KRC
Kilroy Realty Corporation
$33.97
Real Estate Investment Trust
85%
P/FFO × Office REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 35.5% below fair value
You pay
$33.97
Bear
$41.21
Fair
$52.69
Bull
$64.16
Bear
$41.21
+21.3%
$5.34 FFO × 10x
Fair
$52.69
+55.1%
$5.34 FFO × 13x
Bull
$64.16
+88.9%
$5.34 FFO × 16x
Key Value Driver
FFO/share ($5.34) × office P/FFO multiple
Implied Market Multiple
6.4x
Summary
Our base-case estimate uses P/FFO × Office REIT Multiple. We then blend that result with the average analyst price target of $36.86 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $52.69 per share.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 6.4% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $31.17 (46% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $36.86 (from 28 analysts). Our estimate is 57% above the consensus -- consider that gap carefully.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify