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MarketScreener Homepage  >  Equities  >  Nyse  >  Kilroy Realty Corporation    KRC

KILROY REALTY CORPORATION

(KRC)
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Kilroy Realty : Q2 2020 Supplemental Financial Report

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08/01/2020 | 12:36pm EDT

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Table of Contents

Page

Corporate Data and Financial Highlights

Company Background

1

Executive Summary

2

Financial Highlights

3

Common Stock Data

4

Consolidated Balance Sheets

5

Consolidated Statements of Operations

6

Funds From Operations and Funds Available for Distribution

7-8

Net Operating Income

9

Portfolio Data

Same Store Analysis

10

Stabilized Portfolio Occupancy Overview by Region

11-15

Information on Leases Commenced & Leases Executed

16

Stabilized Portfolio Capital Expenditures

17

Stabilized Portfolio Lease Expirations

18-20

Top Fifteen Tenants

21

Consolidated Ventures (Noncontrolling Property Partnerships)

22

Development

Stabilized Office Development Projects & Completed Residential Development Projects

23

In-Process Development

24

Future Development Pipeline

25

Debt and Capitalization Data

Capital Structure

26

Debt Analysis

27-28

Non-GAAP Supplemental Measures

29-31

Definitions & Reconciliations

32-35

This Supplemental Financial Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among other things, information concerning lease expirations, debt maturities, potential investments, development and redevelopment activity, projected construction costs, dispositions and other forward-looking financial data. In some instances, forward-looking statements can be identified by the use of forward-looking terminology such as "expect," "future," "will," "would," "pursue," or "project" and variations of such words and similar expressions that do not relate to historical matters. Forward-looking statements are based on Kilroy Realty Corporation's current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of Kilroy Realty Corporation's control. Accordingly, actual performance, results and events may vary materially from those indicated or implied 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 enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; 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; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. 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 Kilroy Realty Corporation's business and financial performance, see the factors included under the caption "Risk Factors" in Kilroy Realty Corporation's quarterly report on Form 10-Q for the period ending June 30, 2020 to be filed on July 30, 2020 and in its annual report on Form 10-K for the year ended December 31, 2019, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Company Background

Kilroy Realty Corporation (NYSE: 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 seven decades of experience developing, acquiring and managing office and mixed-use real estate assets. At June 30, 2020, the Company's stabilized portfolio totaled approximately 14.3 million square feet of primarily office and life science space that was 92.3% occupied and 96.0% leased located in the coastal regions of Los Angeles, San Diego, the San Francisco Bay Area and Greater Seattle and 200 residential units located in the Hollywood submarket of Los Angeles.

Board of Directors

Executive Management Team

Investor Relations

John Kilroy

Chairman

John Kilroy

President and CEO

12200 W. Olympic Blvd., Suite 200

Edward F. Brennan, PhD

Lead Independent

Robert Paratte

Executive VP, Leasing and Business Development

Los Angeles, CA 90064

Jolie Hunt

Tyler H. Rose

Executive VP and CFO

(310) 481-8400

Web: www.kilroyrealty.com

Scott S. Ingraham

Heidi R. Roth

Executive VP and Chief Administrative Officer

E-mail: investorrelations@kilroyrealty.com

Gary R. Stevenson

Justin W. Smart

Executive VP, Development and Construction Services

Peter B. Stoneberg

Equity Research Coverage

BofA Securities

Jefferies LLC

James Feldman

(646) 855-5808

Peter Abramowitz

(212) 336-7241

BMO Capital Markets Corp.

J.P. Morgan

John P. Kim

(212) 885-4115

Anthony Paolone

(212) 622-6682

BTIG

KeyBanc Capital Markets

Thomas Catherwood

(212) 738-6140

Craig Mailman

(917) 368-2316

Citigroup Investment Research

Mizuho Securities USA LLC

Michael Bilerman

(212) 816-1383

Omotayo Okusanya

(646) 949-9672

Deutsche Bank Securities, Inc.

RBC Capital Markets

Derek Johnston

(210) 250-5683

Mike Carroll

(440) 715-2649

Evercore ISI

Robert W. Baird & Co.

Steve Sakwa

(212) 446-9462

David B. Rodgers

(216) 737-7341

Goldman Sachs & Co. LLC

Scotiabank

Richard Skidmore

(801) 741-5459

Nicholas Yulico

(212) 225-6904

Green Street Advisors

Wells Fargo

Daniel Ismail

(949) 640-8780

Blaine Heck

(443) 263-6529

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

1

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Executive Summary

Quarterly Financial Highlights

  • Net income available to common stockholders per share of $0.17, including $0.17 per share of severance costs and $0.05 per share of reversals of revenue related to the creditworthiness of certain tenants primarily as a result of the COVID-19 pandemic
  • FFO per share of $0.78, including $0.17 per share of severance costs and $0.05 per share of reversals of revenue related to the creditworthiness of certain tenants as a result of the COVID-19 pandemic
  • Revenues of $219.4 million, net of $5.9 million of reversals of revenue as noted above
  • Same Store GAAP NOI decreased 1.3% compared to the prior year
  • Same Store Cash NOI increased 10.9% compared to the prior year

Quarterly Operating Highlights

  • Stabilized portfolio was 92.3% occupied and 96.0% leased at quarter-end
  • 345,231 square feet of leases commenced in the stabilized portfolio
  • 286,477 square feet of leases executed in the stabilized portfolio
    • GAAP rents increased approximately 30.0% from prior levels
    • Cash rents increased approximately 10.7% from prior levels
  • Collected 95% of contractual second quarter rent billings across all property types, including 98% from office and 100% from all of our top 15 tenants. Excluding rent relief provided to certain tenants, collected 97% across all property types, including 98% from office
  • The collection rate for July across all property types was 95%, including 97% from office and 100% from all of our top 15 tenants, as of the date of this report. Excluding rent relief provided to certain tenants, collected 96% across all property types, including 97% from office

Capital Markets Highlights

  • In April, completed a private placement of $350.0 million aggregate principal amount of ten-year, 4.27% unsecured senior notes due 2031
  • As of the date of this report, approximately $1.3 billion of total liquidity comprised of $560.0 million of unrestricted cash on hand and full availability under the $750.0 million unsecured revolving credit facility

Strategic Highlights

  • In June, commenced GAAP revenue recognition on the first phase of 333 Dexter, which represents approximately 49% of the 635,000 square foot development project located in Seattle's South Lake Union submarket. The project is 100% leased to a Fortune 50 publicly-traded company
  • In June, commenced GAAP revenue recognition on 22,000 square feet at the office component of our 285,000 square foot One Paseo mixed-use project in the Del Mar submarket of San Diego. In July, commenced GAAP revenue recognition on an additional 36,000 square feet, bringing the total GAAP revenue recognition commenced on this project to approximately 20% as of the date of this report
  • In July, completed construction on 146 residential units, the final phase of the residential
    development at our One Paseo mixed-use project in the Del Mar submarket of San Diego. The residential development is 38% leased and in lease-up

________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 32-33 "Definitions Included in Supplemental."

2

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Financial Highlights

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

Three Months Ended

6/30/2020 (1)

3/31/2020 (1)

12/31/2019 (1)

9/30/2019

6/30/2019 (1)

INCOME ITEMS:

Revenues

$

219,423

$

221,328

$

220,235

$

215,525

$

200,492

Lease Termination Fees, net

867

60

-

-

1,824

Net Operating Income (2)

157,410

157,826

154,679

152,170

141,916

Capitalized Interest and Debt Costs

20,516

21,418

20,339

20,585

20,880

Net Income Available to Common Stockholders

19,618

39,817

72,500

43,846

42,194

EBITDA, as adjusted (2) (3)

120,321

134,232

131,734

129,163

120,025

Funds From Operations (3) (4)

93,089

110,173

109,518

109,243

99,905

Net Income Available to Common Stockholders per common share - diluted (5)

$

0.17

$

0.37

$

0.67

$

0.41

$

0.41

Funds From Operations per common share - diluted (3) (4)

$

0.78

$

1.00

$

1.00

$

1.01

$

0.95

LIQUIDITY ITEMS:

Funds Available for Distribution (4)

$

68,459

$

84,899

$

65,443

$

65,078

$

52,369

Dividends per common share (5)

