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 Kilroy Realty Corporation Reports First Quarter Financial Results
   Wednesday, April 26, 2017 5:58:00 PM ET

Kilroy Realty Corporation (KRC ) today reported financial results for its first quarter ended March 31, 2017.

First Quarter Highlights

Financial Results

-- Net income available to common stockholders of $0.26 per share

-- Funds from operations ("FFO") available to common stockholders and unitholders of $0.81 per share, including a non-cash charge of $0.04 per share of original issuance costs in connection with the redemption of the Series G preferred stock

-- Excluding the non-cash charge, FFO per share increased 3.6% compared to the prior year period

-- Revenues of $179.3 million

Stabilized Portfolio

-- Stabilized portfolio was 94.1% occupied and 95.7% leased at March 31, 2017

-- Signed approximately 643,000 square feet of new or renewing leases

Development

-- Stabilized the three-building, 365,000 square-foot office development comprising phase two of the company’s Columbia Square mixed-used project in Hollywood, CA. The buildings were 86% leased as of March 31, 2017

-- Signed a lease with Adobe for an additional 104,000 square feet at 100 Hooper in San Francisco, CA. 100% of the office space is now pre-leased to Adobe

Capital Recycling

-- 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

Finance

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

-- In February, fully drew down on an aggregate of $250.0 million private placement debt comprised of $175.0 million of ten-year, 3.35% unsecured senior notes and $75.0 million of twelve-year, 3.45% unsecured senior notes. Both notes were originated in September 2016 and had a six-month delayed draw option

-- Redeemed 4,000,000 shares of our 6.875% Series G preferred stock at the contractual redemption price of $25.00 per share for a total cost of approximately $100.8 million in cash, including accrued dividends. The redemption date was March 30, 2017

Results for the Quarter Ended March 31, 2017

For the first quarter ended March 31, 2017, KRC reported net income available to common stockholders of $26.3 million, or $0.26 per share, compared to $171.0 million, or $1.84 per share, in the first quarter of 2016. Net income in the 2016 first quarter included a $146.0 million gain from operating property dispositions. FFO in the first quarter of 2017 was $81.9 million, or $0.81 per share, including a non-cash charge of $0.04 per share for the write-off of the original issuance costs in connection with redeeming the Series G preferred stock, compared to FFO of $78.2 million, or $0.82 per share, in the year-earlier quarter. Revenues totaled $179.3 million in the first quarter of 2017, compared to $145.4 million in the prior year period.

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

Operating and Leasing Activity

At March 31, 2017, KRC’s stabilized portfolio totaled approximately 14.4 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 first quarter, the company signed new or renewing leases in the office portfolio totaling 643,000 square feet of space. At quarter-end, the office portfolio was 94.1% occupied and 95.7% leased, compared to occupancy of 96.0% at December 31, 2016 and 94.9% at March 31, 2016. KRC’s 200-unit residential tower was 64.9% occupied and 71.3% leased at March 31, 2017.

Real Estate Development Activity

KRC currently has three projects under construction, The Exchange on 16th and 100 Hooper, both located in San Francisco, and phase one of One Paseo, the company’s mixed-used project in the Del Mar submarket of San Diego County. The three projects total approximately 1.2 million square feet of office and PDR space, 237 residential units and 96,000 square feet of retail space, and represent a total estimated investment of approximately $1.1 billion.

Management Comments

"We delivered a solid first quarter at KRC," said John Kilroy, the company’s chairman, president and chief executive officer, "with an especially strong leasing performance in our stabilized portfolio that reflects both the strength of our markets and the appeal of our well-located and well-designed contemporary work environments. We plan to build on this strong start throughout the year, focusing on quality execution across our leasing, development, acquisition and capital recycling programs."

Net Income Available to Common Stockholders / FFO Guidance and Outlook

The company has updated its guidance range of NAREIT-defined FFO per share - diluted for the full year 2017 to $3.38 - $3.54 per share with a midpoint of $3.46 per share. The decrease of approximately $0.04 per share from the midpoint of the company’s prior guidance relates primarily to the non-cash charge of $0.04 per share of original issuance costs in connection with the redemption of the Series G preferred stock.

