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Kilroy Realty Corporation Reports 8.1% Increase in Second Quarter FFO Per Share

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Tuesday July 25, 7:17 pm Eastern Time

Company Press Release

SOURCE: Kilroy Realty Corporation

Kilroy Realty Corporation Reports 8.1% Increase in Second Quarter FFO Per Share

LOS ANGELES, July 25, 2000 (PRIMEZONE) -- Kilroy Realty Corporation (NYSE:KRC - news) today reported financial results for its second quarter ended June 30, 2000, with funds from operations (FFO) of $20.2 million, or $0.67 per share, up 8.1% on a per-share basis from $20.2 million, or $0.62 per share, in the second quarter of 1999. Net income in the second quarter rose to $12.8 million, or $0.49 per share, compared to $10.8 million, or $0.39 per share, in the year-earlier quarter. Revenues totaled $45.4 million, up from $39.3 million a year ago.

For the first six months of 2000, the company reported FFO of $40.8 million, or $1.33 per share, up 9.9% on a per-share basis from $39.0 million, or $1.21 per share in the first six months of 1999. Net income in the first half of 2000 increased to $22.4 million, or $0.84 per share, up from $20.7 million, or $0.75 per share, in the year-earlier period. Revenues for the six months totaled $89.1 million, up from $76.9 million in 1999. All per-share amounts are presented on a diluted basis.

``Southern California market conditions remain bullish for commercial real estate, with demand far outstripping supply in key coastal submarkets,'' said John B. Kilroy, Jr., KRC's president and chief executive officer. ``Our current development pipeline will add $256 million of new properties located in these markets to the KRC portfolio over the next three years.''

During the second quarter, KRC completed four new office buildings aggregating 536,000 square feet of space for a total investment of approximately $98.8 million. Two of the buildings, located in Peregrine Systems Corporate Center in Del Mar, were 100% leased on completion and have been added to the company's stabilized portfolio. The third and fourth buildings, located at Kilroy Airport Center, Long Beach and Calabasas Park Centre in northwest Los Angeles County, are currently in lease-up. Together, these two buildings are 92% leased or otherwise committed.

KRC also initiated construction on five new office buildings during the quarter, including four in San Diego County and the second phase of Calabasas Park Centre. Overall, the company's in-process and committed development pipeline now totals nearly 1.3 million square feet and is 75% leased or otherwise committed, with individual properties scheduled for stabilization at various dates through 2002.

As previously reported, KRC sold five Silicon Valley industrial buildings earlier this week to a private investment group for approximately $62 million in cash. Including this sale, the company has completed approximately $103 million of property dispositions year-to-date. The proceeds will be reinvested in KRC's development program in Southern California.

Some of the information presented in this release is forward-looking in nature. Although the information is based on the company's current best judgment, actual results could vary from expectations stated here. Numerous factors will affect KRC's actual results, some of which are beyond the company's control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. For further information, please see KRC's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

Kilroy Realty Corporation is a southern California-based real estate investment trust active in the office and industrial property sectors. For more than 50 years, the company has owned, developed, acquired and managed real estate assets in the coastal regions of California and Washington. Principal submarkets for KRC's current development projects include Calabasas, West Los Angeles, and coastal San Diego where the company's total development pipeline is over $545 million. At June 30, 2000, the company owned 6.3 million square feet of commercial office space and 6.2 million square feet of industrial space. More information on Kilroy Realty can be found at www.kilroyrealty.com.

                       KILROY REALTY CORPORATION
                      SUMMARY QUARTERLY RESULTS
           (unaudited, in thousands, except per share data)

                                  Three Months        Six Months
                                     Ended               Ended
                                    June 30,            June 30,  
                                 2000      1999      2000      1999
                                 ----      ----      ----      ----
 Revenues                      $45,360   $39,301   $89,123   $76,851

 Net income available
  to common stockholders (1)   $12,804   $10,796   $22,381   $20,706

 Weighted average
  common shares
  outstanding - basic           26,259    27,629    26,744    27,631
 Weighted average
  common shares
  outstanding - diluted         26,348    27,713    26,788    27,674

 Net income per share
  of common stock - basic      $  0.49   $  0.39   $  0.84   $  0.75
 Net income per share
  of common stock - diluted    $  0.49   $  0.39   $  0.84   $  0.75

 Funds From Operations         $20,153   $20,203   $40,832   $38,993

 Weighted average common
  shares/units outstanding
  - basic (2)                   30,041    32,302    30,586    32,109
 Weighted average common
  shares/units outstanding
  - diluted (2)                 30,131    32,386    30,630    32,151

 Funds From Operations
  per common share/unit
  - basic (2)                  $  0.67   $  0.63   $  1.33   $  1.21
 Funds From Operations
  per common share/unit
  - diluted (2)                $  0.67   $  0.62   $  1.33   $  1.21

 Common shares outstanding
  at end of period                                  26,455    27,629
 Common partnership units
  outstanding at end of period                       3,748     4,673
                                                     -----     -----
   Total common shares
    and units outstanding
    at end of period                                30,203    32,302



                                        June 30,     June 30,
                                         2000         1999
                                        --------     -------- 
 Occupancy rates:
  California                               97.1%       95.3%
  Washington                               99.7%       98.4%
  Arizona                                 100.0%      100.0%
  Nevada                                  100.0%      100.0%
                                         -------     ------- 
   Weighted average total                  97.3%       95.6%

 Total square feet of
  stabilized properties owned
  at end of period:
   Office                                 6,333       5,810
   Industrial                             6,238       6,152
                                         -------     ------- 
    Total                                12,571      11,962

 (1)  Net income after minority interests.

 (2)  Calculated based on weighted average shares outstanding assuming
      conversion of all common limited partnership units outstanding.



                       KILROY REALTY CORPORATION
                      CONSOLIDATED BALANCE SHEETS
                       (unaudited, in thousands)

                                            June 30,      December 31,
                                              2000           1999
                                              ----           ----   
 ASSETS
 INVESTMENT IN REAL ESTATE:
  Land and improvements                  $   274,541    $   274,463
  Buildings and improvements               1,016,166        946,130
  Undeveloped land and construction
   in progress, net                          176,858        189,645
                                         -----------    -----------
    Total investment in real estate        1,467,565      1,410,238
  Accumulated depreciation and
   amortization                             (189,410)      (174,427)
                                         -----------    ----------- 
    Investment in real estate, net         1,278,155      1,235,811

 Cash and cash equivalents                    16,518         26,116
 Restricted cash                               6,322          6,636
 Tenant receivables, net                      25,621         22,078
 Notes receivable from
  related party                               45,278          --
 Deferred financing and leasing
  costs, net                                  32,997         27,840
 Prepaid expenses and other assets            18,172          2,020
                                         -----------    ----------- 
   TOTAL ASSETS                          $ 1,423,063    $ 1,320,501
                                         ===========    =========== 
 LIABILITIES & STOCKHOLDERS' EQUITY
 LIABILITIES:
 Mortgage debt                           $   386,034    $   325,516
 Unsecured line of credit                    305,000        228,000
 Accounts payable and accrued
  expenses                                    32,165         26,260
 Accrued distributions                        13,591         13,456
 Rents received in advance and
  tenant security deposits                    20,664         20,287
                                         -----------    ----------- 
   Total liabilities                         757,454        613,519
                                         -----------    ----------- 
 MINORITY INTERESTS:
  8.075% Series A Cumulative Redeemable
   Preferred unitholders                      73,716         73,716
  9.375% Series C Cumulative Redeemable
   Preferred unitholders                      34,464         34,464
  9.250% Series D Cumulative Redeemable
   Preferred unitholders                      44,321         44,022
  Common unitholders of the Operating
   Partnership                                62,315         71,920
  Minority interest in Development LLCs       10,969          9,931
                                         -----------    ----------- 
   Total minority interests                  225,785        234,053
                                         -----------    ----------- 
 STOCKHOLDERS' EQUITY:
  Common stock                                   265            278
  Additional paid-in capital                 459,436        491,204
  Distributions in excess of earnings        (19,877)       (18,553)
                                         -----------    ----------- 
  Total stockholders' equity                 439,824        472,929
                                         -----------    ----------- 
  TOTAL LIABILITIES & STOCKHOLDERS'
   EQUITY                                $ 1,423,063    $ 1,320,501
                                         ===========    ===========

                      KILROY REALTY CORPORATION
                CONSOLIDATED STATEMENTS OF OPERATIONS
           (unaudited, in thousands, except per share data)

