Kilroy Realty (KRC) 8-K First Quarter 2019 Supplemental Financial Report

Exhibit 99.1

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Table of Contents

	Page
Corporate Data and Financial Highlights
Company Background	1
Executive Summary	2
Financial Highlights	3
Net Income Available to Common Stockholders / FFO Guidance and Outlook	4
Common Stock Data	5
Consolidated Balance Sheets	6
Consolidated Statements of Operations	7
Funds From Operations and Funds Available for Distribution	8-9
Net Operating Income	10
Portfolio Data
Same Store Analysis	11
Stabilized Portfolio Occupancy Overview by Region	12-16
Information on Leases Commenced & Leases Executed	17
Stabilized Portfolio Capital Expenditures	18
Stabilized Portfolio Lease Expirations	19-21
Top Fifteen Tenants	22
Consolidated Ventures (Noncontrolling Property Partnerships)	23
Development
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; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect 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 for the year ended December 31, 2018, 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

First Quarter 2019 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 70 years of experience developing, acquiring and managing office and mixed-use real estate assets. At March 31, 2019, the Company’s stabilized portfolio totaled approximately 13.2 million square feet of office space that was 92.5% occupied, located in the coastal regions of Los Angeles, Orange County, 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 Los Angeles, CA 90064 (310) 481-8400 Web: www.kilroyrealty.com E-mail: investorrelations@kilroyrealty.com
Edward F. Brennan, PhD	Lead Independent	Jeffrey C. Hawken	Executive VP and COO
Jolie Hunt		Tracy Murphy	Executive VP, Life Science
Scott S. Ingraham		Robert Paratte	Executive VP, Leasing and Business Development
Gary R. Stevenson		Tyler H. Rose	Executive VP and CFO
Peter B. Stoneberg		Steve Rosetta	Executive VP and CIO
		Heidi R. Roth	Executive VP and Chief Administrative Officer
		Justin W. Smart	Executive VP, Development and Construction Services

Equity Research Coverage
Bank of America Merrill Lynch		Green Street Advisors
James Feldman	(646) 855-5808	Daniel Ismail	(949) 640-8780
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		RBC Capital Markets
Michael Bilerman	(212) 816-1383	Mike Carroll	(440) 715-2649
D. A. Davidson		Robert W. Baird & Co.
Barry Oxford	(212) 240-9871	David B. Rodgers	(216) 737-7341
Deutsche Bank Securities, Inc.		Scotiabank
Derek Johnston	(210) 250-5683	Nicholas Yulico	(212) 225-6904
Evercore ISI		Stifel, Nicolaus & Company
Steve Sakwa	(212) 446-9462	John W. Guinee III	(443) 224-1307
Goldman Sachs & Co.		Wells Fargo
Andrew Rosivach	(212) 902-2796	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.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Executive Summary

Quarterly Financial Highlights	Quarterly Operating Highlights
• Net income available to common stockholders per share of $0.36	• Stabilized portfolio was 92.5% occupied and 96.2% leased at quarter-end
• FFO per share of $0.95	• 381,235 square feet of leases commenced in the stabilized portfolio
- FFO for the first quarter 2019 included a positive $0.03 per share impact related
to the improved credit quality of a tenant for which the Company recorded a bad	• 203,370 square feet of leases executed in the stabilized portfolio
debt reserve in 2018
- The adoption of the new lease accounting standard requires expensing of	- GAAP rents increased approximately 50.1% from prior levels
internal leasing costs and third-party legal fees which had the impact of lowering
first quarter FFO by $0.02 per share when compared to what the results would	- Cash rents increased approximately 34.1% from prior levels
have been under the prior standard
• Revenues of $201.2 million
• Same Store GAAP NOI increased 3.2% compared to the prior year
• Same Store Cash NOI decreased 4.2% compared to the prior year
Capital Markets Highlights	Strategic Highlights
• In February, repaid at par a mortgage note for $74.3 million due June 2019	• In March, commenced construction on Phase I of Kilroy Oyster Point in South San
	Francisco and 9455 Towne Centre Drive in the University Towne Center submarket
• In March and April, executed 12-month forward equity sale agreements under the	of San Diego
ATM program for 1,201,204 shares at a weighted average sales price of $75.92	- Phase I of Kilroy Oyster Point encompasses approximately 630,000 square feet
	of office and lab space and represents a total estimated investment of $600.0
• As of the date of this report, the Company had not drawn down any portion of the	million
shares sold under the forward equity agreements, including the transaction executed	- 9455 Towne Centre Drive encompasses approximately 160,000 square feet of
in August 2018	office and lab space and represents a total estimated investment of $125.0 million
• As of the date of this report, $285.0 million was outstanding on our unsecured	• In March, transferred the $95.0 million retail component of One Paseo,
revolving credit facility	encompassing 96,000 square feet in the Del Mar submarket of San Diego, from
	under construction to the tenant improvement phase. The retail component is
	currently 92% leased

________________________

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

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Financial Highlights

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

		Three Months Ended
		3/31/2019 (1)			12/31/2018 (2)			9/30/2018			6/30/2018 (2)			3/31/2018
INCOME ITEMS:
	Revenues	$	201,202		$	190,842		$	186,562		$	187,072		$	182,822
	Lease Termination Fees, net	1,888			1,293			431			1,093			60
	Net Operating Income (3)	142,442			137,636			131,020			129,465			132,709
	Capitalized Interest and Debt Costs	19,437			19,519			19,156			15,811			13,582
	Net Income Available to Common Stockholders	36,903			160,220			34,400			27,549			36,246
	EBITDA, as adjusted (3) (4)	119,172			113,883			112,085			108,473			117,184
	Funds From Operations (4) (5) (6) (7)	99,812			81,330			94,247			88,629			96,285
	Net Income Available to Common Stockholders per common share – diluted (6)	$	0.36		$	1.58		$	0.33		$	0.27		$	0.36
	Funds From Operations per common share – diluted (4) (6) (7)	$	0.95		$	0.78		$	0.90		$	0.86		$	0.94
LIQUIDITY ITEMS:
	Funds Available for Distribution (5) (6) (8)	$	65,934		$	51,792		$	68,758		$	51,953		$	75,537
	Dividends per common share (6)	$	0.455		$	0.455		$	0.455		$	0.455		$	0.425
RATIOS:
	Net Operating Income Margins	70.8		%	72.1		%	70.2		%	69.2		%	72.6		%
	Fixed Charge Coverage Ratio	4.0x			3.7x			3.8x			3.9x			4.5x
	FFO Payout Ratio (4) (7)	46.9		%	57.5		%	49.6		%	52.7		%	44.5		%
	FAD Payout Ratio (8)	71.1		%	90.3		%	68.0		%	89.9		%	56.8		%
ASSETS:
	Real Estate Held for Investment before Depreciation	$	8,616,167		$	8,426,632		$	8,329,580		$	8,138,413		$	7,645,666
	Total Assets	7,883,987			7,765,707			7,562,236			7,384,784			6,965,932
CAPITALIZATION: (9)
	Total Debt	$	3,020,882		$	2,955,811		$	2,891,725		$	2,807,627		$	2,563,517
	Total Common Equity and Noncontrolling Interests in the Operating Partnership	7,823,144			6,462,321			7,367,745			7,762,978			7,160,602
	Total Market Capitalization	10,844,026			9,418,132			10,259,470			10,570,605			9,724,119
	Total Debt / Total Market Capitalization	27.9		%	31.4		%	28.2		%	26.6		%	26.4		%

______________________________________________________

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

(1) The Company adopted ASC 842 “Leases” effective January 1, 2019. Please refer to page 10 for a description of the impact of the adoption on our consolidated statements of operations.

