Kilroy Realty (KRC) 8-K Third Quarter 2014 Supplemental Financial Report

Exhibit 99.1

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Table of Contents

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

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

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Company Background

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

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

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

Kilroy Realty Corporation is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Kilroy Realty 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.

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Executive Summary

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

________________________

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

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Financial Highlights

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

					Three Months Ended
		9/30/2014 (1)			6/30/2014 (1)(2)			3/31/2014 (1)			12/31/2013 (1)			9/30/2013 (3)
INCOME ITEMS (Including Discontinued Operations):
	Revenues	$	131,082		$	129,194		$	126,318		$	128,041		$	127,803
	Lease Termination Fees, net (4)	1,737			1,844			1,464			15			872
	Net Operating Income	92,543			91,798			89,133			90,143			88,651
	Acquisition-related Expenses	431			609			228			575			568
	Capitalized Interest and Debt Costs	13,328			11,750			10,783			10,067			9,089
	Net Income Available to Common Stockholders	15,669			27,228			96,532			19,316			5,584
	EBITDA	80,965			83,241			78,271			80,209			78,530
	Funds From Operations (5)(6)	60,399			63,307			57,221			58,482			55,899
	Funds Available for Distribution (5)(6)	37,667			37,392			38,348			25,631			23,899
	Net Income Available to Common Stockholders per common share – diluted	$	0.18		$	0.32		$	1.14		$	0.23		$	0.07
	Funds From Operations per common share – diluted	$	0.69		$	0.72		$	0.66		$	0.67		$	0.69
	Dividends per common share	$	0.35		$	0.35		$	0.35		$	0.35		$	0.35
RATIOS (Including Discontinued Operations):
	Operating Margins	70.6		%	71.1		%	70.6		%	70.4		%	69.4		%
	Interest Coverage Ratio	3.0x			3.2x			3.0x			3.1x			3.0x
	Fixed Charge Coverage Ratio	2.6x			2.9x			2.7x			2.7x			2.7x
	FFO Payout Ratio	49.4		%	46.8		%	51.4		%	50.2		%	52.6		%
	FAD Payout Ratio	79.2		%	79.3		%	76.7		%	114.6		%	122.9		%
ASSETS:
	Real Estate Held for Investment before Depreciation	$	5,751,097		$	5,667,027		$	5,434,024		$	5,264,947		$	5,048,531
	Total Assets (7)	5,487,464			5,273,792			5,114,543			5,111,028			5,089,276
CAPITALIZATION:
	Total Debt	$	2,424,033		$	2,236,509		$	2,148,954		$	2,196,368		$	2,153,758
	Total Preferred Equity and Noncontrolling Interests	200,000			200,000			200,000			200,000			200,000
	Total Common Equity and Noncontrolling Interests	5,063,838			5,276,400			4,922,040			4,213,070			4,192,553
	Total Market Capitalization	7,687,871			7,712,909			7,270,994			6,609,438			6,546,311
	Total Debt / Total Market Capitalization	31.5		%	29.0		%	29.5		%	33.2		%	32.9		%
	Total Debt and Preferred / Total Market Capitalization	34.1		%	31.6		%	32.3		%	36.3		%	36.0		%

________________________

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

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

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

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

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

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

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

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

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Common Stock Data (NYSE: KRC)

	Three Months Ended
	9/30/2014		6/30/2014		3/31/2014		12/31/2013		9/30/2013
High Price	$	63.96	$	62.88	$	59.53	$	54.04	$	55.80
Low Price	$	58.03	$	57.29	$	49.72	$	48.89	$	47.73
Closing Price	$	59.44	$	62.28	$	58.58	$	50.18	$	49.95
Dividends per share – annualized	$	1.40	$	1.40	$	1.40	$	1.40	$	1.40
Closing common shares (in 000’s) (1)	83,388		82,916		82,218		82,154		82,113
Closing common partnership units (in 000’s) (1)	1,804		1,804		1,804		1,805		1,822
	85,192		84,720		84,022		83,959		83,935

________________________

(1) As of the end of the period.

