KILROY REALTY CORPORATION (KRC): what the price assumes

boothcheck covers KILROY REALTY CORPORATION (KRC) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-06-27.

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/KRC

Headline

FieldValue
TickerKRC
CompanyKILROY REALTY CORPORATION
Current price$39.82/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisreit
Price-to-FFO7.2x
FFO yield14.0%

The price sits below what even a 5%/yr funds-from-operations decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 11% cost of equity with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.30σ
cohort percentile (of 105 peers)11
implied end-window share0%

Valuation X-Ray

The price is supported by earnings-power and relative-multiple and growth-DCF value, while asset-based lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.22x4expensive
Earnings0.82x4justifies
Relative0.59x4justifies
Growth0.95x5justifies

Families that justify the price: Earnings, Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$46.540.86xyesFCF base $0.6B, growth -1% (input: historical growth), terminal g 0.5%, WACC 8.8%, 5yr projection
DCF Exit MultipleGrowth$41.880.95xyesExit EV/EBITDA: 12.0x / 14.0x / 16.0x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$94.810.42xyesP/E 23.9x (blended: static sector reference 35x + trailing (TTM) 7x), scenarios: 20.2x / 23.9x / 27.6x (bear / base = reference held flat / bull), EV/EBITDA 20x
Simple DDMGrowth$49.800.80xyesDPS $2.19, g=4.6% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$30.471.31xyesStage 1: -2% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$22.451.77xyesBV/sh $44.76, ROE (TTM) 4.6%, ke 9.3%
Two-Stage Excess ReturnAsset$14.982.66xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$21.531.85xyesRev $1.1B, growth -1% (input: historical growth; tapered), Terminal P/S: 3.6x / 4.2x / 4.9x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$13.542.94xyesBV $44.76 + 5yr PV of (ROE (TTM) 4.6% − Kₑ 9.3%) × BV; BV grows 3.0%/yr
Graham NumberAsset$74.420.54xyes√(22.5 × FFO/share $5.50 × BVPS $44.76) — Graham's conservative floor
EV/EBITDA RelativeRelative$58.170.68xyesEBITDA $0.36B × sector EV/EBITDA 20.0x
FCF YieldEarnings$49.920.80xyesFCF $580.1M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$47.660.84xyesSBC-adj FCF $0.56B (FCF $0.58B − SBC $0.02B) capitalized at Kₑ
Ben Graham FormulaEarnings$17.532.27xyesFFO/share $5.50 × (8.5 + 2×-2.3%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$56.710.70xyesRevenue $1.11B × sector P/S 6.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$59.460.67xyesFFO/share $5.50 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative$78.920.50xyesFFO/share $5.50 × 14.3x P/FFO (route cohort median, n=85); FFO $0.65B (FFO incl. D&A + impairments, FY2025, companyfacts), shares 118M
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Funds from operations (trailing)$647.2m
Share count CAGR (dilution)0.1%
Burning cashno

REIT basis: leverage is read against funds from operations (FFO), not depreciation-gutted operating income. The header's implied growth runs on ADJUSTED FFO — FFO minus recurring maintenance capex — so the header's multiple and this leverage ratio use bases that differ by that capex; neither substitutes for the other. Net debt could not be resolved from the corporate debt tags in the filings (REIT notes and mortgage debt are often tagged outside the corporate ladder), so the leverage ratio is withheld rather than rendered from incomplete tags. Interest expense is not separately reported in the cached statements, so fixed-charge coverage cannot be computed.

Bullet Takeaways

Bull Case

The balance sheet is what lets a cheap office REIT play offense instead of defense, and Kilroy's is built for it. Fixed-charge coverage sits near 5.8 times, meaning cash earnings cover interest, preferred, and ground rent with a wide margin, which is the difference between a landlord that can wait out a soft leasing cycle and one forced to sell into it. That coverage funds a dividend the company held at $0.54 a quarter through the downturn and a buyback that retired 2.4 million shares for $72.7 million in the first quarter, while the company recycled capital through $145.5 million of San Diego office dispositions and a $202 million sale of two Hollywood residential towers. A REIT selling stabilized assets at one price and buying back its own stock at roughly 8 times AFFO is arbitraging the gap between private real estate value and where its own equity trades.

The leasing engine is turning, which is the part the bear case has to argue away. The 10-K frames the strategy around developing "office properties primarily" and increasingly life science, and the first quarter delivered the strongest first-quarter leasing since 2017 at 568,000 square feet. Same-property cash net operating income rose 1.8% in the quarter, so the existing portfolio is growing its cash rents, not shrinking them. The company points to its "significant working relationships with tenants, municipalities, and landowners on the West Coast and in Austin, Texas" as the source of new opportunity, and a high-quality, newer portfolio is exactly the kind of office that wins tenants in a flight-to-quality market while older buildings empty out.

The value math is the cleanest part of the case. At roughly 8 times AFFO with a yield near 12% on those cash earnings, the price already embeds a meaningful decline that the operating results contradict. Management raised full-year Nareit FFO guidance to $3.49 to $3.63 per diluted share, an upward revision, not a cut. Against a real-estate cohort that includes Vornado and American Assets Trust, Kilroy trades in the lower half of the group on price-to-AFFO, so the discount is specific to the office wrapper rather than to the cash the buildings actually generate. If occupancy grinds back toward the leased rate, the FFO is already contracted; the price just has not paid for it yet.

