EX-99.1 3 dex991.htm 4TH QUARTER 2001 SUPPLEMENTAL FINANCIAL REPORT 4th Quarter 2001 Supplemental Financial Report
 
 
EXHIBIT 99.1
 
KILROY
REALTY
CORPORATION
 
Fourth Quarter 2001 Supplemental Financial Report
 
 
Some of the enclosed information presented is forward-looking in nature, including information concerning development timing and investment amounts. Although the information is based on Kilroy Realty Corporation’s current expectations, actual results could vary from expectations stated here. Numerous factors will affect Kilroy Realty Corporation’s actual results, some of which are beyond its control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. Kilroy Realty Corporation assumes no obligation to update publicly any forward-looking information, whether as a result of new information, future events or otherwise. For a discussion of important risks related to Kilroy Realty Corporation’s business, and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Business Risks” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2000. In light of these risks, uncertainties and assumptions, the forward-looking events contained in this supplement information might not occur.
 
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
FINANCIAL HIGHLIGHTS
(unaudited, $ in thousands, except per share amounts)
 
    
Three Months Ended December 31,
     
Year Ended December 31,
  
    
2001
     
2000
     
% Change
     
2001
     
2000
     
% Change
  
INCOME ITEMS:
                                          
Revenues
   
$
49,598
 
   
$
50,768
 
   
(2.3
%)
   
$
209,645
 
   
$
187,123
 
   
12.0
%
Net Operating Income
   
 
38,525
 
   
 
38,512
 
   
0.0
%
   
 
161,809
 
   
 
142,940
 
   
13.2
%
Net Income
   
 
7,625
 
   
 
8,786
 
   
(13.2
%)
   
 
38,431
 
   
 
46,846
 
   
(18.0
%)
Funds From Operations
   
 
20,933
 
   
 
21,572
 
   
(3.0
%)
   
 
91,558
 
   
 
83,471
 
   
9.7
%
Funds Available for Distribution
   
 
14,944
 
   
 
16,704
 
   
(10.5
%)
   
 
75,324
 
   
 
68,861
 
   
9.4
%
Funds From Operations per share—diluted
   
$
0.68
 
   
$
0.71
 
   
(4.2
%)
   
$
3.00
 
   
$
2.73
 
   
9.9
%
Funds Available for Distribution per share—diluted
   
 
0.49
 
   
 
0.55
 
   
(10.9
%)
   
 
2.47
 
   
 
2.25
 
   
9.8
%
Dividend per share
   
$
0.48
 
   
$
0.45
 
   
6.7
%
   
$
1.92
 
   
$
1.80
 
   
6.7
%
RATIOS:
                                          
Interest Coverage Ratio (1)
   
 
3.5x
 
   
 
3.3x
 
          
 
3.5x
 
   
 
3.5x
 
       
Fixed Charge Coverage Ratio (2)
   
 
2.6x
 
   
 
2.5x
 
          
 
2.7x
 
   
 
2.6x
 
       
FFO Payout Ratio (3)
   
 
69.9
%
   
 
63.0
%
   
6.9
%
   
 
63.7
%
   
 
65.0
%
   
(1.3
%)
FAD Payout Ratio (4)
   
 
97.9
%
   
 
81.4
%
   
16.5
%
   
 
77.5
%
   
 
78.8
%
   
(1.3
%)
 
    
Dec. 31, 2001
     
Dec. 31, 2000
     
% Change
  
ASSETS:
                     
Investments in Real Estate before Depreciation
   
$1,600,994
 
   
$1,496,477
 
   
7.0
%
Total Assets
   
1,457,229
 
   
1,455,368
 
   
0.1
%
CAPITALIZATION:
                     
Total Debt
   
$   714,587
 
   
$   723,688
 
   
(1.3
%)
Total Preferred Stock (5)
   
155,000
 
   
155,000
 
   
(1.3
%)
Total Market Equity Value (5)
   
800,894
 
   
848,162
 
   
(5.6
%)
Total Market Capitalization (5)
   
1,670,481
 
   
1,726,850
 
   
(3.3
%)
Total Debt/Total Market Capitalization
   
42.8
%
   
41.9
%
   
0.9
%
(1)
 
Calculated as income from operations before interest expense and depreciation and amortization divided by interest expense plus loan cost amortization.
(2)
 
Calculated as income from operations before interest expense and depreciation and amortization divided by interest expense plus loan
 
cost
 
amortization and current year paid and accrued preferred dividends.
(3)
 
Calculated as current year dividends paid and accrued to common shareholders divided by Funds From Operations.
(4)
 
Calculated as current year dividends paid and accrued to common shareholders divided by Funds Available for Distribution.
(5)
 
See “Capital Structure” on page 14.
 

