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 Kilroy Realty Corporation Reports Fourth Quarter Financial Results
   Monday, February 06, 2017 8:26:00 PM ET

Kilroy Realty Corporation (KRC ) today reported financial results for its fourth quarter and full year ended December 31, 2016.

Fourth Quarter Highlights

Financial Results

-- Net income available to common stockholders of $0.29 per share

-- Funds from operations available to common stockholders and unitholders ("FFO") of $0.87 per share, including approximately $0.01 per share of acquisition-related expenses

-- Revenues of $168.6 million

Stabilized Portfolio

-- Stabilized portfolio was 96.0% occupied and 97.0% leased at December 31, 2016

-- Signed approximately 456,000 square feet of new or renewing leases including a 12-year lease with Amazon.com at the company’s Westlake Terry office campus in the South Lake Union submarket of Seattle

Development

-- Commenced construction of a 400,000 square-foot office and production, distribution and repair ("PDR") project at 100 Hooper in the SOMA district of San Francisco, with 66% of the office portion pre-leased to Adobe

-- Commenced construction on the first phase of the company’s 1.1 million square-foot mixed-use One Paseo project in the Del Mar submarket of San Diego. Phase I will include the project’s overall infrastructure and site work, 237 residential units and approximately 96,000 square feet of retail space

Strategic Venture

-- Closed the second of two strategic ventures with Norges Bank Real Estate Management ("NBREM"), in which NBREM contributed $261.5 million for a 44% common equity interest in 303 Second Street in San Francisco, an amount net of NBREM’s proportionate share of existing mortgage debt secured by the property

Acquisitions

-- Acquired a 179,000 square-foot mixed-use project in West Hollywood, encompassing a 10-story office tower, three retail buildings, a four-level subterranean parking structure and three billboards, for $209.2 million. The project was 87% occupied at December, 31, 2016

-- Acquired a 129,000 square-foot office, research and wet lab facility and a 37,000 square-foot office building located in Stanford University’s Stanford Research Park, both subject to a 51-year ground lease, for $130.0 million. The project was 100% occupied at December 31, 2016

Finance

-- Obtained a 10-year, 3.57% fixed-rate mortgage for $170.0 million secured by the company’s Westside Media Center properties in Los Angeles, and used a portion of the proceeds to pay off a $64.4 million mortgage, at par

-- Raised net proceeds of $31.9 million through the issuance of common stock under the company’s at-the-market ("ATM") offering program

-- In December, declared a special cash dividend of $1.90 per common share in addition to the company’s regular quarterly cash dividend of $0.375 per common share which were paid in January 2017

Full Year 2016 Highlights

-- Increased net income available to common stockholders to $280.5 million, FFO per share to $3.46 and revenues to $642.6 million

-- Signed approximately 1.3 million square feet of new or renewing leases in the stabilized portfolio and approximately 99,000 square feet of leases in the lease-up portfolio

-- Stabilized approximately 714,000 square feet of office space that is 96% committed to preeminent technology tenants, including Salesforce and Dropbox

-- Completed construction on the company’s 200-unit residential tower at Columbia Square in Hollywood; the project was approximately 57% leased at year-end

-- Signed a long-term lease for 66% of the office space at 100 Hooper in San Francisco

-- Secured entitlements for approximately 1.8 million square feet of potential new development, including the One Paseo project in Del Mar and 333 Dexter in South Lake Union

-- Acquired approximately $476.0 million of operating properties and land

-- Generated approximately $783.6 million in cash from our capital recycling program including non-strategic property and land dispositions and two ventures with NBREM

-- Raised $451.9 million of new debt and common equity under the ATM program. Private placement notes of $250.0 million, completed in September, were not drawn or outstanding as of December 31, 2016

Recent Developments

-- In January, completed a public offering of 4,427,500 shares of common stock for net proceeds of approximately $308.8 million

-- In January, completed the sale of a 68,000 square-foot office building in San Diego’s Sorrento Mesa submarket for gross proceeds of $12.1 million

Results for the Quarter Ended December 31, 2016

For the fourth quarter ended December 31, 2016, KRC reported net income available to common stockholders of $29.4 million, or $0.29 per share, compared to $25.3 million, or $0.27 per share, in the fourth quarter of 2015. FFO in the fourth quarter of 2016 was $84.3 million, or $0.87 per share, including $0.01 of acquisition-related expenses, compared to $76.7 million, or $0.80 per share, in the year-earlier quarter. Revenues totaled $168.6 million in the fourth quarter of 2016, compared to $147.4 million in the prior year period.

