Exhibit 99.2
 
Contact:
FOR RELEASE:
Richard E. Moran Jr.
October 28, 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
7.5% INCREASE IN THIRD QUARTER FFO PER SHARE
 
LOS ANGELES, October 28, 2002—Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its third quarter ended September 30, 2002, with net income of $7.9 million, or $0.28 per share, compared to $9.3 million, or $0.34 per share in the third quarter of 2001. Revenues from continuing operations in the third quarter totaled $51.1 million, compared to $51.3 million in the third quarter of 2001.
 
For the first nine months of 2002, KRC reported net income of $26.3 million, or $0.95 per share, compared to $30.8 million, or $1.13 per share, in the first nine months of 2001. Revenues from continuing operations in the nine-month period totaled $154.6 million compared to $159.5 million in the same period of 2001.
 
KRC’s funds from operations (FFO) totaled $23.2 million, or $0.72 per share, in the third quarter of 2002, compared to $20.5 million, or $0.67 per share in the prior year’s third quarter. For the first nine months of 2002, FFO totaled $73.7 million, or $2.33 per share, compared to $70.6 million, or $2.31 per share, in the same period of 2001.
 
On Tuesday, October 29, 2002, KRC management will discuss earnings guidance for 2002 and 2003 during its earnings conference call. Based on management’s view of current market conditions and certain assumptions with regard to rental rates and other projections a FFO per share range of $3.04 to $3.06 for 2002 will be discussed. In addition, a FFO per share range of $2.75 to $3.00 for 2003 will be discussed.
 
All per-share amounts in this report are presented on a diluted basis.

 
In the quarter, KRC completed and stabilized an 89,000 square-foot office property in Del Mar for a total estimated investment of $24 million. At quarter’s end, KRC’s entire stabilized portfolio was 93% occupied. The company has an additional 608,419 square feet of space currently in lease-up or under construction, representing a total estimated investment of $199 million. These properties currently are 53% leased.
 
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 September 30, 2002, the company owned 7.6 million square feet of commercial office space and 5.2 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
   
Three Months
   
Nine Months
     
Nine Months
  
    
Ended
   
Ended
   
Ended
     
Ended
  
    
September 30, 2002
   
September 30, 2001
   
September 30, 2002
     
September 30, 2001
  
Revenues (including discontinued operations)
   
$
51,111
   
$
51,446
   
$
155,011
 
   
$
160,047
 
Net income available to common stockholders(1)
   
$
7,885
   
$
9,283
   
$
26,349
 
   
$
30,806
 
Weighted average common shares outstanding—basic
   
 
27,623
   
 
27,359
   
 
27,449
 
   
 
27,080
 
Weighted average common shares outstanding—diluted
   
 
27,839
   
 
27,587
   
 
27,733
 
   
 
27,315
 
Net income per share of common stock—basic
   
$
0.29
   
$
0.34
   
$
0.96
 
   
$
1.14
 
Net income per share of common stock—diluted
   
$
0.28
   
$
0.34
   
$
0.95
 
   
$
1.13
 
Funds From Operations
   
$
23,170
   
$
20,512
   
$
73,680
 
   
$
70,625
 
Weighted average common shares/units outstanding—basic(2)
   
 
31,918
   
 
30,421
   
 
31,360
 
   
 
30,303
 
Weighted average common shares/units outstanding—diluted(2)
   
 
32,134
   
 
30,648
   
 
31,644
 
   
 
30,538
 
Funds From Operations per common share/unit—basic(2)
   
$
0.73
   
$
0.67
   
$
2.35
 
   
$
2.33
 
Funds From Operations per common share/unit—diluted(2)
   
$
0.72
   
$
0.67
   
$
2.33
 
   
$
2.31
 
                                 
Common shares outstanding at end of period
                 
 
27,928
 
   
 
27,426
 
Common partnership units outstanding at end of period
                 
 
4,237
 
   
 
3,061
 
                  
  
Total common shares and units outstanding at end of period
                 
 
32,165
 
   
 
30,487
 
                         
              
September 30, 2002
     
September 30, 2001
  
Occupancy rates:
                                
Los Angeles
                 
 
86.3
%
   
 
89.0
%
Orange County
                 
 
97.1
%
   
 
96.4
%
San Diego
                 
 
93.3
%
   
 
98.6
%
Other
                 
 
98.3
%
   
 
98.9
%
                  
  
Weighted average total
                 
 
93.1
%
   
 
94.8
%
Total square feet of stabilized properties owned at end of period:
                                
Office
                 
 
7,606
 
   
 
7,130
 
Industrial
                 
 
5,193
 
   
 
5,243
 
                  
  
Total
                 
 
12,799
 
   
 
12,373
 
(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)
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
                  
INVESTMENT IN REAL ESTATE:
                  
Land and improvements
   
$
297,305
 
   
$
269,366
 
Buildings and improvements
   
 
1,290,575
 
   
 
1,140,499
 
Undeveloped land and construction in progress, net
   
 
109,700
 
   
 
191,129
 
    
  
Total investment in real estate
   
 
1,697,580
 
   
 
