then I reiterate what I said in my prepared remarks. We continue to be big believers in the long-term growth and value creation potential of this project. I believe we've created a tremendous amount of value in phase one. Appreciate the 5.5% yield on phase two is a challenging number in the context of the current market. But we fully believe that with the leases we're signing today, over time, we're also gonna create a ton of value in phase two, and future phases of KOP will be dependent on us getting to yields that make sense on future development and being substantially pre-leased and de-risked. So we feel great when we think about the campus overall.
Speaker #5: Well , yeah , I'll take the last question first . And I reiterate what I said in prepared my remarks . We continue to be big believers in the long term growth and value creation potential of this project .
Speaker #5: I believe we've created a tremendous amount of value in phase one. Appreciate the 5.5% yield on phase two is a challenging number in the context of the current market.
Speaker #5: But we fully believe that with the leases we're signing today, over time, we're also going to create a ton of value.
Speaker #5: In phase two, and future phases, copy will be dependent on us getting to yields that make sense on future development and being substantially pre-leased and de-risked.
Speaker #5: So, we feel great when we think about the campus overall. South San Francisco remains one of the primary life science hubs in the country, and we have, I think, the most compelling project within that submarket.
Angela Aman: South San Francisco remains one of the primary life science hubs in the country, and we have, I believe, the most compelling projects within that submarket. And we believe over time, we're gonna create a lot of value from that project. So, you know, I'd start there. I'll leave it to Rob to answer the pipeline questions again.
Angela Aman: South San Francisco remains one of the primary life science hubs in the country, and we have, I believe, the most compelling projects within that submarket. And we believe over time, we're gonna create a lot of value from that project. So, you know, I'd start there. I'll leave it to Rob to answer the pipeline questions again.
Speaker #5: And we believe, over time, we're going to create a lot of value from that project. So, you know, I'd start there.
Speaker #5: I'll leave it to Rob to answer the pipeline questions again.
Robert Paratte: Yeah, I don't have much to add to what I said. The pipeline is continuing to grow and, we're executing, we're making market deals, positive NAR, and we're just going to keep aggressively going out there and, you know, securing our share of the deals.
Rob Paratte: Yeah, I don't have much to add to what I said. The pipeline is continuing to grow and, we're executing, we're making market deals, positive NAR, and we're just going to keep aggressively going out there and, you know, securing our share of the deals.
Speaker #1: Yeah .
Speaker #7: I don't have much to add . I mean , to what I said , the pipeline is continuing to grow and we're executing .
Speaker #7: We're making market deals positive, and we're just going to keep aggressively going out there. And you know, securing our share of the deals.
Angela Aman: Yeah. And I think the only other thing I'd say is, you know, we can't share anything more specific about the tenants that are in the future pipeline, but we spent a lot of time in our prepared remarks talking about the quality of tenancy that we've already added at the project in phase one. A real mix of tenants that are gonna provide sort of that innovation ecosystem that's gonna drive future leasing growth of the project, and balancing that with the stability that an institutional lease with someone like UCSF and their credit quality provides. So I think the leasing that we've done to date in phase two has been highly strategic and really puts us in the best position possible to drive enhanced value at phase two and future phases of the project as well.
Angela Aman: Yeah. And I think the only other thing I'd say is, you know, we can't share anything more specific about the tenants that are in the future pipeline, but we spent a lot of time in our prepared remarks talking about the quality of tenancy that we've already added at the project in phase one. A real mix of tenants that are gonna provide sort of that innovation ecosystem that's gonna drive future leasing growth of the project, and balancing that with the stability that an institutional lease with someone like UCSF and their credit quality provides. So I think the leasing that we've done to date in phase two has been highly strategic and really puts us in the best position possible to drive enhanced value at phase two and future phases of the project as well.
Speaker #5: Yeah, and I think the thing I'd say is, you know, we can't share anything more specific about the tenants that are in the pipeline.
Speaker #5: But we've spent a lot of time in our prepared remarks talking about the quality of tenancy that we've already added to the project. In phase one, there's a real mix of tenants that are going to provide sort of that innovation-driven ecosystem that's going to lead future growth at the project, and balancing that with the stability that an institutional lease with someone like UCSF and their credit quality provides.
Speaker #5: So, I think the leasing that we've done to date in phase two has been highly strategic and really puts us in the best position possible to drive enhanced value at phases of phase two and future projects as well.
Vikram Malhotra: Okay, that's helpful. And then just maybe a broader question. You know, while there are a lot of AI tenants in the market, like you highlighted, I'm just wondering, across the broader Bay Area and in San Francisco City, there's probably a market concern about just software, and, you know, the need or lack of need for future hiring in terms of software developers, engineers. I don't know if you've had conversations with any of your tenant base you can share, just how are they thinking about space needs, especially tenants that fit into that broad software category?
Vikram Malhotra: Okay, that's helpful. And then just maybe a broader question. You know, while there are a lot of AI tenants in the market, like you highlighted, I'm just wondering, across the broader Bay Area and in San Francisco City, there's probably a market concern about just software, and, you know, the need or lack of need for future hiring in terms of software developers, engineers. I don't know if you've had conversations with any of your tenant base you can share, just how are they thinking about space needs, especially tenants that fit into that broad software category?
Speaker #10: Okay . That's helpful . And then just maybe a broader question , you know , while there are a lot of AI tenants in the market like you highlighted , I'm just wondering across the broader Bay area , including San Francisco City , there's probably a market concern about just software .
Speaker #10: And , you know , the need or lack of need for future hiring in of terms developers software , engineers . I don't know if you've had conversations with any of your tenant base .
Speaker #10: You can share just how are they thinking about space needs, especially tenants that fit that broad software into category?
Angela Aman: Well, I'll say a few things, and then Eliott, Rob, Jeffrey, anybody can jump in, to augment this. But, you know, what we're seeing in the San Francisco market is clearly a tremendous amount of new business formation and growth, much of which is coming on the back of, you know, what's happened with AI, over the last few years. And we believe that's a, a really exciting dynamic we're seeing in the city. We continue-- We have tenants that we've, we've signed deals with from an AI perspective, that are already talking about expansion and growth, and there are a lot of additional new companies in the market thinking about, taking additional space.
Angela Aman: Well, I'll say a few things, and then Eliott, Rob, Jeffrey, anybody can jump in, to augment this. But, you know, what we're seeing in the San Francisco market is clearly a tremendous amount of new business formation and growth, much of which is coming on the back of, you know, what's happened with AI, over the last few years. And we believe that's a, a really exciting dynamic we're seeing in the city. We continue-- We have tenants that we've, we've signed deals with from an AI perspective, that are already talking about expansion and growth, and there are a lot of additional new companies in the market thinking about, taking additional space.
Speaker #5: Well , I'll say a few things and then Elliot , Rob , Jeffrey , anybody can jump in to augment this , but we're you know what seeing in the San Francisco market is clearly a tremendous amount of new business formation and growth .
Speaker #5: Much of which is coming on the back of what's happened with AI over the last few years. And we believe that's a really exciting dynamic we're seeing in the city.
Speaker #5: We continue. We have tenants that we've signed deals with from an AI perspective that are already talking about expansion and growth.
Speaker #5: there are And a lot of additional new companies in the market thinking about taking additional space . So right now , based on what we see and what we're actively navigating from a leasing transaction perspective , it has been and will continue to be a significant driver from an office using space capacity in the San Francisco market .
Angela Aman: So right now, based on what we see and what we're actively navigating from a leasing transaction perspective, it has been and will continue to be a significant driver from an office using space capacity in the San Francisco market over time. As it relates to some big tech platforms, where maybe that concern around job losses or how jobs are gonna be allocated is a little more amplified. Again, it's early days as it relates to how AI is gonna play out over the longer term, and you know, candidly, none of us have a crystal ball or know very specifically, but we do know that there are, you know, big tech companies within the broader San Francisco Bay region that have recently done things like pull sublease space off the market with the intent to occupy.
Angela Aman: So right now, based on what we see and what we're actively navigating from a leasing transaction perspective, it has been and will continue to be a significant driver from an office using space capacity in the San Francisco market over time. As it relates to some big tech platforms, where maybe that concern around job losses or how jobs are gonna be allocated is a little more amplified. Again, it's early days as it relates to how AI is gonna play out over the longer term, and you know, candidly, none of us have a crystal ball or know very specifically, but we do know that there are, you know, big tech companies within the broader San Francisco Bay region that have recently done things like pull sublease space off the market with the intent to occupy.
Speaker #5: Over time, as it relates to some big tech platforms where concern may be that around job losses or how jobs are going to be allocated, is a little more amplified.
Speaker #5: early Again , it's days as it relates to how going to play AI is out over the longer term . And , you know , candidly , none of us have a crystal ball or know very specifically , but we do know that there are , you know , big tech companies within the broader San Francisco Bay region that have recently done things like pull , sublease , space off the market with the intent to occupy .
