KILROY REALTY CORP
S-3, 1999-02-12
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>
 
   As filed with the Securities and Exchange Commission on February 12, 1999
                                                     Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
 
                                --------------
                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                                --------------
                           KILROY REALTY CORPORATION
            (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                                <C>
            Maryland                                 95-4598246
  (State or Other Jurisdiction                    (I.R.S. Employer
of Incorporation or Organization)              Identification Number)
</TABLE>
 
  2250 East Imperial Highway, Suite 1200, El Segundo, California 90245, (310)
                                   563-5500
  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)
 
                             Richard E. Moran Jr.
             Executive Vice President and Chief Financial Officer
                           Kilroy Realty Corporation
  2250 East Imperial Highway, Suite 1200, El Segundo, California 90245, (310)
                                   563-5500
(Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
 
                                --------------
                                  Copies to:
                        Edward Sonnenschein, Jr., Esq.
                            J. Scott Hodgkins, Esq.
                               Latham & Watkins
 633 West Fifth Street, Suite 4000, Los Angeles, California 90071-2007, (213)
                                   485-1234
 
                                --------------
  Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
  If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box [_]
  If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
  If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [_]
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
                                --------------
                        CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
                                                                              Proposed
                                                                 Proposed      maximum
                                                    Amount       maximum      aggregate   Amount of
             Title of each class of                 to be     offering price  offering   registration
          securities to be registered             registered   per share(2)   price(3)       Fee
- -----------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>            <C>         <C>
Common Stock, par value $.01 per share.........  2,817,476(1)    $21.375     $60,223,550   $16,742
- -----------------------------------------------------------------------------------------------------
Series B Junior Participating Preferred Stock
 Purchase Rights(4)............................  2,817,476(4)       *             *           *
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Including an indeterminate number of shares which may be issued by Kilroy
    Realty Corporation with respect to such shares of common stock by way of a
    stock dividend, stock split or in connection with a stock combination,
    recapitalization, merger, consolidation or otherwise.
(2) Based upon the average of the high and low prices of the common stock
    reported on the New York Stock Exchange on February 10, 1999, pursuant to
    Rule 457(c) of the Securities Act of 1933, as amended.
(3) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457 of the Securities Act of 1933, as amended.
(4) The rights are initially carried with the common stock. The value
    attributable to the rights, if any, is reflected in the value of the
    common stock.
   This registration statement relates to the possible issuance of shares of
common stock of Kilroy Realty Corporation upon the exchange of up to 2,817,476
units representing common limited partnership interests in Kilroy Realty, L.P.
which were issued in transactions on January 31, 1997 and June 18, 1997 and
which may be exchanged on or after January 31, 1999, and the possible resale
of the shares of common stock by the selling stockholders named in the
registration statement.
   The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not issue these securities and the selling stockholders may not resell these  +
+securities until the registration statement filed with the Securities and     +
+Exchange Commission is effective. This prospectus is not an offer to sell     +
+these securities and it is not soliciting an offer to buy these securities in +
+any state where the offer or sale is not permitted.                           +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                 SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1999
 
PROSPECTUS
 
                           KILROY REALTY CORPORATION
 
                        2,817,476 Shares of Common Stock
                           Par Value $0.01 Per Share
 
  This prospectus relates to the possible issuance of up to 2,817,476 shares of
common stock of Kilroy Realty Corporation, a Maryland corporation, to the
holders of common units representing limited partnership interests in Kilroy
Realty L.P., and the possible resale of shares of common stock by these
holders. The holders identified in this prospectus may tender their common
units to Kilroy Realty, L.P. for cash redemption. We may instead elect to
exchange their tendered units on a one-for-one basis for shares of our common
stock. We will not receive any of the proceeds from the issuance of the common
stock to the holders or from the resale of the shares by the holders.
 
  We develop, acquire, own, operate and manage office and industrial real
estate. For U.S. income tax purposes, we elected to be qualified as a real
estate investment trust, or "REIT," beginning with the tax year ended December
31, 1997. The holders currently own 2,817,476 common units. We are registering
the offer and sale of shares of common stock pursuant to our contractual
obligations, but this registration does not necessarily mean that we will in
fact issue any of the common stock, or that if issued, the holders will offer
or resell any of their shares.
 
  Our common stock is listed on the New York Stock Exchange under the symbol
"KRC." On February 10, 1999, the last reported sales price of our common stock
on the New York Stock Exchange was $21.375 per share.
 
                                 ------------
 
  Before you invest in our common stock, you should consider the risks
discussed in "Risk Factors" beginning on page 1.
 
                                 ------------
 
  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
 
               The date of this prospectus is February 12, 1999.
 
<PAGE>
 
  You should rely only on the information contained in this document or
incorporated by reference. Neither we nor the holders have authorized anyone to
provide you with information or make any representation that is different. If
anyone provides you with different or inconsistent information, you should not
rely on it. This prospectus is not an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates and this prospectus is not an offer to sell or the solicitation of an
offer to buy securities in any jurisdiction where, or to any person to whom, it
is unlawful to make such offer or solicitation. You should not assume that the
information contained in this prospectus is correct on any date after the date
of the prospectus even though this prospectus is delivered or shares are sold
pursuant to the prospectus at a later date. Since such dates our business,
financial condition, results of operations and prospects may have changed.
 
                               ----------------
 
                                       i
<PAGE>
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
RISK FACTORS.............................................................    1
THE COMPANY..............................................................   14
FORWARD LOOKING STATEMENTS...............................................   15
USE OF PROCEEDS..........................................................   16
DESCRIPTION OF CAPITAL STOCK.............................................   16
DESCRIPTION OF MATERIAL PROVISIONS OF THE PARTNERSHIP AGREEMENT OF KILROY
 REALTY L.P. ............................................................   26
EXCHANGE OF UNITS FOR COMMON STOCK.......................................   34
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS........   41
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................   46
ERISA CONSIDERATIONS.....................................................   58
SELLING STOCKHOLDERS.....................................................   61
PLAN OF DISTRIBUTION.....................................................   62
LEGAL MATTERS............................................................   63
EXPERTS..................................................................   63
WHERE YOU CAN FIND MORE INFORMATION......................................   63
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................   64
</TABLE>
 
                                       ii
<PAGE>
 
   Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "we," "us," "our" or the "Company" mean Kilroy
Realty Corporation, including our consolidated subsidiaries and our
predecessors. Our subsidiaries are Kilroy Realty, L.P., Kilroy Realty Finance,
Inc., and Kilroy Realty Finance Partnership, L.P. Prior to our initial public
offering of our common stock, our predecessors were comprised of Kilroy
Industries and affiliated partnerships, limited liability companies and trusts
that prior to our initial public offering owned properties that they
contributed to Kilroy Realty, L.P. In some instances, in order to avoid
confusion between Kilroy Realty Corporation and Kilroy Realty, L.P., we refer
to Kilroy Realty Corporation alone as the "Company."
 
   When we refer to our "charter" we mean our Articles of Incorporation, as
amended and restated by our Articles of Amendment and Restatement and as
supplemented by our Articles Supplementary establishing the terms of our 8.075%
Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred
Stock"), our Articles Supplementary establishing the terms of our Series B
Junior Participating Preferred Stock (the "Series B Preferred Stock") and our
Articles Supplementary establishing the terms of our 9.375% Series C Cumulative
Redeemable Preferred Stock (the "Series C Preferred Stock"). When we refer to
"units" we mean Kilroy Realty, L.P.'s current and future common units and
preferred units representing partnership interests in Kilroy Realty, L.P. We
refer to Kilroy Realty, L.P.'s 8.075% Series A Cumulative Redeemable Preferred
Units as the "Series A Preferred Units," the Series B Junior Participating
Preferred Units as the "Series B Preferred Units," and the 9.375% Series C
Cumulative Redeemable Preferred Units as the "Series C Preferred Units."
 
                                  RISK FACTORS
 
   Set forth below are the risks that we believe are material to investors who
purchase or own our common stock. In addition to other information contained or
incorporated by reference in this prospectus or in an accompanying prospectus
supplement, you should carefully consider the following factors before
acquiring shares of common stock offered hereby.
 
Most of our properties are located in Southern California.
 
   Most of our properties are located in Southern California. As of December
31, 1998, these properties represented:
 
  .  approximately 85.5% of the aggregate square footage of all of our
     properties; and
 
  .  88.4% of our annualized base rent.
 
   Our annualized base rent means the monthly contractual rent under existing
leases on December 31, 1998, multiplied by 12. The annualized base rent
excludes expense reimbursements and rental abatements.
 
   Our ability to make expected distributions to our stockholders depends on
our ability to generate funds from operations in excess of scheduled principal
payments on debt, payments on the preferred limited partnership units issued by
Kilroy Realty, L.P. and capital expenditure requirements. Events and conditions
beyond our control may decrease funds available for distribution and the value
of our properties. Examples include:
 
  .  oversupply or reduced demand for local real estate,
 
  .  tenant layoffs,
 
  .  tenant downsizings,
 
  .  industry or economic slowdowns,
 
  .  changing submarket demographics and
 
  .  property damage resulting from seismic activity.
 
                                       1
<PAGE>
 
   Concentrating most of our properties in a single geographic region may
expose us to greater economic risks than if we owned properties in several
geographic regions. Any adverse economic or real estate developments in the
Southern California region could adversely impact our financial condition,
results from operations, cash flow, the quoted per share trading price of our
common stock and our ability to pay distributions to our stockholders.
 
We face risks common to all real estate companies.
 
   General. Our ability to make expected distributions to our stockholders
depends on our ability to generate funds from operations in excess of scheduled
principal payments on debt, payments on the preferred limited partnership units
issued by Kilroy Realty, L.P. and capital expenditure requirements. Rents from
our properties and the value of our properties may decrease as a result of one
or more of the following events or conditions, some of which are beyond our
control:
 
  .  the general economic climate;
 
  .  competition from other office, industrial, and other commercial
     buildings;
 
  .  local oversupply or reduction in demand of office, industrial or other
     commercial space;
 
  .  our ability to collect rent from tenants;
 
  .  vacancies or our inability to rent spaces on favorable terms;
 
  .  our ability to finance property development and acquisitions on
     favorable terms;
 
  .  changes in interest rate levels;
 
  .  increased operating costs, including insurance premiums, utilities, and
     real estate taxes;
 
  .  costs of complying with changes in governmental regulation;
 
  .  changes in the tax laws; and
 
  .  the relative illiquidity of real estate investments.
 
   If our rent revenue decreases, we still have significant expenditures, such
as debt service, payments on the preferred limited partnership units issued by
Kilroy Realty, L.P., mortgage payments, real estate taxes and property
maintenance costs, each of which may remain unchanged.
 
   We have incurred a significant amount of debt. Payments of principal and
interest on borrowings may leave us with insufficient cash resources to operate
the properties or to pay the distributions necessary to maintain our REIT
qualification. Our level of debt and the limitations imposed on us by our debt
agreements may have important consequences, including the following:
 
  .  our cash flow may be insufficient to meet our required principal and
     interest payments;
 
  .  we may be unable to refinance our indebtedness at maturity or the
     refinancing terms may be less favorable than the terms of our original
     indebtedness;
 
  .  we may be forced to dispose of one or more of our properties, possibly
     on disadvantageous terms;
 
  .  we may default on our obligations and the lenders or mortgagees may
     foreclose on our properties that secure their loans and receive an
     assignment of rents and leases; and
 
  .  our default under one mortgage loan with cross default provisions could
     result in a default on other indebtedness.
 
   If any one of these events were to occur, our financial position, results of
operations, cash flow, quoted per share trading price of our common stock and
our ability to pay distributions to our stockholders could be adversely
affected. In addition, foreclosures could create taxable income without
accompanying cash proceeds,
 
                                       2
<PAGE>
 
a circumstance which could hinder our ability to meet the strict REIT
distribution requirements imposed by the Internal Revenue Code of 1986, as
amended.
 
   We face significant competition. We compete with several developers, owners
and operators of office, industrial and other commercial real estate.
Substantially all of our properties are located in areas with similar
properties as our competitors. Competition from these other properties may
effect our ability to attract and retain tenants and reduce the rents that we
may obtain. Many of these competing properties have high vacancy rates which
may result in lower-priced space being available.
 
   Potential losses may not be covered by insurance. We carry comprehensive
liability, fire, extended coverage and rental loss insurance covering all of
our properties. We believe the policy specifications and insured limits are
appropriate given the relative risk of loss, the cost of the coverage and
industry practice. We do not carry insurance for generally uninsured losses
such as loss from riots or acts of war. Some of our policies, like those
covering losses due to floods, are insured subject to limitations involving
large deductibles or co-payments and policy limits. In addition, we carry
earthquake insurance on our properties located in areas known to be subject to
earthquakes in an amount and with deductions which we believe are commercially
reasonable. As of September 30, 1998, 74 of our office buildings aggregating
4.9 million square feet (representing 44.1% of our properties based on
aggregate square footage and 65.9% of our annualized base rent) were located in
areas known to be subject to earthquakes. As of September 30, 1998, 71 of our
industrial buildings aggregating 4.5 million square feet (representing 40.5% of
our properties based on aggregate square footage and 23.6% of our annualized
based rent) were located in areas known to be subject to earthquakes. While we
presently carry earthquake insurance on these properties, the amount of our
earthquake insurance coverage may not be sufficient to cover losses from
earthquakes. In addition, we may discontinue earthquake insurance on these or
any of our other properties in the future if the premiums for earthquake
insurance are not economical.
 
   If we experience a loss which is uninsured or which exceeds policy limits,
we could lose the capital invested in the damaged properties as well as the
anticipated future revenue from those properties. In addition, if the damaged
properties are subject to recourse indebtedness, we would continue to be liable
for the indebtedness, even if the properties were unrepairable.
 
   We may be unable to complete acquisitions and successfully operate acquired
properties. We intend to continue to acquire office and industrial properties
when strategic opportunities exist. Our ability to acquire properties on
favorable terms and successfully operate them is subject to many risks:
 
  .  we may be unable to acquire a desired property because of competition
     from other real estate investors with significant capital, including
     both publicly traded REITS and institutional investment funds;
 
  .  even if we enter into agreements for the acquisition of office and
     industrial properties, these agreements are subject to customary
     conditions to closing, including completion of due diligence
     investigations to our satisfaction;
 
  .  we may not be able to finance the acquisition on favorable terms;
 
  .  we may spend more than budgeted amounts to make necessary improvements
     or renovations to acquired properties; and
 
  .  we may lease the acquired properties at below expected rates.
 
   If we cannot finance property acquisitions on favorable terms, or operate
acquired properties to meet our financial expectations, our financial position,
results of operations, cash flow, quoted per share trading price of our common
stock and our ability to pay distributions to our stockholders could be
adversely affected.
 
                                       3
<PAGE>
 
   We may be unable to complete development projects and successfully operate
developed properties. Property development involves significant risks:
 
  .  we may be unable to obtain construction financing on favorable terms;
 
  .  we may be unable to obtain permanent financing at all or on advantageous
     terms if we finance development projects through construction loans;
 
  .  we may not complete development projects on schedule or within budgeted
     amounts;
 
  .  we may encounter delays or refusals in obtaining all necessary zoning,
     land use, building, occupancy, and other required governmental permits
     and authorizations;
 
  .  we will expend funds on and devote management's time to projects which
     we may not complete; and
 
  .  we may lease the developed properties at below expected rental rates.
 
If any one of these events were to occur, our financial position, results of
operations, cash flow, quoted per share trading price of our common stock and
our ability to pay distributions to our stockholders could be adversely
affected.
 
   While we primarily develop office and industrial property in Southern
California markets, we may in the future develop properties for retail or other
use and expand our business to other geographic regions where we expect the
development of property to result in favorable risk-adjusted returns on our
investment. Presently, we do not possess the same level of familiarity with
development of other property types or outside markets which could adversely
affect our ability to develop properties or to achieve expected performance.
 
   Several of our properties are held subject to ground leases. We hold eight
of our office buildings and one office building currently under development
under ground leases. If we default under the terms of a ground lease, we may
lose the property subject to the ground lease. We may not be able to
renegotiate a new ground lease, on favorable terms, if at all, upon expiration
of the lease and all its options. The loss of these properties or an increase
of our rental expense would have an adverse effect on our financial position,
results of operations, cash flow, quoted per share trading price of our common
stock and our ability to pay distributions to our stockholders. The ground
leases for the Kilroy Airport Center Long Beach will expire in 2035. The ground
leases for the SeaTac Office Center, including renewal options, will expire in
2062.
 
   We are dependent upon the financial health of our tenants. We derive most of
our income from rental income. A tenant may experience a downturn in its
business, which may weaken its financial condition and result in its failure to
make timely rental payments. Also, when our tenants decide not to renew their
leases, we may not be able to relet the space. Even if tenants do renew, the
terms of renewal or reletting may not be as favorable as current lease terms.
Leases representing 13.2% and 11.3% of the square footage of our properties
will expire in 1999 and 2000, respectively. In the event of default by a
lessee, we may experience delays in enforcing our rights as lessor and may
incur substantial costs in protecting our investment.
 
   The bankruptcy or insolvency of a major tenant also may adversely affect the
income produced by our properties. If any tenant becomes a debtor in a case
under the Bankruptcy Code, we cannot evict the tenant solely because of its
bankruptcy. On the other hand, the bankruptcy court might authorize the tenant
to reject and terminate its lease with us. Our claim against such a tenant for
unpaid, future rent would be subject to a statutory cap that might be
substantially less than the remaining rent actually owed under the lease. Even
so, our claim for unpaid rent would likely not be paid in full. This shortfall
could adversely affect our cash flow and our ability to make distributions to
you. Although we have not experienced material losses from tenant bankruptcies,
our tenants could file for bankruptcy protection in the future.
 
   We may be unable to renew leases or relet space as leases expire. Leases on
a total of approximately 24.5% of the aggregate square footage of our
properties as of December 31, 1998 will expire by December 31, 2000. Above
market rental rates on some of our properties may force us to renew or relet
some expiring leases
 
                                       4
<PAGE>
 
at lower rates. While we believe that the average rental rates for most of our
properties are below quoted market rates in each of their respective
submarkets, we cannot assure you that leases will be renewed or our properties
released at rental rates equal to or above the current rental rates. If the
rental rates for our properties decrease, our tenants do not renew their leases
or we do not relet a significant portion of our available space, our financial
position, results of operations, cash flow, quoted per share trading price of
our common stock and our ability to pay distributions to our stockholders would
be adversely affected.
 
   Real estate assets are illiquid and we may not be able to sell properties at
the appropriate time. Our investments in our properties are relatively illiquid
which therefore limits our ability to sell properties quickly in response to
changes in economic or other conditions. Limitations in the Code and related
Treasury Regulations applicable to REITs may also limit our ability to sell
properties. These restrictions on our ability to sell our properties could have
an adverse effect on our financial position, results of operations, cash flow,
quoted per share trading price of our common stock and our ability to pay
distributions to our stockholders.
 
We encounter risks because the development business and related activities are
conducted by Kilroy Services, Inc.
 
   Kilroy Services, Inc. is subject to tax liabilities on net income. Kilroy
Services, Inc. is subject to federal and state income tax on its taxable income
at regular corporate rates. Any federal, state or local income taxes that
Kilroy Services, Inc. must pay will reduce the cash available for distribution
to Kilroy Realty, L.P. and, ultimately, to our stockholders.
 
   We do not control the businesses of Kilroy Services, Inc. We have set up the
following structure to comply with the REIT asset tests that restrict our
ability to own shares of other corporations:
 
  .  Kilroy Realty, L.P. owns 100.0% of the nonvoting preferred stock of
     Kilroy Services, Inc., representing approximately 95.0% of its economic
     value; and
 
  .  John B. Kilroy, Sr. and John B. Kilroy, Jr. own all of the outstanding
     voting common stock of Kilroy Services, Inc., representing approximately
     5.0% of its economic value.
 