1
 
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
CONSOLIDATED BALANCE SHEETS
(unaudited, $ in thousands)
 
    
December 31,
     
December 31,
  
    
2001
     
2000
  
ASSETS:
              
Land and improvements
   
$
269,366
 
   
$
266,444
 
Buildings and improvements
   
 
1,140,499
 
   
 
1,054,995
 
Undeveloped land and construction in progress, net
   
 
191,129
 
   
 
162,633
 
Investment in unconsolidated real estate
          
 
12,405
 
    
    
 
Total investment in real estate
   
 
1,600,994
 
   
 
1,496,477
 
Accumulated depreciation and amortization
   
 
(241,665
)
   
 
(205,332
)
    
    
 
Investment in real estate, net
   
 
1,359,329
 
   
 
1,291,145
 
Cash and cash equivalents
   
 
16,487
 
   
 
17,600
 
Restricted cash
   
 
5,413
 
   
 
35,014
 
Tenant receivables, net
   
 
32,151
 
   
 
30,720
 
Note receivable from related party
          
 
33,274
 
Deferred financing and leasing costs, net
   
 
37,068
 
   
 
39,674
 
Prepaid expenses and other assets
   
 
6,781
 
   
 
7,941
 
    
    
 
TOTAL ASSETS
   
$
1,457,229
 
   
$
1,455,368
 
    
    
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
              
Liabilities:
              
Secured debt
   
$
459,587
 
   
$
432,688
 
Unsecured line of credit
   
 
155,000
 
   
 
191,000
 
Unsecured term facility
   
 
100,000
 
   
 
100,000
 
Accounts payable, accrued expenses and other liabilities
   
 
53,879
 
   
 
33,911
 
Accrued distributions
   
 
14,634
 
   
 
13,601
 
Rents received in advance and tenant security deposits
   
 
15,955
 
   
 
16,009
 
    
    
 
Total liabilities
   
 
799,055
 
   
 
787,209
 
    
    
 
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
   
 
49,176
 
   
 
62,485
 
Minority interest in Development LLCs
   
 
15,869
 
   
 
11,748
 
    
    
 
Total minority interests
   
 
217,546
 
   
 
226,734
 
    
    
 
Stockholders’ Equity:
              
Common stock
   
 
274
 
   
 
265
 
Additional paid-in capital
   
 
479,295
 
   
 
460,390
 
Distributions in excess of earnings
   
 
(33,163
)
   
 
(19,230
)
Accumulated other comprehensive loss
   
 
(5,778
)
       
    
    
 
Total stockholders’ equity
   
 
440,628
 
   
 
441,425
 
    
    
 
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
   
$
1,457,229
 
   
$
1,455,368
 
    
    
 

2
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Consolidated Statements of Operations
(unaudited, $ in thousands, except per share amounts)
 
    
Three Months Ended December 31,
   
Year Ended December 31,
    
2001
   
2000
   
% Change
   
2001
   
2000
   
% Change
REVENUES:
                              
Rental income
   
$
45,152
   
$
43,609
   
    3.5%
   
$
180,552
   
$
161,236
   
12.0%
Tenant reimbursements
   
 
4,261
   
 
5,405
   
  (21.2%)
   
 
21,852
   
 
19,441
   
  12.4%
Interest income
   
 
147
   
 
1,594
   
  (90.8%)
   
 
1,030
   
 
4,602
   
  (77.6%)
Other income
   
 
38
   
 
160
   
  (76.3%)
   
 
6,211
   
 
1,844
   
236.8%
    
  
       
  
    
Total revenues
   
 
49,598
   
 
50,768
   
    (2.3%)
   
 
209,645
   
 
187,123
   
  12.0%
    
  
       
  
    
                               
EXPENSES:
                              
Property expenses
   
 
7,550
   
 
5,598
   
  34.9%
   
 
29,804
   
 
23,347
   
  27.7%
Real estate taxes
   
 
3,015
   
 
4,632
   
  (34.9%)
   
 
15,495
   
 
14,591
   
    6.2%
General and administrative expenses
   
 
3,098
   
 
3,037
   
    2.0%
   
 
12,435
   
 
11,114
   
  11.9%
Ground leases
   
 
361
   
 
432
   
  (16.4%)
   
 
1,507
   
 
1,643
   
    (8.3%)
Interest expense
   
 
9,619
   
 
11,309
   
  (14.9%)
   
 
41,679
   
 
39,109
   
    6.6%
Depreciation and amortization
   
 
13,279
   
 
12,216
   
    8.7%
   
 
51,913
   
 
41,125
   
  26.2%
    
  
       
  
    
Total expenses
   
 
36,922
   
 
37,224
   
    (0.8%)
   
 
152,833
   
 
130,929
   
  16.7%
    
  
       
  
    
INCOME FROM OPERATIONS
   
 
12,676
   
 
13,544
   
    (6.4%)
   
 
56,812
   
 
56,194
   
    1.1%
Net gains on dispositions of operating properties
   
 
707
        
100.0%
   
 
4,714
   
 
11,256
   
  (58.1%)
    
  
       
  
    
INCOME BEFORE MINORITY INTERESTS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
   
 
13,383
   
 
13,544
   
    (1.2%)
   
 
61,526
   
 
67,450
   
  (8.8%)
    
  
       
  
    
MINORITY INTERESTS:
                              
Distributions on Cumulative Redeemable
Preferred units
   
 
(3,375)
   
 
(3,375)
   
    0.0%
   
 
(13,500)
   
 
(13,500)
   
    0.0%
Minority interest in earnings of Operating Partnership
   
 
(834)
   
 
(1,241)
   
  (32.8%)
   
 
(4,502)
   
 
(6,683)
   
  (32.6%)
Minority interest in earnings of Development LLCs
   
 
(1,549)
   
 
(142)
   
990.8%
   
 
(3,701)
   
 
(421)
   
779.1%
    
  
       
  
    
Total minority interests
   
 
(5,758)
   
 
(4,758)
   
  21.0%
   
 
(21,703)
   
 
(20,604)
   
    5.3%
    
  
       
