One major hedge fund is leaning into a beaten-down West Coast office REIT — here’s what they may be seeing.
New York City-based D1 Capital Partners disclosed a significant buy of Kilroy Realty Corporation on November 14, adding nearly 6.6 million shares during the third quarter and seeing its overall position increase in value by an estimated $293.7 million.
What Happened
According to a Securities and Exchange Commission (SEC) filing dated November 14, D1 Capital Partners L.P. increased its stake in Kilroy Realty Corporation (KRC +0.10%) by acquiring nearly 6.6 million additional shares during the quarter. The fund’s position grew to almost 8.5 million shares with a quarter-end value of $358.4 million. The change in position size reflects both new share purchases and changes in market prices during the reporting period.
What Else to Know
The acquisition lifted Kilroy Realty Corporation to 4.1% of D1 Capital Partners’ reportable U.S. equity portfolio as of September 30.
Top five holdings following the filing:
- NASDAQ: CART: $829.2 million (9.5% of AUM)
- NASDAQ: APP: $601.3 million (6.9% of AUM)
- NYSE: CLH: $567.9 million (6.5% of AUM)
- NYSE: RDDT: $465.6 million (5.4% of AUM)
- NYSE: FLS: $397.5 million (4.6% of AUM)
As of Friday, Kilroy shares were priced at $40.78, up just 1% over the past year and well underperforming the S&P 500, which is up 13% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Price (as of market close Friday) | $40.78 |
| Market Capitalization | $4.9 billion |
| Revenue (TTM) | $1.1 billion |
| Net Income (TTM) | $322.1 million |
Company Snapshot
- Kilroy Realty Corporation develops, acquires, and manages office and mixed-use real estate, with a portfolio focused on office and life science space as well as select residential units.
- The company operates as a real estate investment trust (REIT), generating revenue primarily from leasing commercial properties and development projects across major West Coast markets.
- It serves technology, entertainment, life science, and business services companies, targeting tenants seeking modern, sustainable business environments.
Kilroy Realty Corporation has a stabilized portfolio totaling roughly 17 million square feet of primarily office and life science space and maintains a strong focus on sustainability and innovation. The company leverages decades of development and management expertise to deliver high-occupancy, high-quality assets in key urban markets. Kilroy’s commitment to sustainable building operations and strategic tenant relationships provides a competitive edge in serving top-tier corporate clients.
Foolish Take
This move is evidence that institutional capital still sees value in high-quality coastal office REITs — despite a sluggish recovery and years of share price erosion across the sector. Kilroy’s stabilized occupancy remains pressured, yet the company’s latest quarter showed meaningful progress: strong leasing momentum, early rent commencements, and higher GAAP rent spreads all point to improving fundamentals. Revenues came in at $279.7 million (down from $289.9 million one year earlier), but net income jumped to $156.2 million, climbing from $52.4 million a year earlier. For a REIT trading far below levels from a decade ago, operational traction matters.
According to the SEC filing, D1 Capital Partners increased its Kilroy position to roughly 8.5 million shares during the third quarter, lifting its value to $358.4 million. The holding now accounts for 4.1% of D1’s disclosed U.S. equity portfolio — significant for a fund whose top positions skew toward high-growth tech and industrial names. That context suggests Kilroy fits into a long-duration, contrarian bucket where improving cash flows and discounted valuations can compound over time.
With leasing momentum and reaffirmed full-year FFO guidance, Kilroy is offering a somewhat clear path toward stabilization, but weak occupancy and West Coast office risks remain. Ultimately, patient investors may see upside if execution continues.
Glossary
13F AUM: The total value of U.S. equity securities reported by an institutional investment manager in SEC Form 13F filings.
Net position: The total value of an investment holding after accounting for additions and subtractions during a period.
Stake: The amount of ownership an investor or fund holds in a company, usually measured in shares or percentage.
Dividend yield: Annual dividends paid by a company divided by its share price, expressed as a percentage.
Real estate investment trust (REIT): A company that owns, operates, or finances income-producing real estate and distributes most income as dividends.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Annualized: A figure projected for a full year based on data from a shorter period.
Mixed-use real estate: Properties combining multiple uses, such as office, residential, and retail, within a single development.
Portfolio: A collection of investments held by an individual or institution.
Development projects: Real estate initiatives involving the construction or significant renovation of properties for future use or sale.
Occupancy: The percentage of a property’s rentable space that is currently leased to tenants.
Sustainable building operations: Practices that reduce environmental impact and improve efficiency in managing real estate properties.