   We receive substantially all of the economic benefit derived from Kilroy
Services, Inc.'s business by virtue of the dividends that we receive from the
preferred stock. However, we cannot influence Kilroy Services, Inc.'s
operations, elect its directors or officers, or require its board of directors
to declare and pay a cash dividend on the nonvoting preferred stock owned by
Kilroy Realty, L.P. As a result, Kilroy Services, Inc. may make decisions or
pursue business policies which could have an adverse effect on our financial
position, results of operations, cash flow, quoted per share trading price of
our common stock and our ability to pay distributions to our stockholders.
 
   Kilroy Services, Inc. may be adversely affected by our status as a
REIT. Changes in the requirements for REIT qualification may in the future
limit our ability to receive increased distributions from the fee development
operations and related services offered by Kilroy Services, Inc.
 
We could incur significant costs related to environmental remediation.
 
   Environmental laws and regulations hold us liable for the costs of removal
or remediation of certain hazardous or toxic substances released on our
properties. These laws could impose liability without regard to whether we are
responsible for, or even knew of, the presence of the hazardous materials.
Government investigations and remediation actions may have substantial costs
and the presence of hazardous wastes on a property could result in personal
injury or similar claims by private plaintiffs. For instance, third parties may
seek recovery from us for personal injuries associated with asbestos-containing
materials and other hazardous or toxic substances if found on our properties.
Moreover, the presence of these substances on our properties may hinder our
ability to rent or sell our properties, or to borrow using our properties as
collateral. Various laws also impose liability on persons who arrange for the
disposal or treatment of hazardous or toxic substances
 
                                       5
<PAGE>
 
for the cost of removal or remediation of hazardous substances at the disposal
or treatment facility. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
As an owner and operator of our properties, we may be considered to have
arranged for the disposal or treatment of hazardous or toxic substances.
 
   Some of our tenants routinely handle hazardous substances and wastes as part
of their operations on our properties. Environmental laws and regulations
subject our tenants, and potentially us, to liability resulting from such
activities. We require our tenants, in their leases, to comply with these
environmental laws and regulations and to indemnify us for any related
liabilities. We do not believe that these activities will have any material
adverse effect on our operations. Furthermore, we are unaware of any material
noncompliance, liability or claim relating to hazardous or toxic substances or
petroleum products in connection with any of our properties.
 
   Independent environment consultants conducted Phase I or similar
environmental site assessments on all of our properties. Site assessments
generally include an historical review, a public records review, an
investigation of the surveyed site and surrounding properties, and the issuance
of a written report. These assessments do not generally include soil samplings
or subsurface investigations. Our site assessments revealed that:
 
  .  some of our properties contain asbestos-containing materials;
 
  .  historical operations at or near some of our properties, including the
     operation of underground storage tanks, may have caused soil or
     groundwater contamination.
 
   Prior owners of the affected properties conducted soil remediation. We do
not believe that further soil remediation is required. We carry what we believe
to be sufficient environmental insurance to cover any potential liability for
soil and groundwater contamination at the affected sites. We cannot assure our
stockholders that our insurance coverage will be sufficient or whether our
liability, if any, will have a material adverse effect on our financial
condition, results of operations, cash flow, quoted per share trading price of
our common stock and our ability to pay distributions to our stockholders.
 
   None of our site assessments revealed any environmental liability that we
believe would have a material adverse effect on our business, assets or results
of operations. We are not aware of any such condition, liability, or concern by
any other means. However:
 
  .  the assessments may have failed to reveal all environmental conditions,
     liabilities, or compliance concerns;
 
  .  there may be material environmental conditions, liabilities, or
     compliance concerns that arose at a property after the review was
     completed;
 
  .  future laws, ordinances or regulations may impose material additional
     environmental liability; and
 
  .  current environmental conditions at our properties may be affected in
     the future by tenants, third parties, or the condition of land or
     operations near our properties (such as the presence of underground
     storage tanks).
 
   If the costs of environmental compliance exceed our budgeted limits, we may
be unable to make distributions to our stockholders.
 
We may incur significant costs complying with the Americans with Disabilities
act and similar laws.
 
   Under the Americans with Disabilities Act of 1990, all public accommodations
must meet certain federal requirements related to access and use by disabled
persons. Although we believe that our properties substantially comply with
present requirements of the act, we have not conducted an audit or
investigation of all of our properties to determine our compliance. We may
incur additional costs of complying with the act. A number of additional
federal, state and local laws also may require modifications to our properties,
or restrict
 
                                       6
<PAGE>
 
our ability to renovate our properties. We cannot predict the ultimate amount
of the cost of compliance with the act or other legislation. Although we do not
expect such costs to have a material effect on us, such costs could be
substantial.
 
We may incur significant costs complying with other regulations.
 
   Our properties are subject to various federal, state and local regulatory
requirements, such as state and local fire and life safety requirements. If we
fail to comply with these various requirements, we might incur governmental
fines or private damage awards. We believe that our properties are currently in
material compliance with all of these regulatory requirements. However, we do
not know whether existing requirements will change or whether future
requirements will require us to make significant unanticipated expenditures
that will affect our ability to make distributions to you.
 
   The City of Los Angeles adopted regulations relating to the repair of welded
steel moment frames located in certain areas damaged as a result of the January
17, 1994 Northridge earthquake in Southern California. Currently, these
regulations apply to only one of our properties representing approximately
78,000 square feet. We believe that this property complies with these
regulations. We do not know, however, whether other regulatory agencies will
adopt similar regulations or whether we will acquire additional properties
which may be subject to these or similar regulations. We believe, based in part
on engineering reports, that our properties are in good condition. However, if
we are required to make significant expenditures under applicable regulations,
our financial condition, results of operations, cash flow, quoted per share
trading price of our common stock and our ability to pay distributions to our
stockholders would be adversely affected.
 
Common limited partners have limited approval rights.
 
   In addition, we may not withdraw from Kilroy Realty, L.P. or transfer our
general partnership interest or admit another general partner without the
approval of a majority of the common limited partnership units except in the
case of a "termination transaction" described under in the section entitled
"Description of Material Provisions of the Partnership Agreement of Kilroy
Realty, L.P.--Transferability of partnership interests" which requires the
approval of 60% of the common units, including the common units we hold in our
capacity as general partner. The right of common limited partners to vote on
the transactions described above could limit our ability to complete a change
of control transaction that might otherwise be in the best interest of
stockholders.
 
The sale or refinancing of certain properties requires common limited partner
consent.
 
   For as long as limited partners own at least 5% of all of the common units
of Kilroy Realty, L.P., we must obtain the approval of limited partners holding
a majority of the common units before we may:
 
  .dissolve the partnership, or
 
  . sell the property located at 2260 East Imperial Highway at Kilroy Airport
    Center in El Segundo prior to January 31, 2004.
 
   In addition, we may not sell in a taxable transaction 11 of our properties
prior to October 31, 2002 without the consent of the limited partners that
contributed the properties to Kilroy Realty, L.P., except in connection with
the sale or transfer of all or substantially all of our assets or those of
Kilroy Realty, L.P.
 
   Our unitholding directors and officers may seek to influence us as sole
general partner of Kilroy Realty, L.P. not to carry out a sale of these
properties, even though it might be otherwise financially advantageous to us,
Kilroy Realty, L.P., our stockholders and the other partners. In addition,
Kilroy Realty, L.P. agreed to use commercially reasonable efforts to minimize
the tax consequences to common limited partners resulting from the repayment,
refinancing, replacement or restructuring of debt, or any sale, exchange or
other disposition of any of its other assets.
 
                                       7
<PAGE>
 
Certain of our officers and directors have potential conflicts of interest with
us.
 
   Certain of our officers and directors are engaged in competitive real estate
activities. We own four office buildings and four industrial buildings in the
El Segundo submarket. John B. Kilroy, Sr., the chairman of our board of
directors, and John B. Kilroy, Jr., our president and chief executive officer,
own controlling interests in partnerships which own a complex of three office
buildings in the same submarket. Kilroy Realty, L.P. manages the complex
pursuant to a management agreement on market terms. The policies adopted by our
board of directors to minimize this conflict, including requiring that Mr. John
B. Kilroy, Sr. and Mr. John B. Kilroy, Jr. enter into non-competition
agreements with us, may not eliminate their influence over transactions
involving these competing properties.
 
   Officers and directors who are unitholders have substantial influence over
our affairs. John B. Kilroy, Sr. is the Chairman of our board of directors.
John B. Kilroy, Jr. is our President, Chief Executive Officer and one of our
directors. Together, Messrs. Kilroy hold two of the seven seats on our board of
directors. They also beneficially own common limited partnership units
exchangeable for an aggregate of 2,598,639 shares of common stock and currently
vested options to purchase an aggregate of 176,666 shares of common stock,
representing a total of 10.0% of the total outstanding shares of common stock
as of December 31, 1998. Pursuant to our charter no other stockholder may own,
actually or constructively, more than 7.0% of our common stock. Consequently,
Messrs. Kilroy have substantial influence on us and they could exercise their
influence in a manner that is not in the best interest or our stockholders.
Also, they may in the future have a substantial influence on the outcome of any
matters submitted to our stockholders for approval.
 
There are limits on the ownership of our capital stock which limit the
opportunities for a change of control at a premium to existing stockholders.
 
   Certain provisions of the Maryland General Corporation Law, our charter, our
bylaws, and Kilroy Realty, L.P.'s partnership agreement may delay, defer, or
prevent a change in control over us or the removal of existing management. Any
of these actions might prevent our stockholders from receiving a premium for
their shares of stock over the then prevailing market prices.
 
   The Code sets forth stringent ownership limits on us as a result of our
decision to be taxed as a REIT, including:
 
  .  no more than 50% in value of our capital stock may be owned, actually or
     constructively, by five or fewer individuals, including certain
     entities, during the last half of a taxable year;
 
  .  subject to certain exceptions, our common stock shares must be held by a
     minimum of 100 persons for at least 335 days of a 12-month taxable year,
     or a proportionate part of a short taxable year; and
 
  .  if we, or any entity which owns 10% or more of our capital stock,
     actually or constructively owns 10% or more of one of our tenants, or a
     tenant of any partnership in which we are a partner, then any rents that
     we receive from the tenant in question will not be qualifying income for
     purposes of the Code's REIT gross income tests regardless of whether we
     receive the rents directly or through a partnership.
 