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

Operating and Leasing Activity

At December 31, 2016, KRC’s stabilized portfolio totaled approximately 14.0 million square feet of office space and 200 residential units located in Los Angeles, Orange County, San Diego, the San Francisco Bay Area and greater Seattle. During the fourth quarter, the company signed new or renewing leases in the office portfolio totaling 456,000 square feet of space. At quarter-end, the office portfolio was 96.0% occupied, compared to 96.6% at September 30, 2016 and 94.8% at December 31, 2015, and was 97.0% leased.

Real Estate Development Activity

At December 31, 2016, KRC had two office projects totaling approximately 1.1 million square feet, 237 residential units and 96,000 square feet of retail space under construction. These projects represent a total estimated investment of approximately $980.0 million. The company also had one office project in lease-up encompassing approximately 377,000 square feet and representing a total estimated investment of approximately $230.0 million. The office project was 86% committed at the end of the fourth quarter. In addition, KRC’s 200-unit residential tower was 57% leased at December 31, 2016.

Management Comments

"2016 was another exceptional year for KRC, with strong results across all areas of our business," said John Kilroy, the company’s chairman, president and chief executive officer. "Our stabilized portfolio operated at record occupancy, produced record same-store net operating income and generated solid growth in rental rates. In our development program, we delivered approximately $814.0 million of office and residential projects with the office portion 93% committed and secured approvals for approximately 1.8 million square feet in new entitlements, ensuring a shovel-ready set of projects for 2017. Selective participation in the acquisitions market brought us several outstanding properties with unique opportunities for value enhancement. And finally, we demonstrated our commitment to financial discipline and broad access to capital through diverse fund raising that totaled almost $1.6 billion."

FFO per Share Guidance

The company has provided an initial guidance range of NAREIT-defined FFO per share (diluted) for its fiscal year 2017 of $3.40 - $3.60 per share with a midpoint of $3.50 per share. This compares to FFO of $3.41 per share in 2016 after adjusting for a $0.05 per share gain from a property damage settlement.

These estimates reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and otherwise referenced during the conference call referred to below. These estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, other possible capital markets activity or possible future impairment charges. There can be no assurance that the company’s actual results will not differ materially from these estimates.

Conference Call and Audio Webcast

KRC management will discuss earnings guidance for fiscal year 2017 during the company’s February 7, 2017 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) 713-4214 reservation #67784615. A replay of the conference call will be available via phone through February 14, 2017 at (888) 286-8010, reservation #18441253, or via the Internet at the company’s website.

About Kilroy Realty Corporation

With approximately 70 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 region’s 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 December 31, 2016, the company’s stabilized portfolio totaled approximately 14.0 million square feet of office space and 200 residential units located in the coastal regions of Los Angeles, Orange County, San Diego, the San Francisco Bay Area and greater Seattle. The company is recognized by GRESB as the North American leader in sustainability and was ranked first among 178 North American participants across all asset types. At the end of the fourth quarter, the company’s properties were 51% LEED certified and 69% of eligible properties were ENERGY STAR certified. In addition, KRC had two office projects totaling approximately 1.1 million square feet, 237 residential units and 96,000 square feet of retail space under construction. The company also had one office project in lease-up encompassing approximately 377,000 square feet. More information is available at http://www.kilroyrealty.com .

Non-GAAP Financial Information

The company does not provide a reconciliation for its guidance range of FFO per common share/unit - diluted to net income available to common stockholders per common share - diluted, the most directly comparable forward-looking GAAP financial measure, because it is unable to provide a meaningful or accurate estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amount of various items that would impact net income available to common stockholders per share - diluted, including, for example, gains on sales of depreciable real estate and other items that have not yet occurred and are out of the company’s control. For the same reasons, the company is unable to address the probable significance of the unavailable information and believes that providing a reconciliation for its guidance range of FFO per common share/unit - diluted would imply a degree of precision as to its forward-looking net income available to common stockholders per common share - diluted that would be confusing or misleading to investors.

