การประชุมผลประกอบการไตรมาส 3 ปี 2026 ของ Kilroy Realty (KRC): ยอดปล่อยเช่าพุ่งสูงขึ้น ปรับเพิ่มคาดการณ์ FFO

ประเด็นสำคัญ

• คิลรอย รีอัลตี คอร์ปอเรชัน รายงาน FFO ในไตรมาส 3/2026 ที่ 0.88 ดอลลาร์ต่อ หุ้นเจือจาง, ซึ่งรวมถึงประมาณ 0.01 ดอลลาร์ ของรายได้ค่าธรรมเนียมการประนีประนอมและการคืนสภาพ
• บริษัทได้ลงนามสัญญาเช่าประมาณ 815,000 ตาราง ฟุต ของสัญญาเช่าใหม่และสัญญาต่ออายุ โดยยอดการเช่าตั้งแต่ต้นปีจนถึงปัจจุบัน สูงเกิน 1.75 ล้านตารางฟุต, เพิ่มขึ้นเกือบ 44% จากช่วง 9 เดือนแรกของปี 2025
• ค่าเช่าของสัญญาเช่าที่เปรียบเทียบกันได้ปรับตัวเพิ่มขึ้น 30.6% ตามเกณฑ์ GAAP และ 9.7% ตามเกณฑ์เงินสด. หากไม่รวม พื้นที่ว่างนานเกิน 12 เดือน ส่วนต่างปรับตัวขึ้นถึง 37.9% และ 14.9% ตามลำดับ
• อัตราการให้เช่าพื้นที่ปรับตัวขึ้น 150 เบสิสพอยต์จากไตรมาสก่อนหน้า สู่ระดับ 83.0%, ขณะที่อัตราการเข้าใช้พื้นที่จริง ซึ่งรวมถึงคิลรอย ออยสเตอร์ พอยต์ เฟส 2 ลดลง 10 เบสิสพอยต์ สู่ระดับ 76.9%.
• ยอดสัญญาเช่าที่ลงนามแล้วแต่ยังไม่ได้เข้าใช้พื้นที่ขยายตัวสู่ระดับมากกว่า 1.4 ล้านตารางฟุต และ ค่าเช่าฐานปรับเป็นรายปีมูลค่า 101 ล้านดอลลาร์, ช่วยสนับสนุนมุมมองของผู้บริหารต่อ การเติบโตของอัตราการเข้าใช้พื้นที่และ NOI ในอนาคต
• คิลรอยได้ปรับเพิ่มค่ากลางของคาดการณ์ FFO ปี 2026 ขึ้นอีก 0.01 ดอลลาร์, โดยปรับช่วงคาดการณ์ใหม่เป็น 3.55 ถึง 3.59 ดอลลาร์ต่อหุ้น.

ข้อมูลทางการเงินหลัก

ผลการดำเนินงานทางธุรกิจและการปฏิบัติการ

ยอดสัญญาเช่าที่อยู่ในกระบวนการเพิ่มขึ้น 20% จากไตรมาสก่อนหน้า แม้จะมีการทำสัญญาในไตรมาส 3 ในระดับสูงก็ตาม ผู้บริหารกล่าวว่าอุปสงค์กระจายตัวอย่างครอบคลุมใน 5 ภูมิภาคของคิลรอย โดยได้รับปัจจัยหนุนจากผู้เช่าในกลุ่มเทคโนโลยี AI หุ่นยนต์ ชีวเวชศาสตร์ กฎหมาย การเงิน และบริการวิชาชีพ

พื้นที่อ่าวซานฟรานซิสโกยังคงเป็นตลาดที่แข็งแกร่งที่สุด โดยคิลรอยบรรลุ ข้อตกลงต่อสัญญา 12 ปี พื้นที่ 243,000 ตารางฟุตกับบ็อกซ์ (Box) ที่โครงการ Crossing 900 และได้ลงนาม สัญญาเช่าพื้นที่ 65,000 ตารางฟุตกับยูลีสซีส (Ulysses) ที่โครงการ Oyster Point Tech ผู้บริหารเปิดเผยว่าพื้นที่เช่าขนาดใหญ่ระดับพรีเมียมเริ่มหายากขึ้น เนื่องจากอุปสงค์ที่นำโดย AI มีการเติบโตเร่งตัวขึ้น

ซีแอตเทิลเก็บบันทึกการเพิ่มขึ้นของอัตราการปล่อยเช่าจากไตรมาสก่อนหน้าสูงที่สุดที่ 220 basis points ส่วนในซานดิเอโก คิลรอยได้ลงนามสัญญาเช่า 4 ฉบับ คิดเป็นพื้นที่รวมประมาณ 70,000 ตารางฟุต ที่โครงการ Kilroy Centre Del Mar โดยมีส่วนต่างค่าเช่าเฉลี่ยรวมอยู่ที่ 38% ตามเกณฑ์ GAAP และ 12% ตามเกณฑ์เงินสด.

ปัจจุบันอาคาร Indeed Tower ในออสติน มีผู้เช่าแล้วมากกว่า 90% สำหรับในลอสแอนเจลิส ผู้บริหารระบุว่าสภาวะตลาดขึ้นอยู่กับแต่ละตลาดย่อย โดยมีความเคลื่อนไหวที่แข็งแกร่งกว่าในเบเวอร์ลีฮิลส์และคัลเวอร์ซิตี แต่ชะลอตัวลงในเซาท์เบย์

กิจกรรมในกลุ่มวิทยาศาสตร์ชีวภาพก็ปรับตัวดีขึ้นเช่นกัน โดยคิลรอยได้ลงนาม สัญญาเช่าทั้งอาคารพื้นที่ 49,000 ตารางฟุต ที่ 4400 Bohannon สำหรับโครงการ Kilroy Oyster Point เฟส 2 ผู้บริหารกล่าวว่าการเจรจาสำหรับพื้นที่ว่างแบบผู้เช่าหลายรายที่เหลืออยู่นั้นมีความคืบหน้าเกินกว่าขั้นตอนหนังสือแสดงเจตจำนง (LOI) แล้ว ขณะที่ผู้ใช้ในกลุ่มวิทยาศาสตร์ชีวภาพรายใหญ่กำลังประเมินอาคารเดี่ยวที่ยังว่างอยู่

บริษัทมี การขายที่ดินมูลค่า 185 ล้านดอลลาร์ที่อยู่ภายใต้สัญญา รวมถึงการขายที่ดิน มูลค่า 19.5 ล้านดอลลาร์ ในย่านอีสต์วิลเลจ ใจกลางเมืองซานดิเอโกที่ยังรอการสรุปผล ทั้งนี้ คิลรอยคาดว่าธุรกรรมต่างๆ จะเริ่มเสร็จสมบูรณ์ในช่วงปลายปี 2026 ขึ้นอยู่กับการดำเนินการให้แล้วเสร็จ

แนวทางผลดำเนินงานจากฝ่ายบริหาร

Kilroy ได้ปรับทบทวนแนวทาง FFO ปี 2569 เป็น $3.55-$3.59 ต่อหุ้น โดยมีค่ากลางอยู่ที่ $3.57 เพิ่มขึ้น $0.01 จากประมาณการครั้งก่อน ค่ากลางดังกล่าวสะท้อนว่า FFO ในไตรมาส 4 จะอยู่ที่ประมาณ $0.86 ต่อหุ้น.

