Form 8-K KILROY REALTY CORP For: Oct 28

October 29, 2014 6:05 AM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section�13 OR 15 (d)�of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

October�28,�2014

KILROY REALTY CORPORATION

(Exact name of registrant as specified in its charter)



�	Maryland	�	1-12675	�	95-4598246	�
�	(State or other jurisdiction of incorporation)	�	(Commission File Number)	�	(IRS Employer Identification No.)	�
�	�	�	�	�		�
�	12200 W. Olympic Boulevard, Suite 200, �Los Angeles, California	�	�	�	90064	�
�	(Address of principal executive offices)	�	�	�	(Zip�Code)	�

Registrants telephone number, including area code:

(310)�481-8400

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
�	�
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
�	�
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
�	�
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
�	�

Item 2.02��Results of Operations and Financial Condition.

On October�28,�2014, Kilroy Realty Corporation issued a press release announcing its earnings for the quarter ended September�30,�2014 and distributed certain supplemental financial information. On October�28,�2014, Kilroy�Realty Corporation also posted the supplemental information on its website located at www.kilroyrealty.com. Copies of the supplemental information and the related press release are furnished herewith as Exhibits�99.1 and 99.2, respectively.

Exhibits�99.1 and 99.2 are being furnished pursuant to Item�2.02 and shall not be deemed filed for any purpose, including for the purposes of Section�18 of the Securities Exchange Act of 1934, as amended (the Exchange�Act), or otherwise subject to the liabilities of that section. The information in this Current Report on Form�8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the Securities�Act), or the Exchange Act regardless of any general incorporation language in such filing.

Item 7.01��Regulation FD Disclosure.

As discussed in Item�2.02 above, Kilroy Realty Corporation issued a press release announcing its earnings for the quarter ended September�30,�2014 and distributed certain supplemental information. On October�28,�2014, Kilroy�Realty Corporation also posted the supplemental information on its website located at www.kilroyrealty.com.

The information being furnished pursuant to Item�7.01 shall not be deemed filed for any purpose, including for the purposes of Section�18 of the Exchange�Act, or otherwise subject to the liabilities of that section. The information in this Current Report on Form�8-K shall not be deemed incorporated by reference into any filing under the Securities�Act or the Exchange�Act regardless of any general incorporation language in such filing.

Item 9.01��Financial Statements and Exhibits.



(a)	�	Financial statements of businesses acquired: None.
�	�	�
(b)	�	Pro forma financial information: None.
�	�	�
(c)	�	Shell company transactions: None.
�	�	�
(d)	�	Exhibits:

The following exhibits are furnished with this Current Report on Form 8-K:



Exhibit No.	�	Description
99.1**	�	Supplemental Operating and Financial Data for the quarter ended September 30, 2014
�	�	�
99.2**	�	Press Release dated October 28, 2014 regarding third quarter 2014 earnings

_______________

**��Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



�	�	�	Kilroy Realty Corporation			�
�	Date: October 28, 2014	�	�	�	�	�
�	�	�		�		�
�	�	�	By:	�	/s/ Heidi R. Roth	�
�	�	�	�	�	Heidi R. Roth Senior Vice President, Chief Accounting Officer and Controller	�
�	�	�	�	�	�	�

Exhibit 99.1

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Table of Contents



�	Page
Corporate Data and Financial Highlights	�
Company Background	1
Executive Summary	2
Financial Highlights	3
Common Stock Data	4
Consolidated Balance Sheets	5
Consolidated Statements of Operations	6
Funds From Operations and Funds Available for Distribution	7
Portfolio Data	�
Same Store Analysis	8
Stabilized Portfolio Occupancy Overview by Region	9-13
Information on Leases Commenced & Leases Executed	14
Stabilized Portfolio Capital Expenditures	15
Stabilized Portfolio Lease Expirations	16-18
Top Fifteen Tenants	19
2014 Operating Property Acquisitions	20
2014 Dispositions�and Properties Held for Sale	21
Development	�
Completed Development and Redevelopment Projects and Other Land Holdings	22
In-Process and Future Development Pipeline	23
Debt and Capitalization Data	�
Capital Structure	24
Debt Analysis	25-26
Non-GAAP Supplemental Measures	27-29
Definitions	30-31
Reconciliations	32-34

This Supplemental Financial Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, information concerning lease expirations, debt maturity, potential investments, development and redevelopment activity, projected construction costs, dispositions and other forward-looking financial data. In some instances, forward-looking statements can be identified by the use of forward-looking terminology such as expect, future, will, would, pursue, or project and variations of such words and similar expressions that do not relate to historical matters. Forward-looking statements are based on Kilroy Realty Corporations current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of Kilroy Realty Corporations control. Accordingly, actual performance, results and events may vary materially from those indicated in forward-looking statements, and you should not rely on forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in forward-looking statements, including, among others, risks associated with: investment in real estate assets, which are illiquid; trends in the real estate industry; significant competition, which may decrease the occupancy and rental rates of properties; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired properties; the availability of cash for distribution and debt service and exposure of risk of default under debt obligations; adverse changes to, or implementations of, applicable laws, regulations or legislation; and the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts. These factors are not exhaustive. For a discussion of additional factors that could materially adversely affect Kilroy Realty Corporations business and financial performance, see the factors included under the caption Risk Factors in Kilroy Realty Corporations annual report on Form 10-K/A for the year ended December�31,�2013, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on information that was available and speak only as of the date on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report that becomes untrue because of subsequent events, new information or otherwise, except to the extent required in connection with ongoing requirements under U.S. securities laws.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Company Background

Kilroy Realty Corporation (NYSE: KRC), a member of the S&P MidCap 400 Index, is a real estate investment trust active in premier office submarkets along the West�Coast. The Company owns, develops, acquires and manages real estate assets primarily in the coastal regions of Los Angeles, Orange County, San Diego, the San Francisco Bay Area and greater Seattle. As of September�30, 2014, the Companys stabilized portfolio consisted of 105 office buildings, which encompassed an aggregate of 13.5�million rentable square feet and was 94.1% occupied.



Board of Directors		�	Executive Management Team		�	Investor Relations
John Kilroy, Jr.	Chairman	�	John Kilroy, Jr.	President�and�CEO	�	12200 W. Olympic Blvd., Suite 200 Los Angeles, CA 90064 (310) 481-8400 Web: www.kilroyrealty.com E-mail:�[email protected]
Edward�F.�Brennan,�Ph.D.	Lead Independent	�	Jeffrey C. Hawken	Executive VP and COO	�
Scott S. Ingraham	�	�	Eli Khouri	Executive VP and CIO	�
Dale F. Kinsella	�	�	Robert Paratte	Executive VP, Leasing and Business Development	�
Gary R. Stevenson	�	�	Tyler H. Rose	Executive VP and CFO	�
Peter B. Stoneberg	�	�	David Simon	Executive Vice President	�
�	�	�	Justin W. Smart	Executive VP, Development and Construction Services	�	�



Equity Research Coverage
�	�	�	�	�
Bank of America Merrill Lynch	�	�	J.P. Morgan	�
James Feldman	(646)�855-5808	�	Anthony Paolone	(212)�622-6682
Cantor Fitzgerald & Company	�	�	KeyBanc Capital Markets	�
David Toti	(212) 915-1219	�	Craig Mailman	(917) 368-2316
Citigroup Investment Research	�	�	Morgan Stanley	�
Michael Bilerman	(212) 816-1383	�	Vance Edelson	(212) 761-0078
Cowen and Company	�	�	RBC Capital Markets	�
James Sullivan	(646) 562-1380	�	Richard Moore	(440) 715-2646
Deutsche Bank Securities, Inc.	�	�	Robert W. Baird & Co.	�
Vincent Chao	(212) 250-6799	�	David B. Rodgers	(216) 737-7341
Green Street Advisors	�	�	Stifel, Nicolaus & Company	�
Jed Reagan	(949) 640-8780	�	John W. Guinee III	(443)�224-1307
ISI Group	�	�	UBS Investment Research	�
Steve Sakwa	(212)�446-9462	�	Ross T. Nussbaum	(212)�713-2484
JMP Securities	�	�	Wells Fargo	�
Mitch Germain	(212)�906-3546	�	Brendan Maiorana	(443) 263-6516

�

Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Kilroy Realty Corporations performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Kilroy Realty Corporation or its management. Kilroy Realty Corporation does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Executive Summary



�	�	�
Quarterly Financial Highlights	�	Quarterly Operating Highlights
�	�	�
" FFO per share of $0.69 " Net income available to common stockholders per share of $0.18; includes gain on sale of discontinued operations of $0.07 per share " Revenues from continuing operations of $129.0�million " Same Store cash net operating income (NOI) increased 15.2%; adjusted for significant one-time items cash NOI increased 6.2% " Same Store GAAP NOI increased 8.7%; adjusted for significant one-time items GAAP NOI increased 6.5%	�	" Stabilized portfolio was 94.1% occupied and 95.6% leased at quarter-end " 1,291,626 square feet of leases commenced; includes the recently stabilized LinkedIn Campus " 520,489 square feet of leases executed in the stabilized portfolio " In July 2014, executed a 15-year, 93,000 square foot lease for the entire historical office component of the 685,000 square foot, Columbia Square mixed-use campus in Hollywood, CA " In September 2014, executed a 12-year, 334,000 square foot lease for 100% of the office space at Crossing/900 in Redwood City, CA
�	�	�
�	�	�
�	�	�
Capital Markets Highlights	�	Strategic Highlights
�	�	�
" No outstanding balance on the line of credit " Issued, in an underwritten public offering, $400.0 million of 15-year senior unsecured notes that pays interest semi-annually at 4.25% due August 2029 �� " Repaid $83.0 million of Series B unsecured senior notes upon maturity in August 2014 " Repaid $37.0 million of the 4.25%�Exchangeable Notes due November�2014 as a result of early redemptions	�	" In September 2014, completed the development and stabilized 505, 555, and 605 N. Mathilda Avenue in Sunnyvale, CA totaling 587,429 square feet. The complex is 100% leased to LinkedIn Corporation. " In September 2014, completed the sale of an office property at 111�Pacifica located in Irvine, CA for total gross proceeds of $15.1 million " Currently under contract for the sale of two properties located in San Rafael, CA and Orange, CA in two separate transactions. These properties were held for sale as of September 30, 2014 and included in discontinued operations for all periods presented. The transactions are anticipated to close during the fourth quarter of 2014. " In October 2014, commenced development of The Heights at Del Mar, a 73,000 square foot office project in San Diego, CA
�	�	�

________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 30 through 31 Definitions Included in Supplemental.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Financial Highlights

(unaudited, $ in thousands, except per share amounts)

�

Three Months Ended

�

9/30/2014 ⁽¹⁾

�

6/30/2014 ⁽¹⁾⁽²⁾

�

3/31/2014 ⁽¹⁾

�

12/31/2013 ⁽¹⁾

�

9/30/2013 ⁽³⁾�

�

INCOME ITEMS (Including Discontinued Operations):

�

Revenues

�

131,082

�

129,194

�

126,318

�

128,041

�

127,803

�

Lease Termination Fees, net ⁽⁴⁾

�

1,737

�

1,844

�

1,464

�

872

�

Net Operating Income

�

92,543

�

91,798

�

89,133

�

90,143

�

88,651

�

Acquisition-related Expenses

�

431

�

609

�

228

�

575

�

568

�

Capitalized Interest and Debt Costs

�

13,328

�

11,750

�

10,783

�

10,067

�

9,089

�

Net Income Available to Common Stockholders

�

15,669

�

27,228

�

96,532

�

19,316

�

5,584

�

EBITDA

�

80,965

�

83,241

�

78,271

�

80,209

�

78,530

�

Funds From Operations ⁽⁵⁾⁽⁶⁾

�

60,399

�

63,307

�

57,221

�

58,482

�

55,899

�

Funds Available for Distribution ⁽⁵⁾⁽⁶⁾

�

37,667

�

37,392

�

38,348

�

25,631

�

23,899

�

Net Income Available to Common Stockholders per common share diluted

�

0.18

�

0.32

�

1.14

�

0.23

�

0.07

�

Funds From Operations per common share diluted

�

0.69

�

0.72

�

0.66

�

0.67

�

0.69

�

Dividends per common share

�

0.35

�

0.35

�

0.35

�

0.35

�

0.35

�

RATIOS (Including Discontinued Operations):

�

Operating Margins

�

70.6

�

71.1

�

70.6

�

70.4

�

69.4

�

Interest Coverage Ratio

�

3.0x

�

3.2x

�

3.0x

�

3.1x

�

3.0x

�

Fixed Charge Coverage Ratio

�

2.6x

�

2.9x

�

2.7x

�

2.7x

�

2.7x

�

FFO Payout Ratio

�

49.4

�

46.8

�

51.4

�

50.2

�

52.6

�

FAD Payout Ratio

�

79.2

�

79.3

�

76.7

�

114.6

�

122.9

�

ASSETS:

�

Real Estate Held for Investment before Depreciation

�

5,751,097

�

5,667,027

�

5,434,024

�

5,264,947

�

5,048,531

�

Total Assets ⁽⁷⁾

�

5,487,464

�

5,273,792

�

5,114,543

�

5,111,028

�

5,089,276

�

CAPITALIZATION:

�

Total Debt

�

2,424,033

�

2,236,509

�

2,148,954

�

2,196,368

�

2,153,758

�

Total Preferred Equity and Noncontrolling Interests

�

200,000

�

200,000

�

200,000

�

200,000

�

200,000

�

Total Common Equity and Noncontrolling Interests

�

5,063,838

�

5,276,400

�

4,922,040

�

4,213,070

�

4,192,553

�

Total Market Capitalization

�

7,687,871

�

7,712,909

�

7,270,994

�

6,609,438

�

6,546,311

�

Total Debt / Total Market Capitalization

�

31.5

�

29.0

�

29.5

�

33.2

�

32.9

�

Total Debt and Preferred / Total Market Capitalization

�

34.1

�

31.6

�

32.3

�

36.3

�

36.0

�

________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 30 through 31 Definitions Included in Supplemental.


(1)	Net Income Available to Common Stockholders includes gains on dispositions of discontinued operations of $5.6 million, $14.7�million, $90.1�million and $11.8�million for the three months ended September 30, 2014, June�30,�2014, March�31,�2014 and December�31,�2013, respectively, and a $3.5�million gain on sale of land for the three months ended June 30, 2014.