   Our charter establishes clear ownership limits to protect our REIT status.
No single stockholder may own, either actually or constructively, more than
7.0% of our common stock outstanding. Similarly, no single holder of our Series
A Preferred Stock and Series C Preferred Stock may actually or constructively
own any class or series of our preferred stock, so that their total capital
stock ownership would exceed 7.0% by value of our total capital stock, and no
single holder of Series B Preferred Stock, if issued, may actually or
constructively own more than 7.0% of our Series B Preferred Stock.
 
   The board of directors may waive the ownership limits if it is satisfied
that the excess ownership would not jeopardize our REIT status and if it
believes that the waiver would be in our best interests. The board of directors
has already waived the ownership limits with respect to John B. Kilroy, Sr.,
John B. Kilroy, Jr.,
 
                                       8
<PAGE>
 
members of their families and certain affiliated entities. These named
individuals and entities may own either actually or constructively, in the
aggregate, up to 19.6% of the outstanding common stock.
 
   If anyone acquires shares in excess of any ownership limits:
 
  .  the transfer to the transferee will be void with respect to these excess
     shares;
 
  .  the excess shares will be automatically transferred from the transferee
     or owner to a trust for the benefit of a qualified charitable
     organization;
 
  .  the purported transferee or owner will have no right to vote those
     excess shares; and
 
  .  the purported transferee or owner will have no right to receive
     dividends or other distributions from these excess shares.
 
Our charter contains provisions that may delay, defer, or prevent a change of
control transaction.
 
   Our board of directors is divided into classes which serve staggered
terms. Our board of directors is divided into three classes with staggered
terms. The staggered terms for directors may reduce the possibility of a tender
offer or an attempt to complete a change of control transaction even if a
tender offer or a change in control were in our stockholders' interest.
 
   We could issue preferred stock without stockholder approval. Our charter
authorizes our board of directors to issue up to 30,000,000 shares of preferred
stock, including convertible preferred stock, without stockholder approval. The
board of directors may establish the preferences, rights and other terms
including the
right to vote and the right to convert into common stock of any shares issued.
The issuance of preferred stock could delay or prevent a tender offer or a
change of control even if a tender offer or a change of control were in our
stockholders' interest. Kilroy Realty, L.P. has issued 1,500,000 Series A
Preferred Units which in the future may be exchanged one-for-one into shares of
Series A Preferred Stock, and 700,000 Series C Preferred Units which in the
future may be exchanged one for one into shares of Series C Preferred Stock. In
addition, we have designated and authorized the issuance of up to 400,000
shares of Series B Preferred Stock. However, no shares of preferred stock are
currently issued or outstanding.
 
   We have a stockholder rights plan. On October 2, 1998, our board of
directors adopted a stockholders' rights plan and declared a distribution of
one preferred share purchase right for each outstanding share of common stock.
The rights were issued on October 15, 1998, to each common stockholder of
record on that date. The rights have certain anti-takeover effects. The rights
would cause substantial dilution to a person or group that attempts to acquire
us on terms that our board of directors does not approve. We may redeem the
shares for $.01 per right, prior to the time that a person or group has
acquired beneficial ownership of 15% or more of our common stock. Therefore,
the rights should not interfere with any merger or business combination our
board of directors approves.
 
   The staggered terms for directors, the future issuance of additional common
or preferred stock and our stockholder rights plan may:
 
  .  delay or prevent a change of control over us, even if a change of
     control might be beneficial to our stockholders;
 
  .  deter tender offers that may beneficial to our stockholders; or
 
  .  limit stockholders' opportunity to receive a potential premium for their
     shares if an investor attempted to gain shares beyond our ownership
     limits or otherwise to effect a change of control.
 
Loss of our REIT status would have significant adverse consequences to us and
the value of our stock.
 
   We currently operate and have operated since 1997 in a manner that is
intended to allow us to qualify as a REIT for federal income tax purposes under
the Code.
 
                                       9
<PAGE>
 
   If we lose our REIT status, we will face serious tax consequences that will
substantially reduce the funds available for distribution to you for each of
the years involved because:
 
  .  we would not be allowed a deduction for distributions to stockholders in
     computing our taxable income and would be subject to federal income tax
     at regular corporate rates;
 
  .  we also could be subject to the federal alternative minimum tax and
     possibly increased state and local taxes;
 
  .  unless we are entitled to relief under statutory provisions, we could
     not elect to be subject to tax as a REIT for four taxable years
     following the year during which we were disqualified; and
 
  .  all distributions to stockholders will be subject to tax as ordinary
     income to the extent of our current and accumulated earnings and
     profits.
 
   In addition, if we fail to qualify as a REIT, we will not be required to
make distributions to stockholders.
 
   As a result of all these factors, our failure to qualify as a REIT also
could impair our ability to expand our business and raise capital, and would
adversely affect the value of our common stock.
 
   Qualification as a REIT involves the application of highly technical and
complex Code provisions for which there are only limited judicial and
administrative interpretations. The complexity of these provisions and of the
applicable income tax regulations that have been promulgated under the Code
("Treasury Regulations") is greater in the case of a REIT that holds its assets
in partnership form. The determination of various factual matters and
circumstances not entirely within our control may affect our ability to qualify
as a REIT. For example, in order to qualify as a REIT, at least 95% of our
gross income in any year must be derived from qualifying sources. Also, we must
make distributions to stockholders aggregating annually at least 95% of our net
taxable income, excluding capital gains. In addition, legislation, new
regulations, administrative interpretations or court decisions may adversely
affect our investors or our ability to qualify as a REIT for tax purposes.
Although our management believes that we are organized and operate in such
manner, no assurance can be given that we will continue to be organized or be
able to operate in a manner so as to qualify or remain qualified as a REIT for
tax purposes.
 
To maintain our REIT status, we may be forced to borrow funds on a short-term
basis during unfavorable market conditions.
 
   In order to maintain our REIT status, we may need to borrow funds on a
short- term basis to meet the REIT distribution requirements even if the then
prevailing market conditions are not favorable for these borrowings. To qualify
as a REIT, we generally must distribute to our stockholders at least 95% of our
net taxable income each year, excluding capital gains. In addition, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by us in any calendar year are less than the sum of
85% of our ordinary income, 95% of our capital gain net income and 100% of our
undistributed income from prior years. These short-term borrowing needs could
result from differences in timing between the actual receipt of income and
inclusion of income for federal income tax purposes, or the effect of non-
deductible capital expenditures, the creation of reserves or required debt or
amortization payments.
 
Our growth depends on external sources of capital.
 
   We are required under the Code to distribute at least 95% of our taxable
income, determined without regard to the dividends-paid deduction and excluding
any net capital gain. Because of this distribution requirement, we may not be
able to fund future capital needs, including acquisition financing, from
operating cash flow. Consequently, we rely on third-party sources of capital to
fund our capital needs. We may not be able to obtain the financing on favorable
terms or at all. Any additional debt we incur will increase our leverage. Our
access to third-party sources of capital depends, in part, on:
 
  .  general market conditions;
 
  .  the market's perception of our growth potential;
 
                                       10
<PAGE>
 
  .  our current and expected future earnings;
 
  .  our cash distributions; and
 
  .  the market price per share of our common stock.
 
   If we cannot obtain capital from third-party sources, we may not be able to
acquire properties when strategic opportunities exist or make the cash
distributions to our stockholders necessary to maintain our qualification as a
REIT.
 
We may change our investment and financing policies without stockholder
approval.
 
   We are not limited in our ability to incur debt. Our board of directors
adopted a policy of limiting our indebtedness to approximately 50% of our total
market capitalization. Total market capitalization is the market value of our
capital stock, including interests exchangeable for shares of capital stock
(including Units), plus total debt. However, our organizational documents do
not limit the amount or percentage of indebtedness, funded or otherwise, that
we may incur. Our board of directors may alter or eliminate our current policy
on borrowing at any time without stockholder approval. If this policy changed,
we could become more highly leveraged which would result in an increase in our
debt service and which could adversely affect our cash flow and our ability to
make expected distributions to our stockholders. Higher leverage also increases
the risk of default on our obligations.
 
   We may issue additional shares of capital stock without stockholder
approval. We may issue shares of our common stock, preferred stock or other
equity or debt securities without stockholder approval. Similarly, we may cause
Kilroy Realty, L.P. to offer its common or preferred units for contributions of
cash or property without approval by the limited partners of Kilroy Realty,
L.P. or our stockholders. Existing stockholders have no preemptive rights to
acquire any of these securities, and any issuance of equity securities under
these circumstances would dilute an existing stockholder's investment.
 
   We may invest in securities related to real estate. We may purchase
securities issued by entities which own real estate.
 
   We may in the future also invest in mortgages. In general, investments in
mortgages include several risks, including:
 
  .  borrowers may fail to make debt service payments or pay the principal
     when due;
 
  .  the value of the mortgaged property may be less than the principal
     amount of the mortgage note securing the property; and
 
  .  interest rates payable on the mortgages may be lower than our cost for
     the funds used to acquire these mortgages.
 
   Owning these securities may not entitle us to control the ownership,
operation and management of the underlying real estate. In addition, we may
have no control over the distributions with respect to such securities, which
could adversely affect our ability to make distributions to our stockholders.
 
Market conditions may decrease the value of our capital stock.
 
   Market conditions affect the market price per share of our common stock,
like other publicly traded equity securities. These market conditions include:
 
  .  the extent of investor interest in us;
 
  .  the general reputation of REITs and the attractiveness of our equity
     securities in comparison to other equity securities, including
     securities issued by other real estate-based companies;
 
  .  our financial performance; and
 
  .  general stock and bond market conditions, including changes in interest
     rates.
 
                                       11
<PAGE>
 
   Another influential factor on the market price per share of our common stock
is our distribution yield, which is calculated as a percentage of the price of
each share, relative to market interest rates. An increase in market interest
rates might lead prospective purchasers of our common stock to expect a higher
distribution yield. If the distribution yield on our common stock is lower than
investor expectations, the market price per share for our common stock could be
adversely affected. If the market price for our common stock declines
significantly, we might breach certain of our debt covenants which could in
turn adversely affect our liquidity, our ability to make future acquisitions,
and our ability to pay our distributions to our stockholders.
 