(2) Net Income Available to Common Stockholders includes $142.9 million of gains on sales of depreciable operating properties, a $11.8 million gain on sale of land and a $12.6 million loss on early extinguishment of debt for the three months ended December 31, 2018 and $5.6 million of provision for bad debts for the three months ended June 30, 2018.

(3) Please refer to page 10 for the calculation of Net Operating Income and pages 34-35 for reconciliations of GAAP Net Income Available to Common Stockholders to Net Operating Income and EBITDA, as adjusted.

(4) EBITDA, as adjusted, and Funds From Operations include a $11.8 million gain on sale of land and $5.6 million of provision for bad debts for the three months ended December 31, 2018 and June 30, 2018, respectively. 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.

(5) Please refer to page 8 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 9 for a reconciliation of GAAP Net Cash Provided by Operating Activities to Funds Available for Distribution to common stockholders and unitholders.

(6) Reported amounts are attributable to common stockholders, common unitholders and restricted stock unit holders.

(7) Funds From Operations for the three months ended December 31, 2018 includes a $12.6 million loss on early extinguishment of debt.

(8) Funds Available for Distribution for the three months ended December 31, 2018 includes a$11.8 million cash loss on early extinguishment of debt.

(9) Please refer to page 26 for additional information regarding our capital structure.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Net Income Available to Common Stockholders / FFO Guidance and Outlook

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

The Company is providing an updated guidance range of NAREIT-defined FFO per diluted share for its fiscal year 2019 of $3.64 to $3.78 per share with a midpoint of $3.71 per share.

	Full Year 2019 Range
	Low End			High End
Net income available to common stockholders per share - diluted	$	1.49		$	1.63
Weighted average common shares outstanding - diluted (1)	105,700			105,700
Net income available to common stockholders	$	157,000		$	172,000
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership	3,200			3,600
Net income attributable to noncontrolling interests in consolidated property partnerships	17,000			20,000
Depreciation and amortization of real estate assets	241,000			241,000
Gains on sales of depreciable real estate	—			—
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships	(26,500		)	(29,500		)
Funds From Operations (2)	$	391,700		$	407,100
Weighted average common shares and units outstanding - diluted (3)	107,700			107,700
FFO per common share/unit - diluted (3)	$	3.64		$	3.78

Key 2019 assumptions include:

• Dispositions of approximately $150.0 million to $350.0 million

• Flat same store cash net operating income ⁽²⁾ 

• Year-end occupancy of 94.0% to 95.0%

• Total remaining development spending of approximately $400.0 million to $500.0 million

________________________

(1) Calculated based on estimated weighted average shares outstanding including non-participating share-based awards.

(2) See pages 30-31 for Management Statements on Funds From Operations and Same Store Cash Net Operating Income.

(3) Calculated based on weighted average shares outstanding including participating and non-participating share-based awards, dilutive impact of stock options, contingently issuable shares, and shares issuable under forward equity sale agreements and assuming the exchange of all common limited partnership units outstanding. Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.

The Company’s guidance estimates for the full year 2019, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this report, reflect management’s views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this report. Although these guidance estimates reflect the impact on the Company’s operating results of an assumed range of future disposition activity, these guidance estimates do not include any estimates of possible future gains or losses from possible future dispositions because the magnitude of gains or losses on sales of depreciable operating properties, if any, will depend on the sales price and depreciated cost basis of the disposed assets at the time of disposition, information that is not known at the time the Company provides guidance, and the timing of any gain recognition will depend on the closing of the dispositions, information that is also not known at the time the Company provides guidance and may occur after the relevant guidance period. We caution you not to place undue reliance on our assumed range of future disposition activity because any potential future disposition transactions will ultimately depend on the market conditions and other factors, including but not limited to the Company’s capital needs, the particular assets being sold and the Company’s ability to defer some or all of the taxable gain on the sales. These guidance estimates also do not include the impact on operating results from potential future acquisitions, possible capital markets activity, possible future impairment charges or any events outside of the Company’s control. There can be no assurance that the Company’s actual results will not differ materially from these estimates.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Common Stock Data (NYSE: KRC)

	Three Months Ended
	3/31/2019		12/31/2018		9/30/2018		6/30/2018		3/31/2018
High Price	$	76.50	$	72.34	$	76.67	$	77.34	$	74.27
Low Price	$	61.44	$	59.46	$	69.67	$	68.96	$	63.72
Closing Price	$	75.96	$	62.88	$	71.69	$	75.64	$	70.96
Dividends per share – annualized	$	1.82	$	1.82	$	1.82	$	1.82	$	1.70
Closing common shares (in 000’s) (1)	100,967		100,747		100,747		100,560		98,840
Closing common partnership units (in 000’s) (1)	2,023		2,025		2,025		2,071		2,071
	102,990		102,772		102,772		102,631		100,911

________________________

(1) As of the end of the period.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Consolidated Balance Sheets

(unaudited, $ in thousands)