(2)	EBITDA for the three months ended June�30,�2014 includes a $3.5�million gain on sale of land.


(3)	Results for the three months ended September 30, 2013 include the receipt of a $3.7 million net cash payment related to the default of a prior tenant.


(4)	Lease termination fees are presented net of accelerated amortization of deferred rent receivables.


(5)	Please refer to page 7 for a reconciliation of GAAP Net Income Available to Common Stockholders to Funds From Operations and Funds Available for Distribution.


(6)	Reported amounts are attributable to common stockholders and common unitholders.


(7)	Total assets as of September 30, 2014, March�31, 2014, December�31, 2013 and September 30, 2013 include Real estate assets and other assets held for sale, net.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Common Stock Data (NYSE: KRC)

�

Three Months Ended

�

9/30/2014

�

6/30/2014

�

3/31/2014

�

12/31/2013

�

9/30/2013

�

High Price

63.96

�

62.88

�

59.53

�

54.04

�

55.80

�

Low Price

58.03

�

57.29

�

49.72

�

48.89

�

47.73

�

Closing Price

59.44

�

62.28

�

58.58

�

50.18

�

49.95

�

Dividends per share annualized

1.40

�

1.40

�

1.40

�

1.40

�

1.40

�

Closing common shares (in 000s) ⁽¹⁾

83,388

�

82,916

�

82,218

�

82,154

�

82,113

�

Closing common partnership units (in 000s) ⁽¹⁾

1,804

�

1,804

�

1,804

�

1,805

�

1,822

�

85,192

84,720

�

84,022

�

83,959

�

83,935

�

________________________


(1)	As of the end of the period.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Consolidated Balance Sheets

(unaudited, $ in thousands)

�

9/30/2014

�

6/30/2014

�

3/31/2014

�

12/31/2013

�

9/30/2013

�

ASSETS:

�

Land and improvements

757,036

�

675,489

�

679,991

�

657,491

�

612,843

�

Buildings and improvements

3,882,015

�

3,720,863

�

3,706,662

�

3,590,699

�

3,527,729

�

Undeveloped land and construction in progress

1,112,046

�

1,270,675

�

1,047,371

�

1,016,757

�

907,959

�

Total real estate assets held for investment

5,751,097

�

5,667,027

�

5,434,024

�

5,264,947

�

5,048,531

�

Accumulated depreciation and amortization

(912,623

)

�

(885,580

)

�

(854,977

)

�

(818,957

)

�

(781,580

)

�

Total real estate assets held for investment, net

4,838,474

�

4,781,447

�

4,579,047

�

4,445,990

�

4,266,951

�

Real estate assets and other assets held for sale, net

49,815

�

28,272

�

213,100

�

239,411

�

Cash and cash equivalents

200,431

�

24,571

�

95,534

�

35,377

�

197,150

�

Restricted cash

17,487

�

93,522

�

33,717

�

49,780

�

17,931

�

Marketable securities

12,076

�

11,747

�

11,001

�

10,008

�

9,192

�

Current receivables, net

6,443

�

10,588

�

11,092

�

10,743

�

11,769

�

Deferred rent receivables, net

139,910

�

134,269

�

130,750

�

127,123

�

121,659

�

Deferred leasing costs and acquisition-related intangible assets, net

183,057

�

178,841

�

188,466

�

186,622

�

190,085

�

Deferred financing costs, net

19,373

�

16,978

�

15,195

�

16,502

�

17,809

�

Prepaid expenses and other assets, net

20,398

�

21,829

�

21,469

�

15,783

�

17,319

�

TOTAL ASSETS

5,487,464

�

5,273,792

�

5,114,543

�

5,111,028

�

5,089,276

�

LIABILITIES AND EQUITY:

�

Liabilities:

�

Secured debt

549,896

�

553,427

�

556,946

�

560,434

�

563,898

�

Exchangeable senior notes, net

135,049

�

170,704

�

169,528

�

168,372

�

167,236

�

Unsecured debt, net

1,743,962

�

1,431,301

�

1,431,217

�

1,431,132

�

1,431,048

�

Unsecured line of credit

�

90,000

�

45,000

�

Accounts payable, accrued expenses and other liabilities

243,602

�

215,535

�

187,631

�

198,467

�

210,111

�

Accrued distributions

31,897

�

31,730

�

31,456

�

31,490

�

31,479

�

Deferred revenue and acquisition-related intangible liabilities, net

114,504

�

114,670

�

107,569

�

101,286

�

102,991

�

Rents received in advance and tenant security deposits

45,086

�

43,085

�

43,952

�

44,240

�

41,668

�

Liabilities of real estate assets held for sale

3,099

�

634

�

14,447

�

16,751

�

Total liabilities

2,867,095

�

2,650,452

�

2,528,933

�

2,594,868

�

2,565,182

�

Equity:

�

Stockholders Equity

�

6.875% Series G Cumulative Redeemable Preferred stock

96,155

�

96,155

�

96,155

�

96,155

�

96,155

�

6.375% Series H Cumulative Redeemable Preferred stock

96,256

�

96,256

�

96,256

�

96,256

�

96,256

�

Common stock

834

�

829

�

822

�

822

�

821

�

Additional paid-in capital

2,530,282

�

2,519,268

�

2,479,740

�

2,478,975

�

2,476,424

�

Distributions in excess of earnings

(159,799

)

�

(145,851

)

�

(143,636

)

�

(210,896

)

�

(201,048

)

�

Total stockholders equity

2,563,728

�

2,566,657

�

2,529,337

�

2,461,312

�

2,468,608

�

Noncontrolling Interests

�

Common units of the Operating Partnership

51,419

�

51,798

�

51,388

�

49,963

�

50,601

�

Noncontrolling interest in consolidated subsidiary

5,222

�

4,885

�

4,885

�

4,885

�

4,885

�

Total noncontrolling interests

56,641

�

56,683

�

56,273

�

54,848

�

55,486

�

Total equity

2,620,369

�

2,623,340

�

2,585,610

�

2,516,160

�

2,524,094

�

TOTAL LIABILITIES AND EQUITY

5,487,464

�

5,273,792

�

5,114,543

�

5,111,028

�

5,089,276

�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Consolidated Statements of Operations

(unaudited, $ in thousands, except per share amounts)

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

2014

�

2013

�

REVENUES

�

Rental income

�

115,221

�

103,354

�

338,911

�

303,573

�

Tenant reimbursements

�

11,346

�

9,583

�

33,399

�

28,350

�

Other property income

�

2,457

�

608

�

7,650

�

6,584

�

Total revenues

�

129,024

�

113,545

�

379,960

�

338,507

�

EXPENSES

�

Property expenses

�

25,801

�

24,470

�

75,448

�

69,895

�

Real estate taxes

�

11,008

�

10,088

�

32,728

�

29,129

�

Provision for bad debts

�

101

�

196

�

Ground leases

�

771

�

929

�

2,306

�

2,665

�

General and administrative expenses

�

11,138

�

10,226

�

33,806

�

29,750

�

Acquisition-related expenses

�

431

�

568

�

1,268

�

1,387

�

Depreciation and amortization

�

50,032

�

45,804

�

148,647

�

138,652

�

Total expenses

�

99,239

�

92,186

�

294,261

�

271,674

�

OTHER (EXPENSES) INCOME

�

Interest income and other net investment gains/(losses)

�

)

�

673

�

587

�

1,084

�

Interest expense

�

(16,608

)

�

(18,853

)

�

(49,880

)

�

(58,021

)

�

Total other (expenses) income

�

(16,617

)

�

(18,180

)

�

(49,293

)

�

(56,937

)

�

INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF LAND

�

13,168

�

3,179

�

36,406

�

9,896

�

Gain on sale of land

�

3,490

�

INCOME FROM CONTINUING OPERATIONS

�

13,168

�

3,179

�

39,896

�

9,896

�

DISCONTINUED OPERATIONS:

�

Income from discontinued operations

�

548

�

5,848

�

2,091

�

11,199

�

Gains on dispositions of discontinued operations

�

5,587

�

110,391

�

423

�

Total income from discontinued operations

�

6,135

�

5,848

�

112,482

�

11,622

�

NET INCOME

�

19,303

�

9,027

�

152,378

�

21,518

�

Net income attributable to noncontrolling common units of the Operating Partnership

�

(321

)

�

(131

)

�

(3,011

)

�

(266

)

�

NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION

�

18,982

�

8,896

�

149,367

�

21,252

�

Preferred dividends

�

(3,313

)

�

(3,312

)

�

(9,938

)

�

(9,938

)

�

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

�

15,669

�

5,584

�

139,429

�

11,314

�

Weighted average common shares outstanding basic

�

83,161

�

76,769

�

82,525

�

75,751

�

Weighted average common shares outstanding diluted

�

85,110

�

76,769

�

84,623

�

75,751

�

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE

�

Net income available to common stockholders per share basic

�

0.18

�

0.07

�

1.67

�

0.13

�

Net income available to common stockholders per share diluted

�

0.18

�

0.07

�

1.63

�

0.13

�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution

(unaudited, $ in thousands, except per share amounts)

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

2014

�

2013

�

FUNDS FROM OPERATIONS: ⁽¹⁾

�

Net income available to common stockholders

�

15,669

�

5,584

�

139,429

�

11,314

�

Adjustments:

�

Net income attributable to noncontrolling common units of the Operating Partnership

�

321

�

131

�

3,011

�

266

�

Depreciation and amortization of real estate assets

�

49,996

�

50,184

�

148,878

�

148,982

�

Gains on dispositions of discontinued operations

�

(5,587

)

�

(110,391

)

�

(423

)

�

Funds From Operations ⁽²⁾⁽³⁾

�

60,399

�

55,899

�

180,927

�

160,139

�

Weighted average common shares/units outstanding basic ⁽⁴⁾

�

86,189

�

79,806

�

85,555

�

78,795

�

Weighted average common shares/units outstanding diluted ⁽⁴⁾

�

88,138

�

81,527

�

87,653

�

80,586

�

FFO per common share/unit basic ⁽²⁾

�

0.70

�

0.70

�

2.11

�

2.03

�

FFO per common share/unit diluted^�(2)

�

0.69

�

0.69

�

2.06

�

1.99

�

FUNDS AVAILABLE FOR DISTRIBUTION: ⁽¹⁾

�

Funds From Operations ⁽²⁾

�

60,399

�

55,899

�

180,927

�

160,139

�

Adjustments:

�

Tenant improvements, leasing commissions and recurring capital expenditures

�

(20,074

)

�

(24,684

)

�

(52,247

)

�

(58,163

)

�

Amortization of deferred revenue related to tenant-funded tenant improvements ⁽³⁾⁽⁵⁾

�

(2,678

)

�

(2,626

)

�

(7,695

)

�

(7,585

)

�

Net effect of straight-line rents

�

(7,452

)

�

(6,103

)

�

(15,245

)

�

(18,188

)

�

Amortization of net below market rents ⁽⁶⁾

�

(1,766

)

�

(1,938

)

�

(6,216

)

�

(6,015

)

�

Noncash effect of exchangeable notes, net ⁽⁷⁾

�

1,050

�

691

�

2,301

�

2,124

�

Amortization of deferred financing costs and net debt discounts/(premiums)

�

226

�

260

�

596

�

690

�

Noncash amortization of share-based compensation awards

�

3,372

�

2,175

�

8,817

�

6,454

�

Other lease related adjustments, net ⁽⁸⁾

�

4,590

�

225

�

2,169

�

2,011

�

Funds Available for Distribution ⁽¹⁾

�

37,667

�

23,899

�

113,407

�

81,467

�

________________________


(1)	See pages 28 and 29 for Management Statements on Funds From Operation and Funds Available for Distribution.


(2)	Reported amounts are attributable to common shareholders and unitholders.


(3)	FFO includes amortization of deferred revenue related to tenant-funded tenant improvements of $2.7�million and $2.6�million for the three months ended September�30, 2014 and 2013, respectively, and $7.7�million and $7.6�million for the nine�months ended September�30, 2014 and 2013, respectively. These amounts are adjusted out of FFO in our calculation of FAD.