Angela Aman: So we can only be responsive to the signals that are in the market, but I think the signals we're seeing in the real estate market and the office market in San Francisco or the Bay Area in general, do not support the thesis that we are retrenching from a space perspective.
Angela Aman: So we can only be responsive to the signals that are in the market, but I think the signals we're seeing in the real estate market and the office market in San Francisco or the Bay Area in general, do not support the thesis that we are retrenching from a space perspective.
Speaker #5: So, we can only be responsive to the signals that are in the market. But I think the signals we're seeing in the real estate market, and the office market in San Francisco, or the Bay Area in general, do not support the thesis that we are retrenching from a space perspective.
Robert Paratte: Two points I'd add are that, you know, again, as I said, leasing is going very strong in San Francisco. Two-thirds of the leases, large leases done, which is 30,000sq ft or greater, done in San Francisco in 2025, were expansion focused. So I think that's a really important piece of color. Also, I'd just look at. We usually give you some kind of sense of how many deals over 100,000sq ft.
Rob Paratte: Two points I'd add are that, you know, again, as I said, leasing is going very strong in San Francisco. Two-thirds of the leases, large leases done, which is 30,000sq ft or greater, done in San Francisco in 2025, were expansion focused. So I think that's a really important piece of color. Also, I'd just look at. We usually give you some kind of sense of how many deals over 100,000sq ft.
Speaker #7: I two points I'd add are that , you know , again , as I said , leasing is going very strong in San Francisco .
Speaker #7: Two thirds of the leases, large leases done, which is 30,000 ft² or greater, done in San Francisco in '25, were expansion focused.
Speaker #7: So, I think that's a really important piece of color. Also, just to look at, we usually give you some kind of sense of how many deals over the 100,000 ft are in market.
Jeffrey Kuehling: ... are in the market in 2025, there were 16 deals over 100,000 feet that got completed, and, and some bigger ones. So that metric of the 100,000 feet and 16 goes right back to 2018, 2017, sort of the boom years in the last cycle. So all things are pointing in the right direction, and, you know, we're, we're planning to capitalize on that.
Rob Paratte: ... are in the market in 2025, there were 16 deals over 100,000 feet that got completed, and, and some bigger ones. So that metric of the 100,000 feet and 16 goes right back to 2018, 2017, sort of the boom years in the last cycle. So all things are pointing in the right direction, and, you know, we're, we're planning to capitalize on that.
Speaker #7: In 2025, there were 16 deals over 100,000 feet that got completed, and some bigger ones. So that metric of 100,000 feet in 16 goes right back to 2018, 2017, sort of the boom years in the last cycle.
Speaker #7: So, all things are pointing in the right direction, and, you know, we're planning to capitalize on that.
Operator: Thank you. The next question comes from Brendan Lynch with Barclays. Go ahead, Brendan.
Operator: Thank you. The next question comes from Brendan Lynch with Barclays. Go ahead, Brendan.
Speaker #3: Thank you. The next question comes from Brendan Lynch with Barclays. Brendan.
Brendan Lynch: Great. Thank you for taking my question. I want to follow up on Jeffrey's comment about the Riot Games renewal. Are there any other unique renewal considerations, or fixed rate options, or anything like that, that we should expect to impact the re-leasing spreads in 2026?
Brendan Lynch: Great. Thank you for taking my question. I want to follow up on Jeffrey's comment about the Riot Games renewal. Are there any other unique renewal considerations, or fixed rate options, or anything like that, that we should expect to impact the re-leasing spreads in 2026?
Speaker #11: Great, thank you for taking my question. I want to follow up on Jeffrey's comment about the Riot Games renewal. Are there any other unique renewal considerations—fixed rate, or options, or anything like that—that we should expect to impact the releasing spreads in 2026?
Angela Aman: Yeah, look, the spreads in any given quarter are gonna depend on the special mix of leases we have in that quarter. But I don't have anything in particular to point out to you right now. And as I look at the activity in our very near-term pipeline, we actually feel really good about where our spreads are shaking out. Again, that's the mix of leases that have already been executed in Q1, or we expect to execute in the first quarter or two of this year. But certainly, as we pointed out, and Jeffrey pointed out in his comments, one lease sometimes has the ability to change what those metrics look like. But nothing in particular I'd point out to you. And again, the near-term pipeline, we feel pretty good about from a rent spread perspective.
Angela Aman: Yeah, look, the spreads in any given quarter are gonna depend on the special mix of leases we have in that quarter. But I don't have anything in particular to point out to you right now. And as I look at the activity in our very near-term pipeline, we actually feel really good about where our spreads are shaking out. Again, that's the mix of leases that have already been executed in Q1, or we expect to execute in the first quarter or two of this year. But certainly, as we pointed out, and Jeffrey pointed out in his comments, one lease sometimes has the ability to change what those metrics look like. But nothing in particular I'd point out to you. And again, the near-term pipeline, we feel pretty good about from a rent spread perspective.
Speaker #5: Look, I think the spreads in any given quarter are going to depend on the special mix of leases we have in that quarter.
Speaker #5: But I don't have anything in particular to point out to you right now. And as I look at the activity in our very near pipeline, we actually feel really good about where spreads are shaking out. Again, that's the mix of leases that have already been executed in Q1.
Speaker #5: Are we expect to execute in the first quarter or two of this year , but certainly , as we pointed out and Jeffrey pointed out in his comments , one lease sometimes has the ability to change what those metrics look like .
Speaker #5: But nothing in particular . I would point out to you . And again , the near-term pipeline , we feel pretty good about from our perspective .
Brendan Lynch: Okay, great. Thanks. That's helpful. And maybe while we're talking about the pipeline, congratulations on it being up 65% year over year. Can you tell us what that means in terms of square footage and what your historic conversion rate of that pipeline has been?
Brendan Lynch: Okay, great. Thanks. That's helpful. And maybe while we're talking about the pipeline, congratulations on it being up 65% year over year. Can you tell us what that means in terms of square footage and what your historic conversion rate of that pipeline has been?
Speaker #11: Okay , great . Thanks . That's helpful . Maybe while we're talking about the pipeline . Congratulations on being up 65% year over year .
Speaker #11: Can you tell us what that means in terms of square footage, and what your historic conversion rate of that has been, pipeline?
Angela Aman: Yeah, we haven't typically given sort of the aggregate, you know, square footage of the pipeline, in, in part to your point, because at any different point, it's, you know, a very different mix of, you know, early stage deals, middle stage deals, or late stage deals. But as I mentioned in response to a prior question about our lease expirations, we feel really good about the near-term pipeline that's embedded within that number, and our ability to, to execute, and, meet or exceed our occupancy guidance as we move through the year.
Angela Aman: Yeah, we haven't typically given sort of the aggregate, you know, square footage of the pipeline, in, in part to your point, because at any different point, it's, you know, a very different mix of, you know, early stage deals, middle stage deals, or late stage deals. But as I mentioned in response to a prior question about our lease expirations, we feel really good about the near-term pipeline that's embedded within that number, and our ability to, to execute, and, meet or exceed our occupancy guidance as we move through the year.
Speaker #5: typically ? Yeah , we haven't aggregate square footage of the pipeline in part to your point , because at any point it's very different mix of , you know , early stage deals , middle stage deals or late stage deals , but as I mentioned , in response to a prior question about our lease expirations , we feel really good about the near-term pipeline that's embedded within that number .
Speaker #5: given sort
Speaker #5: And our ability to execute and meet or exceed our occupancy guidance as we move through the year.
Operator: Thank you. Our next question comes from Caitlin Burrows with Goldman Sachs. Caitlin, please go ahead.
Operator: Thank you. Our next question comes from Caitlin Burrows with Goldman Sachs. Caitlin, please go ahead.
Speaker #3: Thank you. Our next question comes from Caitlin Burrows with Goldman Sachs. Caitlin, please go ahead.
Caitlin Burrows: Hi, good morning. Maybe as you guys look at the debt maturities that you have in the second half, wondering if you can discuss your plans for those, and what would make you use disposition proceeds on debt reduction versus using those proceeds for acquisitions.
Caitlin Burrows: Hi, good morning. Maybe as you guys look at the debt maturities that you have in the second half, wondering if you can discuss your plans for those, and what would make you use disposition proceeds on debt reduction versus using those proceeds for acquisitions.
Speaker #12: Hi, good morning. Maybe as you guys look at the debt maturities that you have in the second half, I was wondering if you can discuss your plans for those, and what would make you use disposition proceeds on debt reduction versus using those proceeds for acquisitions?
Jeffrey Kuehling: Hi, Caitlin, it's Jeffrey. So we have three maturities in the back half of the year. Two of them are private placement notes. So the wonderful part about that for us is we have a bunch of flexibility as to the timing of retiring them. So as proceeds come in from the disposition program, I think part of the question is gonna be, what are the immediate opportunities for cash? And as we said in our prepared remarks, we're gonna evaluate pretty much every opportunity out there. So if it's acquisition, share buybacks, reducing debt, all of them are on the table. So at a point in time in the year, depending on kind of where our marginal cost of capital sits, we'll make that decision.
