Kilroy Realty Corporation
Real Estate · Office REITs
Structural: pure-play West Coast office + life science REIT, ~17M sqft stabilized. Concentration in SF Bay (~40%), LA (~30%), San Diego (~15%), Seattle/Austin (~15%). Life science conversion thesis (~20% of NOI and rising) hedges office secular pressure with biotech tenants paying premium rents on lab-fitted space.
Investment-grade balance sheet (BBB), ~6 year weighted lease term, ~85% occupancy.
- Life science pivot: Oyster Point, KOP, and SD lab development pipeline targets biotech demand at $80-100/sqft rents vs $60 office.
- AI tenant wave: SF Bay tech leasing inflecting on $OPEN $AI office reabsorption; KRC owns prime SOMA + Mission Bay product.
- Trading below replacement cost: P/FFO ~7x, ~9% dividend yield, ~30% discount to NAV consensus.
- Strong balance sheet: BBB-rated, ~5.5x net debt/EBITDA, no major maturities until 2028.
- Post-COVID return-to-office tailwind: West Coast tech 4-5 day RTO mandates from $AMZN $GOOGL $META lifting marginal demand.
- West Coast office structural pressure: SF + LA office vacancy still 25-30%, sublease overhang elevated.
- Life science oversupply: 2021-2023 biotech development boom (BXP, ARE, Healthpeak) created lab glut in Boston + SF; concession packages expanding.
- Rate sensitivity: ~$5B debt stack repricing through 2028-2030 cycle at higher coupons.
- Tenant credit risk: tech layoffs continue to release space back via subleasing.
- Dividend coverage tightening as occupancy slips; cut risk if AFFO compression continues.
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