(4)	Calculated based on weighted average shares outstanding including participating share-based awards (i.e. nonvested stock and certain time based restricted stock units), dilutive impact of stock options and contingently issuable shares and assuming the exchange of all common limited partnership units outstanding.


(5)	Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements.


(6)	Represents the non-cash adjustment related to the acquisition of buildings with above and/or below market rents.


(7)	Includes the noncash amortization of the debt discount on the Companys exchangeable senior notes and for the three and nine months ended September�30,�2014 also includes the noncash loss incurred on the early redemption of $37.0 million of the exchangeable notes.


(8)	Includes other non-cash adjustments attributable to lease-related GAAP revenue recognition timing differences. For the three months ended September�30,�2014 includes the cash receipt of $5.7 million related to a lease termination fee.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Same Store Analysis ⁽¹⁾�

(unaudited, $ in thousands)

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

% Change

�

2014

�

2013

�

% Change

�

Total Same Store Portfolio

�

Number of properties

�

Square Feet

�

11,306,728

�

11,306,728

�

11,306,728

�

11,306,728

�

Percent of Stabilized Portfolio

�

83.8

�

88.8

�

83.8

�

88.8

�

Average Occupancy

�

93.0

�

91.2

�

92.5

�

91.3

�

Operating Revenues:

�

Rental income

�

96,826

�

92,950

�

4.2

�%

�

287,596

�

275,974

�

4.2

�%

�

Tenant reimbursements

�

9,417

�

8,520

�

10.5

�%

�

28,323

�

25,634

�

10.5

�%

�

Other property income

�

2,457

�

602

�

308.1

�%

�

7,632

�

6,578

�

16.0

�%

�

Total operating revenues ⁽²⁾

�

108,700

�

102,072

�

6.5

�%

�

323,551

�

308,186

�

5.0

�%

�

Operating Expenses:

�

Property expenses ⁽³⁾

�

23,375

�

22,741

�

2.8

�%

�

68,079

�

64,754

�

5.1

�%

�

Real estate taxes

�

8,887

�

8,782

�

1.2

�%

�

26,626

�

25,697

�

3.6

�%

�

Provision for bad debts

�

(38

)

�

132

�

(128.8

�

(38

)

�

227

�

(116.7

�

Ground leases

�

734

�

708

�

3.7

�%

�

2,198

�

2,165

�

1.5

�%

�

Total operating expenses

�

32,958

�

32,363

�

1.8

�%

�

96,865

�

92,843

�

4.3

�%

�

GAAP Net Operating Income

�

75,742

�

69,709

�

8.7

�%

�

226,686

�

215,343

�

5.3

�%

�

Same Store Analysis (Cash Basis) ⁽⁴⁾

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

% Change

�

2014

�

2013

�

% Change

�

Total operating revenues

�

104,831

�

94,571

�

10.8

�%

�

305,539

�

285,563

�

7.0

�%

�

Total operating expenses

�

32,998

�

32,230

�

2.4

�%

�

96,904

�

92,617

�

4.6

�%

�

Cash Net Operating Income

�

71,833

�

62,341

�

15.2

�%

�

208,635

�

192,946

�

8.1

�%

�

________________________


(1)	Same Store is defined as all properties owned and included in our stabilized portfolio as of January�1,�2013 and still owned and included in the stabilized portfolio as of September�30, 2014.


(2)	Total operating revenues for the three and nine months ended September 30, 2014 include $1.6�million and $4.4�million, respectively, related to a lease termination fee received in September 2014. Other property income for the nine months ended September�30,�2013 includes a $5.2�million cash receipt related to a property damage settlement.


(3)	Property expenses for the nine months ended September�30,�2014 and 2013 include $1.7�million and $0.7�million related to cash paid for nonrecurring legal fees, respectively.


(4)	Please refer to page 32 for a reconciliation of the Same Store measures on this page to Net Income Available to Common Stockholders.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region



�	�	�	�	Portfolio�Breakdown					�	�	�	Occupied at					�	Leased at		�
�	�	Buildings⁽¹⁾	�	YTD NOI %⁽¹⁾		�	SF %⁽¹⁾		�	Total SF⁽¹⁾	�	9/30/2014⁽¹⁾		�	6/30/2014		�	9/30/2014⁽¹⁾		�
�	Los Angeles and Ventura Counties	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	101 Corridor	4	�	1.8	%	�	2.3	%	�	306,324	�	98.1	%	�	97.7	%	�	98.1	%	�
�	El Segundo	5	�	7.9	%	�	8.1	%	�	1,090,525	�	99.6	%	�	99.2	%	�	99.6	%	�
�	Hollywood	1	�	1.7	%	�	2.4	%	�	321,883	�	90.2	%	�	86.7	%	�	90.4	%	�
�	Long Beach	7	�	4.4	%	�	7.0	%	�	946,954	�	91.1	%	�	91.1	%	�	92.3	%	�
�	West Los Angeles	10	�	5.1	%	�	6.2	%	�	837,190	�	84.5	%	�	83.0	%	�	93.8	%	�
�	Total Los Angeles and Ventura Counties	27	�	20.9	%	�	26.0	%	�	3,502,876	�	92.7	%	�	91.9	%	�	95.3	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	Total Orange County	1	�	2.0	%	�	2.0	%	�	271,556	�	97.8	%	�	94.1	%	�	98.7	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	San Diego County	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	Del Mar	17	�	15.0	%	�	12.9	%	�	1,743,213	�	95.7	%	�	96.1	%	�	96.7	%	�
�	I-15 Corridor	5	�	4.7	%	�	4.0	%	�	540,852	�	95.0	%	�	95.0	%	�	98.1	%	�
�	Mission Valley	4	�	1.6	%	�	2.2	%	�	290,585	�	87.4	%	�	95.5	%	�	87.4	%	�
�	Point Loma	1	�	2.5	%	�	0.8	%	�	103,900	�	45.5	%	�	100.0	%	�	60.6	%	�
�	Sorrento Mesa	16	�	6.9	%	�	9.7	%	�	1,303,583	�	90.5	%	�	87.9	%	�	90.5	%	�
�	University Towne Center	3	�	1.0	%	�	1.9	%	�	261,933	�	71.9	%	�	71.9	%	�	71.9	%	�
�	Total San Diego County	46	�	31.7	%	�	31.5	%	�	4,244,066	�	90.8	%	�	92.0	%	�	91.9	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	San Francisco Bay Area	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	Menlo Park	7	�	3.7	%	�	2.8	%	�	378,358	�	100.0	%	�	96.9	%	�	100.0	%	�
�	Mountain View	1	�	1.2	%	�	0.7	%	�	87,147	�	100.0	%	�	100.0	%	�	100.0	%	�
�	San Francisco	6	�	19.7	%	�	15.9	%	�	2,150,522	�	98.1	%	�	96.3	%	�	98.1	%	�
�	Sunnyvale	4	�	1.0	%	�	4.9	%	�	663,239	�	100.0	%	�	100.0	%	�	100.0	%	�
�	Total San Francisco Bay Area	18	�	25.6	%	�	24.3	%	�	3,279,266	�	98.8	%	�	96.7	%	�	98.8	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	Greater Seattle	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	Bellevue	2	�	8.3	%	�	6.7	%	�	905,225	�	90.9	%	�	91.5	%	�	96.6	%	�
�	Kirkland	4	�	2.0	%	�	2.1	%	�	279,924	�	92.2	%	�	92.2	%	�	98.0	%	�
�	Lake Union	6	�	8.5	%	�	6.5	%	�	880,990	�	100.0	%	�	100.0	%	�	100.0	%	�
�	Redmond	1	�	1.0	%	�	0.9	%	�	122,103	�	100.0	%	�	100.0	%	�	100.0	%	�
�	Total Greater Seattle	13	�	19.8	%	�	16.2	%	�	2,188,242	�	95.2	%	�	95.5	%	�	98.3	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�
�	TOTAL STABILIZED PORTFOLIO	105	�	100.0	%	�	100.0	%	�	13,486,006	�	94.1	%	�	93.6	%	�	95.6	%	�
�	�	�	�	�		�	�		�	�	�	�		�	�		�	�		�



Average Occupancy
Quarter-to-Date	�	Year-to-Date
94.0%	�	93.2%

(1)��Excludes properties held for sale at September 30, 2014. See page 21, 2014 Dispositions and Properties Held for Sale.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued

�



�	�	�	Submarket	�	Square�Feet	�	Occupied		�
Los Angeles and Ventura, California		�	�	�	�	�	�		�
�	23925 Park Sorrento	�	101 Corridor	�	11,789	�	100.0	%	�
�	23975 Park Sorrento	�	101 Corridor	�	104,797	�	97.8	%	�
�	24025 Park Sorrento	�	101 Corridor	�	108,671	�	96.9	%	�
�	2829 Townsgate Road	�	101 Corridor	�	81,067	�	100.0	%	�
�	2240 E. Imperial Highway	�	El Segundo	�	122,870	�	100.0	%	�
�	2250 E. Imperial Highway	�	El Segundo	�	298,728	�	100.0	%	�
�	2260 E. Imperial Highway	�	El Segundo	�	298,728	�	100.0	%	�
�	909 N. Sepulveda Boulevard	�	El Segundo	�	241,607	�	100.0	%	�
�	999 N. Sepulveda Boulevard	�	El Segundo	�	128,592	�	96.5	%	�
�	6255 W. Sunset Boulevard	�	Hollywood	�	321,883	�	90.2	%	�
�	3750 Kilroy Airport Way	�	Long Beach	�	10,457	�	86.1	%	�
�	3760 Kilroy Airport Way	�	Long Beach	�	165,278	�	81.1	%	�
�	3780 Kilroy Airport Way	�	Long Beach	�	219,842	�	81.9	%	�
�	3800 Kilroy Airport Way	�	Long Beach	�	192,476	�	100.0	%	�
�	3840 Kilroy Airport Way	�	Long Beach	�	136,026	�	100.0	%	�
�	3880 Kilroy Airport Way	�	Long Beach	�	96,035	�	100.0	%	�
�	3900 Kilroy Airport Way	�	Long Beach	�	126,840	�	91.1	%	�
�	12100 W. Olympic Boulevard	�	West Los Angeles	�	150,167	�	94.4	%	�
�	12200 W. Olympic Boulevard	�	West Los Angeles	�	150,117	�	97.0	%	�
�	12233 W. Olympic Boulevard	�	West Los Angeles	�	151,029	�	84.2	%	�
�	12312 W. Olympic Boulevard	�	West Los Angeles	�	76,644	�	0.0	%	�
�	1633 26th Street	�	West Los Angeles	�	44,915	�	100.0	%	�
�	2100/2110 Colorado Avenue	�	West Los Angeles	�	102,864	�	100.0	%	�
�	3130 Wilshire Boulevard	�	West Los Angeles	�	88,339	�	97.6	%	�
�	501 Santa Monica Boulevard	�	West Los Angeles	�	73,115	�	80.1	%	�
�	Total Los Angeles and Ventura Counties	�	�	�	3,502,876	�	92.7	%	�
�	�	�	�	�	�	�	�		�
Orange County, California		�	�	�	�	�	�		�
�	2211 Michelson Drive	�	Irvine	�	271,556	�	97.8	%	�
�	Total Orange County	�	�	�	271,556	�	97.8	%	�
�	�	�	�	�	�	�	�		�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued

��



�	�	�	Submarket	�	Square�Feet	�	Occupied		�
San Diego, California		�	�	�	�	�	�		�
�	12225 El Camino Real	�	Del Mar	�	58,401	�	100.0	%	�
�	12235 El Camino Real	�	Del Mar	�	54,673	�	82.1	%	�
�	12340 El Camino Real	�	Del Mar	�	87,374	�	88.8	%	�
�	12390 El Camino Real	�	Del Mar	�	72,332	�	100.0	%	�
�	12348 High Bluff Drive	�	Del Mar	�	38,806	�	100.0	%	�
�	12400 High Bluff Drive	�	Del Mar	�	209,220	�	100.0	%	�
�	3579 Valley Centre Drive	�	Del Mar	�	50,677	�	100.0	%	�
�	3611 Valley Centre Drive	�	Del Mar	�	130,349	�	93.4	%	�
�	3661 Valley Centre Drive	�	Del Mar	�	129,782	�	82.3	%	�
�	3721 Valley Centre Drive	�	Del Mar	�	114,780	�	79.9	%	�
�	3811 Valley Centre Drive	�	Del Mar	�	112,067	�	100.0	%	�
�	7525 Torrey Santa Fe	�	Del Mar	�	103,979	�	100.0	%	�
�	7535 Torrey Santa Fe	�	Del Mar	�	130,243	�	100.0	%	�
�	7545 Torrey Santa Fe	�	Del Mar	�	130,354	�	100.0	%	�
�	7555 Torrey Santa Fe	�	Del Mar	�	101,236	�	100.0	%	�
�	12780 El Camino Real	�	Del Mar	�	140,591	�	100.0	%	�
�	12790 El Camino Real	�	Del Mar	�	78,349	�	100.0	%	�
�	13280 Evening Creek Drive South	�	I-15 Corridor	�	41,194	�	67.1	%	�
�	13290 Evening Creek Drive South	�	I-15 Corridor	�	61,180	�	85.9	%	�
�	13480 Evening Creek Drive North	�	I-15 Corridor	�	149,817	�	100.0	%	�
�	13500 Evening Creek Drive North	�	I-15 Corridor	�	147,533	�	100.0	%	�
�	13520 Evening Creek Drive North	�	I-15 Corridor	�	141,128	�	96.6	%	�
�	2355 Northside Drive	�	Mission Valley	�	53,610	�	87.4	%	�
�	2365 Northside Drive	�	Mission Valley	�	96,436	�	73.3	%	�
�	2375 Northside Drive	�	Mission Valley	�	51,516	�	91.9	%	�
�	2385 Northside Drive	�	Mission Valley	�	89,023	�	100.0	%	�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued

�



�	�	�	Submarket	�	Square�Feet	�	Occupied		�
San Diego, California (Continued)		�	�	�	�	�	�		�
�	2305 Historic Decatur Road	�	Point Loma	�	103,900	�	45.5	%	�
�	4921 Directors Place	�	Sorrento Mesa	�	56,136	�	84.9	%	�
�	4939 Directors Place	�	Sorrento Mesa	�	60,662	�	100.0	%	�
�	4955 Directors Place	�	Sorrento Mesa	�	76,246	�	100.0	%	�
�	10770 Wateridge Circle	�	Sorrento Mesa	�	174,310	�	85.7	%	�
�	6260 Sequence Drive	�	Sorrento Mesa	�	130,536	�	100.0	%	�
�	6290 Sequence Drive	�	Sorrento Mesa	�	90,000	�	0.0	%	�
�	6310 Sequence Drive	�	Sorrento Mesa	�	62,415	�	100.0	%	�
�	6340 Sequence Drive	�	Sorrento Mesa	�	66,400	�	100.0	%	�
�	6350 Sequence Drive	�	Sorrento Mesa	�	132,600	�	100.0	%	�
�	10390 Pacific Center Court	�	Sorrento Mesa	�	68,400	�	100.0	%	�
�	10394 Pacific Center Court	�	Sorrento Mesa	�	59,630	�	100.0	%	�
�	10398 Pacific Center Court	�	Sorrento Mesa	�	43,645	�	100.0	%	�
�	10421 Pacific Center Court	�	Sorrento Mesa	�	75,899	�	100.0	%	�
�	10445 Pacific Center Court	�	Sorrento Mesa	�	48,709	�	100.0	%	�
�	10455 Pacific Center Court	�	Sorrento Mesa	�	90,000	�	100.0	%	�
�	5717 Pacific Center Boulevard	�	Sorrento Mesa	�	67,995	�	100.0	%	�
�	4690 Executive Drive	�	University Towne Center	�	47,212	�	100.0	%	�
�	6200 Greenwich Drive	�	University Towne Center	�	73,507	�	0.0	%	�
�	6220 Greenwich Drive	�	University Towne Center	�	141,214	�	100.0	%	�
�	Total San Diego County	�	�	�	4,244,066	�	90.8	%	�
�	�	�	�	�	�	�	�		�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued

�



�	�	�	Submarket	�	Square�Feet	�	Occupancy		�
San Francisco Bay Area, California		�	�	�	�	�	�		�
�	4100 Bohannon Drive	�	Menlo Park	�	47,379	�	100.0	%	�
�	4200 Bohannon Drive	�	Menlo Park	�	45,451	�	100.0	%	�
�	4300 Bohannon Drive	�	Menlo Park	�	63,079	�	100.0	%	�
�	4400 Bohannon Drive	�	Menlo Park	�	48,146	�	100.0	%	�
�	4500 Bohannon Drive	�	Menlo Park	�	63,078	�	100.0	%	�
�	4600 Bohannon Drive	�	Menlo Park	�	48,147	�	100.0	%	�
�	4700 Bohannon Drive	�	Menlo Park	�	63,078	�	100.0	%	�
�	331 Fairchild Drive	�	Mountain View	�	87,147	�	100.0	%	�
�	303 Second Street	�	San Francisco	�	740,047	�	95.6	%	�
�	100 First Street	�	San Francisco	�	466,490	�	99.7	%	�
�	250 Brannan Street	�	San Francisco	�	95,008	�	100.0	%	�
�	201 Third Street	�	San Francisco	�	344,551	�	98.9	%	�
�	301 Brannan Street	�	San Francisco	�	74,430	�	100.0	%	�
�	360 Third Street	�	San Francisco	�	429,996	�	99.2	%	�
�	505 Mathilda Avenue	�	Sunnyvale	�	212,322	�	100.0	%	�
�	555 Mathilda Avenue	�	Sunnyvale	�	212,322	�	100.0	%	�
�	605 Mathilda Avenue	�	Sunnyvale	�	162,785	�	100.0	%	�
�	599 Mathilda Avenue	�	Sunnyvale	�	75,810	�	100.0	%	�
�	Total San Francisco Bay Area	�	�	�	3,279,266	�	98.8	%	�
�	�	�	�	�	�	�	�		�
Greater Seattle, Washington		�	�	�	�	�	�		�
�	601 108th Avenue NE	�	Bellevue	�	488,470	�	87.9	%	�
�	10900 NE 4th Street	�	Bellevue	�	416,755	�	94.3	%	�
�	10220 NE Points Drive	�	Kirkland	�	49,851	�	100.0	%	�
�	10230 NE Points Drive	�	Kirkland	�	98,982	�	94.2	%	�
�	10210 NE Points Drive	�	Kirkland	�	84,641	�	100.0	%	�
�	3933 Lake Washington Blvd NE	�	Kirkland	�	46,450	�	65.4	%	�
�	837 N. 34th Street	�	Lake Union	�	111,580	�	100.0	%	�
�	701 N. 34th Street	�	Lake Union	�	138,995	�	100.0	%	�
�	801 N. 34th Street	�	Lake Union	�	169,412	�	100.0	%	�
�	320 Westlake Terry Ave. N.	�	Lake Union	�	184,643	�	100.0	%	�
�	321 Terry Ave. N.	�	Lake Union	�	135,755	�	100.0	%	�
�	401 Terry Avenue North	�	Lake Union	�	140,605	�	100.0	%	�
�	15050 NE 36th Street	�	Redmond	�	122,103	�	100.0	%	�
�	��Total Greater Seattle	�	�	�	2,188,242	�	95.2	%	�
�	�	�	�	�	�	�	�		�
�	TOTAL	�	�	�	13,486,006	�	94.1	%	�
�	�	�	�	�	�	�	�		�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Information on Leases Commenced

�

1st & 2nd Generation

�

2nd Generation

�

#�of�Leases^{� (1)}

�

Square Feet ⁽¹⁾

�

TI/LC

Per�Sq.Ft.�

�

Changes�in

GAAP Rents

�

Changes�in

Cash Rents

�

Retention

Rates

�

Weighted

Average�Lease

Term (Mo.)

�

New

�

Renewal

�

New

�

Renewal

�

Quarter to Date

�

390,260

�

313,937

�

38.03

�

15.4

�

(0.7

�

53.3

�

Year to Date

�

829,386

�

718,837

�

33.49

�

13.0

�

1.3

�%

�

48.4

�

Information on Leases Executed

�

1st & 2nd Generation

�

2nd Generation

�

#�of�Leases^�(2)

�

Square Feet ⁽²⁾

�

TI/LC

Per�Sq.Ft.

�

Changes�in

GAAP Rents

�

Changes�in

Cash Rents

�

Weighted

Average�Lease

Term (Mo.)

�

New

�

Renewal

�

New

�

Renewal

�

Quarter to Date ⁽³⁾

�

206,552

�

313,937

�

37.70

�

15.8

�

(1.6

�

Year to Date ⁽⁴⁾

�

577,343

�

718,837

�

35.60

�

14.2

�

1.8

�%

�

________________________


(1)	Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three�and nine months�ended September�30,�2014, including first and second generation space, net of month-to-month leases.


(2)	Represents leasing activity for leases signed at properties in the stabilized portfolio during the three�and nine months�ended September�30,�2014, including first and second generation space, net of month-to-month leases.


(3)	During the three�months ended September�30,�2014, 15 new leases totaling 117,152 square feet were signed but not commenced as of September�30,�2014.


(4)	During the nine�months ended September�30,�2014, 22 new leases totaling 270,491 square feet were signed but not commenced as of September�30,�2014.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Capital Expenditures

($ in thousands)

�

Q1 2014

�

Q2 2014

�

Q3 2014

�

Total 2014

�

1st Generation (Nonrecurring) Capital Expenditures:

�

Capital Improvements

�

8,031

�

2,751

�

4,794

�

15,576

�

Tenant Improvements & Leasing Commissions ⁽¹⁾

�

10,936

�

4,223

�

2,398

�

17,557

�

Total

�

18,967

�

6,974

�

7,192

�

33,133

�

Q1 2014

�

Q2 2014

�

Q3 2014

�

Total 2014

�

2nd Generation (Recurring) Capital Expenditures:

�

Capital Improvements

�

1,607

�

2,732

�

3,674

�

8,013

�

Tenant Improvements & Leasing Commissions ⁽¹⁾

�

11,460

�

16,374

�

16,400

�

44,234

�

Total

�

13,067

�

19,106

�

20,074

�

52,247

�

________________________


(1)	Represents costs incurred for leasing activity during the period shown. Amounts exclude tenant-funded tenant improvements.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Summary Schedule

($ in thousands, except for annualized rent per sq. ft.)



�	Year of Expiration	�	#�of�Expiring Leases	�	Total�Square Feet	�	%�of Total Leased�Sq.�Ft.		�	Annualized Base�Rent		�	%�of�Total Annualized Base Rent		�	Annualized�Rent per Sq. Ft.		�
�	2014	�	30	�	268,967	�	2.2	%	�	$	8,291	�	1.9	%	�	$	30.83	�
�	2015	�	116	�	1,376,236	�	11.0	%	�	42,288		�	9.6	%	�	30.73		�
�	2016	�	84	�	946,611	�	7.6	%	�	26,652		�	6.0	%	�	28.16		�
�	2017	�	106	�	1,813,305	�	14.5	%	�	60,486		�	13.6	%	�	33.36		�
�	2018	�	60	�	1,305,011	�	10.5	%	�	51,421		�	11.7	%	�	39.40		�
�	2019	�	76	�	1,368,132	�	11.0	%	�	51,264		�	11.6	%	�	37.47		�
�	2020	�	51	�	1,526,277	�	12.3	%	�	53,419		�	12.1	%	�	35.00		�
�	2021	�	22	�	658,247	�	5.3	%	�	31,131		�	7.0	%	�	47.29		�
�	2022	�	14	�	467,308	�	3.8	%	�	14,479		�	3.2	%	�	30.98		�
�	2023	�	13	�	531,257	�	4.2	%	�	21,599		�	4.9	%	�	40.66		�
�	2024 and beyond	�	27	�	2,194,159	�	17.6	%	�	81,143		�	18.4	%	�	36.98		�
�	Total ⁽¹⁾	�	599	�	12,455,510	�	100.0	%	�	$	442,173	�	100.0	%	�	$	35.50	�
�	�	�	�	�	�	�	�		�	�		�	�		�	�		�

________________________


(1)	For leases that have been renewed early or space that has been re-leased to a new tenant, the expiration date and annualized base rent information presented takes into consideration the renewed or re-leased lease terms. Excludes space leased under month-to-month leases, vacant space, and lease renewal options not executed as of September�30, 2014.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Schedule by Region

($ in thousands, except for annualized rent per sq. ft.)

�

Year

�

Region

�

# of

Expirations

�

Total

Square�Feet

�

%�of Total

Leased�Sq.�Ft.

�

Annualized

Base�Rent

�

% of Total

Annualized

Base�Rent

�

Annualized Rent

per Sq. Ft.