$

0.485

$

0.485

$

0.485

$

0.485

$

0.485

RATIOS:

Net Operating Income Margins

71.7%

71.3%

70.2%

70.6%

70.8%

Fixed Charge Coverage Ratio

3.5x

3.9x

4.0x

4.2x

3.9x

FFO Payout Ratio

61.0%

51.5%

47.8%

48.0%

50.0%

FAD Payout Ratio

83.0%

66.9%

80.1%

80.5%

95.4%

ASSETS:

Real Estate Held for Investment before Depreciation

$

9,945,221

$

9,822,116

$

9,628,773

$

8,977,843

$

8,824,558

Total Assets

9,658,665

9,735,147

8,900,094

8,623,815

8,094,721

CAPITALIZATION: (6)

Total Debt

$

3,681,958

$

3,713,236

$

3,579,502

$

3,334,967

$

3,210,427

Total Common Equity and Noncontrolling Interests in the Operating Partnership

6,874,423

7,458,583

9,064,520

8,414,862

7,602,085

Total Market Capitalization

10,556,381

11,171,819

12,644,022

11,749,829

10,812,512

Total Debt / Total Market Capitalization

34.9%

33.2%

28.3%

28.4%

29.7%

______________________________________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 32-33 "Definitions Included in Supplemental."

  1. Net Income Available to Common Stockholders includes $19.7 million of severance costs for the three months ended June 30, 2020, reversals of revenue of $5.9 million and $6.5 million related to the creditworthiness of certain tenants primarily as a result of the COVID-19 pandemic for the three months ended June 30, 2020 and March 31, 2020, respectively, and $29.6 million and $7.2 million of gains on sale of depreciable operating properties for the three months ended December 31, 2019 and June 30, 2019, respectively.
  2. Please refer to pages 34-35 for reconciliations of GAAP Net Income Available to Common Stockholders to Net Operating Income and EBITDA, as adjusted. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.
  3. EBITDA, as adjusted, and Funds From Operations include $19.7 million of severance costs for the three months ended June 30, 2020 and reversals of revenue of $5.9 million and $6.5 million related to the creditworthiness of tenants primarily as a result of the COVID-19 pandemic for the three months ended June 30, 2020 and March 31, 2020, respectively.
  4. Please refer to page 7 for reconciliations of GAAP Net Income Available to Common Stockholders to Funds From Operations available to common stockholders and unitholders and Funds Available for Distribution to common stockholders and unitholders and page 8 for a reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution to common stockholders and unitholders.
  5. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unit holders.
  6. Please refer to page 26 for additional information regarding our capital structure.

3

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Common Stock Data (NYSE: KRC)

Three Months Ended

6/30/2020

3/31/2020

12/31/2019

9/30/2019

6/30/2019

High Price

$

68.88

$

88.28

$

84.50

$

80.06

$

78.36

Low Price

$

51.49

$

49.01

$

76.35

$

74.25

$

72.87

Closing Price

$

58.70

$

63.70

$

83.90

$

77.89

$

73.81

Dividends per share - annualized

$

1.94

$

1.94

$

1.94

$

1.94

$

1.94

Closing common shares (in 000's) (1)

115,177

115,068

106,016

106,012

100,972

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

1,935

2,021

2,023

2,023

2,023

117,112

117,089

108,039

108,035

102,995

________________________

  1. As of the end of the period.

4

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Consolidated Balance Sheets

(unaudited, $ in thousands)

6/30/2020

3/31/2020

12/31/2019

9/30/2019

6/30/2019

ASSETS:

Land and improvements

$

1,546,209

$

1,506,357

$

1,466,166

$

1,315,448

$

1,284,582

Buildings and improvements

6,289,816

5,997,523

5,866,477

5,770,226

5,712,448

Undeveloped land and construction in progress

2,109,196

2,318,236

2,296,130

1,892,169

1,827,528

Total real estate assets held for investment

9,945,221

9,822,116

9,628,773

8,977,843

8,824,558

Accumulated depreciation and amortization

(1,684,837)

(1,622,369)

(1,561,361)

(1,505,785)

(1,480,766)

Total real estate assets held for investment, net

8,260,384

8,199,747

8,067,412

7,472,058

7,343,792

Real estate assets and other assets held for sale, net

-

-

-

77,751

-

Cash and cash equivalents

605,012

762,134

60,044

297,620

52,415

Restricted cash

16,300

16,300

16,300

6,300

6,300

Marketable securities

23,175

19,984

27,098

26,188

25,203

Current receivables, net

20,925

16,534

26,489

34,116

27,563

Deferred rent receivables, net

358,914

352,352

337,937

314,812

297,358

Deferred leasing costs and acquisition-related intangible assets, net

209,637

204,392

212,805

202,063

203,451

Right of use ground lease assets

95,940

96,145

96,348

83,200

82,647

Prepaid expenses and other assets, net

68,378

67,559

55,661

109,707

55,992

TOTALASSETS

$

9,658,665

$

9,735,147

$

8,900,094

$

8,623,815

$

8,094,721

LIABILITIES AND EQUITY:

Liabilities:

Secured debt, net

$

256,113

$

257,359

$

258,593

$

259,027

$

259,455

Unsecured debt, net

3,399,105

3,050,103

3,049,185

3,048,209

2,553,651

Unsecured line of credit

-

380,000

245,000

-

375,000

Accounts payable, accrued expenses and other liabilities

401,378

417,547

418,848

439,081

385,567

Ground lease liabilities

98,093

98,247

98,400

87,617

87,082

Accrued dividends and distributions

57,600

57,620

53,219

53,205

50,800

Deferred revenue and acquisition-related intangible liabilities, net

129,264

130,843

139,488

134,828

136,266

Rents received in advance and tenant security deposits

63,523

65,913

66,503

57,428

59,997

Liabilities and deferred revenue of real estate assets held for sale

-

-

-

4,911

-

Total liabilities

4,405,076

4,457,632

4,329,236

4,084,306

3,907,818

Equity:

Stockholders' Equity

Common stock

1,152

1,151

1,060

1,060

1,010

Additional paid-in capital

5,084,362

5,067,181

4,350,917

4,342,296

3,984,867

Distributions in excess of earnings

(113,223)

(76,182)

(58,467)

(78,707)

(70,345)

Total stockholders' equity

4,972,291

4,992,150

4,293,510

4,264,649

3,915,532

Noncontrolling Interests

Common units of the Operating Partnership

83,502

87,655

81,917

81,393

78,463

Noncontrolling interests in consolidated property partnerships

197,796

197,710

195,431

193,467

192,908

Total noncontrolling interests

281,298

285,365

277,348

274,860

271,371

Total equity

5,253,589

5,277,515

4,570,858

4,539,509

4,186,903

TOTAL LIABILITIES AND EQUITY

$

9,658,665

$

9,735,147

$

8,900,094

$

8,623,815

$

8,094,721

5

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Consolidated Statements of Operations

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

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

REVENUES

Rental income (1)

$

218,356

$

197,629

$

436,989

$

397,011

Other property income

1,067

2,863

3,762

4,683

Total revenues

219,423

200,492

440,751

401,694

EXPENSES

Property expenses

37,829

38,536

76,812

76,685

Real estate taxes

21,854

17,926

44,056

36,565

Ground leases

2,330

2,114

4,647

4,086

General and administrative expenses (2)

38,597

19,857

57,607

43,198

Leasing costs

1,330

2,650

2,786

4,407

Depreciation and amortization

80,085

68,252

154,455

134,387

Total expenses

182,025

149,335

340,363

299,328

OTHER (EXPENSES) INCOME

Interest income and other net investment (loss) gain

2,838

616

(290)

2,444

Interest expense

(15,884)

(11,727)

(30,328)

(22,970)

Gains on sales of depreciable operating properties

-

7,169

-

7,169

Total other (expenses) income

(13,046)

(3,942)

(30,618)

(13,357)

NET INCOME

24,352

47,215

69,770

89,009

Net income attributable to noncontrolling common units of the Operating Partnership

(367)

(871)

(1,072)

(1,571)

Net income attributable to noncontrolling interests in consolidated property partnerships

(4,367)

(4,150)

(9,263)

(8,341)

Total income attributable to noncontrolling interests

(4,734)

(5,021)

(10,335)

(9,912)

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

19,618

$

42,194

$

59,435

$

79,097

Weighted average common shares outstanding - basic

115,085

100,972

110,980

100,937

Weighted average common shares outstanding - diluted

115,540

101,810

111,465

101,619

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE

Net income available to common stockholders per share - basic

$

0.17

$

0.41

$

0.53

$

0.77

Net income available to common stockholders per share - diluted

$

0.17

$

0.41

$

0.52

$

0.77

________________________

  1. Rental income is presented net of reversals of revenue related to the creditworthiness of tenants. For the three and six months ended June 30, 2020, rental income include reversals of revenue of $5.9 million and $12.4 million, respectively, for certain tenants primarily as a result of the COVID-19 pandemic.
  2. Includes $19.7 million and $20.3 million of severance costs for the three and six months ended June 30, 2020, respectively.

