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Kilroy Realty Corporation Reports Second Quarter Financial Results

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Contact: FOR RELEASE:
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, July 24, 1997 - Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its second quarter ended June 30, 1997, with funds from operations (FFO) of $8.0 million, or $0.47 per share on a fully diluted basis. Net income in the second quarter totaled $4.1 million, or $0.28 per share, on revenues of $14.6 million.

For the first five months of 1997, Kilroy reported FFO of $13.0 million, or $0.76 per share on a fully diluted basis. Net income for the five-month period was $6.8 million, or $0.47 per share. Revenues totaled $23.5 million. The Southern California-based real estate investment trust completed its initial public offering of common stock on January 31, 1997.

Since the company's IPO, Kilroy has pursued an aggressive acquisition program in Southern California that has increased its real estate portfolio by 71%, and launched a new marketing effort for its Seattle-area office complex that netted a seven-year, 211,000 square-foot lease with a division of the Boeing Company during the second quarter.

"We hit the ground running in January and we haven't stopped since," said John B. Kilroy, Jr., the company's president and chief executive officer. "California's remarkable economic resurgence has reinvigorated commercial real estate markets here, creating a host of opportunities for profitable long-term investment. We're not wasting any time in capitalizing on the best of these opportunities to grow our business," he said.

Through the end of the second quarter, Kilroy completed $158 million of acquisitions. The purchases added 1.9 million square feet to the company's portfolio of office and industrial properties. Since then, Kilroy has closed an additional $40 million in acquisitions, adding another 544,000 square feet bringing the total new investment and square footage since the IPO to $198 million and 2.4 million, respectively.

Kilroy also purchased two industrial development sites in Orange County during the second quarter for a total price of $6.5 million, and initiated plans to expand facilities at one of the company's existing industrial projects. The company expects to build just over 500,000 square feet of industrial space at the three locations. Construction on these projects will begin this year. The new seven-year lease with Boeing's Commercial Airplane Group boosted the average occupancy rate for Kilroy's entire portfolio to 96%.

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.

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 Kilroy'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 Kilroy's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

Kilroy Realty Corporation

Summary Quarterly Results

(in thousands, except per share data)

Period from

Three Months

Period from

February 1, 1997

Ended

February 1, 1997

to June 30, 1997

June 30, 1997

to March 31, 1997

Revenues

Net income available to common sstockholders (1)

$23,541

$14,569

$8,972

Average common shares outstanding

$6,760

$4,109

$2,652

Ner income pershate of common stock

14,475

14,475

14,475

Funds from operations

$0.47

$0.28

$0.18

Weighted Average shares outstanding (2)

$12,955

$7,997

$4,959

Funds from opeerations per share (2)

17,143

17,153

17,127

$0.76

$0.47

$0.29

June 30, 1997

March 31, 1997

Occupancy

California

97.40%

98.40%

Washington (3)

82.00%

80.70%

Arizona

100.00%


100.00%


Weighted average total

96.00%

88.80%

(1) Net income after minority interest

(2) Calculated based on average shares outstanding assuming conversion of all partnership units outstanding

(3) Occupancy gives pro forma effect for the signing of the Boeing lease on June 20, 1997

Kilroy Realty Corporation Consolidated Balance Sheet

(unaudited in thousands)

June 30,

March 31,

1997


1997


ASSETS

RENTAL PROPERTIES

Land

$74,259

$26,069

Buildings and improvements

376,372


259,334


Total rental properties

450,631

285,403

Accumulated depreciation and amortization

(114,334)


111,791


Rental properties, net

336,297

173,612

Cash and cash equivalents

34,296

116,163

Restricted cash

5,724

4,244

Tenant receivables, net

3,759

3,537

Due from affiliates

163

1,261

Investment in subsidiaries

216

51

Escrow deposits

16,935

Deferred charges and other assets, net

12,841


11,514


TOTAL ASSETS

$410,231



$310,382



LIABILITIES & STOCKHOLDERS' EQUITY

LIABILITIES

Mortage debt

$95,663

$95,917

Line of credit

92,000

Accounts payable and accrued expenses

5,178

4,962

Accrued dividends

6,701

Rents received in advance and tenant security deposits

11,336


8,554


Total liabilities

210,878

109,433

MINORITY INTEREST

32,495

31,127

STOCKHOLDER'S EQUITY

Common stock, $.01 par value, 150,000,000 shares

authorized: 14,475,000 shares issued and outstanding

145

145

Additional paid-in capital

170,392

167,025

Retained (deficit) earnings

(3,679)


2,652


TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$410,231



$310,382



Kilroy Realt Corporation Consolidated Statement of Operations

(unaudited, in thousands, except per share data)

Period from

Three Month

Period from

February 1, 1997

Ended

February 1, 1997

to June 30, 1997

June 30, 1997

to March 31, 997

REVENUES

Rental income

$19,460

$12,350

$7,110

Tenant reimbursements

1,810

1,104

706

Interest income

1,975

1,004

971

Other income

296


111


185


Total revenues

23,541

14,569

8,972

EXPENSES

Property expenses

3,275

2,036

1,239

Real estate taxes

927

573

353

General and administrative

2,175

1,449

725

Ground leases

464

280

185

Interest expense

4,077

2,546

1,531

Depreciation and amortization

4,744


3,000


1,744


Total expenses

15,662

9,884

5,777

Income before equity in income of subsidiary

and minority interests

7,879

4,685

3,195

Equity in income of subsidiary

135

192

(57)

Minority interest

(1,254)


(768)


(486)


Net income

$6,760

$4,109

$2,652

Average shares outstanding

14,475

14,475

14,475

Income per share of common stock

$0.47



$0.28



$0.18



Kilroy Realty Corporation

Funds From Operations

(in thousands, except per share data)

Period from

Three Months

Period from

February 1, 1997

Ended

February 1, 1997

to June 30, 1997

June 30, 1997

to March 31, 1997

Net income

$6,760

$4,109

$2,652

Add

Minority Interest

1,254

768

486

Depreciation and amortization

4,744

3,000

1,744

Depreciation and amortization on

unconsolidated subsidiary

5

5

Other

192


115


77


Funds from operations

$12,955



$7,997



$4,959



Weighted average shares outstanding

17,143

17,153

17,127

Funds from operations per share

$0.76



$0.47



$0.29



Kilroy Realty Corporation

Funds Available for Distribution

(in thousands, except per share data)

Period from

Three Months

Period from

February 1, 1997

Ended

February 1, 1997

to June 30, 1997

June 30, 1997

to March 31, 1997

Funds from operations

$12,955

$7,997

$4,959

Adjustments

Amortization of deferred financing costs

404

243

161

Second generation tenant improvements

and leasing commissions

(276)

(64)

(212)

Building improvements

(256)

(256)

Net effect of straight-line rents

(75)

(80)

5

Funds available for distribution

$12,752

7,840

$4,913

Funds available for distribution per share

$0.74

$0.46

$0.29