Kilroy Realty Corporation Reports Fourth Quarter Financial Results

Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its fourth quarter ended December 31, 2008 with net income available for common stockholders of $5.9 million, or $0.18 per share, compared to $65.6 million, or $2.01 per share, in the fourth quarter of 2007. The company’s 2007 fourth quarter net income includes net gains of approximately $61 million on the sale of properties. Revenues from continuing operations in the fourth quarter totaled $72.4 million, up from $69.7 million in the prior year's fourth quarter. Funds from operations (FFO) for the period totaled $27.2 million, or $0.78 per share, compared to $29.7 million, or $0.85 per share, in the year-earlier period.

For its fiscal year ended December 31, 2008, KRC reported net income available to common stockholders of $34.5 million, or $1.06 per share, compared to $104.2 million, or $3.20 per share, in fiscal year 2007. The company’s 2007 full year net income includes net gains of approximately $75 million on the sale of properties. Revenues from continuing operations in 2008 totaled $290.0 million, up from $258.5 million in 2007. FFO for the year totaled $119.0 million, or $3.42 per share, compared to $110.6 million, or $3.18 per share, in 2007. The company’s 2008 full year net income and FFO include approximately $7.2 million of one-time fees and non-cash rental revenues related to two lease terminations, and the company’s 2007 full year results include approximately $3.5 million of one-time fees and non-cash rental revenues related to two lease terminations. All per-share amounts in this report are presented on a diluted basis.

"KRC delivered a solid performance in 2008, in particular achieving excellent leasing results despite an increasingly difficult economic environment,” said John B. Kilroy, Jr., the company's president and chief executive officer. "This year, which promises to be even more challenging, our top priorities remain a strong balance sheet and an effective leasing program within our stabilized portfolio and our recently delivered development properties.”

During 2008, KRC delivered just over 560,000 square feet of new and newly redeveloped office space to its stabilized portfolio. These six buildings, contained in five individual projects, represent an aggregate estimated investment of $193 million and are currently 75% leased.

The company also completed construction of its one remaining development project during the fourth quarter, a 51,000 square-foot medical office property located in the Sorrento Mesa submarket of coastal San Diego County. The property represents a total estimated investment of $24 million, of which $16 million has been spent to date, and is currently in lease-up.

KRC management will discuss earnings guidance for fiscal 2009 during the company's January 27, 2009 earnings conference call. The call will begin at 11:00 a.m. Pacific time and last approximately one hour. Those interested in listening via the Internet can access the conference call at www.kilroyrealty.com. Please go to the website 15 minutes before the call and register. It may be necessary to download audio software to hear the conference call. Those interested in listening via telephone can access the conference call at (888) 679-8035, reservation #70011749. A replay of the conference call will be available via phone through February 10, 2009 at (888) 286-8010, reservation #64084481, or via the Internet at the company's website.

Some of the information presented in this release is forward looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995. Although Kilroy Realty Corporation believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from Kilroy Realty's expectations are set forth as risk factors in the company's Securities and Exchange Commission reports and filings. Included among these factors are changes in general economic conditions, including changes in the economic conditions affecting industries in which its principal tenants compete; Kilroy Realty's ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs, including utility costs; 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, current reports on Form 8-K and annual reports on Form 10-K. Many of these factors are beyond Kilroy Realty's ability to control or predict. Forward-looking statements are not guarantees of performance. 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 over 60 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of Los Angeles, Orange and San Diego counties. At December 31, 2008, the company owned 8.7 million rentable square feet of commercial office space and 3.7 million rentable square feet of industrial space. More information is available at www.kilroyrealty.com.