The company’s guidance estimates for the full year 2017, and the reconciliation of net income available to stockholders per share - diluted and FFO per share and unit - diluted included within this press release, reflect management’s views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this press release. These guidance estimates do not include any estimates of possible future gains or losses or the impact on operating results from possible future operating property dispositions since any potential future disposition transactions will ultimately depend on market conditions and other factors, including but not limited to the company’s capital needs and its ability to defer some or all of the taxable gain on the sales. Moreover, the magnitude of gains or losses on sales of depreciable operating properties, if any, will depend on the sales price and depreciated cost basis of the disposed assets at the time of disposition, information that is not known at the time the company provides guidance, and the timing of any gain recognition will depend on the closing of the dispositions, information that is also not known at the time the company provides guidance and may occur after the relevant guidance period. These guidance estimates also do not include the impact on operating results from potential future acquisitions, possible capital markets activity, possible future impairment charges or any events outside of the company’s control.

Conference Call and Audio Webcast

KRC management will discuss earnings guidance for fiscal year 2017 during the company’s April 27, 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://investors.kilroyrealty.com/phoenix.zhtml?c=79637&p=irol-calendar . 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 (866) 777-2509. International callers should dial (412) 317-5413. In order to bypass speaking to the operator on the day of the call, please pre-register anytime at http://dpregister.com/10104906 . A replay of the conference call will be available via telephone on April 27, 2017 through May 4, 2017 by dialing (877) 344-7529 and entering passcode 10104906. International callers should dial (412) 317-0088 and enter the same passcode. The replay will also be available on our website at http://investors.kilroyrealty.com/phoenix.zhtml?c=79637&p=irol-audioarchives .

About Kilroy Realty Corporation

Kilroy Realty Corporation (KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is one of the West Coast’s premier landlords. The company has over 70 years of experience developing, acquiring and managing office and mixed-use real estate assets. 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 March 31, 2017, the company’s stabilized portfolio totaled approximately 14.4 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. In addition, KRC had two office projects totaling approximately 1.2 million square feet, 237 residential units and 96,000 square feet of retail space under construction.

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 first quarter, the company’s stabilized portfolio was 52% LEED certified and 71% of eligible properties were ENERGY STAR certified. 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 the forward-looking statements, and you should not rely on the 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 the forward-looking statements, including, among others: 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; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; 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; 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, and which may result in write-offs or impairment charges; 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 and additional factors could adversely affect our business and financial performance. 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, 2016 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information, 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 we are required to do so in connection with our ongoing requirements under federal securities laws.

                                                                                  
                                                                                     KILROY REALTY CORPORATION
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   SUMMARY OF QUARTERLY RESULTS
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         (unaudited, in thousands, except per share data)
                                                                                                       
                                                                                                                                           Three Months Ended
                                                                                                                                                March 31,
                                                                                                      -------------------------------------------------------------------------------------
                                                                                                                     2017                                  2016
                                                                                                      -----------------------------------                     ------------------------------------
Revenues                                                                                                  $ 179,308                                                $ 145,446
                                                                                                                                                               
Net income available to common stockholders (1)                                                           $  26,329                                                $ 170,995
                                                                                                                                                               
Weighted average common shares outstanding - basic                                              97,388                                                   92,225
Weighted average common shares outstanding - diluted                                            98,018                                                   92,735
                                                                                                                                                               
Net income available to common stockholders per share - basic (1)                            $    0.27                                                $    1.85
Net income available to common stockholders per share - diluted (1)                          $    0.26                                                $    1.84
                                                                                                                                                               
Funds From Operations (1)(2)(3)                                                                           $  81,934                                                $  78,193
                                                                                                                                                               
Weighted average common shares/units outstanding - basic (4)                                   100,883                                                   95,319
Weighted average common shares/units outstanding - diluted (5)                                 101,513                                                   95,829
                                                                                                                                                               
Funds From Operations per common share/unit - basic (3)                                      $    0.81                                                $    0.82
Funds From Operations per common share/unit - diluted (3)                                    $    0.81                                                $    0.82
                                                                                                                                                               
Common shares outstanding at end of period                                                                   98,275                                                   92,229
Common partnership units outstanding at end of period                                                         2,077                                 2,631  
                                                                                                      ----------------------------------                      -----------------------------------
   Total common shares and units outstanding at end of period                                               100,352                                                   94,860
                                                                                                                                                               