	3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
ASSETS:
Land and improvements	$	1,184,496		$	1,160,138		$	1,127,100		$	1,127,100		$	1,127,100
Buildings and improvements	5,300,313			5,207,984			5,056,050			5,017,999			4,987,617
Undeveloped land and construction in progress	2,131,358			2,058,510			2,146,430			1,993,314			1,530,949
Total real estate assets held for investment	8,616,167			8,426,632			8,329,580			8,138,413			7,645,666
Accumulated depreciation and amortization	(1,441,506		)	(1,391,368		)	(1,411,529		)	(1,361,811		)	(1,312,612		)
Total real estate assets held for investment, net	7,174,661			7,035,264			6,918,051			6,776,602			6,333,054
Cash and cash equivalents	49,693			51,604			86,517			50,817			53,069
Restricted cash	6,300			119,430			—			—			—
Marketable securities	24,098			21,779			23,353			22,519			21,572
Current receivables, net	28,016			20,176			17,519			15,144			17,602
Deferred rent receivables, net	280,756			267,007			261,003			256,558			251,744
Deferred leasing costs and acquisition-related intangible assets, net	187,309			197,574			183,118			186,649			181,567
Right of use ground lease assets(1)	82,794			—			—			—			—
Prepaid expenses and other assets, net	50,360			52,873			72,675			76,495			107,324
TOTAL ASSETS	$	7,883,987		$	7,765,707		$	7,562,236		$	7,384,784		$	6,965,932
LIABILITIES AND EQUITY:
Liabilities:
Secured debt, net	$	259,878		$	335,531		$	336,866		$	338,189		$	339,501
Unsecured debt, net	2,552,883			2,552,070			2,207,049			2,156,521			2,155,794
Unsecured line of credit	185,000			45,000			330,000			295,000			50,000
Accounts payable, accrued expenses and other liabilities	373,691			374,415			360,674			278,508			223,973
Ground lease liabilities (1)	87,247			—			—			—			—
Accrued dividends and distributions	47,676			47,559			47,411			47,348			43,512
Deferred revenue and acquisition-related intangible liabilities, net	138,973			149,646			149,059			146,741			149,563
Rents received in advance and tenant security deposits	55,457			60,225			56,258			58,604			56,117
Total liabilities	3,700,805			3,564,446			3,487,317			3,320,911			3,018,460
Equity:
Stockholders’ Equity
Common stock	1,010			1,007			1,007			1,006			988
Additional paid-in capital	3,976,204			3,976,953			3,965,405			3,951,289			3,816,385
Distributions in excess of earnings	(62,690		)	(48,053		)	(161,654		)	(149,368		)	(130,514		)
Total stockholders’ equity	3,914,524			3,929,907			3,804,758			3,802,927			3,686,859
Noncontrolling Interests
Common units of the Operating Partnership	78,413			78,991			76,486			78,223			77,240
Noncontrolling interests in consolidated property partnerships	190,245			192,363			193,675			182,723			183,373
Total noncontrolling interests	268,658			271,354			270,161			260,946			260,613
Total equity	4,183,182			4,201,261			4,074,919			4,063,873			3,947,472
TOTAL LIABILITIES AND EQUITY	$	7,883,987		$	7,765,707		$	7,562,236		$	7,384,784		$	6,965,932

________________________

(1) Effective January 1, 2019, the Company adopted ASC 842 “Leases,” which requires right of use assets and liabilities for leases in which the Company is the lessee to be presented on the Company’s consolidated balance sheets.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Consolidated Statements of Operations

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

	Three Months Ended, March 31
	2019			2018
REVENUES
Rental income (1)	$	199,382		$	162,871
Tenant reimbursements (1)	—			19,150
Other property income (1)	1,820			801
Total revenues	201,202			182,822
EXPENSES
Property expenses (1)	38,149			31,671
Real estate taxes (1)	18,639			17,146
Provision for bad debts (1)	—			(265		)
Ground leases (1)	1,972			1,561
General and administrative expenses	23,341			15,559
Leasing costs (1)	1,757			—
Depreciation and amortization	66,135			62,715
Total expenses	149,993			128,387
OTHER (EXPENSES) INCOME
Interest income and other net investment gain	1,828			34
Interest expense	(11,243		)	(13,498		)
Total other (expenses) income	(9,415		)	(13,464		)
NET INCOME	41,794			40,971
Net income attributable to noncontrolling common units of the Operating Partnership	(700		)	(751		)
Net income attributable to noncontrolling interests in consolidated property partnerships	(4,191		)	(3,974		)
Total income attributable to noncontrolling interests	(4,891		)	(4,725		)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	36,903		$	36,246
Weighted average common shares outstanding – basic	100,901			98,744
Weighted average common shares outstanding – diluted	101,443			99,214
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE
Net income available to common stockholders per share – basic	$	0.36		$	0.36
Net income available to common stockholders per share – diluted	$	0.36		$	0.36

________________________

(1) Effective January 1, 2019, the Company adopted ASC 842 “Leases.” Please refer to page 10 for a description of the changes made to our 2019 consolidated statement of operations upon adoption of ASC 842 “Leases.” In accordance with the adoption of the new standard under the modified retrospective method, previously reported periods are not restated for the impact of the standard.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution

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

	Three Months Ended, March 31
	2019			2018
FUNDS FROM OPERATIONS: (1)
Net income available to common stockholders	$	36,903		$	36,246
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership	700			751
Net income attributable to noncontrolling interests in consolidated property partnerships	4,191			3,974
Depreciation and amortization of real estate assets	64,971			61,677
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships	(6,953		)	(6,363		)
Funds From Operations (1)(2)	$	99,812		$	96,285
Weighted average common shares/units outstanding – basic (3)	104,062			102,030
Weighted average common shares/units outstanding – diluted (4)	104,603			102,499
FFO per common share/unit – basic (1)	$	0.96		$	0.94
FFO per common share/unit – diluted (1)	$	0.95		$	0.94
FUNDS AVAILABLE FOR DISTRIBUTION: (1)
Funds From Operations (1)(2)	$	99,812		$	96,285
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures	(21,583		)	(13,994		)
Amortization of deferred revenue related to tenant-funded tenant improvements (2)(5)	(3,817		)	(4,281		)
Net effect of straight-line rents	(16,511		)	(5,353		)
Amortization of net below market rents (6)	(2,094		)	(2,543		)
Amortization of deferred financing costs and net debt discount/premium	135			315
Non-cash executive compensation expense (7)	7,584			3,598
Other lease related adjustments, net and leasing costs (8)	35			1,287
Adjustments attributable to noncontrolling interests in consolidated property partnerships	2,373			223
Funds Available for Distribution (1)	$	65,934		$	75,537

________________________

(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 $3.8 million and $4.3 million for the three months ended March 31, 2019 and 2018, 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-participating share-based awards, dilutive impact of stock options, contingently issuable shares, and shares issuable under forward equity sale agreements 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.

(8) Includes other cash and non-cash adjustments attributable to lease-related matters including GAAP revenue recognition timing differences and leasing costs.

8

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

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

(unaudited, $ in thousands)

	Three Months Ended March 31,
	2019			2018
GAAP Net Cash Provided by Operating Activities	$	99,790		$	94,109
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures	(21,583		)	(13,994		)
Depreciation of non-real estate furniture, fixtures and equipment	(1,164		)	(1,038		)
Net changes in operating assets and liabilities (1)	(5,962		)	6,377
Noncontrolling interests in consolidated property partnerships’ share of FFO and FAD	(4,580		)	(6,140		)
Cash adjustments related to investing and financing activities	(567		)	(3,777		)
Funds Available for Distribution(2)	$	65,934		$	75,537

_______________________

(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.