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Consolidated Balance Sheets

(unaudited, $ in thousands)

	9/30/2014			6/30/2014			3/31/2014			12/31/2013			9/30/2013
ASSETS:
Land and improvements	$	757,036		$	675,489		$	679,991		$	657,491		$	612,843
Buildings and improvements	3,882,015			3,720,863			3,706,662			3,590,699			3,527,729
Undeveloped land and construction in progress	1,112,046			1,270,675			1,047,371			1,016,757			907,959
Total real estate assets held for investment	5,751,097			5,667,027			5,434,024			5,264,947			5,048,531
Accumulated depreciation and amortization	(912,623		)	(885,580		)	(854,977		)	(818,957		)	(781,580		)
Total real estate assets held for investment, net	4,838,474			4,781,447			4,579,047			4,445,990			4,266,951
Real estate assets and other assets held for sale, net	49,815			—			28,272			213,100			239,411
Cash and cash equivalents	200,431			24,571			95,534			35,377			197,150
Restricted cash	17,487			93,522			33,717			49,780			17,931
Marketable securities	12,076			11,747			11,001			10,008			9,192
Current receivables, net	6,443			10,588			11,092			10,743			11,769
Deferred rent receivables, net	139,910			134,269			130,750			127,123			121,659
Deferred leasing costs and acquisition-related intangible assets, net	183,057			178,841			188,466			186,622			190,085
Deferred financing costs, net	19,373			16,978			15,195			16,502			17,809
Prepaid expenses and other assets, net	20,398			21,829			21,469			15,783			17,319
TOTAL ASSETS	$	5,487,464		$	5,273,792		$	5,114,543		$	5,111,028		$	5,089,276
LIABILITIES AND EQUITY:
Liabilities:
Secured debt	$	549,896		$	553,427		$	556,946		$	560,434		$	563,898
Exchangeable senior notes, net	135,049			170,704			169,528			168,372			167,236
Unsecured debt, net	1,743,962			1,431,301			1,431,217			1,431,132			1,431,048
Unsecured line of credit	—			90,000			—			45,000			—
Accounts payable, accrued expenses and other liabilities	243,602			215,535			187,631			198,467			210,111
Accrued distributions	31,897			31,730			31,456			31,490			31,479
Deferred revenue and acquisition-related intangible liabilities, net	114,504			114,670			107,569			101,286			102,991
Rents received in advance and tenant security deposits	45,086			43,085			43,952			44,240			41,668
Liabilities of real estate assets held for sale	3,099			—			634			14,447			16,751
Total liabilities	2,867,095			2,650,452			2,528,933			2,594,868			2,565,182
Equity:
Stockholders’ Equity
6.875% Series G Cumulative Redeemable Preferred stock	96,155			96,155			96,155			96,155			96,155
6.375% Series H Cumulative Redeemable Preferred stock	96,256			96,256			96,256			96,256			96,256
Common stock	834			829			822			822			821
Additional paid-in capital	2,530,282			2,519,268			2,479,740			2,478,975			2,476,424
Distributions in excess of earnings	(159,799		)	(145,851		)	(143,636		)	(210,896		)	(201,048		)
Total stockholders’ equity	2,563,728			2,566,657			2,529,337			2,461,312			2,468,608
Noncontrolling Interests
Common units of the Operating Partnership	51,419			51,798			51,388			49,963			50,601
Noncontrolling interest in consolidated subsidiary	5,222			4,885			4,885			4,885			4,885
Total noncontrolling interests	56,641			56,683			56,273			54,848			55,486
Total equity	2,620,369			2,623,340			2,585,610			2,516,160			2,524,094
TOTAL LIABILITIES AND EQUITY	$	5,487,464		$	5,273,792		$	5,114,543		$	5,111,028		$	5,089,276

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Consolidated Statements of Operations

