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Kilroy Realty Corporation Reports Annual FFO Per Share Growth of 9.9%

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LOS ANGELES, Jan 30, 2002 (BUSINESS WIRE) -- Kilroy Realty Corporation (NYSE:KRC) today reported financial results for its fourth quarter ended December 31, 2001, with funds from operations (FFO) of $20.9 million, or $0.68 per share, down from $21.6 million, or $0.71 per share, in the fourth quarter of 2000. Revenues in the fourth quarter totaled $49.6 million, down from $50.8 million in the prior year's quarter.

For its fiscal year ended December 31, 2001, KRC reported FFO of $91.6 million, or $3.00 per share, up from $83.5 million, or $2.73 per share, in 2000, a 9.9% increase. Revenues for 2001 totaled $209.6 million, up from $187.1 million in the prior year.

The company said net income in its fourth quarter totaled $7.6 million, or $0.28 per share, down from $8.8 million, or $0.33 per share, in the fourth quarter of 2000. For the year, net income totaled $38.4 million, or $1.40 per share, down from $46.8 million, or $1.75 per share, in 2000. All per-share amounts in this report are presented on a diluted basis.

KRC completed and stabilized $67 million of new development in 2001, adding an aggregate 312,000 square feet of space in four new office properties to its stabilized portfolio. At year-end, the stabilized portfolio was 96% occupied. The company also disposed of $70 million of non-strategic real estate assets aggregating 802,000 square feet of space during the year.

KRC currently has in lease-up 284,500 square feet of space, representing a total estimated investment of approximately $66 million, which is 88% leased or committed. The Company has an additional 549,300 square feet of space under construction, with completion dates scheduled through 2002. The properties under construction, representing a total estimated investment of approximately $158 million, are currently 48% leased. In total the company's lease-up and under construction development properties are 62% leased or committed, up from 51% in the prior quarter.

Some of the information presented in this release is forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Although Kilroy Realty Corporation believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that the expectations will be achieved. Certain factors that could cause actual results to differ materially from Kilroy Realty's expectations are set forth as risk factors in the company's Securities and Exchange Commission reports and filings. Included among these factors are changes in general economic conditions, including changes in the economic conditions affecting industries in which its principal tenants compete; any failure of the general economy to recover timely from the current economic downturn; Kilroy Realty's ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs, including utility and insurance costs; future demand for its debt and equity securities; its ability to refinance its debt on reasonable terms at maturity; its ability to complete current and future development projects on schedule and on budget; the demand for office space in markets in which Kilroy Realty has a presence; 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. Many of these factors are beyond Kilroy Realty's ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, Kilroy Realty claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Kilroy Realty Corporation is a Southern California-based real estate investment trust active in the office and industrial property sectors. The company is a member of the S&P Small Cap 600 Index. For more than 50 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of California and Washington. Principal submarkets for KRC's current development program include West Los Angeles, El Segundo and coastal San Diego, where the company's total development pipeline is more than $500 million. At December 31, 2001, the company owned 7.2 million square feet of commercial office space and 5.1 million square feet of industrial space.

