<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 13, 1998
KILROY REALTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MARYLAND COMMISSION FILE NUMBER: 1-12675 95-4598246
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
2250 EAST IMPERIAL HIGHWAY, SUITE 1200, EL SEGUNDO, CALIFORNIA 90245
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 563-5500
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<PAGE>
This Current Report on Form 8-K/A is being filed solely to amend the
financial statements and exhibits previously provided in Item 7 of the Current
Report on Form 8-K filed on February 27, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements.
(i) Combined Historical Summary of Certain Revenues and Certain Expenses
for the Three Acquired Properties
Independent Auditors' Report
Combined Historical Summary of Certain Revenues and Certain Expenses
for the year ended December 31, 1997
Notes to the Combined Historical Summary of Certain Revenues and
Certain Expenses for the year ended December 31, 1997
Additional Combining Schedule of Certain Revenues and Certain
Expenses
(ii) Combined Historical Summary of Certain Revenues and Certain Expenses
for the January Acquisitions
Combined Historical Summary of Certain Revenues and Certain Expenses
for the year ended December 31, 1997 (Unaudited)
Notes to the Combined Historical Summary of Certain Revenues and
Certain expenses for the year ended December 31, 1997 (Unaudited)
Additional Combining Schedule of Certain Revenues and Certain
Expenses (Unaudited)
(b) Pro Forma Financial Information.
Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1997
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1997
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP
</TABLE>
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Kilroy Realty Corporation:
We have audited the accompanying combined historical summary of certain
revenues and certain expenses (the "Historical Summary") of the Three Acquired
Properties (as described in Note 1) for the year ended December 31, 1997. This
Historical Summary is the responsibility of the Three Acquired Properties'
management. Our responsibility is to express an opinion on the Historical
Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation
of the Historical Summary. We believe that our audit provides a reasonable
basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in Form 8-K of Kilroy Realty Corporation as described
in Note 1 to the Historical Summary and is not intended to be a complete
presentation of the Three Acquired Properties revenues and expenses.
In our opinion, such Historical Summary presents fairly, in all material
respects, the combined certain revenues and certain expenses described in Note
1 to the Historical Summary of the Three Acquired Properties for the year
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
Historical Summary taken as a whole. The additional combining schedule is
presented for the purpose of additional analysis of the basic Historical
Summary rather than to present certain revenues and certain expenses of the
individual properties and is not a required part of the basic Historical
Summary. This additional combining schedule is the responsibility of the Three
Acquired Properties' management. Such information has been subjected to
auditing procedures applied in our audit of the basic Historical Summary for
the year ended December 31, 1997 and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic Historical Summary
taken as a whole.
Deloitte & Touche LLP
Los Angeles, California
April 23, 1998
3
<PAGE>
THREE ACQUIRED PROPERTIES
COMBINED HISTORICAL SUMMARY OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
CERTAIN REVENUES:
Rental revenues (Note 2).............................................. $2,903
Tenant reimbursements................................................. 373
Other income.......................................................... 25
------
Total certain revenues.............................................. 3,301
------
CERTAIN EXPENSES:
Property expenses..................................................... 830
Real estate taxes..................................................... 243
------
Total certain expenses.............................................. 1,073
------
CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $2,228
======
</TABLE>
See notes to combined historical summary of certain revenues and certain
expenses.
4
<PAGE>
THREE ACQUIRED PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARY OF CERTAIN REVENUES
AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The combined historical summary of certain revenues and certain expenses
relates to the operations of the following properties which were acquired by
Kilroy Realty Corporation (the "Company") from unaffiliated parties, except as
described below:
<TABLE>
<CAPTION>
DATE OF
PROPERTY ADDRESS LOCATION ACQUISITION
---------------- --------------------- -----------
<S> <C> <C>
Fullerton Business Center (1).............. Fullerton, California 1/15/98
Fortune Drive Business Park (2)............ San Jose, California 1/30/98
795 Trademark Drive (3).................... Reno, Nevada 2/13/98
</TABLE>
- --------
(1) Consists of four buildings at 1501, 1511, 1521 and 1561 East Orangethorpe
Avenue.