Jeffrey Kuehling: Hi, Caitlin, it's Jeffrey. So we have three maturities in the back half of the year. Two of them are private placement notes. So the wonderful part about that for us is we have a bunch of flexibility as to the timing of retiring them. So as proceeds come in from the disposition program, I think part of the question is gonna be, what are the immediate opportunities for cash? And as we said in our prepared remarks, we're gonna evaluate pretty much every opportunity out there. So if it's acquisition, share buybacks, reducing debt, all of them are on the table. So at a point in time in the year, depending on kind of where our marginal cost of capital sits, we'll make that decision.
Speaker #2: Caitlin , Hi , it's Jeffrey , so we have three maturities in the of the back half year . Two of them are private notes .
Speaker #2: placement wonderful part So the about that for us is we have a bunch of flexibility as to the timing of retiring them . So as proceeds come in from the disposition program , I think part of the question is going to be , what are the immediate opportunities for cash ?
Speaker #2: And as we said in our prepared remarks, we're going to evaluate pretty much every opportunity out there. So if it's acquisition, share buybacks, or reducing debt.
Speaker #2: All of them are on the table . So at a point in time in the year , depending on kind of where our of capital sits , we'll make marginal cost that decision .
Angela Aman: Yeah, I think that's very well said. The only other thing I'd add to that is that to the extent we are, you know, exercising sort of the share buyback opportunity, that would be done in a leverage neutral, so slightly de-leveraging way. So those two options would need to be paired together.
Angela Aman: Yeah, I think that's very well said. The only other thing I'd add to that is that to the extent we are, you know, exercising sort of the share buyback opportunity, that would be done in a leverage neutral, so slightly de-leveraging way. So those two options would need to be paired together.
Speaker #5: Yeah I think that's very well said . The only other thing I'd add to that is that to the extent we are , you know , exercising sort of the share buyback opportunity , that would be done in a leveraged neutral to slightly deleveraging way .
Speaker #5: So those two options would need to be paired together.
Caitlin Burrows: Got it. Okay. And then, back earlier in the call, Jeffrey, I think you mentioned that recoveries would be a headwind in 2026. So assuming you did say that, I was just wondering if you could go through why is that, and is it related to occupancy levels? Or you might have said something about real estate tax appeals, but yeah.
Caitlin Burrows: Got it. Okay. And then, back earlier in the call, Jeffrey, I think you mentioned that recoveries would be a headwind in 2026. So assuming you did say that, I was just wondering if you could go through why is that, and is it related to occupancy levels? Or you might have said something about real estate tax appeals, but yeah.
Speaker #12: Got it. Okay. And then, back earlier in the call, Jeffrey, I think you mentioned that recoveries would be a headwind in 2026.
Speaker #12: So, assuming you did say that, I was just wondering if you could go through that, and—is why is it related to levels.
Speaker #12: Or you might say something about occupancy, or have said real estate tax—yeah, appeals. But...
Jeffrey Kuehling: Yeah. So want to point back to some of our comments in calls earlier this year. We did have some pretty sizable tax refunds in Q2 and Q3 of 2025, which are gonna act as a headwind as we go into 2026. And then as we look at kind of the leasing pipeline and the activity that we're seeing, within our operating markets, it's very important for us to make sure that we're putting the right OpEx expenditures in the assets to make sure that we can get the best leasing activity and really present our assets in the right way. So you're gonna see a slight uptick in OpEx perspective, but that's really gonna be, I think, pretty impactful for how we drive revenue going forward.
Jeffrey Kuehling: Yeah. So want to point back to some of our comments in calls earlier this year. We did have some pretty sizable tax refunds in Q2 and Q3 of 2025, which are gonna act as a headwind as we go into 2026. And then as we look at kind of the leasing pipeline and the activity that we're seeing, within our operating markets, it's very important for us to make sure that we're putting the right OpEx expenditures in the assets to make sure that we can get the best leasing activity and really present our assets in the right way. So you're gonna see a slight uptick in OpEx perspective, but that's really gonna be, I think, pretty impactful for how we drive revenue going forward.
Speaker #2: Yeah. So I want to point back to some of our comments in calls earlier this year. We did have some pretty sizable tax refunds in Q2 and Q3 of 2025, which are going to act as a headwind as we go into 2026.
Speaker #2: And then, as we look at kind of the leasing pipeline and the activity that we're seeing within our operating markets, it's very important for us to make sure that we're putting the right CapEx expenditures in the assets to make sure that we can get the best leasing activity and really present our assets in the right way.
Speaker #2: So you're going to see a slight uptick in opex perspective, but that's really going to be, I think, pretty impactful for how we drive revenue going forward.
Operator: Thank you. The next question comes from Michael Carroll with RBC. Michael, please go ahead.
Operator: Thank you. The next question comes from Michael Carroll with RBC. Michael, please go ahead.
Speaker #3: Thank you. The next question comes from Michael Carroll with RBC. Michael, please go ahead.
Michael Carroll: Yeah, thanks. I want to circle back on your comments regarding the leasing pipeline. I appreciate the color on the increase over the past year, but has that improvement been pretty steady over the past 12 months? I'm trying to understand if the pipeline continues to build at these levels, or at what point could it plateau at the levels that you're talking about?
Michael Carroll: Yeah, thanks. I want to circle back on your comments regarding the leasing pipeline. I appreciate the color on the increase over the past year, but has that improvement been pretty steady over the past 12 months? I'm trying to understand if the pipeline continues to build at these levels, or at what point could it plateau at the levels that you're talking about?
Speaker #13: Yeah , thanks . I wanted to circle back on your comments regarding leasing pipeline . the I appreciate the color increase over the past on the but has that improvement been pretty steady over the past 12 months ?
Speaker #13: I'm just—I'm trying to understand if the pipeline continues to build at these levels, or at what point could it plateau at the levels that you're talking about?
Angela Aman: Yeah, the pipeline's pretty consistently grown over the last several quarters. We've had some big executions out of that pipeline as well and have more than backfilled that number. So we do feel like there's additional momentum to see at lease executions continue to improve, as well as the pipeline size continue to improve behind it. You know, what you heard from Rob is that, you know, we've got great activity and momentum in markets that have been consistently strong performers over the last two years, like Bellevue and San Diego. We've got markets where we've recently seen substantial activity and a real recovery, and I would put San Francisco, Seattle, Denny Regrade, and Fremont Lake Union in that bucket.
Angela Aman: Yeah, the pipeline's pretty consistently grown over the last several quarters. We've had some big executions out of that pipeline as well and have more than backfilled that number. So we do feel like there's additional momentum to see at lease executions continue to improve, as well as the pipeline size continue to improve behind it. You know, what you heard from Rob is that, you know, we've got great activity and momentum in markets that have been consistently strong performers over the last two years, like Bellevue and San Diego. We've got markets where we've recently seen substantial activity and a real recovery, and I would put San Francisco, Seattle, Denny Regrade, and Fremont Lake Union in that bucket.
Speaker #5: Yeah, the pipeline has pretty consistently grown over the last several quarters. We've had some big executions out of that pipeline as well, and have more than backfilled that number.
Speaker #5: So, we do feel like there's additional momentum to see at least executions continue to improve, as well as the pipeline size continue to improve behind it.
Speaker #5: You know , what you heard from Robert that , you know , we've got great activity and momentum in markets that have been consistently strong performers over the last few years , like Bellevue and San Diego .
Speaker #5: We've got markets where we've we've recently seen substantial activity and a real recovery . And I would put San Francisco and Seattle , Denny Regrade , Fremont Lake , Union in that bucket .
Angela Aman: Because of the portfolio allocation work we've done, our capital recycling work we've done in LA, we've got a lot more traction and activity in LA than we had 24 months ago. So it has been pretty broad-based across all of our markets, and I think there are good fundamental reasons why we're seeing that improvement in the pipeline. I would just reiterate that the pipeline has continued to grow despite the fact that executions have continued to grow as well, so we are more than backfilling that pipeline.
Angela Aman: Because of the portfolio allocation work we've done, our capital recycling work we've done in LA, we've got a lot more traction and activity in LA than we had 24 months ago. So it has been pretty broad-based across all of our markets, and I think there are good fundamental reasons why we're seeing that improvement in the pipeline. I would just reiterate that the pipeline has continued to grow despite the fact that executions have continued to grow as well, so we are more than backfilling that pipeline.
Speaker #5: And because of the portfolio allocation work we've done, our capital done in recycling work we've done in L.A., we've got a lot more traction than we had 24 months ago.
