On Friday, Kilroy Realty Corporation (NYSE:KRC) maintained its "In Line" rating and a $40.00 price target from Evercore ISI, following a first-quarter funds from operations (FFO) that exceeded expectations by $0.03. The company's FFO for the quarter was $1.11, outperforming estimates due to various small factors including increased revenue and lower operating expenses.
Kilroy Realty reported a slight increase in its 2024 FFO guidance, raising it by $0.05 to a range of $4.15 to $4.30, up from the previous $4.10 to $4.25 estimate. Moreover, the company slightly adjusted its cash net operating income (NOI) growth rate, now expecting a decrease between 3.5% and 5.5%. Despite these adjustments, average occupancy rates are projected to remain steady, ranging from 82.5% to 84%.
The real estate investment trust ended the first quarter with an 84.2% occupancy rate in its stabilized portfolio, a slight decrease from the 85% seen in the previous quarter. This figure aligns with expectations that accounted for a relatively low retention rate of approximately 20% for the year, as Kilroy faces significant tenant move-outs and generally subdued leasing demand.
Kilroy's leasing activity for the quarter was robust at 400,000 square feet, which is notably higher than the estimated 199,000 square feet. This figure includes 116,000 square feet of short-term deals, which, when excluded, leaves a long-term leasing volume of 284,000 square feet.
For context, in the fourth quarter, Kilroy leased 454,000 square feet of space, which included 98,000 square feet of short-term deals or 356,000 square feet of long-term leases.
The breakdown of the first quarter's leasing volume further reveals that 154,000 square feet was new activity, while renewals accounted for 130,000 square feet. Despite no new leases at its three active development projects, the company has not adjusted the costs or stabilization dates for these assets. Still, the lack of leasing in the upcoming quarters could potentially pressure FFO growth once these properties are completed.
InvestingPro Insights
Following the recent financial updates from Kilroy Realty Corporation (NYSE:KRC), the market's response has been reflected in the company's stock performance and valuation metrics.
According to InvestingPro data, Kilroy Realty's market capitalization stands at $4.06 billion, with a Price to Earnings (P/E) ratio of 19.01, which is slightly adjusted to 19.06 for the last twelve months as of Q1 2024. Moreover, the company's dividend yield as of the latest data is an attractive 6.3%, showcasing its commitment to returning value to shareholders.
Two key InvestingPro Tips highlight the company's financial reliability: Kilroy Realty has not only raised its dividend for 6 consecutive years but also maintained dividend payments for 28 consecutive years, indicating a strong and stable history of shareholder returns.
These factors are particularly noteworthy for investors seeking steady income streams through dividends. Moreover, analysts predict that the company will remain profitable this year, which is supported by its profitability over the last twelve months.
For those considering further research into Kilroy Realty, there are additional InvestingPro Tips available that could provide deeper insights into the company's financial health and future prospects. Readers can explore these tips and more by visiting InvestingPro. Plus, take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes a comprehensive list of tips to aid your investment decisions.
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