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: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; investment in our real estate assets, which are illiquid; trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to release property at or above current market rates; costs to comply with government regulations, including environmental remediations; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; failure of interest rate hedging contracts to perform as expected and the effectiveness of such arrangements; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or implementations of, applicable laws, regulations or legislation; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; and our ability to maintain our status as a REIT. 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 for the year ended December 31, 2015 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 OF QUARTERLY RESULTS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          (unaudited, in thousands, except per share data)
                                                                                                                                                                           
                                                                                                                    Three Months Ended                                                                            Year Ended
                                                                                                                       December 31,                                                                              December 31,
                                                                                                      ----------------------------------------                            ------------------------------------------------------------------------------------
                                                                                                          2016           2015                                         2016                                 2015
                                                                                                      -------------                     -------------                     ----------------------------------                     ------------------------------------
Revenues                                                                                                $ 168,645                         $ 147,413                          $ 642,572                                                $ 581,275
                                                                                                                                                                                                                                  
Net income available to common stockholders (1)                                                         $  29,426                         $  25,323                          $ 280,538                                                $ 220,831
                                                                                                                                                                                                                                  
Weighted average common shares outstanding - basic                                            92,706                            92,160                             92,342                                                   89,854
Weighted average common shares outstanding - diluted                                          93,590                            92,791                             93,023                                                   90,396
                                                                                                                                                                                                                                  
Net income available to common stockholders per share - basic (1)                          $    0.29                         $    0.27                          $    3.00                                                $    2.44
Net income available to common stockholders per share - diluted (1)                        $    0.29                         $    0.27                          $    2.97                                                $    2.42
                                                                                                                                                                                                                                  
Funds From Operations (1)(2)(3)                                                                         $  84,292                         $  76,673                          $ 333,742                                                $ 316,612
                                                                                                                                                                                                                                  
Weighted average common shares/units outstanding - basic (4)                                  96,363                            95,095                             95,911                                                   92,816
Weighted average common shares/units outstanding - diluted (5)                                97,247                            95,726                             96,592                                                   93,358
                                                                                                                                                                                                                                  
Funds From Operations per common share/unit - basic (3)                                    $    0.87                         $    0.81                          $    3.48                                                $    3.41
Funds From Operations per common share/unit - diluted (3)                                  $    0.87                         $    0.80                          $    3.46                                                $    3.39
                                                                                                                                                                                                                                  
Common shares outstanding at end of period                                                                                                                                      93,219                                                   92,259
Common partnership units outstanding at end of period                                                                                                                            2,382                                 1,765  
                                                                                                                                                                          ---------------------------------                      -----------------------------------
   Total common shares and units outstanding at end of period                                                                                                                   95,601                                                   94,024
                                                                                                                                                                                                                                  
                                                                                                                                                                                     December 31,                                            December 31,
                                                                                                                                                                                         2016                                                    2015
                                                                                                                                                                          -------------------------------                        ---------------------------------
Stabilized office portfolio occupancy rates: (6)
   Los Angeles and Ventura Counties                                                                                                                                               95.0                    %                                95.1                    %
   Orange County                                                                                                                                                                  97.8                    %                                94.0                    %
   San Diego County                                                                                                                                                               93.2                    %                                89.6                    %
   San Francisco Bay Area                                                                                                                                                         97.6                    %                                98.1                    %
   Greater Seattle                                                                                                                                                                97.2                    %                                95.1                    %
                                                                                                                                                                          ---------------------------------                      -----------------------------------
                                                                                                                                                                                  96.0                    %                                94.8                    %
      Weighted average total
                                                                                                                                                                                                                                  
Total square feet of stabilized office properties owned at end of
period: (6)
   Los Angeles and Ventura Counties                                                                                                                                              3,812                                                    3,614
   Orange County                                                                                                                                                                   272                                                      272
   San Diego County                                                                                                                                                              2,719                                                    2,851
   San Francisco Bay Area                                                                                                                                                        5,157                                                    4,229
   Greater Seattle                                                                                                                                                               2,066                                 2,066  
                                                                                                                                                                          ---------------------------------                      -----------------------------------
      Total                                                                                                                                                                     14,026                                                   13,032
________________________
(1)        Net income available to common stockholders for the year ended
                              December 31, 2016 and December 31, 2015 includes gains on sales of
                              depreciable operating properties of $164.3 million and $110.0
                              million, respectively. Net income available to common stockholders
                              and Funds From Operations for the year ended December 31, 2016 and
                              December 31, 2015 includes a loss on sale of land of $0.3 million
                              and gains on sale of land of $17.1 million, respectively.
 
(2)                           Reconciliation of Net income available to common stockholders to
                              Funds From Operations available to common stockholders and
                              unitholders and management statement on Funds From Operations are
                              included after the Consolidated Statements of Operations.
 
(3)                           Reported amounts are attributable to common stockholders, common
                              unitholders, and restricted stock unitholders.
 