  
    
NET INCOME BEFORE CUMULATIVE EFFECT
                              
OF CHANGE IN ACCOUNTING PRINCIPLE
   
 
7,625
   
 
8,786
   
  (13.2%)
   
 
39,823
   
 
46,846
   
  (15.0%)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
                  
 
(1,392)
        
100.0%
    
  
       
  
    
NET INCOME
   
$
7,625
   
$
8,786
   
  (13.2%)
   
$
38,431
   
$
46,846
   
  (18.0%)
    
  
       
  
    
Weighted average shares outstanding—basic
   
 
27,426
   
 
26,456
        
 
27,167
   
 
26,599
     
Weighted average shares outstanding—diluted
   
 
27,545
   
 
26,747
        
 
27,373
   
 
26,755
     
NET INCOME PER COMMON SHARE:
                              
Income per common share—basic
   
$
0.28
   
$
0.33
   
  (15.2%)
   
$
1.41
   
$
1.76
   
  (19.9%)
    
  
       
  
    
Income per common share—diluted
   
$
0.28
   
$
0.33
   
  (15.2%)
   
$
1.40
   
$
1.75
   
  (20.0%)
    
  
       
  
    

3
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Funds From Operations and Funds Available for Distribution
(unaudited, $ in thousands, except per share amounts)
 
    
Three Months Ended December 31,
     
Year Ended December 31,
  
    
2001
     
2000
     
% Change
     
2001
     
2000
     
% Change
  
FUNDS FROM OPERATIONS:
                                          
Net income
   
$
7,625
 
   
$
8,786
 
   
(13.2%
)
   
$
38,431
 
   
$
46,846
 
   
(18.0%
)
Adjustments:
                                          
Minority interest in earnings of Operating Partnership
   
 
834
 
   
 
1,241
 
   
(32.8%
)
   
 
4,502
 
   
 
6,683
 
   
(32.6%
)
Depreciation and amortization
   
 
12,634
 
   
 
11,037
 
   
14.5%
 
   
 
49,757
 
   
 
39,946
 
   
24.6%
 
Net gains on dispositions of operating properties
   
 
(707
)
          
100.0%
 
   
 
(4,714
)
   
 
(11,256
)
   
(58.1%
)
Cumulative effect of change in accounting principle
                        
 
1,392
 
          
100.0%
 
Non-cash amortization of restricted stock grants
   
 
547
 
   
 
508
 
   
7.7%
 
   
 
2,190
 
   
 
1,252
 
   
74.9%
 
    
    
           
    
        
Funds From Operations
   
$
20,933
 
   
$
21,572
 
   
(3.0%
)
   
$
91,558
 
   
$
83,471
 
   
9.7%
 
    
    
           
    
        
Weighted average common shares/units outstanding—basic
   
 
30,487
 
   
 
30,205
 
          
 
30,349
 
   
 
30,394
 
       
Weighted average common shares/units outstanding—diluted
   
 
30,606
 
   
 
30,495
 
          
 
30,555
 
   
 
30,550
 
       
Funds From Operations per common share/unit—basic
   
$
0.69
 
   
$
0.71
 
   
(2.8%
)
   
$
3.02
 
   
$
2.75
 
   
9.8%
 
    
    
           
    
        
Funds From Operations per common share/unit—diluted
   
$
0.68
 
   
$
0.71
 
   
(4.2%
)
   
$
3.00
 
   
$
2.73
 
   
9.9%
 
    
    
           
    
        
FUNDS AVAILABLE FOR DISTRIBUTION:
                                          
Funds From Operations
   
$
20,933
 
   
$
21,572
 
   
(3.0%
)
   
$
91,558
 
   
$
83,471
 
   
9.7%
 
Adjustments:
                                          
Amortization of deferred financing costs
   
 
532
 
   
 
369
 
   
44.2%
 
   
 
1,720
 
   
 
1,488
 
   
15.6%
 
Tenant improvements, leasing commissions and recurring capital expenditures
                                          
  
 
(4,249
)
   
 
(3,237
)
   
31.3%
 
   
 
(11,168
)
   
 
(8,430
)
   
32.5%
 
Net effect of straight-line rents
   
 
(2,272
)
   
 
(2,000
)
   
13.6%
 
   
 
(6,786
)
   
 
(7,668
)
   
(11.5%
)
    
    
           
    
        
Funds Available for Distribution
   
$
14,944
 
   
$
16,704
 
   
(10.5%
)
   
$
75,324
 
   
$
68,861
 
   
9.4%
 
    
    
           
    
        
Funds Available for Distribution per common share/unit—basic
   
$
0.49
 
   
$
0.55
 
   
(10.9%
)
   
$
2.48
 
   
$
2.27
 
   
9.3%
 
    
    
           
    
        
Funds Available for Distribution per common share/unit—diluted
   
$
0.49
 
   
$
0.55
 
   
(10.9%
)
   
$
2.47
 
   
$
2.25
 
   
9.8%
 
    
    
           
    
        

4
KILROY REALTY CORPORATION
FOURTH QUARTER 2001 SUPPLEMENTAL FINANCIAL REPORT
Net Operating Income Breakdown
 
      
As of December 31, 2001(1)
% OF TOTAL NOI BY PRODUCT TYPE:
       
Office:
       
Los Angeles
     
  39.6%
Orange County
     
    4.2%
San Diego
     
  27.8%
Other
     
    5.8%
      
Subtotal
     
  77.4%
      
Industrial:
       
Los Angeles
     
    3.3%
Orange County
     
  18.1%
Other
     
    1.2%
      
Subtotal
     
  22.6%
      
% OF TOTAL NOI BY REGION:
       
Los Angeles
     
  42.9%
Orange County
     
  22.3%
San Diego
     
  27.8%
Other
     
    7.0%
      
Total
     
100.0%
      
(1)
 
Based on Net Operating Income for the year ended December 31, 2001.