�

2014

�

Los Angeles

�

85,227

�

0.7

�

2,722

�

0.6

�

31.94

�

San Diego

�

42,863

�

0.4

�

889

�

0.2

�

20.75

�

San Francisco Bay Area

�

90,748

�

0.7

�

3,505

�

0.8

�

38.62

�

Greater Seattle

�

50,129

�

0.4

�

1,175

�

0.3

�

23.45

�

Total

�

268,967

�

2.2

�

8,291

�

1.9

�

30.83

�

2015

�

Los Angeles

�

331,522

�

2.6

�

10,877

�

2.5

�

32.81

�

Orange County

�

24,232

�

0.2

�

760

�

0.2

�

31.35

�

San Diego

�

467,875

�

3.8

�

11,985

�

2.7

�

25.62

�

San Francisco Bay Area

�

303,831

�

2.4

�

11,752

�

2.6

�

38.68

�

Greater Seattle

�

248,776

�

2.0

�

6,914

�

1.6

�

27.79

�

Total

�

116

�

1,376,236

�

11.0

�

42,288

�

9.6

�

30.73

�

2016

�

Los Angeles

�

249,467

�

2.0

�

8,054

�

1.8

�

32.28

�

Orange County

�

26,914

�

0.2

�

943

�

0.2

�

35.04

�

San Diego

�

422,667

�

3.4

�

8,863

�

2.0

�

20.97

�

San Francisco Bay Area

�

118,349

�

1.0

�

5,708

�

1.3

�

48.23

�

Greater Seattle

�

129,214

�

1.0

�

3,084

�

0.7

�

23.87

�

Total

�

946,611

�

7.6

�

26,652

�

6.0

�

28.16

�

2017

�

Los Angeles

�

447,294

�

3.6

�

14,979

�

3.4

�

33.49

�

Orange County

�

92,303

�

0.7

�

3,394

�

0.8

�

36.77

�

San Diego

�

704,408

�

5.7

�

22,319

�

5.0

�

31.68

�

San Francisco Bay Area

�

255,590

�

2.0

�

10,763

�

2.4

�

42.11

�

Greater Seattle

�

313,710

�

2.5

�

9,031

�

2.0

�

28.79

�

Total

�

106

�

1,813,305

�

14.5

�

60,486

�

13.6

�

33.36

�

2018

�

Los Angeles

�

129,254

�

1.0

�

4,207

�

1.0

�

32.55

�

Orange County

�

17,173

�

0.2

�

608

�

0.1

�

35.41

�

San Diego

�

503,723

�

4.0

�

21,619

�

4.9

�

42.92

�

San Francisco Bay Area

�

282,649

�

2.3

�

13,125

�

3.0

�

46.44

�

Greater Seattle

�

372,212

�

3.0

�

11,862

�

2.7

�

31.87

�

Total

�

1,305,011

�

10.5

�

51,421

�

11.7

�

39.40

�

2019

and

Beyond

�

Los Angeles

�

1,852,723

�

14.9

�

61,912

�

14.0

�

33.42

�

Orange County

�

101,758

�

0.8

�

4,086

�

0.9

�

40.15

�

San Diego

�

1,683,263

�

13.5

�

59,680

�

13.5

�

35.45

�

San Francisco Bay Area

�

2,148,906

�

17.3

�

96,178

�

21.7

�

44.76

�

Greater Seattle

�

958,730

�

7.7

�

31,179

�

7.1

�

32.52

�

Total

�

203

�

6,745,380

�

54.2

�

253,035

�

57.2

�

37.51

�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Stabilized Portfolio Quarterly Lease Expirations for 2014 and 2015

($ in thousands, except for annualized rent per sq. ft.)

�

#�of�Expiring

Leases

�

Total�Square

Feet

�

% of Total

Leased�Sq.�Ft.

�

Annualized

Base�Rent

�

% of Total
Annualized
Base�Rent

�

Annualized Rent

per Sq. Ft.

�

2014:

�

Q4 2014

�

268,967

�

2.2

�

8,291

�

1.9

�

30.83

�

Total 2014

�

268,967

�

2.2

�

8,291

�

1.9

�

30.83

�

2015:

�

Q1 2015

�

183,023

�

1.5

�

7,039

�

1.6

�

38.46

�

Q2 2015

�

293,810

�

2.3

�

7,107

�

1.6

�

24.19

�

Q3 2015

�

637,989

�

5.1

�

20,230

�

4.6

�

31.71

�

Q4 2015

�

261,414

�

2.1

�

7,912

�

1.8

�

30.27

�

Total 2015

�

116

�

1,376,236

�

11.0

�

42,288

�

9.6

�

30.73

�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Top Fifteen Tenants⁽¹⁾�

($ in thousands) �



�	Tenant Name	�	Annualized Base Rental Revenue		�	Rentable Square�Feet	�	Percentage of Total�Annualized�Base Rental Revenue		�	Percentage of Total�Rentable Square Feet		�
�	LinkedIn Corporation	�	$	28,270	�	663,239	�	6.4	%	�	5.2	%	�
�	DIRECTV, LLC	�	22,964		�	667,852	�	5.2	%	�	5.3	%	�
�	Bridgepoint Education, Inc.	�	15,066		�	322,342	�	3.4	%	�	2.5	%	�
�	Intuit, Inc.	�	13,489		�	465,812	�	3.1	%	�	3.7	%	�
�	Delta Dental of California	�	10,798		�	218,348	�	2.4	%	�	1.7	%	�
�	AMN Healthcare, Inc.	�	9,003		�	176,075	�	2.0	%	�	1.4	%	�
�	Scan Group ⁽²⁾⁽³⁾	�	6,969		�	218,742	�	1.6	%	�	1.7	%	�
�	Group Health Cooperative	�	6,372		�	183,422	�	1.4	%	�	1.4	%	�
�	Neurocrine Biosciences, Inc.	�	6,366		�	140,591	�	1.4	%	�	1.1	%	�
�	Microsoft Corporation	�	6,250		�	215,997	�	1.4	%	�	1.7	%	�
�	Institute for Systems Biology	�	6,207		�	140,605	�	1.4	%	�	1.1	%	�
�	Fish & Richardson, P.C.	�	6,071		�	139,547	�	1.4	%	�	1.1	%	�
�	Pac-12 Enterprises, LLC	�	5,602		�	131,749	�	1.3	%	�	1.0	%	�
�	Splunk, Inc.	�	5,413		�	95,008	�	1.2	%	�	0.7	%	�
�	Wells Fargo Bank ⁽²⁾	�	5,369		�	129,820	�	1.2	%	�	1.0	%	�
�	�	�	�		�	�	�	�		�	�		�
�	Total Top Fifteen Tenants	�	$	154,209	�	3,909,149	�	34.8	%	�	30.6	%	�
�	�	�	�		�	�	�	�		�	�		�

________________________


(1)	The information presented is as of September�30, 2014.


(2)	The Company has entered into leases with various affiliates of the tenant.

(3)

In December 2013, Scan Group renewed and expanded their lease at Kilroy Airport Center in Long Beach, CA. As of September 30, 2014, revenue recognition had not commenced for the expansion premises. The annualized base rental revenue and rentable square feet presented in this table include the projected annualized base rental revenue of approximately $1.6 million and rentable square feet of approximately 50,000 for the expansion premises.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

2014 Operating Property Acquisitions

($ in millions)

�

COMPLETED OFFICE PROPERTY ACQUISITIONS

�

Submarket

�

Month of

Acquisition

�

Number of Buildings

�

Rentable
Square Feet

�

Purchase
Price

�

1st Quarter

�

401 Terry Ave. N., Seattle, WA

�

Lake Union

�

March

�

140,605

�

106.1

�

2nd Quarter

�

None

�

3rd Quarter

�

None

�

TOTAL

�

140,605

�

106.1

�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

2014 Dispositions and Properties Held for Sale

($ in millions)

�

COMPLETED OFFICE PROPERTY DISPOSITIONS

�

Property

�

Submarket

�

Month�of
Disposition

�

No. of Buildings

�

Rentable
Square Feet

�

Sales
Price ⁽¹⁾

�

1st Quarter

�

San Diego Properties,^�San Diego, CA ⁽²⁾

�

I-15 Corridor/Sorrento Mesa

�

January

�

1,049,035

�

294.7

�

2nd Quarter

�

9785 and 9791 Towne Centre Drive, San Diego, CA

�

University Towne Center

�

June

�

126,000

�

29.5

�

3rd Quarter

�

111 Pacifica, Irvine, CA

�

Irvine

�

September

�

67,496

�

15.1

�

TOTAL DISPOSITIONS

�

1,242,531

�

339.3

�

COMPLETED LAND DISPOSITIONS

�

Property

�

Submarket

�

Month�of
Disposition

�

Gross Site

Acreage

�

Month�of
Disposition

�

Sales
Price ⁽¹⁾

�

2nd Quarter

�

10850 Via Frontera, San Diego, CA

�

I-15 Corridor/Rancho Bernardo

�

April

�

21.0

�

April

�

33.1

�

OFFICE PROPERTIES HELD FOR SALE AS OF SEPTEMBER 30, 2014

�

Property

�

Submarket

�

Anticipated Disposition

�

No. of Buildings

�

Rentable
Square Feet

�

Sales
Price ⁽¹⁾

�

4040 Civic Center Dr, San Rafael, CA

�

San Rafael

�

4Q 2014

�

130,237

�

34.9

�

999 Town & Country Rd, Orange, CA

�

Orange

�

4Q 2014

�

98,551

�

25.3

�

Total properties held for sale

�

228,788

�

60.2

�

________________________


(1)	Represents gross sales price before the impact of commissions and closing costs.


(2)	The San Diego Properties included the following: 10020 Pacific Mesa Boulevard, 6055 Lusk Avenue, 5010 and 5005 Wateridge Vista Drive, 15435 and 15445�Innovation Drive, and 15051,�15073, 15231, 15253, 15333 and 15378 Avenue of Science.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Completed Development and Redevelopment Projects and Other Land Holdings

($ in millions)

�

Completed Development Projects

�

Location

�

Start Date

�

Completion

Date

�

Rentable

Square Feet

�

Total Estimated Investment

�

% Occupied

�

1st Quarter

�

None

�

2nd Quarter

�

None

�

3rd Quarter

�

505, 555 and 605 N. Mathilda Avenue

�

Sunnyvale

�

4Q 2012

�

3Q 2014

�

587,429

�

300.0

�

100%

�

Completed Redevelopment Projects

�

Location

�

Start Date

�

Completion

Date

�

Stabilization Date

�

Rentable

Square Feet

�

Existing Investment ⁽¹⁾

�

Estimated Redevelopment Costs

�

Total Estimated Investment

�

% Occupied

�

1st Quarter

�

360 Third Street

�

�San Francisco

�

4Q 2011

�

1Q 2013

�

1Q 2014

�

429,996

�

88.5

�

99.3

�

188.2

�

99.2%

�

2nd Quarter

�

None

�

3rd Quarter

�

None

�

Gross Site

�

Estimated Rentable

�

Total Costs as of

�

Other Land Holdings

�

Acreage

�

Square Feet

�

9/30/2014^�(2)

�

IRVINE, CALIFORNIA

�

17150 Von Karman

�

8.5

�

N/A

�

8.2

�

________________________


(1)	Represents the depreciated carrying value at the commencement of redevelopment for the space being redeveloped.


(2)	Represents cash paid and costs incurred as of September�30, 2014.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

In-Process and Future Development Pipeline

($ in millions)

�

Location

�

Estimated Construction Period

�

Estimated Stabilization Date

�

Estimated Rentable Square Feet

�

Total Estimated Investment

�

Total Costs as

of 9/30/2014 ⁽¹⁾

�

Office

% Leased

�

Start Date

�

Compl. Date

�

UNDER CONSTRUCTION:

�

San Francisco Bay Area

�

680 and 690 E. Middlefield Road

�

Mountain View

�

2Q 2012

�

4Q 2014

�

4Q 2014

�

341,000

�

193.4

�

171.6

�

100%

�

350 Mission Street

�

San Francisco

�

4Q 2012

�

4Q 2015

�

1Q 2016

�

450,000

�

276.6

�

161.8

�

100%

�

333 Brannan Street

�

San Francisco

�

4Q 2013

�

3Q 2015

�

3Q 2015

�

185,000

�

100.2

�

46.0

�

100%

�

Crossing/900 ⁽²⁾

�

Redwood City

�

4Q 2013

�

3Q 2015

�

1Q 2017

�

339,000

�

188.0

�

98.0

�

100%

�

Los Angeles

�

Columbia Square ⁽³⁾

�

Hollywood

�

2Q 2013 4Q 2013

�

1Q 2015 2Q 2016

�

1Q 2015 2Q 2017

�

685,000

�

407.2

�

164.0

�

20%

�

TOTAL:

2,000,000

1,165.4

641.4

79%

�

FUTURE DEVELOPMENT PIPELINE:

�

San Francisco Bay Area

�

Kilroy Mission Bay ⁽⁴⁾

�

San Francisco

�

TBD

�

TBD

�

TBD

�

645,000

�

TBD

�

101.6

�

N/A

�

Los Angeles

�

Academy Project

�

Hollywood

�

TBD

�

TBD

�

TBD

�

475,000

�

TBD

�

51.0

�

N/A

�

San Diego

�

The Heights at Del Mar ⁽⁵⁾

�

Del Mar

�

4Q 2014

�

4Q 2015

�

4Q 2016

�

73,000

�

45.0

�

11.5

�

N/A

�

9455 Towne Centre Drive ⁽⁶⁾

San Diego

TBD

150,000

TBD

4.4

N/A

�

Carlsbad Oaks Lots 4, 5, 7 & 8

�

Carlsbad

�

TBD

�

TBD

�

TBD

�

288,000

�

TBD

�

18.4

�

N/A

�

One Paseo ⁽⁷⁾

�

Del Mar

�

TBD

�

TBD

�

TBD

�

500,000

�

TBD

�

157.9

�

N/A

�

Pacific Corporate Center Lot 8

�

Sorrento Mesa

�

TBD

�

TBD

�

TBD

�

170,000

�

TBD

�

13.8

�

N/A

�

Santa Fe Summit Phase II and III

�

56 Corridor

�

TBD

�

TBD

�

TBD

�

600,000

�

TBD

�

78.0

�

N/A

�

Sorrento Gateway Lot 2

�

Sorrento Mesa

�

TBD

�

TBD

�

TBD

�

80,000

�

TBD

�

12.2

�

N/A

�

TOTAL:

�

2,981,000

�

TBD

�

448.8

�

N/A

�

________________________


(1)	Represents cash paid and costs incurred as of September�30, 2014.