(2) Consists of three buildings at 2010, 2030 and 2040 Fortune Drive.
(3) The property was acquired from a partnership controlled by Richard S.
Allen, a member of the board of directors of the Company. Development of
the property was completed during January 1998 and therefore the
requirement for historical financial statements for the three years ended
December 31, 1997 are not applicable.
Operating revenues and direct operating expenses are presented on the
accrual basis of accounting. The accompanying historical summary of certain
revenues and certain expenses are not representative of the actual operations
for the year presented as certain revenues and expenses which may not be
comparable to the revenues and expenses expected to be incurred by the Company
in the proposed future operations of the properties have been excluded.
Revenues and expenses excluded consist of certain other income, interest,
depreciation and amortization and professional fees not directly related to
the future operations of the properties.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Use of Estimates
The preparation of financial statements in confirmity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
2. OPERATING LEASES
The properties are leased to tenants under operating leases with expiration
dates extending to the year 2022. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses, as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------- --------------
<S> <C>
1998......................................................... $2,172
1999......................................................... 1,779
2000......................................................... 1,479
2001......................................................... 1,050
2002......................................................... 449
Thereafter................................................... 24
------
Total...................................................... $6,953
======
</TABLE>
5
<PAGE>
THREE ACQUIRED PROPERTIES
ADDITIONAL COMBINING SCHEDULE OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FULLERTON
BUSINESS FORTUNE DRIVE
CENTER BUSINESS PARK TOTAL
--------- ------------- ------
<S> <C> <C> <C>
CERTAIN REVENUES:
Rental revenues.............................. $1,340 $1,563 $2,903
Tenant reimbursements........................ 25 348 373
Other income................................. 20 5 25
------ ------ ------
Total certain revenues..................... 1,385 1,916 3,301
------ ------ ------
CERTAIN EXPENSES:
Property expenses............................ 619 211 830
Real estate taxes............................ 63 180 243
------ ------ ------
Total certain expenses..................... 682 391 1,073
------ ------ ------
CERTAIN REVENUES IN EXCESS OF CERTAIN
EXPENSES...................................... $ 703 $1,525 $2,228
====== ====== ======
</TABLE>
See notes to combined historical summary of certain revenues and certain
expenses.
6
<PAGE>
JANUARY 1998 ACQUISITIONS
COMBINED HISTORICAL SUMMARY OF CERTAIN
REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<S> <C>
CERTAIN REVENUES:
Rental revenues (Note 2).............................................. $2,543
Tenant reimbursements................................................. 152
Other income.......................................................... 1
------
Total certain revenues.............................................. 2,696
------
CERTAIN EXPENSES:
Property expenses..................................................... 731
Real estate taxes..................................................... 133
Ground rents.......................................................... 51
General & administrative expenses..................................... 13
------
Total certain expenses.............................................. 928
------
CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $1,768
======
</TABLE>
See notes to combined historical summary of certain revenues and certain
expenses.
7
<PAGE>
JANUARY 1998 ACQUISITIONS
NOTES TO COMBINED HISTORICAL SUMMARY OF CERTAIN REVENUES
AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited combined historical summary of certain revenues and certain
expenses relates to the operations of the following properties which were
acquired by the Company from unaffiliated parties:
<TABLE>
<CAPTION>
DATE OF
PROPERTY ADDRESS LOCATION ACQUISITION
---------------- ------------------------ -----------
<S> <C> <C>
12100-12166 West Olympic/2121 S.