5
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Same Store Analysis (1)
($  in thousands)
 
   
Three Months Ended December 31,
   
Year Ended December 31,
   
2001
  
2000
  
$ Change
  
% Change
   
2001
   
2000
   
$ Change
   
% Change
TOTAL SAME STORE PORTFOLIO
                                    
Operating Revenues:
                                    
  Rental income
  
$
35,344
  
$
34,774
  
$
 570 
  
    1.6%
   
$
142,160
   
$
138,582
   
$
3,578  
   
  2.6%
  Tenant reimbursements
  
 
3,280
  
 
4,433
  
 
(1,153)
  
  (26.0%)
   
 
17,809
   
 
17,201
   
 
608  
   
  3.5%
  Other income
  
 
121
  
 
30
  
 
91 
  
303.3%
   
 
582
   
 
1,621
   
 
(1,039)
   
(64.1%)
   
 
 
      
  
  
    
Total operating revenues
  
$
38,745
  
$
39,237
  
$
(492)
  
    (1.3%)
   
$
160,551
   
$
157,404
   
$
3,147  
   
  2.0%
   
 
 
      
  
  
    
Operating Expenses:
                                    
  Property expenses
  
$
5,613
  
$
4,422
  
$
1,191 
  
  26.9%
   
$
22,280
   
$
19,996
   
$
2,284  
   
11.4%
  Real estate taxes
  
 
1,979
  
 
3,914
  
 
(1,935)
  
  (49.4%)
   
 
11,766
   
 
12,491
   
 
(725)
   
  (5.8%)
  Ground leases
  
 
311
  
 
374
  
 
 (63)
  
  (16.8%)
   
 
1,297
   
 
1,506
   
 
(209)
   
(13.9%)
   
 
 
      
  
  
    
Total operating expenses
  
$
7,903
  
$
8,710
  
$
(807)
  
    (9.3%)
   
$
35,343
   
$
33,993
   
$
1,350  
   
  4.0%
   
 
 
      
  
  
    
Net Operating Income
  
$
30,842
  
$
30,527
  
$
315 
  
    1.0%
   
$
125,208
   
$
123,411
   
$
1,797  
   
  1.5%
   
 
 
      
  
  
    
(1)
 
Same store defined as all stabilized properties owned at January 1, 2000 and still owned at December 31, 2001.

6
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Stabilized and Renovation Portfolio and Occupancy Overview
 
      
# of
Buildings
   
Square Feet
   
Occupancy at:
         
Total
   
Leased
   
Available
   
12/31/01
   
9/30/01
   
12/31/00
STABILIZED PORTFOLIO:
                                                         
OCCUPANCY BY PRODUCT TYPE:
                                     
Office:
                                     
Los Angeles
     
  31
   
3,177,788
   
2,799,110
   
378,678
   
  88.1%
   
  87.5%
   
  97.3%
Orange County
     
  12
   
546,850
   
490,452
   
56,398
   
  89.7%
   
  92.9%
   
  73.6%
San Diego
     
  37
   
2,791,235
   
2,791,235
   
0
   
100.0%
   
  98.6%
   
100.0%
Other
     
  6
   
709,575
   
702,389
   
7,186
   
  99.0%
   
  98.4%
   
  98.2%
      
  
  
  
              
Subtotal
     
  86
   
7,225,448
   
6,783,186
   
442,262
   
  93.9%
   
  93.2%
   
  96.2%
      
  
  
  
              
Industrial:
                                     
Los Angeles
     
    7
   
554,490
   
551,023
   
3,467
   
  99.4%
   
  97.3%
   
  99.8%
Orange County
     
  52
   
4,236,038
   
4,163,306
   
72,732
   
  98.3%
   
  96.8%
   
  97.1%
Other
     
    2
   
295,417
   
295,417
   
0  
   
100.0%
   
100.0%
   
100.0%
      
  
  
  
              
Subtotal
     
  61
   
5,085,945
   
5,009,746
   
76,199
   
  98.5%
   
  97.1%
   
  97.8%
      
  
  
  
              
OCCUPANCY BY REGION:
                                     
Los Angeles
     
  38
   
3,732,278
   
3,350,133
   
382,145
   
  89.8%
   
  89.0%
   
  97.7%
Orange County
     
  64
   
4,782,888
   
4,653,758
   
129,130
   
  97.3%
   
  96.4%
   
  94.2%
San Diego
     
  37
   
2,791,235
   
2,791,235
   
0
   
100.0%
   
  98.6%
   
100.0%
Other
     
    8
   
1,004,992
   
997,806
   
7,186
   
  99.3%
   
  98.9%
   
  99.1%
      
  
  
  
              
TOTAL STABILIZED PORTFOLIO
     
147
   
12,311,393
   
11,792,932
   
518,461
   
  95.8%
   
  94.8%
   
  97.0%
                                      
RENOVATION PORTFOLIO:
                                     
Office:
                                     
