Company Reports

Kilroy Realty reported funds from operations of $0.88 per share for the third quarter, while cash same-store net operating income declined 1.5%.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco, Seattle, and Austin. The firm has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco, Seattle, and Austin. The firm has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy Realty reported funds from operations of $0.92 per share and cash same-store net operating income growth of 1.5% for the second quarter.

Kilroy Realty reported good first-quarter results with funds from operations of $0.91 per share, and a cash same-store net operating income increased 1.8%. Shares traded up 4.3% on April 28 as a result of the company's earnings.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco, Seattle, and Austin. The firm has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy Realty reported funds from operations of $0.97 per share and a cash same-store net operating income decline of 7.2% for the fourth quarter.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco, Seattle, and Austin. The firm has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy's third-quarter numbers were in line with our expectations, as it reported funds from operations of $1.08 per share, 7.7% lower than the $1.17 of the prior-year quarter. There are some encouraging signs of recovery in the West Coast office markets, but the outlook remains difficult.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco, Seattle, and Austin. The firm has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy Realty owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, the San Francisco Bay Area, Seattle, and Austin. The company has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy reported decent results for the second quarter, with funds from operations at $1.13 per share, 2.7% higher than the $1.10 per share reported in the same period last year. We think the firm is still trading at an attractive valuation, but substantial uncertainty abounds.

Kilroy reported weak numbers in the first quarter as funds from operations were $1.02 per share, 8.1% lower than the $1.11 per share in the prior-year quarter. The firm is still trading at an attractive valuation but West Coast, macroeconomic, and remote work-related uncertainty abounds.

Performance of the REIT sector remains negatively correlated with interest rate movements with performance over the past three years demonstrating strong statistical relationship with 10-year US Treasury movements.

Kilroy Realty is a REIT that owns, develops, acquires, and manages premier office, life science, and mixed-use real estate properties in Los Angeles, San Diego, San Francisco Bay Area, Seattle, and Austin. It owns around 120 properties consisting of approximately 17 million square feet. The company has positioned itself to benefit from the burgeoning life sciences sector with material exposure in its current portfolio and future development pipeline. We also welcome management’s focus on ESG as it aligns its office portfolio to meet the sustainability requirements of its clients.

Kilroy Realty reported decent fourth-quarter numbers. Funds from operations came in at $1.20 per share, 11% higher than the $1.08 in the year-ago quarter. Leasing volume was the highest for the company since the fourth quarter of 2019, but 2025 guidance was weak.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

No-moat-rated Kilroy Realty’s third-quarter numbers had some encouraging signs of fundamentals being close to bottoming out as the firm reported funds from operations, or FFO, of $1.17 per share, which was around 4.5% higher on a year-over-year basis. The demand for office real estate in West Coast cities like Los Angeles and San Francisco has remained tepid due to city-specific factors and a slower recovery in physical office utilization rates for tech companies compared with other sectors. While Kilroy’s high-quality portfolio holds up significantly better than the overall market, the pressure on its portfolio remains intense. We think that the headline performance for Kilroy will remain under significant stress in the medium term, but the current valuation of the company implies an extremely pessimistic outlook for the long run that we think is unlikely. We are maintaining our $59 per share fair value estimate for Kilroy Realty as we incorporate third-quarter results.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.