Goldman Sachs Touts Office REITs Hudson Pacific, SL Green  


Another all-west-coast REIT is Kilroy Realty Corp. (NYSE: KRC), which has a market cap of around $8.2 billion and received a Neutral rating from Burrows. Goldman Sachs has a price target on the stock of $75, implying a total return of 11.6% including Kilroy’s 2.9% dividend yield.

Burrows does not expect new development to be an earnings growth driver for Kilroy, although she expects longer-term revenue growth from two future developments in San Francisco, where 58% of the company’s properties are located. In the first quarter of this year, Kilroy sold a San Francisco building for $1.08 billion, funds Burrows says will be used to develop new projects or make acquisitions in the fourth quarter of this year.

Kilroy’s shares traded down by less than 1% Wednesday to $70.60, in a 52-week range of $45.28 to $71.78, and the high was posted earlier in the morning. The consensus price target on the stock is $74.54, and the average daily trading volume is about 1.1 million shares.

Boston Properties

With a market cap of around $17.7 billion, Boston Properties Inc. (NYSE: BXP) is the largest office REIT in this group, and it is one of two to get a Sell rating from Burrows. She also assigned the stock a price target of $106. Including a dividend yield of 3.6%, the Goldman Sachs price target implies downside of 5.4%.

Boston Properties operates on both coasts, with 35% of its exposure in Boston, 27% in New York, 21% in San Francisco and 13% in Washington, D.C. Burrows expects future operations revenue per share growth “to be challenged by a muted and gradual recovery in occupancy, and a relatively small development pipeline relative to the company’s size.”

Shares traded down about 1.4% on Wednesday, at $113.44 in a 52-week range of $69.69 to $115.29. The consensus price target is $112.18. The average daily trading volume is about 1.1 million shares.


The second-largest company on Goldman Sach’s list, Vornado Realty Trust (NYSE: VNO), has a market cap of around $8.7 billion. The company also got stuck with a Sell rating from Burrows, as well as a price target of $39.00. That 12-month target implies a downside of 13.4% and included Vornado’s 4.7% dividend yield.

Burrows expects Vornado’s property types, including a retail mall in Manhattan and the recently closed Hotel Pennsylvania, also in Manhattan, to face more earnings pressure than the company’s peers. Vornado also has the dubious distinction of being the only office REIT in the Goldman Sachs coverage that analysts don’t expect to regain 2019 earnings levels by 2023.

Shares traded down about 2.5% to $45.74, in a 52-week range of $29.79 to $49.50. The consensus price target is $45.00, and the average daily trading volume is about 1.8 million shares.

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