Kilroy Realty's Mixed Performance Warrants Caution, Analysts Say

Kilroy Realty's financial performance is impacted by mixed signals and non-recurring gains, leading BTIG analyst Tom Catherwood to maintain a Hold rating. The company's recent quarterly results exceeded expectations due to one-time items, but occupancy rates have declined and leasing activity remains below pre-pandemic levels. Mizuho Securities also maintains a Hold rating with a $35.00 price target.

Kilroy Realty Corp (KRC) reported its Q2 2025 earnings, significantly exceeding analyst expectations with an earnings per share (EPS) of $0.57, compared to the forecasted $0.32. This resulted in a notable 78.13% surprise. Revenue also surpassed projections, reaching $289.9 million against the expected $270.28 million, marking a 7.26% surprise. Following the earnings announcement, Kilroy’s stock price rose by 5.38%, closing at $36.61 [3].

However, the company’s recent financial performance has been impacted by mixed signals and non-recurring gains, leading BTIG analyst Tom Catherwood to maintain a Hold rating on July 14. Catherwood attributed the Hold rating to a combination of factors, including the reliance on one-time items such as higher capitalized interest and termination income, rather than sustainable operational growth [1]. Despite some positive signs, such as accelerating leasing activity and successful asset sales at a premium, Kilroy Realty faces challenges with declining occupancy rates and lower leasing spreads. The company’s occupancy has decreased, and while leasing activity is picking up, it remains below pre-pandemic levels [1].

Mizuho Securities also maintained a Hold rating on the stock with a $35.00 price target on July 14 [1]. The company reported a Q2 funds from operations (FFO) of $1.13 per diluted share, inclusive of $0.11 per share from one-time items. Despite a slight decline in occupancy from 81.4% in Q1 to 80.8%, Kilroy maintained solid growth in cash same property net operating income (NOI), which grew by 4.50% [3].

Kilroy Realty’s Q2 2025 EPS of $0.57 significantly outperformed the forecast of $0.32, resulting in a 78.13% earnings surprise. Revenue also exceeded expectations, coming in at $289.9 million compared to the predicted $270.28 million. This strong performance reflects Kilroy’s effective management and strategic focus on high-demand sectors such as healthcare, life sciences, and AI [3].

Following the earnings release, Kilroy’s stock price experienced a 5.38% increase, closing at $36.61. The stock’s performance is noteworthy, considering its 52-week range between $27.07 and $43.78 [3]. The company has raised its 2025 FFO outlook to a range of $4.05-$4.15 per share, signaling confidence in its operational strategy and market positioning [3].

In another significant development, Apple is set to purchase another campus in Silicon Valley, California, amid almost $1 billion of property purchases this year. According to The San Francisco Chronicle, Apple is purchasing the four-building Mathilda Campus, located at 505–599 North Mathilda Avenue and 605 West Maude Avenue, from Kilroy Realty Corporation. The site comprises approximately 663,000 square feet of office space, of which Apple already leases over 580,000 square feet, which is roughly 88% of the complex. The sale is expected to close in the third quarter of 2025 at a rate of $550 per square foot [2].

Kilroy Realty disclosed in its second-quarter earnings report that it is under contract to sell a "four building campus in Silicon Valley" but did not specify the buyer. Two individuals with direct knowledge of the transaction confirmed to The San Francisco Chronicle that the buyer is Apple and that the property in question is the Mathilda Campus [2].

The Mathilda Campus purchase follows two other significant acquisitions by Apple in recent months. In June, Apple finalized the $166.9 million purchase of Cupertino Gateway, a three-building complex at 10200 North Tantau Avenue, adjacent to its Apple Park headquarters. Then, in July, the company acquired two neighboring office properties at 615 and 625 North Mathilda Avenue, directly adjacent to the Mathilda Campus, for $350 million [2].

Combined, these three transactions amount to a total outlay of approximately $882 million within a span of several weeks. All three sites are located within a few miles of ‌Apple Park‌ [2].

References:
[1] https://www.tipranks.com/news/ratings/kilroy-realty-hold-rating-amid-mixed-financial-signals-and-non-recurring-gains-ratings
[2] https://www.macrumors.com/2025/07/30/apple-to-buy-another-silicon-valley-campus/
[3] https://www.investing.com/news/transcripts/earnings-call-transcript-kilroy-realtys-q2-2025-earnings-surpass-expectations-93CH-4158235