KILROY REALTY CORP - FORM 8-K - EX-99.1

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EX-99.2 - EX-99.2 - KILROY REALTY CORP	exhibit992.htm
8-K - 8-K - KILROY REALTY CORP	krc-20210728.htm

Exhibit 99.1

Kilroy Realty Corporation

Second Quarter 2021 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
2021 Dispositions			23
Consolidated Ventures (Noncontrolling Property Partnerships)			24
Development
Stabilized Office Development Projects			25
In-Process Development			26
Future Development Pipeline			27
Debt and Capitalization Data
Capital Structure			28
Debt Analysis			29-30
Non-GAAP Supplemental Measures			31-33
Definitions & Reconciliations			34-37

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, Texas and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect Kilroy Realty Corporation’s business and financial performance, see the factors included under the caption “Risk Factors” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2020, and its other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. Kilroy Realty Corporation assumes no obligation to update any forward-looking statement made in this Supplemental Financial Report that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

Kilroy Realty Corporation

Second Quarter 2021 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 a leading U.S. landlord and developer. The Company has over seven decades of experience developing, acquiring and managing office, life science and mixed-use real estate assets. At June 30, 2021, the Company’s stabilized portfolio totaled approximately 14.2 million square feet of primarily office and life science space that was 91.8% occupied and 93.6% leased located in the coastal regions of Los Angeles, San Diego, the San Francisco Bay Area and Greater Seattle and 1,001 residential units in the Los Angeles and San Diego regions. The Company recently expanded its portfolio to Austin, Texas with its acquisition of the Indeed Tower development project.

Board of Directors

Executive and Senior Management Team

Investor Relations

John Kilroy

Chairman

John Kilroy

Chief Executive Officer

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

Tyler H. Rose

President

Jolie Hunt

Robert Paratte

Executive VP, Leasing and Business Development

Scott S. Ingraham

Heidi R. Roth

Executive VP, Chief Administrative Officer

Louisa Ritter

Justin W. Smart

Executive VP, Development and Construction Services

Gary R. Stevenson

Michelle Ngo

Senior VP, Chief Financial Officer and Treasurer

Peter B. Stoneberg

John Osmond

Senior VP, Head of Asset Management

Eliott Trencher

Senior VP, Chief Investment Officer

Merryl Werber

Senior VP, Chief Accounting Officer and Controller

Equity Research Coverage

BofA Securities

Jefferies LLC

James Feldman

(646) 855-5808

Peter Abramowitz

(212) 336-7241

BMO Capital Markets Corp.

J.P. Morgan

Frank Lee

(415) 591-2129

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

Emmanuel Korchman

(212) 816-1382

Mike Carroll

(440) 715-2649

Deutsche Bank Securities, Inc.

Robert W. Baird & Co.

Derek Johnston

(210) 250-5683

David B. Rodgers

(216) 737-7341

Evercore ISI

Scotiabank

Steve Sakwa

(212) 446-9462

Nicholas Yulico

(212) 225-6904

Goldman Sachs & Co. LLC

Wells Fargo

Caitlin Burrows

(212) 902-4736

Blaine Heck

(443) 263-6529

Green Street Advisors

Wolfe Research

Daniel Ismail

(949) 640-8780

Andrew Rosivach

(646) 582-9250

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.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Executive Summary



Quarterly Financial Highlights						Quarterly Operating Highlights

• Net income available to common stockholders per share of $0.30						• Stabilized portfolio was 91.8% occupied and 93.6% leased at quarter-end

• FFO per share of $0.88						• 204,114 square feet of leases commenced in the stabilized portfolio

• Revenues of $226.0 million						• 197,504 square feet of leases executed in the stabilized portfolio

• Same Store GAAP NOI increased 5.5% compared to the prior year						◦GAAP rents increased approximately 25.6% from prior levels

• Same Store Cash NOI increased 4.9% compared to the prior year						◦Cash rents increased approximately 8.7% from prior levels

						• Collected 97% of contractual second quarter rent billings across all property types,
						including 98% from office and life science









Capital Markets Highlights						Strategic Highlights

• In April, amended and restated the unsecured revolving credit facility (the “Credit						• In April, completed construction of Jardine, the Company's 193-unit residential project in
Facility”). The new sustainability-linked Credit Facility includes an increase in size from						the Hollywood submarket of Los Angeles, which is now 30% leased
$750.0 million to $1.1 billion, a reduction in borrowing costs and an extension of the
maturity date to July 31, 2025 with two six-month extension options						• In June, completed the acquisition of Indeed Tower in Austin, Texas, a new LEED
◦The Credit Facility now bears interest at LIBOR plus 0.900%						Platinum targeted, 36-story office project in the tenant improvement phase totaling
◦The Credit Facility also features a sustainability-linked pricing component whereby						approximately 734,000 square feet located in the heart of downtown Austin for $580.2
the pricing can improve if the Company meets certain sustainability performance						million
targets
						• In June, commenced construction on Kilroy Oyster Point Phase 2 (“KOP 2”), the second
• As of the date of this report, approximately $2.0 billion of total liquidity comprised of						phase of the Company’s five phase life science development in South San Francisco.
$465.0 million of cash and cash equivalents, $395.0 million of restricted cash and full						KOP 2 will include approximately 875,000 square feet in three buildings and has a total
availability under the $1.1 billion unsecured revolving credit facility						estimated investment of $940.0 million

						• In June, completed the acquisition of 2045 Pacific Highway in San Diego, a land site
						directly adjacent to the Company’s 2100 Kettner project in the Little Italy neighborhood for
						$42.0 million. The Company plans to develop up to 275,000 square feet of office space
						on the full city block site

						• In June, added a 92,042 square foot office building located at One Paseo in the Del Mar
						submarket of San Diego to the stabilized portfolio. A separate office building, totaling
						195,000 square feet, remains in the tenant improvement phase. The One Paseo office
						project is now 100% leased

						• In July, completed the acquisition of the land that was subject to a ground lease underlying
						the 490,738 square foot Key Center office building in Bellevue, Washington for $47.0
						million

________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 34-35 “Definitions Included in Supplemental.”

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Financial Highlights

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


		Three Months Ended
		6/30/2021			3/31/2021 (1)			12/31/2020 (1)			9/30/2020 (1)			6/30/2020 (1)
INCOME ITEMS:
	Revenues	$	225,983		$	235,646		$	229,332		$	228,314		$	219,423
	Lease Termination Fees, net	1,411			53			732			424			867
	Net Operating Income (2)	161,369			169,693			163,843			163,091			157,410
	Capitalized Interest and Debt Costs	18,073			16,908			18,280			19,339			20,516
	Net Income Available to Common Stockholders	35,839			497,631			78,642			49,028			19,618
	EBITDA, as adjusted (2)	137,316			148,389			141,882			145,402			120,321
	Funds From Operations (3)	104,595			116,244			112,703			117,391			93,089
	Net Income Available to Common Stockholders per common share – diluted (4)	$	0.30		$	4.26		$	0.67		$	0.42		$	0.17
	Funds From Operations per common share – diluted (3)	$	0.88		$	0.98		$	0.95		$	0.99		$	0.78
LIQUIDITY ITEMS:
	Funds Available for Distribution (3)	$	77,161		$	78,106		$	73,953		$	88,396		$	68,459
	Dividends per common share (4)	$	0.500		$	0.500		$	0.500		$	0.500		$	0.485
RATIOS:
	Net Operating Income Margins	71.4		%	72.0		%	71.4		%	71.4		%	71.7		%
	Fixed Charge Coverage Ratio	3.7x			4.0x			3.8x			4.0x			3.5x
	FFO Payout Ratio	56.2		%	50.6		%	52.0		%	49.9		%	61.0		%
	FAD Payout Ratio	76.2		%	75.3		%	79.2		%	66.3		%	83.0		%
ASSETS:
	Real Estate Held for Investment before Depreciation	$	10,552,076		$	9,792,161		$	10,190,046		$	10,086,784		$	9,945,221
	Total Assets	10,434,766			10,384,353			10,000,708			9,984,608			9,658,665
CAPITALIZATION: (5)
	Total Debt	$	3,951,720		$	3,953,049		$	3,954,365		$	3,955,668		$	3,681,958

	Total Common Equity and Noncontrolling Interests in the Operating Partnership	8,189,997			7,718,150			6,726,499			6,088,611			6,874,423
	Total Market Capitalization	12,141,717			11,671,199			10,680,864			10,044,279			10,556,381
	Total Debt / Total Market Capitalization	32.5		%	33.8		%	37.0		%	39.4		%	34.9		%

______________________________________________________

Note: Definitions for commonly used terms in this Supplemental Financial Report are on pages 34-35 “Definitions Included in Supplemental.”