9

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Net Operating Income ⁽¹⁾ 

(unaudited, $ in thousands)

	Three Months Ended, March 31
	2019 (2)		2018 As Reported			2018 As Adjusted (3)		% Change 2019 vs. 2018 As Adjusted
Operating Revenues:
Rental income	$	171,882	$	162,871		$	161,945	6.1	%
Tenant reimbursements	27,500		19,150			22,675		21.3	%
Other property income	1,820		801			1,992		(8.6	)%
Total operating revenues	201,202		182,822			186,612		7.8	%
Operating Expenses:
Property expenses	38,149		31,671			35,196		8.4	%
Real estate taxes	18,639		17,146			16,684		11.7	%
Provision for bad debts	—		(265		)	—		—	%
Ground leases	1,972		1,561			2,023		(2.5	)%
Total operating expenses	58,760		50,113			53,903		9.0	%
Net Operating Income	$	142,442	$	132,709		$	132,709	7.3	%

________________________

(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) Effective January 1, 2019, the Company adopted ASC 842 “Leases,” which required the following changes for all periods beginning and subsequent to January 1, 2019. In accordance with the adoption of the new standard under the modified retrospective method, previously reported periods are not restated for the impact of the standard.

- All lease related revenue required to be reported as a single component within rental income. For the three months ended March 31, 2019, rental income includes $27.5 million of tenant reimbursements and $3.3 million of lease termination fees. For this analysis, tenant reimbursements have been broken out from rental income for comparison purposes.

- Rental income to be presented net of provision for bad debts. For the three months ended March 31, 2019, rental income includes a recovery of provision for bad debts of $3.5 million.

- All property expenses paid directly by the Company and reimbursed by the tenant to be presented on a gross basis. For the three months ended March 31, 2019, rental income and property expenses both include $3.0 million of additional tenant reimbursements and the related property expenses, which were previously shown net in property expenses in prior periods. This change has no impact to net income, Net Operating Income or Funds From Operations.

- Non-tenant parking income to be presented in other property income instead of rental income since recognized under ASC 606 “Revenue from Contracts with Customers” and outside the scope of ASC 842 “Leases.”

- Real estate taxes for properties where the Company is a lessee under ground leases to be presented in ground leases instead of real estate taxes. For the three months ended March 31, 2019, ground leases includes $0.5 million of property taxes for properties where the Company is a lessee.

(3) The components of Net Operating Income for the three months ended March 31, 2018 have been presented as if we adopted ASC 842 “Leases” effective January 1, 2018 for comparison purposes. For this analysis, tenant reimbursements have been broken out from rental income for comparison purposes. For the three months ended March 31, 2018 as adjusted, rental income includes $0.4 million of lease termination fees.

10

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Same Store Analysis ⁽¹⁾ 

(unaudited, $ in thousands)

		Three Months Ended, March 31
		2019			2018			2018 As Adjusted (2)			% Change 2019 vs. 2018 As Adjusted
	Total Same Store Portfolio
	Office Portfolio
	Number of properties	90			90			90
	Square Feet	12,980,793			12,980,793			12,980,793
	Percent of Stabilized Portfolio	98.1		%	93.6		%	93.6		%
	Average Occupancy	93.2		%	94.9		%	94.9		%
	Operating Revenues: (3) (4)
	Rental income(5)	$	160,300		$	155,886		$	154,949		3.5	%
	Tenant reimbursements	23,959			17,578			21,006			14.1	%
	Other property income	1,752			768			1,990			(12.0	)%
	Total operating revenues	186,011			174,232			177,945			4.5	%
	Operating Expenses: (4)
	Property expenses	36,511			30,164			33,592			8.7	%
	Real estate taxes	16,630			15,989			15,528			7.1	%
	Provision for bad debts	—			(285		)	—			—	%
	Ground leases	1,972			1,561			2,022			(2.5	)%
	Total operating expenses	55,113			47,429			51,142			7.8	%
	GAAP Net Operating Income	$	130,898		$	126,803		$	126,803		3.2	%
Same Store Analysis (Cash Basis) (6)
		Three Months Ended, March 31
		2019			2018			2018 As Adjusted (2)			% Change 2019 vs. 2018 As Adjusted
	Total operating revenues	$	166,305		$	163,723		$	167,151		(0.5	)%
	Total operating expenses	55,131			47,713			51,141			7.8	%
	Cash Net Operating Income	$	111,174		$	116,010		$	116,010		(4.2	)%

________________________

(1) Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2018 and still owned and included in the stabilized portfolio as of March 31, 2019. Same Store includes 100% of consolidated property partnerships as well as the residential tower at Columbia Square.

(2) The components of Net Operating Income for the three months ended March 31, 2018 have been presented as if we adopted ASC 842 “Leases” effective January 1, 2018 for comparison purposes.

(3) For this analysis, tenant reimbursements have been broken out from rental income.

(4) Please refer to page 10 for our Net Operating Income and a description of the changes made and their impact on our consolidated statements of operations effective January 1, 2019 upon adoption of ASC 842 “Leases.” For our same store portfolio, the gross-up presentation of property expenses paid directly by the Company and reimbursed by the tenant increased tenant reimbursements and property expenses by $2.8 million for the three months ended March 31, 2019. The impact of all other changes from the adoption of ASC 842 was the same for our consolidated portfolio and our same store portfolio.

(5) For the three months ended March 31, 2019, rental income includes lease termination fees of $1.5 million. For the three months ended March 31, 2018 as adjusted, rental income includes lease termination fees of $0.4 million.

(6) 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.