Speaker #5: So, it has been pretty broad-based across all of our markets. And I think there are good fundamental reasons why we're seeing that improvement in the pipeline.
Speaker #5: I would just reiterate pipeline that has continued to grow, despite the fact that executions have continued to grow as well. So we are more than backfilling that pipeline.
Michael Carroll: ... Oh, great. And then what about the breakout of the pipeline? I know you said that there is different categories of early stage and late stage type leasing activity. I mean, has all those categories kind of grown a similar amount, or has there been a focus where you're seeing more growth in the early stages, for example? I guess, what's the breakout, and how has that trended over the past 12 months?
Michael Carroll: ... Oh, great. And then what about the breakout of the pipeline? I know you said that there is different categories of early stage and late stage type leasing activity. I mean, has all those categories kind of grown a similar amount, or has there been a focus where you're seeing more growth in the early stages, for example? I guess, what's the breakout, and how has that trended over the past 12 months?
Speaker #13: Great . And then what about the breakout of the pipeline ? I know you said that there is different categories of early stage and late stage type leasing activity .
Speaker #13: I mean , has all those categories kind of grown in a similar amount , or has there been a focus where you're seeing more growth in the early stages , for example , I guess what's the breakout and how has that trended over the past 12 months ?
Angela Aman: Yeah, as the pipeline really started to accelerate, obviously, you start by seeing it really build in the early stage deals. And it's hard to get on a call like this and communicate a tremendous amount of conviction in those early stages, where you don't know how much of that is going to convert. Over the last couple of quarters, we have seen it sort of even out, and so you've seen what started earlier in this recovery as a real expansion of the early stage pipeline move to the mid stage pipeline and the late stage pipeline, and that's really what's underscored the elevated executions we've had over the last couple of quarters as well. So I think it's all consistent. It's playing out the way you would expect it to, I think, you know, just based on how transaction activity comes together.
Angela Aman: Yeah, as the pipeline really started to accelerate, obviously, you start by seeing it really build in the early stage deals. And it's hard to get on a call like this and communicate a tremendous amount of conviction in those early stages, where you don't know how much of that is going to convert. Over the last couple of quarters, we have seen it sort of even out, and so you've seen what started earlier in this recovery as a real expansion of the early stage pipeline move to the mid stage pipeline and the late stage pipeline, and that's really what's underscored the elevated executions we've had over the last couple of quarters as well. So I think it's all consistent. It's playing out the way you would expect it to, I think, you know, just based on how transaction activity comes together.
Speaker #5: Yeah . So pipeline really started to accelerate . Obviously , you start by seeing it really build in the early stage deals , and it's hard to get on a call like this .
Speaker #5: And communicate a tremendous amount of conviction in those early stages where you don't know how much of that is going to convert. Over the last couple of quarters, we have seen it sort of even out.
Speaker #5: And so you've seen what started what earlier in this recovery as a real expansion of the early-stage pipeline move to the mid-stage pipeline and the late-stage pipeline.
Speaker #5: And that's really what's underscored the elevated executions we've had over the last couple of quarters as well. So I think it's all consistent.
Speaker #5: It's playing out the way you would expect it to. I think, you know, just based on how transaction activity comes together.
Angela Aman: But we've continued to see it in, you know, really all three of those buckets and, continue to build that funnel with additional early stage deals that we believe, you know, are more likely than they might have been 24 months ago, to continue to move through the pipeline.
Angela Aman: But we've continued to see it in, you know, really all three of those buckets and, continue to build that funnel with additional early stage deals that we believe, you know, are more likely than they might have been 24 months ago, to continue to move through the pipeline.
Speaker #5: But we continue to see it in really all three of those buckets . And , you know , continue to build that funnel with additional early stage deals that we believe , are more likely than they might have been 24 months ago to continue to move through the pipeline .
Operator: Thank you. Our next question comes from John Kim with BMO. Please go ahead, John.
Operator: Thank you. Our next question comes from John Kim with BMO. Please go ahead, John.
Speaker #3: Thank you . Our next question comes from John Kim with BMO . Please go ahead . John .
John Kim: Thank you. On the Nautilus Campus, do you anticipate acquiring more life science assets, given there's a lot of the market from willing sellers, or was it really just focused this opportunity because of Torrey Pines? And I was wondering if you can give us the timing of the occupancy ramp to get to your upper, upper single digits yield.
John Kim: Thank you. On the Nautilus Campus, do you anticipate acquiring more life science assets, given there's a lot of the market from willing sellers, or was it really just focused this opportunity because of Torrey Pines? And I was wondering if you can give us the timing of the occupancy ramp to get to your upper, upper single digits yield.
Speaker #14: Thank you. On the Nautilus campus, do you anticipate acquiring more life science assets, given there's a lot of the market from willing it, really?
Speaker #14: sellers just Or is focused ? This opportunity because ? And I was Pines of Torrey wondering if you can give us the timing of the occupancy ramp to get to your upper , upper single digits , yield .
Angela Aman: Yeah, I would say, you know, look, we don't have any specific mandates to acquire life science to get to a certain percentage of the portfolio or anything like that. We, I think, have acted in a way that's been highly opportunistic, and we would continue to expect to navigate kind of capital deployment in that way as well. We're really thrilled about this opportunity. As I mentioned, I really view this as a generational opportunity to enter a market that's as tightly held as Torrey Pines is, and with enough scale, I think, to really be able to establish a presence there and continue to benefit not only life science projects we have in other submarkets within the San Diego portfolio, but even sort of the broader, more national reputation around life science.
Angela Aman: Yeah, I would say, you know, look, we don't have any specific mandates to acquire life science to get to a certain percentage of the portfolio or anything like that. We, I think, have acted in a way that's been highly opportunistic, and we would continue to expect to navigate kind of capital deployment in that way as well. We're really thrilled about this opportunity. As I mentioned, I really view this as a generational opportunity to enter a market that's as tightly held as Torrey Pines is, and with enough scale, I think, to really be able to establish a presence there and continue to benefit not only life science projects we have in other submarkets within the San Diego portfolio, but even sort of the broader, more national reputation around life science.
Speaker #5: Yeah . I you know , would say , look , we don't have any specific mandates to acquire life science to get to a certain percentage of the portfolio or anything like that .
Speaker #5: We , I think , have acted in a way that's been highly opportunistic , and we would continue to expect to to navigate deployment capital in that way as well .
Speaker #5: We're really thrilled about this opportunity . As I mentioned , I really view this as a generational opportunity to enter a market that's as tightly held as Torrey Pines is .
Speaker #5: And with enough scale , I think , to really to be able establish a presence there and continue to benefit not only life science projects we have in other submarkets within the San Diego portfolio , but even sort of the broader , more national reputation around life science .
Angela Aman: So I think this was a really interesting transaction that accomplished a lot for us strategically, but we certainly don't feel any mandate. And as we've talked about in our prepared remarks and in prior Q&A questions, you know, as we look at sort of the set of available capital deployment opportunities at this point in time, we're going to be very mindful of the signals we're receiving from both the public and private markets, and think we've got a lot of interesting opportunities on the table for capital deployment. And then, Eliott?
Angela Aman: So I think this was a really interesting transaction that accomplished a lot for us strategically, but we certainly don't feel any mandate. And as we've talked about in our prepared remarks and in prior Q&A questions, you know, as we look at sort of the set of available capital deployment opportunities at this point in time, we're going to be very mindful of the signals we're receiving from both the public and private markets, and think we've got a lot of interesting opportunities on the table for capital deployment. And then, Eliott?
Speaker #5: So I think this was a really interesting transaction that accomplished a lot for us strategically . But we certainly mandate . And as we've talked about in our prepared remarks and don't prior feel any Q&A questions , you know , as we look of the at sort set of available capital deployment opportunities at this point in time , we're going to be very mindful of the signals we're receiving from both the public and private markets and think we've got a lot of interesting opportunities on the table capital for deployment .
Eliott Trencher: To the second part of your question, so we have about 50,000 sq ft to lease at the campus, and that's going to be the main driver that gets us up to that million, that, that upper single digits return. So you know, you can assume we underwrote it conservatively because that's how we approach these sorts of things, but that's, that is the main factor that will get us there.
Speaker #5: And then Elliott .
Eliott Trencher: To the second part of your question, so we have about 50,000 sq ft to lease at the campus, and that's going to be the main driver that gets us up to that million, that, that upper single digits return. So you know, you can assume we underwrote it conservatively because that's how we approach these sorts of things, but that's, that is the main factor that will get us there.
Speaker #1: And to the second part of your question—so, we have about 50,000 ft² to lease at the campus, and that's going to be the main driver that gets us up to that million, that upper single digits return.
Speaker #1: So you can assume we underwrote it conservatively because that's how we approach these sorts of things. But that is the main factor that will get us there.
Angela Aman: Right. As Eliott said in his prepared remarks, we're working on spec suites at the project. It's a very manageable amount of square footage to lease. As Eliott points out, in that 50 to 55,000 sq ft range, and the spec suite program we think is going to be highly effective there.