   The market value of our equity securities is based primarily upon the
market's perception of our growth potential and our current and potential
future earnings and cash distributions. Consequently, our equity securities,
including our common stock, may trade at prices that are higher or lower than
our net asset value per share. Our failure to meet market expectations
concerning our future earnings or cash distribution likely would adversely
affect the market price for our common stock.
 
   Governmental regulatory action and changes in tax laws could also have a
significant impact on our common stock's market price per share.
 
Sales of a substantial number of shares of common stock, or the perception that
this could occur, could result in decreasing the market price per share for our
common stock.
 
   We cannot predict whether future issuances of shares of our common stock or
the availability of shares for resale in the open market will result in
decreasing the market price per share of our common stock.
 
   As of December 31, 1998, 27,639,210 shares of our common stock were issued
and outstanding and we had reserved for future issuance the following shares of
common stock:
 
  .  1,383,392 shares issuable upon the exchange, at our option, of common
     units issued in connection with our formation and in connection with the
     acquisition of properties (excluding the common stock offered pursuant
     to this prospectus);
 
  .  2,900,000 shares issuable under our 1997 Stock Option and Incentive
     Plan.
 
  .  1,000,000 shares issuable under our Dividend Reinvestment and Direct
     Stock Purchase Plan.
 
Of the 27,639,210 shares of common stock presently outstanding, all but 80,000
shares may be freely traded in the public market by persons other than our
affiliates. In addition, we have filed or have agreed to file registration
statements covering all of the shares of common stock reserved for future
issuance. Consequently, if and when the shares are issued, they may be freely
traded in the public markets.
 
We could be adversely affected if our year 2000 problems are significant.
 
   The year 2000 issue refers to a computer system's failure to recognize dates
on or beyond January 1, 2000. The failure of these systems to interpret dates
beyond the year 1999 could lead to disruptions in our operations. Our
Information and Technology Committee examined our year 2000 issue. The
committee identified three phases to our year 2000 plan:
 
  .  discovery and assessment,
 
  .  remediation and implementation and
 
  .  testing and verification.
 
   We have identified year 2000 risks in the following areas:
 
  .  Our information systems might not be year 2000 compliant. After our
     initial public offering in 1997 we replaced and tested all of our
     accounting and property management systems for year 2000 compliance.
     Also, we acquired all new network hardware and software and updated all
     of our desktop

                                       12
<PAGE>
 
     systems and software. In each case, we tested for year 2000 compliance
     and our vendors have asserted that their products are year 2000
     compliant. We will continue to conduct ongoing testing to ensure year
     2000 compliance. Despite our efforts to identify and resolve year 2000
     compliance problems, we cannot assure our stockholders that all of our
     systems will be year 2000 compliant. We believe there is no material
     year 2000 exposure relating to our information systems.
 
  .  Our building management system could have potential year 2000
     exposure. During 1998, our property management executives and personnel
     began gathering data to identify all of our year 2000 sensitive building
     management systems and to determine if they are compliant or should be
     modified or replaced. We expect to complete this discovery and gathering
     phase and determine our state of readiness as to building management
     systems by May 1999. We have identified the following five categories of
     building management systems that could have year 2000 exposure:
 
     .  building automation,
 
     .  security card access,
 
     .  fire and life safety,
 
     .  elevator and
 
     .  office equipment.
 
  .  We may have year 2000 issues with significant third parties. We have a
     diverse tenant base and the success of our business is not tied to the
     success of any one particular tenant. Also, the success of our business
     is not closely tied to the operations of any one vendor supplier or
     manufacturer. However, we are in the process of surveying significant
     tenants, vendors, suppliers and other relevant third parties, to
     determine if their systems will be year 2000 compliant and if our normal
     operations will continue without interruption. We anticipate this
     project will be completed by September 1999.
 
   We replaced our accounting and property management system and installed our
updated desktop systems and software as a result of our initial public
offering. Also, we are using our employees to perform the discovery and
assessment phase. As a result, our year 2000 costs to date have been minimal
and are not material to our financial position or our results of operations.
However, future costs for completing phases two and three for the building
management systems are not readily quantifiable. We believe that a significant
portion of such costs will be treated as operating expenses and will be
reimbursable to us under our tenant leases.
 
   We do not believe that the impact of any year 2000 issues will have a
material adverse effect on our financial condition or results of operations.
However, despite our efforts to identify and resolve year 2000 compliance
problems, we cannot guarantee that all of our systems will be year 2000
compliant or that other companies on which we rely will be timely converted. As
a result, our operations could be interrupted or otherwise adversely affected.
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain of our business operations. Such
failures could have a material adverse effect on our financial condition and
results of operations.
 
   We believe the year 2000 issue relating to our building management systems
are immaterial because each of our properties have separate building management
systems. However, we do not currently have a comprehensive contingency plan for
the year 2000 problem. We intend to establish such a plan during 1999 as part
of our ongoing year 2000 compliance effort.
 
                                       13
<PAGE>
 
                                  THE COMPANY
 
  We are a REIT which develops, acquires, owns and operates office and
industrial real estate. We were incorporated in September 1996 in Maryland and
commenced operations upon the completion of our initial public offering on
January 31, 1997. As of December 31, 1998, our stablized portfolio consists of
80 suburban office buildings encompassing approximately 5.6 million rentable
square feet and 84 industrial buildings encompassing approximately 6.2 million
rentable square feet. The majority of our properties are located in Southern
California. In addition, we have 6 office buildings and 4 industrial buildings
under development which, when completed, are expected to encompass
approximately 500,000 rentable square feet each, respectively. Lastly, there
are two industrial buildings encompasing approximately 164,000 rentable square
feet, on which construction was recently completed, that are in the lease-up
phase.
 
  We conduct substantially all of our activities through Kilroy Realty, L.P. in
which, as of December 31, 1998, we owned an approximate 86.8% general partner
interest. The remaining 13.2% limited partnership interest in Kilroy Realty,
L.P. is owned by members of our executive officers and directors, certain of
their affiliates, and other outside investors. We are the sole general partner
of Kilroy Realty, L.P. and have control over its management. Kilroy Realty,
L.P. owns 146 properties. The remaining 18 properties are owned by Kilroy
Realty Finance Partnership, L.P., a limited partnership. Of the 146 properties
owned by Kilroy Realty, L.P., a third party owns a 12.3% minority interest in 3
of the properties. We own the sole 1% general partnership interest in Kilroy
Realty Finance Partnership, L.P. through Kilroy Realty Finance, Inc., a wholly
owned subsidiary, and Kilroy Realty, L.P. owns the sole 99% limited partnership
interest.
 
  Our common stock is listed on the New York Stock Exchange under the Symbol
"KRC." Our principal executive offices are located at 2250 East Imperial
Highway, Suite 1200, El Segundo, California 90245. Our telephone number is
(310) 563-5500.
 
 Recent Developments.
 
  For the fiscal year ended December 31, 1998, we had revenues of $136.3
million, net income of $38.8 million or $1.43 per share diluted and funds from
operations of $71.2 million, or $2.30 per share diluted. For the fourth quarter
ended December 31, 1998, we had revenues of $39.3 million, net income of
$10.2 million or $0.37 per share diluted, and funds from operations of $18.9
million. In addition, during the fiscal year ended December 31, 1998, we
completed $254 million in building acquisitions and $71 million in new
development, adding more than 2.5 million square feet of space to our office
and industrial real estate portfolio. We have approximately 932,000 square feet
of office and industrial space under construction, representing a total
projected investment of $113 million. An additional 2.2 million square feet of
space is in various stages of pre-development and preleasing, which we will
build over the next several years on a phased basis.
 
                                       14
<PAGE>
 
                           FORWARD LOOKING STATEMENTS
 
   This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements. Also, documents we subsequently file with
the SEC and incorporate by reference will contain forward-looking statements.
In particular, statements pertaining to our capital resources, portfolio
performance and results of operations contain forward-looking statements.
Likewise, our pro forma financial statements and other pro forma information
incorporated by reference and all our statements regarding anticipated growth
in our funds from operations and anticipated market conditions, demographics
and results of operations are forward-looking statements. Forward-looking
statements involve numerous risks and uncertainties and you should not rely on
them as predictions of future events. Forward-looking statements depend on
assumptions, data or methods which may be incorrect or imprecise and we may not
be able to realize them. We do not guarantee that the transactions and events
described will happen as described (or that they will happen at all). You can
identify forward-looking statements by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "pro forma," "estimates" or "anticipates"
or the negative of these words and phrases or similar words or phrases. You can
also identify forward-looking statements by discussions of strategy, plans or
intentions. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the
forward-looking statements:
 
  .  defaults on or non-renewal of leases by tenants;
 
  .  increased interest rates and operating costs;
 
  .  our failure to obtain necessary outside financing;
 
  .  difficulties in identifying properties to acquire and completing
     acquisitions;
 
  .  our failure to successfully operate acquired properties and operations;
 
  .  our failure to successfully develop property;
 
  .  our failure to maintain our status as a REIT;
 
  .  environmental uncertainties and risks related to natural disasters;
 
  .  financial market fluctuations; and
 
  .  changes in real estate and zoning laws and increases in real property
     tax rates.
 
   Our success also depends upon economic trends generally, as well as income
tax laws, governmental regulation, legislation, population changes and certain
other matters discussed above in the section entitled "Risk Factors." We
caution you, however, that any list of risk factors may not be exhaustive.
 
                                       15
<PAGE>
 
                                USE OF PROCEEDS
 
   We are filing the registration statement of which this prospectus is a part
pursuant to our contractual obligation to the holders named in the section
entitled "Selling Stockholders." We will not receive any of the proceeds from
the issuance of shares of common stock to the holders or the resale of the
shares by the holders. However, we will pay registration expenses which we
estimate to be approximately $150,000.
 
