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Call sheet · Q2'25

Kilroy Realty (KRC)

Q2'25 earnings call · held July 29, 2025 · compared with the Q1'25 call · management-credibility review
7/12
Disclosure score
2 high, 4 medium, 1 low flags
Financial quality
Bottom line
The sleeper story is the Flower Mart capitalization cliff that creates a $32M annual headwind starting January 1, morphing this recovery story into a 2026 earnings decline story nobody sees coming. Yes, San Francisco is recovering with AI-driven demand, but these are seed-stage companies taking 30K feet on short leases because they can't commit to more; the binding constraint isn't demand but tenant creditworthiness. The $365M Silicon Valley campus sale at $550/foot reveals what informed buyers think this portfolio is really worth, not the NAV fantasy the Street clings to. As management admitted about AI tenants: 'They're being rational and disciplined as they initially lease space,' which is code for they're not paying up. My view changes if they sign a 100K+ sf lease to a creditworthy tenant at positive spreads, proving the recovery has legs beyond speculation.

The 30-second version

  • THE SLEEPER: Flower Mart capitalization cessation at year-end reveals $32M annual earnings headwind nobody's modeling
  • San Francisco AI leasing surge looks great until you realize it's small tenants taking 30K feet who 'might' grow
  • Silicon Valley campus sale at $550/foot exposes portfolio valuation reality the Street is ignoring

What changed this quarter

MetricQ1'25Q2'25Change
FFO per share$1.02 (Q1 2025)$1.13 (Q2 2025)+$0.11 sequential including one-time items
Occupancy81.4% (Q1 2025)80.8% (Q2 2025)-60 bps sequential decline
Cash Same-Store NOI-1.6% YoY (Q1)+4.5% YoY (Q2)+610 bps YoY improvement BUT 300 bps from one-time items
Leasing Volume~250K sf (Q1)400K+ sf (Q2)+60% sequential acceleration
San Francisco Tour Activity60% YoY increase (Q1)110% YoY increase (Q2)Accelerating momentum in core market
Signed Not Commenced170 bps (Q1)270 bps (Q2)+100 bps of future occupancy growth
Cash Re-leasing Spreads-23% (Q1)-15.2% (Q2)+780 bps improvement but still deeply negative
GAAP Re-leasing Spreads-15.8% (Q1)-11.2% (Q2)+460 bps sequential improvement
Disposition Proceeds$38M contracted (Q1)$480M+ announced (Q2)Major portfolio rotation underway
Full Year FFO Guidance$3.90-$4.00 (initial)$4.05-$4.15 (raised)+$0.15 at midpoint

Accountability tracked

7 new promises made4 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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