11

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region

		Portfolio Breakdown					Occupied at				Leased at
STABILIZED OFFICE PORTFOLIO	Buildings	YTD NOI %		SF %		Total SF	3/31/2019		12/31/2018 (1)		3/31/2019
Greater Los Angeles
101 Corridor	1	0.2	%	0.6	%	84,098	80.5	%	80.5	%	80.5	%
El Segundo	5	5.2	%	8.2	%	1,093,050	98.3	%	99.5	%	98.3	%
Hollywood	6	7.2	%	6.1	%	806,557	99.2	%	99.0	%	99.2	%
Long Beach	7	3.2	%	7.2	%	949,942	93.0	%	92.1	%	96.2	%
West Hollywood	4	1.3	%	1.4	%	178,699	95.1	%	95.9	%	95.1	%
West Los Angeles	10	6.1	%	6.4	%	844,151	93.3	%	90.3	%	94.8	%
Total Greater Los Angeles	33	23.2	%	29.9	%	3,956,497	95.6	%	95.1	%	96.7	%
Total Orange County	1	1.3	%	2.1	%	271,556	90.3	%	89.6	%	93.7	%
San Diego County
Del Mar	14	8.7	%	10.2	%	1,349,747	92.7	%	93.1	%	93.1	%
I-15 Corridor	5	1.4	%	4.1	%	540,892	81.8	%	77.5	%	82.9	%
Point Loma	1	0.5	%	0.8	%	107,456	100.0	%	100.0	%	100.0	%
University Towne Center	1	0.2	%	0.4	%	47,846	91.4	%	91.4	%	91.4	%
Total San Diego County	21	10.8	%	15.5	%	2,045,941	90.2	%	89.3	%	90.7	%
San Francisco Bay Area
Menlo Park	7	3.3	%	2.9	%	378,358	99.1	%	99.1	%	100.0	%
Mountain View	4	5.1	%	4.0	%	542,235	100.0	%	100.0	%	100.0	%
Palo Alto	2	1.8	%	1.3	%	165,585	100.0	%	100.0	%	100.0	%
Redwood City	2	4.2	%	2.6	%	347,269	99.1	%	99.1	%	100.0	%
San Francisco	9	30.1	%	22.0	%	2,918,152	88.0	%	94.9	%	97.0	%
South San Francisco	3	1.2	%	1.1	%	145,530	78.5	%	78.5	%	78.5	%
Sunnyvale	4	5.9	%	5.0	%	663,460	100.0	%	100.0	%	100.0	%
Total San Francisco Bay Area	31	51.6	%	38.9	%	5,160,589	92.5	%	96.4	%	97.7	%
Greater Seattle
Bellevue	2	6.1	%	6.9	%	917,027	93.8	%	89.5	%	97.5	%
Lake Union	6	7.0	%	6.7	%	884,763	83.7	%	97.8	%	97.8	%
Total Greater Seattle	8	13.1	%	13.6	%	1,801,790	88.8	%	93.6	%	97.7	%
TOTAL STABILIZED OFFICE PORTFOLIO	94	100.0	%	100.0	%	13,236,373	92.5	%	94.4	%	96.2	%
						Total No. of Units	Average Residential Occupancy
RESIDENTIAL PROPERTY		Submarket		Buildings			Quarter-to-Date
Greater Los Angeles
1550 N. El Centro Avenue		Hollywood		1		200	72.8%

Average Office Occupancy

Quarter-to-Date

93.1%

________________________

(1) Represents occupancy for properties in the stabilized portfolio as of the date presented, including properties sold subsequent to the date presented.

12

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

		Submarket	Square Feet	Occupied
Greater Los Angeles, California
	2829 Townsgate Road	101 Corridor	84,098	80.5	%
	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	94.0	%
	999 N. Pacific Coast Highway	El Segundo	128,588	97.0	%
	1500 N. El Centro Avenue	Hollywood	104,504	100.0	%
	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	100.0	%
	6121 W. Sunset Boulevard	Hollywood	91,173	100.0	%
	6255 W. Sunset Boulevard	Hollywood	323,920	97.9	%
	3750 Kilroy Airport Way	Long Beach	10,457	100.0	%
	3760 Kilroy Airport Way	Long Beach	165,278	92.5	%
	3780 Kilroy Airport Way	Long Beach	219,777	84.1	%
	3800 Kilroy Airport Way	Long Beach	192,476	96.1	%
	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	129,893	91.4	%
	8560 W. Sunset Boulevard	West Hollywood	71,875	100.0	%
	8570 W. Sunset Boulevard	West Hollywood	43,603	97.0	%
	8580 W. Sunset Boulevard	West Hollywood	7,126	100.0	%
	8590 W. Sunset Boulevard	West Hollywood	56,095	86.8	%
	12100 W. Olympic Boulevard	West Los Angeles	152,048	100.0	%
	12200 W. Olympic Boulevard	West Los Angeles	150,832	91.9	%
	12233 W. Olympic Boulevard	West Los Angeles	151,029	97.6	%
	12312 W. Olympic Boulevard	West Los Angeles	76,644	100.0	%
	1633 26th Street	West Los Angeles	43,857	50.3	%
	2100/2110 Colorado Avenue	West Los Angeles	102,864	100.0	%
	3130 Wilshire Boulevard	West Los Angeles	90,074	94.3	%
	501 Santa Monica Boulevard	West Los Angeles	76,803	82.2	%
	Total Greater Los Angeles		3,956,497	95.6	%

13

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First Quarter 2019 Supplemental Financial Report

Stabilized Office Portfolio Occupancy Overview by Region, continued

		Submarket	Square Feet	Occupied
Orange County, California
	2211 Michelson Drive	Irvine	271,556	90.3	%
	Total Orange County		271,556	90.3	%
San Diego, 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	39.4	%
	12390 El Camino Real	Del Mar	70,140	44.9	%
	12348 High Bluff Drive	Del Mar	38,806	100.0	%
	12780 El Camino Real	Del Mar	140,591	100.0	%
	12790 El Camino Real	Del Mar	78,836	100.0	%
	12770 El Camino Real	Del Mar	73,032	100.0	%
	12400 High Bluff Drive	Del Mar	209,220	100.0	%
	3579 Valley Centre Drive	Del Mar	52,418	100.0	%
	3611 Valley Centre Drive	Del Mar	129,656	100.0	%
	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	%
	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	37.3	%
	13520 Evening Creek Drive North	I-15 Corridor	146,701	91.9	%
	2305 Historic Decatur Road	Point Loma	107,456	100.0	%
	4690 Executive Drive	University Towne Center	47,846	91.4	%
	Total San Diego County		2,045,941	90.2	%

14

Kilroy Realty Corporation

First Quarter 2019 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	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	93.0	%
	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	97.3	%
	100 First Street	San Francisco	467,095	97.5	%
	303 Second Street	San Francisco	740,047	75.3	%
	201 Third Street	San Francisco	346,538	98.9	%
	360 Third Street	San Francisco	429,796	84.5	%
	250 Brannan Street	San Francisco	100,850	100.0	%
	301 Brannan Street	San Francisco	82,834	0.0	%
	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	52.2	%
	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	76,031	100.0	%
	Total San Francisco Bay Area		5,160,589	92.5	%

15

Kilroy Realty Corporation

First Quarter 2019 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	89.7	%
	10900 NE 4th Street	Bellevue	428,557	98.4	%
	837 N. 34th Street	Lake Union	112,487	83.0	%
	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	32.1	%
	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	88.8	%
	TOTAL		13,236,373	92.5	%

16

Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Information on Leases Commenced⁽¹⁾ 

	1st & 2nd Generation						2nd Generation
	# of Leases  (2)		Square Feet (2)		Retention Rates		TI/LC Per Sq.Ft. (3)		TI/LC Per Sq.Ft. /Year (3)		Changes in GAAP Rents		Changes in Cash Rents		Weighted Average Lease Term (Mo.)
	New	Renewal	New	Renewal
Quarter to Date	12	16	222,613	158,622	23.1	%	$	30.01	$	5.14	28.1	%	11.1	%	70

Information on Leases Executed⁽¹⁾ 

	1st & 2nd Generation				2nd Generation
	# of Leases (4)		Square Feet (4)		TI/LC Per Sq.Ft. (3)		TI/LC Per Sq.Ft. /Year (3)		Changes in GAAP Rents		Changes in Cash Rents		Weighted Average Lease Term (Mo.)
	New	Renewal	New	Renewal
Quarter to Date (5)	10	16	44,748	158,622	$	29.46	$	5.20	50.1	%	34.1	%	68

________________________

(1) Includes 100% of consolidated property partnerships.