6

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution

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

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

FUNDS FROM OPERATIONS: (1)

Net income available to common stockholders

$

19,618

$

42,194

$

59,435

$

79,097

Adjustments:

Net income attributable to noncontrolling common units of the Operating Partnership

367

871

1,072

1,571

Net income attributable to noncontrolling interests in consolidated property partnerships

4,367

4,150

9,263

8,341

Depreciation and amortization of real estate assets

75,981

67,011

148,419

131,982

Gains on sales of depreciable real estate

-

(7,169)

-

(7,169)

Funds From Operations attributable to noncontrolling interests in consolidated property partnerships

(7,244)

(7,152)

(14,927)

(14,105)

Funds From Operations (1)(2)

$

93,089

$

99,905

$

203,262

$

199,717

Weighted average common shares/units outstanding - basic (3)

118,218

104,115

114,125

104,088

Weighted average common shares/units outstanding - diluted (4)

118,673

104,952

114,609

104,770

FFO per common share/unit - basic (1)

$

0.79

$

0.96

$

1.78

$

1.92

FFO per common share/unit - diluted (1)

$

0.78

$

0.95

$

1.77

$

1.91

FUNDS AVAILABLE FOR DISTRIBUTION: (1)

Funds From Operations (1)(2)

$

93,089

$

99,905

$

203,262

$

199,717

Adjustments:

Recurring tenant improvements, leasing commissions and capital expenditures

(22,366)

(33,433)

(39,429)

(55,016)

Amortization of deferred revenue related to tenant-funded tenant improvements (2)(5)

(8,019)

(4,364)

(13,021)

(8,181)

Net effect of straight-line rents

(6,562)

(16,947)

(20,977)

(33,458)

Amortization of net below market rents (6)

(1,914)

(2,321)

(4,500)

(4,415)

Amortization of deferred financing costs and net debt discount/premium

571

582

1,076

717

Non-cash executive compensation expense (7)

11,895

7,244

19,054

14,828

Lease related adjustments, leasing costs and other (8)

1,564

(1,878)

5,025

(1,843)

Adjustments attributable to noncontrolling interests in consolidated property partnerships

201

3,581

2,868

5,954

Funds Available for Distribution (1)

$

68,459

$

52,369

$

153,358

$

118,303

________________________

  1. See page 31 for Management Statements on Funds From Operations and Funds Available for Distribution. Reported per common share/unit amounts are attributable to common stockholders, common unitholders and restricted stock unit holders.
  2. FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $8.0 million and $4.4 million for the three months ended June 30, 2020 and 2019, respectively, and $13.0 million and $8.2 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are adjusted out of FFO in our calculation of FAD.
  3. Calculated based on weighted average shares outstanding including participating share-based awards and assuming the exchange of all common limited partnership units outstanding.
  4. Calculated based on weighted average shares outstanding including participating and non-participatingshare-based awards, dilutive impact of stock options and contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.
  5. Represents revenue recognized during the period as a result of the amortization of deferred revenue recorded for tenant-funded tenant improvements.
  6. Represents the non-cash adjustment related to the acquisition of buildings with above and/or below market rents.
  7. Includes non-cash amortization of share-based compensation and accrued potential future executive retirement benefits. Includes $4.1 million and $4.3 million of accelerated non-cash amortization of share-based compensation related to severance costs for the three and six months ended June 30, 2020, respectively.
  8. Includes other cash and non-cash adjustments attributable to lease-related matters including GAAP revenue recognition timing differences, leasing costs and other.

7

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

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

(unaudited, $ in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

GAAP Net Cash Provided by Operating Activities

$

101,082

$

65,870

$

224,022

$

165,660

Adjustments:

Recurring tenant improvements, leasing commissions and capital expenditures

(22,366)

(33,433)

(39,429)

(55,016)

Depreciation of non-real estate furniture, fixtures and equipment

(4,104)

(1,241)

(6,036)

(2,405)

Net changes in operating assets and liabilities (1)

2,431

24,965

(11,151)

19,003

Noncontrolling interests in consolidated property partnerships' share of FFO and FAD

(7,043)

(3,571)

(12,059)

(8,151)

Cash adjustments related to investing and financing activities

(1,541)

(221)

(1,989)

(788)

Funds Available for Distribution(2)

$

68,459

$

52,369

$

153,358

$

118,303

_______________________

  1. Primarily includes changes in the following assets and liabilities: marketable securities; current receivables; prepaid expenses and other assets; accounts payable, accrued expenses and other liabilities; and rents received in advance and tenant security deposits.
  2. Please refer to page 31 for a Management Statement on Funds Available for Distribution.

8

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Net Operating Income (1)

(unaudited, $ in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

Operating Revenues:

Rental income (2)(3)

$

188,604

$

173,065

9.0 %

$

375,619

$

344,947

8.9 %

Tenant reimbursements (3)

29,752

24,564

21.1 %

61,370

52,064

17.9 %

Other property income

1,067

2,863

(62.7)%

3,762

4,683

(19.7)%

Total operating revenues

219,423

200,492

9.4 %

440,751

401,694

9.7 %

Operating Expenses:

Property expenses

37,829

38,536

(1.8)%

76,812

76,685

0.2 %

Real estate taxes

21,854

17,926

21.9 %

44,056

36,565

20.5 %

Ground leases

2,330

2,114

10.2 %

4,647

4,086

13.7 %

Total operating expenses

62,013

58,576

5.9 %

125,515

117,336

7.0 %

Net Operating Income

$

157,410

$

141,916

10.9 %

$

315,236

$

284,358

10.9 %

________________________

  1. Please refer to page 29 for Management Statements on Net Operating Income and page 34 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.
  2. Rental income is presented net of reversals in revenue related to the creditworthiness of certain tenants. For the three and six months ended June 30, 2020, rental income includes reversals of revenue of $5.9 million and $12.4 million, respectively, as a result of the COVID-19 pandemic.
  3. Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.

9

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Same Store Analysis (1)

(unaudited, $ in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

Total Same Store Portfolio

Office Portfolio

Number of properties

92

92

92

92

Square Feet

12,935,383

12,935,383

12,935,383

12,935,383

Percent of Stabilized Portfolio

90.3%

95.5%

90.3%

95.5%

Average Occupancy

92.5%

93.9%

93.1%

93.6%

Operating Revenues:

Rental income (2)(3)

$

160,631

$

162,416

(1.1)%

$

323,582

$

325,878

(0.7)%

Tenant reimbursements (2)

21,692

23,295

(6.9)%

45,155

48,275

(6.5)%

Other property income

922

2,291

(59.8)%

3,102

4,002

(22.5)%

Total operating revenues

183,245

188,002

(2.5)%

371,839

378,155

(1.7)%

Operating Expenses:

Property expenses

32,936

36,154

(8.9)%

67,693

72,449

(6.6)%

Real estate taxes

17,214

17,067

0.9 %

34,460

34,177

0.8 %

Ground leases

2,121

2,114

0.3 %

4,230

4,086

3.5 %

Total operating expenses

52,271

55,335

(5.5)%

106,383

110,712

(3.9)%

GAAP Net Operating Income

$

130,974

$

132,667

(1.3)%

$

265,456

$

267,443

(0.7)%

Same Store Analysis (Cash Basis) (4)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

% Change

2020

2019

% Change

Total operating revenues

$

175,792

$

166,703

5.5 %

$

359,017

$

334,425

7.4 %

Total operating expenses

52,288

55,364

(5.6)%

106,417

110,745

(3.9)%

Cash Net Operating Income

$

123,504

$

111,339

10.9 %

$

252,600

$

223,680

12.9 %

________________________

  1. Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2019 and still owned and included in the stabilized portfolio as of June 30, 2020. Same Store includes 100% of consolidated property partnerships as well as the residential tower at Columbia Square.
  2. Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.
  3. Rental income is presented net of reversals of revenue related to the creditworthiness of tenants. For the three and six months ended June 30, 2020, rental income includes reversals of revenue of $3.9 million and $9.8 million, respectively, primarily as a result of the COVID-19 pandemic. For the three months and six months ended June 30, 2019, rental income includes reversals of revenue of $0.2 million and recovery of provision for bad debts of $3.0 million, respectively.
  4. Please refer to page 34 for a reconciliation of GAAP Net Income Available to Common Stockholders to Same Store GAAP Net Operating Income and Same Store Cash Net Operating Income.