Angela Aman: Right. As Eliott said in his prepared remarks, we're working on spec suites at the project. It's a very manageable amount of square footage to lease. As Eliott points out, in that 50 to 55,000 sq ft range, and the spec suite program we think is going to be highly effective there.
Speaker #5: Right. And as Elliott said in his prepared remarks, we're working on spec suites at the project. It's a very manageable amount of square footage to lease.
Speaker #5: As Elliott points out, in that 50,000 to 55,000 square foot range, and the spec suite program, we think is going to be highly effective.
Speaker #5: There .
John Kim: Okay, and then can I get your latest views on Flower Mart? I think you've said in the past you prefer not to do standalone multifamily development, but just given how much San Francisco rents have moved, would you contemplate changing that strategy and keeping that asset for development, if you could, if you could develop that at an attractive deal?
John Kim: Okay, and then can I get your latest views on Flower Mart? I think you've said in the past you prefer not to do standalone multifamily development, but just given how much San Francisco rents have moved, would you contemplate changing that strategy and keeping that asset for development, if you could, if you could develop that at an attractive deal?
Speaker #14: Okay. And then, any views on—can I get your latest on Flower Mart? I think you've said in the past you prefer not to do standalone multifamily development, but just given how much San Francisco rents have moved up, would you contemplate changing that strategy and keeping that asset for development?
Speaker #14: If you could, if you could develop that and interact, revealed.
Angela Aman: Look, everything's on the table, right? And so I think as we've talked about since we began this process of reimagining Flower Mart, it was important to us from the very beginning to appreciate that the San Francisco market has in the past and could very likely come back very quickly. And so what we didn't want to do was commit to a different entitlement path at the project that was less dense or took away opportunities we already have embedded in the current entitlement. So we've been, you know, pursuing the word I've continued to use as it relates to what we're, we're working towards at the Flower Mart. There's a lot of optionality and flexibility around our entitlements and around the mix of uses we could develop at the site.
Angela Aman: Look, everything's on the table, right? And so I think as we've talked about since we began this process of reimagining Flower Mart, it was important to us from the very beginning to appreciate that the San Francisco market has in the past and could very likely come back very quickly. And so what we didn't want to do was commit to a different entitlement path at the project that was less dense or took away opportunities we already have embedded in the current entitlement. So we've been, you know, pursuing the word I've continued to use as it relates to what we're, we're working towards at the Flower Mart. There's a lot of optionality and flexibility around our entitlements and around the mix of uses we could develop at the site.
Speaker #5: Like the table. Right. And so, I think, as we've talked about since we began this process of reimagining Flower Mart, it was important to us from the very beginning to appreciate that the San Francisco market has in the past, and could very likely come back very quickly.
Speaker #5: And so what we didn't want to do was commit to a different entitlement path for the project that was less dense or took away opportunities.
Speaker #5: We already have embedded in the current entitlements . So we've been , you know , pursuing the word . I've continued to use as it relates to what we're we're towards at the Flower Mound is a lot of optionality .
Speaker #5: And flexibility around our entitlements and around mix of uses we could develop at the site. We are fully on track with the work that we've been doing at the Jeffrey Flower Mart.
Angela Aman: We are fully on track with the work that we've been doing at the Flower Mart. Jeffrey reiterated, you know, in his prepared remarks, that things are playing out the way we expected them to. Our guidance around when we'll stop capitalizing Flower Mart is consistent with what we communicated last year. So things are fully on track as it relates to getting that additional flexibility. And as we get closer to the point in time where we have that flexibility in place, we'll continue to assess how different asset classes are penciling and what that means for the path going forward. I would be hesitant for us, as Kilroy, to on a standalone basis develop multifamily. I don't think we have a cost of capital that makes a tremendous amount of sense for us to do that.
Angela Aman: We are fully on track with the work that we've been doing at the Flower Mart. Jeffrey reiterated, you know, in his prepared remarks, that things are playing out the way we expected them to. Our guidance around when we'll stop capitalizing Flower Mart is consistent with what we communicated last year. So things are fully on track as it relates to getting that additional flexibility. And as we get closer to the point in time where we have that flexibility in place, we'll continue to assess how different asset classes are penciling and what that means for the path going forward. I would be hesitant for us, as Kilroy, to on a standalone basis develop multifamily. I don't think we have a cost of capital that makes a tremendous amount of sense for us to do that.
Speaker #5: He reiterated, you know, in his prepared remarks that things are playing out the way we expected them to. Are our guidance around when we'll stop capitalizing?
Speaker #5: Flower is consistent with what we communicated last year, so things are fully on track as it relates to getting that additional flexibility.
Speaker #5: And as we get closer to the point in time where we have that flexibility in place, we'll continue to assess how different asset classes are penciling and what that means for the path going forward.
Speaker #5: I would be hesitant for us as Kilroy to on a standalone basis , develop multifamily . I don't think we have a cost of capital that makes a tremendous amount of sense for us to do that , but there are many opportunities where we can join Venture , contribute the land or sell outright .
Angela Aman: But there are many opportunities where we can joint venture or contribute the land or, or sell outright if we decide that, that multifamily path for a portion of the project makes sense. And as we continue to get closer, Rob mentioned in his comments about San Francisco as well, that the number of big contiguous blocks that are left and available in the market has dwindled significantly. And we think over the next quarter or two, that picture is going to continue to shift and evolve in our favor. And so, you know, that's why flexibility around the path for Flower Mart has been more important than driving to one outcome at a point in time.
Angela Aman: But there are many opportunities where we can joint venture or contribute the land or, or sell outright if we decide that, that multifamily path for a portion of the project makes sense. And as we continue to get closer, Rob mentioned in his comments about San Francisco as well, that the number of big contiguous blocks that are left and available in the market has dwindled significantly. And we think over the next quarter or two, that picture is going to continue to shift and evolve in our favor. And so, you know, that's why flexibility around the path for Flower Mart has been more important than driving to one outcome at a point in time.
Speaker #5: If we decide that that multifamily path for a portion of the project makes sense . And as we continue to get closer , Robb mentioned in his comments about San Francisco as well , that the contiguous , number of big contiguous blocks that are left and available in the market has dwindled significantly .
Speaker #5: And we think over the next quarter or two, that picture is going to continue to shift and evolve in our favor. And so, you know, why that flexibility around the path for Flower Mart has been more important than driving to one outcome at a point in time.
Angela Aman: I feel like we've put all the right pieces in place to be able to make the absolute best decision when we get there, and we'll know more as this year evolves.
Angela Aman: I feel like we've put all the right pieces in place to be able to make the absolute best decision when we get there, and we'll know more as this year evolves.
Speaker #5: And I feel like we've put all the right pieces in place to be able to make the absolute best decision when we get there, and we'll know more as this year evolves.
Operator: Thank you. Our next question comes from Peter Abramowitz with Deutsche Bank. Peter, please go ahead.
Operator: Thank you. Our next question comes from Peter Abramowitz with Deutsche Bank. Peter, please go ahead.
Speaker #3: Thank you. Our next question comes from Peter Abramowitz with Deutsche Bank. Peter, please go ahead.
Peter Abramowitz: Yes, thank you for taking the question. Just wondering if you could talk sort of about the cumulative NOI impact of the capital recycling activity, particularly Sabre Springs, Sunset Media Center, and then the offset from acquisition in Nautilus. But I guess, how should we think about kind of the overall NOI impact, and how that's baked into the guidance for 2026?
Peter Abramowitz: Yes, thank you for taking the question. Just wondering if you could talk sort of about the cumulative NOI impact of the capital recycling activity, particularly Sabre Springs, Sunset Media Center, and then the offset from acquisition in Nautilus. But I guess, how should we think about kind of the overall NOI impact, and how that's baked into the guidance for 2026?
Speaker #15: Yes . Thank you for taking the question . Just wondering if you could talk sort of about the cumulative NOI impact of the capital recycling activity , particularly Sabre Springs sunset Media Center and then the offset from acquisition and Nautilus , I guess .
Speaker #15: should we How think about kind of the overall NOI impact and baked guidance 2026 ? how that's for into the
Angela Aman: Yeah, I'd say, you know, look, I think if we just talk about sort of, you know, cap rates and returns for a moment. When we step back and look at all the activity we completed over the course of 2025, and then KSS, which closed in early January. You know, as we think about 2026, sort of implied cap rate on that pool is probably, you know, in and around 8%, probably a bit inside of 8%, across that, the entirety of that pool.
Angela Aman: Yeah, I'd say, you know, look, I think if we just talk about sort of, you know, cap rates and returns for a moment. When we step back and look at all the activity we completed over the course of 2025, and then KSS, which closed in early January. You know, as we think about 2026, sort of implied cap rate on that pool is probably, you know, in and around 8%, probably a bit inside of 8%, across that, the entirety of that pool.