                          DESCRIPTION OF CAPITAL STOCK
 
   We have summarized the material terms and provisions of our capital stock in
this section. For more detail you should refer to our charter, which we have
previously filed with the SEC and which we incorporate by reference as an
exhibit to the registration statement of which this prospectus is a part.
 
Common stock.
 
   General. Our charter authorizes us to issue 150,000,000 shares of common
stock, par value $0.01 per share. As of the date of this prospectus, we had
27,639,210 shares of common stock issued and outstanding. The 27,639,210
outstanding shares excludes the 4,200,868 shares of common stock, as of
December 31, 1998, which we may issue at our option in exchange for presently
outstanding common units which are tendered for redemption to Kilroy Realty,
L.P., including the 2,817,476 offered pursuant to this prospectus.
 
   Shares of our common stock:
 
  .  are entitled to one vote per share on all matters presented to
     stockholders generally for a vote, including the election of directors,
     with no right to cumulative voting;
 
  .  do not have any conversion rights;
 
  .  do not have any exchange rights;
 
  .  do not have any sinking fund rights;
 
  .  do not have any redemption rights;
 
  .  do not have any appraisal rights;
 
  .  do not have any preemptive rights to subscribe for any of our
     securities;
 
  .  are duly authorized, fully paid and nonassessable; and
 
  .  are subject to restrictions or ownership and transfer.
 
   We may pay distributions on shares of common stock, subject to the
preferential rights of, when issued, our Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and any other series or class of
capital stock which we may issue in the future. However, we may only pay
distributions when our board of directors authorizes a distribution out of
legally available funds. We make, and intend to continue to make, quarterly
distributions on outstanding shares of common stock.
 
   Our board of directors may:
 
  .  reclassify any unissued shares of common stock into other classes or
     series of capital stock;
 
  .  establish the number of shares in each such class or series of capital
     stock;
 
  .  establish any preference rights, conversion rights and other rights,
     including voting powers, of each such class or series of capital stock;
 
  .  establish restrictions, such as limitations and restrictions on
     ownership, dividends or other distributions of each such class or series
     of capital stock; and
 
  .  establish qualifications and terms or conditions of redemption for each
     such class or series of capital stock.
 
                                       16
<PAGE>
 
   Material provisions of Maryland General Corporation Law. Under the Maryland
General Corporation Law, our stockholders are generally not liable for our
debts or obligations. If we liquidate, we will first pay all debts and other
liabilities, including debts and liabilities arising out of our status as
general partner of Kilroy Realty, L.P., and any preferential distributions on
any outstanding shares of preferred stock. Each holder of common stock then
will share ratably in our remaining assets. All shares of common stock have
equal distribution, liquidation and voting rights, and have no preference or
exchange rights, subject to the ownership limits in our charter or as permitted
by our board of directors.
 
   Under the Maryland General Corporation Law, subject to certain exceptions,
we require approval by our stockholders by the affirmative vote of at least
two-thirds of the votes entitled to vote before we can:
 
  .  dissolve;
 
  .  amend our charter;
 
  .  merge;
 
  .  sell all or substantially all of our assets;
 
  .  engage in a share exchange; or
 
  .  engage in similar transactions outside the ordinary course of business.
 
   Because the term "substantially all of the Company's assets" is not defined
in the Maryland General Corporation Law it is subject to Maryland common law
and to judicial interpretation and review in the context of the unique facts
and circumstances of any particular transaction. Although the Maryland General
Corporation Law allows our charter to establish a lesser percentage of
affirmative votes by our stockholders for approval of those actions, our
charter does not include such provision.
 
   Rights to purchase Series B Preferred Stock. Each share of our common stock
includes a right to purchase from us, once the rights become exercisable, one
one-hundredth (1/100th) of a share of our Series B Preferred Stock, at a
purchase price of $71.00 per share, subject to certain anti-dilution
adjustments. Once exercisable, the rights may be exercised until we redeem
them, until they are exchanged or terminated, or until they expire on October
2, 2008.
 
   Until the earlier to occur of:
 
  .  ten days following a public announcement that a person or group of
     affiliated or associated persons has acquired, or obtained the right to
     acquire, beneficial ownership of 15% or more (or, in the case of John B.
     Kilroy, Sr., the Chairman of our board of directors, John B. Kilroy,
     Jr., our President and Chief Executive Officer, and Kilroy Industries,
     and their respective affiliates, more than 21%) of the shares of our
     common stock (an "Acquiring Person") or
 
  .  ten business days (or such later date as may be determined by action of
     our board of directors prior to such time as any person or group of
     affiliated persons becomes an Acquiring Person) following the
     commencement or announcement of an intention to make a tender offer or
     exchange offer for shares of our common stock, the consummation of which
     would result in the beneficial ownership by a person or group of 15% or
     more (or, in the case of John B. Kilroy, Sr., the Chairman of our board
     of directors, John B. Kilroy, Jr., our President and Chief Executive
     Officer, and Kilroy Industries, and their respective affiliates, more
     than 21%) of the shares of our common stock,
 
the rights will be evidenced by any common stock certificates outstanding on
October 15, 1998. We refer to the earlier of these dates as the distribution
date. The rights will be transferred with and only with shares of our common
stock until the distribution date or earlier redemption or expiration of the
rights. Our board of directors may not postpone the exercisability and
transferability of the rights. As soon as practicable after such time, separate
right certificates will be issued to holders of record of shares of common
stock as of the close of business on the distribution date. Subject to the
termination of the right of redemption, the rights will become
 
                                       17
<PAGE>
 
exercisable and transferable. Right certificates initially will represent the
right to purchase one share of common stock for each share of our common stock
currently outstanding.
 
   If a person or group becomes an Acquiring Person, or if we were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person and shares of common stock were not changed or
exchanged, each holder of a right, other than rights that are or were acquired
or beneficially owned by the Acquiring Person, will then have the right to
receive upon exercise that number of shares of common stock having a market
value of two times the then current purchase price of one right. The rights
that are or were acquired or beneficially owned by the Acquiring Person will
then be void. We will adjust the number of rights associated with each share of
our common stock as necessary if we distribute shares of common stock as
dividends, or declare a split or reverse split in the number of shares of
common stock. If after a person has become an Acquiring Person, we are acquired
in a merger or other business combination transaction or more than 50% of our
assets or earning power are sold, we will provide that each holder of a right
will receive, upon the exercise of a right at the then current purchase price,
the number of shares of common stock of the acquiring company which at the time
of such transaction would have a market value of two times the then current
purchase price of one right.
 
   At any time after a person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by the Acquiring Person of 50% or more of our then
outstanding common stock, we may exchange the rights (other than rights owned
by an Acquiring Person which have become void), in whole or in part, for shares
of common stock having an aggregate value equal to the difference between the
value of the common stock issuable upon exercise of the rights and the purchase
price payable upon such exercise.
 
   Our board of directors may redeem the rights in whole, but not in part, at a
redemption price of $.01 per right at any time prior to the time a person
becomes an Acquiring Person. The board of directors in its sole discretion may
establish when the redemption of the rights may be made effective, on what
basis and under conditions. Immediately upon any redemption of the rights, the
right to exercise the rights will terminate and the holders of rights may then
only receive the redemption price.
 
   We may adjust from time to time the purchase price payable, and the number
of one one-hundredths of a share of Series B Preferred Stock or other
securities or property issuable, upon exercise of the rights to prevent
dilution:
 
  .  in the event of a stock dividend on, or a subdivision, combination or
     reclassification of, the Series B Preferred Stock,
 
  .  upon the grant to holders of the shares of Series B Preferred Stock of
     certain rights or warrants to subscribe to or purchase shares of Series
     B Preferred Stock or convertible securities at less than the current
     market price of the Series B Preferred Stock, or
 
  .  upon the distribution to holders of shares of Series B Preferred Stock
     of evidences of indebtedness, cash, securities or assets or of
     subscription rights or warrants, other than those referred to above.
 
   The distributions referred to above exclude regular periodic cash dividends
at a rate not in excess of 125% of the rate of the last regular periodic cash
dividend paid or, in case regular periodic cash dividends have not been paid,
at a rate not in excess of 50% of our average net income per share for the four
quarters ended immediately prior to the payment of such dividend, or dividends
payable in shares of Series B Preferred Stock which will be subject to the
adjustment described above.
 
   Until a right is exercised, the holder of the right will have no rights as a
stockholder beyond those as an existing stockholder, including, without
limitation, the right to vote or to receive dividends.
 
   Any of the provisions of the Rights Agreement dated as of October 2, 1998
between us and the rights agent may be amended by our board of directors for so
long as the rights are redeemable. After the rights are no longer redeemable,
we may amend or supplement the Rights Agreement in any manner that does not
adversely affect the interests of the holders of the rights.
 
                                       18
<PAGE>
 
Preferred stock.
 
   Our charter authorizes us to issue 30,000,000 shares of preferred stock, par
value $.01 per share. Of the 30,000,000 authorized shares of preferred stock,
we have classified and designated 1,700,000 shares as Series A Preferred Stock,
400,000 as Series B Preferred Stock and 700,000 shares as Series C Preferred
Stock. No shares of preferred stock are currently issued and outstanding.
 
   We may classify, designate and issue additional shares of preferred stock,
in one or more classes, as authorized by our board of directors without the
prior consent of our stockholders. The board of directors may afford the
holders of preferred stock preferences, powers and rights-voting or otherwise-
senior to the rights of holders of shares of common stock. Our board of
directors can authorize the issuance of preferred stock with terms and
conditions that could have the effect of delaying or preventing a change of
control transaction that might involve a premium price for holders of shares of
common stock or otherwise be in their best interest. All shares of preferred
stock which are issued and become outstanding will be fully paid and
nonassessable. Before we may issue any shares of preferred stock of any class,
the Maryland General Corporation Law and our charter require our board of
directors to determine the following:
 
  .  the designation;
 
  .  the terms;
 
  .  preferences;
 
  .  conversion and other rights;
 
  .  voting powers;
 
  .  restrictions;
 
  .  limitations as to distributions;
 
  .  qualifications;
 
  .  terms or conditions of redemption.
 
8.075% Series A Cumulative Redeemable Preferred Stock and 9.375% Series C
Cumulative Redeemable Preferred Stock.
 