(4)                           Calculated based on weighted average shares outstanding including
                              participating share-based awards (i.e. nonvested stock and certain
                              time based restricted stock units) and assuming the exchange of all
                              common limited partnership units outstanding.
 
(5)                           Calculated based on weighted average shares outstanding including
                              participating and non-participating share-based awards (i.e.
                              nonvested stock and 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.
 
(6)                           Occupancy percentages and total square feet reported are based on
                              the company’s stabilized office portfolio for the periods presented.
                              Occupancy percentages and total square feet shown for December 31,
                              2015 include the office properties that were sold subsequent to
                              December 31, 2015 and held for sale at December 31, 2016.
                                                                                                                  
                                                                                                                                                          
                                                                                    KILROY REALTY CORPORATION
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                                                                                   CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         (in thousands)
                                                                                                                                                          
                                                                                                        December 31, 2016                                           December 31, 2015
                                                                                             ---------------------------------------                     ---------------------------------------
                                                                                                           (unaudited)
ASSETS
-----------------------------------------------------------------------
REAL ESTATE ASSETS:
   Land and improvements                                                                           $ 1,108,971                                                 $   875,794
   Buildings and improvements                                                                        4,938,250                                                   4,091,012
   Undeveloped land and construction in progress                                                     1,013,533                                1,361,340  
                                                                                             --------------------------------------                      --------------------------------------
      Total real estate assets held for investment                                                   7,060,754                                                   6,328,146
   Accumulated depreciation and amortization                                                        (1,139,853 )                                                  (994,241 )
                                                                                             --------------------------------------                      --------------------------------------
      Total real estate assets held for investment, net                                              5,920,901                                                   5,333,905
                                                                                                                                                          
Real estate assets and other assets held for sale, net                                                   9,417                                                     117,666
Cash and cash equivalents                                                                              193,418                                                      56,508
Restricted cash                                                                                         56,711                                                         696
Marketable securities                                                                                   14,773                                                      12,882
Current receivables, net                                                                                13,460                                                      11,153
Deferred rent receivables, net                                                                         218,977                                                     189,704
Deferred leasing costs and acquisition-related intangible assets, net                                  208,368                                                     176,683
Prepaid expenses and other assets, net (1)                                                              70,608                                   27,233  
                                                                                             --------------------------------------                      --------------------------------------
      TOTAL ASSETS                                                                                 $ 6,706,633                              $ 5,926,430  
                                                                                             ======= ========= ====================                      ======= ========= ====================
                                                                                                                                                          
LIABILITIES AND EQUITY
-----------------------------------------------------------------------
LIABILITIES:
   Secured debt, net (1)                                                                           $   472,772                                                 $   380,835
   Unsecured debt, net (1)                                                                           1,847,351                                                   1,844,634
   Unsecured line of credit                                                                     --                                              --
   Accounts payable, accrued expenses and other liabilities                                            202,391                                                     246,323
   Accrued dividends and distributions                                                                 222,306                                                      34,992
   Deferred revenue and acquisition-related intangible liabilities, net                                150,360                                                     128,156
   Rents received in advance and tenant security deposits                                               52,080                                                      49,361
   Liabilities and deferred revenue of real estate assets held for sale                                     56                                    7,543  
                                                                                             --------------------------------------                      --------------------------------------
                                                                                                     2,947,316                                2,691,844  
      Total liabilities
                                                                                             ----------------  --------------------                      ----------------  --------------------
                                                                                                                                                          
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                                                                                         932                                                         923
      Additional paid-in capital                                                                     3,457,649                                                   3,047,894
      Distributions in excess of earnings                                                             (107,997 )                                                   (70,262 )
                                                                                             --------------------------------------                      --------------------------------------
         Total stockholders’ equity                                       3,542,995                                                   3,170,966
   Noncontrolling Interests
      Common units of the Operating Partnership                                                         85,590                                                      57,100
      Noncontrolling interests in consolidated property partnerships                                   130,732                                    6,520  
                                                                                             --------------------------------------                      --------------------------------------
         Total noncontrolling interests                                                                216,322                                   63,620  
                                                                                             --------------------------------------                      --------------------------------------
         Total equity                                                                                3,759,317                                3,234,586  
                                                                                             --------------------------------------                      --------------------------------------
      TOTAL LIABILITIES AND EQUITY                                                                 $ 6,706,633                              $ 5,926,430  
                                                                                             ======= ========= ====================                      ======= ========= ====================
________________________
(1)        Effective January 1, 2016, the company adopted Financial Accounting
                              Standards Board Accounting Standards Update No. 2015-03 and 2015-15,
                              which changed the presentation of deferred financing costs on the
                              balance sheet. As a result, for all periods presented, deferred
                              financing costs, with the exception of deferred financing costs
                              related to the unsecured line of credit, have been reclassified as a
                              reduction to the related secured debt, net and unsecured debt, net
                              line items. Deferred financing costs related to the unsecured line
                              of credit are included in prepaid expenses and other assets, net.
                               