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
REVENUES
Rental income	$	115,221		$	103,354		$	338,911		$	303,573
Tenant reimbursements	11,346			9,583			33,399			28,350
Other property income	2,457			608			7,650			6,584
Total revenues	129,024			113,545			379,960			338,507
EXPENSES
Property expenses	25,801			24,470			75,448			69,895
Real estate taxes	11,008			10,088			32,728			29,129
Provision for bad debts	58			101			58			196
Ground leases	771			929			2,306			2,665
General and administrative expenses	11,138			10,226			33,806			29,750
Acquisition-related expenses	431			568			1,268			1,387
Depreciation and amortization	50,032			45,804			148,647			138,652
Total expenses	99,239			92,186			294,261			271,674
OTHER (EXPENSES) INCOME
Interest income and other net investment gains/(losses)	(9		)	673			587			1,084
Interest expense	(16,608		)	(18,853		)	(49,880		)	(58,021		)
Total other (expenses) income	(16,617		)	(18,180		)	(49,293		)	(56,937		)
INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF LAND	13,168			3,179			36,406			9,896
Gain on sale of land	—			—			3,490			—
INCOME FROM CONTINUING OPERATIONS	13,168			3,179			39,896			9,896
DISCONTINUED OPERATIONS:
Income from discontinued operations	548			5,848			2,091			11,199
Gains on dispositions of discontinued operations	5,587			—			110,391			423
Total income from discontinued operations	6,135			5,848			112,482			11,622
NET INCOME	19,303			9,027			152,378			21,518
Net income attributable to noncontrolling common units of the Operating Partnership	(321		)	(131		)	(3,011		)	(266		)
NET INCOME ATTRIBUTABLE TO KILROY REALTY CORPORATION	18,982			8,896			149,367			21,252
Preferred dividends	(3,313		)	(3,312		)	(9,938		)	(9,938		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	15,669		$	5,584		$	139,429		$	11,314
Weighted average common shares outstanding – basic	83,161			76,769			82,525			75,751
Weighted average common shares outstanding – diluted	85,110			76,769			84,623			75,751
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE
Net income available to common stockholders per share – basic	$	0.18		$	0.07		$	1.67		$	0.13
Net income available to common stockholders per share – diluted	$	0.18		$	0.07		$	1.63		$	0.13

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
FUNDS FROM OPERATIONS: (1)
Net income available to common stockholders	$	15,669		$	5,584		$	139,429		$	11,314
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership	321			131			3,011			266
Depreciation and amortization of real estate assets	49,996			50,184			148,878			148,982
Gains on dispositions of discontinued operations	(5,587		)	—			(110,391		)	(423		)
Funds From Operations (2)(3)	$	60,399		$	55,899		$	180,927		$	160,139
Weighted average common shares/units outstanding – basic (4)	86,189			79,806			85,555			78,795
Weighted average common shares/units outstanding – diluted (4)	88,138			81,527			87,653			80,586
FFO per common share/unit – basic (2)	$	0.70		$	0.70		$	2.11		$	2.03
FFO per common share/unit – diluted (2)	$	0.69		$	0.69		$	2.06		$	1.99
FUNDS AVAILABLE FOR DISTRIBUTION: (1)
Funds From Operations (2)	$	60,399		$	55,899		$	180,927		$	160,139
Adjustments:
Tenant improvements, leasing commissions and recurring capital expenditures	(20,074		)	(24,684		)	(52,247		)	(58,163		)
Amortization of deferred revenue related to tenant-funded tenant improvements (3)(5)	(2,678		)	(2,626		)	(7,695		)	(7,585		)
Net effect of straight-line rents	(7,452		)	(6,103		)	(15,245		)	(18,188		)
Amortization of net below market rents (6)	(1,766		)	(1,938		)	(6,216		)	(6,015		)
Noncash effect of exchangeable notes, net (7)	1,050			691			2,301			2,124
Amortization of deferred financing costs and net debt discounts/(premiums)	226			260			596			690
Noncash amortization of share-based compensation awards	3,372			2,175			8,817			6,454
Other lease related adjustments, net (8)	4,590			225			2,169			2,011
Funds Available for Distribution (1)	$	37,667		$	23,899		$	113,407		$	81,467

________________________

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

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

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

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

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

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

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

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

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Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Same Store Analysis ⁽¹⁾ 