Bundy................................ Los Angeles, California 1/13/98
501 Santa Monica Boulevard............ Santa Monica, California 1/23/98
</TABLE>
Operating revenues and direct operating expenses are presented on the
accrual basis of accounting. The accompanying unaudited historical summary of
certain revenues and certain expenses are not representative of the actual
operations for the year presented as certain revenues and expenses which may
not be comparable to the revenues and expenses expected to be incurred by the
Company in the proposed future operations of the properties have been
excluded. Revenues and expenses excluded consist of certain other income,
interest, depreciation and amortization and professional fees not directly
related to the future operations of the properties.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
2. OPERATING LEASES
The properties are leased to tenants under operating leases with expiration
dates extending to the year 2003. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses, as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1998......................................................... $1,783
1999......................................................... 1,371
2000......................................................... 949
2001......................................................... 416
2002......................................................... 142
Thereafter................................................... 38
------
Total...................................................... $4,699
======
</TABLE>
8
<PAGE>
JANUARY 1998 ACQUISITIONS
ADDITIONAL COMBINING SCHEDULE OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
501 12100
SANTA MONICA W. OLYMPIC TOTAL
------------ ---------- ------
<S> <C> <C> <C>
CERTAIN REVENUES:
Rental revenues.............................. $1,800 $743 $2,543
Tenant reimbursements........................ 152 152
Other income................................. 1 1
------ ---- ------
Total certain revenues..................... 1,801 895 2,696
------ ---- ------
CERTAIN EXPENSES:
Property expenses............................ 555 176 731
Real estate taxes............................ 109 24 133
Ground rents................................. 51 51
General & administrative expenses............ 13 13
------ ---- ------
Total certain expenses..................... 664 264 928
------ ---- ------
CERTAIN REVENUES IN EXCESS OF CERTAIN
EXPENSES...................................... $1,137 $631 $1,768
====== ==== ======
</TABLE>
See notes to unaudited combined historical summary of certain revenues and
certain expenses.
9
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet is presented as
if the purchases of the Three Acquired Properties and the January 1998
Acquisitions (collectively referred to as the "First Quarter Acquisitions")
had occurred on December 31, 1997. Such pro forma information is based upon
the balance sheet of the Company at December 31, 1997. The accompanying
unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1997 was prepared as if the acquisition of the First
Quarter Acquisitions had occurred on January 1, 1997. These statements should
be read in conjunction with the respective consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. In the opinion of management, the unaudited, pro
forma condensed consolidated financial information provides for all
adjustments necessary to reflect the effects of the transaction previously
noted.
These pro forma statements may not necessarily be indicative of the results
that would have actually occurred if the acquisitions had been in effect on
the date indicated, nor does it purport to present the financial position,
results of operations or cash flows for future periods.
10
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
KILROY REALTY
KILROY REALTY FIRST CORPORATION
CORPORATION QUARTER PRO FORMA
HISTORICAL ACQUISITIONS CONSOLIDATED
------------- ------------ -------------
ASSETS
<S> <C> <C> <C>
Investment in real estate, net.... $712,910 $69,391 (A) $782,301
Cash and cash equivalents......... 8,929 8,929
Restricted cash................... 5,680 5,680
Tenant receivables, net........... 7,367 7,367
Investment in subsidiary.......... 123 123
Escrow deposits................... 5,114 5,114
Deferred charges and other assets,
net.............................. 17,531 17,531
-------- ------- --------
Total.......................... $757,654 $69,391 $827,045
======== ======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
<S> <C> <C> <C>
Liabilities:
Debt............................. $131,363 $131,363
Line of credit................... 142,000 68,525 210,525
Accounts payable and accrued
expenses........................ 9,711 9,711
Accrued distributions............ 10,804 10,804
Rent received in advance and
tenant security deposits........ 11,441 11,441
-------- ------- --------
Total liabilities.............. 305,319 68,525 373,844
-------- ------- --------
Minority interest................. 55,185 559 55,744
-------- ------- --------
Stockholders' equity:
Common stock..................... 245 245
