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Kilroy Realty Corporation Reports Third Quarter Results

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LOS ANGELES, Nov. 1, 2000 -- Kilroy Realty Corporation (NYSE:KRC) today reported financial results for its third quarter ended September 30, 2000, with funds from operations (FFO) of $21.1 million, or $0.69 per share, up 7.8% on a per-share basis from $20.7 million, or $0.64 per share, in the third quarter of 1999. Net income in the third quarter rose to $15.7 million, or $0.59 per share, compared to $10.9 million, or $0.39 per share, in the year-earlier quarter. Revenues totaled $47.2 million, up from $40.2 million a year ago.

For the first nine months of 2000, the company reported FFO of $61.9 million, or $2.02 per share, up 9.2% on a per-share basis from $59.7 million, or $1.85 per share, in the first nine months of 1999. Net income for the nine-month period increased to $38.1 million, or $1.42 per share, up from $31.6 million, or $1.14 per share, in the year-earlier period. Revenues for the nine months totaled $136.3 million, up from $117.1 million in 1999. All per-share amounts are presented on a diluted basis.

"Market conditions for commercial real estate in Southern California's key coastal submarkets remain robust," said John B. Kilroy, Jr., KRC's president and chief executive officer, "and we continue to use this opportunity to improve the quality of the KRC portfolio. Our development pipeline will add over $500 million of high quality, well-located properties over the next three years, a program financed in part by the disposition of $114 million in non-strategic real estate assets year-to-date," added Kilroy.

During the third quarter, KRC completed three new office buildings aggregating approximately 316,400 square feet of space for a total investment of approximately $69.7 million. All three projects, including two properties in San Diego County and the second phase of the company's Westside Media Center in West Los Angeles, were 100% leased on completion and have been added to the company's stabilized portfolio. Year-to-date, the company has completed and stabilized approximately 630,500 square feet in six new office properties for a total investment of approximately $132.5 million. Overall, the company's in-process and committed development pipeline -- with individual properties scheduled for stabilization at various dates through 2002 -- now totals just over one million square feet and is 91% leased or otherwise committed.

Kilroy Realty will conduct a conference call to discuss its 2000 third quarter results on Thursday, November 2, 2000 at 11:00 am PST. A live webcast of the call will be available through the Investors Relations section of the company's website at www.kilroyrealty.com under Conference Calls. Replay information is also available on the website. Additionally, a copy of the company's Third Quarter 2000 Supplemental Financial Report will be available in the Investor Relations section of the company's website under Financial Reports.

Some of the information presented in this release is forward-looking in nature within the meaning of the federal securities law. Although the information is based on the company's current best judgment, actual results, including the timing and total investment of the company's development projects, 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, capital market conditions and risks detailed from time to time in the company's SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.

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 exceeds $500 million. Other key submarkets where the company owns stabilized assets include El Segundo, and Orange County in California and the city of SeaTac in Washington. At September 30, 2000, the company owned 6.3 million square feet of commercial office space and 5.8 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  Three Months  Nine Months  Nine Months
                    Ended         Ended        Ended        Ended
                  Sept. 30,     Sept. 30,    Sept. 30,     Sept. 30, 
                    2000          1999         2000          1999
                ------------  ------------  -----------  -----------
 
 Revenues          $ 47,221     $ 40,202     $ 136,344    $ 117,053
 
 Net income 
  available 
  to common 
  stockholders(1)  $ 15,679      $ 10,911      $ 38,060     $ 31,617
 
 Weighted average 
  common shares 
  outstanding
   - basic           26,455        27,658        26,647       27,640
 Weighted average 
  common shares 
  outstanding
   - diluted         26,697        27,677        26,758       27,675
 
 Net income per 
  share of common 
  stock - basic      $ 0.59        $ 0.39        $ 1.43       $ 1.14
 Net income per 
  share of common 
  stock - diluted    $ 0.59        $ 0.39        $ 1.42       $ 1.14
  
 Funds From 
  Operations       $ 21,067      $ 20,693      $ 61,899     $ 59,686
  
 Weighted average 
  common 
  shares/units 
  outstanding 
  - basic(2)         30,203        32,302        30,457       32,174
 Weighted average 
  common 
  shares/units 
  outstanding 
  - diluted(2)       30,444        32,321        30,568       32,208
  
 Funds From 
  Operations 
  per common 
  share/unit
   - basic(2)        $ 0.70        $ 0.64        $ 2.03       $ 1.86
 Funds From 
  Operations 
  per common  
  share/unit
   - diluted(2)      $ 0.69        $ 0.64        $ 2.02       $ 1.85
  