Orange County
     
    1
   
78,016
   
0
   
78,016
               
      
  
  
  
              
TOTAL PORTFOLIO
     
148
   
12,389,409
   
11,792,932
   
596,477
               
      
  
  
  
              
 
 
AVERAGE OCCUPANCY—STABILIZED PORTFOLIO
  
 
AVERAGE OCCUPANCY—SAME STORE PORTFOLIO
       
    Office    
      
Industrial
      
    Total    
                   
    Office    
      
Industrial
      
    Total    
Quarter-to-Date
   
93.6%
   
98.7%
   
95.6%
  
Quarter-to-Date
   
94.6%
   
99.2%
   
96.8%
Year-to-Date
   
94.3%
   
97.7%
   
95.7%
  
Year-to-Date
   
94.6%
   
97.7%
   
96.1%

7
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Leasing Activity
 
Quarter-to-Date
 
                
Weighted Average Lease Term (Mo.)
         
2nd Generation
          
    
# of Leases(1)
   
Square Feet(1)
   
TI/LC Per Sq. Ft.
     
Maintenance Capex Per Sq. Ft.(2)
   
Changes in Rents(3)
     
Changes in
Cash Rents(4)
   
Retention Rates(5)
     
    
New
     
Renewal
   
New
   
Renewal
                        
Office
   
2
     
10
   
4,674
   
184,661
   
$7.30
     
$0.21
   
32.6%
     
23.3%
   
82.7%
     
76
Industrial
   
2
     
6
   
103,240
   
37,231
   
$0.49
     
$0.04
   
42.0%
     
24.9%
   
31.4%
     
77
    
    
  
  
  
    
  
    
  
    
Total
   
4
     
16
   
107,914
   
221,892
   
$4.02
     
$0.14
   
33.9%
     
23.7%
   
64.9%
     
76
    
    
  
  
  
    
  
    
  
    
 
Year-to-Date
 
                
Weighted Average Lease Term (Mo.)
         
2nd Generation
          
    
# of Leases(1)
   
Square Feet(1)
   
TI/LC Per Sq. Ft.
     
Maintenance Capex Per Sq. Ft.(2)
   
Changes in Rents(3)
     
Changes in Cash Rents(4)
   
Retention Rates(5)
     
    
New
     
Renewal
   
New
   
Renewal
                        
Office
   
27
     
44
   
146,431
   
650,642
   
$7.60
     
$0.35
   
25.3%
     
14.2%
   
69.9%
     
70
Industrial
   
30
     
43
   
261,438
   
548,304
   
$2.21
     
$0.10
   
37.1%
     
16.5%
   
70.6%
     
58
    
    
  
  
  
    
  
    
  
    
Total
   
57
     
87
   
407,869
   
1,198,946
   
$4.73
     
$0.24
   
28.6%
     
14.9%
   
70.3%
     
64
    
    
  
  
  
    
  
    
  
    
(1)
 
Includes first and second generation space, net of month-to-month leases. Excludes leasing on new construction. First generation space
       
 
is defined as the space first leased by the Company.
(2)
 
Calculated over entire stabilized portfolio.
(3)
 
Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space.
(4)
 
Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space.
(5)
 
Calculated as the percentage of space either renewed or expanded into by existing tenants at lease expiration.

8
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Lease Expiration Schedule
($ in thousands)
 
Year of Expiration
     
# of Expiring Leases
   
Total Square
 Feet(1)
       
% of Total Leased Sq. Ft.
     
Annual Base Rent
   
Annual Rent per Sq. Ft.
OFFICE:
                                 
2002
     
68
   
503,852
 
     
7.5
%
   
$    9,039
   
$17.94
2003
     
60
   
710,490
 
     
10.6
%
   
11,070
   
15.58
2004
     
57
   
797,880
 
     
11.9
%
   
17,880
   
22.41
2005
     
53
   
914,786
 
     
13.6
%
   
16,357
   
17.88
2006
     
43
   
618,069
 
     
9.2
%
   
15,921
   
25.76
2007
     
14
   
591,706
 
     
8.8
%
   
11,309
   
19.11
2008
     
11
   
590,001
 
     
8.8
%
   
17,423
   
29.53
2009
     
9
   
682,104
 
     
10.2
%
   
17,281
   
25.33
2010
     
8
   
282,264
 
     
4.2
%
   
8,203
   
29.06
2011 and beyond
     
14
   
1,016,630
 
     
15.2
%
   
32,260
   
31.73
      
  
      
    
    
Subtotal
     
337
   
6,707,782
 
     
100.0
%
   
$156,743
   
$23.37
      
  
      
    
    
INDUSTRIAL:
                                 
2002
     
36
   
366,835
 
     
7.3
%
   
$3,181
   
$  8.67
2003
     
29
   
698,880
 
     
14.0
%
   
4,421
   
6.33
2004
     
24
   
548,867
 
     
11.0
%
   
4,231
   
7.71
2005
     
15
   
755,742
 
     
15.1
%
   
5,759
   
7.62
2006
     
10
   
590,638
 
     
11.8
%
   
4,620
   
7.82
2007
     
2
   
87,013
 
     
1.7
%
   
791
   
9.09
2008
     
5
   
752,946
 
     
15.0
%
   
6,007
   
7.98
2009
     
7
   
505,976
 
     
10.1
%
   
3,654
   
7.22
2010
     
2
   
70,101
 
     
1.4
%
   
596
   
8.50
2011 and beyond
     
5
   
631,810
 
     
12.6
%
   
7,175
   
11.36
      
  
      