บริษัทได้ปรับเพิ่มช่วงการเติบโตของ NOI จากทรัพย์สินเดิมที่คาดไว้เป็น 0.75%-1.00% สะท้อนถึงการเริ่มรับรู้ค่าเช่าที่เร็วขึ้นและรายได้จากค่าจอดรถที่แข็งแกร่งขึ้น ค่าใช้จ่ายในการดำเนินงานที่ลดลงในโครงการ Kilroy Oyster Point เฟส 2 และค่าใช้จ่ายดอกเบี้ยสุทธิที่ลดลงยังมีส่วนช่วยหนุนการปรับทบทวนครั้งนี้ โดยถูกชดเชยบางส่วนด้วยค่าธรรมเนียมการยกเลิกสัญญาเช่าที่คาดว่าจะลดลงและค่าใช้จ่ายในการบริหารที่สูงขึ้น

ฝ่ายบริหารคาดว่าสัญญาเช่าซึ่งคิดเป็น ค่าเช่าฐานปรับเต็มปีมูลค่า 48 ล้านดอลลาร์ จะเริ่มมีผลระหว่างสิ้นไตรมาส 3 ปี 2569 ถึงสิ้นปี 2570 ซึ่งรวมถึง 14 ล้านดอลลาร์ที่คาดว่าจะเกิดขึ้นในไตรมาส 4 ปี 2569 และ 34 ล้านดอลลาร์ในระหว่างปี 2570

ความเสี่ยงและประเด็นที่ต้องติดตาม

Kilroy มีหนี้สินที่จะครบกำหนดชำระประมาณ 395 ล้านดอลลาร์ ในช่วง 9 เดือนข้างหน้า โดยมีอัตราดอกเบี้ยที่แท้จริงถัวเฉลี่ยถ่วงน้ำหนักอยู่ที่ประมาณ 3.8% ฝ่ายบริหารระบุว่าต้นทุนการรีไฟแนนซ์น่าจะสูงขึ้น โดยทุก ๆ 100 basis points ที่เพิ่มขึ้นเหนือระดับ 3.8% จะเพิ่มค่าใช้จ่ายประมาณ 4 ล้านดอลลาร์ ต่อปี

สัญญาเช่าที่ El Segundo ของ DIRECTV จะหมดอายุเป็น 2 งวด โดยงวดแรกขนาด 49,000 ตารางฟุต หมดอายุเมื่อเริ่มต้นไตรมาส 4 ปี 2569 ในขณะที่ส่วนที่เหลืออีก 484,000 ตารางฟุต จะหมดอายุเมื่อเริ่มต้นไตรมาส 4 ปี 2570 ค่าเช่าฐานรายปีรวมกันอยู่ที่ 16 ล้านดอลลาร์ Kilroy คาดว่าจะมีการลดขนาดพื้นที่ลงอย่างมากหรือย้ายออกทั้งหมด แม้ว่าการต่อสัญญาเพียงบางส่วนยังคงเป็นไปได้

Kilroy คาดว่าจะหยุดบันทึกต้นทุนเป็นสินทรัพย์สำหรับโครงการ Flower Mart ในเดือนมกราคม 2570 หลังจากเสร็จสิ้นกระบวนการกับนครซานฟรานซิสโก ฝ่ายบริหารประเมินว่าจะส่งผลกระทบต่อกำไรปรับเต็มปีประมาณ 37 ล้านดอลลาร์ ซึ่งประกอบด้วยค่าใช้จ่ายดอกเบี้ยเพิ่มเติม 32 ล้านดอลลาร์ และค่าใช้จ่ายในการดำเนินงานรวมถึงภาษีอีก 5 ล้านดอลลาร์

ฝ่ายบริหารยังตั้งข้อสังเกตอีกว่า การพัฒนาโครงการเก็งกำไรในซานฟรานซิสโกปัจจุบันยังไม่สามารถทำผลตอบแทนได้ตามที่ต้องการ โดยต้นทุนการทดแทนประเมินไว้อยู่ที่ $1,300-$1,700 ต่อตารางฟุต ขณะที่ค่าเช่าจำเป็นต้องเพิ่มขึ้นประมาณ 20%-40% จากระดับค่าเช่าจริงในปัจจุบันของอาคารเก่า โดยขึ้นอยู่กับปัจจัยทางเศรษฐกิจของแต่ละโครงการ

ประเด็นสำคัญจากการถาม-ตอบกับนักวิเคราะห์

• ความยั่งยืนของการปล่อยเช่า: ฝ่ายบริหารระบุว่าโครงการในดีลส่วนใหญ่ประกอบด้วยสัญญาเช่าใหม่และยังคงกระจายตัวอย่างหลากหลายในแต่ละภูมิภาค อย่างไรก็ตาม ขณะนี้อยู่ในระยะเริ่มต้นมากกว่า หลังจากดีลในระยะท้ายจำนวนมากได้ปิดสัญญาไปแล้วในไตรมาส 3
• อุปสงค์ในซานฟรานซิสโก: Kilroy กำลังติดตามความต้องการเช่าพื้นที่ขนาดเกิน 100,000 ตารางฟุต จำนวน 31 รายการในซานฟรานซิสโก ซึ่งรวมถึง 21 รายการจากบริษัท AI ฝ่ายบริหารระบุว่าตัวเลือกพื้นที่ว่างขนาด 100,000 ตารางฟุต อาจลดลงมากถึง 50% ในช่วงสองไตรมาสข้างหน้า
• กรอบเวลาของ KOP เฟส 2: พื้นที่เช่าสร้างเสร็จพร้อมอยู่อาจสร้างรายได้ได้เร็วยิ่งขึ้นหลังลงนามสัญญา ขณะที่โอกาสในการเช่าโครงอาคารเปล่าทั้งหลังจะต้องใช้ระยะเวลาการออกแบบและการก่อสร้างที่ยาวนานกว่า
• ผลตอบแทนของ Flower Mart: ฝ่ายบริหารอ้างอิงกรอบการดำเนินงานของ 1900 Broadway ซึ่งมีผลตอบแทนต่อต้นทุนเมื่อเปิดดำเนินงานเต็มที่อยู่ที่ช่วง 9% ช่วงต้นถึงช่วงกลาง โดยมียอดจองเช่าล่วงหน้าอยู่ที่ 60% เป็นจุดอ้างอิง พร้อมย้ำว่าผลตอบแทนที่ต้องการขึ้นอยู่กับยอดจองเช่าล่วงหน้า เกรดความน่าเชื่อถือของผู้เช่า และขนาดของโครงการ
• การจัดสรรเงินทุน: วัตถุประสงค์ที่อาจเป็นไปได้ในการใช้เงินจากการขายสินทรัพย์ ได้แก่ การซื้อกิจการ การพัฒนาโครงการที่มีการจองเช่าล่วงหน้าเป็นส่วนใหญ่ การชำระคืนหนี้ และการซื้อหุ้นคืน นอกจากนี้ บริษัทยังพิจารณาทางเลือกในการปล่อยเช่า การแปลงเป็นเงินทุนบางส่วน หรือการแปลงเป็นเงินทุนทั้งหมดสำหรับอสังหาริมทรัพย์ของ DIRECTV

บันทึกการประชุมแถลงผลประกอบการฉบับเต็ม

บทถอดเสียงฉบับเต็มของการประชุมทางโทรศัพท์ผลประกอบการ

คำชี้แจงจากฝ่ายบริหาร

Operator

Hello, everyone. Thank you for joining us, and welcome to the Kilroy Realty Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now turn the call over to John Perry, Senior Vice President of Investor Relations and Capital Markets. John, please go ahead.