                            Three Months Ended       Six Months Ended
                                  June 30,               June 30,
                            ------------------       ----------------
                              2000       1999        2000       1999
                              ----       ----        ----       ----
 REVENUES:
  Rental income             $39,370    $34,164    $ 77,072    $66,982
  Tenant reimbursements       4,594      4,193       9,288      8,316
  Interest income             1,016        221       1,302        621
  Other income                  380        723       1,461        932
                            -------    -------    --------    ------- 
   Total revenues            45,360     39,301      89,123     76,851
                            -------    -------    --------    ------- 
 EXPENSES:
  Property expenses           6,074      5,329      11,532     10,463
  Real estate taxes           3,049      2,852       6,436      5,861
  General and administrative
   expenses                   2,555      2,201       5,187      4,515
  Ground leases                 399        334         788        671
  Interest expense            9,948      6,160      17,776     11,919
  Depreciation and
   amortization               9,645      7,460      18,968     14,677
                            -------    -------    --------    ------- 
   Total expenses            31,670     24,336      60,687     48,106
                            -------    -------    --------    ------- 
 Income from operations
  before gains on dispositions
  of operating properties,
  equity in loss of
  unconsolidated subsidiary
  and minority interests     13,690     14,965      28,436     28,745
 Gains on dispositions of
  operating properties        4,273       --         3,968       --
 Equity in loss of
  unconsolidated subsidiary     (24)       (14)        (17)       (14)
                            -------    -------    --------    ------- 
 Income before minority
  interests                  17,939     14,951      32,387     28,731
                            -------    -------    --------    ------- 
 Minority interests:
  Distributions on
  Cumulative Redeemable
  Preferred units            (3,375)    (2,335)     (6,750)    (4,669)
 Minority interest in
  earnings of Operating
  Partnership                (1,843)    (1,820)     (3,215)    (3,356)
 Minority interest in
  earnings of
  Development LLCs               83       --           (41)      --
                            -------    -------    --------    ------- 
   Total minority interests  (5,135)    (4,155)    (10,006)    (8,025)
                            -------    -------    --------    ------- 
 Net income                 $12,804    $10,796    $ 22,381    $20,706
                            =======    =======    ========    =======
 Weighted average shares
  outstanding - basic        26,259     27,629      26,744     27,631
 Weighted average shares
  outstanding - diluted      26,348     27,713      26,788     27,674

 Income per common share
 - basic                    $  0.49    $  0.39    $   0.84    $  0.75
                            =======    =======    ========    ======= 
 Income per common share
 - diluted                  $  0.49    $  0.39    $   0.84    $  0.75
                            =======    =======    ========    ======= 


                      KILROY REALTY CORPORATION
                        FUNDS FROM OPERATIONS
           (unaudited, in thousands, except per share data)

                               Three Months Ended    Six Months Ended
                                     June 30,             June 30,
                               ------------------    ----------------
                                 2000       1999       2000      1999
                                 ----       ----       ----      ----
 Net income                    $12,804    $10,796    $22,381   $20,706
  Adjustments:
  Minority interest in
   earnings of
   Operating Partnership         1,843      1,820      3,215     3,356
  Depreciation and
   amortization                  9,645      7,460     18,968    14,677
  Gains on dispositions of
   operating properties         (4,273)       --      (3,968)      --
  Non-cash amortization of
   restricted stock grants         134        127        236       254
                               -------    -------    -------   -------
 Funds From Operations         $20,153    $20,203    $40,832   $38,993
                               =======    =======    =======   =======
 Weighted average common
  shares/units outstanding
  - basic                       30,041     32,302     30,586    32,109
 Weighted average common
  shares/units outstanding
  - diluted                     30,131     32,386     30,630    32,151

 Funds From Operations per
  common share/unit - basic    $  0.67    $  0.63    $  1.33   $  1.21
                               =======    =======    =======   =======
 Funds From Operations per
  common share/unit - diluted  $  0.67    $  0.62    $  1.33   $  1.21
                               =======    =======    =======   =======

                      KILROY REALTY CORPORATION
                   FUNDS AVAILABLE FOR DISTRIBUTION
           (unaudited, in thousands, except per share data)

                             Three Months Ended    Six Months Ended
                                    June 30,             June 30,
                             ------------------    ----------------
                               2000       1999       2000      1999
                               ----       ----       ----      ----

 Funds From Operations       $20,153    $20,203    $40,832    $38,993

 Adjustments:
 Amortization of deferred
  financing costs                487        269        693        563
 Tenant improvements,
  leasing commissions and
  recurring capital
  expenditures                (1,827)      (849)    (2,731)    (1,950)
 Net effect of
  straight-line rents         (1,549)    (1,220)    (3,057)    (2,609)
                             -------    -------    -------    -------
 Funds Available for
  Distribution               $17,264    $18,403    $35,737    $34,997
                             =======    =======    =======    ======= 
 Funds Available for
  Distribution per common
  share/unit - basic         $  0.57    $  0.57    $  1.17    $  1.09
                             =======    =======    =======    =======
 Funds Available for
  Distribution per common
  share/unit - diluted       $  0.57    $  0.57    $  1.17    $  1.09
                             =======    =======    =======    =======

SOURCE: Kilroy Realty Corporation