Kilroy Realty Corporation Reports Third Quarter Financial Results

Kilroy Realty Corporation (NYSE: KRC) today reported financial results for its third quarter ended September 30, 2019.

Third Quarter Highlights

Financial Results

• Net income available to common stockholders per share of $0.41
• Funds from operations available to common stockholders and unitholders ("FFO") per share of $1.01
• Revenues of $215.5 million

Stabilized Portfolio

• Stabilized portfolio was 92.1% occupied and 97.3% leased at September 30, 2019
• Signed approximately 484,000 square feet of new or renewing leases, increasing the year to date total to 1.6 million square feet

Finance

• In September, completed a public offering of $500.0 million of 10-year senior unsecured notes at 3.050% due February 2030

Development

• In August, completed the acquisition of a 2.3-acre land site in the East Village submarket of San Diego for a cash purchase price of $40.0 million. The site is fully entitled for the development of a mixed-use project. Currently, there are three existing buildings that are leased by the prior owner through the first half of 2021
• In September, completed construction on 237 residential units, the first of three phases of the residential development at the company's One Paseo mixed-use project in the Del Mar submarket of San Diego. Phase I is currently 33% leased
• In September, commenced construction on 2100 Kettner, a 200,000 square foot office project in the Little Italy submarket of downtown San Diego. The project has a total estimated investment of $140.0 million

Results for the Quarter Ended September 30, 2019

For the third quarter ended September 30, 2019, KRC reported net income available to common stockholders of $43.8 million, or $0.41 per share, compared to $34.4 million, or $0.33 per share, in the third quarter of 2018. FFO in the third quarter of 2019 was $109.2 million, or $1.01 per share, compared to $94.2 million, or $0.90 per share in the third quarter of 2018.

All per share amounts in this report are presented on a diluted basis.

Net Income Available to Common Stockholders / FFO Guidance and Outlook

The company has updated its guidance range of NAREIT-defined FFO per diluted share for its fiscal year 2019 to $3.82 to $3.88 per share with a midpoint of $3.85 per share, reflecting management's views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of events referenced in this press release.

Key 2019 assumptions include:

• Flat same store cash net operating income
• Year-end occupancy of 94.0% to 95.0%
• Total remaining development spending of approximately $125.0 million to $150.0 million

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The company's guidance estimates for the full year 2019, and the reconciliation of net income available to common stockholders per share - diluted and FFO per share and unit - diluted included within this press release, reflect management's views on current and future market conditions, including assumptions with respect to rental rates, occupancy levels, and the earnings impact of the events referenced in this press release. Although these guidance estimates reflect the impact on the company's operating results of an assumed range of future disposition activity, these guidance estimates do not include any estimates of possible future gains or losses from possible future dispositions because the magnitude of gains or losses on sales of depreciable operating properties, if any, will depend on the sales price and depreciated cost basis of the disposed assets at the time of disposition, information that is not known at the time the company provides guidance, and the timing of any gain recognition will depend on the closing of the dispositions, information that is also not known at the time the company provides guidance and may occur after the relevant guidance period. We caution you not to place undue reliance on our assumed range of future disposition activity because any potential future disposition transactions will ultimately depend on the market conditions and other factors, including but not limited to the company's capital needs, the particular assets being sold and the company's ability to defer some or all of the taxable gain on the sales. These guidance estimates also do not include the impact on operating results from potential future acquisitions, possible capital markets activity, possible future impairment charges or any events outside of the company's control. There can be no assurance that the company's actual results will not differ materially from these estimates.

Conference Call and Audio Webcast

KRC management will discuss updated earnings guidance for fiscal year 2019 during the company's October 24, 2019 earnings conference call. The call will begin at 10:00 a.m. Pacific Time and last approximately one hour. Those interested in listening via the Internet can access the conference call at https://services.choruscall.com/links/krc191024.html. 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 (866) 312-7299. International callers should dial (412) 317-1070. In order to bypass speaking to the operator on the day of the call, please pre-register anytime at http://dpregister.com/10126360. A replay of the conference call will be available via telephone on October 24, 2019 through October 31, 2019 by dialing (877) 344-7529 and entering passcode 10126360. International callers should dial (412) 317-0088 and enter the same passcode. The replay will also be available on our website at http://investors.kilroyrealty.com/CustomPage/Index?KeyGenPage=1073743647.

About Kilroy Realty Corporation

Kilroy Realty Corporation (KRC), a publicly traded real estate investment trust and member of the S&P MidCap 400 Index, is one of the West Coast's premier landlords. The company has over 70 years of experience developing, acquiring and managing office and mixed-use real estate assets. The company provides physical work environments that foster creativity and productivity and serves a broad roster of dynamic, innovation-driven tenants, including technology, entertainment, digital media and health care companies.

At September 30, 2019, the company's stabilized portfolio totaled approximately 13.3 million square feet of office space located in the coastal regions of Los Angeles, San Diego, the San Francisco Bay Area and Greater Seattle and 200 residential units located in the Hollywood submarket of Los Angeles. The stabilized portfolio was 92.1% occupied and 97.3% leased. In addition, KRC had six projects totaling approximately 2.3 million square feet of office and life science space that were 63% leased and 564 residential units under construction. KRC also completed 237 residential units, with a third of the units leased, and had two projects in the tenant improvement phase, The Exchange on 16^th, totaling approximately 750,000 square feet, with the office space fully leased to Dropbox, and 96,000 square feet of retail at One Paseo, which was 100% leased.

The company's commitment and leadership position in sustainability has been recognized by various industry groups across the world. In September 2019, the company was recognized by GRESB as the sustainability leader in the Americas across all asset classes for the fifth time. Other sustainability accolades include NAREIT's Leader in the Light award for the past five years and the EPA's highest honor of ENERGY STAR Partner of the Year Sustained Excellence award for the past four years. The company is listed in the Dow Jones Sustainability World Index. At the end of the third quarter, the company's stabilized portfolio was 61% LEED certified and 72% of eligible properties were ENERGY STAR certified. More information is available at http://www.kilroyrealty.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants' businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers' financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2018 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

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