Kilroy Realty downgraded at Goldman Sachs on FFO headwinds

Goldman Sachs downgraded Kilroy Realty Corporation (NYSE: KRC) to a "Sell" rating, highlighting concerns about the company's funds from operations (FFO) and challenges in the West Coast office market.

The analysts pointed to low tenant retention and excess office space as factors likely to hinder lease signings and diminish pricing power, impacting the company's same-store net operating income (SS NOI) growth.

Expected challenges with capitalized interest and delayed timelines for new development projects could further decrease KRC's valuation, prompting a predicted stock price drop to a target of $33.00.

This downgrade stands in contrast to Seeking Alpha's quant rating of "Buy," while other analysts classify the stock as a "Hold."

Recommendation Rating: Downgrade to Sell

Kilroy Realty Corporation (NYSE: KRC) experienced a decline in its stock value following a downgrade by Goldman Sachs, citing challenges related to funds from operations (FFO).

In pre-market trading on Thursday, shares dropped by 1.34%, reaching a price of $38.41.

Goldman Sachs analysts Caitlin Burrows, Jeremy Kuhl, and Shailee Lnu expressed concerns regarding the company's same-store net operating income (SS NOI) growth. They noted that low tenant retention and an abundance of available office space in KRC's West Coast markets are likely to hinder urgency in lease signings and diminish pricing power.

Furthermore, the analysts pointed out that capitalized interest could pose significant challenges in 2026. The extended timelines required for recent development projects to yield substantial net operating income contribute to this concern.

Taking these elements into account, the analysts predict that KRC's valuation multiple may decline from current levels, which could result in underperformance of the stock price.

Consequently, Goldman Sachs has revised its outlook on Kilroy Realty's stock to a "Sell," setting a target price of $33.00.

This downgrade contrasts with Seeking Alpha's Quant Rating, which currently rates the stock as a "Buy." In addition, both Seeking Alpha authors and Wall Street analysts categorize the stock as a "Hold."