10

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region

Portfolio Breakdown

Occupied at

Leased at

STABILIZED OFFICE PORTFOLIO (1)

Buildings

YTD NOI %

SF %

Total SF

6/30/2020

3/31/2020 (2)

6/30/2020

Greater Los Angeles

Culver City

19

1.5%

1.1%

151,908

100.0 %

100.0 %

100.0 %

El Segundo

5

4.8%

7.6%

1,093,050

97.6 %

97.5 %

97.6 %

Hollywood

6

3.3%

5.6%

806,557

87.5 %

98.7 %

88.4 %

Long Beach

7

2.9%

6.7%

954,009

93.6 %

92.7 %

96.0 %

West Hollywood

4

1.5%

1.3%

180,244

90.9 %

90.5 %

94.4 %

West Los Angeles

10

5.6%

5.9%

844,151

82.0 %

86.1 %

83.8 %

Total Greater Los Angeles

51

19.6%

28.2%

4,029,919

91.2%

94.0%

92.4%

San Diego County

Del Mar

15

7.7%

10.1%

1,450,059

86.4 %

89.6 %

94.8 %

I-15 Corridor

5

1.4%

3.8%

540,892

87.4 %

82.5 %

96.4 %

Point Loma

1

0.4%

0.7%

107,456

100.0 %

100.0 %

100.0 %

University Towne Center

1

0.2%

0.3%

47,846

91.4 %

91.4 %

91.4 %

Total San Diego County

22

9.7%

14.9%

2,146,253

87.4%

88.3%

95.4%

San Francisco Bay Area

Menlo Park

7

2.7%

2.6%

378,358

74.8 %

79.2 %

74.8 %

Mountain View

4

4.1%

3.8%

542,235

100.0 %

100.0 %

100.0 %

Palo Alto

2

1.5%

1.2%

165,585

100.0 %

100.0 %

100.0 %

Redwood City

2

3.5%

2.4%

347,269

100.0 %

100.0 %

100.0 %

San Francisco

11

41.0%

28.7%

4,107,473

92.6 %

93.0 %

98.3 %

South San Francisco

3

1.3%

1.0%

145,530

100.0 %

100.0 %

100.0 %

Sunnyvale

4

4.9%

4.6%

663,460

100.0 %

100.0 %

100.0 %

Total San Francisco Bay Area

33

59.0%

44.3%

6,349,910

93.7%

94.3%

97.4%

Greater Seattle

Bellevue

2

5.3%

6.4%

917,027

92.0 %

91.1 %

98.7 %

Lake Union

6

6.4%

6.2%

884,763

100.0 %

100.0 %

100.0 %

Total Greater Seattle

8

11.7%

12.6%

1,801,790

95.9%

95.5%

99.3%

TOTAL STABILIZED OFFICE PORTFOLIO

114

100.0%

100.0%

14,327,872

92.3%

93.5%

96.0%

Total No. of

Average Residential Occupancy

STABILIZED RESIDENTIAL PROPERTY

Submarket

Buildings

Units

Q2 2020

Q1-Q2 2020

Greater Los Angeles

1550 N. El Centro Avenue

Hollywood

1

200

85.0%

89.3%

Average Office Occupancy

Q2 2020

Q1-Q2 2020

92.8%

93.2%

________________________

  1. Includes stabilized retail space.
  2. Represents occupancy for properties in the stabilized portfolio as of the date presented, including properties sold subsequent to the date presented.