                               
                                                                                                                                              KILROY REALTY CORPORATION
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  (unaudited, in thousands, except per share data)
                                                                                                                                                                               
                                                                                                                                                                                                                       
                                                                                                                                        Three Months Ended                                                                                                      Year Ended
                                                                                                                                           December 31,                                                                                                        December 31,
                                                                                                  ----------------------------------------------------------------------------------------                            ---------------------------------------------------------------------------------------
                                                                                                                  2016                                   2015                                                      2016                                   2015
                                                                                                  -------------------------------------                     -------------------------------------                     -------------------------------------                     ------------------------------------
REVENUES
   Rental income                                                                                        $ 150,466                                                 $ 133,463                                                 $ 574,413                                                $ 525,355
   Tenant reimbursements                                                                                   17,131                                                    13,494                                                    61,079                                                   53,774
   Other property income                                                                                    1,048                                    456                                  7,080                                 2,146  
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
                                                                                                          168,645                                147,413                                642,572                               581,275  
      Total revenues
                                                                                                  --------------  --------------------                      --------------  --------------------                      --------------  --------------------                      -------------  --------------------
                                                                                                                                                                                                                                                                                 
EXPENSES
   Property expenses                                                                                       28,696                                                    27,114                                                   113,932                                                  105,378
   Real estate taxes                                                                                       15,828                                                    12,991                                                    55,206                                                   50,223
   Provision for bad debts                                                                         --                                                       256                                            --                                                      545
   Ground leases                                                                                              933                                                       645                                                     3,439                                                    3,096
   General and administrative expenses                                                                     16,080                                                    12,065                                                    57,029                                                   48,265
   Acquisition-related expenses                                                                               938                                                       100                                                     1,902                                                      497
   Depreciation and amortization                                                                           56,782                                 51,727                                217,234                               204,294  
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
      Total expenses                                                                                      119,257                                104,898                                448,742                               412,298  
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
                                                                                                                                                                                                                                                                                 
OTHER (EXPENSES) INCOME
   Interest income and other net investment gains                                                             644                                                        66                                                     1,764                                                      243
   Interest expense                                                                                       (14,614 )                                                 (13,121 )                                                 (55,803 )                                                (57,682 )
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
      Total other (expenses) income                                                                       (13,970 )                                                 (13,055 )                                                 (54,039 )                                                (57,439 )
                                                                                                                                                                                                                                                                                 
INCOME FROM OPERATIONS BEFORE GAINS (LOSSES) ON SALES OF REAL ESTATE                                       35,418                                                    29,460                                                   139,791                                                  111,538
   Net (loss) gain on sales of land                                                                --                                                      (152 )                                                    (295 )                                                 17,116
   Gains on sale of depreciable operating properties                                               --                         --                                164,302                               109,950  
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
NET INCOME                                                                                                 35,418                                 29,308                                303,798                               238,604  
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
                                                                                                                                                                                                                                                                                 
   Net income attributable to noncontrolling common units of the                                             (743 )                                                    (489 )                                                  (6,635 )                                                 (4,339 )
   Operating Partnership
   Net income attributable to noncontrolling interests in consolidated                                     (1,937 )                                                    (184 )                                                  (3,375 )                                                   (184 )
   property partnerships
                                                                                                  --------------  --------------------                      --------------  --------------------                      --------------  --------------------                      -------------  --------------------
      Total income attributable to noncontrolling interests                                                (2,680 )                                                    (673 )                                                 (10,010 )                                                 (4,523 )
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
                                                                                                                                                                                                                                                                                 
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION                                                       32,738                                                    28,635                                                   293,788                                                  234,081
                                                                                                                                                                                                                                                                                 
