Kilroy Realty (KRC) 8-K Second Quarter 2005 Supplemental Financial Report

Exhibit 99.2

Contact:	FOR RELEASE:
Richard E. Moran Jr.	July 25, 2005
Executive Vice President
and Chief Financial Officer
(310) 481-8483
or
Tyler H. Rose
Senior Vice President
and Treasurer
(310) 481-8484

KILROY REALTY CORPORATION REPORTS

SECOND QUARTER FINANCIAL RESULTS

LOS ANGELES, CA, July 25, 2005 – Kilroy Realty Corporation(NYSE: KRC) today reported financial results for its second quarter ended June 30, 2005, with a net loss of $1.5 million, or $0.05 per share, compared to net income available for common shareholders of $7.9 million, or $0.28 per share, in the second quarter of 2004. Revenues from continuing operations totaled $60.0 million, compared to $53.1 million in the year-earlier period. Funds from operations (FFO) in the second quarter totaled $14.4 million, or $0.44 per share, compared to $23.4 million, or $0.72 per share, in the second quarter of 2004.

For the first six months of 2005, KRC reported net income available to common shareholders of $11.3 million, or $0.39 per share, compared to $13.8 million, or $0.49 per share, in the first half of 2004. Revenues from continuing operations in the six-month period totaled $119.3 million, up from $105.9 million in the same period of 2004.

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

“Our properties continued to perform well during the second quarter with occupancy in our stabilized portfolio increasing to 95%,” said John B. Kilroy, Jr., the company’s

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president and CEO. “We also executed a 178,000 square foot lease for three new buildings in Rancho Bernardo during the quarter which demonstrates the continued strength of our San Diego development pipeline,” he added.

Active projects in the company’s committed development and redevelopment programs include one building in lease-up totaling approximately 241,600 square feet, two buildings under construction totaling approximately 103,000 square feet, and five committed buildings totaling approximately 540,600 square feet. These development and redevelopment projects represent a total estimated investment of approximately $257 million, of which $98 million has been spent to date.

Earnings guidance for 2005 will be discussed by KRC management during the company’s July 26, 2005 earnings conference call. The call will begin at 11:00 a.m. PDT and last approximately one hour. Those interested in listening via the Internet can access the conference call at www.kilroyrealty.com. Please go to the website 15 minutes before the call and register. It may be necessary to download audio software to hear the conference call. Those interested in listening via telephone can access the conference call at (800) 706-7745, reservation #96369098. A replay of the conference call will be available via phone through August 5, 2005 at (888) 286-8010, reservation #41255891 or via the Internet at the company’s website.

Some of the information presented in this release is forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Although Kilroy Realty Corporation believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from Kilroy Realty’s expectations are set forth as risk factors in the company’s Securities and Exchange Commission reports and filings. Included among these factors are changes in general economic conditions, including changes in the economic conditions affecting industries in which its principal tenants compete; Kilroy Realty’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs, including utility costs; fluctuations in the company’s share price and the resulting impact on general and administrative costs, future demand for its debt and equity securities; its ability to refinance its debt on reasonable terms at

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maturity; its ability to complete current and future development projects on schedule and on budget; the demand for office space in markets in which Kilroy Realty has a presence; and other risks detailed from time to time in the company’s SEC reports, including quarterly reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K. Many of these factors are beyond Kilroy Realty’s ability to control or predict. Forward-looking statements are not guarantees of performance. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Kilroy Realty Corporation, a member of the S&P Small Cap 600 Index, is a Southern California-based real estate investment trust active in the office and industrial property sectors. For more than 50 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of California and Washington. KRC is currently active in office development and redevelopment in Los Angeles and San Diego counties. At June 30, 2005, the company owned 7.6 million square feet of commercial office space and 4.4 million square feet of industrial space. More information is available atwww.kilroyrealty.com.

