Kilroy Realty Corporation Reports Third Quarter Financial Results

Kilroy Realty Corporation (NYSE:KRC) today reported financial results for its third quarter ended September 30, 2008 with net income available for common stockholders of $13.2 million, or $0.40 per share, compared to $9.0 million, or $0.28 per share, in the third quarter of 2007. Revenues from continuing operations in the third quarter totaled $77.1 million, up from $65.1 million in the prior year's third quarter. Funds from operations (FFO) for the period totaled $34.5 million, or $1.00 per share, compared to $28.2 million, or $0.81 per share, in the year-earlier period.

For the first nine months of 2008, KRC reported net income available for common stockholders of $28.6 million, or $0.88 per share, compared to $38.6 million, or $1.19 per share, in the first nine months of 2007. Revenues from continuing operations in the nine-month period totaled $217.5 million, up from $188.7 million in the same period of 2007. FFO in the first nine months of 2008 totaled $91.8 million, or $2.64 per share, compared to $80.9 million, or $2.33 per share, in first nine months of 2007.

Included in the results for the nine months ended September 30, 2008 is an approximate $4.9 million net lease termination fee related to an early termination agreement the company entered into with Intuit Inc. ("Intuit”). The lease that was terminated encompassed approximately 90,000 rentable square feet of office space. Intuit had an option to early terminate this lease in 2010 and the lease was scheduled to expire in 2014. Also included in the results for the nine months ended September 30, 2008 is approximately $2.7 million of non-cash rental revenue related to the termination of the company’s lease with Favrille, Inc. ("Favrille”). In July 2008, the company and Favrille entered into an agreement to terminate this lease effective August 31, 2008. The non-cash rental revenue recognized for the quarter primarily represents the unamortized deferred revenue balance related to tenant-funded tenant improvements for this lease at the lease termination date. All per-share amounts in this report are presented on a diluted basis.

"KRC reported solid financial results for the third quarter, despite the uncertainty about the direction of the economy and the turmoil in global credit markets,” said John B. Kilroy, Jr., the company's president and chief executive officer. "We remain focused on the fundamentals of our business, including leasing, delivering our in-process development, and maintaining a strong, flexible financial position."

During the third quarter, KRC added two properties, which are 100% leased, to its stabilized portfolio, a newly developed 146,000 square-foot office building located along the I-15 corridor in San Diego County and a newly redeveloped 107,000 square-foot office building in El Segundo. The two properties represent a total estimated new investment of approximately $66 million.

KRC has three additional properties currently under development, all located in submarkets of San Diego County. The three properties encompass approximately 254,000 square feet of rentable space and represent a total estimated investment of approximately $111 million, of which $90 million has been spent to date. They are 58% leased.

The company also has one redevelopment project underway totaling approximately 104,000 square feet. This project has a total estimated incremental investment of approximately $10 million and is 19% leased.

Updated earnings guidance for 2008 will be discussed by KRC management during the company's October 28, 2008 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 #84755372. A replay of the conference call will be available via phone through November 11, 2008 at (888) 286-8010, reservation #62289237, 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. Kilroy Realty currently has an in-process development and redevelopment pipeline of approximately 358,000 square feet. At September 30, 2008, the company owned 8.3 million rentable square feet of commercial office space and 3.9 million rentable square feet of industrial space. More information is available at www.kilroyrealty.com.