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Kilroy Realty Corporation Reports 9.2% Increase in Fourth Quarter FFO Per Share

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LOS ANGELES, Jan. 31, 2001 -- Kilroy Realty Corporation (NYSE:KRC) today reported financial results for its fourth quarter ended December 31, 2000, with funds from operations (FFO) of $21.6 million, or $0.71 per share, up 9.2% on a per-share basis from $20.9 million, or $0.65 per share, in the fourth quarter of 1999. Net income in the fourth quarter rose to $8.8 million, or $0.33 per share, compared to $8.3 million, or $0.30 per share, in the year-earlier quarter. Revenues totaled $50.8 million, up from $42.6 million a year ago.

For the year, the company reported FFO of $83.5 million, or $2.73 per share, up 9.2% on a per-share basis from $80.6 million, or $2.50 per share in 1999. Net income in the twelve-month period increased to $46.8 million, or $1.75 per share, up from $39.9 million, or $1.44 per share, in the year-earlier period. Revenues totaled $187.1 million, up from $159.7 million in 1999. All per-share amounts are presented on a diluted basis.

"California delivered one of the strongest economic performances in the state's modern history last year, and we took full advantage of the commercial real estate opportunities this created," said John B. Kilroy, Jr., Kilroy Realty's president and chief executive officer. "We significantly enhanced the overall quality of our portfolio with new development, while selling older, mature properties into a strong market. And we achieved this while maintaining an average occupancy rate of 97%."

KRC completed and stabilized $203 million of new development in 2000, adding an aggregate 1.0 million square feet of space to its portfolio. At year-end, the portfolio was 97% occupied. The company also disposed of $114 million of non-strategic real estate assets totaling 957,000 square feet last year, using the proceeds to help fund its development program.

Through year-end, the company had committed to build or initiated construction on an additional 964,000 square feet of space, representing a total estimated investment of $232 million. This committed pipeline includes individual properties scheduled for stabilization at various dates through 2003. The properties are located in select coastal submarkets of Southern California, including San Diego County, El Segundo, West Los Angeles, and the city of Calabasas along the northwestern Los Angeles Interstate 101 Corridor.

The company also reported that eToys, a tenant at the company's Westside Media Center in West Los Angeles, has defaulted on its space lease and related obligations to Kilroy Realty. Under the terms of the lease and related obligations, the company has fully drawn on two letters of credit totaling $15 million that support the lease and other obligations.

Kilroy Realty will conduct a conference call to discuss its 2000 fourth quarter results on Thursday, February 1, 2001 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 Fourth 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, El Segundo and coastal San Diego, where the company's total development pipeline exceeds $480 million. At December 31, 2000, the company owned 6.6 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    Year         Year
                     Ended         Ended        Ended        Ended
                  December 31,  December 31, December 31, December 31,
                     2000          1999         2000         1999
                 -------------  ------------ -----------  ------------
 
 Revenues          $ 50,769     $ 42,647      $187,113     $159,700
 
 Net income              
  available to 
  common
  stockholders (1) $  8,786     $  8,278      $ 46,846     $ 39,895
 
 Weighted average
  common shares
  outstanding
  - basic            26,456       27,884        26,599       27,701 
 Weighted average
  common shares
  outstanding
  - diluted          26,747       27,884        26,755       27,727
 
 Net income per
  share of common
  stock - basic    $   0.33     $   0.30      $   1.76     $   1.44
 Net income per
  share of common
  stock - diluted  $   0.33     $   0.30      $   1.75     $   1.44
 
 Funds From
  Operations       $ 21,572     $ 20,945      $ 83,471     $ 80,631
 
 Weighted average
  common shares/units
  outstanding
  - basic (2)        30,205       32,284        30,394       32,201
 Weighted average
  common shares/units
  outstanding
  - diluted (2)      30,495       32,284        30,550       32,227
 
 Funds From
  Operations per
  common share/unit
  - basic (2)      $   0.71     $   0.65      $   2.75     $   2.50
 Funds From
  Operations per
  common share/unit
  - diluted (2)    $   0.71     $   0.65      $   2.73     $   2.50
 
 Common shares
  outstanding at
  end of period                                 26,475       27,808
 Common partnership
  units outstanding
  at end of period                               3,749        4,229
    Total common                             -----------  -----------
     shares and units
     outstanding at
     end of period                              30,224       32,037
                                      
