- Price
- $34.83
- Fair value
- $50.00
- Discount
- 30.3%
- Uncertainty
- High
- LSEG rating
- 2.75
- Moat
- None
- Next earnings
- 2026-10-27
- Next earnings is estimate
- Yes
- Company name
- Kilroy Realty
- Sector
- Office & life science REIT
- About
- Kilroy Realty is a real estate investment trust that owns, develops and leases office, life science and mixed-use buildings on the West Coast and in Austin. Its markets are the San Francisco Bay Area, Los Angeles, Seattle, San Diego and Austin. At June 30, 2026, its stabilized portfolio had about 17.1 million square feet, which was 77.0% occupied and 81.5% leased. It also owns 608 residential units in San Diego. Its tenants include technology, media, life science and professional services companies. Kilroy Oyster Point Phase 2 is a large life science campus in South San Francisco with low occupancy, and the Flower Mart project in San Francisco is a large development site.
- Thesis
- The market prices Kilroy for weak office and life science demand on the West Coast. Its stabilized portfolio was only 77.0% occupied at June 30, 2026, and the large Kilroy Oyster Point Phase 2 campus has low occupancy. Funds from operations per share fell to $0.92 in Q2 2026 from $1.13 a year earlier, and net debt was 7.0 times the company's share of EBITDAre. Investors fear that vacancy stays high, that rents do not recover, and that the company must sell more buildings at low prices to keep its debt in control. In addition, the Chief Financial Officer left on August 11, 2026. For the gap to close, three things must be true. Leases signed but not yet started must turn into occupancy, so that occupancy rises from the 76.5% to 78.0% average expected for 2026. Kilroy must lease more space at Kilroy Oyster Point Phase 2, which costs money while it is empty. Kilroy must sell non-core assets at fair prices and keep its debt stable. The Q3 2026 report, expected in late October 2026, and the 2027 guidance in early 2027 give the next evidence. If these checks pass, the gap can close slowly over two to three years. The main reason it may not close is that office demand in San Francisco and Seattle recovers more slowly than leasing activity now suggests.
- Risks
- Occupancy is low. The stabilized portfolio was 77.0% occupied at June 30, 2026. If tenants do not renew, or new leases start late, funds from operations can fall more.
Debt is high for an office REIT. Net debt was 7.0 times the company's share of EBITDAre at June 30, 2026. If earnings fall, or interest rates stay high when debt matures, Kilroy may have to sell assets at low prices.
Kilroy Oyster Point Phase 2 and the Flower Mart project tie up capital. The company expects a negative NOI of $22.5 million to $24.0 million from development properties in 2026, and its guidance assumes that it capitalizes interest on the Flower Mart project only through December 2026. If that interest becomes an expense after 2026, funds from operations will be lower.
The Chief Financial Officer left in August 2026, and the company still searches for a successor. A long search can slow financial decisions.
- Balance sheet
- Cash: $254M
Debt: $4.6B
Net debt: $4.3B
Net debt / EBITDA: 7.0× (high)
Undrawn credit line: $1.3B, to July 2030
Debt due within 12 months: $522M
At June 30, 2026, total debt was $4.57 billion at face value: unsecured debt of $3.98 billion and secured debt of $597 million. Cash was $254 million, and there were no borrowings under the $1.25 billion revolving credit facility. Debt due within 12 months includes $200 million of notes due October 2026, which Kilroy repaid in July 2026, $175 million of notes due February 2027 and a $147 million mortgage due December 2026. Net debt was 7.0 times the company's share of EBITDAre for the last 12 months, and the fixed charge coverage ratio was 3.1 times in Q2 2026. Kilroy pays a dividend of $0.54 per share each quarter.
As of 2026-06-30.
- Checkpoints
- Oct 27, 2026 (estimate): Q3 2026 earnings: occupancy. Pending. Watch: Occupancy in line with the 76.5% to 78.0% average for 2026 and unchanged guidance pass; lower occupancy or a cut to guidance fails.
Feb 2027 (estimate): 2027 guidance. Pending. Watch: Guidance for higher occupancy in 2027 and new leases at Kilroy Oyster Point Phase 2 pass; lower funds from operations per share without a path to recovery fail.
- Recent events
- 2026-08-11: Kilroy said that its Chief Financial Officer, Jeffrey Kuehling, left the company on that day. Eliott Trencher, the Chief Investment Officer and a former Chief Financial Officer, became interim Chief Financial Officer. The company started a search for a new Chief Financial Officer and kept its 2026 guidance.
2026-07-27: Kilroy reported Q2 2026 results. Funds from operations were $0.92 per diluted share, down from $1.13 a year earlier. It signed about 376,000 square feet of leases, and GAAP and cash rents on second-generation leases rose 21.0% and 6.1%. It kept its 2026 guidance of $3.49 to $3.63 of funds from operations per share. In April, it sold two residential towers in Hollywood for gross proceeds of $202.0 million, and in July it repaid $200 million of notes due October 2026.
2026-06-17: Kilroy amended its unsecured credit facilities. The revolving credit facility increased from $1.10 billion to $1.25 billion and now matures on July 31, 2030. The term loan facility increased from $200 million to $250 million and now matures on July 31, 2031.