11

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

Submarket

Square Feet

Occupied

Greater Los Angeles, California

3101-3243 La Cienega Boulevard

Culver City

151,908

100.0%

2240

E. Imperial Highway

El Segundo

122,870

100.0%

2250

E. Imperial Highway

El Segundo

298,728

100.0%

2260

E. Imperial Highway

El Segundo

298,728

100.0%

909 N. Pacific Coast Highway

El Segundo

244,136

91.4%

999 N. Pacific Coast Highway

El Segundo

128,588

96.1%

1500

N. El Centro Avenue

Hollywood

104,504

27.9%

1525

N. Gower Street

Hollywood

9,610

100.0%

1575

N. Gower Street

Hollywood

251,245

100.0%

6115 W. Sunset Boulevard

Hollywood

26,105

73.1%

6121 W. Sunset Boulevard

Hollywood

91,173

100.0%

6255 W. Sunset Boulevard

Hollywood

323,920

94.4%

3750

Kilroy Airport Way

Long Beach

10,718

62.9%

3760

Kilroy Airport Way

Long Beach

166,521

94.1%

3780

Kilroy Airport Way

Long Beach

221,452

85.1%

3800

Kilroy Airport Way

Long Beach

192,476

98.4%

3840

Kilroy Airport Way

Long Beach

136,026

100.0%

3880

Kilroy Airport Way

Long Beach

96,923

100.0%

3900

Kilroy Airport Way

Long Beach

129,893

91.4%

8560 W. Sunset Boulevard

West Hollywood

71,875

100.0%

8570 W. Sunset Boulevard

West Hollywood

45,941

97.1%

8580 W. Sunset Boulevard

West Hollywood

7,126

0.0%

8590 W. Sunset Boulevard

West Hollywood

55,302

85.6%

12100 W. Olympic Boulevard

West Los Angeles

152,048

71.6%

12200 W. Olympic Boulevard

West Los Angeles

150,832

90.2%

12233 W. Olympic Boulevard

West Los Angeles

151,029

59.1%

12312 W. Olympic Boulevard

West Los Angeles

76,644

100.0%

1633

26th Street

West Los Angeles

43,857

34.9%

2100/2110 Colorado Avenue

West Los Angeles

102,864

100.0%

3130 Wilshire Boulevard

West Los Angeles

90,074

97.6%

501 Santa Monica Boulevard

West Los Angeles

76,803

97.8%

Total Greater Los Angeles

4,029,919

91.2%

12

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

Submarket

Square Feet

Occupied

San Diego County, California

12225

El Camino Real

Del Mar

58,401

100.0%

12235

El Camino Real

Del Mar

53,751

88.9%

12340

El Camino Real

Del Mar

89,272

50.1%

12390

El Camino Real

Del Mar

70,140

100.0%

12348

High Bluff Drive

Del Mar

39,193

85.3%

12400

High Bluff Drive

Del Mar

210,732

89.4%

12770

El Camino Real

Del Mar

73,032

66.1%

12780

El Camino Real

Del Mar

140,591

100.0%

12790

El Camino Real

Del Mar

78,836

100.0%

3579 Valley Centre Drive

Del Mar

54,960

31.1%

3611 Valley Centre Drive

Del Mar

129,656

63.8%

3661 Valley Centre Drive

Del Mar

128,364

100.0%

3721 Valley Centre Drive

Del Mar

115,193

100.0%

3811 Valley Centre Drive

Del Mar

112,067

100.0%

3745 Paseo Place

Del Mar

95,871

90.0%

13280

Evening Creek Drive South

I-15 Corridor

41,196

100.0%

13290

Evening Creek Drive South

I-15 Corridor

61,180

100.0%

13480

Evening Creek Drive North

I-15 Corridor

154,157

100.0%

13500

Evening Creek Drive North

I-15 Corridor

137,658

62.0%

13520

Evening Creek Drive North

I-15 Corridor

146,701

89.0%

2305 Historic Decatur Road

Point Loma

107,456

100.0%

4690 Executive Drive

University Towne Center

47,846

91.4%

Total San Diego County

2,146,253

87.4%

13

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

Submarket

Square Feet

Occupied

San Francisco Bay Area, California

4100

Bohannon Drive

Menlo Park

47,379

100.0%

4200

Bohannon Drive

Menlo Park

45,451

70.8%

4300

Bohannon Drive

Menlo Park

63,079

38.8%

4400

Bohannon Drive

Menlo Park

48,146

39.4%

4500

Bohannon Drive

Menlo Park

63,078

100.0%

4600

Bohannon Drive

Menlo Park

48,147

70.7%

4700

Bohannon Drive

Menlo Park

63,078

100.0%

1290-1300 Terra Bella Avenue

Mountain View

114,175

100.0%

331

Fairchild Drive

Mountain View

87,147

100.0%

680

E. Middlefield Road

Mountain View

170,090

100.0%

690

E. Middlefield Road

Mountain View

170,823

100.0%

1701

Page Mill Road

Palo Alto

128,688

100.0%

3150

Porter Drive

Palo Alto

36,897

100.0%

900

Jefferson Avenue

Redwood City

228,505

100.0%

900

Middlefield Road

Redwood City

118,764

100.0%

100

Hooper Street

San Francisco

394,340

87.6%

100

First Street

San Francisco

467,095

89.6%

1800

Owens Street

San Francisco

750,370

99.6%

303

Second Street

San Francisco

784,658

78.4%

201 Third Street

San Francisco

346,538

90.3%

360 Third Street

San Francisco

429,796

100.0%

250

Brannan Street

San Francisco

100,850

100.0%

301

Brannan Street

San Francisco

82,834

100.0%

333

Brannan Street

San Francisco

185,602

100.0%

345

Brannan Street

San Francisco

110,050

99.7%

350

Mission Street

San Francisco

455,340

99.7%

345

Oyster Point Boulevard

South San Francisco

40,410

100.0%

347

Oyster Point Boulevard

South San Francisco

39,780

100.0%

349

Oyster Point Boulevard

South San Francisco

65,340

100.0%

505

Mathilda Avenue

Sunnyvale

212,322

100.0%

555

Mathilda Avenue

Sunnyvale

212,322

100.0%

605

Mathilda Avenue

Sunnyvale

162,785

100.0%

599

Mathilda Avenue

Sunnyvale

76,031

100.0%

Total San Francisco Bay Area

6,349,910

93.7%

14

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

Submarket

Square Feet

Occupied

Greater Seattle, Washington

601

108th Avenue NE

Bellevue

488,470

98.3%

10900 NE 4th Street

Bellevue

428,557

84.7%

837

N. 34th Street

Lake Union

112,487

100.0%

701

N. 34th Street

Lake Union

141,860

100.0%

801

N. 34th Street

Lake Union

169,412

100.0%

320 Westlake Avenue North

Lake Union

184,644

100.0%

321 Terry Avenue North

Lake Union

135,755

100.0%

401 Terry Avenue North

Lake Union

140,605

100.0%

Total Greater Seattle

1,801,790

95.9%

TOTAL

14,327,872

92.3%

15

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Information on Leases Commenced (1)

1st & 2nd Generation

2nd Generation

# of Leases (2)

Square Feet (2)

Retention

TI/LC

TI/LC

Changes in

Changes in

Weighted

Per Sq.Ft. /

GAAP

Average Lease

New

Renewal

New

Renewal

Rates

Per Sq.Ft. (3)

Year (3)

Rents

Cash Rents

Term (Mo.)

Quarter to Date

13

9

111,968

233,263

50.1%

$ 61.16

$ 10.05

37.2%

15.4%

73

Year to Date

23

18

159,894

323,330

40.4%

54.49

8.38

36.4%

16.6%

78

Information on Leases Executed (1)

1st & 2nd Generation

2nd Generation

# of Leases (4)

Square Feet (4)

TI/LC

TI/LC

Changes in

Changes in

Weighted

Per Sq.Ft. /

Average Lease

New

Renewal

New

Renewal

Per Sq.Ft. (3)

Year (3)

GAAP Rents

Cash Rents

Term (Mo.)

Quarter to Date (5)

5

9

53,214

233,263

$

54.10

$

9.02

30.0%

10.7%

72

Year to Date (6)

12

18

184,875

323,330

56.72

8.62

36.9%

18.6%

79

________________________

  1. Includes 100% of consolidated property partnerships.
  2. Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three and six months ended June 30, 2020, including first and second generation space, net of month-to- month leases.
  3. Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.
  4. Represents leasing activity for leases signed at properties in the stabilized portfolio during the three and six months ended June 30, 2020, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.
  5. During the three months ended June 30, 2020, 4 new leases totaling 51,726 square feet were signed but not commenced as of June 30, 2020.
  6. During the six months ended June 30, 2020, 11 new leases totaling 178,626 square feet were signed but not commenced as of June 30, 2020.

16

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Capital Expenditures

($ in thousands)

Total 2020

Q2 2020

Q1 2020

1st Generation (Nonrecurring) Capital Expenditures:(1)

Capital Improvements

$

1,212

$

591

$

621

Tenant Improvements & Leasing Commissions (2)

5,305

998

4,307

Total

$

6,517

$

1,589

$

4,928

Total 2020

Q2 2020

Q1 2020

2nd Generation (Recurring) Capital Expenditures:(1)

Capital Improvements

$

10,662

$

7,686

$

2,976

Tenant Improvements & Leasing Commissions (2)

28,767

14,680

14,087

Total

$

39,429

$

22,366

$

17,063

________________________

  1. Includes 100% of capital expenditures of consolidated property partnerships.
  2. Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements.

17

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Summary Schedule

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

# of Expiring

Total Square

% of Total

Annualized

% of Total

Annualized Rent

Year of Expiration

Annualized

Leases

Feet

Leased Sq. Ft.

Base Rent (1)

Base Rent

per Sq. Ft.

Remaining 2020 (2)

35

395,942

3.1%

$

17,080

2.5%

$

43.14

2021 (2)

78

764,334

5.8%

32,319

4.6%

42.28

2022 (2)

65

749,808

5.8%

32,351

4.7%

43.15

2023

81

1,299,381

10.0%

68,853

9.9%

52.99

2024

58

945,844

7.3%

46,338

6.6%

48.99

2025

53

663,871

5.1%

32,304

4.6%

48.66

2026

34

1,597,161

12.3%

72,710

10.5%

45.52

2027

35

1,273,218

9.8%

53,159

7.6%

41.75

2028

21

878,790

6.8%

54,616

7.9%

62.15

2029

21

763,347

5.9%

43,381

6.2%

56.83

2030 and beyond

52

3,678,861

28.1%

242,121

34.9%

65.81

Total (3)

533

13,010,557

100.0%

$

695,232

100.0%

$

53.44

________________________

  1. Includes 100% of annualized base rent of consolidated property partnerships.
  2. Adjusting for leasing transactions executed as of June 30, 2020 but not yet commenced, the 2020, 2021 and 2022 expirations would be reduced by 105,716, 177,052 and 29,498 square feet, respectively.
  3. For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of June 30, 2020, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of June 30, 2020.

18

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Schedule by Region

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

# of

Total

% of Total

Annualized

% of Total

Annualized Rent

Year

Region

Annualized

Expiring Leases

Square Feet

Leased Sq. Ft.

Base Rent (1)

Base Rent

per Sq. Ft.