    
    
Subtotal
     
135
   
5,008,808
 
     
100.0
%
   
$  40,435
   
$  8.07
      
  
      
    
    
TOTAL PORTFOLIO:
                                 
2002
     
104
   
870,687
 
     
7.4
%
   
$  12,220
   
$14.03
2003
     
89
   
1,409,370
 
     
12.0
%
   
15,491
   
10.99
2004
     
81
   
1,346,747
 
     
11.5
%
   
22,111
   
16.42
2005
     
68
   
1,670,528
 
     
14.3
%
   
22,116
   
13.24
2006
     
53
   
1,208,707
 
     
10.3
%
   
20,541
   
16.99
2007
     
16
   
678,719
 
     
5.8
%
   
12,100
   
17.83
2008
     
16
   
1,342,947
 
     
11.5
%
   
23,430
   
17.45
2009
     
16
   
1,188,080
 
     
10.1
%
   
20,935
   
17.62
2010
     
10
   
352,365
 
     
3.0
%
   
8,799
   
24.97
2011 and beyond
     
19
   
1,648,440
 
     
14.1
%
   
39,435
   
23.92
      
  
      
    
    
Total
     
472
   
11,716,590
(1)
     
100.0
%
   
$197,178
   
$16.83
      
  
      
    
    
(1)
 
Excludes space leased under month-to-month leases and vacant space at December 31, 2001.

9
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
2001 Dispositions
($ in thousands)
 
Project
   
Location
   
Type
   
Month of Disposition
   
Square Feet
   
Sales Price
1st QUARTER:
                         
6828 Nancy Ridge Drive
   
San Diego, CA
   
Industrial
   
February
   
39,669
   
$
3,300
                   
  
2nd QUARTER:
                         
199 & 201 N. Sunrise Avenue
   
Roseville, CA
   
Industrial
   
April
   
162,203
   
$
15,400
                   
  
3rd QUARTER:
                         
4880 Santa Rosa Road
   
Camarillo, CA
   
Office
   
August
   
41,131
   
$
6,580
1900 Aerojet Way
   
Las Vegas, NV
   
Industrial
   
August
   
106,717
   
 
5,067
795 Trademark Drive
   
Reno, NV
   
Industrial
   
September
   
75,257
   
 
7,296
41093 County Center Drive
   
Temecula, CA
   
Industrial
   
September
   
77,582
   
 
5,395
1840 Aerojet Way
   
Las Vegas, NV
   
Industrial
   
September
   
102,948
   
 
5,100
                   
  
Subtotal
                  
403,635
   
$
29,438
                   
  
4th QUARTER:
                         
184—220 Technology Drive
   
Irvine, CA
   
Industrial
   
October
   
157,499
   
$
19,000
2231 Rutherford Road
   
Carlsbad, CA
   
Office
   
December
   
39,000
   
 
3,290
                   
  
Subtotal
                  
196,499
   
$
22,290
                   
  
                          
TOTAL YEAR-TO-DATE DISPOSITIONS
                  
802,006
   
$
70,428
                   
  

10
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Stabilized Development
($ in thousands)
 
Project
  
Location
  
Type
  
Start Date
  
Completion
Date
   
Rentable
Square Feet
  
Total Est.
Investment
   
Occupancy
1st QUARTER:
                              
  None
                              
2nd QUARTER:
                              
  Pacific Technology Center
  
San Diego, CA
  
Office
  
1Q 2000
  
2Q 2001
   
67,995
  
$12,129
   
100%
  Sorrento Rim Business Park II
  
San Diego, CA
  
Office
  
2Q 2000
  
2Q 2001
   
102,875
  
25,307
   
100%
                    
 
    
Subtotal
                   
170,870
  
$37,436
     
                    
 
    
3rd QUARTER:
                              
  Calabasas Park Centre—
 Phase III
  
Calabasas, CA
  
Office
  
3Q 2000
  
1Q 2001
   
11,789
  
$  2,726
   
100%
                    
 
    
4th QUARTER:
                              
  Peregrine Systems—Bld 3(1)
  
Del Mar, CA
  
Office
  
2Q 2000
  
2Q 2001
   
129,752
  
$27,124
   
100%
                    
 
    
TOTAL YEAR-TO-DATE STABILIZED DEVELOPMENT
   
312,411
  
$67,286
   
100%
                    
 
    
(1)
 
Project is being developed by a Development LLC in which the Company holds a 50% managing interest. The estimated investment figure includes the capital required to purchase the remaining 50% interest in the project.
 
Some of the enclosed information presented is forward-looking in nature, including information concerning development timing and investment amounts. Although the information is based on Kilroy Realty Corporation’s current expectations, actual results could vary from expectations stated here. Numerous factors will affect Kilroy Realty Corporation’s actual results, some of which are beyond its control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. Kilroy Realty Corporation assumes no obligation to update publicly any forward-looking information, whether as a result of new information, future events or otherwise. For a discussion of important risks related to Kilroy Realty Corporation’s business, and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Business Risks” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2000. In light of these risks, uncertainties and assumptions, the forward-looking events contained contained in this supplement information might not occur.

