<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): DECEMBER 17, 1997
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 IDENTIFICATION NO.)
ORGANIZATION)
</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>
The Company hereby amends Item 7 of its current reports on Form 8-K filed
with the Securities and Exchange Commission on December 29, 1997 and January
20, 1998 (the "Initial Form 8-K's") to file the (i) audited combined
historical summaries of certain revenues and certain expenses of the Five
Acquired Properties for the year ended December 31, 1996, (ii) unaudited pro
forma condensed consolidated financial information and (iii) the consent of
its independent auditors. Capitalized terms used but not defined herein have
the meaning given to each such term in the Initial Form 8-K's.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of properties acquired.
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 Five Acquired
Properties (as described in Note 1) for the year ended December 31, 1996. This
Historical Summary is the responsibility of the Five Acquiried 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 Five 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 Five Acquired Properties for the year ended
December 31, 1996 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 information 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 information is the responsibility of the
Five 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, 1996 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
January 20, 1998
3
<PAGE>
FIVE ACQUIRED PROPERTIES
COMBINED HISTORICAL SUMMARY OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
CERTAIN REVENUES:
Rental revenues (Note 2).............................................. $4,157
Tenant reimbursements................................................. 718
------
Total certain revenues.............................................. 4,875
------
CERTAIN EXPENSES:
Property expenses..................................................... 1,195
Real estate taxes..................................................... 495
------
Total certain expenses.............................................. 1,690
------
CERTAIN REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $3,185
======
</TABLE>
See notes to combined historical summary of certain revenues and certain
expenses.
4
<PAGE>
FIVE ACQUIRED PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARY OF CERTAIN REVENUES
AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
1. 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 an unaffiliated party as
follows:
<TABLE>
<CAPTION>
DATE OF
PROPERTY ADDRESS LOCATION ACQUISITION
---------------- ---------------------------- -----------
<S> <C> <C>
5101 East Palm Avenue.............. Anaheim, California 12/17/97
27141 Aliso Creek Road............. Aliso Viejo, California 12/17/97
26242 Dimension Drive.............. Lake Forest, California 12/17/97
16182 Gothard Street............... Huntington Beach, California 12/17/97
13845 Alton Parkway................ Irvine, California 1/7/98
</TABLE>
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.
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, 1996 are as follows:
<TABLE>
<CAPTION>
PERIOD ENDING
DECEMBER 31, (IN THOUSANDS)
------------- --------------
<S> <C>
1997......................................................... $ 3,595
1998......................................................... 2,003
1999......................................................... 1,119
2000......................................................... 608
2001......................................................... 381
Thereafter................................................... 3,149
-------
Total...................................................... $10,855
=======
</TABLE>
5
<PAGE>
FIVE ACQUIRED PROPERTIES
ADDITIONAL COMBINING INFORMATION OF CERTAIN REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
5101 27141 26242 16182 13845
E. PALM AVE. ALISO CREEK RD. DIMENSION DR. GOTHARD ST. ALTON PKY. TOTAL
------------ --------------- ------------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
CERTAIN REVENUES:
Rental revenues....... $1,225 $1,264 $368 $334 $ 966 $4,157
Tenant
reimbursements....... 351 219 12 21 115 718
------ ------ ---- ---- ----- ------
Total certain
revenues........... 1,576 1,483 380 355 1,081 4,875
------ ------ ---- ---- ----- ------
CERTAIN EXPENSES:
Property expenses..... 518 335 78 70 194 1,195
Real estate taxes..... 124 170 62 28 111 495
------ ------ ---- ---- ----- ------
Total certain
expenses........... 642 505 140 98 305 1,690
------ ------ ---- ---- ----- ------
CERTAIN REVENUES IN
EXCESS OF CERTAIN
EXPENSES............... $ 934 $ 978 $240 $257 $ 776 $3,185
====== ====== ==== ==== ===== ======
</TABLE>
See notes to combined historical summary of certain revenues and certain
expenses.
6
<PAGE>
(b) Pro forma financial information.
KILROY REALTY CORPORATION
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet is presented as
if the purchase of the Five Acquired Properties had occurred on September 30,
1997. Such pro forma information is based upon the balance sheet of Kilroy
Realty Corporation (the "Company") at September 30, 1997.