(2) Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three months ended March 31, 2019, 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 required to be expensed under ASC 842 “Leases” effective January 1, 2019.

(4) Represents leasing activity for leases signed at properties in the stabilized portfolio during the three months ended March 31, 2019, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.

(5) During the three months ended March 31, 2019, nine new leases totaling 37,258 square feet were signed but not commenced as of March 31, 2019.

17

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First Quarter 2019 Supplemental Financial Report

Stabilized Portfolio Capital Expenditures

($ in thousands)

	Q1 2019
1st Generation (Nonrecurring) Capital Expenditures: (1)
Capital Improvements	$	1,767
Tenant Improvements & Leasing Commissions (2)	3,997
Total	$	5,764
	Q1 2019
2nd Generation (Recurring) Capital Expenditures: (1)
Capital Improvements	$	4,002
Tenant Improvements & Leasing Commissions (2)	17,581
Total	$	21,583

________________________

(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.

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First Quarter 2019 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Summary Schedule

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

Year of Expiration	# of Expiring Leases	Total Square Feet	% of Total Leased Sq. Ft.		Annualized Base Rent (1)		% of Total Annualized Base Rent		Annualized Rent per Sq. Ft.
Remaining 2019 (2)	69	855,656	7.2	%	$	42,896	7.6	%	$	50.13
2020	95	1,349,815	11.2	%	56,795		10.1	%	42.08
2021	85	916,833	7.6	%	39,589		6.9	%	43.18
2022	52	637,258	5.4	%	27,392		4.7	%	42.98
2023	72	1,272,018	10.7	%	66,431		11.6	%	52.22
2024	49	950,595	7.9	%	45,087		7.9	%	47.43
2025	29	533,220	4.4	%	26,246		4.6	%	49.22
2026	24	1,364,256	11.4	%	56,587		9.9	%	41.48
2027	23	1,217,266	10.2	%	50,429		8.9	%	41.43
2028	16	816,535	6.8	%	53,662		9.4	%	65.72
2029 and beyond	25	2,071,913	17.2	%	103,695		18.4	%	50.05
Total (3)	539	11,985,365	100.0	%	$	568,809	100.0	%	$	47.46

________________________

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

(2) Adjusting for leasing transactions executed as of March 31, 2019 but not yet commenced, the 2019 expirations would be reduced by 549,078square feet.

(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 March 31, 2019, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of March 31, 2019.

19

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First Quarter 2019 Supplemental Financial Report

Stabilized Portfolio Lease Expiration Schedule by Region

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

Year	Region	# of Expiring Leases	Total Square Feet	% of Total Leased Sq. Ft.		Annualized Base Rent (1)		% of Total Annualized Base Rent		Annualized Rent per Sq. Ft.
2019	Greater Los Angeles	38	178,406	1.5	%	$	6,848	1.2	%	$	38.38
	Orange County	4	72,897	0.6	%	3,102		0.5	%	42.55
	San Diego	9	55,141	0.5	%	2,141		0.4	%	38.83
	San Francisco Bay Area	12	522,791	4.4	%	29,925		5.3	%	57.24
	Greater Seattle	6	26,421	0.2	%	880		0.2	%	33.31
	Total	69	855,656	7.2	%	$	42,896	7.6	%	$	50.13
2020	Greater Los Angeles	52	464,321	3.9	%	$	18,621	3.3	%	$	40.10
	Orange County	5	38,526	0.3	%	1,238		0.2	%	32.13
	San Diego	14	254,962	2.1	%	10,153		1.8	%	39.82
	San Francisco Bay Area	20	503,283	4.2	%	24,222		4.3	%	48.13
	Greater Seattle	4	88,723	0.7	%	2,561		0.5	%	28.87
	Total	95	1,349,815	11.2	%	$	56,795	10.1	%	$	42.08
2021	Greater Los Angeles	47	313,760	2.6	%	$	12,538	2.2	%	$	39.96
	Orange County	5	72,299	0.6	%	2,556		0.4	%	35.35
	San Diego	13	235,674	2.0	%	9,258		1.6	%	39.28
	San Francisco Bay Area	12	266,788	2.2	%	14,336		2.5	%	53.74
	Greater Seattle	8	28,312	0.2	%	901		0.2	%	31.82
	Total	85	916,833	7.6	%	$	39,589	6.9	%	$	43.18
2022	Greater Los Angeles	31	278,050	2.3	%	$	12,605	2.2	%	$	45.33
	Orange County	2	6,898	0.1	%	269		—	%	39.00
	San Diego	7	198,982	1.7	%	6,854		1.2	%	34.45
	San Francisco Bay Area	6	83,868	0.7	%	5,141		0.9	%	61.30
	Greater Seattle	6	69,460	0.6	%	2,523		0.4	%	36.32
	Total	52	637,258	5.4	%	$	27,392	4.7	%	$	42.98
2023	Greater Los Angeles	32	368,453	3.1	%	$	18,416	3.2	%	$	49.98
	Orange County	3	17,738	0.1	%	709		0.1	%	39.97
	San Diego	11	225,060	1.9	%	9,140		1.6	%	40.61
	San Francisco Bay Area	20	569,849	4.8	%	35,049		6.2	%	61.51
	Greater Seattle	6	90,918	0.8	%	3,117		0.5	%	34.28
	Total	72	1,272,018	10.7	%	$	66,431	11.6	%	$	52.22
2024 and Beyond	Greater Los Angeles	56	2,004,635	16.7	%	$	87,153	15.3	%	$	43.48
	Orange County	3	32,316	0.3	%	1,209		0.2	%	37.41
	San Diego	26	845,371	7.1	%	38,407		6.8	%	45.43
	San Francisco Bay Area	47	2,784,688	23.2	%	159,186		28.0	%	57.16
	Greater Seattle	34	1,286,775	10.6	%	49,751		8.8	%	38.66
	Total	166	6,953,785	57.9	%	$	335,706	59.1	%	$	48.28

________________________

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

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First Quarter 2019 Supplemental Financial Report

Stabilized Portfolio Quarterly Lease Expirations for 2019 and 2020

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

	# of Expiring Leases	Total Square Feet	% of Total Leased Sq. Ft.		Annualized Base Rent (1)		% of Total Annualized Base Rent		Annualized Rent per Sq. Ft.
2019:
Q2 2019	25	202,324	1.7	%	$	7,990	1.4	%	$	39.49
Q3 2019	24	494,363	4.1	%	28,143		5.0	%	56.93
Q4 2019	20	158,969	1.4	%	6,763		1.2	%	42.54
Total 2019 (2)	69	855,656	7.2	%	$	42,896	7.6	%	$	50.13
2020:
Q1 2020	29	323,297	2.7	%	$	13,486	2.4	%	$	41.71
Q2 2020	21	239,895	2.0	%	9,931		1.7	%	41.40
Q3 2020	18	290,811	2.4	%	11,094		2.0	%	38.15
Q4 2020	27	495,812	4.1	%	22,284		4.0	%	44.94
Total 2020	95	1,349,815	11.2	%	$	56,795	10.1	%	$	42.08