11
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
In-Process and Committed Development Projects
($ in thousands)
 
           
Estimated
Construction Period
  
Est.
Stabilization Date(1)
  
Rentable
Square
Feet
  
Total Estimated
Investment
                  
Project
  
Location
  
Type
  
Start Date
  
Compl. Date
         
% Leased
    
% LOI
     
% Committed (2)
PROJECTS IN LEASE-UP:
                                          
  Calabasas Park Centre—Phase II
  
Calabasas, CA
  
Office
  
2Q 2000
  
1Q 2001
  
1Q 2002
  
98,706
  
$  21,840
   
85
%
  
4
%
   
  89%
  Innovation Corporate Center—Lot 8
  
San Diego, CA
  
Office
  
2Q 2000
  
2Q 2001
  
2Q 2002
  
46,759
  
9,365
   
51
%
  
0
%
   
  51%
  Innovation Corporate Center—
    Lot 12(3)
  
San Diego, CA
  
Office
  
2Q 2000
  
2Q 2001
  
1Q 2002
  
70,617
  
16,282
   
100
%
  
0
%
   
100%
  Pacific Corporate Center—Lots 25 & 27
  
San Diego, CA
  
Office
  
2Q 2001
  
4Q 2001
  
2Q 2002
  
68,400
  
18,071
   
0
%
  
100
%
   
100%
                       
 
                 
Subtotal
                      
284,482
  
$  65,558
   
63
%
  
25
%
   
  88%
                       
 
                 
PROJECTS UNDER CONSTRUCTION:
                                          
  Brobeck, Phleger & Harrison Expansion
  
Del Mar, CA
  
Office
  
3Q 2001
  
3Q 2002
  
3Q 2002
  
89,168
  
$  22,748
   
100
%
  
0
%
   
100%
  Imperial & Sepulveda(4)
  
El Segundo, CA
  
Office
  
1Q 2001
  
1Q 2002
  
1Q 2003
  
133,678
  
38,410
   
0
%
  
0
%
   
    0%
  Peregrine Systems Corporate Ctr—Bld 4(5)
  
Del Mar, CA
  
Office
  
3Q 2001
  
4Q 2002
  
2Q 2003
  
114,780
  
26,143
   
100
%
  
0
%
   
100%
  Sorrento Gateway—Lot 4(5)
  
San Diego, CA
  
Office
  
2Q 2001
  
1Q 2002
  
1Q 2002
  
60,662
  
15,609
   
100
%
  
0
%
   
100%
  Westside Media Center—Phase III
  
West LA, CA
  
Office
  
4Q 2000
  
1Q 2002
  
1Q 2003
  
151,000
  
54,842
   
0
%
  
0
%
   
    0%
                       
 
                 
Subtotal
                      
549,288
  
$157,753
   
48
%
  
0
%
   
  48%
                       
 
                 
TOTAL PROJECTS IN LEASE UP AND UNDER CONSTRUCTION
      
833,770
  
$223,311
   
53
%
  
9
%
   
62%
                       
 
                 
COMMITTED DEVELOPMENT:
                                          
   None
                                              
TOTAL IN-PROCESS AND COMMITTED DEVELOPMENT PROJECTS:
  
833,770
  
$223,311
   
53
%
  
9
%
   
  62%
                       
 
                 
(1)
 
Based on management’s estimation of the earlier of stabilized occupancy (95%) or one year from the date of substantial completion.
(2)
 
Includes executed leases and signed letters of intent, calculated on a square footage basis.
(3)
 
This project is 100% leased to one tenant. It is expected that the tenant will take occupancy of 100% of the space in the first quarter of 2002.
(4)
 
This project was completed in January 2002.
(5)
 
Project is being developed by a Development LLC in which the Company holds a 50% managing interest. The estimated investment figure includes the
      
 
capital required to purchase the remaining 50% interest in the project.
 
Some of the enclosed information presented is forward-looking in nature, including information concerning development timing and investment amounts. Although the information is based on Kilroy Realty Corporation’s current expectations, actual results could vary from expectations stated here. Numerous factors will affect Kilroy Realty Corporation’s actual results, some of which are beyond its control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. Kilroy Realty Corporation assumes no obligation to update publicly any forward- looking information, whether as a result of new information, future events or otherwise. For a discussion of important risks related to Kilroy Realty Corporation’s business, and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Business Risks” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2000. In light of these risks, uncertainties and assumptions the forward-looking events contained in this supplemental information might not occur.

12
KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Future Development Pipeline
($ in thousands)
 
Project
   
Location
   
Type
   
Rentable
Square Feet
   
Total
Estimated
Investment
SAN DIEGO COUNTY:
                    
  Innovation Corporate Center—Lot 2
   
San Diego, CA
   
Office
   
51,187
   
$  10,149
  Innovation Corporate Center—Lot 4
   
San Diego, CA
   
Office
   
75,000
   
13,763
  Innovation Corporate Center—Lot 9
   
San Diego, CA
   
Office
   
65,867
   
12,485
  Innovation Corporate Center—Lot 10
   
San Diego, CA
   
Office
   
37,405
   
7,931
  Pacific Corporate Center—Lots 3, 4 & 6
   
San Diego, CA
   
Office
   
225,000
   
48,145
  Pacific Corporate Center—Lot 8
   
San Diego, CA
   
Office
   
95,000
   
19,420
  San Diego Corporate Center—Lot 7
   
Del Mar, CA
   
Office
   
207,842
   
63,683
  Santa Fe Summit—Phase I
   
San Diego, CA
   
Office
   
150,000
   
33,997
  Santa Fe Summit—Phase II
   
San Diego, CA
   
Office
   
150,000
   
34,764
  Sorrento Gateway—Lot 1
   
San Diego, CA
   
Office
   
55,933
   
10,906
  Sorrento Gateway—Lot 2(1)
   