The accompanying unaudited pro forma condensed consolidated statement of
operations for the nine months ended September 30, 1997, and the year ended
December 31, 1996, were prepared as if each of the following had occurred on
January 1, 1996: (i) the January 1997 initial public offering (the "IPO") and
mortgage loans and use of proceeds therefrom to purchase the properties
acquired in connection with the IPO and repay certain indebtedness; (ii) the
transfer of the business and operations of the Kilroy Group pursuant to
certain formation transactions; (iii) the August 1997 follow-on stock offering
and use of proceeds therefrom to acquire properties and paydown the Company's
$250 million line of credit (the "Credit Facility"); and (iv) the purchase of
the Five Acquired Properties and the related assumption of a promissory note.
These statements should be read in conjunction with the respective
consolidated financial statements and notes thereto included in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, and
its Annual Report on Form 10-K for the year ended December 31, 1996. In the
opinion of management, the unaudited, pro forma condensed consolidated
financial information provides for all adjustments necessary to reflect the
effects of the transactions 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.
7
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
KILROY REALTY
FIVE CORPORATION
KILROY REALTY ACQUIRED PRO FORMA
CORPORATION PROPERTIES CONSOLIDATED
------------- ---------- -------------
(A)
ASSETS
<S> <C> <C> <C>
Rental properties, net............... $469,626 $ 49,489 (B) $519,115
Cash and cash equivalents............ 74,890 (48,589) 26,301
Restricted cash...................... 4,634 4,634
Tenant receivables, net.............. 3,764 3,764
Investment in subsidiary............. 267 267
Escrow deposits...................... 1,179 1,179
Deferred charges and other assets,
net................................. 18,184 18,184
-------- -------- --------
Total............................. $572,544 $ 900 $573,444
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Liabilities:
Debt................................ $104,054 900 (B) $104,954
Accounts payable and accrued
expenses........................... 9,794 9,794
Accrued distributions............... 10,576 10,576
Rent received in advance and tenant
security deposits.................. 10,902 10,902
-------- -------- --------
Total liabilities................. 135,326 900 136,226
-------- -------- --------
Minority interest.................... 45,120 45,120
-------- -------- --------
Stockholders' equity:
Common stock........................ 245 245
Additional paid-in capital.......... 397,445 397,445
Distributions in excess of
earnings........................... (5,592) (5,592)
-------- -------- --------
Total stockholders' equity........ 392,098 392,098
-------- -------- --------
Total............................. $572,544 $ 900 $573,444
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited,
pro forma condensed consolidated financial statements.
8
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-
KILROY ACQUISITION
GROUP KILROY REALTY PERIOD FOR THE
JANUARY 1, CORPORATION PROPERTIES
1997 TO FEBRUARY 1, ACQUIRED
JANUARY 31, 1997 TO THROUGH FIVE COMPANY PRO
1997 SEPTEMBER 30, SEPTEMBER 30, ACQUIRED PRO FORMA FORMA
HISTORICAL 1997(A) 1997(M) PROPERTIES ADJUSTMENTS CONSOLIDATED
----------- ------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Rental income........... $2,760 $35,878 $13,217 $3,118 $ 54,973
Tenant reimbursements... 275 3,441 2,499 539 6,754
Development and
management fees........ 14 $ (14)(E)
Interest income......... 2,875 (1,889)(F) 986
Other income............ 4 454 7 465
------ ------- ------- ------ ------- ----------
Total revenues.......... 3,053 42,648 15,723 3,657 (1,903) 63,178
------ ------- ------- ------ ------- ----------
EXPENSES:
Property expenses....... 579 5,999 2,309 896 9,783
Real estate taxes....... 106 1,925 1,006 371 218 (H) 3,626
General and
administrative
expenses............... 78 3,652 97 281 (I) 4,108
Ground leases........... 64 670 28 762
Development and
management expenses.... 46 (46)(E)
Interest expense........ 1,895 6,714 (1,945)(J) 6,664
Depreciation and
amortization........... 787 8,404 3,543 (K) 12,734
------ ------- ------- ------ ------- ----------
Total expenses.......... 3,555 27,364 3,440 1,267 2,051 37,677
------ ------- ------- ------ ------- ----------
(Loss) income from
operations before
equity in loss of
subsidiary, minority
interest and
extraordinary gains.... (502) 15,284 12,283 2,390 (3,954) 25,501
Equity in income (loss)
of subsidiary.......... 187 (30)(E) 157
Minority interest....... (2,231) (414)(L) (2,645)
------ ------- ------- ------ ------- ----------
Net (loss) income....... $ (502) $13,240 $12,283 $2,390 $(4,398) $ 23,013
====== ======= ======= ====== ======= ==========
Shares outstanding...... 24,475,000
----------
Pro forma net income per
common
share.................. $ .94
==========
</TABLE>
The accompanying notes are an integral part of these unaudited,
pro forma condensed consolidated financial statements.
