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Kilroy Realty Corporation to Acquire the Principal Assets of San Diego-Based Allen Group for a Total Investment of Over $300 Million

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Richard E. Moran Jr Tyler H. Rose
Executive Vice President Senior Vice President
and Chief Financial Officer and Treasurer
(310) 563-5533(310) 563-5531

LOS ANGELES, August 1, 1997 - Kilroy Realty Corporation (NYSE: KRC) today said it has signed a letter of intent to acquire the principal assets of The Allen Group, a privately held, San Diego-based real estate investment and development company. The acquisition would include more than 1.7 million square feet of office and industrial space and a strategically located development pipeline that would provide Kilroy with a significant new market presence in Southern California's rapidly expanding North San Diego County region.

Under terms of the agreement, Kilroy would purchase The Allen Group's existing office and industrial portfolio and its development pipeline, the majority of which is located in North San Diego County, in phases over the next several years for a total estimated investment of over $300 million.

In conjunction with the purchase, the current owners of The Allen Group would acquire an ownership interest in Kilroy Realty L.P, the operating limited partnership of which Kilroy Realty Corporation is the sole general partner. Richard S. Allen, the managing partner of The Allen Group, would join Kilroy's board of directors. In addition, two senior executives of The Allen Group, Steven L. Black and T. Patrick Smith, would join Kilroy as executive vice presidents, assuming primary responsibility for the new San Diego operations and joining the senior management team responsible for Kilroy's overall development program.

"This acquisition is an excellent strategic fit for Kilroy Realty," said John B. Kilroy, Jr. the company's president and chief executive officer. "It provides immediate critical mass in one of the most attractive growth markets in California today, along with an excellent development pipeline that will continue to build our market presence in the North San Diego County region for years to come," he said.

"What's more, The Allen Group and its development team have demonstrated a strong track record in providing state-of-the-art facilities to many of San Diego's most dynamic companies," Kilroy added. The Allen Group and its principals have successfully pursued acquisition and development opportunities in a number of west coast commercial real estate markets, focusing most of their efforts on the burgeoning sub-markets of North San Diego County. Prior to forming the real estate company in 1990, Richard S. Allen was a principal in the family-owned Imperial Cup Company. Steven L. Black, currently a partner of The Allen Group, is a veteran of the real estate industry with a 16-year history in west coast commercial real estate. T. Patrick Smith, also a partner of The Allen Group, was previously president of Irvine Apartment Communities, a publicly-traded REIT, and, before that, was a division president with The Irvine Company.

"With the tremendous growth potential of the North San Diego County region increasingly evident, we have been actively reviewing strategic options to maximize the long-term growth potential of our real estate operations," said Richard S. Allen, managing partner and chief executive officer of The Allen Group. "In our view, the opportunity to make a long-term investment in Kilroy Realty, a strong, well-capitalized REIT provides a tremendous opportunity to capitalize on the outstanding growth prospects we see in the California real estate markets," he said.

Kilroy said it expects to finance the proposed acquisition with a combination of cash, assumed debt and the issuance over time of approximately four million limited partnership units in Kilroy Realty, L.P. to the current owners of The Allen Group, including the Allen family, Allen's senior management, and others. The transaction, which is subject to the completion of due diligence and final documentation, would close early in the fourth quarter of 1997.

Kilroy Realty Corporation owns, operates and develops commercial and industrial properties, primarily in California. At June 30, 1997, the company owned 2.7 million square feet of commercial office space and 2.5 million square feet of industrial space.

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