John Perry

Thanks, Marina. Good morning, everyone. Thank you for joining us, and welcome to the Kilroy Realty Corporation Third Quarter 2026 Earnings Call. On the call today are Angela Aman, CEO; and Eliott Trencher, EVP, CIO and Interim CFO. In addition, Rob Paratte, EVP, Chief Leasing Officer, will be available for Q&A.

Please note that some of the information that will be discussed during this call is forward-looking in nature. Please refer to the company's supplemental package for a statement regarding forward-looking information on this call and in the supplemental. This call is being webcast live on the company's website and will be available for replay. The company's earnings release and supplemental package have been filed on a Form 8-K with the SEC, and both are also available on the company's website.

And with that, I'd like to hand the call over to Angela.

Angela Aman

Thanks, John, and thank you all for joining us today. We're pleased to report on an exceptional quarter of leasing activity with not only robust steel volume, but also some of the strongest lease economics reported over the last 6 years. Our activity this quarter underscores the breadth and depth of the commercial real estate recovery continuing to gain momentum across our West Coast markets.

As the innovation economy and supporting ecosystem experienced record growth against a backdrop of shrinking high-quality availability. This dynamic has not been lost on users. We're increasingly shifting from a flexibility and optionality mindset to one that recognizes the need to proactively plan for long-term space needs, creating a renewed sense of urgency from tenants. During the third quarter, we executed approximately 815,000 square feet of new and renewal leases, substantially all of which were long term in nature, bringing year-to-date leasing volume to over 1.75 million square feet, an increase of nearly 44% versus the first 9 months of 2025.

During the period, all 5 of our regions reported sequential improvements in leased occupancy of more than 100 basis points, with activity well diversified across 45 separate transactions executed with an ever-expanding roster of new and existing tenants, including those in the technology, AI, robotics and automation, biotech, legal, financial and professional services industries. This quarter's re-leasing spreads were amongst the highest reported since before the pandemic, particularly meaningful given the large volume of activity this quarter.

For all comparable leases signed during the period, GAAP rental rates were up 30.6% and cash rents were up 9.7%. And when excluding leases signed on spaces vacant for longer than 12 months, re-leasing spreads improved further to 37.9% and 14.9% on a GAAP and cash basis, respectively. It's worth noting that year-to-date annualized capital per square foot for second-generation deals was down 2.4% relative to the same period in 2025 despite an improvement in re-leasing spreads of roughly 2,000 basis points.

The leasing strength this quarter has further enhanced the transparency of our future growth outlook. The spread between build and leased occupancy now stands at 610 basis points and the total signed but not yet commenced pool is now comprised of more than 1.4 million square feet of executed leases, representing nearly $101 million of contractually obligated Annualized Base Rent or ABR. The ABR per square foot associated with the signed but not yet commenced pool is nearly $72, approximately 22% above our current portfolio-wide average.

In addition, 78% of the signed but not yet commenced pool is comprised of triple net lease structures versus 54% of the existing portfolio. As we pointed out before, taken together, these statistics underscore that average commencements from this pool will have a disproportionately positive impact on NOI as they occur over the coming years, providing strong visibility on future bottom line growth.

Importantly, despite the significance of our third quarter leasing volume, our forward pipeline further expanded during the period with total square footage represented by pipeline transactions up 20% quarter-over-quarter. We remain focused on quickly converting the current pipeline into signed leases and look forward to updating you on our progress as we move through the balance of this year and into 2027. With just over 6% of our total portfolio ABR expiring between now and the end of next year, we believe this pipeline activity, combined with an improving supply-demand backdrop in our markets, positions us well for further net leasing gains.

Now turning to our markets. The San Francisco Bay Area continues to lead the way, both in terms of executed deal volume and forward pipeline activity. As we discussed last quarter, tenant demand across the market remains robust and optionality is quickly dwindling, resulting in both a strong new deal pipeline and an acceleration of inbound requests from large tenants looking to discuss early renewal opportunities to lock in their space requirements in what is quickly becoming an increasingly competitive environment.

To that end, during the third quarter, we signed a 12-year, 243,000 square foot renewal with Box at Crossing 900 in downtown Redwood City at highly compelling lease economics, reflecting the overall strength of the submarket and further validating our conviction in the nearby 1900 Broadway development project we announced earlier this year. More broadly, across the San Francisco market, demand from growing technology and AI companies continues to accelerate. And over the last 2 quarters, we have also seen a meaningful uptick in activity from robotics users, particularly in the Peninsula and Silicon Valley submarkets.

In Q3, we capitalized on this growing category of demand by signing a 65,000 square foot lease with Ulysses a new oceanic robotics company at Oyster Point Tech in South San Francisco in space formerly leased to 23andMe. In Seattle, where we experienced our largest sequential increase in leased occupancy during the period at 220 basis points, we continue to see improving broad-based demand from a wide range of tech, AI, legal, financial and professional service users.

Notable activity in the third quarter included a 28,000 square foot lease at West 8th with Morrison & Foerster, an international law firm, who will join an expanding list of top caliber tenants of the project over the last few quarters. In San Diego, our concentration in suburban markets such as Del Mar continues to provide opportunities to leverage our scale to meet the evolving needs of tenants. During the quarter, we facilitated the relocation of top-tier law firm, Greenberg Traurig, from One Paseo to nearby Kilroy Centre Del Mar, or KCDM, in order to double their footprint while concurrently executing a direct new deal and expansion with an existing subtenant at One Paseo, facilitating their growth into the space that will be vacated by Greenberg.

While One Paseo remains over 99% leased, we have had vacancy at KCDM, which has recently experienced significant momentum. During the quarter, we signed a total of 4 new leases at the project, including the lease with Greenberg for a total of approximately 70,000 square feet. Blended re-leasing spreads across all of these transactions totaled 38% and 12% on a GAAP and cash basis, respectively. In Los Angeles, the recovery remains more nuanced and submarket dependent. In Beverly Hills and Culver City, we continue to experience broad-based demand from a wide variety of high-quality users.

At Blackwelder in Culver City, we signed 2 new leases during the quarter with well-capitalized tech and fintech tenants, building upon other successful leasing at the project earlier this year. And while the South Bay submarkets remain slower, we are seeing the early signs of an uptick in defense, aerospace and advanced manufacturing demand, which could be a meaningful driver of activity in the region over the coming years. And lastly, in Austin, Indeed Tower is now over 90% leased, following a new deal with a media company during the quarter.

Although the market continues to work through the significant amount of new supply that has delivered in recent years, tenant demand remains healthy and strong execution activity continues to chip away at the backlog of competitive space, which has translated into increased momentum at the project. With respect to the life science sector, public and private equity capital markets remain open and the M&A, licensing and approval landscapes all remain supportive, which has translated into higher levels of activity as we've moved through 2026.