Greater Los Angeles

22

243,813

1.9%

$

9,465

1.4%

$

38.82

2020

San Diego

7

61,044

0.5%

2,340

0.3%

38.33

San Francisco Bay Area

5

68,651

0.5%

4,545

0.7%

66.20

Greater Seattle

1

22,434

0.2%

730

0.1%

32.54

Total

35

395,942

3.1%

$

17,080

2.5%

$

43.14

Greater Los Angeles

49

330,964

2.5%

$

13,084

1.8%

$

39.53

2021

San Diego

15

187,468

1.4%

6,795

1.0%

36.25

San Francisco Bay Area

10

234,125

1.8%

11,947

1.7%

51.03

Greater Seattle

4

11,777

0.1%

493

0.1%

41.86

Total

78

764,334

5.8%

$

32,319

4.6%

$

42.28

Greater Los Angeles

42

362,860

2.8%

$

16,382

2.5%

$

45.15

2022

San Diego

8

204,237

1.6%

6,991

1.0%

34.23

San Francisco Bay Area

6

115,111

0.9%

6,558

0.9%

56.97

Greater Seattle

9

67,600

0.5%

2,420

0.3%

35.80

Total

65

749,808

5.8%

$

32,351

4.7%

$

43.15

Greater Los Angeles

39

396,914

3.1%

$

21,261

3.1%

$

53.57

2023

San Diego

13

195,866

1.5%

8,138

1.2%

41.55

San Francisco Bay Area

22

597,245

4.6%

35,784

5.1%

59.92

Greater Seattle

7

109,356

0.8%

3,670

0.5%

33.56

Total

81

1,299,381

10.0%

$

68,853

9.9%

$

52.99

Greater Los Angeles

31

439,031

3.4%

$

19,745

2.8%

$

44.97

2024

San Diego

9

64,792

0.5%

3,243

0.5%

50.05

San Francisco Bay Area

10

236,359

1.8%

15,605

2.2%

66.02

Greater Seattle

8

205,662

1.6%

7,745

1.1%

37.66

Total

58

945,844

7.3%

$

46,338

6.6%

$

48.99

Greater Los Angeles

57

1,784,117

13.7%

$

76,741

11.0%

$

43.01

2025

San Diego

68

1,119,961

8.6%

55,859

8.0%

49.88

and

San Francisco Bay Area

54

4,650,603

35.7%

312,831

45.1%

67.27

Beyond

Greater Seattle

37

1,300,567

10.0%

52,860

7.6%

40.64

Total

216

8,855,248

68.0%

$

498,291

71.7%

$

56.27

________________________

  1. Includes 100% of annualized base rent of consolidated property partnerships.

19

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Portfolio Quarterly Lease Expirations for 2020 and 2021

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

# of Expiring

Total Square

% of Total

Annualized

% of Total

Annualized Rent

Annualized

Leases

Feet

Leased Sq. Ft.

Base Rent (1)

Base Rent

per Sq. Ft.

2020:

Q3 2020

15

125,357

1.0%

$

5,015

0.8%

$

40.01

Q4 2020

20

270,585

2.1%

12,065

1.7%

44.59

Total 2020 (2)

35

395,942

3.1%

$

17,080

2.5%

$

43.14

2021:

Q1 2021

18

172,392

1.2%

$

6,753

1.0%

$

39.17

Q2 2021

19

100,996

0.8%

3,728

0.5%

36.91

Q3 2021

24

336,305

2.6%

15,814

2.3%

47.02

Q4 2021

17

154,641

1.2%

6,024

0.9%

38.95

Total 2021 (2)

78

764,334

5.8%

$

32,319

4.7%

$

42.28

________________________

  1. Includes 100% of annualized base rent of consolidated property partnerships.
  2. Adjusting for leasing transactions executed as of June 30, 2020 but not yet commenced, the 2020 and 2021 expirations would be reduced by 105,716 and 177,052 square feet, respectively.

20

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Top Fifteen Tenants (1)

($ in thousands)

Percentage of

Percentage of

Annualized Base

Rentable

Total Annualized

Tenant Name

Region

Base Rental

Total Rentable

Year(s) of Lease Expiration

Rental Revenue (2)

Square Feet

Revenue

Square Feet

Dropbox, Inc.

San Francisco Bay Area

$

55,998

738,081

7.9%

5.0%

2033

GM Cruise, LLC

San Francisco Bay Area

36,337

374,618

5.1%

2.6%

2031

LinkedIn Corporation / Microsoft Corporation

San Francisco Bay Area

29,752

663,460

4.2%

4.5%

2024 / 2026

Adobe Systems, Inc.

San Francisco Bay Area / Greater Seattle

27,897

513,111

3.9%

3.5%

2027 / 2031

salesforce.com, inc.

San Francisco Bay Area

24,076

451,763

3.4%

3.1%

2031 / 2032

DIRECTV, LLC

Greater Los Angeles

23,152

684,411

3.3%

4.7%

2027

Box, Inc.

San Francisco Bay Area

22,441

371,792

3.2%

2.5%

2021 / 2028

Okta, Inc.

San Francisco Bay Area

18,263

218,100

2.6%

1.5%

2028

Riot Games, Inc.

Greater Los Angeles

15,554

251,509

2.2%

1.7%

2020 / 2023 / 2024

Synopsys, Inc.

San Francisco Bay Area

15,492

340,913

2.2%

2.3%

2030

Fortune 50 Publicly-Traded Company (3)

Greater Seattle

15,355

311,983

2.2%

2.1%

2033

Viacom International, Inc.

Greater Los Angeles

13,718

211,343

1.9%

1.4%

2028

DoorDash, Inc.

San Francisco Bay Area

13,531

135,137

1.9%

0.9%

2032

Amazon.com

Greater Seattle

12,397

277,399

1.7%

1.9%

2030

Nektar Therapeutics, Inc.

San Francisco Bay Area

12,297

135,350

1.7%

0.9%

2030

Total Top Fifteen Tenants

$

336,260

5,678,970

47.4%

38.6%

________________________

  1. The information presented is as of June 30, 2020.
  2. Includes 100% of annualized base rental revenues of consolidated property partnerships.
  3. In June, the Company commenced GAAP revenue recognition on Phase I of this tenant's lease at 333 Dexter, which represents approximately 49% of the 635,000 square foot project located in the South Lake Union submarket of Seattle.

21

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Consolidated Ventures (Noncontrolling Property Partnerships)

Property (1)

Venture Partner

Submarket

Rentable Square Feet

KRC Ownership %

100

First Street, San Francisco, CA

Norges Bank Real Estate Management

San Francisco

467,095

56%

303

Second Street, San Francisco, CA

Norges Bank Real Estate Management

San Francisco

784,658

56%

900

Jefferson Avenue and 900 Middlefield Road, Redwood City, CA (2)

Local developer

Redwood City

347,269

93%

____________________

  1. For breakout of Net Operating Income by partnership, refer to page 34, Reconciliation of Net Income Available to Common Stockholders to Same Store Net Operating Income.
  2. Reflects the KRC ownership percentage at time of agreement. Actual percentage may vary depending on cash flows or promote structure.

22

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Stabilized Office Development Projects and Completed Residential Development Projects

($ in millions)

STABILIZED OFFICE AND RETAIL DEVELOPMENT PROJECTS(1)

Location

Start Date

Stabilization

Total Estimated

Rentable

Total Project

Date (2)

Investment

Square Feet

% Occupied

1st Quarter

The Exchange on 16th

San Francisco

2Q 2015

1Q 2020

$

585.0

750,370

100%

One Paseo - Retail

Del Mar

4Q 2016

1Q 2020

100.0

95,871

90%

TOTAL:

$

685.0

846,241

98%

COMPLETED RESIDENTIAL DEVELOPMENT PROJECTS NOT YET STABILIZED

Location

Start Date

Completion

Total Estimated

Number of

% Leased

Date

Investment

Units

One Paseo - Residential Phase I

Del Mar

4Q 2016

3Q 2019

$

145.0

237

68%

One Paseo - Residential Phase II

Del Mar

4Q 2016

1Q 2020

145.0

225

21%

TOTAL:

$

290.0

462

45%

____________________

  1. Our stabilized office portfolio includes stabilized retail space.
  2. For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components.