(1)Net Income Available to Common Stockholders, EBITDA, as adjusted, and Fund From Operations include $19.7 million of severance costs for the three months ended June 30, 2020 and net charges of, $1.0 million, $3.6 million, $1.8 million and $5.9 million related to the creditworthiness of tenants as a result of the COVID-19 pandemic for the three months ended March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020, respectively. Net Income Available to Common Stockholder also includes $457.3 million and $35.5 million of gains on sale of depreciable operating properties for the three months ended March 31, 2021 and December 31, 2020.

(2)Please refer to pages 36-37 for reconciliations of GAAP Net Income Available to Common Stockholders to Net Operating Income and EBITDA, as adjusted. The Company’s calculation of EBITDA, as adjusted, is the same as EBITDAre, as defined by NAREIT, as the Company does not have any unconsolidated joint ventures.

(3)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.

(4)Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.

(5)Please refer to page 28 for additional information regarding our capital structure.

Kilroy Realty Corporation

Second Quarter 2021 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 a guidance range of NAREIT-defined FFO per diluted share for its fiscal year 2021 of $3.71 to $3.82 per share with a midpoint of $3.77 per share.


	Full Year 2021 Range
	Low End		High End
Net income available to common stockholders per share - diluted	$	5.33	$	5.44

Weighted average common shares outstanding - diluted (1)	117,650		117,650

Net income available to common stockholders	$	627,000	$	640,000
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership	6,400		6,500
Net income attributable to noncontrolling interests in consolidated property partnerships	22,500		24,500
Depreciation and amortization of real estate assets	278,000		278,000
Gains on sales of depreciable real estate	(458,000)		(458,000)
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships	(35,000)		(37,000)
Funds From Operations (2)	$	440,900	$	454,000

Weighted average common shares and units outstanding - diluted (3)	118,800		118,800

FFO per common share/unit - diluted (3)	$	3.71	$	3.82

Key 2021 assumptions include:

•Same Store Cash NOI growth of 2.0% to 2.5% (2)

•Year-end occupancy of approximately 91.5%

•Total remaining development spending of approximately $200.0 million to $250.0 million

________________________

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

(2)See pages 32-33 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 and contingently issuable shares, 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 2021, 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.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Common Stock Data (NYSE: KRC)


	Three Months Ended
	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020

High Price	$	73.74	$	69.05	$	64.31	$	60.98	$	68.88
Low Price	$	65.57	$	54.67	$	46.46	$	51.74	$	51.49
Closing Price	$	69.64	$	65.63	$	57.40	$	51.96	$	58.70

Dividends per share – annualized	$	2.00	$	2.00	$	2.00	$	2.00	$	1.94

Closing common shares (in 000s) (1)	116,454		116,450		116,036		115,247		115,177
Closing common partnership units (in 000s) (1)	1,151		1,151		1,151		1,932		1,935
	117,605		117,601		117,187		117,179		117,112

________________________

(1)As of the end of the period.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Consolidated Balance Sheets

(unaudited, $ in thousands)


	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020
ASSETS:
Land and improvements	$	1,551,653	$	1,539,542	$	1,628,848	$	1,612,224	$	1,546,209
Buildings and improvements	6,682,208		6,480,857		6,783,092		6,535,637		6,289,816
Undeveloped land and construction in progress	2,318,215		1,771,762		1,778,106		1,938,923		2,109,196
Total real estate assets held for investment	10,552,076		9,792,161		10,190,046		10,086,784		9,945,221
Accumulated depreciation and amortization	(1,900,740)		(1,838,338)		(1,798,646)		(1,744,325)		(1,684,837)
Total real estate assets held for investment, net	8,651,336		7,953,823		8,391,400		8,342,459		8,260,384

Cash and cash equivalents	519,307		657,819		731,991		849,009		605,012
Restricted cash	450,457		1,028,759		91,139		16,300		16,300
Marketable securities	25,885		24,089		27,481		25,073		23,175
Current receivables, net	9,773		12,855		12,007		16,083		20,925
Deferred rent receivables, net	384,475		370,470		386,658		375,939		358,914
Deferred leasing costs and acquisition-related intangible assets, net	184,510		190,721		210,949		208,306		209,637
Right of use ground lease assets	141,529		95,312		95,523		95,733		95,940
Prepaid expenses and other assets, net	67,494		50,505		53,560		55,706		68,378
TOTAL ASSETS	$	10,434,766	$	10,384,353	$	10,000,708	$	9,984,608	$	9,658,665
LIABILITIES AND EQUITY:
Liabilities:
Secured debt, net	$	251,000	$	252,298	$	253,582	$	254,854	$	256,113
Unsecured debt, net	3,672,152		3,671,094		3,670,099		3,668,976		3,399,105
Unsecured line of credit	—		—		—		—		—
Accounts payable, accrued expenses and other liabilities	429,168		408,552		445,100		458,421		401,378
Ground lease liabilities	143,885		97,617		97,778		97,936		98,093
Accrued dividends and distributions	59,455		59,472		59,431		59,416		57,600
Deferred revenue and acquisition-related intangible liabilities, net	122,902		123,794		128,523		131,558		129,264
Rents received in advance and tenant security deposits	62,739		68,634		68,874		61,483		63,523

Total liabilities	4,741,301		4,681,461		4,723,387		4,732,644		4,405,076
Equity:
Stockholders’ Equity
Common stock	1,165		1,165		1,160		1,152		1,152
Additional paid-in capital	5,134,320		5,122,584		5,131,916		5,089,926		5,084,362
Retained earnings (distributions in excess of earnings)	311,458		334,496		(103,133)		(122,936)		(113,223)
Total stockholders’ equity	5,446,943		5,458,245		5,029,943		4,968,142		4,972,291
Noncontrolling Interests
Common units of the Operating Partnership	53,810		53,930		49,875		83,226		83,502
Noncontrolling interests in consolidated property partnerships	192,712		190,717		197,503		200,596		197,796
Total noncontrolling interests	246,522		244,647		247,378		283,822		281,298
Total equity	5,693,465		5,702,892		5,277,321		5,251,964		5,253,589
TOTAL LIABILITIES AND EQUITY	$	10,434,766	$	10,384,353	$	10,000,708	$	9,984,608	$	9,658,665

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Consolidated Statements of Operations

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
REVENUES
Rental income (1)	$	224,473	$	218,356	$	459,129	$	436,989
Other property income	1,510		1,067		2,500		3,762
Total revenues	225,983		219,423		461,629		440,751
EXPENSES
Property expenses	40,482		37,829		79,341		76,812
Real estate taxes	22,109		21,854		47,375		44,056

Ground leases	2,023		2,330		3,851		4,647
General and administrative expenses (2)	24,507		38,597		46,492		57,607

Leasing costs	883		1,330		1,575		2,786
Depreciation and amortization	73,589		80,085		149,521		154,455
Total expenses	163,593		182,025		328,155		340,363
OTHER INCOME (EXPENSES)
Interest income and other net investment gain (loss)	1,337		2,838		2,710		(290)
Interest expense	(21,390)		(15,884)		(43,724)		(30,328)


Gain on sale of depreciable operating property (3)	543		—		457,831		—

Total other (expenses) income	(19,510)		(13,046)		416,817		(30,618)
NET INCOME	42,880		24,352		550,291		69,770
Net income attributable to noncontrolling common units of the Operating Partnership	(354)		(367)		(5,240)		(1,072)
Net income attributable to noncontrolling interests in consolidated property partnerships	(6,687)		(4,367)		(11,581)		(9,263)
Total income attributable to noncontrolling interests	(7,041)		(4,734)		(16,821)		(10,335)




NET INCOME AVAILABLE TO COMMON STOCKHOLDERS (1)	$	35,839	$	19,618	$	533,470	$	59,435
Weighted average common shares outstanding – basic	116,452		115,085		116,398		110,980
Weighted average common shares outstanding – diluted	116,917		115,540		116,860		111,465
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS PER SHARE
Net income available to common stockholders per share – basic	$	0.30	$	0.17	$	4.58	$	0.53
Net income available to common stockholders per share – diluted	$	0.30	$	0.17	$	4.56	$	0.52

________________________

(1)Net income available to common stockholders is presented net of charges related to the creditworthiness of tenants offset by charges attributable to noncontrolling interests in consolidated property partnerships. For the three and six months ended June 30, 2020, rental income includes reversals of revenue of $5.9 million and $12.4 million, respectively, for certain tenants primarily as a result of the COVID-19 pandemic.