(unaudited, $ in thousands)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2014			2013			% Change		2014			2013			% Change
	Total Same Store Portfolio
	Number of properties	93			93					93			93
	Square Feet	11,306,728			11,306,728					11,306,728			11,306,728
	Percent of Stabilized Portfolio	83.8		%	88.8		%			83.8		%	88.8		%
	Average Occupancy	93.0		%	91.2		%			92.5		%	91.3		%
	Operating Revenues:
	Rental income	$	96,826		$	92,950		4.2	%	$	287,596		$	275,974		4.2	%
	Tenant reimbursements	9,417			8,520			10.5	%	28,323			25,634			10.5	%
	Other property income	2,457			602			308.1	%	7,632			6,578			16.0	%
	Total operating revenues (2)	108,700			102,072			6.5	%	323,551			308,186			5.0	%
	Operating Expenses:
	Property expenses (3)	23,375			22,741			2.8	%	68,079			64,754			5.1	%
	Real estate taxes	8,887			8,782			1.2	%	26,626			25,697			3.6	%
	Provision for bad debts	(38		)	132			(128.8	)%	(38		)	227			(116.7	)%
	Ground leases	734			708			3.7	%	2,198			2,165			1.5	%
	Total operating expenses	32,958			32,363			1.8	%	96,865			92,843			4.3	%
	GAAP Net Operating Income	$	75,742		$	69,709		8.7	%	$	226,686		$	215,343		5.3	%
Same Store Analysis (Cash Basis) (4)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2014			2013			% Change		2014			2013			% Change
	Total operating revenues	$	104,831		$	94,571		10.8	%	$	305,539		$	285,563		7.0	%
	Total operating expenses	32,998			32,230			2.4	%	96,904			92,617			4.6	%
	Cash Net Operating Income	$	71,833		$	62,341		15.2	%	$	208,635		$	192,946		8.1	%

________________________

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

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

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

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

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Stabilized Portfolio Occupancy Overview by Region

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

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

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

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Stabilized Portfolio Occupancy Overview by Region, continued

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

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Stabilized Portfolio Occupancy Overview by Region, continued

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

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Stabilized Portfolio Occupancy Overview by Region, continued

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

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Stabilized Portfolio Occupancy Overview by Region, continued

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

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Information on Leases Commenced

	1st & 2nd Generation				2nd Generation
	# of Leases  (1)		Square Feet (1)		TI/LC Per Sq.Ft.		Changes in GAAP Rents		Changes in Cash Rents		Retention Rates		Weighted Average Lease Term (Mo.)
	New	Renewal	New	Renewal
Quarter to Date	38	25	390,260	313,937	$	38.03	15.4	%	(0.7	)%	53.3	%	87
Year to Date	83	58	829,386	718,837	33.49		13.0	%	1.3	%	48.4	%	73

Information on Leases Executed

	1st & 2nd Generation				2nd Generation
	# of Leases (2)		Square Feet (2)		TI/LC Per Sq.Ft.		Changes in GAAP Rents		Changes in Cash Rents		Weighted Average Lease Term (Mo.)
	New	Renewal	New	Renewal
Quarter to Date (3)	31	25	206,552	313,937	$	37.70	15.8	%	(1.6	)%	93
Year to Date (4)	82	58	577,343	718,837	35.60		14.2	%	1.8	%	79

________________________

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

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

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

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

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Stabilized Portfolio Capital Expenditures

($ in thousands)

	Q1 2014		Q2 2014		Q3 2014		Total 2014
1st Generation (Nonrecurring) Capital Expenditures:
Capital Improvements	$	8,031	$	2,751	$	4,794	$	15,576
Tenant Improvements & Leasing Commissions (1)	10,936		4,223		2,398		17,557
Total	$	18,967	$	6,974	$	7,192	$	33,133
	Q1 2014		Q2 2014		Q3 2014		Total 2014
2nd Generation (Recurring) Capital Expenditures:
Capital Improvements	$	1,607	$	2,732	$	3,674	$	8,013
Tenant Improvements & Leasing Commissions (1)	11,460		16,374		16,400		44,234
Total	$	13,067	$	19,106	$	20,074	$	52,247

________________________

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

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Stabilized Portfolio Lease Expiration Summary Schedule

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

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

________________________

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

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Stabilized Portfolio Lease Expiration Schedule by Region

