Analyst Note| Kevin Brown, CFA |
No-moat-rated Kilroy Realty reported decent third-quarter results, with funds from operations of $0.98 per share, slightly lower than the $0.99 in FFO during the third quarter of 2020. The company’s high-quality portfolio, which benefits from the booming technology and life sciences sector on the West Coast has shown remarkable resiliency during the pandemic-induced recession. We have previously highlighted areas of potential risk and uncertainty for the company, including high exposure to the technology sector, impact of remote work, tech exodus from California, and tepid recovery in physical building occupancy. However, we would also like to point out that most of these risks have not materially affected the company’s portfolio performance over the past year. In addition to this, the company has limited lease expiration exposure in the near term, with an average of approximately 7.2% of total rentable square feet expiring per year through 2025. We are maintaining our $67 fair value estimate for Kilroy Realty after incorporating the third-quarter results.