San Diego, CA
   
Office
   
70,000
   
14,090
  Sorrento Gateway—Lot 3(1)
   
San Diego, CA
   
Office
   
56,800
   
11,469
  Sorrento Gateway—Lot 7(1)
   
San Diego, CA
   
Office
   
57,000
   
11,907
              
  
Subtotal
             
1,297,034
   
$292,709
              
  
TOTAL FUTURE DEVELOPMENT PIPELINE
             
1,297,034
   
$292,709
              
  
(1)
 
Project is being developed by a Development LLC in which the Company holds a 50% interest. The estimated investment figure includes the capital required to purchase the remaining 50% interest in the project.
 
Some of the enclosed information presented is forward-looking in nature, including information concerning development timing and investment amounts. Although the information is based on Kilroy Realty Corporation’s current expectations, actual results could vary from expectations stated here. Numerous factors will affect Kilroy Realty Corporation’s actual results, some of which are beyond its control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. Kilroy Realty Corporation assumes no obligation to update publicly any forward-looking information, whether as a result of new information, future events or otherwise. For a discussion of important risks related to Kilroy Realty Corporation’s business and an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information, see the discussion under the caption “Business Risks” in Kilroy Realty Corporation’s annual report on Form 10-K for the year ended December 31, 2000. In light of these risks, uncertainties and assumptions, the forward-looking events contained in this supplement information might not occur.

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KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Capital Structure
At December 31, 2001
($ in thousands)
 
      
Shares/Units at December 31, 2001
   
Aggregate Principal Amount or $ Value Equivalent
   
% of Total Market Capitalization
DEBT:
                 
Secured Debt
          
$
459,587
   
27.5%
Unsecured Line of Credit
          
 
155,000
   
9.3%
Unsecured Term Facility
          
 
100,000
   
6.0%
           
  
Total Debt
          
$
714,587
   
42.8%
           
  
EQUITY:
                 
8.075% Series A Cumulative Redeemable Preferred Units(1)
     
1,500,000
   
$
75,000
   
4.5%
9.375% Series C Cumulative Redeemable Preferred Units (1)
     
700,000
   
 
35,000
   
2.1%
9.250% Series D Cumulative Redeemable Preferred Units(1)
     
900,000
   
 
45,000
   
2.7%
Common Units Outstanding(2)
     
3,060,954
   
 
80,411
   
4.8%
Common Shares Outstanding(2)
     
27,426,071
   
 
720,483
   
43.1%
           
  
Total Equity
          
$
955,894
   
57.2%
           
  
TOTAL MARKET CAPITALIZATION
          
$
1,670,481
   
100.0%
           
  
(1)
 
Value based on $50.00 per share liquidation preference.
(2)
 
Valued based on closing share price of $26.27 at December 31, 2001.

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KILROY REALTY CORPORATION
Fourth Quarter 2001 Supplemental Financial Report
Debt Analysis
At December 31, 2001
($ in thousands)
 
SECURED DEBT AND UNSECURED TERM FACILITY PRINCIPAL REPAYMENT SCHEDULE
 
2002
  
2003
  
2004
  
2005
  
2006
  
Thereafter
  
Total
$6,009
  
$172,113
  
$130,958
  
$87,893
  
$4,972
  
$157,642
  
$559,587

 

TOTAL DEBT COMPOSITION
 
           
Weighted Average
    
% of Total Debt
     
Interest Rate
   
Maturity
Secured vs. Unsecured Debt:
                 
Secured Debt
   
64.3%
     
6.3%
   
4.8
Unsecured Debt
   
35.7%
     
7.8%
   
1.6
Floating vs. Fixed Rate Debt:
                 
Fixed Rate Debt(1),(2),(4)
   
76.5%
     
7.6%
   
4.1
Floating Rate Debt(3)
   
23.5%
     
4.0%
   
2.1
           
  
Total Debt
          
6.8%
   
3.6
           
  
 
UNSECURED LINE OF CREDIT
 
Total Line
  
Outstanding Balance
  
Expiration Date
$400,000
  
$155,000
  
November 2002
 
CAPITALIZED INTEREST
 
Quarter-to-Date
   
Year-to-Date
$3.8 million
   
$13.6 million
 
(1)
 
The Company currently has an interest-rate swap agreement to fix LIBOR on $150 million of its floating rate debt at 6.95% which expires in February 2002.
(2)
 
The Company currently has an interest-rate swap agreement to fix LIBOR on $150 million of its floating rate debt at 5.48% which expires in November 2002.
(3)
 
The Company, through one of its Development LLCs, currently has an interest-rate cap agreement to cap LIBOR on its floating rate construction debt at 8.5% which expires in April 2002. The notional amount of the cap increases over the life of the agreement as the balance of the related construction loan increases. At December 31, 2001, the notional amount of the cap agreement was approximately $57.0 million.
(4)
 
The percentage of fixed rate debt to total debt does not take into consideration the portion of floating rate debt capped by the Company’s interest-rate cap agreement. Including the effects of the interest-rate cap agreement, the Company had fixed or capped approximately 84.4% of its total outstanding debt at December 31, 2001.

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