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

Year	Region	# of Expirations	Total Square Feet	% of Total Leased Sq. Ft.		Annualized Base Rent		% of Total Annualized Base Rent		Annualized Rent per Sq. Ft.
2014	Los Angeles	18	85,227	0.7	%	$	2,722	0.6	%	$	31.94
	San Diego	3	42,863	0.4	%	889		0.2	%	20.75
	San Francisco Bay Area	6	90,748	0.7	%	3,505		0.8	%	38.62
	Greater Seattle	3	50,129	0.4	%	1,175		0.3	%	23.45
	Total	30	268,967	2.2	%	$	8,291	1.9	%	$	30.83
2015	Los Angeles	58	331,522	2.6	%	$	10,877	2.5	%	$	32.81
	Orange County	4	24,232	0.2	%	760		0.2	%	31.35
	San Diego	22	467,875	3.8	%	11,985		2.7	%	25.62
	San Francisco Bay Area	15	303,831	2.4	%	11,752		2.6	%	38.68
	Greater Seattle	17	248,776	2.0	%	6,914		1.6	%	27.79
	Total	116	1,376,236	11.0	%	$	42,288	9.6	%	$	30.73
2016	Los Angeles	41	249,467	2.0	%	$	8,054	1.8	%	$	32.28
	Orange County	3	26,914	0.2	%	943		0.2	%	35.04
	San Diego	20	422,667	3.4	%	8,863		2.0	%	20.97
	San Francisco Bay Area	9	118,349	1.0	%	5,708		1.3	%	48.23
	Greater Seattle	11	129,214	1.0	%	3,084		0.7	%	23.87
	Total	84	946,611	7.6	%	$	26,652	6.0	%	$	28.16
2017	Los Angeles	51	447,294	3.6	%	$	14,979	3.4	%	$	33.49
	Orange County	10	92,303	0.7	%	3,394		0.8	%	36.77
	San Diego	15	704,408	5.7	%	22,319		5.0	%	31.68
	San Francisco Bay Area	17	255,590	2.0	%	10,763		2.4	%	42.11
	Greater Seattle	13	313,710	2.5	%	9,031		2.0	%	28.79
	Total	106	1,813,305	14.5	%	$	60,486	13.6	%	$	33.36
2018	Los Angeles	23	129,254	1.0	%	$	4,207	1.0	%	$	32.55
	Orange County	2	17,173	0.2	%	608		0.1	%	35.41
	San Diego	10	503,723	4.0	%	21,619		4.9	%	42.92
	San Francisco Bay Area	12	282,649	2.3	%	13,125		3.0	%	46.44
	Greater Seattle	13	372,212	3.0	%	11,862		2.7	%	31.87
	Total	60	1,305,011	10.5	%	$	51,421	11.7	%	$	39.40
2019 and Beyond	Los Angeles	68	1,852,723	14.9	%	$	61,912	14.0	%	$	33.42
	Orange County	9	101,758	0.8	%	4,086		0.9	%	40.15
	San Diego	37	1,683,263	13.5	%	59,680		13.5	%	35.45
	San Francisco Bay Area	50	2,148,906	17.3	%	96,178		21.7	%	44.76
	Greater Seattle	39	958,730	7.7	%	31,179		7.1	%	32.52
	Total	203	6,745,380	54.2	%	$	253,035	57.2	%	$	37.51

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Stabilized Portfolio Quarterly Lease Expirations for 2014 and 2015

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

	# of Expiring Leases	Total Square Feet	% of Total Leased Sq. Ft.		Annualized Base Rent		% of Total Annualized Base Rent		Annualized Rent per Sq. Ft.
2014:
Q4 2014	30	268,967	2.2	%	$	8,291	1.9	%	$	30.83
Total 2014	30	268,967	2.2	%	$	8,291	1.9	%	$	30.83
2015:
Q1 2015	26	183,023	1.5	%	$	7,039	1.6	%	$	38.46
Q2 2015	25	293,810	2.3	%	7,107		1.6	%	24.19
Q3 2015	47	637,989	5.1	%	20,230		4.6	%	31.71
Q4 2015	18	261,414	2.1	%	7,912		1.8	%	30.27
Total 2015	116	1,376,236	11.0	%	$	42,288	9.6	%	$	30.73

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Top Fifteen Tenants⁽¹⁾ 

($ in thousands)

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

________________________

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

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

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

19

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

2014 Operating Property Acquisitions

($ in millions)

COMPLETED OFFICE PROPERTY ACQUISITIONS	Submarket	Month of Acquisition	Number of Buildings	Rentable Square Feet	Purchase Price
1st Quarter
401 Terry Ave. N., Seattle, WA	Lake Union	March	1	140,605	$	106.1
2nd Quarter
None
3rd Quarter
None
TOTAL			1	140,605	$	106.1