During the third quarter, we signed a 49,000 square foot full building lease with a life science company at 4400 Bohannon, a building within our Menlo Corporate Center campus that underwent a life science conversion project that stabilized about a year ago. Life science demand at the project has been negligible since conversion delivered, but due to improvements in biotech capital markets and the tightening of high-quality life science availability across the Bay Area, we saw multiple parties competing for the space during the second and third quarters, ultimately driving a strong outcome for the project.

At Kilroy Oyster Point Phase 2, the momentum that we discussed last quarter has continued unabated, with ongoing active negotiations for all remaining vacancy within our multi-tenant building and a growing list of larger potential users for our full building on the campus. Our ability to accommodate a wide range of user size requirements within both Phase 2 and future phases continues to distinguish KOP from much of the competitive set. In particular, our remaining spec suites are a material advantage as we compete for larger requirements in the market, some of which are prioritizing the near-term availability of temporary space they can occupy while they customize and build out their permanent premises.

We're excited about where we stand at KOP 2, and we look forward to providing additional updates over the next several quarters. Lastly, on investments. While Eliott will discuss our thoughts on the current transaction environment in a moment, I do want to provide a quick update on the Flower Mart project, where we continue to make meaningful progress on the finalization of the amendment to our development agreement with the City of San Francisco. Earlier this month, we presented the project at an informational meeting in the Planning Commission, receiving constructive and supportive feedback on our proposal, which is aimed at enhancing the long-term flexibility of the site.

Based on our current expectations, we now believe the process will conclude at the end of January 2027, at which time capitalization will cease. We're grateful for the city's continued engagement in this effort and look forward to reaching our remaining milestones over the next several months. In closing, I'd like to thank the entire Kilroy team for its continued hard work, dedication and commitment. As activity across our regions continues to accelerate, our team across all departments is rising to the challenge and bringing renewed focus, energy and enthusiasm to our execution on behalf of all stakeholders. Eliott?

Eliott Trencher

Thanks, Angela. I will start with a brief update on the transactions market and then go over our financial results and guidance. Starting with transactions. Last night, we announced the pending sale of our East Village land site in Downtown San Diego to a residential developer for $19.5 million. This marks the fourth land sale we have put under contract and a continuation of our strategy to monetize parcels that have a higher and better use outside of office and life science. In total, we have $185 million under contract, and we expect transactions to begin closing late this year.

We will continue to explore opportunities to monetize additional noncore land sites as well as properties in the operating portfolio. As it relates to property dispositions, our focus is on assets where we have maximized value or where there are anticipated capital requirements that are not accretive to value. As we continue to raise disposition proceeds, we will consider all investment alternatives, including acquisitions, substantially pre-leased developments, debt paydowns and stock buybacks. Turning to financial results. FFO for the quarter was $0.88 per diluted share, which includes roughly $0.01 of settlement and restoration fee income.

Portfolio occupancy, including KOP 2, ended the quarter at 76.9%, down 10 basis points from the prior quarter. The strength in our leasing volume had a meaningful impact on lease percentage as we ended the quarter at 83.0%, up an impressive 150 basis points from last quarter. Furthermore, our lease rollover between now and year-end 2028 has gone down by nearly 300 basis points. Turning to the signed but not occupied or SNO pipeline. Total square footage increased to 1.4 million and ABR increased by $22 million to $101 million.

The schedule on Page 18 of the supplemental reflects the impact of the new leasing during the quarter as well as updated timing for deals in last quarter's pipeline. The substantial growth in ABR is a good reflection of how our strong leasing sets us up for growth in the coming years. Cash same-property NOI decreased 1.5%. Lower settlement and restoration fees and real estate tax refunds compared to the prior period resulted in a negative 170 basis point impact on same-property growth. Moving to the balance sheet. In July, we elected to repay the outstanding $200 million private placement notes with cash on hand.

Over the next 9 months, we have 3 debt maturities, which in total aggregate approximately $395 million at a weighted average effective interest rate of roughly 3.8%. We have over $1.2 billion of unused capacity between our line of credit and term loan that give us flexibility in addressing these maturities as we evaluate more permanent financing options in early 2027. Turning to guidance. We revised our FFO guidance range to be between $3.55 and $3.59 with a midpoint of $3.57, up $0.01 from our prior estimate.

The $0.01 increase can be broken down as follows: Add $0.01 from changes to same-property NOI. The revised range of positive 0.75% to 1.00% is up 12.5 basis points at the midpoint compared to the prior range. Drivers of the increase include earlier rent commencements and better parking revenue. Add $0.02 from higher development NOI. The revised estimate assumes a $2 million improvement compared to the prior midpoint, predominantly due to lower operating expenses at KOP 2. Add $0.01 due to lower net interest expense, mainly due to timing.

These factors are offset by $0.02 from lower anticipated lease termination fees and $0.01 from higher G&A and lower non-cash adjustments. The midpoint of the updated range implies fourth quarter FFO of $0.86 per share. To walk there from the third quarter, deduct $0.01 for the previously mentioned settlement and restoration fee income and $0.01 for higher G&A. While we are not giving 2027 guidance until our fourth quarter call, we wanted to remind you of some factors that will impact earnings next year.

First, between the end of Q3 and year-end 2027, leases in our SNO pipeline totaling $48 million in ABR are anticipated to commence, positively impacting occupancy and revenue. Because ABR is an annualized number, we will get the full benefit of the $14 million expected to come online in the fourth quarter of 2026 and partial benefit of the $34 million anticipated to take effect in 2027. Second, as mentioned earlier, our late 2026 and 2027 debt maturities total approximately $395 million at a weighted average effective interest rate of 3.8%. We will evaluate options for these maturities, including unsecured bonds, bank debt and disposition proceeds, but it is likely the forward-looking cost will be higher.

Every 100 basis point increase above 3.8% has an annualized impact of roughly $4 million. Third, as previously discussed, DIRECTV's lease in El Segundo expires in 2 tranches. 49,000 square feet expired at the beginning of the fourth quarter of 2026 and the remaining 484,000 square feet expires at the beginning of the fourth quarter of 2027. Annual ABR for both tranches of this gross lease is $16 million or roughly $4 million per quarter.

DIRECTV has moved out of the 49,000 square feet, and we expect them to significantly downsize or fully vacate the balance. As Angela mentioned, market dynamics in the South Bay are improving across an array of industries, and we continue to explore a range of alternatives for the property as we focus on maximizing value post lease expiration. Finally, as mentioned on several prior calls, we intend to stop capitalizing the Flower Mart at the conclusion of our process with the city, which, as Angela discussed, is now expected to be January 2027.

The annualized impact of stopping capitalization is roughly $32 million in additional interest expense and $5 million in additional operating expenses and taxes for a total of $37 million. While speculative development does not yet pencil in San Francisco, the market is strengthening day by day and high-quality office blocks are becoming increasingly scarce. We believe our process with the city when complete, will create real value and position the Flower Mart to capture more than its fair share of demand as San Francisco continues to grow.

In conclusion, we are thrilled with the results from the third quarter. Our leasing was strong, spreads were decidedly positive and the SNO pipeline continued to expand. The tailwinds we are seeing in many markets are exciting and position us well for the coming years. With that, we're happy to take your questions. Marina?

