Exhibit 99.2
 
Contact:
   
FOR RELEASE:
Richard E. Moran Jr.
   
July 24, 2002
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, July 24, 2002—Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its second quarter ended June 30, 2002, with net income of $5.0 million, or $0.18 per share, on revenues of $51.3 million. KRC’s second-quarter earnings were reduced by a $5.3 million ($0.17 per share) charge to depreciation for capitalized leasing costs and a $1.5 million ($0.05 per share) charge to record development and bad debt reserves related to the financial condition Peregrine Systems, Inc., an existing tenant. In the second quarter of 2001, the company reported net income of $15.1 million, or $0.55 per share, on revenues of $58.2 million. Earnings in the second quarter of 2001 were increased by a $5.4 million ($ 0.18 per share) non-recurring lease termination fee.
 
For the first six months of 2002, KRC reported net income of $18.5 million, or $0.67 per share, on revenues of $103.9 million. In the same year-earlier period, the company reported net income of $21.5 million, or $0.79 per share, on revenues of $108.7 million.
 
KRC’s funds from operations (FFO) totaled $23.4 million, or $0.73 per share, in the second quarter of 2002, compared to $28.2 million, or $0.93 per share in the prior year’s second quarter. Second quarter FFO was reduced by the $1.5 million ($0.05 per share) charge to record development and bad debt reserves related to the financial condition of Peregrine Systems. For the first six months of 2002, FFO totaled $50.5 million, or $1.61 per share, compared to $50.1 million, or $1.64 per share, in the same period of 2001.

 
All per-share amounts in this report are presented on a diluted basis.
 
KRC added $49 million of new development to its stabilized portfolio in the second quarter of 2002, including an aggregate 213,900 square feet of space in three new office properties. At quarter’s end, the company’s stabilized portfolio was 94.8% occupied.
 
KRC has an additional 697,600 square feet of space currently in lease-up or under construction representing a total estimated investment of approximately $221 million. These properties are 42% leased or committed.
 
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; any failure of the general economy to recover timely from the current economic downturn; 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; future demand for its debt and equity securities; its ability to refinance its debt on reasonable terms at 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 risks detailed from time to time in the company’s SEC reports, including quarterly reports on Form 10-Q, 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. For forward-looking statements herein, Kilroy Realty claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 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. Principal submarkets for KRC’s current development program include West Los Angeles, El Segundo and coastal San Diego. At June 30, 2002, the company owned 7.6 million square feet of commercial office space and 5.1 million square feet of industrial space. More information can be found at www.kilroyrealty.com.
 
#########################

 
KILROY REALTY CORPORATION
SUMMARY QUARTERLY RESULTS
 
(unaudited, in thousands, except per share data)
 
    
Three Months
Ended
June 30, 2002
   
Three Months
Ended
June 30, 2001
   
Six Months
Ended
June 30, 2002
     
Six Months
Ended
June 30, 2001
  
Revenues
   
$
51,265
   
$
58,234
   
$
103,900
 
   
$
108,701
 
                                 
Net income available to common stockholders (1)
   
$
4,957
   
$
15,097
   
$
18,464
 
   
$
21,523
 
                                 
Weighted average common shares outstanding—basic
   
 
27,463
   
 
27,160
   
 
27,360
 
   
 
26,938
 
Weighted average common shares outstanding—diluted
   
 
27,805
   
 
27,380
   
 
27,678
 
   
 
27,177
 
                                 
Net income per share of common stock—basic
   
$
0.18
   
$
0.56
   
$
0.67
 
   
$
0.80
 
Net income per share of common stock—diluted
   
$
0.18
   
$
0.55
   
$
0.67
 
   
$
0.79
 
                                 
Funds From Operations
   
$
23,358
   
$
28,237
   
$
50,510
 
   
$
50,113
 
                                 
Weighted average common shares/units outstanding—basic (2)
   
 
31,827
   
 
30,260
   
 
31,076
 
   
 
