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Kilroy Realty Corp KRC

Morningstar Rating
$35.13 +0.57 (1.65%)
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Company Report

Most REITs in the US Are Trading at Significant Discounts to Fair Value

The US REIT sector remains significantly undervalued, in our perspective. 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 two years, with many REITs reaching historical levels of net operating income growth, the sector has underperformed the broader equity markets over the past two years. We believe that the cause has been 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, we don’t believe that higher rates significantly change our fair value estimates for the sector. Additionally, interest rates are down from the October 2023 highs, and REIT share prices have generally inversely followed the movements of the US 10-year Treasury.

Price vs Fair Value

KRC is trading at a 774% premium.
Price
$34.55
Fair Value
$35.00
Uncertainty
High
1-Star Price
$74.27
5-Star Price
$72.60
Economic Moat
Kjd
Capital Allocation
Rcbmpbwc

Bulls Say, Bears Say

Bulls

Kilroy’s focus on technology and life science market clusters should benefit the firm in the long run as we expect buoyant growth in these areas. In addition to this, the company’s high-quality office buildings with good amenities should benefit from the flight to quality trend.

Bears

Employees are still hesitant in returning to the office as physical building occupancy rates remain at approximately 50% of the pre-pandemic level.

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News

Trading Information

Previous Close Price
$34.56
Day Range
$34.3435.29
52-Week Range
$26.8343.36
Bid/Ask
$35.11 / $35.14
Market Cap
$4.12 Bil
Volume/Avg
385,099 / 973,470

Key Statistics

Price/Earnings (Normalized)
19.86
Price/Sales
3.64
Dividend Yield (Trailing)
6.25%
Dividend Yield (Forward)
6.25%
Total Yield
6.48%

Company Profile

Kilroy Realty is a premier owner and landlord of approximately 17 million square feet of office space across Los Angeles, San Diego, the San Francisco Bay Area, Austin, Texas, and greater Seattle. The company operates as a real estate investment trust.
Sector
Real Estate
Industry
REIT - Office
Stock Style Box
Small Value
Total Number of Employees
248

Competitors

Valuation

Metric
KRC
SLG
ESRT
Price/Earnings (Normalized)
19.8654.91
Price/Book Value
0.751.141.76
Price/Sales
3.644.763.75
Price/Cash Flow
6.8818.9110.39
Price/Earnings
KRC
SLG
ESRT

Financial Strength

Metric
KRC
SLG
ESRT
Quick Ratio
2.030.541.15
Current Ratio
2.060.691.24
Interest Coverage
2.53−3.241.69
Quick Ratio
KRC
SLG
ESRT

Profitability

Metric
KRC
SLG
ESRT
Return on Assets (Normalized)
2.24%−1.77%2.17%
Return on Equity (Normalized)
4.65%−4.77%9.34%
Return on Invested Capital (Normalized)
3.09%−0.59%4.33%
Return on Assets
KRC
SLG
ESRT
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REIT - Office Industry Comparables

1-Day Chart
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Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
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Vornado Realty Trust
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MRPRF
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Mapletree Pan Asia Commercial Trust Units Real Estate Investment Trust Reg
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SL Green Realty Corp
SLG
XtnpcrklFqz$3.9 Bil

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