                                                                                                                March 31, 2017                                           March 31, 2016
                                                                                                      -----------------------------------                     ------------------------------------
Stabilized office portfolio occupancy rates: (6)
   Los Angeles and Ventura Counties                                                                            91.5 %                                                   94.3 %
   Orange County                                                                                               95.5 %                                                   97.6 %
   San Diego County                                                                                            92.8 %                                                   88.8 %
   San Francisco Bay Area                                                                                      95.5 %                                                   98.6 %
   Greater Seattle                                                                                             97.2 %                                                   95.3 %
                                                                                                      ----------------------------------                      -----------------------------------
                                                                                                               94.1 %                                                   94.9 %
      Weighted average total
                                                                                                                                                               
Total square feet of stabilized office properties owned at end of
period: (6)
   Los Angeles and Ventura Counties                                                                           4,181                                                    3,613
   Orange County                                                                                                272                                                      272
   San Diego County                                                                                           2,719                                                    2,850
   San Francisco Bay Area                                                                                     5,157                                                    4,871
   Greater Seattle                                                                                            2,066                                 2,066  
                                                                                                      ----------------------------------                      -----------------------------------
      Total                                                                                                  14,395                                                   13,672
________________________
(1)        Net income available to common stockholders for the three months
                              ended March 31, 2017 and 2016 includes gains on sales of depreciable
                              operating properties of $2.3 million and $146.0 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 March 31, 2016
                              include the office properties that were sold subsequent to March 31,
                              2016.
                                                                                                                  
                                                                                   KILROY REALTY CORPORATION
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        (in thousands)
                                                                                                                                                          
                                                                                                         March 31, 2017                                             December 31, 2016
                                                                                             ---------------------------------------                     --------------------------------------
                                                                                                           (unaudited)
ASSETS
-----------------------------------------------------------------------
REAL ESTATE ASSETS:
   Land and improvements                                                                           $ 1,108,971                                                $ 1,108,971
   Buildings and improvements                                                                        4,962,732                                                  4,938,250
   Undeveloped land and construction in progress                                                     1,087,678                               1,013,533  
                                                                                             --------------------------------------                      -------------------------------------
                                                                                                     7,159,381                                                  7,060,754
      Total real estate assets held for investment
   Accumulated depreciation and amortization                                                        (1,186,246 )                                               (1,139,853 )
                                                                                             --------------------------------------                      -------------------------------------
      Total real estate assets held for investment, net                                              5,973,135                                                  5,920,901
                                                                                                                                                          
Real estate assets and other assets held for sale, net                                          --                                                      9,417
Cash and cash equivalents                                                                              478,391                                                    193,418
Restricted cash                                                                                          7,199                                                     56,711
Marketable securities                                                                                   15,163                                                     14,773
Current receivables, net                                                                                13,740                                                     13,460
Deferred rent receivables, net                                                                         225,860                                                    218,977
Deferred leasing costs and acquisition-related intangible assets, net                                  202,499                                                    208,368
Prepaid expenses and other assets, net                                                                  77,678                                  70,608  
                                                                                             --------------------------------------                      -------------------------------------
      TOTAL ASSETS                                                                                 $ 6,993,665                             $ 6,706,633  
                                                                                             ======= ========= ====================                      ====== ========= ====================
                                                                                                                                                          
LIABILITIES AND EQUITY
-----------------------------------------------------------------------
LIABILITIES:
   Secured debt, net                                                                               $   469,670                                                $   472,772
   Unsecured debt, net                                                                               2,096,356                                                  1,847,351
   Accounts payable, accrued expenses and other liabilities                                            215,469                                                    202,391
   Accrued dividends and distributions                                                                  38,983                                                    222,306
   Deferred revenue and acquisition-related intangible liabilities, net                                153,369                                                    150,360
   Rents received in advance and tenant security deposits                                               53,677                                                     52,080
   Liabilities and deferred revenue of real estate assets held for sale                         --                                      56  
                                                                                             --------------------------------------                      -------------------------------------
      Total liabilities                                                                              3,027,524                               2,947,316  
                                                                                             --------------------------------------                      -------------------------------------
                                                                                                                                                          