9
<PAGE>
KILROY REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROPERTIES
ACQUIRED
THROUGH FIVE COMPANY PRO
KILROY GROUP SEPTEMBER 30, ACQUIRED PRO FORMA FORMA
HISTORICAL(D) 1997(M) PROPERTIES ADJUSTMENTS CONSOLIDATED
------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental income........... $35,022 $33,546 $4,157 $ (524)(C) $ 72,201
Tenant reimbursements... 3,380 4,577 718 8,675
Development and
management fees........ 698 (698)(E)
Interest income.........
Other income............ 76 635 711
------- ------- ------ -------- ----------
Total revenues.......... 39,176 38,758 4,875 (1,222) 81,587
------- ------- ------ -------- ----------
EXPENSES:
Property expenses....... 6,788 6,214 1,195 117 (G) 14,314
Real estate taxes....... 1,301 2,227 495 546 (H) 4,569
General and
administrative
expenses............... 2,383 361 2,734 (I) 5,478
Ground leases........... 768 338 1,106
Development and
management expenses.... 650 (650)(E)
Option buy-out.......... 3,150 3,150
Interest expense........ 21,853 (12,968)(J) 8,885
Depreciation and
amortization........... 9,111 7,516 (K) 16,627
------- ------- ------ -------- ----------
Total expenses.......... 46,004 9,140 1,690 (2,705) 54,129
------- ------- ------ -------- ----------
(Loss) income from
operations before
equity in loss of
subsidiary, minority
interest and
extraordinary gains.... (6,828) 29,618 3,185 1,483 27,458
Equity in (loss) of
subsidiary............. (6)(E) (6)
Minority interest....... (2,828)(L) (2,828)
------- ------- ------ -------- ----------
Net (loss) income ...... $(6,828) $29,618 $3,185 $ (1,351) $ 24,624
======= ======= ====== ======== ==========
Average number of shares
outstanding............ 24,475,000
----------
Pro forma net income per
common share (K)....... $ 1.01
==========
</TABLE>
The accompanying notes are an integral part of these unaudited,
pro forma condensed consolidated financial statements.
10
<PAGE>
KILROY REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
PRO FORMA ADJUSTMENTS
(A) Reflects Kilroy Realty Corporation unaudited condensed consolidated
financial statements as of and for the eight months ended September 30,
1997.
(B) Reflects the purchase price and closing costs of the Five Acquired
Properties, all of which were acquired from unaffiliated third parties, as
follows:
<TABLE>
<CAPTION>
PURCHASE
PROPERTY PRICE SELLER
-------- -------- ------
<S> <C> <C>
5101 East Palm Avenue... $15,314 Swede-Cal Properties, Inc.
27141 Aliso Creek Road.. 14,492 Swede-Cal Properties, Inc.
26242 Dimension Drive... 3,520 Viking Investors of Southern California, L.P.
16182 Gothard Street.... 3,603 Viking Investors of Southern California, L.P.
13845 Alton Parkway..... 12,560 Viking Investors of Southern California II, L.P.
-------
Total............... $49,489
=======
</TABLE>
The Five Acquired Properties will be accounted for as purchase transactions.
The acquisitions were financed with approximately $48,589 of working capital
and borrowings on the Credit Facility and the issuance of a $900 promissory
note, which bore interest at 5% and was repaid January 1998. The cost of the
properties is allocated as follows:
<TABLE>
<S> <C>
Land............................ $19,796
Buildings....................... 29,693
-------
$49,489
=======
</TABLE>
(C) Represents the elimination of rental income received from Kilroy
Industries.