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KILROY REALTY CORPORATION SUMMARY QUARTERLY RESULTS

(unaudited, in thousands, except per share data)

	Three Months Ended June 30, 2005			Three Months Ended June 30, 2004		Six Months Ended June 30, 2005			Six Months Ended June 30, 2004
Revenues from continuing operations	$	60,033		$	53,115	$	119,272		$	105,885
Revenues including discontinued operations	$	60,054		$	54,921	$	120,372		$	110,347
Net (loss) income available to common stockholders (1)	$	(1,466	)	$	7,854	$	11,278		$	13,838
Weighted average common shares outstanding—basic		28,739			28,220		28,648			28,168
Weighted average common shares outstanding—diluted		28,739			28,362		28,798			28,333
Net (loss) income per share of common stock—basic	$	(0.05	)	$	0.28	$	0.39		$	0.49
Net (loss) income per share of common stock—diluted	$	(0.05	)	$	0.28	$	0.39		$	0.49
Funds From Operations (2) (3)	$	14,427		$	23,385	$	39,432		$	44,341
Weighted average common shares/units outstanding—basic (4)		32,458			32,316		32,439			32,292
Weighted average common shares/units outstanding—diluted (4)		32,594			32,457		32,589			32,456
Funds From Operations per common share/unit—basic (4)	$	0.44		$	0.72	$	1.22		$	1.37
Funds From Operations per common share/unit—diluted (4)	$	0.44		$	0.72	$	1.21		$	1.37
Common shares outstanding at end of period							28,900			28,398
Common partnership units outstanding at end of period							3,717			4,082
Total common shares and units outstanding at end of period							32,617			32,480
						June 30, 2005			June 30, 2004
Stabilized portfolio occupancy rates:
Los Angeles							92.4	%		82.9	%
Orange County							98.5	%		96.5	%
San Diego							94.3	%		94.4	%
Other							93.0	%		93.1	%
Weighted average total							95.2	%		92.0	%
Total square feet of stabilized properties owned at end of period:
Office							7,607			7,185
Industrial							4,358			4,878
Total							11,965			12,063

(1) Net income after minority interests.

(2) Reconciliation of Net Income to Funds From Operations and management statement on Funds From Operations are included after the Consolidated Statements of Operations.

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

(4) Calculated based on weighted average shares outstanding assuming conversion of all common limited partnership units outstanding.

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KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

	June 30, 2005			December 31, 2004
ASSETS
REAL ESTATE ASSETS:
Land and improvements	$	296,412		$	304,033
Buildings and improvements, net		1,431,039			1,445,918
Undeveloped land and construction in progress		133,466			96,545
Total real estate held for investment		1,860,917			1,846,496
Accumulated depreciation and amortization		(382,687	)		(365,831	)
Real estate held for investment, net		1,478,230			1,480,665
Property held for sale, net		3,693			—
Total real estate assets, net		1,481,923			1,480,665
Cash and cash equivalents		7,706			4,853
Restricted cash		728			332
Current receivables, net		3,624			4,843
Deferred rent receivables, net		51,568			46,816
Deferred leasing costs and other related intangibles, net		49,073			51,251
Deferred financing costs, net		5,724			5,849
Prepaid expenses and other assets		6,246			5,046
TOTAL ASSETS	$	1,606,592		$	1,599,655
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES:
Secured debt	$	490,417		$	490,441
Unsecured senior notes		144,000			144,000
Unsecured line of credit		184,000			167,000
Accounts payable, accrued expenses and other liabilities		81,689			73,005
Accrued distributions		17,844			16,923
Rents received in advance, tenant security deposits and deferred revenue		20,734			21,605
Total liabilities		938,684			912,974
MINORITY INTERESTS:
7.45% Series A Cumulative Redeemable Preferred unitholders		73,638			73,638
Common unitholders of the Operating Partnership		53,934			60,351
Total minority interests		127,572			133,989
STOCKHOLDERS' EQUITY:
7.80% Series E Cumulative Redeemable Preferred stock		38,425			38,425
7.50% Series F Cumulative Redeemable Preferred stock		83,157			83,157
Common stock		289			286
Additional paid-in capital		522,321			515,285
Deferred compensation		(3,069	)		(1,412	)
Distributions in excess of earnings		(101,591	)		(83,394	)
Accumulated net other comprehensive income		804			345
Total stockholders' equity		540,336			552,692
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,606,592		$	1,599,655

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KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)