   General. Of our 30,000,000 authorized preferred shares, we designated
1,700,000 shares as Series A Preferred Stock and 700,000 shares as Series C
Preferred Stock. Shares of Series A Preferred Stock are issuable on a one-for-
one basis upon redemption or exchange of Kilroy Realty, L.P.'s Series A
Preferred Units. Shares of Series C Preferred Stock are issuable on a one-for-
one basis upon redemption or exchange of Kilroy Realty, L.P.'s Series C
Preferred Units.
 
   Dividends. Each share of Series A Preferred Stock and Series C Preferred
Stock will be entitled to receive cumulative preferential dividends from the
date of issue payable on or before the 15th of February, May, August and
November of each year, in cash, in preference to any payment made on any other
classes or series of capital stock or our other equity securities ranking
junior to the Series A Preferred Stock and Series C Preferred Stock. Shares of
Series A Preferred Stock will be entitled to dividends at a rate of 8.075% pre
annum and shares of Series C Preferred Stock will be entitled to dividends at a
rate of 9.375% pre annum. Cumulative preferential dividends include any accrued
but unpaid distributions in respect of Series A Preferred Units and Series C
Preferred Units at the time they are exchanged for shares of Series A Preferred
Stock or Series C Preferred Stock, as applicable.
 
   Ranking. The Series A Preferred Stock and Series C Preferred Stock will
rank:
 
  .  on parity with each other and with all other classes or series of
     preferred stock designated as ranking on a parity with the Series A
     Preferred Stock and Series C Preferred Stock with respect to
     distributions and rights upon liquidation, dissolution, or winding-up,
 
 
                                       19
<PAGE>
 
  .  senior to the Series B Preferred Stock and all other classes or series
     of preferred stock designated as ranking junior to the Series A
     Preferred Stock and Series C Preferred Stock and
 
  .  junior to all other classes or series of preferred stock designated as
     ranking senior to Series A Preferred Stock and Series C Preferred Stock.
 
   Redemption. At our option, we may redeem the Series A Preferred Stock, on
and after February 6, 2003, and the Series C Preferred stock on and after
November 24, 2003, in each case in whole or in part from time to time, at a
redemption price payable in cash equal to $50.00 per share, plus any accrued
but unpaid dividends to the date of redemption. We may redeem shares of Series
A Preferred Stock and Series C Preferred Stock prior to these dates to the
extent necessary to maintain our qualification as a REIT. We are required to
pay the redemption price of the Series A Preferred Stock and Series C Preferred
Stock, excluding the portion consisting of accumulated but unpaid dividends,
solely out of proceeds from issuances of our capital stock.
 
   Limited voting rights. If we do not pay dividends on any shares of Series A
Preferred Stock or on any shares of Series C Preferred Stock for six or more
quarterly periods, including any periods we did not make distributions in
respect of Series A Preferred Units and Series C Preferred Units prior to their
exchange into shares of Series A Preferred Stock and Series C Preferred Stock,
as applicable, whether or not consecutive, the holders of such shares of
preferred stock will vote as a single class with all other shares of capital
stock ranking on parity with the Series A Preferred Stock and Series C
Preferred Stock which have similar vested voting rights for the election of two
additional directors. The directors will be elected by a plurality of the votes
cast in the election for a one-year term and until their successors are duly
elected and qualify or until the director's right to hold such office
terminates, whichever occurs earlier, subject to the director's earlier death,
disqualification, resignation or removal. The election will take place at:
 
  .  special meetings called by the holders of at least 10% of the
     outstanding shares of Series A Preferred Stock, Series C Preferred Stock
     or the holders of shares of any other class or series of stock on parity
     with the Series A Preferred Stock and the Series C Preferred Stock with
     respect to which dividends are also accrued and unpaid if such request
     is received more than 90 days before the date fixed for our next annual
     or special meeting of stockholders or,
 
  .  if the request for a special meeting is received by us less than 90 days
     before the date fixed for our next annual or special meeting of
     stockholders, at our annual or special meeting of stockholders, and
 
  .  at each subsequent annual meeting until all dividends accumulated on the
     Series A Preferred Stock and the Series C Preferred Stock for all past
     dividend periods and the dividend for the then current dividend period,
     including accrued but unpaid distributions in respect of Series A
     Preferred Units and Series C Preferred Units at the time they are
     exchanged for shares of Series A Preferred Stock or Series C Preferred
     Stock, as applicable, have been fully paid or declared and a sum
     sufficient for the payment of such dividends is irrevocably set aside in
     trust for payment in full.
 
   When all such dividends have been paid in full, the holders of Series A
Preferred Stock and Series C Preferred Stock will be divested of their voting
rights and the term of any member of our board of directors elected by the
holders of Series A Preferred Stock, Series C Preferred Stock and holders of
any other shares of stock on parity with the Series A Preferred Stock and the
Series C Preferred Stock will terminate.
 
   In addition, if any shares of Series A Preferred Stock or Series C Preferred
Stock are outstanding, without the consent of two-thirds of the holders of such
series of preferred stock then outstanding, as applicable, we may not:
 
  .  authorize or create or increase the authorized or issued amount of any
     shares of capital stock ranking senior to the Series A Preferred Stock
     and the Series C Preferred Stock, or
 
  .  reclassify any of our authorized shares of capital stock into any shares
     ranking senior to the Series A Preferred Stock and the Series C
     Preferred Stock, or
 
                                       20
<PAGE>
 
  .  designate or create, or increase the authorized or issued amount of, or
     reclassify any of our authorized shares of capital stock into any stock
     on parity with the Series A Preferred Stock and the Series C Preferred
     Stock, or create, authorize or issue any obligations or security
     convertible into or evidencing the right to purchase any such shares,
     but only to the extent the shares on parity with the Series A Preferred
     Stock and the Series C Preferred Stock are issued to one or our
     affiliates, or
 
  .  either
 
     .  consolidate, merge into or with, or convey, transfer or lease our
        assets substantially as an entirety, to any corporation or other
        entity, or
 
     .  amend, alter or repeal the provisions of our charter, whether by
        merger, consolidation or otherwise, in each case that would
        materially and adversely affect the powers, special rights,
        preferences, privileges or voting power of the Series A Preferred
        Stock and Series C Preferred Stock or the holders of Series A
        Preferred Stock and Series C Preferred Stock.
 
   The Series A Preferred Stock and Series C Preferred Stock will have no
voting rights other than as discussed above.
 
   Liquidation preference. Each share of Series A Preferred Stock and Series C
Preferred Stock is entitled to a liquidation preference of $50.00 per share,
plus any accrued but unpaid dividends, in preference to any other class or
series of our capital stock, other than any class or series of our equity
securities expressly designated as ranking on a parity with or senior to the
Series A Preferred Stock and Series C Preferred Stock.
 
Series B Junior Participating Preferred Stock.
 
   General. Of our 30,000,000 authorized preferred shares, we designated
400,000 shares as Series B Junior Participating Preferred Stock. The Series B
Preferred Stock is issuable upon exercise of the rights to purchase shares of
Series B Preferred Stock, as described above in the section entitled "--Common
stock--Rights to purchase Series B Preferred Stock."
 
   Ranking. The Series B Preferred Stock, if and when issued, will rank:
 
  .  junior to our Series A Preferred Stock and Series C Preferred Stock, if
     and when issued, and all other classes or series of preferred stock
     designated as ranking senior to the Series B Preferred Stock with
     respect to distributions and rights upon liquidation, dissolution, or
     winding-up,
 
  .  senior to all classes or series of preferred stock designated as ranking
     junior to the Series B Preferred Stock and
 
  .  on a parity with all other classes or series of stock designated as
     ranking on a parity with the Series B Preferred Stock.
 
   Dividends. Each share of Series B Preferred Stock will be entitled, when, as
and if declared, to:
 
  .  a minimum preferential cumulative quarterly dividend payment of $1.00
     per share and
 
  .  an aggregate dividend of 100 times the dividend, if any, declared per
     share of common stock, other than a dividend payable in shares of common
     stock, since the last quarterly dividend payment date.
 
   We will adjust as necessary the right to dividends per share of the Series B
Preferred Stock if we increase or decrease the number of shares of common stock
by declaring or paying a dividend on the common stock payable in shares of
common stock, or subdividing, combining or consolidating the outstanding shares
of common stock. Dividends on Series B Preferred Stock, when and if declared,
will be paid on the first day of March, June, September and December. Accrued
and unpaid dividends shall not bear interest. Dividends paid on shares of
Series B Preferred Stock in an amount less than the total amount of the
dividends accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such outstanding shares of Series B Preferred
Stock.
 
                                      21
<PAGE>
 
   Until dividends or distributions payable on the Series B Preferred Stock,
whether or not declared, have been paid in full, we may not:
 
  .  declare or pay dividends, or make any other distributions, including
     upon liquidation, dissolution or winding up, on any shares of capital
     stock ranking:
 
     .  junior to the Series B Preferred Stock;
 
     .  on parity with the Series B Preferred Stock, except dividends paid
        ratably on the Series B Preferred Stock and all such parity stock on
        which dividends are payable or in arrears in proportion to the total
        amounts to which the holders of all such shares are then entitled;
 
  .  redeem or purchase or otherwise acquire for consideration:
 
     .  shares of any capital stock ranking junior, either as to dividends
        or upon liquidation, dissolution or winding up, to the Series B
        Preferred Stock, except as provided in our charter to protect our
        REIT status or if we acquire shares of such junior stock in exchange
        for shares of any of our capital stock ranking junior both as to
        dividends and upon dissolution, liquidation or winding up, to the
        Series B Preferred Stock; or
 
     .  any shares of Series B Preferred Stock, or any shares of capital
        stock ranking on parity with the Series B Preferred Stock, except as
        provided in our charter to protect our REIT status or in accordance
        with a written or published purchase offer to all holders of such
        shares such terms our board of directors shall determine in good
        faith will result in fair and equitable treatment among the
        respective series or classes.
 
   We will not permit any of our subsidiaries to purchase or otherwise acquire
for consideration any shares of our capital stock unless we could purchase or
otherwise acquire the shares at that time and in the manner set forth above.
 