(2)	The Company anticipates the first building, totaling approximately 226,000 square feet, to be completed in the third quarter of 2015 and the second building, totaling approximately 113,000 square feet, to be completed in the first quarter of 2017.


(3)	In the second quarter of 2013, the Company commenced redevelopment of the historical buildings encompassing approximately 110,000 rentable square feet.� In the fourth quarter of 2013, the Company commenced development of the second phase of its 685,000 square foot mixed-use project, which encompasses office, multi-family and retail components.


(4)	In May 2014, the Company completed the acquisition of this undeveloped land for a total purchase price of $95.0 million plus approximately $2.3�million in accrued liabilities.


(5)	In October 2014, the Company commenced construction on this project, which is adjacent to the One Paseo project.


(6)	The Company is planning to demolish the existing 2-story 45,195 rentable square foot office building and is currently pursuing entitlements to build a new 5-story 150,000 rentable square foot building.


(7)	Estimated rentable square feet reflects existing office entitlements. The Company is currently pursuing mixed-use entitlements for this project, which would increase the estimated rentable square feet.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Capital Structure

As of September�30, 2014

($ in thousands)



�	�	�	�	�	�		�	�		�
�		�	Shares/Units September 30, 2014	�	Aggregate Principal Amount or $ Value Equivalent		�	% of Total Market Capitalization		�
�	DEBT:	�	�	�	�		�	�		�
�	Unsecured Term Loan Facility	�	�	�	$	150,000	�	1.9	%	�
�	Unsecured Exchangeable Senior Notes due 2014 ⁽¹⁾	�	�	�	135,481		�	1.8	%	�
�	Unsecured Senior Notes due 2015 ⁽¹⁾	�	�	�	325,000		�	4.2	%	�
�	Unsecured Senior Notes due 2018 ⁽¹⁾	�	�	�	325,000		�	4.2	%	�
�	Unsecured Senior Notes due 2020 ⁽¹⁾	�	�	�	250,000		�	3.3	%	�
�	Unsecured Senior Notes due 2023 ⁽¹⁾	�	�	�	300,000		�	3.9	%	�
�	Unsecured Senior Notes due 2029 ⁽¹⁾	�	�	�	400,000		�	5.2	%	�
�	Secured Debt ⁽¹⁾	�	�	�	538,552		�	7.0	%	�
�	Total Debt	�	�	�	$	2,424,033	�	31.5	%	�
�	EQUITY AND NONCONTROLLING INTERESTS:	�	�	�	�		�	�		�
�	6.875% Series G Cumulative Redeemable Preferred stock ⁽²⁾	�	4,000,000	�	$	100,000	�	1.3	%	�
�	6.375% Series H Cumulative Redeemable Preferred stock ⁽²⁾	�	4,000,000	�	100,000		�	1.3	%	�
�	Common limited partnership units outstanding ⁽³⁾	�	1,804,200	�	107,242		�	1.4	%	�
�	Shares of common stock outstanding ⁽³⁾	�	83,388,220	�	4,956,596		�	64.5	%	�
�	Total Equity and Noncontrolling Interests	�	�	�	$	5,263,838	�	68.5	%	�
�	TOTAL MARKET CAPITALIZATION	�	�	�	$	7,687,871	�	100.0	%	�
�	�	�	�	�	�		�	�		�

________________________


(1)	Represents gross aggregate principal amount due at maturity before the effect of net unamortized premiums as of September�30, 2014. The aggregate net unamortized premiums totaled approximately $4.9�million as of September�30,�2014.


(2)	Value based on $25.00 per share liquidation preference.


(3)	Value based on closing share price of $59.44 as of September�30, 2014.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Debt Analysis

As of September�30,�2014 ($ in millions)



�	�	�	�		�	�		�	�	�
�	TOTAL DEBT COMPOSITION									�
�	�	�	Percent of Total Debt		�	Weighted Average				�
�		�	Percent of Total Debt		�	Interest�Rate		�	Maturity	�
�	Secured vs. Unsecured Debt	�	�		�	�		�	�	�
�	Unsecured Debt	�	77.8	%	�	4.5	%	�	6.5	�
�	Secured Debt	�	22.2	%	�	5.2	%	�	4.5	�
�	Floating vs. Fixed-Rate Debt	�	�		�	�		�	�	�
�	Floating-Rate Debt	�	6.2	%	�	1.6	%	�	4.8	�
�	Fixed-Rate Debt	�	93.8	%	�	4.9	%	�	6.1	�
�	�	�	�		�	�		�	�	�
�	Stated Interest Rate	�	�		�	4.7	%	�	6.0	�
�	�	�	�		�	�		�	�	�
�	GAAP Effective Rate	�	�		�	4.7	%	�	�	�
�	�	�	�		�	�		�	�	�
�	GAAP Effective Rate Including Debt Issuance Costs	�	�		�	4.9	%	�	�	�
�	�	�	�		�	�		�	�	�

�



�	�	�	�	�	�	�
�	KEY DEBT COVENANTS
�	�	�	Covenant	�	Actual Performance as of September 30, 2014	�
�	Unsecured Credit Facility and Term Loan Facility (as defined in the Credit Agreements):	�	�	�	�	�
�	Total debt to total asset value	�	less than 60%	�	33%	�
�	Fixed charge coverage ratio	�	greater than 1.5x	�	2.5x	�
�	Unsecured debt ratio	�	greater than 1.67x	�	2.77x	�
�	Unencumbered asset pool debt service coverage	�	greater than 1.75x	�	3.54x	�
�	�	�	�	�	�	�
�	Unsecured Senior Notes due 2015, 2018, 2020, 2023 and 2029 (as defined in the Indentures):	�	�	�	�	�
�	Total debt to total asset value	�	less than 60%	�	40%	�
�	Interest coverage	�	greater than 1.5x	�	4.9x	�
�	Secured debt to total asset value	�	less than 40%	�	9%	�
�	Unencumbered asset pool value to unsecured debt	�	greater than 150%	�	262%	�
�	�	�	�	�	�	�

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Debt Analysis

($ in thousands)

�

DEBT MATURITY SCHEDULE

�

Floating/

Fixed Rate

�

Stated

Rate

�

GAAP Effective Rate

�

Maturity

Date

�

Remaining 2014

�

2015

�

2016

�

2017

�

2018

�

After 2018

�

Total ⁽¹⁾

�

Unsecured Debt:

�

Floating ⁽²⁾

�

1.56%

�

1.56%

�

7/1/2019

�

150,000

�

150,000

�

Fixed

�

4.25%

�

7.13%

�

11/15/2014

�

135,481

�

135,481

�

Fixed

�

5.00%

�

5.01%

�

11/3/2015

�

325,000

�

325,000

�

Fixed

�

4.80%

�

4.83%

�

7/15/2018

�

325,000

�

325,000

�

Fixed

�

6.63%

�

6.74%

�

6/1/2020

�

250,000

�

250,000

�

Fixed

�

3.80%

�

3.80%

�

1/15/2023

�

300,000

�

300,000

�

Fixed

�

4.25%

�

4.35%

�

8/15/2029

�

400,000

�

400,000

�

Total unsecured debt

�

4.50%

�

4.73%

�

135,481

�

325,000

�

325,000

�

1,100,000

�

1,885,481

�

Secured Debt:

�

Fixed^�⁽³⁾

�

4.94%

�

4.00%

�

4/15/2015

�

284

�

26,206

�

26,490

�

Fixed^�⁽³⁾

�

5.09%

�

3.50%

�

8/7/2015

�

34,000

�

34,000

�

Fixed^�⁽³⁾

�

5.23%

�

3.50%

�

1/1/2016

�

221

�

908

�

50,969

�

52,098

�

Fixed^�⁽³⁾

�

5.57%

�

3.25%

�

2/11/2016

�

157

�

645

�

38,694

�

39,496

�

Fixed

�

6.51%

�

6.51%

�

2/1/2017

�

260

�

1,084

�

1,157

�

64,406

�

66,907

�

Fixed

�

7.15%

�

7.15%

�

5/1/2017

�

617

�

2,581

�

2,772

�

1,215

�

7,185

�

Fixed

�

4.27%

�

4.27%

�

2/1/2018

�

596

�

2,452

�

2,559

�

2,671

�

123,085

�

131,363

�

Fixed^�⁽³⁾

�

6.05%

�

3.50%

�

6/1/2019

�

368

�

1,531

�

1,626

�

1,727

�

1,835

�

74,479

�

81,566

�

Fixed

�

4.48%

�

4.48%

�

7/1/2027

�

646

�

1,600

�

1,673

�

1,749

�

91,332

�

97,000

�

Fixed

�

Various

�

Various

�

Various

�

2,202

�

2,447

�

Total secured debt

�

5.17%

�

4.29%

�

2,528

�

70,104

�

99,431

�

71,748

�

126,728

�

168,013

�

538,552

�

Total

�

4.65%

�

4.65%

�

138,009

�

395,104

�

99,431

�

71,748

�

451,728

�

1,268,013

�

2,424,033

�

________________________


(1)	Amounts presented reflect the gross principal balances before the effect of any unamortized discounts/premiums as of September�30,�2014. The aggregate net unamortized premiums totaled approximately $4.9�million as of September�30,�2014.


(2)	The interest for this loan is calculated at an annual rate of LIBOR plus 1.400% at September�30, 2014.


(3)	Represents secured debt assumed in connection with an operating property acquisition.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures

�

Included in this section are managements statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations (FFO), in the Companys earnings release on October�28,�2014 and the reasons why management believes that these measures provide useful information to investors about the Companys financial condition and results of operations.

Net Operating Income:

Management believes that Net Operating Income (NOI) is a useful supplemental measure of the Companys operating performance. The Company defines NOI as operating revenues (rental income, tenant reimbursements and other property income) less property and related expenses (property expenses, real estate taxes, provision for bad debts and ground leases). Other real estate investment trusts (REITs) may use different methodologies for calculating NOI, and accordingly, the Companys NOI may not be comparable to other REITs.

Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a portfolio basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base have on the Companys results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Companys financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.

However, NOI should not be viewed as an alternative measure of the Companys financial performance since it does not reflect general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Companys properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Companys results from operations.

Same Store Net Operating Income:

Management believes that Same Store NOI is a useful supplemental measure of the Companys operating performance. Same Store NOI represents the NOI for all of the properties that were owned and included in our stabilized portfolio for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties that were operational for two comparable periods, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Companys Same Store NOI may not be comparable to other REITs.

However, Same Store NOI should not be viewed as an alternative measure of the Companys financial performance since it does not reflect the operations of the Companys entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition-related expenses, interest expense, depreciation and amortization costs, other nonproperty income and losses, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Companys properties, or trends in development and construction activities which are significant economic costs and activities that could materially impact the Companys results from operations.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

�

EBITDA:

Management believes that earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, gains and losses on disposition of discontinued operations, net income attributable to noncontrolling interests, preferred dividends and distributions, original issuance costs of redeemed preferred stock and preferred units, and impairment losses (EBITDA) is a useful supplemental measure of the Companys operating performance. When considered with other GAAP measures and FFO, management believes EBITDA gives the investment community a more complete understanding of the Companys operating results, including the impact of general and administrative expenses and acquisition-related expenses, before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA as it is used in several of the Companys financial covenants for both its secured and unsecured debt. However, EBITDA should not be viewed as an alternative measure of the Companys operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Companys results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA and, accordingly, the Companys EBITDA may not be comparable to other REITs.

Funds From Operations:

The Company calculates FFO in accordance with the White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets.

Management believes that FFO is a useful supplemental measure of the Companys operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of the Companys activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, the Companys FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, management believes that FFO along with the required GAAP presentations provides a more complete measurement of the Companys performance relative to its competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.

However, FFO should not be viewed as an alternative measure of the Companys operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Companys properties, which are significant economic costs and could materially impact the Companys results from operations.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

�

Funds Available for Distribution:

Management believes that Funds Available for Distribution (FAD) is a useful supplemental measure of the Companys liquidity. The Company computes FAD by adding to FFO the non-cash amortization of deferred financing costs, debt discounts and premiums and share-based compensation awards and amortization of above (below) market rents for acquisition properties, then subtracting recurring tenant improvements, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements and other non-cash adjustments. FAD provides an additional perspective on the Companys ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Companys financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Companys FAD may not be comparable to other REITs.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Definitions Included in Supplemental

Annualized Base Rent:

Includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue.

Change in GAAP/ Cash Rents (Leases Commenced):

Calculated as the change between GAAP/cash rents for new/renewed leases and the expiring GAAP/cash rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company.

Change in GAAP/Cash Rents (Leases Executed):

Calculated as the change between GAAP/cash rents for signed leases and the expiring GAAP/cash rents for the same space. Excludes leases for which the space was vacant longer than one year, or vacant when the property was acquired by the Company.