(2)Includes $19.7 million and $20.3 million of severance costs for the three and six months ended June 30, 2020, respectively.

(3)The gain on sale recognized during the three months ended June 30, 2020 relates to trailing post-closing items for The Exchange on 16th, which was sold during the three months ended March 31, 2021.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Funds From Operations and Funds Available for Distribution

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
FUNDS FROM OPERATIONS: (1)
Net income available to common stockholders	$	35,839	$	19,618	$	533,470	$	59,435
Adjustments:
Net income attributable to noncontrolling common units of the Operating Partnership	354		367		5,240		1,072
Net income attributable to noncontrolling interests in consolidated property partnerships	6,687		4,367		11,581		9,263
Depreciation and amortization of real estate assets	72,037		75,981		146,468		148,419
Gain on sale of depreciable real estate	(543)		—		(457,831)		—
Funds From Operations attributable to noncontrolling interests in consolidated property partnerships	(9,779)		(7,244)		(18,089)		(14,927)
Funds From Operations (1)(2)	$	104,595	$	93,089	$	220,839	$	203,262
Weighted average common shares/units outstanding – basic (3)	118,340		118,218		118,337		114,125
Weighted average common shares/units outstanding – diluted (4)	118,806		118,673		118,798		114,609
FFO per common share/unit – basic (1)	$	0.88	$	0.79	$	1.87	$	1.78
FFO per common share/unit – diluted (1)	$	0.88	$	0.78	$	1.86	$	1.77
FUNDS AVAILABLE FOR DISTRIBUTION: (1)
Funds From Operations (1)(2)	$	104,595	$	93,089	$	220,839	$	203,262
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures	(20,486)		(22,366)		(47,395)		(39,429)
Amortization of deferred revenue related to tenant-funded tenant improvements (2)(5)	(4,711)		(8,019)		(8,915)		(13,021)
Net effect of straight-line rents	(14,005)		(6,562)		(30,898)		(20,977)
Amortization of net below market rents (6)	(1,013)		(1,914)		(2,194)		(4,500)
Amortization of deferred financing costs and net debt discount/premium	796		571		1,590		1,076
Non-cash executive compensation expense (7)	9,917		11,895		18,173		19,054


Lease related adjustments, leasing costs and other (8)	977		1,564		2,612		5,025
Adjustments attributable to noncontrolling interests in consolidated property partnerships	1,091		201		1,455		2,868
Funds Available for Distribution (1)	$	77,161	$	68,459	$	155,267	$	153,358

________________________

(1)See page 33 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 unitholders.

(2)FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $4.7 million and $8.0 million for the three months ended June 30, 2021 and 2020, respectively and $8.9 million and $13.0 million for the six months ended June 30, 2021 and 2020, 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 and contingently issuable shares, and assuming the exchange of all common limited partnership units outstanding.

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

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

(7)Includes non-cash amortization of share-based compensation and accrued potential future executive retirement benefits. Includes $4.1 million and $4.3 million of accelerated non-cash amortization of share-based compensation related to severance costs for the three and six months ended June 30, 2020, respectively.

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

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

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

(unaudited, $ in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
GAAP Net Cash Provided by Operating Activities	$	72,314	$	101,082	$	216,466	$	224,022
Adjustments:
Recurring tenant improvements, leasing commissions and capital expenditures	(20,486)		(22,366)		(47,395)		(39,429)



Depreciation of non-real estate furniture, fixtures and equipment	(1,552)		(4,104)		(3,053)		(6,036)

Net changes in operating assets and liabilities (1)	38,019		2,431		10,741		(11,151)
Noncontrolling interests in consolidated property partnerships’ share of FFO and FAD	(8,688)		(7,043)		(16,634)		(12,059)
Cash adjustments related to investing and financing activities	(2,446)		(1,541)		(4,858)		(1,989)

Funds Available for Distribution(2)	$	77,161	$	68,459	$	155,267	$	153,358

_______________________

(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 33 for a Management Statement on Funds Available for Distribution.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Net Operating Income (1)

(unaudited, $ in thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		% Change		2021		2020		% Change
Operating Revenues:
Rental income (2)(3)	$	198,239	$	188,604	5.1	%	$	401,451	$	375,619	6.9	%
Tenant reimbursements (3)	26,234		29,752		(11.8)	%	57,678		61,370		(6.0)	%
Other property income	1,510		1,067		41.5	%	2,500		3,762		(33.5)	%
Total operating revenues	225,983		219,423		3.0	%	461,629		440,751		4.7	%
Operating Expenses:
Property expenses	40,482		37,829		7.0	%	79,341		76,812		3.3	%
Real estate taxes	22,109		21,854		1.2	%	47,375		44,056		7.5	%

Ground leases	2,023		2,330		(13.2)	%	3,851		4,647		(17.1)	%
Total operating expenses	64,614		62,013		4.2	%	130,567		125,515		4.0	%
Net Operating Income	$	161,369	$	157,410	2.5	%	$	331,062	$	315,236	5.0	%

________________________

(1)Please refer to page 31 for Management Statements on Net Operating Income and page 36 for a reconciliation of GAAP Net Income Available to Common Stockholders to Net Operating Income.

(2)Rental income is presented net of charges related to the creditworthiness of tenants. For the three and six months ended June 30, 2020, rental income includes reversals of revenue of $5.9 million and $12.4 million, respectively, as a result of the COVID-19 pandemic.

(3)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Same Store Analysis (1)

(unaudited, $ in thousands)



		Three Months Ended June 30,								Six Months Ended June 30,
		2021			2020			% Change		2021			2020			% Change
	Total Same Store Portfolio
	Office Portfolio
	Number of properties	111			111					111			111
	Square Feet	13,441,929			13,441,929					13,441,929			13,441,929
	Percent of Stabilized Portfolio	95.0		%	93.8		%			95.0		%	93.8		%
	Average Occupancy	91.4		%	92.4		%			91.1		%	93.0		%

	Operating Revenues:
	Rental income (2)(3)	$	176,044		$	167,912		4.8	%	$	344,722		$	338,033		2.0	%
	Tenant reimbursements (2)	24,965			23,224			7.5	%	49,056			49,373			(0.6)	%
	Other property income	1,249			919			35.9	%	2,013			3,183			(36.8)	%
	Total operating revenues	202,258			192,055			5.3	%	395,791			390,589			1.3	%
	Operating Expenses:
	Property expenses	36,141			34,065			6.1	%	69,861			70,276			(0.6)	%
	Real estate taxes	18,927			17,978			5.3	%	37,749			36,784			2.6	%
	Ground leases	1,985			2,330			(14.8)	%	3,813			4,647			(17.9)	%
	Total operating expenses	57,053			54,373			4.9	%	111,423			111,707			(0.3)	%
	GAAP Net Operating Income	$	145,205		$	137,682		5.5	%	$	284,368		$	278,882		2.0	%


Same Store Analysis (Cash Basis) (4)

		Three Months Ended June 30,								Six Months Ended June 30,
		2021			2020			% Change		2021			2020			% Change
	Total operating revenues	$	192,203		$	183,152		4.9	%	$	377,249		$	374,156		0.8	%
	Total operating expenses	57,002			54,322			4.9	%	111,322			111,604			(0.3)	%
	Cash Net Operating Income	$	135,201		$	128,830		4.9	%	$	265,927		$	262,552		1.3	%

________________________

(1)Same Store is defined as all properties owned and included in our stabilized portfolio as of January 1, 2020 and still owned and included in the stabilized portfolio as of June 30, 2021. Same Store includes 100% of consolidated property partnerships as well as the residential tower at Columbia Square.