30,243
 
Weighted average common shares/units outstanding—diluted (2)
   
 
32,169
   
 
30,481
   
 
31,394
 
   
 
30,482
 
                                 
Funds From Operations per common share/unit—basic (2)
   
$
0.73
   
$
0.93
   
$
1.63
 
   
$
1.66
 
Funds From Operations per common share/unit—diluted (2)
   
$
0.73
   
$
0.93
   
$
1.61
 
   
$
1.64
 
                                 
Common shares outstanding at end of period
                 
 
27,744
 
   
 
27,266
 
Common partnership units outstanding at end of period
                 
 
4,421
 
   
 
3,063
 
                  
  
Total common shares and units outstanding at end of period
                 
 
32,165
 
   
 
30,329
 
              
 
June 30, 2002
     
June 30, 2001
  
Occupancy rates:
                                
California
                 
 
94.6
%
   
 
94.5
%
Washington
                 
 
97.7
%
   
 
99.8
%
Arizona
                 
 
100.0
%
   
 
100.0
%
Nevada
                          
 
100.0
%
                  
  
Weighted average total
                 
 
94.8
%
   
 
94.9
%
Total square feet of stabilized properties owned at end of period:
                                
Office
                 
 
7,570
 
   
 
7,235
 
Industrial
                 
 
5,086
 
   
 
5,606
 
                  
  
Total
                 
 
12,656
 
   
 
12,841
 
 
(1)
Net income after minority interests.
(2)
Calculated based on weighted average shares outstanding assuming conversion of all common limited partnership units outstanding.

 
KILROY REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
 
(unaudited, in thousands)
 
    
June 30,
2002
     
December 31,
2001
  
ASSETS
                  
INVESTMENT IN REAL ESTATE:
                  
Land and improvements
   
$
285,585
 
   
$
269,366
 
Buildings and improvements
   
 
1,220,923
 
   
 
1,140,499
 
Undeveloped land and construction in progress, net
   
 
172,331
 
   
 
191,129
 
    
  
Total investment in real estate
   
 
1,679,358
 
   
 
1,600,994
 
Accumulated depreciation and amortization
   
 
(259,676
)
   
 
(241,665
)
    
  
Investment in real estate, net
   
 
1,419,163
 
   
 
1,359,329
 
Cash and cash equivalents
   
 
12,663
 
   
 
16,487
 
Restricted cash
   
 
5,811
 
   
 
5,413
 
Tenant receivables, net
   
 
29,511
 
   
 
32,151
 
Deferred financing and leasing costs, net
   
 
37,909
 
   
 
37,068
 
Prepaid expenses and other assets
   
 
5,520
 
   
 
6,781
 
    
  
TOTAL ASSETS
   
$
1,510,577
 
   
$
1,457,229
 
    
  
LIABILITIES & STOCKHOLDERS’ EQUITY
                  
LIABILITIES:
                  
Secured debt
   
$
455,302
 
   
$
459,587
 
Unsecured line of credit
   
 
306,000
 
   
 
155,000
 
Unsecured term facility
            
 
100,000
 
Accounts payable, accrued expenses and other liabilities
   
 
39,016
 
   
 
53,879
 
Accrued distributions
   
 
15,891
 
   
 
14,634
 
Rents received in advance and tenant security deposits
   
 
16,737
 
   
 
15,955
 
    
  
Total liabilities
   
 
832,946
 
   
 
799,055
 
    
  
MINORITY INTERESTS:
                  
8.075% Series A Cumulative Redeemable
                  
Preferred unitholders
   
 
73,716
 
   
 
73,716
 
9.375% Series C Cumulative Redeemable
                  
Preferred unitholders
   
 
34,464
 
   
 
34,464
 
9.250% Series D Cumulative Redeemable
                  
Preferred unitholders
   
 
44,321
 
   
 
44,321
 
Common unitholders of the Operating Partnership
   
 
72,415
 
   
 