PREFERRED DIVIDENDS                                                                                        (3,312 )                                                  (3,312 )                                                 (13,250 )                                                (13,250 )
                                                                                                  ------------------------------------                      ------------------------------------                      ------------------------------------                      -----------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                                                             $  29,426                              $  25,323                              $ 280,538                             $ 220,831  
                                                                                                  ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                                 
Weighted average common shares outstanding - basic                                            92,706                                                    92,160                                                    92,342                                                   89,854
Weighted average common shares outstanding - diluted                                          93,590                                                    92,791                                                    93,023                                                   90,396
                                                                                                                                                                                                                                                                                 
Net income available to common stockholders per share - basic                              $    0.29                              $    0.27                              $    3.00                             $    2.44  
                                                                                                  ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ====== ======= ====================
Net income available to common stockholders per share - diluted                            $    0.29                              $    0.27                              $    2.97                             $    2.42  
                                                                                                  ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                
                                                                                                                                            KILROY REALTY CORPORATION
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              FUNDS FROM OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                (unaudited, in thousands, except per share data)
                                                                                                                                                                              
                                                                                                                                 Three Months Ended December 31,                                                                                       Year Ended December 31,
                                                                                                 -----------------------------------------------------------------------------------------------                     -------------------------------------------------------------------------------------------
                                                                                                                 2016                                   2015                                                     2016                                 2015
                                                                                                 -------------------------------------                     -------------------------------------                     ----------------------------------                     ------------------------------------
Net income available to common stockholders                                                            $  29,426                                                 $  25,323                                              $ 280,538                                                $ 220,831
   Adjustments:
      Net income attributable to noncontrolling common units of the                                          743                                                       489                                                  6,635                                                    4,339
      Operating Partnership
      Net income attributable to noncontrolling interests in consolidated                                  1,937                                                       184                                                  3,375                                                      184
      property partnerships
      Depreciation and amortization of real estate assets                                                 55,569                                                    50,949                                                213,156                                                  201,480
      Gains on sales of depreciable real estate                                                   --                                            --                                               (164,302 )                                               (109,950 )
      Funds From Operations attributable to noncontrolling interests in                                   (3,383 )                                                    (272 )                                               (5,660 )                                                   (272 )
      consolidated property partnerships
                                                                                                 --------------  --------------------                      --------------  --------------------                      -----------  --------------------                      -------------  --------------------
Funds From Operations(1)(2)(3)                                                                         $  84,292                              $  76,673                           $ 333,742                             $ 316,612  
                                                                                                 ======= ======= ====================                      ======= ======= ====================                      ==== ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                             
Weighted average common shares/units outstanding - basic (4)                                 96,363                                                    95,095                                                 95,911                                                   92,816
Weighted average common shares/units outstanding - diluted (5)                               97,247                                                    95,726                                                 96,592                                                   93,358
                                                                                                                                                                                                                                                                             
Funds From Operations per common share/unit - basic (2)                                   $    0.87                              $    0.81                           $    3.48                             $    3.41  
                                                                                                 ======= ======= ====================                      ======= ======= ====================                      ==== ======= ====================                      ====== ======= ====================
Funds From Operations per common share/unit - diluted (2)                                 $    0.87                              $    0.80                           $    3.46                             $    3.39  
                                                                                                 ======= ======= ====================                      ======= ======= ====================                      ==== ======= ====================                      ====== ======= ====================
________________________
(1)        We calculate Funds From Operations available to common stockholders
                              and common unitholders ("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 also add back net income attributable to noncontrolling common
                              units of the Operating Partnership because we report FFO
                              attributable to common stockholders and common unitholders.
                               
                              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)                           Reported amounts are attributable to common stockholders, common
                              unitholders, and restricted stock unitholders.
                               
(3)                           FFO available to common stockholders and unitholders includes
                              amortization of deferred revenue related to tenant-funded tenant
                              improvements of $3.5 million and $3.4 million for the three months
                              ended December 31, 2016 and 2015, respectively, and $13.2 million
                              and $13.3 million for the twelve months ended December 31, 2016 and
                              2015, respectively.
                               
(4)                           Calculated based on weighted average shares outstanding including
                              participating share-based awards (i.e. nonvested stock and certain
                              time based restricted stock units) and assuming the exchange of all
                              common limited partnership units outstanding.
                               
(5)                           Calculated based on weighted average shares outstanding including
                              participating and non-participating share-based awards (i.e.
                              nonvested stock and 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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170206006244r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170206006244/en/

SOURCE: Kilroy Realty Corporation

Kilroy Realty Corporation 
Tyler H. Rose 
Executive Vice President and Chief Financial Officer 
(310) 481-8484 
or 
Michelle Ngo 
Senior Vice President and Treasurer 
(310) 481-8581


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