(2)Revenue from tenant reimbursements is included in rental income on our consolidated statements of operations.

(3)Rental income is presented net of charges related to the creditworthiness of tenants. For the three and six months ended June 30, 2020, rental income includes a reduction in revenue of $4.1 million and $10.7 million, respectively, primarily as a result of the COVID-19 pandemic.

(4)Please refer to page 36 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.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region


		Portfolio Breakdown					Occupied at				Leased at
STABILIZED OFFICE PORTFOLIO (1)	Buildings	YTD NOI %		SF %		Total SF	6/30/2021		3/31/2021		6/30/2021
Greater Los Angeles
Culver City	19	1.4	%	1.1	%	151,908	97.9	%	93.5	%	97.9	%
El Segundo	5	4.9	%	7.7	%	1,093,050	94.8	%	96.5	%	94.8	%
Hollywood	10	6.6	%	8.3	%	1,179,266	89.4	%	89.9	%	90.0	%
Long Beach	7	2.5	%	6.7	%	955,291	79.1	%	78.4	%	80.1	%
West Hollywood	4	1.0	%	1.3	%	185,925	75.5	%	89.3	%	78.9	%
West Los Angeles	10	4.9	%	6.0	%	844,151	81.7	%	81.6	%	81.7	%
Total Greater Los Angeles	55	21.3	%	31.1	%	4,409,591	86.7	%	87.5	%	87.2	%
San Diego County
Del Mar	16	10.2	%	11.0	%	1,553,665	88.9	%	84.3	%	93.5	%
I-15 Corridor	5	2.1	%	3.8	%	540,892	94.9	%	94.8	%	98.2	%
Point Loma	1	0.7	%	0.8	%	107,456	100.0	%	79.0	%	100.0	%
University Towne Center	2	1.3	%	1.5	%	208,290	92.4	%	94.6	%	92.4	%
Total San Diego County	24	14.3	%	17.1	%	2,410,303	91.0	%	87.4	%	94.7	%
San Francisco Bay Area
Menlo Park	7	2.3	%	2.7	%	378,358	74.2	%	71.7	%	74.2	%
Mountain View	3	3.6	%	3.2	%	457,066	100.0	%	100.0	%	100.0	%
Palo Alto	2	1.7	%	1.2	%	165,574	100.0	%	100.0	%	100.0	%
Redwood City	2	3.8	%	2.4	%	347,269	100.0	%	100.0	%	100.0	%
San Francisco	10	34.6	%	23.8	%	3,370,465	94.2	%	93.8	%	96.8	%
South San Francisco	3	1.4	%	1.0	%	145,530	100.0	%	100.0	%	100.0	%
Sunnyvale	4	5.1	%	4.7	%	663,460	100.0	%	100.0	%	100.0	%
Total San Francisco Bay Area	31	52.5	%	39.0	%	5,527,722	94.7	%	94.3	%	96.3	%
Greater Seattle
Bellevue	2	5.6	%	6.5	%	919,295	93.3	%	95.9	%	98.9	%
Lake Union	6	6.3	%	6.3	%	884,763	99.9	%	99.9	%	99.9	%
Total Greater Seattle	8	11.9	%	12.8	%	1,804,058	96.5	%	97.8	%	99.4	%
TOTAL STABILIZED OFFICE PORTFOLIO	118	100.0	%	100.0	%	14,151,674	91.8	%	91.5	%	93.6	%


Average Office Occupancy
Quarter-to-Date						Year-to-Date
91.7%						91.6%

________________________

(1)Includes stabilized retail space, which contributed approximately 2.4% of YTD NOI.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued


		Submarket	Square Feet	Occupied		Leased
Greater Los Angeles, California
	3101-3243 La Cienega Boulevard	Culver City	151,908	97.9	%	97.9	%
	2240 E. Imperial Highway	El Segundo	122,870	100.0	%	100.0	%
	2250 E. Imperial Highway	El Segundo	298,728	100.0	%	100.0	%
	2260 E. Imperial Highway	El Segundo	298,728	100.0	%	100.0	%
	909 N. Pacific Coast Highway	El Segundo	244,136	88.5	%	88.5	%
	999 N. Pacific Coast Highway	El Segundo	128,588	77.6	%	77.6	%
	1350 Ivar Avenue	Hollywood	16,448	100.0	%	100.0	%
	1355 Vine Street	Hollywood	183,129	100.0	%	100.0	%
	1375 Vine Street	Hollywood	159,236	100.0	%	100.0	%
	1395 Vine Street	Hollywood	2,575	100.0	%	100.0	%
	1500 N. El Centro Avenue (1)	Hollywood	113,447	28.8	%	28.8	%
	1525 N. Gower Street	Hollywood	9,610	100.0	%	100.0	%
	1575 N. Gower Street	Hollywood	251,245	100.0	%	100.0	%
	6115 W. Sunset Boulevard	Hollywood	26,238	71.0	%	97.9	%
	6121 W. Sunset Boulevard	Hollywood	93,418	100.0	%	100.0	%
	6255 W. Sunset Boulevard	Hollywood	323,920	88.5	%	88.5	%
	3750 Kilroy Airport Way	Long Beach	10,718	100.0	%	100.0	%
	3760 Kilroy Airport Way	Long Beach	166,761	85.7	%	91.0	%
	3780 Kilroy Airport Way	Long Beach	221,452	96.8	%	96.8	%
	3800 Kilroy Airport Way	Long Beach	192,476	88.9	%	88.9	%
	3840 Kilroy Airport Way (1)	Long Beach	136,026	0.0	%	0.0	%
	3880 Kilroy Airport Way	Long Beach	96,923	100.0	%	100.0	%
	3900 Kilroy Airport Way	Long Beach	130,935	91.5	%	91.5	%
	8560 W. Sunset Boulevard	West Hollywood	76,359	61.4	%	61.4	%
	8570 W. Sunset Boulevard	West Hollywood	45,941	97.1	%	97.1	%
	8580 W. Sunset Boulevard (1)	West Hollywood	6,875	0.0	%	0.0	%
	8590 W. Sunset Boulevard	West Hollywood	56,750	85.9	%	97.4	%
	12100 W. Olympic Boulevard	West Los Angeles	152,048	66.0	%	66.0	%
	12200 W. Olympic Boulevard	West Los Angeles	150,832	90.2	%	90.2	%
	12233 W. Olympic Boulevard	West Los Angeles	151,029	57.8	%	57.8	%
	12312 W. Olympic Boulevard	West Los Angeles	76,644	100.0	%	100.0	%
	1633 26th Street	West Los Angeles	43,857	69.9	%	69.9	%
	2100/2110 Colorado Avenue	West Los Angeles	102,864	100.0	%	100.0	%
	3130 Wilshire Boulevard	West Los Angeles	90,074	97.6	%	97.6	%
	501 Santa Monica Boulevard	West Los Angeles	76,803	88.7	%	88.7	%
	Total Greater Los Angeles		4,409,591	86.7	%	87.2	%

________________________

(1)This property is part of a complex of properties and is analyzed at the complex level.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued


		Submarket	Square Feet	Occupied		Leased
San Diego County, California
	12225 El Camino Real	Del Mar	58,401	100.0	%	100.0	%
	12235 El Camino Real	Del Mar	53,751	100.0	%	100.0	%
	12340 El Camino Real (1)	Del Mar	89,272	31.2	%	31.2	%
	12390 El Camino Real	Del Mar	70,140	55.1	%	100.0	%
	12770 El Camino Real	Del Mar	75,035	100.0	%	100.0	%
	12780 El Camino Real	Del Mar	140,591	100.0	%	100.0	%
	12790 El Camino Real	Del Mar	87,944	100.0	%	100.0	%
	12860 El Camino Real	Del Mar	92,042	82.4	%	100.0	%
	12348 High Bluff Drive	Del Mar	39,193	67.8	%	67.8	%
	12400 High Bluff Drive	Del Mar	210,732	100.0	%	100.0	%
	3579 Valley Centre Drive	Del Mar	54,960	100.0	%	100.0	%
	3611 Valley Centre Drive	Del Mar	130,109	100.0	%	100.0	%
	3661 Valley Centre Drive	Del Mar	128,364	82.6	%	82.6	%
	3721 Valley Centre Drive	Del Mar	115,193	79.5	%	100.0	%
	3811 Valley Centre Drive	Del Mar	112,067	100.0	%	100.0	%
	3745 Paseo Place	Del Mar	95,871	95.0	%	95.0	%
	13280 Evening Creek Drive South	I-15 Corridor	41,196	100.0	%	100.0	%
	13290 Evening Creek Drive South	I-15 Corridor	61,180	100.0	%	100.0	%
	13480 Evening Creek Drive North	I-15 Corridor	154,157	94.4	%	100.0	%
	13500 Evening Creek Drive North	I-15 Corridor	137,658	100.0	%	100.0	%
	13520 Evening Creek Drive North	I-15 Corridor	146,701	87.0	%	93.4	%
	2305 Historic Decatur Road	Point Loma	107,456	100.0	%	100.0	%
	4690 Executive Drive	University Towne Center	47,846	67.1	%	67.1	%
	9455 Towne Centre Drive	University Towne Center	160,444	100.0	%	100.0	%
	Total San Diego County		2,410,303	91.0	%	94.7	%

________________________

(1)This property is part of a complex of properties and is analyzed at the complex level.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued


		Submarket	Square Feet	Occupied		Leased
San Francisco Bay Area, California
	4100 Bohannon Drive	Menlo Park	47,379	100.0	%	100.0	%
	4200 Bohannon Drive	Menlo Park	45,451	70.8	%	70.8	%
	4300 Bohannon Drive (1)	Menlo Park	63,079	48.7	%	48.7	%
	4400 Bohannon Drive (1)	Menlo Park	48,146	21.3	%	21.3	%
	4500 Bohannon Drive	Menlo Park	63,078	100.0	%	100.0	%
	4600 Bohannon Drive	Menlo Park	48,147	70.7	%	70.7	%
	4700 Bohannon Drive	Menlo Park	63,078	100.0	%	100.0	%
	1290-1300 Terra Bella Avenue	Mountain View	114,175	100.0	%	100.0	%
	680 E. Middlefield Road	Mountain View	171,676	100.0	%	100.0	%
	690 E. Middlefield Road	Mountain View	171,215	100.0	%	100.0	%
	1701 Page Mill Road	Palo Alto	128,688	100.0	%	100.0	%
	3150 Porter Drive	Palo Alto	36,886	100.0	%	100.0	%
	900 Jefferson Avenue	Redwood City	228,505	100.0	%	100.0	%
	900 Middlefield Road	Redwood City	118,764	100.0	%	100.0	%
	100 Hooper Street	San Francisco	394,340	97.2	%	97.2	%
	100 First Street	San Francisco	480,457	98.3	%	99.0	%
	303 Second Street	San Francisco	784,658	88.2	%	93.2	%
	201 Third Street	San Francisco	346,538	90.1	%	90.1	%
	360 Third Street	San Francisco	429,796	88.8	%	99.6	%
	250 Brannan Street	San Francisco	100,850	100.0	%	100.0	%
	301 Brannan Street	San Francisco	82,834	100.0	%	100.0	%
	333 Brannan Street	San Francisco	185,602	100.0	%	100.0	%
	345 Brannan Street	San Francisco	110,050	99.7	%	99.7	%
	350 Mission Street	San Francisco	455,340	99.7	%	99.7	%
	345 Oyster Point Boulevard	South San Francisco	40,410	100.0	%	100.0	%
	347 Oyster Point Boulevard	South San Francisco	39,780	100.0	%	100.0	%
	349 Oyster Point Boulevard	South San Francisco	65,340	100.0	%	100.0	%
	505 Mathilda Avenue	Sunnyvale	212,322	100.0	%	100.0	%
	555 Mathilda Avenue	Sunnyvale	212,322	100.0	%	100.0	%
	599 Mathilda Avenue	Sunnyvale	76,031	100.0	%	100.0	%
	605 Mathilda Avenue	Sunnyvale	162,785	100.0	%	100.0	%
	Total San Francisco Bay Area		5,527,722	94.7	%	96.3	%

________________________

(1)This property is part of a complex of properties and is analyzed at the complex level.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Occupancy Overview by Region, continued


		Submarket	Square Feet	Occupied		Leased
Greater Seattle, Washington
	601 108th Avenue NE	Bellevue	490,738	88.8	%	98.7	%
	10900 NE 4th Street	Bellevue	428,557	98.4	%	99.2	%
	701 N. 34th Street	Lake Union	141,860	100.0	%	100.0	%
	801 N. 34th Street	Lake Union	169,412	100.0	%	100.0	%
	837 N. 34th Street	Lake Union	112,487	100.0	%	100.0	%
	320 Westlake Avenue North	Lake Union	184,644	99.4	%	99.4	%
	321 Terry Avenue North	Lake Union	135,755	100.0	%	100.0	%
	401 Terry Avenue North	Lake Union	140,605	100.0	%	100.0	%
	Total Greater Seattle		1,804,058	96.5	%	99.4	%

	TOTAL STABILIZED OFFICE PORTFOLIO		14,151,674	91.8	%	93.6	%


		Total No. of Units	Average Residential Occupancy
COMPLETED RESIDENTIAL PROPERTIES	Submarket		Quarter-to-Date	Year-to-Date
Greater Los Angeles
1550 N. El Centro Avenue	Hollywood	200	93.5%	91.4%
6390 De Longpre Avenue	Hollywood	193	4.4%	4.4%
San Diego County
3200 Paseo Village Way	Del Mar	608	79.1%	70.7%
TOTAL COMPLETED RESIDENTIAL PROPERTIES		1,001	71.9%	70.6%

Kilroy Realty Corporation

Second Quarter 2021 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	10	8	138,543	65,571	39.1	%	$	61.73	$	10.43	45.2	%	24.0	%	71
Year to Date	22	21	594,296	206,271	40.8	%	74.24		11.00		54.2	%	31.5	%	81

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	8	131,933	65,571	$	48.06	$	9.01	25.6	%	8.7	%	64
Year to Date (6)	19	21	198,592	206,271	30.48		7.32		20.1	%	6.7	%	50

________________________

(1)Includes 100% of consolidated property partnerships.

(2)Represents leasing activity for leases that commenced at properties in the stabilized portfolio during the three and six months ended June 30, 2021, including first and second generation space, net of month-to-month leases.

(3)Includes tenant improvement costs and third-party leasing commissions. Amounts exclude tenant-funded tenant improvements and indirect leasing costs.

(4)Represents leasing activity for leases signed at properties in the stabilized portfolio during the three and six months ended June 30, 2021, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.

(5)During the three months ended June 30, 2021, 10 new leases totaling 137,438 square feet were signed but not commenced as of June 30, 2021.

(6)During the six months ended June 30, 2021, 12 new leases totaling 149,577 square feet were signed but not commenced as of June 30, 2021.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Capital Expenditures

($ in thousands)


	Total 2021		Q2 2021		Q1 2021
1st Generation (Nonrecurring) Capital Expenditures: (1)
Capital Improvements	$	10,812	$	5,856	$	4,956

Tenant Improvements & Leasing Commissions (2)	425		—		425

Total	$	11,237	$	5,856	$	5,381


	Total 2021		Q2 2021		Q1 2021
2nd Generation (Recurring) Capital Expenditures: (1)
Capital Improvements	$	14,457	$	7,659	$	6,798

Tenant Improvements & Leasing Commissions (2)	32,938		12,827		20,111

Total	$	47,395	$	20,486	$	26,909

________________________

(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.