Estimated Stabilization Date (Development):

Managements estimation of the earlier of stabilized occupancy (95%) or one year from the date of substantial completion.

FAD Payout Ratio:

Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by Funds Available for Distribution.

First Generation Capital Expenditures:

Capital expenditures for newly acquired space, newly developed or redeveloped space, or change in use. These costs are not subtracted in our calculation of Funds Available for Distribution.

Fixed Charge Coverage Ratio:

Calculated as EBITDA divided by interest expense (excluding amortization of deferred debt costs and debt discounts/premiums), current year accrued preferred dividends and distributions on Cumulative Redeemable Preferred units.

FFO Payout Ratio:

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Definitions Included in Supplemental, continued

GAAP Effective Rate:

The rate at which interest expense is recorded for financial reporting purposes, which reflects the amortization of any discounts/premiums, excluding debt issuance costs.

Interest Coverage Ratio:

Calculated as EBITDA divided by interest expense (excluding amortization of deferred debt costs and debt discounts/premiums).

Lease-up Properties:

Properties recently redeveloped that have not yet reached 95% occupancy and are within one year following cessation of major construction activities.

Net Effect of Straight-Line Rents:

Represents the straight-line rent income recognized during the period offset by cash received during the period that was applied to deferred rents receivable balances for terminated leases and the provision for bad debts recorded for deferred rent receivable balances.

Operating Margins:

Calculated as Net Operating Income divided by total revenues, including discontinued operations.

Retention Rates (Leases Commenced):

Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.

Same Store Portfolio:

Our Same Store portfolio includes all of our properties owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2013 and still owned and included in the stabilized portfolio as of September�30,�2014. It does not include undeveloped land, development and redevelopment properties currently under construction or committed for construction, lease-up properties and properties held-for-sale. We define lease-up properties as properties recently developed or redeveloped that have not yet reached 95%�occupancy and are within one year following cessation of major construction activities. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.

Stated Interest Rate:

The rate at which interest expense is recorded per the respective loan documents, excluding the impact of the amortization of any debt discounts/premiums.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Reconciliation of Same Store Net Operating Income to Net Income Available to Common Stockholders

(unaudited, $ in thousands)

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

2014

�

2013

�

Adjusted Same Store Cash Net Operating Income

�

66,178

�

62,341

�

204,650

�

188,384

�

Adjustments to 2014 and 2013:

�

Other income related to property damage settlement

�

5,225

�

Other property income related to a lease termination fee

�

5,655

�

5,655

�

Property expenses related to nonrecurring property damage legal fees

�

(1,670

)

�

(663

)

�

Same Store Cash Net Operating Income

�

71,833

�

62,341

�

208,635

�

192,946

�

Cash to GAAP Adjustments:

�

GAAP Operating Revenues Adjustments, net ⁽²⁾

�

3,869

�

7,501

�

18,012

�

22,623

�

GAAP Operating Expenses Adjustments, net

�

(133

)

�

(226

)

�

Same Store GAAP Net Operating Income

�

75,742

�

69,709

�

226,686

�

215,343

�

Non-Same Store GAAP Net Operating Income

�

15,644

�

8,248

�

42,734

�

21,279

�

Net Operating Income excluding discontinued operations

�

91,386

�

77,957

�

269,420

�

236,622

�

Net Operating Income from discontinued operations

�

1,157

�

10,694

�

4,054

�

22,892

�

Net Operating Income, as defined ⁽¹⁾

�

92,543

�

88,651

�

273,474

�

259,514

�

Adjustments:

�

General and administrative expenses

�

(11,138

)

�

(10,226

)

�

(33,806

)

�

(29,750

)

�

Acquisition-related expenses

�

(431

)

�

(568

)

�

(1,268

)

�

(1,387

)

�

Depreciation and amortization (including discontinued operations)

�

(50,641

)

�

(50,650

)

�

(150,610

)

�

(150,345

)

�

Interest income and other net investment gains/(losses)

�

)

�

673

�

587

�

1,084

�

Interest expense

�

(16,608

)

�

(18,853

)

�

(49,880

)

�

(58,021

)

�

Gain on sale of land

�

3,490

�

Gains on dispositions of discontinued operations

�

5,587

�

110,391

�

423

�

Net Income

�

19,303

�

9,027

�

152,378

�

21,518

�

Net income attributable to noncontrolling common units of the Operating Partnership

�

(321

)

�

(131

)

�

(3,011

)

�

(266

)

�

Preferred dividends

�

(3,313

)

�

(3,312

)

�

(9,938

)

�

(9,938

)

�

Net Income Available to Common Stockholders

�

15,669

�

5,584

�

139,429

�

11,314

�

________________________


(1)	Please refer to page 27 for Management Statements on Net Operating Income and Same Store Net Operating Income.


(2)	For the three and nine months ended September�30,�2014, GAAP Operating Revenue Adjustments, includes $1.6�million and $4.4�million related to a lease termination fee, net of accelerated amortization of deferred rent receivables.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Reconciliation of Net Income Available to Common Stockholders to EBITDA

(unaudited, $ in thousands)



�	�	�	Three Months Ended September 30,						�
�	�	�	2014			�	2013		�
�	Net Income Available to Common Stockholders	�	$	15,669		�	$	5,584	�
�	Interest expense	�	16,608			�	18,853		�
�	Depreciation and amortization (including discontinued operations)	�	50,641			�	50,650		�
�	Net income attributable to noncontrolling common units of the Operating Partnership	�	321			�	131		�
�	Gains on dispositions of discontinued operations	�	(5,587		)	�			�
�	Preferred dividends	�	3,313			�	3,312		�
�	�	�	�			�	�		�
�	EBITDA^�⁽¹⁾	�	$	80,965		�	$	78,530	�
�	�	�	�			�	�		�

________________________


(1)	Please refer to page 28 for a Management Statement on EBITDA.

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Reconciliation of Funds Available for Distribution to GAAP Net Cash Provided by Operating Activities

(unaudited, $ in thousands)

�

Three Months Ended September 30,

�

Nine Months Ended September 30,

�

2014

�

2013

�

2014

�

2013

�

Funds Available for Distribution^�⁽¹⁾

37,667

�

23,899

�

113,407

�

81,467

�

Adjustments:

�

Tenant improvements, leasing commissions and recurring capital expenditures

20,074

�

24,684

�

52,247

�

58,163

�

Depreciation for furniture, fixtures and equipment

644

�

466

�

1,731

�

1,363

�

Preferred dividends

3,313

�

3,312

�

9,938

�

9,938

�

Provision for uncollectible tenant receivables

�

101

�

196

�

Net changes in operating assets and liabilities and other adjustments ⁽²⁾

28,646

�

26,844

�

19,883

�

35,183

�

GAAP Net Cash Provided by Operating Activities

90,402

�

79,306

�

197,264

�

186,310

�

________________________


(1)	Please refer to page 29 for a Management Statement on Funds Available for Distribution.


(2)	Primarily includes changes in the following assets and liabilities: marketable securities; current receivables; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities and rents received in advance and tenant security deposits.�

Exhibit 99.2

�



Contact:	FOR RELEASE:
Tyler H. Rose	October�28, 2014
Executive Vice President	�
and Chief Financial Officer	�
(310) 481-8484 Or	�
Michelle Ngo	�
Senior Vice President	�
and Treasurer	�
(310) 481-8581	�

�

KILROY REALTY CORPORATION REPORTS

THIRD QUARTER FINANCIAL RESULTS

---------------

LOS ANGELES, October�28, 2014 - Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its third quarter ended September�30,�2014.

Third Quarter Highlights


"	Funds from operations (FFO) of $0.69 per share


"	Net income available to common stockholders of $0.18 per share, including a gain from a property disposition of $0.07 per share


"	Revenues from continuing operations of $129.0�million


"	Signed new or renewing leases in the stabilized portfolio totaling 520,489 square feet


"	At September�30,�2014, stabilized portfolio was 94.1% occupied and 95.6% leased


"	Delivered and stabilized a 587,429 square-foot, three-building office project located in Silicon Valleys Sunnyvale submarket


"	Executed a 15-year, 93,000 square-foot lease for the entire historical office component of Columbia Square, a 685,000 square-foot, mixed-use development project in Los Angeles Hollywood submarket


"	Executed a 12-year, 334,000 square-foot lease for 100% of the office development project at Crossing/900 in Redwood City, CA


"	Completed the sale of a 67,000 square-foot property in Irvine, CA, for gross proceeds of $15.1 million


"	Repaid all $83.0 million of Series B unsecured senior notes upon maturity in August


"	Issued, in an underwritten public offering, $400.0 million of 15-year unsecured senior notes that pay interest semi-annually at 4.25%

Recent Activity


"	In October, commenced construction on a 73,000 square-foot office building in San Diegos Del Mar submarket

Results for the Quarter and Nine Months ended September�30,�2014

For its third quarter ended September�30,�2014, KRC reported FFO of $60.4�million, or $0.69�per share, compared to $55.9�million, or $0.69�per share, in the third quarter of 2013. Net income available to common stockholders in the third quarter was $15.7�million, or $0.18�per share, compared to $5.6�million, or $0.07 per share, in the year-earlier period. Net income for the 2014 third quarter included an approximate $5.6�million gain from a property disposition. Results for the third quarter of 2014 included $0.02 per share of net lease termination fees and in the same quarter last year, results included a net $0.05 per share cash payment related to the default of a prior tenant. Including discontinued operations, the companys revenues in the third quarter of 2014 totaled $131.1�million, up from $127.8�million in the third quarter of 2013.

For the first nine�months of 2014, KRC reported FFO of $180.9�million, or $2.06�per share, compared to $160.1�million, or $1.99�per share, in the first nine months of 2013. Net income available to common stockholders in the first nine months of 2014 was $139.4�million, or $1.63�per share, compared to $11.3�million, or $0.13 per share, in the same period of 2013. Net income for the 2014 nine-month period included approximately $113.9�million in gains from property and land dispositions. Results for the first nine months of 2014 included $0.06 per share of net lease termination fees and in the same period last year, results included approximately $0.11 per share of cash payments related to prior tenant matters. Including discontinued operations, the companys revenues for the first nine�months of 2014 totaled $386.6�million, up from $369.8�million in the first nine�months of 2013.

Revenues from continuing operations for the first nine�months of 2014 totaled $380.0�million, up from $338.5�million for the first nine�months of 2013.

All per share amounts in this report are presented on a diluted basis.

Operating and Leasing Activity

At September�30,�2014, KRCs stabilized portfolio encompassed approximately 13.5�million square feet of office space located in Los�Angeles, Orange�County, San�Diego, the San�Francisco Bay Area and greater Seattle. During the third quarter, the company signed new or renewing leases on 520,489 square feet of space in the stabilized portfolio. Also, during the third quarter, KRC delivered and stabilized a 587,429 square foot, three building office project located in Sunnyvale, CA. The campus is 100% leased to LinkedIn Corporation. The stabilized portfolio was 94.1% occupied at September�30,�2014, compared to 93.6% at June 30,�2014 and 92.2% at September�30,�2013. At September�30,�2014, the companys stabilized portfolio was 95.6% leased.

Real Estate Investment Activity

During the third quarter, KRC executed a 15-year lease with creative workspace provider NeueHouse for the entire historical office component of its Columbia Square mixed-use development project located in Hollywood, CA, and a 12-year lease with cloud-storage and content management services provider Box Inc. for 100% of its Crossing/900 office project under construction in Redwood City, CA. With these transactions in place, 79% of KRCs office development under construction was pre-leased.

In October, KRC commenced construction on a 73,000 square foot office building, The Heights at Del Mar, located in the Del Mar submarket of San Diego. The company expects to invest approximately $45 million in the development project, which is scheduled for completion in the fourth quarter of 2015.

Within its existing development program, as of October 2014, KRC had six development projects under construction aggregating just under 2.1 million square feet with scheduled completion dates ranging from year-end 2014 through 2016. The company estimates its total investment in these six projects will be approximately $1.2 billion.

KRC also completed the sale of a 67,000 square-foot office property located in Irvine, CA, during the quarter, generating gross proceeds of approximately $15 million, and executed contracts to sell two additional properties located in San Rafael, CA and Orange, CA, that together total 229,000 square feet and are expected to generate aggregate proceeds of approximately $60 million. The two transactions are anticipated to close in the fourth quarter of 2014.

Financing Activity

In August, KRC issued $400.0 million of unsecured senior notes in an underwritten public offering. The notes pay interest semi-annually at 4.25% and mature in August 2029. During the quarter, the company also repaid all $83.0 million of its Series B unsecured senior notes upon maturity in August, as well as $37.0 million of its 4.25%�Exchangeable Notes due November�2014 as a result of early redemptions.

Management Comments

With our West Coast real estate markets among the most dynamic in the nation, KRCs operating teams are delivering strong results across all our strategic priorities, said John Kilroy, Jr., the companys chairman, president and chief executive officer. Vacancies within our stabilized portfolio are now at frictional levels, our active office development pipeline at quarter end was approximately 79% pre-leased, and our same-store operating results have benefited from rising rents. Equally important, our unrelenting focus on top quality, contemporary office space located in highly sought after urban locales is strengthening the KRC franchise among our potential tenants and enhancing the long-term value of our portfolio.