                                            December 31, December 31, 
 Occupancy rates:                                2000        1999
                                            -----------  -----------
   California                                    96.7%        96.4%
   Washington                                   100.0%        99.6%
   Arizona                                      100.0%       100.0%
   Nevada                                       100.0%       100.0%
                                            -----------  ----------- 
    Weighted average total                       97.0%        96.7%
 
 Total square feet 
  of stabilized 
  properties owned at 
  end of period:
     Office                                     6,624        6,148
     Industrial                                 5,808        6,477
                                            ----------  -----------
      Total                                    12,432       12,625
 
 
 (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)
 
                                     December 31,       December 31,
                                         2000              1999
                                   --------------    ---------------
 ASSETS
 ------
 INVESTMENT IN REAL ESTATE:
  Land and improvements             $   266,444       $   274,463
  Buildings and improvements          1,054,995           946,130
  Undeveloped land and
   construction in progress, net        162,633           189,645
  Investment in unconsolidated
   real estate                           12,405
                                   --------------    ---------------
   Total investment in real estate    1,496,477         1,410,238
  Accumulated depreciation
   and amortization                    (205,332)         (174,427)
                                   --------------    --------------- 
   Investment in real estate, net     1,291,145         1,235,811
 
 Cash and cash equivalents               17,600            26,116
 Restricted cash                         35,014             6,636
 Tenant receivables, net                 32,521            22,078
 Note receivable from
  related party                          33,274
 Deferred financing and
  leasing costs, net                     39,674            27,840
 Prepaid expenses and
  other assets                            7,941             2,020
                                   --------------    ---------------
   TOTAL ASSETS                     $ 1,457,169       $ 1,320,501
                                   ==============    ===============
 
 
 LIABILITIES & STOCKHOLDERS' EQUITY LIABILITIES:
 ----------------------------------------------
  Secured debt                      $   432,688       $   325,516
  Unsecured line of credit              191,000           228,000
  Unsecured term facility               100,000
  Accounts payable and
   accrued expenses                      33,911            26,260
  Accrued distributions                  13,601            13,456
  Rents received in
   advance and tenant
   security deposits                     17,810            20,287
                                   --------------    ---------------
   Total liabilities                    789,010           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             62,485            71,920
  Minority interest in
   Development LLCs                      11,748             9,931
                                   --------------    ---------------
   Total minority interests             226,734           234,053
                                   --------------    ---------------
 
 STOCKHOLDERS' EQUITY:
 Common stock                               265               278
 Additional paid-in
  capital                               460,390           491,204
 Distributions in
  excess of earnings                    (19,230)          (18,553)
                                   --------------    --------------- 
  Total stockholders' equity            441,425           472,929
                                   --------------    ---------------
  TOTAL LIABILITIES & 
   STOCKHOLDERS' EQUITY             $ 1,457,169       $ 1,320,501
                                   ==============    ===============
 
                       KILROY REALTY CORPORATION 
                  CONSOLIDATED STATEMENTS OF OPERATIONS
            (unaudited, in thousands, except per share data)
  