	Three Months Ended June 30, 2005			Three Months Ended June 30, 2004			Six Months Ended June 30, 2005			Six Months Ended June 30, 2004
REVENUES:
Rental income	$	53,461		$	47,925		$	106,729		$	94,835
Tenant reimbursements		6,169			5,062			11,920			10,386
Other property income		403			128			623			664
Total revenues		60,033			53,115			119,272			105,885
EXPENSES:
Property expenses		10,061			8,369			19,463			16,797
Real estate taxes		4,462			4,092			8,859			7,954
Provision for bad debts		272			385			1,405			610
Ground leases		443			332			848			662
General and administrative expenses		16,790			5,250			22,814			12,943
Interest expense		9,568			9,148			19,190			18,358
Depreciation and amortization		16,294			14,140			32,490			27,791
Total expenses		57,890			41,716			105,069			85,115
OTHER INCOME:
Interest and other income		54			78			111			385
Total other income		54			78			111			385
Income from continuing operations before minority interests		2,197			11,477			14,314			21,155
Minority interests:
Distributions on Cumulative Redeemable Preferred units		(1,397	)		(2,437	)		(2,794	)		(4,958	)
Minority interest in loss (earnings) of Operating Partnership attributable to continuing operations		206			(1,045	)		(782	)		(1,954	)
Total minority interests		(1,191	)		(3,482	)		(3,576	)		(6,912	)
Income from continuing operations		1,006			7,995			10,738			14,243
Discontinued operations:
Revenues from discontinued operations		21			1,806			1,100			4,462
Expenses from discontinued operations		(116	)		(1,005	)		(830	)		(2,337	)
Net (loss) gain on disposition of discontinued operations					(64	)		5,779			(64	)
Impairment loss on property held for sale											(726	)
Minority interest in loss (earnings) of Operating Partnership attributable to discontinued operations		25			(93	)		(705	)		(170	)
Total (loss) income from discontinued operations		(70	)		644			5,344			1,165
Net income		936			8,639			16,082			15,408
Preferred dividends		(2,402	)		(785	)		(4,804	)		(1,570	)
Net (loss) income available for common shareholders	$	(1,466	)	$	7,854		$	11,278		$	13,838
Weighted average shares outstanding—basic		28,739			28,220			28,648			28,168
Weighted average shares outstanding—diluted		28,739			28,362			28,798			28,333
Net (loss) income per common share—basic	$	(0.05	)	$	0.28		$	0.39		$	0.49
Net (loss) income per common share—diluted	$	(0.05	)	$	0.28		$	0.39		$	0.49

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KILROY REALTY CORPORATION FUNDS FROM OPERATIONS

(unaudited, in thousands, except per share data)

	Three Months Ended June 30, 2005			Three Months Ended June 30, 2004		Six Months Ended June 30, 2005			Six Months Ended June 30, 2004
Net (loss) income available for common shareholders	$	(1,466	)	$	7,854	$	11,278		$	13,838
Adjustments:
Minority interest in earnings Minority interest in (loss) earnings of Operating Partnership		(231	)		1,138		1,487			2,124
Depreciation and amortization		16,124			14,329		32,446			28,315
Net loss (gain) on dispositions of operating properties					64		(5,779	)		64
Funds From Operations (1) (2)	$	14,427		$	23,385	$	39,432		$	44,341
Weighted average common shares/units outstanding—basic		32,458			32,316		32,439			32,292
Weighted average common shares/units outstanding—diluted		32,594			32,457		32,589			32,456
Funds From Operations per common share/unit—basic	$	0.44		$	0.72	$	1.22		$	1.37
Funds From Operations per common share/unit—diluted	$	0.44		$	0.72	$	1.21		$	1.37

(1) Management believes that Funds From Operations ("FFO") is a useful supplemental measure of the Company's operating performance. The Company computes FFO in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The White Paper defines FFO as net income or loss computed in accordance with generally accepted accounting principles ("GAAP"), excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable operating property, 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. Other real estate investment trusts ("REITs") may use different methodologies for calculating FFO and, accordingly, the Company's FFO may not be comparable to other REITs.

Because FFO excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective on operating performance not immediately apparent from net income. In addition, management believes that FFO provides useful information to the investment community about the Company's operating performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.

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 that could materially impact the Company’s results of operations.

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

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