Moody’s changes Kilroy view to negative

Moody's Investors Service said it changed the outlook for Kilroy Realty, LP to negative from stable and affirmed its backed senior unsecured ratings and issuer rating at Baa2. The agency also assigned a (P)Baa2 rating to Kilroy Realty's senior unsecured debt shelf registration.

“Although Kilroy Realty's portfolio continues to outperform the broader markets by a significant margin, its occupancy declined to 86.2% as of Sept. 30, 2023, from 91.9% at YE 2021 and 94.6% at YE 2019. Some of the REIT's markets such as San Francisco, Seattle, and Los Angeles have been among the most affected by the weak operating environment. Moody's expects the REIT's occupancy rate to decline further in 2024 because new tenants are taking longer than in the past to make their leasing decisions,” Moody’s said in a press release.

The agency said it expects the weak operating environment to linger, which will hurt Kilroy’s ability to raise occupancy and grow earnings, resulting in net debt to EBITDA staying well above 6.5x.

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