________________________

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

(2) Adjusting for leasing transactions executed as of March 31, 2019 but not yet commenced, the 2019 expirations would be reduced by549,078 square feet.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Top Fifteen Tenants⁽¹⁾ 

($ in thousands)

Tenant Name	Region	Annualized Base Rental Revenue (2)		Rentable Square Feet	Percentage of Total Annualized Base Rental Revenue		Percentage of Total Rentable Square Feet
LinkedIn Corporation / Microsoft Corporation	San Francisco Bay Area	$	29,752	663,460	5.2	%	5.0	%
Adobe Systems Inc.	San Francisco Bay Area / Greater Seattle	27,897		501,573	4.9	%	3.8	%
salesforce.com, inc.	San Francisco Bay Area	24,076		451,763	4.2	%	3.4	%
DIRECTV, LLC	Greater Los Angeles	23,152		684,411	4.1	%	5.2	%
Box, Inc.	San Francisco Bay Area	22,441		371,792	4.0	%	2.8	%
Dropbox, Inc.	San Francisco Bay Area	17,501		291,784	3.1	%	2.2	%
Okta, Inc.	San Francisco Bay Area	17,129		207,066	3.0	%	1.6	%
Riot Games, Inc.	Greater Los Angeles	15,514		251,509	2.7	%	1.9	%
Synopsys, Inc.	San Francisco Bay Area	15,492		340,913	2.7	%	2.6	%
Viacom International, Inc.	Greater Los Angeles	13,718		211,343	2.4	%	1.6	%
Cisco Systems, Inc.	San Francisco Bay Area	10,792		147,288	1.9	%	1.1	%
Concur Technologies	Greater Seattle	10,643		288,322	1.9	%	2.2	%
Capital One, N.A.	San Francisco Bay Area	9,170		117,993	1.6	%	0.9	%
AMN Healthcare, Inc.	San Diego County	9,001		176,075	1.6	%	1.3	%
Stanford University School of Medicine	San Francisco Bay Area	8,461		128,688	1.5	%	1.0	%
Total Top Fifteen Tenants		$	254,739	4,833,980	44.8	%	36.6	%

________________________

(1) The information presented is as of March 31, 2019.

(2) Includes 100% of annualized base rental revenues of consolidated property partnerships.

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Kilroy Realty Corporation

First Quarter 2019 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	740,047	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.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

In-Process Development

($ in millions)

	Location	Construction Start Date	Estimated Stabilization Date (2)	Estimated Rentable Square Feet	Total Estimated Investment		Total Cash Costs Incurred as of 3/31/2019 (3)		Total Project % Leased	Total Project % Occupied
TENANT IMPROVEMENT(1)
Office
San Francisco Bay Area
100 Hooper (4)	SOMA	4Q 2016	2Q 2019	400,000	$	275.0	$	256.0	90%	82%
The Exchange on 16th (5)	Mission Bay	2Q 2015	3Q 2019 - 3Q 2020	750,000	585.0		478.9		99%	—%
Mixed-Use
San Diego County
One Paseo - Retail	Del Mar	4Q 2016	3Q 2019	96,000	95.0		83.4		92%	49%
TOTAL:				1,246,000	$	955.0	$	818.3	96%	30%

UNDER CONSTRUCTION	Location	Construction Start Date	Estimated Stabilization Date (2)	Estimated Rentable Square Feet	Total Estimated Investment		Total Cash Costs Incurred as of 3/31/2019 (3)		Office % Leased
Office / Life Science
San Francisco Bay Area
Kilroy Oyster Point - Phase I	South San Francisco	1Q 2019	3Q 2022	630,000	$	600.0	$	86.0	—%
San Diego County
9455 Towne Centre Drive	University Towne Center	1Q 2019	2Q 2021	160,000	125.0		19.6		—%
Greater Seattle
333 Dexter	South Lake Union	2Q 2017	3Q 2020	650,000	380.0		202.7		—%
Mixed-Use
Greater Los Angeles
Netflix // On Vine - Office	Hollywood	1Q 2018	1Q 2021	355,000	300.0		127.1		100%
Living // On Vine - Residential	Hollywood	4Q 2018	4Q 2020	193 Resi Units	195.0		58.7		N/A
San Diego County
One Paseo - Residential	Del Mar	4Q 2016	3Q 2019 - 3Q 2020	608 Resi Units	375.0		283.7		N/A
One Paseo - Office	Del Mar	4Q 2018	2Q 2021	285,000	205.0		99.5		60%
TOTAL:					$	2,180.0	$	877.3	26%

________________________

(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 residential, represents when construction is complete and the project is available for occupancy. 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.

(3) Represents costs incurred as of March 31, 2019, excluding accrued liabilities recorded in accordance with GAAP. Upon adoption of ASC 842 “Leases” effective January 1, 2019, also excludes leasing overhead.

(4) The office component of this project, which consists of approximately 312,000 rentable square feet, is 100% leased to Adobe Systems, Inc. and the lease commenced in October 2018. The remaining PDR space of approximately 88,000 rentable square feet is currently 52% leased and 18% occupied.

(5) The Company has an executed 15-year lease for 100% of the office space with Dropbox, Inc., which commenced in phases beginning in the fourth quarter of 2018 through the fourth quarter of 2019. The estimated stabilization dates for Phase I, Phase II, and Phase III are the third quarter of 2019, the fourth quarter of 2019, and the third quarter of 2020, respectively.