                      KILROY REALTY CORPORATION
                      SUMMARY QUARTERLY RESULTS
           (unaudited, in thousands, except per share data)
                          Three Months Ended         Year Ended
                          -------------------   ---------------------
                          Dec. 31,   Dec. 31,    Dec. 31,    Dec. 31,
                            2001       2000       2001         2000
                          --------  ---------   ---------   ---------
Revenues                 $ 49,598   $ 50,768   $ 209,645   $ 187,123
Net income available to
 common stockholders (1)  $ 7,625    $ 8,786    $ 38,431    $ 46,846
Weighted average common
 shares outstanding
 - basic                   27,426     26,456     27,167       26,599
Weighted average common
 shares outstanding
 - diluted                 27,545     26,747     27,373       26,755
Net income per share
 of common stock
 - basic                   $ 0.28     $ 0.33     $ 1.41       $ 1.76
Net income per share
 of common stock
 - diluted                 $ 0.28     $ 0.33     $ 1.40       $ 1.75
Funds From Operations    $ 20,933   $ 21,572   $ 91,558     $ 83,471
Weighted average common
 shares/units outstanding
  - basic (2)              30,487     30,205     30,349       30,394
Weighted average common
 shares/units outstanding
 - diluted (2)             30,606     30,495     30,555       30,550
Funds From Operations per
 common share/unit
 - basic (2)               $ 0.69     $ 0.71     $ 3.02       $ 2.75
Funds From Operations per
 common share/unit
 - diluted (2)             $ 0.68     $ 0.71     $ 3.00       $ 2.73
Common shares outstanding
 at end of period                                 27,426      26,475
Common partnership units
 outstanding at end
 of period                                         3,061       3,749
                                                 --------    --------
   Total common shares and
    units outstanding at
    end of period                                 30,487      30,224
                                         Dec. 31, 2001   Dec. 31, 2000
                                         --------------  -------------
Occupancy rates:
 California                                   95.6%          96.7%
 Washington                                   99.6%         100.0%
 Arizona                                     100.0%         100.0%
 Nevada                                                     100.0%
                                         --------------  -------------
  Weighted average total                      95.8%          97.0%
Total square feet of stabilized
 properties owned at end of period:
 Office                                       7,225          6,624
 Industrial                                   5,086          5,808
                                         --------------  -------------
  Total                                      12,311         12,432
(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,
                                          2001               2000
                                      --------------    -------------
ASSETS
INVESTMENT IN REAL ESTATE:
 Land and improvements                  $ 269,366          $ 266,444
 Buildings and improvements             1,140,499          1,054,995
 Undeveloped land and construction
  in progress, net                        191,129            162,633
 Investment in unconsolidated
  real estate                                                 12,405
                                      --------------    -------------
  Total investment in real estate       1,600,994          1,496,477
 Accumulated depreciation and
  amortization                           (241,665)          (205,332)
                                      --------------    -------------
  Investment in real estate, net        1,359,329          1,291,145
Cash and cash equivalents                  16,487             17,600
Restricted cash                             5,413             35,014
Tenant receivables, net                    32,151             30,720
Note receivable from related party                            33,274
Deferred financing and leasing
 costs, net                                37,068             39,674
Prepaid expenses and other assets           6,781              7,941
                                      --------------    -------------
  TOTAL ASSETS                        $ 1,457,229        $ 1,455,368
                                     ===============    =============
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
 Secured debt                           $ 459,587          $ 432,688
 Unsecured line of credit                 155,000            191,000
 Unsecured term facility                  100,000            100,000
 Accounts payable, accrued expenses
  and other liabilities                    53,879             33,911
 Accrued distributions                     14,634             13,601
 Rents received in advance and tenant
  security deposits                        15,955             16,009
                                      --------------    -------------
  Total liabilities                       799,055            787,209
                                      --------------    -------------
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             44,321
 Common unitholders of the Operating
  Partnership                              49,176             62,485
 Minority interest in Development LLCs     15,869             11,748
                                      --------------    -------------
  Total minority interests                217,546            226,734
                                      --------------    -------------
STOCKHOLDERS' EQUITY:
 Common stock                                 274                265
 Additional paid-in capital               479,295            460,390
 Distributions in excess of earnings      (33,163)           (19,230)
 Accumulated other comprehensive loss      (5,778)
                                      --------------    -------------
  Total stockholders' equity              440,628            441,425
                                      --------------    -------------
  TOTAL LIABILITIES & STOCKHOLDERS'
   EQUITY                             $ 1,457,229        $ 1,455,368
                                     ===============    =============
    KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
           (unaudited, in thousands, except per share data)
                              Three Months Ended       Year Ended
                             -------------------  --------------------
                              Dec. 31,  Dec. 31,  Dec. 31,    Dec. 31,
                               2001       2000      2001        2000