20

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

2014 Dispositions and Properties Held for Sale

($ in millions)

COMPLETED OFFICE PROPERTY DISPOSITIONS
Property	Submarket	Month of Disposition	No. of Buildings	Rentable Square Feet	Sales Price (1)
1st Quarter
San Diego Properties,San Diego, CA (2)	I-15 Corridor/Sorrento Mesa	January	12	1,049,035	$	294.7
2nd Quarter
9785 and 9791 Towne Centre Drive, San Diego, CA	University Towne Center	June	2	126,000	29.5
3rd Quarter
111 Pacifica, Irvine, CA	Irvine	September	1	67,496	15.1
TOTAL DISPOSITIONS			15	1,242,531	$	339.3

COMPLETED LAND DISPOSITIONS
Property	Submarket	Month of Disposition	Gross Site Acreage	Month of Disposition	Sales Price (1)
2nd Quarter
10850 Via Frontera, San Diego, CA	I-15 Corridor/Rancho Bernardo	April	21.0	April	$	33.1

OFFICE PROPERTIES HELD FOR SALE AS OF SEPTEMBER 30, 2014
Property	Submarket	Anticipated Disposition	No. of Buildings	Rentable Square Feet	Sales Price (1)
4040 Civic Center Dr, San Rafael, CA	San Rafael	4Q 2014	1	130,237	$	34.9
999 Town & Country Rd, Orange, CA	Orange	4Q 2014	1	98,551	25.3
Total properties held for sale			2	228,788	$	60.2

________________________

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

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

21

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Completed Development and Redevelopment Projects and Other Land Holdings

($ in millions)

Completed Development Projects	Location	Start Date	Completion Date	Rentable Square Feet	Total Estimated Investment		% Occupied
1st Quarter
None
2nd Quarter
None
3rd Quarter
505, 555 and 605 N. Mathilda Avenue	Sunnyvale	4Q 2012	3Q 2014	587,429	$	300.0	100%

Completed Redevelopment Projects

Location

Start Date

Completion Date

Stabilization Date

Rentable Square Feet

Existing Investment (1)

Estimated Redevelopment Costs

Total Estimated Investment

% Occupied

1st Quarter

360 Third Street

San Francisco

4Q 2011

1Q 2013

1Q 2014

429,996

$

88.5

$

99.3

$

188.2

99.2%

2nd Quarter

None

3rd Quarter

None

	Gross Site	Estimated Rentable	Total Costs as of
Other Land Holdings	Acreage	Square Feet	9/30/2014 (2)
IRVINE, CALIFORNIA
17150 Von Karman	8.5	N/A	$	8.2

________________________

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

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

22

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

In-Process and Future Development Pipeline

($ in millions)

	Location	Estimated Construction Period		Estimated Stabilization Date	Estimated Rentable Square Feet	Total Estimated Investment		Total Costs as of 9/30/2014 (1)		Office % Leased
		Start Date	Compl. Date
UNDER CONSTRUCTION:
San Francisco Bay Area
680 and 690 E. Middlefield Road	Mountain View	2Q 2012	4Q 2014	4Q 2014	341,000	$	193.4	$	171.6	100%
350 Mission Street	San Francisco	4Q 2012	4Q 2015	1Q 2016	450,000	276.6		161.8		100%
333 Brannan Street	San Francisco	4Q 2013	3Q 2015	3Q 2015	185,000	100.2		46.0		100%
Crossing/900 (2)	Redwood City	4Q 2013	3Q 2015	1Q 2017	339,000	188.0		98.0		100%
Los Angeles
Columbia Square (3)	Hollywood	2Q 2013 – 4Q 2013	1Q 2015 – 2Q 2016	1Q 2015 – 2Q 2017	685,000	407.2		164.0		20%
TOTAL:					2,000,000	$	1,165.4	$	641.4	79%
FUTURE DEVELOPMENT PIPELINE:
San Francisco Bay Area
Kilroy Mission Bay (4)	San Francisco	TBD	TBD	TBD	645,000	TBD		$	101.6	N/A
Los Angeles
Academy Project	Hollywood	TBD	TBD	TBD	475,000	TBD		51.0		N/A
San Diego
The Heights at Del Mar (5)	Del Mar	4Q 2014	4Q 2015	4Q 2016	73,000	$	45.0	11.5		N/A
9455 Towne Centre Drive (6)	San Diego	TBD	TBD	TBD	150,000	TBD		4.4		N/A
Carlsbad Oaks – Lots 4, 5, 7 & 8	Carlsbad	TBD	TBD	TBD	288,000	TBD		18.4		N/A
One Paseo (7)	Del Mar	TBD	TBD	TBD	500,000	TBD		157.9		N/A
Pacific Corporate Center – Lot 8	Sorrento Mesa	TBD	TBD	TBD	170,000	TBD		13.8		N/A
Santa Fe Summit – Phase II and III	56 Corridor	TBD	TBD	TBD	600,000	TBD		78.0		N/A
Sorrento Gateway – Lot 2	Sorrento Mesa	TBD	TBD	TBD	80,000	TBD		12.2		N/A
TOTAL:					2,981,000	TBD		$	448.8	N/A