EQUITY:
   Stockholders’ Equity
      6.875% Series G Cumulative Redeemable Preferred stock                                     --                                                     96,155
      6.375% Series H Cumulative Redeemable Preferred stock                                             96,256                                                     96,256
      Common stock                                                                                         983                                                        932
      Additional paid-in capital                                                                     3,782,291                                                  3,457,649
      Distributions in excess of earnings                                                             (120,207 )                                                 (107,997 )
                                                                                             --------------------------------------                      -------------------------------------
         Total stockholders’ equity                                       3,759,323                                                  3,542,995
   Noncontrolling Interests
      Common units of the Operating Partnership                                                         77,432                                                     85,590
      Noncontrolling interests in consolidated property partnerships                                   129,386                                 130,732  
                                                                                             --------------------------------------                      -------------------------------------
         Total noncontrolling interests                                                                206,818                                 216,322  
                                                                                             --------------------------------------                      -------------------------------------
         Total equity                                                                                3,966,141                               3,759,317  
                                                                                             --------------------------------------                      -------------------------------------
      TOTAL LIABILITIES AND EQUITY                                                                 $ 6,993,665                             $ 6,706,633  
                                                                                             ======= ========= ====================                      ====== ========= ====================
                                                                                                                                                                           
                                                                              
                                                                                    KILROY REALTY CORPORATION
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        (unaudited, in thousands, except per share data)
                                                                                                   
                                                                                                                                        Three Months Ended
                                                                                                                                             March 31,
                                                                                                  ----------------------------------------------------------------------------------------
                                                                                                                  2017                                   2016
                                                                                                  -------------------------------------                     -------------------------------------
REVENUES
   Rental income                                                                                        $ 156,648                                                 $ 133,755
   Tenant reimbursements                                                                                   19,296                                                    11,404
   Other property income                                                                                    3,364                                    287  
                                                                                                  ------------------------------------                      ------------------------------------
      Total revenues                                                                                      179,308                                145,446  
                                                                                                  ------------------------------------                      ------------------------------------
                                                                                                                                                             
EXPENSES
   Property expenses                                                                                       31,241                                                    25,965
   Real estate taxes                                                                                       17,964                                                    11,032
   Provision for bad debts                                                                                  1,298                                            --
   Ground leases                                                                                            1,642                                                       829
   General and administrative expenses                                                                     14,933                                                    13,437
   Acquisition-related expenses                                                                    --                                                        62
   Depreciation and amortization                                                                           60,919                                 50,440  
                                                                                                  ------------------------------------                      ------------------------------------
      Total expenses                                                                                      127,997                                101,765  
                                                                                                  ------------------------------------                      ------------------------------------
                                                                                                                                                             
OTHER (EXPENSES) INCOME
   Interest income and other net investment gains                                                           1,065                                                       271
   Interest expense                                                                                       (17,352 )                                                 (11,829 )
                                                                                                  ------------------------------------                      ------------------------------------
      Total other (expenses) income                                                                       (16,287 )                                                 (11,558 )
                                                                                                                                                             
INCOME FROM OPERATIONS BEFORE GAINS ON SALES OF REAL ESTATE                                                35,024                                                    32,123
   Gains on sale of depreciable operating properties                                                        2,257                                145,990  
                                                                                                  ------------------------------------                      ------------------------------------
NET INCOME                                                                                                 37,281                                178,113  
                                                                                                  ------------------------------------                      ------------------------------------
                                                                                                                                                             
   Net income attributable to noncontrolling common units of the                                             (623 )                                                  (3,610 )
   Operating Partnership
   Net income attributable to noncontrolling interests in consolidated                                     (3,133 )                                                    (195 )
   property partnerships
                                                                                                  --------------  --------------------                      --------------  --------------------
      Total income attributable to noncontrolling interests                                                (3,756 )                                                  (3,805 )
                                                                                                  ------------------------------------                      ------------------------------------
                                                                                                                                                             
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION                                                       33,525                                                   174,308
                                                                                                                                                             
   Preferred dividends                                                                                     (3,351 )                                                  (3,313 )
   Original issuance costs of redeemed preferred stock                                                     (3,845 )                                          --  
                                                                                                  ------------------------------------                      ------------------------------------
      Total preferred dividends                                                                            (7,196 )                                                  (3,313 )
                                                                                                  ------------------------------------                      ------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS                                                             $  26,329                              $ 170,995  
                                                                                                  ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                             
Weighted average common shares outstanding - basic                                            97,388                                                    92,225
Weighted average common shares outstanding - diluted                                          98,018                                                    92,735
                                                                                                                                                             