Kilroy Realty Corporation

Second Quarter 2021 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 2021 (2)	33	333,304	2.6	%	$	14,887	2.2	%	$	44.66
2022 (2)	72	768,814	6.0	%	31,827		4.7	%	41.40
2023	76	1,196,717	9.4	%	63,640		9.3	%	53.18
2024	63	989,196	7.7	%	48,365		7.1	%	48.89
2025	56	773,736	6.0	%	38,943		5.7	%	50.33
2026	43	1,717,490	13.4	%	78,698		11.5	%	45.82
2027 (3)	35	1,274,714	10.0	%	51,882		7.6	%	40.70
2028	23	977,618	7.6	%	61,903		9.1	%	63.32
2029	21	832,267	6.5	%	47,373		6.9	%	56.92
2030	34	1,348,043	10.6	%	74,638		10.9	%	55.37
2031 and beyond	36	2,584,376	20.2	%	171,462		25.0	%	66.35
Total (4)	492	12,796,275	100.0	%	$	683,618	100.0	%	$	53.42

________________________

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

(2)Adjusting for leasing transactions executed as of June 30, 2021 but not yet commenced, the 2021 and 2022 expirations would be reduced by 78,759 and 50,343 square feet, respectively.

(3)On April 5, 2021, DIRECTV, LLC’s successor-in-interest (“DIRECTV”) filed suit in Los Angeles Superior Court against a subsidiary of the Company, claiming that DIRECTV properly exercised its contraction rights as to certain space leased by DIRECTV at the property located at 2250 East Imperial Highway, El Segundo, California. The Company strongly disagrees with the contentions made by DIRECTV and will vigorously defend the litigation.

(4)For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of June 30, 2021, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of June 30, 2021.

Kilroy Realty Corporation

Second Quarter 2021 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.

2021	Greater Los Angeles	23	143,422	1.1	%	$	5,902	0.9	%	$	41.15
	San Diego	3	11,967	0.1	%	415		0.1	%	34.68
	San Francisco Bay Area	6	176,643	1.4	%	8,512		1.2	%	48.19
	Greater Seattle	1	1,272	—	%	58		—	%	45.60
	Total	33	333,304	2.6	%	$	14,887	2.2	%	$	44.66

2022	Greater Los Angeles	53	473,871	3.7	%	$	19,973	2.9	%	$	42.15
	San Diego	10	214,463	1.7	%	7,617		1.1	%	35.52
	San Francisco Bay Area	5	50,108	0.4	%	3,180		0.5	%	63.46
	Greater Seattle	4	30,372	0.2	%	1,057		0.2	%	34.80
	Total	72	768,814	6.0	%	$	31,827	4.7	%	$	41.40

2023	Greater Los Angeles	39	388,287	3.0	%	$	20,763	3.0	%	$	53.47
	San Diego	11	194,835	1.5	%	8,057		1.2	%	41.35
	San Francisco Bay Area	17	498,529	3.9	%	31,059		4.5	%	62.30
	Greater Seattle	9	115,066	1.0	%	3,761		0.6	%	32.69
	Total	76	1,196,717	9.4	%	$	63,640	9.3	%	$	53.18

2024	Greater Los Angeles	35	475,631	3.7	%	$	21,039	3.1	%	$	44.23
	San Diego	7	49,630	0.4	%	2,809		0.4	%	56.60
	San Francisco Bay Area	14	258,768	2.0	%	16,845		2.5	%	65.10
	Greater Seattle	7	205,167	1.6	%	7,672		1.1	%	37.39
	Total	63	989,196	7.7	%	$	48,365	7.1	%	$	48.89

2025	Greater Los Angeles	18	178,831	1.4	%	$	7,782	1.1	%	$	43.52
	San Diego	21	194,692	1.4	%	9,248		1.4	%	47.50
	San Francisco Bay Area	8	263,914	2.1	%	16,516		2.4	%	62.58
	Greater Seattle	9	136,299	1.1	%	5,397		0.8	%	39.60
	Total	56	773,736	6.0	%	$	38,943	5.7	%	$	50.33

2026 and Beyond	Greater Los Angeles	49	2,042,798	16.0	%	$	94,230	13.8	%	$	46.13
	San Diego	63	1,501,038	11.8	%	78,466		11.5	%	52.27
	San Francisco Bay Area	48	3,944,874	30.8	%	261,762		38.2	%	66.35
	Greater Seattle	32	1,245,798	9.7	%	51,498		7.5	%	41.34
	Total	192	8,734,508	68.3	%	$	485,956	71.0	%	$	55.64

________________________

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

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Portfolio Quarterly Lease Expirations for 2021 and 2022

($ 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.
2021:


Q3 2021	15	222,913	1.7	%	$	10,553	1.6	%	$	47.34
Q4 2021	18	110,391	0.9	%	4,334		0.6	%	39.26
Total 2021 (2)	33	333,304	2.6	%	$	14,887	2.2	%	$	44.66

2022:
Q1 2022	23	285,935	2.2	%	$	10,362	1.5	%	$	36.24
Q2 2022	16	113,289	0.9	%	4,620		0.7	%	40.78
Q3 2022	15	159,825	1.3	%	6,494		0.9	%	40.63
Q4 2022	18	209,765	1.6	%	10,351		1.6	%	49.35
Total 2022 (2)	72	768,814	6.0	%	$	31,827	4.7	%	$	41.40

________________________

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

(2)Adjusting for leasing transactions executed as of June 30, 2021 but not yet commenced, the 2021 and 2022 expirations would be reduced by 78,759 and 50,343 square feet, respectively.

Kilroy Realty Corporation

Second Quarter 2021 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		Year(s) of Lease Expiration
GM Cruise, LLC	San Francisco Bay Area	$	36,337	374,618	5.2	%	2.6	%	2031
LinkedIn Corporation / Microsoft Corporation	San Francisco Bay Area	29,752		663,460	4.3	%	4.6	%	2024 / 2026
Adobe Systems, Inc.	San Francisco Bay Area / Greater Seattle	27,897		513,111	4.0	%	3.5	%	2027 / 2031
salesforce.com, inc.	San Francisco Bay Area	24,076		451,763	3.4	%	3.1	%	2031 / 2032
DIRECTV, LLC (3)	Greater Los Angeles	23,152		684,411	3.3	%	4.7	%	2027
Fortune 50 Publicly-Traded Company	Greater Seattle / San Diego County	23,059		472,427	3.3	%	3.3	%	2032 / 2033
Box, Inc.	San Francisco Bay Area	22,441		372,673	3.2	%	2.6	%	2021 / 2028
Okta, Inc.	San Francisco Bay Area	22,387		273,371	3.2	%	1.9	%	2028
Netflix, Inc.	Greater Los Angeles	21,943		362,868	3.1	%	2.5	%	2021 / 2032
DoorDash, Inc.	San Francisco Bay Area	18,650		184,968	2.7	%	1.3	%	2032
Amazon.com	Greater Seattle	16,923		405,278	2.4	%	2.8	%	2023 / 2029 / 2030
Synopsys, Inc.	San Francisco Bay Area	15,492		342,891	2.2	%	2.4	%	2030
Riot Games, Inc.	Greater Los Angeles	15,152		243,051	2.2	%	1.7	%	2023 / 2024
Neurocrine Biosciences, Inc.	San Diego County	13,914		254,578	2.0	%	1.8	%	2024 / 2031
Viacom International, Inc.	Greater Los Angeles	13,718		211,343	2.0	%	1.5	%	2028

Total Top Fifteen Tenants		$	324,893	5,810,811	46.5	%	40.3	%

________________________

(1)The information presented is as of June 30, 2021.