                   Three Months Three Months    Year          Year
                       Ended       Ended       Ended         Ended
                   December 31, December 31, December 31, December 31,
                        2000       1999         2000          1999
                     --------    --------     --------      --------
 REVENUES:
  Rental income      $ 43,609    $ 38,241    $ 161,236     $ 140,182
  Tenant
   reimbursements       5,405       3,786       19,441        16,316
  Interest income       1,594         315        4,602         1,175
  Other income            161         305        1,834         2,027
                     --------    --------     --------      --------
   Total revenues      50,769      42,647      187,113       159,700
                     --------    --------     --------      --------
 EXPENSES:
  Property expenses     5,598       5,152       23,347        20,669
  Real estate taxes     4,632       3,400       14,591        12,369
  General and
   administrative
   expenses             3,037       2,310       11,114         9,091
  Ground leases           432         395        1,643         1,397
  Interest expense     11,309       7,889       39,109        26,309
  Depreciation and
   amortization        12,216      11,217       41,125        33,794
                     --------    --------     --------      --------
   Total expenses      37,224      30,363      130,929       103,629
                     --------    --------     --------      --------
 Income from
  operations before
  net (losses) gains
  on dispositions of
  operating properties,
  equity in (loss)
  income of
  unconsolidated
  subsidiary and
  minority interests   13,545      12,284       56,184        56,071
 Net (losses) gains
  on dispositions 
  of operating
  properties                          (29)      11,256            46
 Equity in (loss)
  income of
  unconsolidated
  subsidiary               (1)         39           10            17
                     --------    --------     --------      --------
 Income before
  minority interests   13,544      12,294       67,450        56,134
                     --------    --------     --------      --------
 Minority interests:
  Distributions on
   Cumulative
   Redeemable
   Preferred units     (3,375)     (2,557)     (13,500)       (9,560)
 Minority interest
  in earnings of
  Operating
  Partnership          (1,241)     (1,294)      (6,683)       (6,480)
 Minority interest
  in earnings of
  Development LLCs       (142)       (165)        (421)         (199)
                     --------    --------     --------      --------
 Total minority
  interests            (4,758)     (4,016)     (20,604)      (16,239)
                     --------    --------     --------      --------
 Net income           $ 8,786     $ 8,278     $ 46,846      $ 39,895
                     ========    ========     ========      ========
 Weighted average
  shares outstanding
   - basic             26,456      27,884       26,599        27,701
 Weighted average
  shares outstanding
   - diluted           26,747      27,884       26,755        27,727
 Income per common
  share - basic        $ 0.33      $ 0.30       $ 1.76        $ 1.44
                     ========    ========     ========      ========
 Income per common
  share - diluted      $ 0.33      $ 0.30       $ 1.75        $ 1.44
                     ========    ========     ========      ========
 
 
                   KILROY REALTY CORPORATION
                     FUNDS FROM OPERATIONS
        (unaudited, in thousands, except per share data)
 
                   Three Months Three Months    Year          Year
                       Ended       Ended       Ended         Ended
                   December 31, December 31, December 31, December 31,
                        2000       1999         2000          1999
                     --------    --------     --------      --------
 Net income           $ 8,786     $ 8,278     $ 46,846      $ 39,895
  
 Adjustments:
 Minority interest
  in earnings of
  Operating
  Partnership           1,241       1,294        6,683         6,480
 Depreciation and
  amortization         11,037      11,217       39,946        33,794
 Net losses (gains)
  on dispositions
  of operating
  properties                           29      (11,256)          (46)
 Non-cash
  amortization of
  restricted
  stock grants            508         127        1,252           508
                     --------    --------     --------      --------
  Funds From
   Operations        $ 21,572    $ 20,945     $ 83,471      $ 80,631
                     ========    ========     ========      ========
 Weighted average
  common shares/units
  outstanding
   - basic             30,205      32,284       30,394        32,201
 Weighted average
  common shares/units
  outstanding
   - diluted           30,495      32,284       30,550        32,227
  
 Funds From
  Operations per
  common share/unit
   - basic             $ 0.71      $ 0.65       $ 2.75        $ 2.50
                     ========    ========     ========      ========
 Funds From
  Operations per
  common share/unit
  - diluted            $ 0.71      $ 0.65       $ 2.73        $ 2.50
                     ========    ========     ========      ========
 
 
                      KILROY REALTY CORPORATION
                  FUNDS AVAILABLE FOR DISTRIBUTION
         (unaudited, in thousands, except per share data)
 
                   Three Months Three Months    Year          Year
                       Ended       Ended       Ended         Ended
                   December 31, December 31, December 31, December 31,
                        2000       1999         2000          1999
                     --------    --------     --------      --------
 Funds From
  Operations         $ 21,572    $ 20,945     $ 83,471      $ 80,631
 
 Adjustments:
  Amortization of
   deferred
   financing costs        369         645        1,488         1,465
  Tenant
   improvements,
   leasing
   commissions
   and recurring
   capital
   expenditures        (3,237)     (2,322)      (8,430)       (5,596)
 Net effect of
  straight-line
  rents                (2,000)     (2,300)      (7,668)       (6,866)
                     --------    --------     --------      --------
 Funds Available
  for Distribution   $ 16,704    $ 16,968     $ 68,861      $ 69,634
                     ========    ========     ========      ========
 Funds Available
  for Distribution
  per common
  share/unit
   - basic             $ 0.55      $ 0.53       $ 2.27        $ 2.16
                     ========    ========     ========      ========
 Funds Available
  for Distribution
  per common
  share/unit
   - diluted           $ 0.55      $ 0.53       $ 2.25        $ 2.16
                     ========    ========     ========      ========
-0-
CONTACT:  Kilroy Realty Corporation 
          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