1,600,994
 
Accumulated depreciation and amortization
   
 
(270,951
)
   
 
(241,665
)
    
  
Investment in real estate, net
   
 
1,426,629
 
   
 
1,359,329
 
Cash and cash equivalents
   
 
9,878
 
   
 
16,487
 
Restricted cash
   
 
7,348
 
   
 
5,413
 
Current receivables, net
   
 
2,779
 
   
 
4,770
 
Deferred rent receivables, net
   
 
28,422
 
   
 
27,381
 
Deferred leasing costs, net
   
 
30,532
 
   
 
33,120
 
Deferred financing costs, net
   
 
6,873
 
   
 
3,948
 
Prepaid expenses and other assets
   
 
5,852
 
   
 
6,781
 
    
  
TOTAL ASSETS
   
$
1,518,313
 
   
$
1,457,229
 
    
  
LIABILITIES & STOCKHOLDERS’ EQUITY
                  
LIABILITIES:
                  
Secured debt
   
$
473,268
 
   
$
459,587
 
Unsecured line of credit
   
 
300,000
 
   
 
155,000
 
Unsecured term facility
            
 
100,000
 
Accounts payable, accrued expenses and other liabilities
   
 
37,766
 
   
 
53,879
 
Accrued distributions
   
 
15,922
 
   
 
14,634
 
Rents received in advance, tenant security deposits and deferred revenue
   
 
20,143
 
   
 
15,955
 
    
  
Total liabilities
   
 
847,099
 
   
 
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
   
 
68,522
 
   
 
49,176
 
Minority interest in Development LLCs
            
 
15,869
 
    
  
Total minority interests
   
 
221,023
 
   
 
217,546
 
    
  
STOCKHOLDERS’ EQUITY:
                  
Common stock
   
 
278
 
   
 
274
 
Additional paid-in capital
   
 
503,184
 
   
 
479,295
 
Distributions in excess of earnings
   
 
(48,020
)
   
 
(33,163
)
Accumulated net other comprehensive loss
   
 
(5,251
)
   
 
(5,778
)
    
  
Total stockholders’ equity
   
 
450,191
 
   
 
440,628
 
    
  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   
$
1,518,313
 
   
$
1,457,229
 
    
  

 
KILROY REALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
 
(unaudited, in thousands, except per share data)
 
    
Three Months Ended September 30, 2002
     
Three Months Ended September 30, 2001
     
Nine Months Ended September 30, 2002
     
Nine Months Ended September 30, 2001
  
REVENUES:
                                    
Rental income
   
$
45,481
 
   
$
44,826
 
   
$
134,872
 
   
$
134,902
 
Tenant reimbursements
   
 
5,280
 
   
 
5,882
 
   
 
17,576
 
   
 
17,537
 
Interest income
   
 
80
 
   
 
170
 
   
 
451
 
   
 
883
 
Other income
   
 
211
 
   
 
383
 
   
 
1,678
 
   
 
6,173
 
    
  
  
  
Total revenues
   
 
51,052
 
   
 
51,261
 
   
 
154,577
 
   
 
159,495
 
    
  
  
  
EXPENSES:
                                    
Property expenses
   
 
7,931
 
   
 
7,879
 
   
 
23,148
 
   
 
22,193
 
Real estate taxes
   
 
4,061
 
   
 
4,087
 
   
 
11,938
 
   
 
12,425
 
General and administrative expenses
   
 
2,966
 
   
 
2,796
 
   
 
9,582
 
   
 
8,870
 
Ground leases
   
 
319
 
   
 
379
 
   
 
1,035
 
   
 
1,146
 
Interest expense
   
 
8,966
 
   
 
10,605
 
   
 
27,025
 
   
 
31,879
 
Depreciation and amortization
   
 
14,744
 
   
 
12,838
 
   
 
46,060
 
   
 
39,079
 
    
  
  
  
Total expenses
   
 
38,987
 
   
 
38,584
 
   
 
118,788
 
   
 
115,592
 
    
  
  
  
Income from continuing operations before net gains on dispositions
   
 
12,065
 
   
 
12,677
 
   
 
35,789
 
   
 
43,903
 
Net gains on dispositions of operating properties
            
 
2,468
 
   
 
896
 
   
 
4,007
 
    
  
  
  
Income from continuing operations before minority interests
   
 
12,065
 
   
 
15,145
 
   
 
36,685
 
   
 
47,910
 
    
  
  
  
Minority interests:
                                    
Distributions on Cumulative Redeemable Preferred units
   
 
(3,375
)
   
 
(3,375
)
   
 
(10,125
)
   
 
(10,125
)
Minority interest in earnings of Operating Partnership attributable to continuing operations
   
 
(1,184
)
   
 
(1,018
)
   
 
(3,656
)
   
 
(3,643
)
Recognition of previously reserved Development LLC preferred return
                     
 
3,908
 
         
Minority interest in earnings of Development LLCs
            
 
(1,547
)
   
 
(1,024
)
   
 
(2,152
)
    
  
  
  
Total minority interests
   
 
(4,559
)
   