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

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

2021 Dispositions

($ in billions)

COMPLETED OPERATING PROPERTY DISPOSITIONS

Submarket

Month of
Disposition

No. of Buildings

Rentable
Square Feet

Sales
Price (1)

1st Quarter

1800 Owens Street, San Francisco, CA (The Exchange on 16th)

San Francisco

March

750,370

1.08

2nd Quarter

None

TOTAL DISPOSITIONS

750,370

1.08

____________________

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

Kilroy Realty Corporation

Second Quarter 2021 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

480,457

56%

303 Second Street, San Francisco, CA

Norges Bank Real Estate Management

San Francisco

784,658

56%

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

Local developer

Redwood City

347,269

93%

____________________

(1)For breakout of Net Operating Income by partnership, refer to page 36, 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.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Stabilized Office Development Projects and Completed Residential Development Projects

($ in millions)

STABILIZED OFFICE DEVELOPMENT PROJECTS

Location

Construction Start Date

Stabilization Date (1)

Total Estimated Investment

Rentable
Square Feet

Total Project % Occupied

1st Quarter

9455 Towne Centre Drive

University Towne Center

1Q 2019

1Q 2021

95.0

160,444

100%

2nd Quarter

12860 El Camino Real (One Paseo - Office Building 1)

Del Mar

4Q 2018

2Q 2021

65.0

92,042

82%

TOTAL:

160.0

252,486

94%

COMPLETED RESIDENTIAL DEVELOPMENT PROJECTS

Location

Construction Start Date

Completion Date

Total Estimated Investment

Number of Units

% Leased

1st Quarter

None

2nd Quarter

Jardine

Hollywood

4Q 2018

2Q 2021

185.0

193

30%

TOTAL:

185.0

193

30%

____________________

(1)Represents the earlier of 95% occupancy date or one year from substantial completion of base building components.

Kilroy Realty Corporation

Second Quarter 2021 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 6/30/2021 (3)		% Leased	Total Project % Occupied
TENANT IMPROVEMENT (1)

Office / Life Science
San Francisco Bay Area
Kilroy Oyster Point - Phase 1	South San Francisco	1Q 2019	4Q 2021	656,000	$	570.0	$	402.6	100%	—%
San Diego County
One Paseo - Office (Building 2)	Del Mar	4Q 2018	3Q 2021	195,000	145.0		137.9		100%	89%
Greater Seattle
333 Dexter	South Lake Union	2Q 2017	3Q 2022	635,000	410.0		345.2		100%	49%
Austin
Indeed Tower (4)	Austin CBD	2Q 2021	4Q 2022	734,000	680.0		545.5		57%	—%

TOTAL:				2,220,000	$	1,805.0	$	1,431.2	86%	22%



UNDER CONSTRUCTION	Location	Construction Start Date	Estimated Stabilization Date (2)	Estimated Rentable Square Feet	Total Estimated Investment		Total Cash Costs Incurred as of 6/30/2021 (3)		Office % Leased

Office / Life Science
San Francisco Bay Area
Kilroy Oyster Point - Phase 2 (5)	South San Francisco	2Q 2021	4Q 2024	875,000	$	940.0	$	157.2	—%
San Diego County
2100 Kettner	Little Italy	3Q 2019	3Q 2022	235,000	140.0		104.9		—%


TOTAL:				1,110,000	$	1,080.0	$	262.1	—%

COMMITTED

Location

Potential Start Date

Approx. Developable

Square Feet (6)

Total Estimated Investment

Total Cash Costs Incurred as of

6/30/2021 (3)

Office

San Diego County

9514 Towne Centre Drive (7)

University Towne Center

4Q 2021

71,000

60.0

6.8

________________________

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

(2)For office and retail, represents the earlier of anticipated 95% occupancy date or one year from substantial completion of base building components. For multi-phase projects, interest and carry cost capitalization may cease and recommence driven by various factors, including tenant improvement construction and other tenant related timing or project scope. The timing of completion of our projects may be impacted by factors outside of our control, including government restrictions and/or social distancing requirements on construction projects due to the COVID-19 pandemic. As of the date of this report, all of our in-process development projects were under active construction.

(3)Represents costs incurred as of June 30, 2021, excluding GAAP accrued liabilities and leasing overhead.

(4)This 36-story office tower was acquired in June 2021 subsequent to core/shell completion for $580.2 million and establishes the Company’s presence in Austin, Texas. The property is subject to a long-term ground lease.

(5)Total cash costs incurred for this project assume approval by the city of South San Francisco of a pending lot line adjustment among KOP Phases 2-4.

(6)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.

(7)Project currently committed with an executed definitive agreement for 100% of the building.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Future Development Pipeline

($ in millions)

FUTURE DEVELOPMENT PIPELINE

Location

Approx. Developable

Square Feet (1)

Total Cash Costs Incurred as of 6/30/2021 (2)

San Diego County

Santa Fe Summit – Phases 2 and 3

56 Corridor

600,000 - 650,000

81.2

2045 Pacific Highway

Little Italy

275,000

47.3

Kilroy East Village

East Village

TBD

59.6

San Francisco Bay Area

Kilroy Oyster Point - Phases 3 and 4 (3)

South San Francisco

875,000 - 1,000,000

195.4

Flower Mart

SOMA

2,300,000

414.4

Greater Seattle

SIX0 - Office & Residential

Seattle CBD

TBD

142.2

TOTAL:

940.1

________________________

(1)The developable square feet and scope of projects could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new supply, regulatory and entitlement processes or project design.

(2)Represents costs incurred as of June 30, 2021, excluding accrued liabilities recorded in accordance with GAAP.

(3)Total cash costs incurred for this project assume approval by the city of South San Francisco of a pending lot line adjustment among KOP Phases 2-4.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Capital Structure

As of June 30, 2021

($ in thousands)



	Shares/Units June 30, 2021	Aggregate Principal Amount or $ Value Equivalent		% of Total Market Capitalization
DEBT: (1)(2)


Unsecured Senior Notes due 2023		$	300,000	2.5	%
Unsecured Senior Notes due 2024		425,000		3.5	%
Unsecured Senior Notes due 2025		400,000		3.3	%
Unsecured Senior Notes Series A & B due 2026		250,000		2.0	%
Unsecured Senior Notes due 2028		400,000		3.3	%
Unsecured Senior Notes due 2029		400,000		3.3	%
Unsecured Senior Notes Series A & B due 2027 & 2029		250,000		2.0	%
Unsecured Senior Notes due 2030		500,000		4.1	%
Unsecured Senior Notes due 2031		350,000		2.9	%
Unsecured Senior Notes due 2032		425,000		3.5	%
Secured Debt		251,720		2.1	%
Total Debt		$	3,951,720	32.5	%
EQUITY AND NONCONTROLLING INTEREST IN THE OPERATING PARTNERSHIP: (3)
Common limited partnership units outstanding (4)	1,150,574	$	80,126	0.7	%
Shares of common stock outstanding	116,454,210	8,109,871		66.8	%
Total Equity and Noncontrolling Interests in the Operating Partnership		$	8,189,997	67.5	%
TOTAL MARKET CAPITALIZATION		$	12,141,717	100.0	%

________________________

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

(2)As of June 30, 2021, there was no outstanding balance on the unsecured revolving credit facility.

(3)Value based on closing share price of $69.64 as of June 30, 2021.