(D) Reflects Kilroy Group combined income statement for the year ended
December 31, 1996.
(E) Represents the elimination of Kilroy Services, Inc.'s (the "Service
Company") gross revenues and expenses and the recording of the equity in
income of the Services Company net of income taxes.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------- ------------
<S> <C> <C>
Development and management fees........... $ 14 $ 698
Development and management expenses....... (46) (650)
Elimination of nonrecurring Services
Company expenses......................... 132
Elimination of management fees earned on
one of the IPO acquisition properties.... (186)
---- -----
Estimated service company net loss........ (32) (6)
==== =====
At 95% economic interest.................. $(30) $ (6)
==== =====
</TABLE>
11
<PAGE>
KILROY REALTY CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(F) Represents the elimination of interest earned on excess proceeds from the
IPO and the August Offering.
(G) Represents the elimination of management fees charged to the Kilroy Group
by Kilroy Industries and the reclassification of expenses which previously
had not been allocated to individual properties.
(H) Represents incremental property taxes on the properties acquired at the
IPO and the office properties acquired subsequent to the IPO due to change
of ownership.
(I) Represents the estimated incremental increases in other general and
administrative expenses, including, without limitation, the incremental
general and administrative expenses to be incurred as a public company,
increases in other general and administrative expenses, less the effect of
the reclassification of property expenses which previously had not been
allocated to individual properties.
(J) Reflects reduction of interest expense associated with the mortgage debts
and Credit Facility assumed to be repaid using net proceeds from the IPO
and the August Offering:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------- ------------
<S> <C> <C>
. Interest expense on the Mortgage Loans
(fixed interest rate of 8.35% on
$84,000 with 25-year amortization;
variable interest rate of LIBOR plus
1.5% on $14,000)....................... $6,090 $ 8,120
. Interest expense on the promissory note
issued (fixed interest rate of 5%)..... 34 45
. Amortization of Mortgage Loan issuance
costs (8 years for $84,000 note and 18
months for $14,000 note)............... 540 720
------ -------
Total pro forma interest expense....... $6,664 $ 8,885
Historical interest expense............ 8,609 21,853
------ -------
Net interest expense adjustment........ $1,945 $12,968
====== =======
</TABLE>
(K) Represents depreciation expense calculated based on the cost of the
properties acquired during the period February 1, 1997 through September
30, 1997 and the Five Acquired Properties depreciated on the straight-line
method over a 35 year life.
(L) Represents the income allocated to the 10.3% minority interest in the
Operating Partnership owned by the holders of units in the Operating
Partnership.
(M) Reflects January 1997 operating activities of the properties acquired at
the IPO, and the properties acquired during the period February 1, 1997
through September 30, 1997.
12
<PAGE>
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
*10.70 Purchase and Sale Agreement and Escrow Instructions, dated
December 11, 1997, by and between Kilroy Realty, L.P. and Swede-
Cal Properties, Inc., Viking Investors of Southern California,
L.P. and Viking Investors of Southern California II, L.P.
23.1 Consent of Deloitte and Touche LLP
</TABLE>
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* Previously filed as an exhibit to the Registrant's Current Report on Form
8-K (No. 1-12675) dated December 17, 1997 and incorporated herein by
reference.
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: February 27, 1998
By: /s/ Ann Marie Whitney
_________________________________
ANN MARIE WHITNEY
Vice-President and Controller
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP
*10.70 Purchase and Sale Agreement and Escrow Instructions, dated December
11, 1997, by and between Kilroy Realty, L.P. and Swede-Cal
Properties, Inc., Viking Investors of Southern California, L.P.
and Viking Investors of Southern California II, L.P.
</TABLE>
- --------
* Previously filed as an exhibit to the Registrant's Current Report on Form 8-
K (No. 1-127675) dated December 17, 1997 and incorporated herein by
reference.
1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-45097 of Kilroy Realty Corporation on Form S-3 of our report on the Five
Acquired Properties dated January 20, 1998, appearing in this Current Report on
Form 8-K/A of Kilroy Realty Corporation dated December 17, 1997.
Deloitte & Touche LLP
Los Angeles, California
February 27, 1998
1