Operator

[Operator Instructions]

Your first question comes from the line of Jana Galan with Bank of America Securities.

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Jana Galan

I was hoping if you could talk a little bit more about that forward pipeline and if that 20% increase is pretty broad-based across your markets or maybe driven by San Francisco.

Angela Aman

Yes. I mean I'll touch on to just expand on kind of the quality of the pipeline behind it. But the expansion we saw in the pipeline and the totality of the pipeline at this point really is pretty ratable across all of our markets, which does mean there's a higher concentration in the pipeline of deals in San Francisco, but still roughly proportionate to the amount of square footage we have in the various markets. Like you saw this quarter with a sort of consistent improvement in sequential leased occupancy across all of our regions, I think the pipeline sort of speaks to that broad-based demand across the portfolio.

A. Paratte

Yes. The only other thing I'd add to what Angela said, across the platform, what we're seeing is that the resurgence of larger transactions in the market and potential transactions, and that's a very encouraging sign. And particularly in San Francisco, I mean, the way I would summarize things is that sort of what Angela said in her script that San Francisco is supply constrained. AI has led the record leasing that we're having in San Francisco and premium large block space is disappearing.

And that's having an impact that's positive on South San Francisco as well, which is capturing the spillover from San Francisco. So we're seeing pretty broadening life science, robotics and R&D demand. So that I focused on San Francisco, but across our markets, the larger transactions are really helping drive down vacancy.

Jana Galan

And assuming very elevated leasing in 3Q was part of the reason that led to the FAD payout ratio being elevated. I was wondering if you could just maybe help us think about how to model that going forward.

Angela Aman

Yes, I think that's exactly right. During the quarter, you saw some fluctuations in the FAD payout ratio that were pretty directly tied to some upfront capital associated with the significant volume of activity that we executed during the third quarter. I think as you look at the FAD payout ratio going forward, given that we do believe we're pretty much at trough occupancy here, we have that 610 basis points of contractually obligated revenue to come online over the coming years.

I think you will continue to see quarter-to-quarter fluctuations in the number. But excluding one of the larger payments, upfront payments that was made during Q3, the FAD payout ratio would have been kind of in the mid-80% range.

Operator

Your next question comes from the line of Seth Bergey with Citi.

Seth Bergey

It sounds like in your opening remarks, you mentioned you have ongoing negotiations for the remaining of the kind of KOP 2 vacancy. Can you just provide some more color on kind of where you are in those negotiations process and if that has changed any of your underwriting expectations for KOP 2?

A. Paratte

I guess I would say that I don't want to predict, but I feel very strongly about the pipeline we've got and where we are in the negotiations. And I would characterize it as we're well beyond the letter of intent stage. So more to come, but we're feeling very good about the prospects we have and the depth of the pipeline, both multi-tenant as well as larger users.

Angela Aman

Yes, I think that's exactly right. I mean it's consistent with what we said last quarter. Last quarter, we really saw a pickup in tour and kind of proposal activity. Those deals have continued to move through the pipeline. So while there weren't KOP 2 executions in the third quarter, things have continued to move at a really healthy pace at the project. The space we have remaining in the multi-tenant building, like we said earlier, is effectively spoken for with some of the demand we're seeing now.

So we're just trying to continue to work those deals through the pipeline and have seen more larger format deals that would take all or potentially larger components of that remaining full building opportunity on the campus. So I really do think that the activity we've seen from a broader life science capital markets perspective, the M&A activity in the space, I think, some really important scientific milestones in some cases for some companies. All of it sort of led to a real improvement in the quality, both the breadth and depth of the pipeline at projects like KOP 2.

Seth Bergey

Great. And then [Technical Difficulty] the tenure and kind of debt costs and your ongoing negotiations with the city of San Francisco. Can you talk about kind of what return hurdles you would look to underwrite to kind of move forward for development for Flower Mart? And maybe just on that, just kind of expand more on maybe some of the options that you would explore with the DIRECTV move-out space.

Eliott Trencher

Many different dynamics at play. How much pre-leasing do you have? What is the credit profile of those tenants? What is the total dollar size of the potential investment because we're going to hopefully have the feasibility there to build the projects in stages. So all of those factors are going to influence the kinds of returns that we're going to target. I think the best thing we can do is kind of point you to 1900 Broadway and how we approach that.

And we talked about that as sort of a low to mid-9s stabilized yield on cost with a 60% pre-leased project. So with a good quality tenant. So I think that, that's a good framework to start from. But obviously, all these dynamics are going to change as market dynamics change.

Angela Aman

Yes. I would just add. I mean, remember, the entire process we're going through with the city of San Francisco is meant to give us a lot more flexibility around phasing this project. So instead of needing to build what was our original entitlement of 2.4 million square feet all at once effectively due to some of the restrictions in that original development agreement, we will be able to build this in more discrete pieces to respond to tenant demand when it really does materialize at the rate we need it to materialize at to move this project forward.

Eliott Trencher

And then just hitting on the second piece of DIRECTV. We are looking at a whole host of options, which could include anything from leasing up the space to some sort of monetization, a partial monetization, a full monetization. And we're really trying to explore as many options as we can as quickly as we can.

Operator

Your next question comes from the line of Steve Sakwa with Evercore.

Steve Sakwa

Angela, I know you've been trying to reposition the portfolio through selective dispositions. I'm just curious in kind of today's rate environment, I guess, how are you sort of thinking about that outside of some of those land sales? And are there opportunities to both deploy capital on the plus side, but also how is that impacting kind of your disposition thought process?

Angela Aman

Yes. Steve, it's a really good question. It's pretty early for us to understand exactly how the transaction market within our regions is really going to respond to what we're seeing from a rate environment standpoint. We're watching and listening carefully for signs of what's happening to some of the deals that are out in the market right now. But it's just a bit early. All I would say as it relates to sort of the strategic direction of the portfolio and our ability to continue to upgrade the portfolio, we're going to be active and the plan has been to be active on sort of both sides of the equation, right?

So we can, even in a higher rate environment, sell properties and either acquire properties also at better -- commensurately better pricing or execute on debt paydowns or buybacks, all of which may be a bit more attractive given the environment. So I think the business plan overall is balanced and actually allows us to continue to execute on our strategic goals even in a more dislocated transaction environment.

Steve Sakwa

Okay. And then maybe as a follow-up, I guess I just wanted to drill a little bit deeper into L.A. I think people understand the accelerating demand drivers in places like San Francisco, to some extent, Seattle, which will benefit from the strength of Northern Cal and San Diego has been pretty good. Can you maybe just unpack a little bit what you're seeing in L.A. and how do you sort of tackle outside of DIRECTV, some of the other maybe vacancy or upcoming vacancies you might get in the L.A. market?

A. Paratte

Steve, it's Rob. I'll tackle that one. Again, I like to focus on the markets that we operate in and not the broader L.A. market for a variety of reasons and primarily because there are projects. But when you look at Century City, vacancy now is at 15% in Century City and Trophy quality product is at 9%. And that's having a real direct impact on our leasing at Maple Plaza, where we're really having great success. It's also having a spillover effect in Culver City, where you're seeing leasing activity that Angela mentioned in her script.