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

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Debt Analysis

As of June 30, 2021



TOTAL DEBT COMPOSITION (1)
	Percent of Total Debt	Weighted Average
		Interest Rate	Years to Maturity
Secured vs. Unsecured Debt
Unsecured Debt	93.6%	3.8%	6.8
Secured Debt	6.4%	3.9%	5.6
Floating vs. Fixed-Rate Debt
Floating-Rate Debt	—%	—%	—
Fixed-Rate Debt	100.0%	3.8%	6.7

Stated Interest Rate		3.8%	6.7

GAAP Effective Rate		3.8%

GAAP Effective Rate Including Debt Issuance Costs		4.0%

KEY DEBT COVENANTS

Covenant

Actual Performance
as of June 30, 2021

Unsecured Credit Facility and Private Placement Notes (as defined in the Credit Agreements):

Total debt to total asset value

less than 60%

28%

Fixed charge coverage ratio

greater than 1.5x

3.0x

Unsecured debt ratio

greater than 1.67x

3.23x

Unencumbered asset pool debt service coverage

greater than 1.75x

3.55x

Unsecured Senior Notes due 2023, 2024, 2025, 2028, 2029, 2030 and 2032 (as defined in the Indentures):

Total debt to total asset value

less than 60%

35%

Interest coverage

greater than 1.5x

7.2x

Secured debt to total asset value

less than 40%

Unencumbered asset pool value to unsecured debt

greater than 150%

321%

________________________

(1)As of June 30, 2021, there was no outstanding balance on the unsecured revolving credit facility.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Debt Analysis

($ in thousands)



DEBT MATURITY SCHEDULE
Floating/ Fixed Rate	Stated Rate	Maturity Date	2021		2022		2023		2024		2025		After 2025		Total (1)

Unsecured Debt(2):


Fixed	3.80%	1/15/2023					$	300,000							$	300,000
Fixed	3.45%	12/15/2024							$	425,000					425,000
Fixed	4.38%	10/1/2025									$	400,000			400,000
Fixed	4.30%	7/18/2026											$	50,000	50,000
Fixed	4.35%	10/18/2026											200,000		200,000
Fixed	3.35%	2/17/2027											175,000		175,000
Fixed	4.75%	12/15/2028											400,000		400,000
Fixed	3.45%	2/17/2029											75,000		75,000
Fixed	4.25%	8/15/2029											400,000		400,000
Fixed	3.05%	2/15/2030											500,000		500,000
Fixed	4.27%	1/31/2031											350,000		350,000
Fixed	2.50%	11/15/2032											425,000		425,000

Total unsecured debt	3.78%		—		—		300,000		425,000		400,000		2,575,000		3,700,000

Secured Debt:
Fixed	3.57%	12/1/2026	$	1,686	$	3,462	3,587		3,718		3,853		148,814		165,120
Fixed	4.48%	7/1/2027	1,012		2,092		2,188		2,288		2,393		76,627		86,600

Total secured debt	3.88%		2,698		5,554		5,775		6,006		6,246		225,441		251,720

Total	3.78%		$	2,698	$	5,554	$	305,775	$	431,006	$	406,246	$	2,800,441	$	3,951,720

________________________

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

(2)As of June 30, 2021, there was no outstanding balance on the unsecured revolving credit facility.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

Management Statements on Non-GAAP Supplemental Measures

Included in this section are management’s statements regarding certain non-GAAP financial measures provided in this supplemental financial report and, with respect to Funds From Operations available to common stockholders and common unitholders (“FFO”), in the Company’s earnings release on July 28, 2021 and the reasons why management believes that these measures provide useful information to investors about the Company’s financial condition and results of operations.

Net Operating Income:

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

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

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

Same Store Net Operating Income:

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

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

Kilroy Realty Corporation

Second Quarter 2021 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.

Kilroy Realty Corporation

Second Quarter 2021 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 amounts of gain or loss on marketable securities related to the Company’s executive deferred compensation plan that are capitalized as development costs, and after adjustment for amounts attributable to noncontrolling interests in consolidated property partnerships. FAD provides an additional perspective on the Company’s ability to fund cash needs and make distributions to stockholders by adjusting FFO for the impact of certain cash and non-cash items, as well as adjusting FFO for recurring capital expenditures and leasing costs. Management also believes that FAD provides useful information to the investment community about the Company’s financial position as compared to other REITs since FAD is a liquidity measure used by other REITs. However, other REITs may use different methodologies for calculating FAD and, accordingly, the Company’s FAD may not be comparable to other REITs.

Kilroy Realty Corporation

Second Quarter 2021 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.

Kilroy Realty Corporation

Second Quarter 2021 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, 2020 and still owned and included in the stabilized portfolio as of June 30, 2021. It does not include undeveloped land, development and redevelopment properties currently committed for construction, under construction, or in the tenant improvement phase, completed residential developments not yet stabilized and properties held-for-sale. We define redevelopment properties as those projects for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan, the intended result of which is a higher economic return on the property.

Stated Interest Rate:

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

Tenant Improvement Phase:

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

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

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

(unaudited, $ in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net Income Available to Common Stockholders	$	35,839	$	19,618	$	533,470	$	59,435
Net income attributable to noncontrolling common units of the Operating Partnership	354		367		5,240		1,072
Net income attributable to noncontrolling interests in consolidated property partnerships	6,687		4,367		11,581		9,263

Net Income	42,880		24,352		550,291		69,770
Adjustments:
General and administrative expenses	24,507		38,597		46,492		57,607
Acquisition-related expenses	—		—		—		—
Leasing costs	883		1,330		1,575		2,786
Depreciation and amortization	73,589		80,085		149,521		154,455
Interest income and other net investment (gain) loss	(1,337)		(2,838)		(2,710)		290
Interest expense	21,390		15,884		43,724		30,328


Gain on sale of depreciable operating property	(543)		—		(457,831)		—
Net Operating Income, as defined (1)	161,369		157,410		331,062		315,236
Wholly-Owned Properties	134,903		137,168		281,328		273,483
Consolidated property partnerships: (2)
100 First Street (3)	6,179		4,928		12,576		10,388
303 Second Street (3)	14,418		9,621		25,256		19,883
Crossing/900 (4)	5,869		5,693		11,902		11,482
Net Operating Income, as defined (1)	161,369		157,410		331,062		315,236
Non-Same Store GAAP Net Operating Income (5)	(16,164)		(19,728)		(46,694)		(36,354)
Same Store GAAP Net Operating Income	145,205		137,682		284,368		278,882
GAAP to Cash Adjustments:
GAAP Operating Revenues Adjustments, net (6)	(10,055)		(8,903)		(18,542)		(16,433)
GAAP Operating Expenses Adjustments, net (7)	51		51		101		103
Same Store Cash Net Operating Income	$	135,201	$	128,830	$	265,927	$	262,552

________________________

(1)Please refer to pages 31-32 for Management Statements on Net Operating Income, Same Store Net Operating Income and Same Store Cash Net Operating Income.

(2)Reflects GAAP Net Operating Income for all periods presented.

(3)For all periods presented, an unrelated third party entity owned approximately 44% common equity interests in two properties located at 100 First Street and 303 Second Street in San Francisco, CA.

(4)For all periods presented, an unrelated third party entity owned an approximate 7% common equity interest in two properties located at 900 Jefferson Avenue and 900 Middlefield Road in Redwood City, CA.

(5)Includes the results of one office property disposed of during the fourth quarter 2020, one office property disposed of during the first quarter 2021, our completed residential development, one retail development project added to the stabilized portfolio in the first quarter of 2020, one office development project added to the stabilized portfolio in the fourth quarter of 2020, one office development project added to the stabilized portfolio in the first quarter of 2021, one office development building added to the stabilized portfolio in the second quarter of 2021, our 193-unit residential project added to the stabilized portfolio in the second quarter of 2021 and our in-process and future development projects.

(6)Includes the net effect of straight-line rents, amortization of deferred revenue related to tenant-funded tenant improvements, amortization of above and below market lease intangibles and revenue reversals (recoveries) related to tenant creditworthiness.

(7)Includes the amortization of above and below market lease intangibles for ground leases.

Kilroy Realty Corporation

Second Quarter 2021 Supplemental Financial Report

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

(unaudited, $ in thousands)


	Three Months Ended June 30,
	2021		2020
Net Income Available to Common Stockholders	$	35,839	$	19,618
Interest expense	21,390		15,884
Depreciation and amortization	73,589		80,085

Net income attributable to noncontrolling common units of the Operating Partnership	354		367
Net income attributable to noncontrolling interests in consolidated property partnerships	6,687		4,367
Gain on sale of depreciable operating property	(543)		—



EBITDA, as adjusted (1)	$	137,316	$	120,321

________________________

(1)Please refer to page 32 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.

KILROY REALTY CORP - FORM 8-K - EX-99.1 - July 28, 2021

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KILROY REALTY CORP Reports