23

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

In-Process Development

($ in millions)

Estimated

Total Cash

Construction

Estimated

Total Estimated

Costs Incurred

Total Project

TENANT IMPROVEMENT(1)

Location

Rentable Square

as of

% Leased

Start Date

Stabilization Date (2)

Feet

Investment

6/30/2020 (3)

% Occupied

Office

San Diego County

One Paseo - Office

Del Mar

4Q 2018

2Q 2021

285,000

$

205.0

$

175.1

91%

20%

Greater Seattle

333 Dexter (4)

South Lake Union

2Q 2017

3Q 2022

635,000

410.0

291.2

100%

49%

Greater Los Angeles

Netflix // On Vine - Office

Hollywood

1Q 2018

1Q 2021

355,000

300.0

221.7

100%

-%

TOTAL:

1,275,000

$

915.0

$

688.0

98%

29%

Estimated

Total Cash

Construction

Estimated

Total Estimated

Costs Incurred

Office %

UNDER CONSTRUCTION

Rentable Square

as of

Location

Start Date

Stabilization Date (2)

Feet

Investment

6/30/2020 (3)

Leased

Office / Life Science

San Francisco Bay Area

Kilroy Oyster Point - Phase I

South San Francisco

1Q 2019

4Q 2021

656,000

$

570.0

$

214.3

100%

San Diego County

2100 Kettner

Little Italy

3Q 2019

1Q 2022

200,000

140.0

66.5

-%

9455 Towne Centre Drive

University Towne Center

1Q 2019

1Q 2021

160,000

110.0

67.2

100%

Residential

Greater Los Angeles

Living // On Vine - Residential

Hollywood

4Q 2018

1Q 2021

193 Resi Units

195.0

157.1

N/A

San Diego County

One Paseo - Residential Phase III

Del Mar

4Q 2016

3Q 2020

146 Resi Units

100.0

95.5

N/A

TOTAL:

$

1,115.0

$

600.6

80%

________________________

  1. Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.
  2. For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. The timing of completion of our projects may be impacted by factors outside of our control, including government restrictions and/or social distancing requirements on construction projects due to the COVID-19 pandemic. As of the date of this report, all of our in-process development projects were under active construction.
  3. Represents costs incurred as of June 30, 2020, excluding accrued liabilities recorded in accordance with GAAP. Upon adoption of ASC 842 "Leases" effective January 1, 2019, also excludes leasing overhead.
  4. In June, the Company delivered and commenced revenue recognition on Phase I of 333 Dexter, representing approximately 49% of the 635,000 square foot development project located in Seattle's South Lake Union submarket. The project is 100% leased to a Fortune 50 publicly-traded company.

24

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Future Development Pipeline

($ in millions)

Approx. Developable

Total Cash Costs

FUTURE DEVELOPMENT PIPELINE

Location

Incurred as of

Square Feet (1)

6/30/2020

(2)

San Diego County

Santa Fe Summit - Phases II and III

56 Corridor

600,000 - 650,000

$

79.7

1335 Broadway & 901 Park Boulevard

East Village

TBD

46.5

San Francisco Bay Area

Kilroy Oyster Point - Phases II - IV

South San Francisco

1,750,000 - 1,900,000

312.2

Flower Mart

SOMA

2,300,000

383.9

Greater Seattle

SIX0 - Office & Residential

Seattle CBD

TBD

134.2

TOTAL:

$

956.5

________________________

  1. The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design.
  2. Represents costs incurred as of June 30, 2020, excluding accrued liabilities recorded in accordance with GAAP.

25

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Capital Structure

As of June 30, 2020

($ in thousands)

Shares/Units

Aggregate Principal

% of Total

$

Amount or

Market

June 30, 2020

Value Equivalent

Capitalization

DEBT: (1)(2)

Unsecured Term Loan Facility

$

150,000

1.4%

Unsecured Senior Notes due 2023

300,000

2.8%

Unsecured Senior Notes due 2024

425,000

4.0%

Unsecured Senior Notes due 2025

400,000

3.8%

Unsecured Senior Notes Series A & B due 2026

250,000

2.4%

Unsecured Senior Notes due 2028

400,000

3.8%

Unsecured Senior Notes due 2029

400,000

3.8%

Unsecured Senior Notes Series A & B due 2027 & 2029

250,000

2.4%

Unsecured Senior Notes due 2030

500,000

4.8%

Unsecured Senior Notes due 2031

350,000

3.3%

Secured Debt

256,958

2.4%

Total Debt

$

3,681,958

34.9%

EQUITY AND NONCONTROLLING INTEREST IN THE OPERATING PARTNERSHIP: (3)

Common limited partnership units outstanding (4)

1,934,586

$

113,560

1.1%

Shares of common stock outstanding

115,176,538

6,760,863

64.0%

Total Equity and Noncontrolling Interests in the Operating Partnership

$

6,874,423

65.1%

TOTAL MARKET CAPITALIZATION

$

10,556,381

100.0%

________________________

  1. Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
  2. As of June 30, 2020, there was no outstanding balance on the unsecured revolving credit facility.
  3. Value based on closing share price of $58.70 as of June 30, 2020.
  4. Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.

26

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Debt Analysis

As of June 30, 2020

TOTAL DEBT COMPOSITION (1)

Percent of

Weighted Average

Total Debt

Interest Rate

Years to Maturity

Secured vs. Unsecured Debt

Unsecured Debt

93.0%

3.8%

7.0

Secured Debt

7.0%

3.9%

6.6

Floating vs. Fixed-Rate Debt

Floating-Rate Debt

4.1%

1.3%

2.1

Fixed-Rate Debt

95.9%

3.9%

7.2

Stated Interest Rate

3.8%

7.0

GAAP Effective Rate

3.9%

GAAP Effective Rate Including Debt Issuance Costs

4.0%

KEY DEBT COVENANTS

Covenant

Actual Performance

as of June 30, 2020

Unsecured Credit and Term Loan Facility and Private Placement Notes (as defined in the Credit

Agreements):

Total debt to total asset value

less than 60%

28%

Fixed charge coverage ratio

greater than 1.5x

3.4x

Unsecured debt ratio

greater than 1.67x

3.32x

Unencumbered asset pool debt service coverage

greater than 1.75x

4.14x

Unsecured Senior Notes due 2023, 2024, 2025, 2028, 2029 and 2030 (as defined in the

Indentures):

Total debt to total asset value

less than 60%

34%

Interest coverage

greater than 1.5x

9.8x

Secured debt to total asset value

less than 40%

2%

Unencumbered asset pool value to unsecured debt

greater than 150%

307%

________________________

  1. As of June 30, 2020, there was no outstanding balance on the unsecured revolving credit facility.

27

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Debt Analysis

($ in thousands)

DEBT MATURITY SCHEDULE

Floating/

Stated

Maturity

2020

2021

2022

2023

2024

After 2024

Total (1)

Fixed Rate

Rate

Date

Unsecured Debt(2):

Floating

1.28%

7/31/2022

$

150,000

$

150,000

Fixed

3.80%

1/15/2023

300,000

300,000

Fixed

3.45%

12/15/2024

425,000

425,000

Fixed

4.38%

10/1/2025

400,000

400,000

Fixed

4.30%

7/18/2026

50,000

50,000

Fixed

4.35%

10/18/2026

200,000

200,000

Fixed

3.35%

2/17/2027

175,000

175,000

Fixed

4.75%

12/15/2028

400,000

400,000

Fixed

3.45%

2/17/2029

75,000

75,000

Fixed

4.25%

8/15/2029

400,000

400,000

Fixed

3.05%

2/15/2030

500,000

500,000

Fixed

4.27%

1/31/2031

350,000

350,000

Total unsecured debt

3.82%

-

-

150,000

300,000

425,000

2,550,000

3,425,000

Secured Debt:

Fixed

3.57%

12/1/2026

1,626

3,341

3,462

3,587

3,718

152,668

168,402

Fixed

4.48%

7/1/2027

968

2,001

2,092

2,188

2,288

79,019

88,556

Total secured debt

3.83%

2,594

5,342

5,554

5,775

6,006

231,687

256,958

Total

3.83%

$

2,594

$

5,342

$

155,554

$

305,775

$

431,006

$

2,781,687

$

3,681,958

________________________

  1. Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.
  2. As of June 30, 2020, there was no outstanding balance on the unsecured revolving credit facility.

28

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures

Included in this section are management's statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations available to common stockholders and common unitholders ("FFO"), in the Company's earnings release on July 29, 2020 and the reasons why management believes that these measures provide useful information to investors about the Company's financial condition and results of operations.

Net Operating Income:

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

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

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

Same Store Net Operating Income:

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

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

29

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

Same Store Cash Net Operating Income:

Management believes that Same Store Cash NOI is a useful supplemental measure of the Company's operating performance. Same Store Cash NOI represents the consolidated NOI for all of the properties that were owned and included in the Company's stabilized portfolio for two comparable reporting periods, adjusted for the net effect of straight- line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles, and the provision for bad debts. Because Same Store Cash NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties, it highlights operating trends on a cash basis such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store Cash NOI, and accordingly, our Same Store Cash NOI may not be comparable to other REITs.