Speaker #5: Yeah , I'd say , you know , look , about sort I think just talk if we of cap rates and returns for for a moment when we step back and look at all the activity we completed over the course of 2025 , and then CHS , which closed in early , early January , you know , as we think 2026 , sort of about implied cap rate on that pool is probably , you know , in and around 8% , probably a bit inside of 8% across the entirety of that pool .
Angela Aman: Eliott mentioned in his prepared remarks, and it's pretty consistent with what we had reported on Maple Plaza as well, that we're in sort of, you know, in the mid to slightly above mid-single digit going in returns, with a real path on both of those projects to getting into stabilized yields in the high single digits. So I think once we hit stabilization on those projects, we're actually net accretive relative to where the sales have been. But there is sort of a path to get there. I mentioned in my prepared remarks, we've had great success on lease up at Maple Plaza, and we just talked about Nautilus. You know, there's 50,000 square feet to lease there to get to that stabilized yield number.
Angela Aman: Eliott mentioned in his prepared remarks, and it's pretty consistent with what we had reported on Maple Plaza as well, that we're in sort of, you know, in the mid to slightly above mid-single digit going in returns, with a real path on both of those projects to getting into stabilized yields in the high single digits. So I think once we hit stabilization on those projects, we're actually net accretive relative to where the sales have been. But there is sort of a path to get there. I mentioned in my prepared remarks, we've had great success on lease up at Maple Plaza, and we just talked about Nautilus. You know, there's 50,000 square feet to lease there to get to that stabilized yield number.
Speaker #5: Elliott mentioned in his prepared remarks . And it's pretty consistent with what we had reported on Maple Plaza as well , that we're in sort of , you know , in the the mid to slightly above mid-single digit going in returns with a real path on both of those projects to getting into stabilized yields in the high single digits .
Speaker #5: So I think once we hit stabilization on those projects, we're actually net accretive relative to where the sales have been. But there is sort of a path to, as I mentioned, get there.
Speaker #5: We , in my prepared remarks . We've we've had great success lease on up at Maple Plaza . And we just talked about Nautilus .
Speaker #5: You know , there's 50,000 square foot square feet to lease there to get to that stabilized yield number . So the path is pretty clear and we feel a high degree of conviction in in both of those lease up and stabilization
Angela Aman: So the path is pretty clear, and we feel a high degree of conviction in both those lease up and stabilization exercises.
Angela Aman: So the path is pretty clear, and we feel a high degree of conviction in both those lease up and stabilization exercises.
Eliott Trencher: And just to add to that, as we thought about it, we're touching on the 2026 impact, but I think it's also important to consider the impact beyond that. And when you take that, call it 8-ish cap rate that Angela referenced, layer on the above market in-place rents at the assets that we sold, layer on the short lease term, and, that's, that's gonna bring the future returns a lot lower. On top of that, there's the CapEx flows, so the economic returns are even lower. None of these actually factor in the last piece, which is the land sales, which we're obviously selling at 0 or negative cap rates. So it really helps kind of manage that discrepancy.
Eliott Trencher: And just to add to that, as we thought about it, we're touching on the 2026 impact, but I think it's also important to consider the impact beyond that. And when you take that, call it 8-ish cap rate that Angela referenced, layer on the above market in-place rents at the assets that we sold, layer on the short lease term, and, that's, that's gonna bring the future returns a lot lower. On top of that, there's the CapEx flows, so the economic returns are even lower. None of these actually factor in the last piece, which is the land sales, which we're obviously selling at 0 or negative cap rates. So it really helps kind of manage that discrepancy.
Speaker #5: exercises . And
Speaker #1: Just to add to that, we thought about it. We're touching on the 2026 impact, but I think it's also important to consider the impact beyond that.
Speaker #1: And when you take that , call it eight ish cap rate , that Angela referenced , layer on the above market in-place rents at the assets that we sold layer on the short lease term and that's going to bring the future returns a lot lower .
Speaker #1: On top of that , there's the CapEx flows for the economic returns are even lower . None of these actually factor in the last piece , which is the land sales , which we're obviously selling at zero or negative cap rates .
Speaker #1: So it really helps kind of manage that
Angela Aman: Yeah. Eliott's making a really important point here, which is that we're, we're working to be very balanced. I think we are, we are IRR long-term return buyers and sellers, but we are very cognizant of the near-term impacts on earnings associated with this portfolio recycling activity, and we're really working hard to balance those two things. And things like the land sale certainly make that easier. But even across the operating portfolio dispositions, I think we're doing a very effective job at managing that dilution, while also creating a portfolio that's stronger, where the cash flow is more durable and that will grow faster over the medium to longer term.
Angela Aman: Yeah. Eliott's making a really important point here, which is that we're, we're working to be very balanced. I think we are, we are IRR long-term return buyers and sellers, but we are very cognizant of the near-term impacts on earnings associated with this portfolio recycling activity, and we're really working hard to balance those two things. And things like the land sale certainly make that easier. But even across the operating portfolio dispositions, I think we're doing a very effective job at managing that dilution, while also creating a portfolio that's stronger, where the cash flow is more durable and that will grow faster over the medium to longer term.
Speaker #1: discrepancy .
Speaker #5: thinking Elliott's Yeah . really important point here , which is that we're working to be we're very balanced . I think we are we are IRR or long term return buyers and sellers .
Speaker #5: But we are very cognizant of the near-term impacts on earnings associated with this portfolio—recycling activity. And we're really working hard to balance those two things.
Speaker #5: And things like the landfill certainly make that easier . But even across the operating portfolio dispositions , I think we're doing a very effective job at managing that dilution while also creating a portfolio that's stronger , where the cash flow is more durable , and that will grow faster over the to longer term .
Peter Abramowitz: Okay, that's helpful. And then a strategic one, or a question on kind of strategy on capital allocation as well. I think, Eliott, you talked about in your comments, you really focus on the lack of supply in Torrey Pines and San Diego overall. I guess I'm just curious, you know, one, sort of what do you see from a demand perspective? Do you feel like that has bottomed in the life science market in San Diego? And then, you know, two, the supply dynamic is maybe not as favorable in the Bay Area. So is that to say, maybe asking John's question a different way, you know, would you be willing to invest in, you know, more life science assets if they were in the Bay Area?
Peter Abramowitz: Okay, that's helpful. And then a strategic one, or a question on kind of strategy on capital allocation as well. I think, Eliott, you talked about in your comments, you really focus on the lack of supply in Torrey Pines and San Diego overall. I guess I'm just curious, you know, one, sort of what do you see from a demand perspective? Do you feel like that has bottomed in the life science market in San Diego? And then, you know, two, the supply dynamic is maybe not as favorable in the Bay Area. So is that to say, maybe asking John's question a different way, you know, would you be willing to invest in, you know, more life science assets if they were in the Bay Area?
Speaker #15: Okay , that's helpful . And then a strategic one or question on kind of strategy on capital allocation as well . I think , Elliott , you talked about in your comments , you really focused on on the lack of supply and and Torrey Pines in San Diego overall .
Speaker #15: I guess I'm just curious , you know , one sort of what do you see from a demand perspective ? Do you feel like that has bottomed in the life science market in San Diego .
Speaker #15: , you know , to the And then supply dynamic is maybe not as favorable in the Bay area ? So is that the same ?
Speaker #15: Maybe asking John's question or a different way ? Would you be willing to invest in , you know , more life science assets if they were in the Bay area ?
Peter Abramowitz: Or is this more specific to kind of the better backdrop in San Diego and what you view as unique opportunities?
Peter Abramowitz: Or is this more specific to kind of the better backdrop in San Diego and what you view as unique opportunities?
Speaker #15: Or is this more specific to, kind of, the better backdrop in San Diego? And what you view as the unique opportunity?
Angela Aman: Yeah, and we do think that Torrey Pines is a really unique opportunity with great, not only, physicality of the asset, but great submarket dynamics as well. You know, we have, I think, significantly outleased the competition in South San Francisco. We have additional vacancy there at that project to work through, and so I think we'd be hard-pressed to buy additional vacancy in the South San Francisco market today, despite the fact that we feel great about not only what we accomplished at KOP in 2025, but the future pipeline there as well. This was, you know, great campus. Nautilus was a great campus and a great submarket, great long-term fundamentals, and a very manageable amount of leasing to complete to get to a stabilized yield number. So I think it just-- it really, things really lined up.
Angela Aman: Yeah, and we do think that Torrey Pines is a really unique opportunity with great, not only, physicality of the asset, but great submarket dynamics as well. You know, we have, I think, significantly outleased the competition in South San Francisco. We have additional vacancy there at that project to work through, and so I think we'd be hard-pressed to buy additional vacancy in the South San Francisco market today, despite the fact that we feel great about not only what we accomplished at KOP in 2025, but the future pipeline there as well. This was, you know, great campus. Nautilus was a great campus and a great submarket, great long-term fundamentals, and a very manageable amount of leasing to complete to get to a stabilized yield number. So I think it just-- it really, things really lined up.