49,176
 
Minority interest in Development LLCs
            
 
15,869
 
    
  
Total minority interests
   
 
224,916
 
   
 
217,546
 
    
  
STOCKHOLDERS’ EQUITY:
                  
Common stock
   
 
277
 
   
 
274
 
Additional paid-in capital
   
 
499,196
 
   
 
479,295
 
Distributions in excess of earnings
   
 
(42,079
)
   
 
(33,163
)
Accumulated net other comprehensive loss
   
 
(4,679
)
   
 
(5,778
)
    
  
Total stockholders’ equity
   
 
452,715
 
   
 
440,628
 
    
  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   
$
1,510,577
 
   
$
1,457,229
 
    
  

 
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
 
(unaudited, in thousands, except per share data)
 
    
Three Months Ended
June 30, 2002
     
Three Months Ended
June 30, 2001
     
Six Months Ended June 30, 2002
     
Six Months Ended June 30, 2001
  
REVENUES:
                                    
Rental income
   
$
44,435
 
   
$
46,029
 
   
$
89,730
 
   
$
90,408
 
Tenant reimbursements
   
 
6,714
 
   
 
6,170
 
   
 
12,332
 
   
 
11,690
 
Interest income
   
 
86
 
   
 
277
 
   
 
371
 
   
 
713
 
Other income
   
 
30
 
   
 
5,758
 
   
 
1,467
 
   
 
5,890
 
    
  
  
  
Total revenues
   
 
51,265
 
   
 
58,234
 
   
 
103,900
 
   
 
108,701
 
    
  
  
  
EXPENSES:
                                    
Property expenses
   
 
7,529
 
   
 
7,330
 
   
 
15,230
 
   
 
14,312
 
Real estate taxes
   
 
4,063
 
   
 
4,744
 
   
 
7,913
 
   
 
8,379
 
General and administrative expenses
   
 
3,129
 
   
 
2,973
 
   
 
6,097
 
   
 
6,073
 
Ground leases
   
 
333
 
   
 
375
 
   
 
716
 
   
 
767
 
Provision for potentially unrecoverable development costs
   
 
519
 
            
 
519
 
   
 
100
 
Interest expense
   
 
8,768
 
   
 
10,612
 
   
 
18,127
 
   
 
21,403
 
Depreciation and amortization
   
 
18,502
 
   
 
12,695
 
   
 
31,368
 
   
 
26,295
 
    
  
  
  
Total expenses
   
 
42,843
 
   
 
38,729
 
   
 
79,970
 
   
 
77,329
 
    
  
  
  
Income from operations
   
 
8,422
 
   
 
19,505
 
   
 
23,930
 
   
 
31,372
 
Net gains on dispositions of operating properties
   
 
896
 
   
 
1,234
 
   
 
896
 
   
 
1,539
 
    
  
  
  
Income before minority interests and cumulative effect of change in accounting principle
   
 
9,318
 
   
 
20,739
 
   
 
24,826
 
   
 
32,911
 
    
  
  
  
Minority interests:
                                    
Distributions on Cumulative Redeemable
                                    
Preferred units
   
 
(3,375
)
   
 
(3,375
)
   
 
(6,750
)
   
 
(6,750
)
Minority interest in earnings of Operating Partnership
   
 
(986
)
   
 
(1,796
)
   
 
(2,496
)
   
 
(2,641
)
Recognition of previously reserved Development LLC preferred return
                     
 
3,908
 
         
                                     
Minority interest in earnings of Development LLCs
            
 
(471
)
   
 
(1,024
)
   
 
(605
)
    
  
  
  
Total minority interests
   
 
(4,361
)
   
 
(5,642
)
   
 
(6,362
)
   
 
(9,996
)
    
  
  
  
                                     
Net income before cumulative effect of change in accounting principle
   
 
4,957
 
   
 
15,097
 
   
 
18,464
 
   
 
22,915
 
Cumulative effect of change in accounting principle
                              
 
(1,392
)
    