 
(5,940
)
   
 
(10,897
)
   
 
(15,920
)
    
  
  
  
Income from continuing operations
   
 
7,506
 
   
 
9,205
 
   
 
25,788
 
   
 
31,990
 
Discontinued operations:
                                    
Revenues from discontinued operations
   
 
59
 
   
 
185
 
   
 
434
 
   
 
552
 
Expenses from discontinued operations
   
 
(95
)
   
 
(98
)
   
 
(264
)
   
 
(319
)
Net gain on disposition of discontinued operations
   
 
470
 
            
 
470
 
         
Minority interest in earnings of Operating Partnership attributable to discontinued operations
   
 
(55
)
   
 
(9
)
   
 
(79
)
   
 
(25
)
    
  
  
  
Total discontinued operations
   
 
379
 
   
 
78
 
   
 
561
 
   
 
208
 
    
  
  
  
Net income before cumulative effect of change in accounting principle
   
 
7,885
 
   
 
9,283
 
   
 
26,349
 
   
 
32,198
 
Cumulative effect of change in accounting principle
                              
 
(1,392
)
    
  
  
  
Net income
   
$
7,885
 
   
$
9,283
 
   
$
26,349
 
   
$
30,806
 
    
  
  
  
Weighted average shares outstanding—basic
   
 
27,623
 
   
 
27,359
 
   
 
27,449
 
   
 
27,080
 
Weighted average shares outstanding—diluted
   
 
27,839
 
   
 
27,587
 
   
 
27,733
 
   
 
27,315
 
Net Income per common share—basic
   
$
0.29
 
   
$
0.34
 
   
$
0.96
 
   
$
1.14
 
    
  
  
  
Net Income per common share—diluted
   
$
0.28
 
   
$
0.34
 
   
$
0.95
 
   
$
1.13
 
    
  
  
  

 
KILROY REALTY CORPORATION
FUNDS FROM OPERATIONS
 
(unaudited, in thousands, except per share data)
 
      
Three Months
Ended
September 30, 2002
       
Three Months
Ended
September 30, 2001
       
Nine Months
Ended
September 30, 2002
       
Nine Months
Ended
September 30, 2001
  
Net income
     
$
7,885
 
     
$
9,283
 
     
$
26,349
 
     
$
30,806
 
Adjustments:
                                            
Minority interest in earnings of Operating Partnership
     
 
1,239
 
     
 
1,027
 
     
 
3,735
 
     
 
3,668
 
Depreciation and amortization
     
 
14,516
 
     
 
12,123
 
     
 
44,962
 
     
 
37,123
 
Net gains on dispositions of operating properties
     
 
(470
)
     
 
(2,468
)
     
 
(1,366
)
     
 
(4,007
)
Cumulative effect of change in accounting principle
                                      
 
1,392
 
Non-cash amortization of restricted stock grants
                
 
547
 
                
 
1,643
 
      
    
    
    
Funds From Operations
     
$
23,170
 
     
$
20,512
 
     
$
73,680
 
     
$
70,625
 
      
    
    
    
Weighted average common shares/units outstanding—basic
     
 
31,918
 
     
 
30,421
 
     
 
31,360
 
     
 
30,303
 
Weighted average common shares/units outstanding—diluted
     
 
32,134
 
     
 
30,648
 
     
 
31,644
 
     
 
30,538
 
Funds From Operations per common share/unit—basic
     
$
0.73
 
     
$
0.67
 
     
$
2.35
 
     
$
2.33
 
      
    
    
    
Funds From Operations per common share/unit—diluted
     
$
0.72
 
     
$
0.67
 
     
$
2.33
 
     
$
2.31
 
      
    
    
    
 
KILROY REALTY CORPORATION
FUNDS AVAILABLE FOR DISTRIBUTION
 
(unaudited, in thousands, except per share data)
 
      
Three Months
Ended
September 30, 2002
       
Three Months
Ended
September 30, 2001
       
Nine Months
Ended
September 30, 2002
       
Nine Months
Ended
September 30, 2001
  
Funds From Operations
     
$
23,170
 
     
$
20,512
 
     
$
73,680
 
     
$
70,625
 
Adjustments:
                                            
Amortization of deferred financing costs
     
 
457
 
     
 
408
 
     
 
1,677
 
     
 
1,188
 
Tenant improvements, leasing commissions and recurring capital expenditures
     
 
(2,394
)
     
 
(2,240
)
     
 
(4,031
)
     
 
(6,919
)
Net effect of straight-line rents
     
 
(1,948
)
     
 
(1,927
)
     
 
(3,079
)
     
 
(4,514
)
      
    
    
    
Funds Available for Distribution
     
$
19,285
 
     
$
16,753
 
     
$
68,247
 
     
$
60,380
 
      
    
    
    
Funds Available for Distribution per common share/unit—basic
     
$
0.60
 
     
$
0.55
 
     
$
2.18
 
     
$
1.99
 
      
    
    
    
Funds Available for Distribution per common share/unit—diluted
     
$
0.60
 
     
$
0.55
 
     
$
2.16
 
     
$
1.98