 Common shares 
  outstanding at 
  end of period                                  26,455       27,894
 Common partnership 
  units outstanding 
  at end of period                                3,748        4,408
                                                  -----        -----
 Total common 
  shares and units 
  outstanding at 
  end of period                                  30,203       32,302
  
 
                                                Sept. 30,    Sept. 30,
                                                  2000         1999
                                                --------     --------
 Occupancy rates:
   California                                     96.6%        95.1%
   Washington                                    100.0%        99.5%
   Arizona                                       100.0%       100.0%
   Nevada                                        100.0%       100.0%
                                                --------     --------
  Weighted average total                          96.9%        95.5%
 
 Total square feet 
  of stabilized 
  properties owned 
  at end of period:
   Office                                        6,294        6,209
   Industrial                                    5,807        6,351
                                               --------     --------
   Total                                        12,101       12,560
 
 (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)
 
                                            September 30, December 31,
                                                2000          1999
                                              --------      --------
 ASSETS
 ------
 INVESTMENT IN REAL ESTATE:
 Land and improvements                      $   263,923   $   274,463
 Buildings and improvements                   1,034,081       946,130
 Undeveloped land and
  construction in progress, net                 151,453       189,645
                                            -----------   -----------
  Total investment in real estate             1,449,457     1,410,238
 Accumulated depreciation
   and amortization                            (194,563)     (174,427)
                                            -----------   -----------
  Investment in real estate, net              1,254,894     1,235,811
 
 Cash and cash equivalents                       12,801        26,116
 Restricted cash                                 35,506         6,636
 Tenant receivables, net                         25,181        22,078
 Note receivable from related party              45,278            --
 Deferred financing and leasing costs, net       34,657        27,840
 Prepaid expenses and other assets                5,735         2,020
                                            -----------   -----------
  TOTAL ASSETS                              $ 1,414,052   $ 1,320,501
                                            ===========   ===========
 
 LIABILITIES & STOCKHOLDERS' EQUITY
 ----------------------------------
 LIABILITIES:
  Secured debt                              $   387,556   $   325,516
  Unsecured line of credit                      186,000       228,000
  Unsecured term facility                       100,000            --
  Accounts payable and accrued expenses          39,177        26,260
  Accrued distributions                          13,591        13,456
  Rents received in advance
   and tenant security deposits                  16,773        20,287
                                            -----------   -----------
   Total liabilities                            743,097       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                         62,900        71,920
  Minority interest in Development LLCs          11,606         9,931
                                            -----------   -----------
   Total minority interests                     227,007       234,053
                                            -----------   -----------
 STOCKHOLDERS' EQUITY:
  Common stock                                      265           278
  Additional paid-in capital                    459,785       491,204
  Distributions in excess of earnings           (16,102)      (18,553)
                                            -----------   -----------
   Total stockholders' equity                   443,948       472,929
                                            -----------   -----------
 
  TOTAL LIABILITIES & STOCKHOLDERS' EQUITY  $ 1,414,052   $ 1,320,501
                                            ===========   ===========
 
 
    KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
         (unaudited, in thousands, except per share data)
 
                             Three      Three       Nine       Nine
                             Months     Months     Months     Months
                             Ended      Ended      Ended      Ended
                            Sept. 30,  Sept. 30,  Sept. 30,  Sept. 30,
                              2000       1999       2000       1999  
                            --------   --------   --------   --------
 REVENUES:
  Rental income            $ 40,555   $ 34,959   $117,627   $101,941
  Tenant reimbursements       4,748      4,214     14,036     12,530
  Interest income             1,706        239      3,008        860
  Other income                  212        790      1,673      1,722
                           --------   --------   --------   --------
      Total revenues         47,221     40,202    136,344    117,053
                           --------   --------   --------   --------
 EXPENSES:
  Property expenses           6,217      5,054     17,749     15,517
  Real estate taxes           3,523      3,108      9,959      8,969
  General and
   administrative
   expenses                   2,890      2,266      8,077      6,781
  Ground leases                 423        331      1,211      1,002
  Interest expense           10,024      6,501     27,800     18,420
  Depreciation and
   amortization               9,941      7,900     28,909     22,577
                           --------   --------   --------   --------
     Total expenses          33,018     25,160     93,705     73,266
                           --------   --------   --------   --------
 
 Income from operations
  before net gains on
  dispositions of
  operating properties,
  equity in income
  (loss) of
  unconsolidated
  subsidiary and
  minority interests         14,203     15,042     42,639     43,787
 Net gains on
  dispositions of
  operating properties        7,288         75     11,256         75
 Equity in income
  (loss) of
  unconsolidated
  subsidiary                     28         (8)        11        (22)
                            --------  --------   --------   --------
 Income before
  minority interests         21,519     15,109     53,906     43,840
                            --------  --------   --------   --------
 