Additional paid-in capital....... 403,163 307 (A)(F) 403,470
Distributions in excess of
earnings........................ (6,258) (6,258)
-------- ------- --------
Total stockholders' equity..... 397,150 307 397,457
-------- ------- --------
Total.......................... $757,654 $69,391 $827,045
======== ======= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
11
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KILROY
KILROY REALTY
GROUP CORPORATION
JANUARY 1, FEBRUARY 1,
1997 TO 1997 TO
JANUARY 31, DECEMBER 31, FIRST COMPANY PRO
1997 1997 QUARTER PRO FORMA FORMA
HISTORICAL HISTORICAL ACQUISITIONS ADJUSTMENTS CONSOLIDATED
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental income........... $2,760 $56,069 $5,446 $143 (B) $ 64,418
Tenant reimbursements... 275 5,600 525 6,400
Development and
management fees........ 14 14
Interest income......... 3,571 3,571
Other income............ 4 889 26 919
------ ------- ------ ------- ----------
Total revenues.......... 3,053 66,129 5,997 143 75,322
------ ------- ------ ------- ----------
EXPENSES:
Property expenses....... 579 8,770 1,561 10,910
Real estate taxes....... 106 3,048 376 $ 152 (C) 3,682
General and
administrative
expenses............... 78 4,949 13 5,040
Ground leases........... 64 938 51 1,053
Development and
management expenses.... 46 46
Interest expense........ 1,895 9,738 4,614 (D) 16,247
Depreciation and
amortization........... 787 13,236 1,415 (E) 15,438
------ ------- ------ ------- ----------
Total expenses.......... 3,555 40,679 2,001 6,181 52,416
------ ------- ------ ------- ----------
(Loss) income from
operations before
equity in loss of
subsidiary, minority
interest and
extraordinary gains.... (502) 25,450 3,996 (6,038) 22,906
Equity in income of
subsidiary............. 23 23
Minority interest....... (3,413) 593 (F) (2,820)
Extraordinary gain...... 3,204 3,204
------ ------- ------ ------- ----------
Net income (loss)....... $2,702 $22,060 $3,996 $(5,445) $ 23,313
====== ======= ====== ======= ==========
Weighted average shares
outstanding--basic..... 18,445,149
Weighted average shares
outstanding--diluted... 18,539,299
----------
Pro forma net income per
common share--basic.... $ 1.26
==========
Pro forma net income per
common share--diluted.. $ 1.26
==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
12
<PAGE>
KILROY REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS
(A) Reflects the purchase price and closing costs of the First Quarter
Acquisitions, all of which were acquired from unaffiliated third parties,
except the property located at 795 Trademark Drive, which was acquired from
a partnership controlled by Richard S. Allen, a member of the board of
directors of the Company:
<TABLE>
<CAPTION>
PURCHASE
PROPERTY PRICE SELLER
-------- -------- ------
<S> <C> <C>
12100-12166 W. Olympic Boulevard.... $ 7,628 Olybund, LLC
Fullerton Business Center........... 10,623 Red Eagles Properties, Ltd.
501 Santa Monica Boulevard.......... 16,556 501 Santa Monica Partners, L.P.
Fortune Drive Business Park......... 27,665 Limar Realty Corporation #17
795 Trademark Drive................. 6,919 ADI Memec Partners
-------
Total........................... $69,391
=======
</TABLE>
The First Quarter Acquisitions were accounted for as purchase transactions.
The acquisitions were financed with approximately $68,525 of working capital
and borrowings on the line of credit and the issuance of 30,827 units of common
limited partnership interest in Kilroy Realty L.P. (the "Operating
Partnership") valued at approximately $866. The cost of the properties is
allocated as follows:
<TABLE>
<S> <C>
Land............................ $19,866
Buildings....................... 49,525
-------
$69,391
=======
</TABLE>
(B) Reflects adjustment to straight-line rent calculation due to change in
ownership.
(C) Represents incremental property taxes on the First Quarter Acquisitions due
to change of ownership.
(D) Represents the incremental interest expense associated with the increased
borrowings outstanding on the line of credit based on the December 31, 1997
line of credit weighted average interest rate of 7.5%.
(E) Represents depreciation expense calculated based on the cost of the First
Quarter Acquisitions depreciated on the straight-line method over a 35 year
life.
(F) Adjustment to reflect the 12.3% minority interest in the Operating
Partnership owned by the holders of units in the Operating Partnership.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KILROY REALTY CORPORATION
Date: April 28, 1998 /s/ Ann Marie Whitney
By: _________________________________
ANN MARIE WHITNEY
Vice-President and Controller
14
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Kilroy Realty Corporation's
Amendment No. 1 to Registration Statement No. 333-45097 on Form S-3 and
Registration Statement No. 333-43227 on Form S-8 of our report on the Three
Acquired Properties dated April 23, 1998, appearing in this Current Report on
Form 8-K/A of Kilroy Realty Corporation dated January 13, 1998.
Deloitte & Touche LLP
Los Angeles, California
April 28, 1998