  
  
  
Net income
   
$
4,957
 
   
$
15,097
 
   
$
18,464
 
   
$
21,523
 
    
  
  
  
Weighted average shares outstanding—basic
   
 
27,463
 
   
 
27,160
 
   
 
27,360
 
   
 
26,938
 
Weighted average shares outstanding—diluted
   
 
27,805
 
   
 
27,380
 
   
 
27,678
 
   
 
27,177
 
                                     
Net Income per common share—basic
   
$
0.18
 
   
$
0.56
 
   
$
0.67
 
   
$
0.80
 
    
  
  
  
Net Income per common share—diluted
   
$
0.18
 
   
$
0.55
 
   
$
0.67
 
   
$
0.79
 
    
  
  
  

 
KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
 
(unaudited, in thousands, except per share data)
 
    
Three Months Ended
June 30, 2002
     
Three Months Ended
June 30, 2001
     
Six Months Ended
June 30, 2002
     
Six Months Ended
June 30, 2001
  
Net income
   
$
4,957
 
   
$
15,097
 
   
$
18,464
 
   
$
21,523
 
Adjustments:
                                    
Minority interest in earnings of Operating Partnership
   
 
986
 
   
 
1,796
 
   
 
2,496
 
   
 
2,641
 
Depreciation and amortization
   
 
18,311
 
   
 
12,030
 
   
 
30,446
 
   
 
25,000
 
Net gains on dispositions of operating properties
   
 
(896
)
   
 
(1,234
)
   
 
(896
)
   
 
(1,539
)
Cumulative effect of change in accounting principle
                              
 
1,392
 
Non-cash amortization of restricted stock grants
            
 
548
 
            
 
1,096
 
    
  
  
  
Funds From Operations
   
$
23,358
 
   
$
28,237
 
   
$
50,510
 
   
$
50,113
 
    
  
  
  
Weighted average common shares/units outstanding—basic
   
 
31,827
 
   
 
30,260
 
   
 
31,076
 
   
 
30,243
 
Weighted average common shares/units outstanding—diluted
   
 
32,169
 
   
 
30,481
 
   
 
31,394
 
   
 
30,482
 
                                     
Funds From Operations per common share/unit—basic
   
$
0.73
 
   
$
0.93
 
   
$
1.63
 
   
$
1.66
 
    
  
  
  
Funds From Operations per common share/unit—diluted
   
$
0.73
 
   
$
0.93
 
   
$
1.61
 
   
$
1.64
 
    
  
  
  
 
 
KILROY REALTY CORPORATION
FUNDS AVAILABLE FOR DISTRIBUTION
 
(unaudited, in thousands, except per share data)
 
    
Three Months
Ended
June 30, 2002
     
Three Months
Ended
June 30, 2001
     
Six Months
Ended
June 30, 2002
     
Six Months
Ended
June 30, 2001
  
Funds From Operations
   
$
23,358
 
   
$
28,237
 
   
$
50,510
 
   
$
50,113
 
Adjustments:
                                    
Amortization of deferred financing costs
   
 
442
 
   
 
399
 
   
 
1,220
 
   
 
780
 
Tenant improvements, leasing commissions and recurring capital expenditures
   
 
(1,302
)
   
 
(3,668
)
   
 
(1,637
)
   
 
(4,679
)
Net effect of straight-line rents
   
 
97
 
   
 
(873
)
   
 
(1,131
)
   
 
(2,587
)
    
  
  
  
Funds Available for Distribution
   
$
22,595
 
   
$
24,095
 
   
$
48,962
 
   
$
43,627
 
    
  
  
  
Funds Available for Distribution per common share/unit—basic
   
$
0.71
 
   
$
0.80
 
   
$
1.58
 
   
$
1.44
 
    
  
  
  
Funds Available for Distribution per common share/unit—diluted
   
$
0.70
 
   
$
0.79
 
   
$
1.56
 
   
$
1.43