In fact, Culver City posted almost 129,000 -- 130,000 square feet of positive absorption in the quarter. So that's a very promising market. The Westside, last quarter, we signed a lease at 2100 Colorado. But beyond that, the Westside is muted, and there are just a variety of factors that are driving that kind of slower market. But we are seeing more tour activity and so more to come. But I think what we're really happy with is the performance in Culver City. Long Beach is actually a pretty busy project for us on a weekly basis. And we also have some activity in our Hollywood project at Columbia Square.

Operator

Your next question comes from the line of Blaine Heck with Wells Fargo.

Blaine Heck

Just following up on DIRECTV. Can you give us an update on whether there's any chance of a partial renewal there? And if you were to look at a repositioning or redevelopment there, how much time and capital might be needed for that effort?

Eliott Trencher

So Blaine, this is Eliott. There is a chance of a renewal in some form. I think the way we characterized it is expect a full vacate or a meaningful downsize, but that does -- we are trying to say there is a possibility that they stay in some capacity. On the second part of your question, I think that's the process that we're working through right now. And I think we're pretty eyes wide open about what are the pluses and minuses are about that market.

And we're trying to make an assessment of not just how much capital it would require, but what sort of ROI would we anticipate if we were going to spend that capital. So more to come, but I think suffice to say that if that is a path we take, it's because we get comfort that there is an acceptable return of spending capital to enhance and redevelop that property.

Blaine Heck

All right. That's helpful, Eliott. On the Box renewal at Crossing 900, 12 years and 240,000 square feet is a meaningful vote of confidence. I guess, can you just talk about where that rent landed relative to the expiring rent and relative to market, what concession packages look like and whether that's representative of kind of what you'd expect on the rest of your large Bay Area of renewals?

Angela Aman

Yes. I mean I'll take it, and Rob will jump in if he wants to provide any additional color. I'd just say we're very reticent to speak about deal economics on an individual tenant perspective. We did say in our prepared remarks, we thought the lease economics here were highly compelling for the company and for our shareholders, but pretty consistent with what we've talked about in the past in terms of other space we've leased at Crossing 900 over the last few years and certainly, the rent comp that was set by the Cooley lease at our 1900 Broadway development project.

We've been very enthusiastic about the stability that, that downtown Redwood City submarket has experienced over the last 10 or 15 years. The fact that occupancy has stayed pretty high, especially at projects like Crossing 900 and that you've seen pretty consistent rent growth. So I think this was a crystallization of the fundamentals we've talked about in downtown Redwood City over the last couple of years.

Operator

Your next question comes from the line of Nicholas Yulico with Scotiabank.

Nicholas Yulico

In terms of the 2027 lease expirations, I know you've already got -- you've addressed some of them. But if we think about -- maybe you could talk about just the activity on the remaining expirations, putting aside DIRECTV. And is there any way to think about a good retention rate to think about, again, ex DIRECTV next year?

Angela Aman

Yes, it's still early. I think for some of the later in the year expirations, the team is in conversations on many of them. So over the next quarter or 2, we'll have a much better sense. My sense in 2027, we've talked about this before, there's the DIRECTV expiration. There's another under 100,000 square foot, but call it 80,000 to 90,000 square foot expiration in Long Beach to a tenant that was about double that size and chose to vacate the project to own their own building. And so they already vacated that first tranche and the second tranche expires in 2027.

Outside of that, all the expirations are below 50,000 square feet. So it's a pretty granular pool, and that's part of why it's just still a little bit early to talk more specifically about what that looks like. I think in totality, you're still probably going to be just if you look at the 2027 expirations, a bit below the company's kind of pre-pandemic average in the 40% to 50% range. But again, it is early to tell.

And the 2 things to think about here is that can be true on the pool of 2027 expirations as we laid out in the supplemental, but we also highlighted and you sort of saw it play out this quarter, in particular, the dynamic where we have early renewal activity from '28 or beyond that's going to improve the retention ratio as reported in the supplemental in any given quarter. And we're certainly seeing a lot of that activity, particularly in the San Francisco Bay Area with tenants sort of appreciating how quickly availability and optionality are tightening up and approaching us about potential early renewal activity. So retention in the 2027 pool is one thing, but do expect you're going to see kind of an improved profile from a reported standpoint as some of those early renewals occur.

Nicholas Yulico

Okay. And then my second question is on KOP 2. I know you talked about some of the leasing interest there. Can you just give us a sense if you -- the different scenarios where you're doing on the multi-tenant building, some that spec versus a full building user, let's say, you got leases done this year on any of that space. Just thinking about sort of the NOI commencement build-out. I mean, is there any benefit that comes later next year? Or is that more still of a 2028 earnings benefit that if you got leasing done by the end of this year?

Angela Aman

Yes. So I mean, for the existing multi-tenant building where we have spec suites that are built out, depending on the tenant we're talking to and what their requirements are, there's certainly an opportunity to get revenue turned on more quickly in that building as we get leases executed over the coming quarters. That full building opportunity is in shell condition. So leases that are signed in that full building opportunity are going to take more time to build out, but we'll know more as we execute with specific tenants and understand what their space planning needs and design needs are.

Operator

Your next question comes from the line of Anthony Paolone with JPMorgan.

Anthony Paolone

I was wondering if you can talk a bit more about the accelerating demand you're seeing in AI and robotics type tenants in the sense of what do the size requirements look like? What type of space do they want? Where do they want to be, that sort of thing?

A. Paratte

Anthony, it's Rob. I'll tackle that. What we're seeing, particularly in San Francisco, is that there's a real constraint in terms of what robotics companies need versus the space that's available because it is pretty specialized space. So that is why I made the comment earlier that we're starting to see the spillover effect into KOP. However, the robotics companies we're talking to at KOP are related to life science, but you also have a wide swath of automobile-related robotics, battery creation of new types of batteries and things like that.

And so we think we're watching it very carefully. And it's almost identical to what happened with AI starting out a couple of years ago. It's just accelerated. Right now, there's about 500,000 square feet of AI/robotics. And when I say AI, I mean directly related to robotics, there's a lot more demand for just pure AI. There's about 500,000 square feet looking for space in San Francisco. And our 100 Hooper project can address a lot of that because we do have PDR space, which is designed for that kind of use.

Angela Aman

I'd just add, we're also seeing some of that robotics demand in the South Bay in Los Angeles, where you've got sort of a concentration of aerospace and defense and those kinds of other uses. So there are definitely corollary robotics demand that you're seeing pop up amongst those companies and to help service those companies also.

Anthony Paolone

Okay. And then my second one is, I think you also still have land teed up to be sold for residential use. And do you think the risk of those closing has changed much just given what's happened in both rates and housing in general?

Eliott Trencher

Tony, it's Eliott. I think that while it's reasonable to point to an elevated rate environment as increasing risk, there's nothing that we've seen from our discussions with all the counterparties that we're working on in those transactions to suggest that the risk is any higher today.

Operator

Your next question comes from the line of Caitlin Burrows with Goldman Sachs.

Caitlin Burrows

Maybe just a follow-up question on the strong leasing in the quarter and sustainability of it. I guess as you look at the leasing pipeline, it maybe would suggest that the leasing volume could be sustained since the pipeline is higher, but wondering if you could give any comments on your expectation for volume going forward? And do you have more visibility to the new versus renewal portions?