Conference Call and Audio Webcast

KRC management will discuss updated earnings guidance for fiscal 2014 during the companys October�29,�2014 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. Those interested in listening via the Internet can access the conference call at http://www.kilroyrealty.com. Please go to the website 15 minutes before the call and register. It may be necessary to download audio software to hear the conference call. Those interested in listening via telephone can access the conference call at (888) 679-8033 reservation #61919692. A replay of the conference call will be available via phone through November 5,�2014 at (888) 286-8010, reservation #87923640, or via the Internet at the companys website.

About Kilroy Realty Corporation

With more than 65 years experience owning, developing, acquiring and managing real estate assets in West Coast real estate markets, Kilroy Realty Corporation (KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is one of the regions premier landlords. The company provides physical work environments that foster creativity and productivity and serves a broad roster of dynamic, innovation-driven tenants, including technology, entertainment, digital media and health care companies.

At September�30,�2014, the companys stabilized portfolio totaled 13.5�million square feet of office properties, all located in the coastal regions of greater Seattle, the San Francisco Bay Area, Los Angeles, Orange County and San Diego. The company is recognized by the Global Real Estate Sustainability Benchmark (GRESB) as the North American leader in sustainability and was ranked first among 151�North American participants across all asset types. At the end of the third quarter, the companys properties were 41% LEED certified and 59% of eligible properties are ENERGY STAR certified. In addition, KRC has approximately 2.0�million square feet of new office development under construction with a total estimated investment of approximately $1.2�billion. More information is available at http://www.kilroyrealty.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in forward-looking statements, and you should not rely on forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in forward-looking statements, including, among others, risks associated with: investment in real estate assets, which are illiquid; trends in the real estate industry; significant competition, which may decrease the occupancy and rental rates of properties; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired properties; the availability of cash for distribution and debt service and exposure of risk of default under debt obligations; adverse changes to, or implementations of, applicable laws, regulations or legislation; and the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts. These factors are not exhaustive. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption Risk Factors in our annual report on Form�10-K/A for the year ended December 31, 2013 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on information that was available, and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent required in connection with ongoing requirements under U.S. securities laws.

KILROY REALTY CORPORATION

SUMMARY QUARTERLY RESULTS

(unaudited, in thousands, except per share data)

�

Three Months Ended

September 30,

�

Nine Months Ended

September 30,

�

2014

�

2013

�

2014

�

2013

Revenues from continuing operations^�

129,024

�

113,545

�

379,960

�

338,507

�

Revenues including discontinued operations

131,082

�

127,803

�

386,594

�

369,778

�

Net income available to common stockholders ⁽¹⁾⁽²⁾

15,669

�

5,584

�

139,429

�

11,314

�

Weighted average common shares outstanding basic

83,161

�

76,769

�

82,525

�

75,751

Weighted average common shares outstanding diluted

85,110

�

76,769

�

84,623

�

75,751

�

Net income available to common stockholders per share basic ⁽¹⁾⁽²⁾

0.18

�

0.07

�

1.67

�

0.13

Net income available to common stockholders per share diluted ⁽¹⁾⁽²⁾

0.18

�

0.07

�

1.63

�

0.13

�

Funds From Operations ⁽³⁾⁽⁴⁾

60,399

�

55,899

�

180,927

�

160,139

�

Weighted average common shares/units outstanding basic^�(5)

86,189

�

79,806

�

85,555

�

78,795

Weighted average common shares/units outstanding diluted^�(5)

88,138

�

81,527

�

87,653

�

80,586

�

Funds From Operations per common share/unit basic ⁽⁵⁾

0.70

�

0.70

�

2.11

�

2.03

Funds From Operations per common share/unit diluted ⁽⁵⁾

0.69

�

0.69

�

2.06

�

1.99

�

Common shares outstanding at end of period

�

83,388

�

82,113

Common partnership units outstanding at end of period

�

1,804

�

1,822

Total common shares and units outstanding at end of period

�

85,192

�

83,935

�

September�30, 2014

�

September�30, 2013

Stabilized office portfolio occupancy rates: ⁽⁶⁾

�

Los Angeles and Ventura Counties

�

92.7

�

93.2

Orange County

�

97.8

�

93.3

San Diego County

�

90.8

�

89.6

San Francisco Bay Area

�

98.8

�

92.7

Greater Seattle

�

95.2

�

95.2

Weighted average total

�

94.1

�

92.2

�

Total square feet of stabilized office properties owned at end of period: ⁽⁶⁾

�

Los Angeles and Ventura Counties

�

3,503

�

3,398

Orange County

�

272

�

437

San Diego County

�

4,244

�

4,364

San Francisco Bay Area

�

3,279

�

2,289

Greater Seattle

�

2,188

�

2,048

Total

�

13,486

�

12,536

________________________


(1)	Net income available to common stockholders and Funds From Operations for the three months ended September 30,�2013 includes the receipt of a $3.7�million net cash payment related to the default of a former tenant and for the nine months ended September 30,�2013 also includes the receipt of a $5.2�million payment related to a property damage settlement.


(2)	Net income available to common stockholders includes gains on dispositions of discontinued operations of $5.6 million and $110.4�million for the three and nine�months ended September�30, 2014, $0.4 million for the nine�months ended September�30,�2013 and a $3.5 million gain on sale of land for the nine�months ended September�30, 2014.


(3)	Reconciliation of Net income available to common stockholders to Funds From Operations and management statement on Funds From Operations are included after the Consolidated Statements of Operations.


(4)	Reported amounts are attributable to common stockholders and common unitholders.


(5)	Calculated based on weighted average shares outstanding including participating share-based awards and assuming the exchange of all common limited partnership units outstanding.


(6)	Occupancy percentages and total square feet reported are based on the companys stabilized office portfolio for the periods presented. Occupancy percentages and total square feet shown for September�30, 2013 include the office properties that were sold during 2013 and 2014.

KILROY REALTY CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)



�	September�30, 2014			�	December�31,�2013
�	(unaudited)			�	�
ASSETS	�			�	�
REAL ESTATE ASSETS:	�			�	�
Land and improvements	$	757,036		�	$	657,491
Buildings and improvements	3,882,015			�	3,590,699
Undeveloped land and construction in progress	1,112,046			�	1,016,757
Total real estate assets held for investment	5,751,097			�	5,264,947
Accumulated depreciation and amortization	(912,623		)	�	(818,957		)
Total real estate assets held for investment, net	4,838,474			�	4,445,990
�	�			�	�
Real estate assets and other assets held for sale, net	49,815			�	213,100
Cash and cash equivalents	200,431			�	35,377
Restricted cash	17,487			�	49,780
Marketable securities	12,076			�	10,008
Current receivables, net	6,443			�	10,743
Deferred rent receivables, net	139,910			�	127,123
Deferred leasing costs and acquisition-related intangible assets, net	183,057			�	186,622
Deferred financing costs, net	19,373			�	16,502
Prepaid expenses and other assets, net	20,398			�	15,783
TOTAL ASSETS	$	5,487,464		�	$	5,111,028
�	�			�	�
LIABILITIES AND EQUITY	�			�	�
LIABILITIES:	�			�	�
Secured debt	$	549,896		�	$	560,434
Exchangeable senior notes, net	135,049			�	168,372
Unsecured debt, net	1,743,962			�	1,431,132
Unsecured line of credit				�	45,000
Accounts payable, accrued expenses and other liabilities	243,602			�	198,467
Accrued distributions	31,897			�	31,490
Deferred revenue and acquisition-related intangible liabilities, net	114,504			�	101,286
Rents received in advance and tenant security deposits	45,086			�	44,240
Liabilities of real estate assets held for sale	3,099			�	14,447
Total liabilities	2,867,095			�	2,594,868
�	�			�	�
EQUITY:	�			�	�
Stockholders Equity	�			�	�
6.875% Series G Cumulative Redeemable Preferred stock	96,155			�	96,155
6.375% Series H Cumulative Redeemable Preferred stock	96,256			�	96,256
Common stock	834			�	822
Additional paid-in capital	2,530,282			�	2,478,975
Distributions in excess of earnings	(159,799		)	�	(210,896		)
Total stockholders equity	2,563,728			�	2,461,312
Noncontrolling Interests	�			�	�
Common units of the Operating Partnership	51,419			�	49,963
Noncontrolling interest in consolidated subsidiary	5,222			�	4,885
Total noncontrolling interests	56,641			�	54,848
Total equity	2,620,369			�	2,516,160
TOTAL LIABILITIES AND EQUITY	$	5,487,464		�	$	5,111,028

KILROY REALTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

�

Three Months Ended
September 30,

�

Nine Months Ended
September 30,

�

2014

�

2013

�

2014

�

2013

REVENUES

�

Rental income

115,221

�

103,354

�

338,911

�

303,573

Tenant reimbursements

11,346

�

9,583

�

33,399

�

28,350

Other property income

2,457

�

608

�

7,650

�

6,584

Total revenues

129,024

�

113,545

�

379,960

�

338,507

�

EXPENSES

�

Property expenses

25,801

�

24,470

�

75,448

�

69,895

Real estate taxes

11,008

�

10,088

�

32,728

�

29,129

Provision for bad debts

�

101

�

196

Ground leases

771

�

929

�

2,306

�

2,665

General and administrative expenses

11,138

�

10,226

�

33,806

�

29,750

Acquisition-related expenses

431

�

568

�

1,268

�

1,387

Depreciation and amortization

50,032

�

45,804

�

148,647

�

138,652

Total expenses

99,239

�

92,186

�

294,261

�

271,674

�

OTHER (EXPENSES) INCOME

�

Interest income and other net investment gains/(losses)

)

�

673

�

587

�

1,084

Interest expense

(16,608

)

�

(18,853

)

�

(49,880

)

�

(58,021

)

Total other (expenses) income

(16,617

)

�

(18,180

)

�

(49,293

)

�

(56,937

)

�

INCOME FROM CONTINUING OPERATIONS BEFORE

GAIN ON SALE OF LAND

13,168

�

3,179

�

36,406

�

9,896

Gain on sale of land

�

3,490

�

INCOME FROM CONTINUING OPERATIONS

13,168

�

3,179

�

39,896

�

9,896

�

DISCONTINUED OPERATIONS:

�

Income from discontinued operations

548

�

5,848

�

2,091

�

11,199

Gains on dispositions of discontinued operations

5,587

�

110,391

�

423

Total income from discontinued operations

6,135

�

5,848

�

112,482

�

11,622

�

NET INCOME

19,303

�

9,027

�

152,378

�

21,518

�

Net income attributable to noncontrolling common units of the

Operating Partnership

(321

)

�

(131

)

�

(3,011

)

�

(266

)

�

NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION

18,982

�

8,896

�

149,367

�

21,252

�

PREFERRED DIVIDENDS

(3,313

)

�

(3,312

)

�

(9,938

)

�

(9,938

)

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

15,669

�

5,584

�

139,429

�

11,314

�

Weighted average common shares outstanding basic

83,161

�

76,769

�

82,525

�

75,751

Weighted average common shares outstanding diluted

85,110

�

76,769

�

84,623

�

75,751

�

Net income available to common stockholders per share basic

0.18

�

0.07

�

1.67

�

0.13

Net income available to common stockholders per share diluted

0.18

�

0.07

�

1.63

�

0.13

KILROY REALTY CORPORATION

FUNDS FROM OPERATIONS

(unaudited, in thousands, except per share data)

�



�	Three Months Ended September 30,						�	Nine Months Ended September 30,
�	2014			�	2013		�	2014			�	2013
Net income available to common stockholders	$	15,669		�	$	5,584	�	$	139,429		�	$	11,314
Adjustments:	�			�	�		�	�			�	�
Net income attributable to noncontrolling common units of the Operating Partnership	321			�	131		�	3,011			�	266
Depreciation and amortization of real estate assets	49,996			�	50,184		�	148,878			�	148,982
Gains on dispositions of discontinued operations	(5,587		)	�			�	(110,391		)	�	(423		)
Funds From Operations ^(1)(2)(3)	$	60,399		�	$	55,899	�	$	180,927		�	$	160,139
�	�			�	�		�	�			�	�
Weighted average common shares/units outstanding basic	86,189			�	79,806		�	85,555			�	78,795
Weighted average common shares/units outstanding diluted	88,138			�	81,527		�	87,653			�	80,586
�	�			�	�		�	�			�	�
Funds From Operations per common share/unit basic ⁽³⁾	$	0.70		�	$	0.70	�	$	2.11		�	$	2.03
Funds From Operations per common share/unit diluted ⁽³⁾	$	0.69		�	$	0.69	�	$	2.06		�	$	1.99

�________________________

(1)

We calculate FFO in accordance with the White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets.

We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.

Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide.

However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.

�


(2)	FFO includes amortization of deferred revenue related to tenant-funded tenant improvements of $2.7�million and $2.6�million for the three months ended September�30, 2014 and 2013, respectively, and $7.7�million and $7.6�million for the nine�months ended September�30, 2014 and 2013, respectively.


(3)	Reported amounts are attributable to common stockholders and common unitholders.

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Form 8-K KILROY REALTY CORP For: Oct 28

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