________________________

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

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

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

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

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

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

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

23

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Capital Structure

As of September 30, 2014

($ in thousands)

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

________________________

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

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

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

24

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Debt Analysis

As of September 30, 2014 ($ in millions)

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

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

25

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Debt Analysis

($ in thousands)

DEBT MATURITY SCHEDULE
Floating/ Fixed Rate	Stated Rate	GAAP Effective Rate	Maturity Date	Remaining 2014		2015		2016		2017		2018		After 2018		Total (1)
Unsecured Debt:
Floating (2)	1.56%	1.56%	7/1/2019											$	150,000	$	150,000
Fixed	4.25%	7.13%	11/15/2014	135,481												135,481
Fixed	5.00%	5.01%	11/3/2015			325,000										325,000
Fixed	4.80%	4.83%	7/15/2018									325,000				325,000
Fixed	6.63%	6.74%	6/1/2020											250,000		250,000
Fixed	3.80%	3.80%	1/15/2023											300,000		300,000
Fixed	4.25%	4.35%	8/15/2029											400,000		400,000
Total unsecured debt	4.50%	4.73%		135,481		325,000		—		—		325,000		1,100,000		1,885,481
Secured Debt:
Fixed(3)	4.94%	4.00%	4/15/2015	284		26,206										26,490
Fixed(3)	5.09%	3.50%	8/7/2015			34,000										34,000
Fixed(3)	5.23%	3.50%	1/1/2016	221		908		50,969								52,098
Fixed(3)	5.57%	3.25%	2/11/2016	157		645		38,694								39,496
Fixed	6.51%	6.51%	2/1/2017	260		1,084		1,157		64,406						66,907
Fixed	7.15%	7.15%	5/1/2017	617		2,581		2,772		1,215						7,185
Fixed	4.27%	4.27%	2/1/2018	596		2,452		2,559		2,671		123,085				131,363
Fixed(3)	6.05%	3.50%	6/1/2019	368		1,531		1,626		1,727		1,835		74,479		81,566
Fixed	4.48%	4.48%	7/1/2027			646		1,600		1,673		1,749		91,332		97,000
Fixed	Various	Various	Various	25		51		54		56		59		2,202		2,447
Total secured debt	5.17%	4.29%		2,528		70,104		99,431		71,748		126,728		168,013		538,552
Total	4.65%	4.65%		$	138,009	$	395,104	$	99,431	$	71,748	$	451,728	$	1,268,013	$	2,424,033

________________________

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

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

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

26

Kilroy Realty Corporation

Third Quarter 2014 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 (“FFO”), in the Company’s earnings release on October 28, 2014 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 operating revenues (rental income, tenant reimbursements and other property income) less property and related expenses (property expenses, real estate taxes, provision for bad debts and ground leases). Other real estate investment trusts (“REITs”) may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.

Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other nonproperty income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a perspective on operations not immediately apparent from net income. The Company uses NOI to evaluate its operating performance on a portfolio basis since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and tenant base have on the 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, 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.

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 NOI for all of the properties that were owned and included in our stabilized portfolio for two comparable reporting periods. Because Same Store NOI excludes the change in NOI from developed, redeveloped, acquired and disposed of and held for sale properties that were operational for two comparable periods, it highlights operating trends such as occupancy levels, rental rates and operating costs on properties. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the 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, 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.