Net income available to common stockholders per share - basic                              $    0.27                              $    1.85  
                                                                                                  ======= ======= ====================                      ======= ======= ====================
Net income available to common stockholders per share - diluted                            $    0.26                              $    1.84  
                                                                                                  ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                                             
                                                                             
                                                                                  KILROY REALTY CORPORATION
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    FUNDS FROM OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      (unaudited, in thousands, except per share data)
                                                                                                  
                                                                                                                                Three Months Ended March 31,
                                                                                                 -------------------------------------------------------------------------------------------
                                                                                                                2017                                 2016
                                                                                                 ----------------------------------                     ------------------------------------
Net income available to common stockholders                                                          $ 26,329                                                $ 170,995
   Adjustments:
      Net income attributable to noncontrolling common units of the                                       623                                                    3,610
      Operating Partnership
      Net income attributable to noncontrolling interests in consolidated                               3,133                                                      195
      property partnerships
      Depreciation and amortization of real estate assets                                              59,734                                                   49,664
      Gains on sales of depreciable real estate                                                        (2,257 )                                               (145,990 )
      Funds From Operations attributable to noncontrolling interests in                                (5,628 )                                                   (281 )
      consolidated property partnerships
                                                                                                 -----------  --------------------                      -------------  --------------------
Funds From Operations(1)(2)(3)                                                                       $ 81,934                             $  78,193  
                                                                                                 ===== ====== ====================                      ====== ======= ====================
                                                                                                                                                         
Weighted average common shares/units outstanding - basic (4)                             100,883                                                   95,319
Weighted average common shares/units outstanding - diluted (5)                           101,513                                                   95,829
                                                                                                                                                         
Funds From Operations per common share/unit - basic (2)                                 $   0.81                             $    0.82  
                                                                                                 ===== ====== ====================                      ====== ======= ====================
Funds From Operations per common share/unit - diluted (2)                               $   0.81                             $    0.82  
                                                                                                 ===== ====== ====================                      ====== ======= ====================
________________________
(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 $3.7 million and $2.9 million for the three months
                              ended March 31, 2017 and 2016, 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.
                               
                                                                             
                                                                                  KILROY REALTY CORPORATION
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
                                                                                 / FFO GUIDANCE AND OUTLOOK
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      (unaudited, in thousands, except per share data)
                                                                                                  
                                                                                                                               Full Year Range at March 31, 2017
                                                                                                 --------------------------------------------------------------------------------------------
                                                                                                               Low End                              High End
Net income available to common stockholders per share - diluted                                      $    1.25                                                $    1.31
                                                                                                                                                          
Weighted average common shares outstanding - diluted(1)                                                100,000                                                  100,000
                                                                                                                                                          
Net income available to common stockholders                                                          $ 125,320                                                $ 131,090
   Adjustments:
      Net income attributable to noncontrolling common units of the                                      2,950                                                    3,080
      Operating Partnership
      Net income attributable to noncontrolling interests in consolidated                               13,990                                                   14,640
      property partnerships
      Depreciation and amortization of real estate assets                                              228,190                                                  238,710
      Gains on sales of depreciable real estate                                                         (2,260 )                                                 (2,260 )
      Funds From Operations attributable to noncontrolling interests in                                (23,190 )                                                (24,260 )
      consolidated property partnerships
                                                                                                 ------------  --------------------                      -------------  --------------------
Funds From Operations(2)(3)                                                                          $ 345,000                             $ 361,000  
                                                                                                 ===== ======= ====================                      ====== ======= ====================
                                                                                                                                                          
Weighted average common shares/units outstanding - diluted (3)                            102,000                                                  102,000
                                                                                                                                                          
Funds From Operations per common share/unit - diluted (2)(3)                            $    3.38                             $    3.54  
                                                                                                 ===== ======= ====================                      ====== ======= ====================
________________________
(1)         Calculated based on estimated weighted average shares outstanding
                               including participating share-based awards (i.e. nonvested stock and
                               certain time based restricted stock units).
                               
(2)                            See management statement for FFO on previous page.
                               
(3)                            Calculated based on estimated 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 estimated common limited partnership units outstanding.
                               

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170426006839r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170426006839/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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