A. Paratte

Sure. Caitlin, it's Rob. The first comment I'll make is that across the platform, our leasing team is unparalleled, and that's largely the result of what you're seeing in terms of the 800-plus thousand square feet of leasing that we've done. Every region is actively engaged in negotiations. And I feel like the pipeline we've got for the large deals that we signed in the quarter, we're starting to see large deals again come up in the fourth quarter. So I'm really confident between our life science leasing as well as our office leasing in terms of just the pipeline itself, and it continues to actually grow. So without being real specific in terms of numbers, hopefully, you can hear it in my voice, but we're pretty confident about what the future holds.

Angela Aman

Yes. I'd say a couple of things just to add to what Rob said, all of which I agree with. The pipeline is -- the majority of the pipeline is on the new deal side, which you would expect based on our early comments about retention in '26 and '27. Certainly, some early renewal type activity in the pipeline as well, but it is primarily on the new deal activity side, again, pretty broad-based and spread out across the regions and kind of ratable based on our concentration in the different markets. So that's exciting.

The only thing I would say, I think it's great given the 815,000 square feet signed during the quarter to see a 20% expansion in the pipeline. I think as you would expect, the pipeline is a bit earlier stage right now, given how much of the later-stage deals going into the third quarter were executed. So feeling really optimistic about what we're seeing, the continued conversations we're having. We have not, at this point, seen any impact negatively in the pipeline or otherwise in the transaction market related to the increase in rates or any broader macroeconomic concerns. So we feel good about continuing to progress things through. How that looks on a quarter-to-quarter basis, we'll see. Stay tuned.

Caitlin Burrows

And then maybe just on the acquisition side, you guys have been active in the past, and you mentioned earlier that disposition proceeds could be used for a few different things, one of them being acquisitions. So just wondering what you guys are seeing on the acquisition front and yes, I guess, what you're seeing and how likely it is, but I'm sure you probably won't tell us that. So yes, just what you're seeing on the acquisition potential side.

Eliott Trencher

Caitlin, it's Eliott. We're looking at a bunch of things. I think that, as you can imagine, there's a range of opportunities out there, some interesting, some less interesting. And it's really about picking and choosing spots where we think we can create value. We think that we see something that maybe other people don't see or we have some sort of competitive advantage that we can bring to the table. And we found some of those opportunities last year, and we'll see how the rest of the year plays out, but we're certainly spending some time on it.

Operator

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Michael Carroll

Rob, you mentioned earlier in the call that you're seeing some larger tenant demand moving from San Francisco just because there's not a lot of space available down to South San Francisco. I mean does that mean that larger tenants are starting to look at the North Peninsula area? Or is that just too far south and more north of that?

A. Paratte

No. Definitely. I mean tenants are having to look at a broader range of options south of Oyster Point. So North Peninsula does quite well because there are amenities there, and it's not as robust the life science market as Oyster Point is, but we're definitely seeing tenants looking throughout. In fact, Silicon Valley, a lot of robotics uses that are really heavy manufacturing or related R&D are in South Silicon Valley, where the opportunities are because there's a lot of R&D buildings down there.

Michael Carroll

Okay. And then the larger scale tenants that you guys are saying is interested at the third building at KOP 2. I mean, is that mostly life science tenants? Or is that a broader list and there's other tenants interested in that, not just life science?

A. Paratte

Right. As I said earlier, it's all life science. We do have an AI -- there are AI users, but they're related to life science, as I said earlier. And that's really becoming a broadening tenant base, this AI melding with life science, speeding product to market is the goal.

Operator

Your next question comes from the line of Peter Abramowitz with Deutsche Bank.

Peter Abramowitz

Most of my questions have been asked, but I did want to touch on -- you obviously talked about robotics and AI in the Bay Area. Curious if you could just kind of give some color on sort of the legacy big tech companies as well as non-AI tenants, both in Silicon Valley and the city of San Francisco. Just curious to hear your latest thoughts and what demand trends are like outside of the AI ecosystem.

A. Paratte

Outside of AI. So AI right now in San Francisco itself is roughly about 40% of the demand. And so there is a lot of demand from law firm and FIRE category tenants. So the city, as I've said on previous calls, the city has a pretty balanced tenant mix even though AI has gotten all the headlines.

Angela Aman

Yes. I think of your question specifically on what we're seeing from some of the more traditional big tech users, obviously, there's a lot of overlap now in terms of where they might be growing space needs tend to be user groups that would be focused on some of their AI initiatives as well. But that's really what we've seen over the last couple of quarters. I think it was last quarter, we talked about one of the big tech firms pulling a significant amount of space off the sublease market in Silicon Valley. We've definitely seen that happening and that same big tech company looking for some pretty significant additional new space in the city of San Francisco, not to replace space in the valley, but really to continue to grow and expand and have a home for other components of their talent base.

So we've continued to see and we've talked about over the last several quarters, a bit of a disconnect between some of the headlines around hiring and headcount at some of the big tech companies and what their actual space needs are at this point in time. That's become a bit dislocated, and we've just seen that trend continue. Certainly, layoffs across the big tech ecosystem have abated over the course of the last few months in the third quarter. I think they were lower, but we have continued to see sort of space needs and expansion kind of across our regions as a result.

A. Paratte

To add a little bit to what Angela said, just some statistics, I guess, right now, there are 31 requirements over 100,000 feet in San Francisco. Of those, 21 are AI companies and institutional quality, which I think is really an important thing to note because the quality of the tenant, even though there's been a lot of AI start-ups, the quality and institutional level AI interest is really burgeoning. And with what we're tracking and the deals that are in the market right now, 100,000 square foot opportunities for tenants could fall by as much as 50% over the next 2 quarters. So things are very dynamic and changing really rapidly in San Francisco and therefore, the other Bay Area markets.

Peter Abramowitz

Maybe it's something we haven't really talked about much in a while. It seems that the market has kind of moved past it. But just curious, how is office utilization across the portfolio? Is there any kind of low-hanging fruit still to pick in any of your markets? Or is that kind of mostly stabilized, do you feel like?

Angela Aman

Yes, it continues to evolve. I would say, kind of across the board, office utilization is improving, even still on the margin within tenants that have been back in office. I think you're seeing not just requirements, but interest in being back in the office kind of improve across a lot of the markets. When we look at the statistics for our own portfolio, especially in markets like the San Francisco Bay Area, utilization appears to be improving, in some cases, significantly because we had certain leases that were on the sublease market where the existing tenants weren't actually occupying the space that are now being effectively sublet by tenants that are bringing employees back into the space.

So I think there's a lot of healthy underlying dynamics, but it is kind of across the board. AI companies, particularly in San Francisco Bay Area continue to be -- want to be in office and are in office 4 to 5 days a week. And so that really has driven a lot more foot traffic kind of across the CBD market and definitely encourage other tenants and other asset classes to kind of bring people back as well.

Operator

Your next question comes from the line of Dylan Burzinski with Green Street.

Dylan Burzinski

Can you kind of just talk about -- and maybe just talking about the Bay Area specifically, just the prospect for net effective rent growth given the tightening supply-demand dynamics, especially within the context of that being even much tighter within the Class A and Trophy segment of office?