Bear Case

The structural truth a holder has to sit with is that this is office, and office is the asset class the market has spent years deciding it does not want. The stabilized portfolio was 77.6% occupied at the most recent print, which means nearly a quarter of the space generates no rent, and the leased rate of 82.3% sets the near-term ceiling even if every signed lease commences on time. Quarterly FFO fell to $0.91 per diluted share from $1.02 a year earlier, so the cash earnings the whole valuation rests on are declining, not holding, and the cheap multiple is cheap precisely because the market is extrapolating that direction. A landlord priced at 8 times AFFO is not a bargain if the AFFO keeps stepping down.

The asset-value lens agrees the price looks expensive against the buildings themselves, and the reason is the one office owners least want to hear: the private-market value of office real estate has reset lower, and the discount the bull calls an arbitrage may simply be the market marking the assets to a level the appraisals have not caught up to yet. West Coast office demand depends heavily on tech hiring, and the same AI investment cycle that could fill towers could also stall, leaving the recovery the guidance assumes stranded. The company itself revised forward FFO estimates with a cautious eye on land monetization, which is the speculative end of the portfolio and the slowest to turn into cash in a weak market.

Interest rates are the lever that does the structural damage. The 10-K warns that it may "incur additional variable rate debt in the future" and that "Interest rates are highly sensitive to many factors that are beyond our control," which matters because a REIT refinances perpetually and every maturity that rolls at a higher coupon is FFO that leaves the building. Fixed-charge coverage near 5.8 times is comfortable today, but it is computed against a cash-earnings base that is falling, and a combination of higher refinancing costs and continued occupancy drift would compress it from both sides. The dividend at $0.54 a quarter is covered now; it is covered by an FFO stream the bear expects to keep declining, and a REIT that has to choose between its dividend and its balance sheet usually disappoints the holders who were there for the yield.

Valuation

A real-estate trust is valued on its adjusted funds from operations, the cash it generates after the maintenance spending that keeps its buildings leasable, not on an operating multiple. On that basis Kilroy is cheap: the price sits at roughly 8 times AFFO, an AFFO yield near 12%, low enough that it sits below what even a 5% annual decline in funds from operations would warrant. The market is not paying for growth here. It is pricing in a decline, and the leasing results are the evidence on the other side of that bet.

The method families split in a way that is unusual and informative for this name. The asset-value lens reads the price as expensive, sitting roughly double where book value lands, while the earnings-power, relative-multiple, and growth-oriented cash-flow lenses all support the price. The asset lens reads high because office building values have reset and book carries depreciated cost; the cash methods read fair because the rent the buildings actually collect supports the price at a high single-digit AFFO multiple.

Leverage is read against funds from operations for a REIT, not against depreciation-gutted operating income, and on that basis the cushion is real: fixed-charge coverage near 5.8 times means cash earnings cover the fixed obligations comfortably. The exact net-debt-to-FFO figure cannot be cleanly resolved because mortgage and unsecured notes sit outside the standard corporate debt tags, but the coverage ratio is the more honest read for a property company and it is sound. Against a cohort that includes Vornado and American Assets Trust, Kilroy sits in the lower half on price-to-AFFO, with a mean analyst target near $36 to $37 essentially at today's price. The street, in other words, sees the same standoff this framework does: cheap cash earnings against an office wrapper the market refuses to re-rate until occupancy proves the recovery.

Catalysts

The first-quarter 2026 report, released in late April, gave the bull case its strongest evidence in years. Kilroy leased 568,000 square feet, its strongest first quarter since 2017, and same-property cash net operating income rose 1.8%, even as FFO slipped to $0.91 per diluted share from $1.02 a year earlier. On the strength of the leasing, management raised full-year 2026 Nareit FFO guidance to $3.49 to $3.63 per diluted share and held the quarterly dividend at $0.54. Strong leasing plus an FFO guidance raise plus a maintained dividend is the trifecta a discounted office REIT needs to start closing the gap to its cash earnings.

Capital recycling is the recurring catalyst to watch. In the quarter Kilroy closed $145.5 million of San Diego office dispositions and a $202 million sale of two Hollywood residential towers, and repurchased 2.4 million shares for $72.7 million. Selling stabilized assets near private-market value while buying back equity at a high single-digit AFFO multiple is the value-creating loop, and each future disposition is a chance to repeat it or a signal that the private bid for office has softened.

The sell side remains unconvinced, which frames the risk. The consensus rating sits at Hold, with a mean price target near $36 to $37, essentially at the current price, and a wide range from about $29 to $44 that captures how divided the view is. Several analysts have trimmed forward FFO estimates on concern that West Coast office recovery stalls if AI-driven tech demand cools. The next occupancy print is the catalyst that decides which side of that range the stock moves toward.

Peer Cohorts (Per Segment, With Filing Citations)

Real estate (office/life science) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Kilroy Q1 2026 results, April 2026 · Kilroy Q1 2026 guidance, April 2026 · MarketBeat and TipRanks analyst consensus, 2026

View the full interactive KRC report on boothcheck