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

EBITDA, as adjusted:

Managementbelievesthatconsolidatedearningsbeforeinterestexpense,depreciationandamortization,gain/lossonearlyextinguishmentofdebt,gainsandlossesondepreciable real estate, net income attributable to noncontrolling interests, preferred dividends and distributions, original issuance costs of redeemed preferred stock and preferred units, and impairment losses ("EBITDA, as adjusted") is a useful supplemental measure of the Company's operating performance. When considered with other GAAP measures and FFO, management believes EBITDA, as adjusted, gives the investment community a more complete understanding of the Company's consolidated operating results, including the impact of general and administrative expenses and acquisition-related expenses, before the impact of investing and financing transactions and facilitates comparisons with competitors. Management also believes it is appropriate to present EBITDA, as adjusted, as it is used in several of the Company's financial covenants for both its secured and unsecured debt. However, EBITDA, as adjusted, should not be viewed as an alternative measure of the Company's operating performance since it excludes financing costs as well as depreciation and amortization costs which are significant economic costs that could materially impact the Company's results of operations and liquidity. Other REITs may use different methodologies for calculating EBITDA, as adjusted, and, accordingly, the Company's EBITDA, as adjusted, may not be comparable to other REITs. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.

30

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

Funds From Operations:

The Company calculates Funds From Operations available to common stockholders and common unitholders ("FFO") in accordance with the 2018 Restated 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.

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

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

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

Funds Available for Distribution:

Management believes that Funds Available for Distribution available to common stockholders and common unitholders ("FAD") is a useful supplemental measure of the Company's liquidity. The Company computes FAD by adding to FFO the non-cash amortization of deferred financing costs, debt discounts and premiums and share-based compensation awards, amortization of above (below) market rents for acquisition properties and non-cash executive compensation expense then subtracting recurring tenant improvements,leasingcommissionsandcapitalexpendituresandeliminatingtheneteffectofstraight-linerents,amortizationofdeferredrevenuerelatedtotenantimprovements, adjusting for other lease related items and amounts of gain or loss on marketable securities related to the Company's executive deferred compensation plan that are capitalized as development costs, and after adjustment for amounts attributable to noncontrolling interests in consolidated property partnerships. FAD provides an additional perspective on the Company's ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company's financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company's FAD may not be comparable to other REITs.

31

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Definitions Included in Supplemental

Annualized Base Rent:

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

Change in GAAP/Cash Rents (Leases Commenced):

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

Change in GAAP/Cash Rents (Leases Executed):

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

Estimated Stabilization Date (Development):

Management's estimation of the earlier of stabilized occupancy (95%) or one year from the date of the cessation of major base building construction activities for office and retail properties and upon substantial completion for residential properties.

FAD Payout Ratio:

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

First Generation Capital Expenditures:

Capital expenditures for newly acquired space, newly developed, redeveloped, or repositioned space. These costs are not subtracted in our calculation of FAD.

Fixed Charge Coverage Ratio:

Calculated as EBITDA, as adjusted, divided by gross interest expense (excluding amortization of deferred debt costs and debt discounts/premiums) and current year accrued preferred dividends.

FFO Payout Ratio:

Calculated as current-quarter dividends accrued to common stockholders and common unitholders (excluding dividend equivalents accrued to restricted stock unitholders) divided by FFO attributable to common stockholders and unitholders.

32

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Definitions Included in Supplemental, continued

GAAP Effective Rate:

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

Interest Coverage Ratio:

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

Net Effect of Straight-Line Rents:

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

Net Operating Income Margins:

Calculated as Net Operating Income divided by total revenues.

Retention Rates (Leases Commenced):

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

Same Store Portfolio:

Our Same Store portfolio includes all of our properties owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2019 and still owned and included in the stabilized portfolio as of June 30, 2020. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, completed residential developments not yet stabilized and properties held-for-sale. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.

Stated Interest Rate:

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

Tenant Improvement Phase:

Represents projects that have reached cold shell condition and are ready for tenant improvements, which may require additional major base building construction before being placed in service.

33

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

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

(unaudited, $ in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Net Income Available to Common Stockholders

$

19,618

$

42,194

$

59,435

$

79,097

Net income attributable to noncontrolling common units of the Operating Partnership

367

871

1,072

1,571

Net income attributable to noncontrolling interests in consolidated property partnerships

4,367

4,150

9,263

8,341

Net Income

24,352

47,215

69,770

89,009

Adjustments:

General and administrative expenses

38,597

19,857

57,607

43,198

Leasing costs

1,330

2,650

2,786

4,407

Depreciation and amortization

80,085

68,252

154,455

134,387

Interest income and other net investment (gain) loss

(2,838)

(616)

290

(2,444)

Interest expense

15,884

11,727

30,328

22,970

Gains on sales of depreciable operating properties

-

(7,169)

-

(7,169)

Net Operating Income, as defined (1)

157,410

141,916

315,236

284,358

Wholly-Owned Properties

137,168

122,010

273,483

251,249

Consolidated property partnerships: (2)

100 First Street (3)

4,928

6,027

10,388

5,638

303 Second Street (3)

9,621

8,072

19,883

15,870

Crossing/900 (4)

5,693

5,807

11,482

11,601

Net Operating Income, as defined (1)

157,410

141,916

315,236

284,358

Non-Same Store GAAP Net Operating Income (5)

(26,436)

(9,249)

(49,780)

(16,915)

Same Store GAAP Net Operating Income

130,974

132,667

265,456

267,443

GAAP to Cash Adjustments:

GAAP Operating Revenues Adjustments, net (6)

(7,453)

(21,299)

(12,822)

(43,730)

GAAP Operating Expenses Adjustments, net (7)

(17)

(29)

(34)

(33)

Same Store Cash Net Operating Income

$

123,504

$

111,339

$

252,600

$

223,680

________________________

  1. Please refer to pages 29-30 for Management Statements on Net Operating Income, Same Store Net Operating Income and Same Store Cash Net Operating Income.
  2. Reflects GAAP Net Operating Income for all periods presented.
  3. For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.
  4. For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City, CA.
  5. Includes the results of one office property disposed of during the second quarter of 2019, one property disposed of during the fourth quarter of 2019, one office property we acquired in the third quarter of 2019, our completed residential development that is not yet stabilized and our in-process and future development projects.
  6. Includes the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements and amortization of above and below market lease intangibles.
  7. Includes the amortization of above and below market lease intangibles for ground leases and the provision for bad debts.

34

Kilroy Realty Corporation

Second Quarter 2020 Supplemental Financial Report

Reconciliation of Net Income Available to Common Stockholders to EBITDA, as Adjusted

(unaudited, $ in thousands)

Three Months Ended June 30,

2020

2019

Net Income Available to Common Stockholders

$

19,618

$

42,194

Interest expense

15,884

11,727

Depreciation and amortization

80,085

68,252

Net income attributable to noncontrolling common units of the Operating Partnership

367

871

Net income attributable to noncontrolling interests in consolidated property partnerships

4,367

4,150

Gains on sales of depreciable operating properties

-

(7,169)

EBITDA, as adjusted (1)

$

120,321

$

120,025

________________________

  1. Please refer to page 30 for a Management Statement on EBITDA, as adjusted. The Company's calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.

35

Disclaimer

Kilroy Realty Corporation published this content on 29 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2020 16:36:15 UTC

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Financials (USD)
Sales 2020 895 M - -
Net income 2020 157 M - -
Net Debt 2020 3 043 M - -
P/E ratio 2020 43,1x
Yield 2020 3,32%
Capitalization 6 797 M 6 797 M -
EV / Sales 2020 11,0x
EV / Sales 2021 10,3x
Nbr of Employees 267
Free-Float 98,2%
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Mean consensus OUTPERFORM
Number of Analysts 16
Average target price 69,67 $
Last Close Price 59,01 $
Spread / Highest target 54,2%
Spread / Average Target 18,1%
Spread / Lowest Target -17,0%
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Managers
NameTitle
John B. Kilroy Chairman, President & Chief Executive Officer
Tyler H. Rose Chief Financial Officer, Secretary & EVP
Edward F. Brennan Lead Independent Director
Scott S. Ingraham Independent Director
Peter B. Stoneberg Independent Director
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