Speaker #5: Yeah , we do think that Torrey Pines is a really unique opportunity with great not only physicality of the asset , but great submarket dynamics as well .
Speaker #5: You know, we have, I think, significantly at least the competition in South San Francisco. We have additional vacancy there at that project to work through.
Speaker #5: And so I think we'd be hard-pressed to buy additional vacancy in the South San Francisco market today, despite the fact that we feel great about not only what we accomplished at COP in '25, but the future pipeline there as well.
Speaker #5: This was , you know , great campus . Nautilus was great a great campus and submarket , great long term and fundamentals a very manageable amount of to leasing a complete to get to stabilized yield number .
Speaker #5: So I think it just it really things really lined up . We think it was a tremendous opportunity that was in the best interest of shareholders .
Angela Aman: We think it was a tremendous opportunity that was in the best interest of shareholders. And as we move forward, we're gonna be thinking about not only the opportunities that present themselves in the market, but importantly, signals we're getting from the public market as well, as we think about redeployment for disposition proceeds.
Angela Aman: We think it was a tremendous opportunity that was in the best interest of shareholders. And as we move forward, we're gonna be thinking about not only the opportunities that present themselves in the market, but importantly, signals we're getting from the public market as well, as we think about redeployment for disposition proceeds.
Speaker #5: And as we move forward , we're going to be thinking about not only the opportunities that present themselves in the market , but importantly signals we're getting from the public market as well as we think about redeployment for disposition proceeds .
Operator: Thank you. The next question comes from Dylan Burzinski with Green Street Advisors. Dylan, please go ahead.
Operator: Thank you. The next question comes from Dylan Burzinski with Green Street Advisors. Dylan, please go ahead.
Speaker #3: Thank you. The next question comes from Dylan Basinski with Green Street Advisors. Dylan, please go ahead.
Dylan Burzinski: Morning, guys. Thanks for taking the question. Good to hear you guys' sort of occupancy guidance in 2026 is sort of flattish versus where it was in 2025. Are you able to sort of give any sort of guardrails around the ramp of that occupancy throughout the year? Jeffrey, you mentioned that a lot of the expirations are one-half weighted, so it seems like occupancy should sort of ramp towards the back half. Are you able to give any sort of guidance as to sort of where year-end occupancy 2026 will land versus where it ended 2025?
Dylan Burzinski: Morning, guys. Thanks for taking the question. Good to hear you guys' sort of occupancy guidance in 2026 is sort of flattish versus where it was in 2025. Are you able to sort of give any sort of guardrails around the ramp of that occupancy throughout the year? Jeffrey, you mentioned that a lot of the expirations are one-half weighted, so it seems like occupancy should sort of ramp towards the back half. Are you able to give any sort of guidance as to sort of where year-end occupancy 2026 will land versus where it ended 2025?
Speaker #16: Good morning, guys. Thanks for taking the question. Good to hear your guys' sort of occupancy guidance in '26 is sort of flattish versus where it was in '25.
Speaker #16: Are you able to sort of give any sort of guardrails around the ramp of that occupancy throughout the year ? Jeffrey , you mentioned that a the expirations are one half weighted .
Speaker #16: So it seems like occupancy should , should sort of ramp the back half . But are you able to give any sort of guidance as sort of to where your end occupancy 26 will land versus where it ended 25 ?
Angela Aman: Yeah, I mean, just as it relates to the trajectory of occupancy, I would say, you know, not surprisingly, based on the disclosure on the lease expiration page, you should expect it to trough during 2026 in Q2. And that just speaks to the move-out activity we have in the first half of the year and sort of the pace of moving some of those leases in the signed but not commenced bucket into occupancy over the course of the year. We give guidance on sort of average occupancy. We haven't given guidance on year-end occupancy, but, you know, we'll continue to evaluate that and provide as much color and context as we can around occupancy as we move through the year.
Angela Aman: Yeah, I mean, just as it relates to the trajectory of occupancy, I would say, you know, not surprisingly, based on the disclosure on the lease expiration page, you should expect it to trough during 2026 in Q2. And that just speaks to the move-out activity we have in the first half of the year and sort of the pace of moving some of those leases in the signed but not commenced bucket into occupancy over the course of the year. We give guidance on sort of average occupancy. We haven't given guidance on year-end occupancy, but, you know, we'll continue to evaluate that and provide as much color and context as we can around occupancy as we move through the year.
Speaker #5: Yeah , I mean , just as it relates to the trajectory of occupancy , I would say , you know , not surprisingly , based on the disclosure and the lease expiration page , you should expect it to trough during 2026 .
Speaker #5: second quarter . And In the that just speaks to the move out activity we have in the first half of the year . And sort of the pace of moving some of those those leases and the sign , but not commenced bucket into occupancy over the course of the year .
Speaker #5: We give guidance on sort of average occupancy . We haven't given guidance on year end occupancy , but we'll continue to evaluate that .
Speaker #5: And provide as much color and context as we can around occupancy as we move through the year.
Dylan Burzinski: Appreciate that, and then maybe turning over to demand. Obviously, you guys mentioned or highlighted several times, the strong demand environment across, you know, all of your markets. So sort of just curious, you know, the backdrop for demand, if you look at sort of offices using jobs, it would suggest that, you know, demand is much stronger than, you know, job creation and where it's been over the last 18 months. It seems like demand has benefited, not only in your guys' market footprint, but across the US in general. As RTO has picked up, you've seen this flood of pent-up demand. So any sort of sense of when you guys think demand will be back to being driven by the job growth outlook rather than the sort of pent-up demand environment we've been in?
Dylan Burzinski: Appreciate that, and then maybe turning over to demand. Obviously, you guys mentioned or highlighted several times, the strong demand environment across, you know, all of your markets. So sort of just curious, you know, the backdrop for demand, if you look at sort of offices using jobs, it would suggest that, you know, demand is much stronger than, you know, job creation and where it's been over the last 18 months. It seems like demand has benefited, not only in your guys' market footprint, but across the US in general. As RTO has picked up, you've seen this flood of pent-up demand. So any sort of sense of when you guys think demand will be back to being driven by the job growth outlook rather than the sort of pent-up demand environment we've been in?
Speaker #16: Appreciate that. And then maybe turn it over to demand. Obviously, you guys mentioned or highlighted several times that there's a strong demand environment across nearly all of your markets.
Speaker #16: So sort of just curious , you the for backdrop demand , if you look at sort of office using jobs , it would suggest that demand is much stronger than job creation .
Speaker #16: And where it's been over the last 18 months, it seems like demand has benefited not only in your guys' market footprint, but across the U.S. in general.
Speaker #16: As RTOs picked up , you've seen this flood of pent up demand . So any sort of sense of when you guys think demand will be back to being driven by job the growth outlook rather than the sort of pent up demand environment we've been in ?
Angela Aman: Yeah, I mean, look, it's, it's different market to market, right? And even in some cases, submarket to submarket. But what I can tell you across our West Coast markets is that, well, generally, yes, I think there's been some pent-up demand as people have brought folks back into the office. But the bigger component we're seeing is what's been happening from a new business formation and growth perspective in our innovation-driven West Coast markets, and companies from outside of the West Coast establishing presences in some of our markets in order to tap into the tech talent that's resident in those markets. And that's been a really powerful driver of leasing demand and growth over the last couple of quarters, particularly in San Francisco, particularly in Bellevue, particularly in Seattle, where you've got, you know, significant concentrations of tech talent available.
Angela Aman: Yeah, I mean, look, it's, it's different market to market, right? And even in some cases, submarket to submarket. But what I can tell you across our West Coast markets is that, well, generally, yes, I think there's been some pent-up demand as people have brought folks back into the office. But the bigger component we're seeing is what's been happening from a new business formation and growth perspective in our innovation-driven West Coast markets, and companies from outside of the West Coast establishing presences in some of our markets in order to tap into the tech talent that's resident in those markets. And that's been a really powerful driver of leasing demand and growth over the last couple of quarters, particularly in San Francisco, particularly in Bellevue, particularly in Seattle, where you've got, you know, significant concentrations of tech talent available.
Speaker #5: Yeah , I mean , look , it's different markets , market , right . And even in some cases submarkets a But what I submarket .
Speaker #5: can tell you across our West Coast markets is that while generally yes , I think there's been some pent up demand as people have brought folks back into the office , but the bigger component we're seeing is what's been happening from a new business formation and growth perspective .
Speaker #5: In our innovation-driven West Coast and markets, companies from outside of the West Coast are establishing presences in some of our markets in order to tap into the tech talent that's resident in those markets.
Speaker #5: And that's been a really powerful driver of of of leasing demand and growth over the last couple of quarters , particularly in San Francisco , particularly in Bellevue , particularly in Seattle , where you've got significant concentrations of tech talent available .