                             --------  ---------  ---------   --------
REVENUES:
 Rental income              $ 45,152   $ 43,609  $ 180,552  $ 161,236
 Tenant reimbursements         4,261      5,405     21,852     19,441
 Interest income                 147      1,594      1,030      4,602
 Other income                     38        160      6,211      1,844
                             --------  ---------  ---------   --------
     Total revenues           49,598     50,768    209,645    187,123
                             --------  ---------  ---------   --------
EXPENSES:
 Property expenses             7,550      5,598     29,804     23,347
 Real estate taxes             3,015      4,632     15,495     14,591
 General and administrative
  expenses                     3,098      3,037     12,435     11,114
 Ground leases                   361        432      1,507      1,643
 Interest expense              9,619     11,309     41,679     39,109
 Depreciation and
  amortization                13,279     12,216     51,913     41,125
                             --------  ---------  ---------   --------
     Total expenses           36,922     37,224    152,833    130,929
                             --------  ---------  ---------   --------
Income from operations        12,676     13,544     56,812     56,194
Net gains on dispositions of
 operating properties            707                 4,714     11,256
                             --------  ---------  ---------   --------
Income before minority
 interests and cumulative
 effect of change
 in accounting principle      13,383     13,544     61,526     67,450
                             --------  ---------  ---------   --------
Minority interests:
 Distributions on Cumulative
  Redeemable Preferred units  (3,375)    (3,375)   (13,500)   (13,500)
 Minority interest in earnings
  of Operating Partnership      (834)    (1,241)    (4,502)    (6,683)
 Minority interest in earnings
  of Development LLCs         (1,549)      (142)    (3,701)      (421)
                             --------  ---------  ---------   --------
     Total minority interests (5,758)    (4,758)   (21,703)   (20,604)
                             --------  ---------  ---------   --------
Net income before cumulative
 effect of change in
 accounting principle          7,625      8,786     39,823     46,846
Cumulative effect of change
 in accounting principle                            (1,392)
                             --------  ---------  ---------   --------
Net income                   $ 7,625    $ 8,786   $ 38,431   $ 46,846
                             ========   ========  ========   =========
Weighted average shares
 outstanding - basic          27,426     26,456     27,167     26,599
Weighted average shares
 outstanding - diluted        27,545     26,747     27,373     26,755
Income per common share
 - basic                      $ 0.28     $ 0.33     $ 1.41     $ 1.76
                             ========   ========  ========   =========
Income per common share
 - diluted                    $ 0.28     $ 0.33     $ 1.40     $ 1.75
                             ========   ========  ========   =========
                       KILROY REALTY CORPORATION
                         FUNDS FROM OPERATIONS
           (unaudited, in thousands, except per share data)
                              Three Months Ended       Year Ended
                             -------------------  --------------------
                             Dec. 31,   Dec. 31,  Dec. 31,    Dec. 31,
                               2001       2000      2001        2000
                             --------  ---------  ---------   --------
Net income                   $ 7,625    $ 8,786  $ 38,431    $ 46,846
Adjustments:
 Minority interest in
  earnings of Operating
  Partnership                    834      1,241     4,502       6,683
 Depreciation and
  amortization                12,634     11,037    49,757      39,946
 Net gains on dispositions
  of operating properties       (707)              (4,714)    (11,256)
 Cumulative effect of change
  in accounting principle                           1,392
 Non-cash amortization of
  restricted stock grants        547        508     2,190       1,252
                             --------  ---------  ---------   --------
Funds From Operations       $ 20,933   $ 21,572  $ 91,558    $ 83,471
                            =========  ========= =========   =========
Weighted average common
 shares/units outstanding
  - basic                     30,487     30,205    30,349      30,394
Weighted average common
 shares/units outstanding
 - diluted                    30,606     30,495    30,555      30,550
Funds From Operations per
 common share/unit
 - basic                      $ 0.69     $ 0.71    $ 3.02      $ 2.75
                            =========  ========= =========   =========
Funds From Operations per
 common share/unit
 - diluted                    $ 0.68     $ 0.71    $ 3.00      $ 2.73
                            =========  ========= =========   =========
                       KILROY REALTY CORPORATION
                   FUNDS AVAILABLE FOR DISTRIBUTION
           (unaudited, in thousands, except per share data)
                              Three Months Ended       Year Ended
                             -------------------  --------------------
                              Dec. 31,  Dec. 31,  Dec. 31,    Dec. 31,
                                2001      2000      2001        2000
                             --------  ---------  ---------   --------
Funds From Operations        $ 20,933  $ 21,572  $ 91,558    $ 83,471
Adjustments:
 Amortization of deferred
  financing costs                 532       369     1,720       1,488
 Tenant improvements, leasing
  commissions and recurring
  capital expenditures         (4,249)   (3,237)  (11,168)     (8,430)
 Net effect of straight-line
  rents                        (2,272)   (2,000)   (6,786)     (7,668)
                             --------  ---------  ---------   --------
Funds Available for
 Distribution                $ 14,944  $ 16,704  $ 75,324    $ 68,861
                            =========  ========= =========   =========
Funds Available for
 Distribution per common
 share/unit - basic            $ 0.49    $ 0.55    $ 2.48      $ 2.27
                            =========  ========= =========   =========
Funds Available for
 Distribution per common
  share/unit - diluted         $ 0.49    $ 0.55    $ 2.47      $ 2.25
                            =========  ========= =========   =========
CONTACT:
Kilroy Realty Corporation
Richard E. Moran Jr., 310/563-5533
Tyler H. Rose, 310/563-5531

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