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First Quarter 2019 Supplemental Financial Report

Future Development Pipeline

($ in millions)

FUTURE DEVELOPMENT PIPELINE:	Location	Approx. Developable Square Feet (1)	Total Cash Costs Incurred as of 3/31/2019 (2)
San Diego County
2100 Kettner	Little Italy	175,000 - 200,000	$	25.1
Santa Fe Summit – Phases II and III	56 Corridor	600,000 - 650,000	78.2
San Francisco Bay Area
Kilroy Oyster Point - Phases II - IV	South San Francisco	1,750,000 - 1,900,000	279.0
Flower Mart	SOMA	TBD	233.3
TOTAL:			$	615.6

________________________

(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 March 31, 2019, excluding accrued liabilities recorded in accordance with GAAP.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Capital Structure

As of March 31, 2019

($ in thousands)

	Shares/Units March 31, 2019	Aggregate Principal Amount or $ Value Equivalent		% of Total Market Capitalization
DEBT: (1)
Unsecured Line of Credit		$	185,000	1.7	%
Unsecured Term Loan Facility		150,000		1.4	%
Unsecured Senior Notes due 2023		300,000		2.8	%
Unsecured Senior Notes due 2024		425,000		3.9	%
Unsecured Senior Notes due 2025		400,000		3.7	%
Unsecured Senior Notes Series A & B due 2026		250,000		2.3	%
Unsecured Senior Notes due 2028		400,000		3.7	%
Unsecured Senior Notes due 2029		400,000		3.7	%
Unsecured Senior Notes Series A & B due 2027 & 2029		250,000		2.3	%
Secured Debt		260,882		2.4	%
Total Debt		$	3,020,882	27.9	%
EQUITY AND NONCONTROLLING INTEREST IN THE OPERATING PARTNERSHIP: (2)
Common limited partnership units outstanding (3)	2,023,287	$	153,689	1.4	%
Shares of common stock outstanding (4)	100,967,024	7,669,455		70.7	%
Total Equity and Noncontrolling Interests in the Operating Partnership		$	7,823,144	72.1	%
TOTAL MARKET CAPITALIZATION		$	10,844,026	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) Value based on closing share price of $75.96 as of March 31, 2019.

(3) Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.

(4) Shares of common stock outstanding exclude 6,201,204 shares of common stock sold under forward equity sale agreements that remain to be settled as of the date of this report.

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Debt Analysis

As of March 31, 2019

TOTAL DEBT COMPOSITION
	Percent of Total Debt	Weighted Average
		Interest Rate	Years to Maturity
Secured vs. Unsecured Debt
Unsecured Debt	91.4%	4.0%	7.0
Secured Debt	8.6%	3.9%	7.9
Floating vs. Fixed-Rate Debt
Floating-Rate Debt	11.1%	3.5%	3.3
Fixed-Rate Debt	88.9%	4.1%	7.5
Stated Interest Rate		4.0%	7.1
GAAP Effective Rate		4.0%
GAAP Effective Rate Including Debt Issuance Costs		4.2%

KEY DEBT COVENANTS
	Covenant	Actual Performance as of March 31, 2019
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%	29%
Fixed charge coverage ratio	greater than 1.5x	3.3x
Unsecured debt ratio	greater than 1.67x	3.14x
Unencumbered asset pool debt service coverage	greater than 1.75x	4.22x
Unsecured Senior Notes due 2023, 2024, 2025, 2028 and 2029 (as defined in the Indentures):
Total debt to total asset value	less than 60%	34%
Interest coverage	greater than 1.5x	10.2x
Secured debt to total asset value	less than 40%	3%
Unencumbered asset pool value to unsecured debt	greater than 150%	293%

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Kilroy Realty Corporation

First Quarter 2019 Supplemental Financial Report

Debt Analysis

($ in thousands)

DEBT MATURITY SCHEDULE
Floating/ Fixed Rate	Stated Rate	Maturity Date	2019		2020		2021		2022		2023		After 2023		Total (1)
Unsecured Debt:
Floating	3.50%	7/31/2022							$	185,000					$	185,000
Floating	3.60%	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
Total unsecured debt	4.01%		—		—		—		335,000		300,000		2,125,000		2,760,000
Secured Debt:
Fixed	3.57%	12/1/2026			3,224		3,341		3,462		3,587		156,386		170,000
Fixed	4.48%	7/1/2027	1,380		1,913		2,001		2,092		2,188		81,308		90,882
Total secured debt	3.89%		1,380		5,137		5,342		5,554		5,775		237,694		260,882
Total	4.00%		$	1,380	$	5,137	$	5,342	$	340,554	$	305,775	$	2,362,694	$	3,020,882

________________________

(1) Represents the gross aggregate principal amount due at maturity before the effect of unamortized deferred financing costs and premiums and discounts.

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First Quarter 2019 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 May 6, 2019 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 after the adoption of the new lease accounting standard ASC 842 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). The Company defines NOI prior to the adoption of the new lease accounting standard ASC 842 as follows: consolidated operating revenues (rental income, tenant reimbursements and other property income) less consolidated 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 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.

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First Quarter 2019 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:

Management believes that consolidated earnings before interest expense, depreciation and amortization, gain/loss on early extinguishment of debt, gains and losses on depreciable 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.

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Kilroy Realty Corporation

First Quarter 2019 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, leasing commissions and capital expenditures and eliminating the net effect of straight-line rents, amortization of deferred revenue related to tenant improvements, adjusting for other lease related items 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.

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First Quarter 2019 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.

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Kilroy Realty Corporation

First Quarter 2019 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, 2018 and still owned and included in the stabilized portfolio as of March 31, 2019. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase 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

First Quarter 2019 Supplemental Financial Report

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

(unaudited, $ in thousands)

	Three Months Ended March 31,
	2019			2018
Net Income Available to Common Stockholders	$	36,903		$	36,246
Net income attributable to noncontrolling common units of the Operating Partnership	700			751
Net income attributable to noncontrolling interests in consolidated property partnerships	4,191			3,974
Net Income	41,794			40,971
Adjustments:
General and administrative expenses	23,341			15,559
Leasing costs	1,757			—
Depreciation and amortization	66,135			62,715
Interest income and other net investment loss (gain)	(1,828		)	(34		)
Interest expense	11,243			13,498
Net Operating Income, as defined (1)	142,442			132,709
Wholly-Owned Properties	122,834			114,513
Consolidated property partnerships: (2)
100 First Street (3)	6,015			4,749
303 Second Street (3)	7,798			7,673
Crossing/900 (4)	5,795			5,774
Net Operating Income, as defined (1)	142,442			132,709
Non-Same Store GAAP Net Operating Income (5)	(11,544		)	(5,906		)
Same Store GAAP Net Operating Income	130,898			126,803
GAAP to Cash Adjustments:
GAAP Operating Revenues Adjustments, net (6)	(19,706		)	(10,509		)
GAAP Operating Expenses Adjustments, net (7)	(18		)	(284		)
Same Store Cash Net Operating Income	$	111,174		$	116,010

________________________

(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 three office properties we acquired in the first quarter of 2018, one office property we acquired in the fourth quarter of 2018, eleven properties disposed of during the fourth quarter of 2018and 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

First Quarter 2019 Supplemental Financial Report

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

(unaudited, $ in thousands)

	Three Months Ended March 31,
	2019		2018
Net Income Available to Common Stockholders	$	36,903	$	36,246
Interest expense	11,243		13,498
Depreciation and amortization	66,135		62,715
Net income attributable to noncontrolling common units of the Operating Partnership	700		751
Net income attributable to noncontrolling interests in consolidated property partnerships	4,191		3,974
EBITDA, as adjusted (1)	$	119,172	$	117,184

________________________

(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.

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