 Minority interests:
  Distributions on
   Cumulative Redeemable
   Preferred units          (3,375)     (2,334)   (10,125)    (7,003)
  Minority interest
   in earnings
   of Operating
   Partnership              (2,227)     (1,830)    (5,442)    (5,186)
  Minority interest
   in earnings
   of Development
   LLCs                       (238)        (34)      (279)       (34)
                           --------   --------   --------   --------
     Total minority
      interests             (5,840)     (4,198)   (15,846)   (12,223)
                           --------   --------   --------   --------
 
 Net income               $ 15,679    $ 10,911   $ 38,060   $ 31,617
                           =======    ========   ========   ========
                          
 Weighted average
  shares outstanding
  - basic                   26,455      27,658     26,647     27,640
 Weighted average
  shares
  outstanding
  - diluted                 26,697      27,677     26,758     27,675
 Income per common
  share - basic           $   0.59    $   0.39   $   1.43   $   1.14
                          ========    ========   ========   ========
 Income per common
  share - diluted         $   0.59    $   0.39   $   1.42   $   1.14
                          ========    ========   ========   ========
 
                       KILROY REALTY CORPORATION
                         FUNDS FROM OPERATIONS
                         ---------------------
           (unaudited, in thousands, except per share data)
 
 
                 Three Months  Three Months  Nine Months  Nine Months
                     Ended         Ended        Ended        Ended
                   Sept. 30,     Sept. 30,    Sept. 30,    Sept. 30, 
                     2000          1999          2000         1999
                 ------------  ------------  -----------  -----------
 Net income        $ 15,679      $ 10,911      $ 38,060    $ 31,617
  
 Adjustments      
  Minority
   interest in
   earnings
   of Operating 
   Partnership        2,227         1,830         5,442       5,186
  Depreciation and 
   amortization       9,941         7,900        28,909      22,577
  Net Gains on 
   dispositions 
   of operating 
   properties        (7,288)          (75)      (11,256)        (75)
  Non-cash 
   amortization 
   of restricted 
   stock grants         508           127           744         381
                 ------------  ------------  -----------  -----------
 Funds From 
  Operations       $ 21,067      $ 20,693      $ 61,899    $ 59,686
                 ============  ============  ===========  ===========
  
 Weighted average 
  common 
  shares/units 
  outstanding
   - basic           30,203        32,302        30,457      32,174
 Weighted average 
  common 
  shares/units 
  outstanding 
  - diluted          30,444        32,321        30,568      32,208
  
 Funds From 
  Operations 
  per common 
  share/unit 
  - basic            $ 0.70        $ 0.64        $ 2.03      $ 1.86
                 ============  ============  ===========  ===========
 Funds From 
  Operations 
  per common 
  share/unit
  - diluted          $ 0.69        $ 0.64        $ 2.02      $ 1.85
                 ============  ============  ===========  ===========
  
 
                       KILROY REALTY CORPORATION
                   FUNDS AVAILABLE FOR DISTRIBUTION
                   --------------------------------
           (unaudited, in thousands, except per share data)
 
 
                 Three Months  Three Months  Nine Months  Nine Months
                    Ended         Ended         Ended        Ended
                   Sept. 30,     Sept. 30,     Sept. 30,    Sept. 30,
                     2000          1999         2000          1999
                 -----------  ------------  -----------  -----------
 Funds From 
  Operations       $ 21,067      $ 20,693      $ 61,899    $ 59,686
  
 Adjustments:
  Amortization 
   of deferred 
   financing 
   costs                426           257         1,119         820
  Tenant 
   improvements, 
   leasing 
   commissions
   and recurring 
   capital 
   expenditures      (2,462)       (1,324)       (5,193)     (3,274)
  Net effect of 
   straight-line 
   rents             (2,611)       (1,957)       (5,668)     (4,566)
                  -----------   -----------   ----------  -----------
 Funds Available 
  for 
  Distribution     $ 16,420      $ 17,669      $ 52,157    $ 52,666
                  ===========   ===========   ==========  ===========
 Funds Available 
  for Distribution 
  per common  
  share/unit 
  - basic            $ 0.54        $ 0.55        $ 1.71      $ 1.64
                 ===========   ===========   ==========  ===========
 Funds Available  
  for 
  Distribution  
  per common 
  share/unit
  - diluted          $ 0.54        $ 0.55        $ 1.71      $ 1.64
                 ===========   ===========   ==========  ===========
-0-
CONTACT: Kilroy Realty Corporation, El Segundo
         Richard E. Moran Jr.
         Executive Vice President and Chief Financial Officer
         (310) 563-5533
 
         Tyler H. Rose
         Senior Vice President and Treasurer
         (310) 563-5531