A. Paratte

Definitely. I mean we're already seeing it thus far asking rents in San Francisco are up 7% from last quarter, and it is a tightening market. But again, it's a very bifurcated market. There's some space that hasn't transacted for more than 5 years, and that space is not in the competitive pool. If you look at our Class A vacancy in San Francisco, it's 15% for the type of product that Kilroy owns. And as I've said and Angela said also, opportunities are dwindling quickly. So tenants are having to be pretty focused on what their space needs are and where they're going to locate.

Dylan Burzinski

And I guess in the parallel to that, Eliott, I think you mentioned that spec development in San Francisco doesn't pencil today. Can you at all share with us sort of what replacement cost is in San Francisco today, assuming some level of prescribed land value? And then what does that mean in terms of replacement rents? And I guess, how much above market is that today?

Eliott Trencher

Yes. So I think it's going to vary a little bit based on the project and the scope and the size. You're probably somewhere between $1,300 and $1,700 a foot depending on the specifics. And then as we talked about earlier, it depends on what your return threshold is. But I think if you use that $1,300 to $1,700 per square foot range, that will give you a sense of where replacement rents need to be. You're talking about still, call it, 20% to 40% rent growth from where we are today relative to where in-place second-gen rents are. But as we've talked about in the past, second-gen rents don't need to get there in order for a tenant to say they're willing to pay a premium to be in a first-gen property. So I know that's a lot of different dynamics, but that's how we're thinking about it.

Operator

Your next question comes from the line of John Kim with BMO Capital Markets.

John Kim

I wanted to ask about your gravitation towards higher triple net leases in your signed backlog. If this is primarily a function of just mix with higher life science and geographic mix? Or are you actively converting gross leases to triple net as you renew or sign new leases? And if it's the latter, what's the trade-off in terms of either base rents or concessions?

Angela Aman

Yes, it's primarily mix related. As we look at the portfolio, there hasn't been necessarily an intention to try to move different markets that may have different conventions in terms of gross versus lease to net leases. But given where the activity has been, some of the projects it's been at and where the pipeline -- the signed but not yet commenced pipeline is, it really does reflect more mix. That doesn't negate the point that as that space comes online, not only do you see the over $100 million of contractually obligated base rent, there's also going to be a nice pickup in recovery income associated with those leases. We just want to make sure that people don't miss as they think about the economic power and the NOI generating power of that signed but not commenced pipeline.

John Kim

And then on Flower Mart, can you just remind us what happened in January when you stopped capitalizing interest on the project? Is it just a temporary hold until you start developing the asset? And from Eliott's comments, can we assume that this project will have a higher office component than maybe it had previously?

Angela Aman

Well, the original project was 2.4 million square feet of office. So this was originally contemplated as an entirely or nearly entirely office-focused project. The process we've gone through with the city over the last few years has really been oriented around sort of realizing more flexibility and optionality on the site without committing ourselves to one specific plan. And that has been intentional given sort of the volatility you traditionally see in the San Francisco market and the belief we had even going back a few years that we could go through a re-entitlement process for a specific plan, whether it's a specific mix between resi and office or a full residential entitlement plan only to get to the end of that process and realize the original office plan may have, in fact, been the best one.

So we've left ourselves, I think, with a lot of room to really be responsive to market dynamics and the way that things are improving, and they are improving on both the commercial side and the residential side. Both still, to Eliott's earlier point, neither residential nor commercial pencils today, but that gap does continue to close quarter in and quarter out. And so we're just watching and being very mindful of how that evolves over the coming months. But until we get closer on one of those things or until we have a significant office tenant sort of appear and want to pay the kind of rents that would kick off a substantially pre-leased component of that development project, we're going to be in a bit of holding pattern as we wait to assess which of those 2 uses or potentially other uses is actually going to make the most sense on the site.

Operator

Your next question comes from the line of Upal Rana with KeyBanc Capital Markets.

Upal Rana

I just had a quick question on TIs and concessions. It looks like it came in a bit higher at $94 a square foot. Maybe you could update us on where TIs and concessions are trending broadly in your markets?

Angela Aman

Yes. I'll just make a global comment, and Rob will jump in on a specific deal perspective. But I would say it's important to kind of look at the TIs and LCs, not only on a per square foot per year basis, but really over longer time frames, you're going to have fluctuations in any one quarter. And prepared remarks, if you look at the annualized TI and LC per square foot for all year-to-date activity relative to the same period in 2025, we're actually down almost 2.5%, even though spreads are materially better than they were during that same year-to-date period last year. But Rob?

A. Paratte

What I'd add to that is that just on a deal-by-deal basis, it's going to depend on the condition of the space. Is it shell space, for example, at KOP? Or is it second-generation space. And one thing I would say across our markets, mostly other than L.A., I guess. I think that we're having a lot more leverage, both in terms of rent and as well as tenant improvement packages. So particularly in San Francisco, we're focused on that.

Upal Rana

And then I know this is a bit early, but with the Box renewal complete, you do have another large lease with Okta expiring in '28, which is about 3% of ABR. Just curious how you're approaching early renewal discussions with them as San Francisco's leasing market continues to improve.

Angela Aman

Yes. I think we're reluctant to comment on any tenant in particular. What I would say is just point back to the commentary we've given a couple of times on this call that certainly in the San Francisco Bay Area, given what has been a pretty quick tightening up of some of those larger availabilities that were in the market. We're definitely having across the board more early renewal conversations with tenants as they think about that flexibility and optionality they might have felt was important in a market that was in decline sort of shifting to one where people are very focused on making sure that they have the ability to ensure their future space needs given the tightness of the market.

Operator

Your next question comes from the line of Nicholas Yulico with Scotiabank.

Nicholas Yulico

Angela, I just wanted to ask you about the CFO transition. The departure of Jeffrey felt a bit abrupt in August. And so I just wanted to give you a chance to address that and then also ask how the process is going on a replacement and whether you expect a new CFO to be in place ahead of providing guidance in the fourth quarter.

Angela Aman

Yes. I think the process is going really, really well. We're excited about the quality and the caliber of candidates we're seeing, the interest in joining the team and all the exciting things that I think are going on here at Kilroy. So I feel really good about sort of where the search is at and how things are trending. We're very well supported on the finance and accounting side. Eliott has done a tremendous job in stepping back into the interim CFO role. Chandni Jalan, our Chief Accounting Officer, has stepped up in a really meaningful way that I'm very grateful for, but the entire accounting and finance team have just really done a great job through this transition, and I think we haven't missed a beat at all.

So I feel really good about that and where we're at. [ Jeffrey ]'s departure was -- Jeffrey had a really great skill set in depth and a lot of data analytics and the way information moves across the organization. And the work he did over the first couple of years that he was here provided us with a tremendous amount of additional visibility on our business and analytics that really do help drive better outcomes across the board. And I'm incredibly grateful for everything he contributed while he was here.

At the same time, we collectively kind of evaluated the needs of this role going forward and decided together that it was time for a transition. So again, really excited about the candidates we're seeing. I believe given the strength and depth on the finance and accounting side of this team, while we obviously want to move as quickly as possible, we also really do have the ability to be methodical with this search process and make sure that we find the best possible candidate for the organization.

Operator

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.