Angela Aman: So, RTO is a component of it, certainly, but I think what's happening from a new business formation and growth perspective is what's really exciting about the West Coast markets right now.
Angela Aman: So, RTO is a component of it, certainly, but I think what's happening from a new business formation and growth perspective is what's really exciting about the West Coast markets right now.
Speaker #5: So, RTO is a component of it, certainly. But I think what's happening from a new business formation and growth perspective is what's really exciting about the West Coast markets right now.
Operator: Thank you. The next question comes from Upal Rana with KeyCorp. Go ahead, your line is now open.
Operator: Thank you. The next question comes from Upal Rana with KeyCorp. Go ahead, your line is now open.
Speaker #3: Thank you. The next question comes from Rana with KeyCorp. Go ahead. Your line is now open.
Upal Rana: Great, thank you. Just on the disposition front, you've already mentioned how you're thinking about, you know, capital recycling this year, but just thinking about it broadly, how much more is there to do, not just, not just this year, but just going forward overall, just to optimize the portfolio?
Upal Rana: Great, thank you. Just on the disposition front, you've already mentioned how you're thinking about, you know, capital recycling this year, but just thinking about it broadly, how much more is there to do, not just, not just this year, but just going forward overall, just to optimize the portfolio?
Speaker #17: Great, thank you. Just on the disposition front, you've already mentioned how you're thinking about capital recycling this year. But just thinking about it broadly.
Speaker #17: How much more is there to do—not to not going, but just this year forward overall, just to optimize the portfolio.
Eliott Trencher: Hey, Paul, it's Eliott. Look, I think there's always something to do, and in part, that's because our debt dynamics in our markets are constantly evolving, and so it's on us to be actively evaluating what those trends are and how they impact different parts of the portfolio. So historically, we've always been asset sellers, and we think that that will be something that we can continue to do and should continue to do over time in order to deliver a portfolio that can have that optimal cash flow stream that's diverse, and growing, and stable.
Eliott Trencher: Hey, Paul, it's Eliott. Look, I think there's always something to do, and in part, that's because our debt dynamics in our markets are constantly evolving, and so it's on us to be actively evaluating what those trends are and how they impact different parts of the portfolio. So historically, we've always been asset sellers, and we think that that will be something that we can continue to do and should continue to do over time in order to deliver a portfolio that can have that optimal cash flow stream that's diverse, and growing, and stable.
Speaker #1: Hey , Paul Elliott , look , I think there's always something to do in in part that's because our the dynamics in our markets are constantly evolving .
Speaker #1: And so it's on us to be actively evaluating what those trends are and how they impact different parts of the portfolio. So, historically, we've always been asset sellers.
Speaker #1: And we think that that will be something that we can continue to do, and continue to do over time, in order to deliver a portfolio that can have that optimal cash flow stream.
Speaker #1: That's diverse, growing, and stable.
Upal Rana: Okay, great. That was, that was helpful. And then just last one from me. You know, on the short-term leasing, it did come down this quarter. You know, I'm just curious, if you've seen any of those leases start to convert to longer term leases, or are they still continuing to release in the shorter term increments?
Upal Rana: Okay, great. That was, that was helpful. And then just last one from me. You know, on the short-term leasing, it did come down this quarter. You know, I'm just curious, if you've seen any of those leases start to convert to longer term leases, or are they still continuing to release in the shorter term increments?
Speaker #17: Okay , great . That was helpful . And then just last one from me , you know , on the short term leasing , it did come down this quarter .
Speaker #17: You know, I'm just curious if you've seen any of those leases start to convert to longer term, or are they still continuing to release in shorter-term increments?
Angela Aman: I mean, some of it's been renewal activity, as people just need a little bit more time to make decisions to finalize renewals or, you know, to relocate in certain circumstances. Some of it's been short term new and people taking temporary space ahead of their permanent space being available. So that's been a dynamic we've seen over the last couple of quarters as well. I think it speaks to the broader dynamics we've been talking about over the last several quarters, particularly in markets like San Francisco, where there's been a real priority on space that's ready and available today.
Angela Aman: I mean, some of it's been renewal activity, as people just need a little bit more time to make decisions to finalize renewals or, you know, to relocate in certain circumstances. Some of it's been short term new and people taking temporary space ahead of their permanent space being available. So that's been a dynamic we've seen over the last couple of quarters as well. I think it speaks to the broader dynamics we've been talking about over the last several quarters, particularly in markets like San Francisco, where there's been a real priority on space that's ready and available today.
Speaker #5: I mean, some of it's been renewal activity, as people just need a little bit more time to make decisions to finalize renewals or to relocate in certain circumstances.
Speaker #5: Some of it's been short-term new, and people taking temporary space ahead of their permanent space being available. So that's been a dynamic we've seen over the last couple of quarters as well.
Speaker #5: I think it speaks to the broader dynamics we've been talking about over the last several quarters, particularly in San Francisco, where there's been a real priority on space that's ready and available today.
Angela Aman: Some of the short-term new leasing has reflected our team doing a really great job at being creative and finding space in the portfolio to put tenants in temporarily while we build out and complete their space, and that, in some cases, has won us long-term deals. So I'm really thrilled with the way we're executing and how we're approaching it, how we're understanding what tenants need and what's gonna get deals across the finish line. And that's probably gonna continue to be some part of the leasing activity going forward. But to your point, overall, short-term leasing has come down pretty significantly.
Angela Aman: Some of the short-term new leasing has reflected our team doing a really great job at being creative and finding space in the portfolio to put tenants in temporarily while we build out and complete their space, and that, in some cases, has won us long-term deals. So I'm really thrilled with the way we're executing and how we're approaching it, how we're understanding what tenants need and what's gonna get deals across the finish line. And that's probably gonna continue to be some part of the leasing activity going forward. But to your point, overall, short-term leasing has come down pretty significantly.
Speaker #5: So some of the short term new leasing is reflected . Our team doing a really great job at being creative and finding space in the portfolio to put tenants in temporarily while we build out and complete their space .
Speaker #5: And that in some cases , is deal . So I'm really thrilled with the way we're executing and how we're approaching it , how we're understanding what tenants need and what's going to get deals across the finish line .
Speaker #5: And that's probably going to continue to be some part of the leasing activity going forward . But to your point , overall , short term leasing has come down pretty significantly .
Operator: Thank you. Our final question comes from Anthony Paolone with J.P. Morgan. Please go ahead.
Operator: Thank you. Our final question comes from Anthony Paolone with J.P. Morgan. Please go ahead.
Speaker #3: Thank you . Our final question comes from Paolone with Anthony J.P. Morgan . Please go ahead .
Dylan Burzinski: Okay, thanks. I was wondering, can you maybe give us a sense as to, like, where the FFO run rate kind of finishes the year relative to the, say, $3.35 midpoint?
Anthony Paolone: Okay, thanks. I was wondering, can you maybe give us a sense as to, like, where the FFO run rate kind of finishes the year relative to the, say, $3.35 midpoint?
Speaker #9: Okay . Thanks . I was wondering , can you maybe give us a sense as to like where the FFO run rate kind of finishes the year relative to the , say , 335 midpoint ?
Angela Aman: I think we're hesitant to give much of a trajectory as it relates to that. What I will say, you know, and this is the biggest thing to note as it relates to the FFO trajectory, is the guidance around Flower Mart, right? And the expectation that Flower Mart ceases capitalization at the end of Q2. So first half, from an FFO perspective, likely looks higher than second half, which might be what's embedded in your question. But I don't think at this point it makes sense for us to be more specific than that.
Angela Aman: I think we're hesitant to give much of a trajectory as it relates to that. What I will say, you know, and this is the biggest thing to note as it relates to the FFO trajectory, is the guidance around Flower Mart, right? And the expectation that Flower Mart ceases capitalization at the end of Q2. So first half, from an FFO perspective, likely looks higher than second half, which might be what's embedded in your question. But I don't think at this point it makes sense for us to be more specific than that.
Speaker #5: I think we're hesitant to give much of a trajectory as it relates to that . What I will say , you know , and this is the biggest thing to note as it relates to the FFO trajectory , is the guidance around Flower Mart , right ?
Speaker #5: And the expectation that Flower Mart ceases capitalization at the end of the second quarter. So, first half from an FFO perspective likely looks higher than the second half, which might be what's embedded in your question.
Speaker #5: But I don't think at this point it makes sense for us to be more specific than that.
Operator: Thank you. Those are all the questions we have, and so this concludes our call. Thank you all for your participation. You may now disconnect your lines.
Operator: Thank you. Those are all the questions we have, and so this concludes our call. Thank you all for your participation. You may now disconnect your lines.
Speaker #3: Thank you. Those are all the questions we have. And so this concludes our call. Thank you all for your participation. You may now disconnect.