27

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

EBITDA:

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

Funds From Operations:

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

Management believes that FFO is a useful supplemental measure of the 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.

28

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures, continued

Funds Available for Distribution:

Management believes that Funds Available for Distribution (“FAD”) is a useful supplemental measure of the 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 and amortization of above (below) market rents for acquisition properties, then subtracting recurring tenant improvements, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements and other non-cash adjustments. FAD provides an additional perspective on the 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.

29

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Definitions Included in Supplemental

Annualized Base Rent:

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

Change in GAAP/ Cash Rents (Leases Commenced):

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

Change in GAAP/Cash Rents (Leases Executed):

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

Estimated Stabilization Date (Development):

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

FAD Payout Ratio:

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

First Generation Capital Expenditures:

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

Fixed Charge Coverage Ratio:

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

FFO Payout Ratio:

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

30

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Definitions Included in Supplemental, continued

GAAP Effective Rate:

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

Interest Coverage Ratio:

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

Lease-up Properties:

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

Net Effect of Straight-Line Rents:

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

Operating Margins:

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

Retention Rates (Leases Commenced):

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

Same Store Portfolio:

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

Stated Interest Rate:

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

31

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

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

(unaudited, $ in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Adjusted Same Store Cash Net Operating Income	$	66,178		$	62,341		$	204,650		$	188,384
Adjustments to 2014 and 2013:
Other income related to property damage settlement	—			—			—			5,225
Other property income related to a lease termination fee	5,655			—			5,655			—
Property expenses related to nonrecurring property damage legal fees	—			—			(1,670		)	(663		)
Same Store Cash Net Operating Income	$	71,833		$	62,341		$	208,635		$	192,946
Cash to GAAP Adjustments:
GAAP Operating Revenues Adjustments, net (2)	3,869			7,501			18,012			22,623
GAAP Operating Expenses Adjustments, net	40			(133		)	39			(226		)
Same Store GAAP Net Operating Income	75,742			69,709			226,686			215,343
Non-Same Store GAAP Net Operating Income	15,644			8,248			42,734			21,279
Net Operating Income excluding discontinued operations	91,386			77,957			269,420			236,622
Net Operating Income from discontinued operations	1,157			10,694			4,054			22,892
Net Operating Income, as defined (1)	92,543			88,651			273,474			259,514
Adjustments:
General and administrative expenses	(11,138		)	(10,226		)	(33,806		)	(29,750		)
Acquisition-related expenses	(431		)	(568		)	(1,268		)	(1,387		)
Depreciation and amortization (including discontinued operations)	(50,641		)	(50,650		)	(150,610		)	(150,345		)
Interest income and other net investment gains/(losses)	(9		)	673			587			1,084
Interest expense	(16,608		)	(18,853		)	(49,880		)	(58,021		)
Gain on sale of land	—			—			3,490			—
Gains on dispositions of discontinued operations	5,587			—			110,391			423
Net Income	19,303			9,027			152,378			21,518
Net income attributable to noncontrolling common units of the Operating Partnership	(321		)	(131		)	(3,011		)	(266		)
Preferred dividends	(3,313		)	(3,312		)	(9,938		)	(9,938		)
Net Income Available to Common Stockholders	$	15,669		$	5,584		$	139,429		$	11,314

________________________

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

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

32

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

Reconciliation of Net Income Available to Common Stockholders to EBITDA

(unaudited, $ in thousands)

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

________________________

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

33

Kilroy Realty Corporation

Third Quarter 2014 Supplemental Financial Report

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

(unaudited, $ in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Funds Available for Distribution(1)	$	37,667	$	23,899	$	113,407	$	81,467
Adjustments:
Tenant improvements, leasing commissions and recurring capital expenditures	20,074		24,684		52,247		58,163
Depreciation for furniture, fixtures and equipment	644		466		1,731		1,363
Preferred dividends	3,313		3,312		9,938		9,938
Provision for uncollectible tenant receivables	58		101		58		196
Net changes in operating assets and liabilities and other adjustments (2)	28,646		26,844		19,883		35,183
GAAP Net Cash Provided by Operating Activities	$	90,402	$	79,306	$	197,264	$	186,310

________________________

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

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

34