   Liquidation preference. If we liquidate, dissolve or wind-up our business,
the holders of shares of Series B Preferred Stock will be entitled, pro rata
with any shares of preferred stock ranking on parity with the Series B
Preferred Stock, to an aggregate preferential liquidation payment of 100 times
the payment made per share of common stock. In no event may such liquidation
payment be less than $1,000 per share plus any accrued and unpaid dividends. We
will adjust as necessary the liquidation preference per share of the Class B
Preferred Stock if we increase or decrease the number of shares of common stock
by declaring or paying a dividend on the common stock payable in shares of
common stock, or subdividing, combining or consolidating the outstanding shares
of common stock.
 
   Voting rights. Each holder of a share of Series B Preferred Stock is
entitled to 100 votes on all matters submitted to our stockholders having
general voting rights. We will adjust as necessary the votes per share of the
Series B Preferred Stock if we increase or decrease the number of shares of
common stock by declaring or paying a dividend on the common stock payable in
shares of common stock, or subdividing, combining or consolidating the
outstanding shares of common stock.
 
   Subject to any of our provisions or as required by law, we do not require
the consent of holders of Series B Preferred Stock for taking any corporate
action, unless they are entitled to vote with holders of common stock.
Generally, any holder of Series B Preferred Stock, common stock or any other
shares of stock that have general voting powers will vote together as one class
on all matters submitted to those stockholders having general voting rights.
 
   Business combinations. If we enter into any consolidation, merger,
combination or other transaction, shares of our common stock may be exchanged
for or changed into other stock or securities, cash and/or any other property.
In that case, each share of Series B Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to 1,000 times
the aggregate amount of stock, securities, cash and/or any other property,
payable in kind, as the case may be, into or for which each share of common
stock is changed or exchanged. We will adjust as necessary the amount of per
share consideration to be
 
                                       22
<PAGE>
 
received by holders of Series B Preferred Stock upon any such transaction if we
increase or decrease the number of shares of common stock by declaring or
paying a dividend on the common stock payable in shares of common stock, or
subdividing, combining or consolidating the outstanding shares of common stock.
 
   Redemption. We may not redeem the Series B Preferred Stock at any time.
 
Restrictions on ownership and transfer.
 
 Internal Revenue Code requirements.
 
   To maintain our tax status as a REIT, five or fewer individuals (as defined
in the Code to include certain entities) may not own, actually or
constructively, more than 50% in value of our issued and outstanding capital
stock at any time during the last half of a taxable year. Attribution rules in
the Code determine if any individual or entity constructively owns our capital
stock under this requirement. In addition, 100 or more persons must
beneficially own our capital stock during at least 335 days of a taxable year
or during a proportionate part of a short taxable year. Also, rent from Related
Party Tenants (as defined below under "Federal Income Tax Considerations--
Income Tests") is not qualifying income for purposes of the gross income tests
of the Code. To help ensure we meet these tests, our charter restricts the
acquisition and ownership of shares of our capital stock.
 
 Transfer Restrictions in our charter.
 
   Subject to exceptions specified in our charter, no holder may own, either
actually or constructively under the applicable attribution rules of the Code:
 
  .  more than 7%, by number of shares or value, whichever is more
     restrictive, of the outstanding shares of our common stock;
 
  .  if and when such stock is issued, more than 7%, by number of shares or
     value, whichever is more restrictive, of our Series B Preferred Stock;
     and
 
  .  if and when such stock is issued, shares of our Series A and/or Series C
     Preferred Stock, which, taking into account all other shares of our
     capital stock actually or constructively held, would cause a holder to
     own more than 7% by value of our outstanding shares of capital stock.
 
In addition, because rent from Related Party Tenants is not qualifying rent for
purposes of the gross income tests under the Code, our charter provides that no
holder may own, either actually or constructively by virtue of the attribution
provisions of the Code (which differ from the attribution provisions described
in the preceding sentence):
 
  .  more than 9.8%, by number of shares or value, whichever is more
     restrictive, of the outstanding shares of our common stock;
 
  .  if and when such stock is issued, more than 9.8% by number of shares or
     value, whichever is more restrictive, of our Series B Preferred Stock;
     and
 
  .  if and when such stock is issued, shares of our Series A and/or Series C
     Preferred Stock, which, taking into account all other shares of our
     capital stock actually or constructively held, would cause a holder to
     own more than 9.8% by value of our outstanding shares of capital stock.
 
We refer to the limits described in this paragraph, together, as the "Ownership
Limits."
 
   The constructive ownership rules set forth in the Code are complex, and may
cause shares of our capital stock owned actually or constructively by a group
of related individuals and/or entities to be constructively owned by one
individual or entity. As a result, the acquisition of shares of our capital
stock in an amount that does not exceed the Ownership Limits, or the
acquisition of an interest in an entity that actually or constructively owns
our capital stock, could, nevertheless cause that individual or entity, or
another individual
 
                                       23
<PAGE>
 
or entity, to own constructively shares in excess of the Ownership Limits and
thus violate the Ownership Limits described above or otherwise permitted by our
board of directors. In addition, if and when such shares are issued, a
violation of the Ownership Limits relating to the Series A Preferred Stock or
the Series C Preferred Stock could occur as a result of a fluctuation in the
relative value of such stock and our common stock, even absent a transfer or
other change in actual or constructive ownership.
 
   Our board of directors may, but in no event will be required to, waive the
Ownership Limits with respect to a particular stockholder if it determines that
such ownership will not jeopardize our status as a REIT and our board of
directors otherwise decides such action would be in our best interest. As a
condition of such waiver, our board of directors may require opinions of
counsel satisfactory to it and/or undertakings or representations from the
applicant with respect to preserving our REIT status. Our board of directors
has waived the ownership limit applicable to our common stock for John B.
Kilroy, Sr. and John B. Kilroy, Jr., as well as members of their families and
entities which are deemed to own Messrs. Kilroy's common stock, allowing them
to own up to 19.6% of our common stock. However, we conditioned this waiver
upon the receipt of undertakings and representations from Messrs. Kilroy which
we believed were reasonably necessary in order for us to conclude that the
waiver would not cause us to fail to qualify and maintain our status as a REIT.
 
   In addition to the foregoing Ownership Limits, no holder may own, either
actually or constructively under the applicable attribution rules of the Code,
any shares of any class of our capital stock if:
 
  .  more than 50% in value of our outstanding capital stock would be owned,
     either actually or constructively under the applicable attribution rules
     of the Code, by five or fewer individuals, as defined in the Code to
     include certain entities,
 
  .  our capital stock would be beneficially owned by less than 100 persons,
     determined without reference to any rules of attribution, or
 
  .  we would fail to qualify as a REIT.
 
   Any person who acquires or attempts or intends to acquire actual or
constructive ownership of our shares of capital stock that will or may violate
any of the foregoing restrictions on transferability and ownership is required
to give notice immediately to us and provide us with such other information as
we may request in order to determine the effect of such transfer on our status
as a REIT. The foregoing restrictions on transferability and ownership will not
apply if our board of directors determines that it is no longer in our best
interest to attempt to qualify, or to continue to qualify, as a REIT.
 
 Effect of violation of transfer restrictions.
 
   If any attempted transfer of our capital stock or any other event would
result in any person violating the Ownership Limits described above, unless
otherwise permitted by our board of directors, then any such purported transfer
will be void and of no force or effect with respect to the attempted transferee
as to that number of shares in excess of the applicable Ownership Limit and
such transferee shall acquire no right or interest in the excess shares. In the
case of any event other than a purported transfer, the person or entity holding
record title to any such excess shares shall cease to own any right or interest
in the excess shares.
 
   Any excess shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by us. The automatic transfer will be
effective as of the close of business on the business day prior to the date of
the violative transfer. Within 20 days of receiving notice from us of the
transfer of shares to the trust, the trustee of the trust will be required to
sell the excess shares to a person or entity who could own such shares without
violating the Ownership Limits or as otherwise permitted by our board of
directors, and distribute to the prohibited transferee or owner, as applicable,
an amount equal to the lesser of the price paid by the prohibited transferee or
owner for the excess shares or the sales proceeds received by the trust for the
excess shares. In the case of any excess shares resulting from any event other
than a transfer, or from a transfer for no consideration, such as a gift, the
trustee
 
                                       24
<PAGE>
 
will be required to sell the excess shares to a qualified person or entity and
distribute to the prohibited transferee or owner, as applicable, an amount
equal to the lesser of the market price of the excess shares as of the date of
such event or the sales proceeds received by the trust for the excess shares.
In either case, any proceeds in excess of the amount distributable to the
prohibited transferee or owner, as applicable, will be distributed to the
charitable organization selected by us as beneficiary of the trust.
 
   The trustee of the trust shall be designated by us and be unaffiliated with
us and any prohibited transferee or owner. Prior to a sale of any excess shares
by the trust, the trustee will be entitled to receive, in trust for such
beneficiary, all dividends and other distributions paid by us with respect to
the excess shares, and also will be entitled to exercise all voting rights with
respect to the excess shares.
 
   Subject to Maryland law, effective as of the date that such shares have been
transferred to the trust, the trustee shall have the authority, at the
trustee's sole discretion, (i) to rescind as void any vote cast by a prohibited
transferee or owner, as applicable, prior to our discovery that our shares have
been transferred to the trust and (ii) to recast such vote in accordance with
the desires of the trustee acting for the benefit of the beneficiary of the
trust. However, if we have already taken irreversible corporate action, then
the trustee shall not have the authority to rescind and recast such vote. Any
dividend or other distribution paid to the prohibited transferee or owner,
prior to our discovery that such shares had been automatically transferred to a
trust as described above, will be required to be repaid to the trustee upon
demand for distribution to the beneficiary of the trust. In the event that the
transfer to the trust as described above is not automatically effective, for
any reason, to prevent violation of the applicable ownership limit or as
otherwise permitted by the Board of Directors, then our charter provides that
the transfer of the excess shares will be void.
 
   If shares of capital stock which would cause us to be beneficially owned by
fewer than 100 persons are transferred to any person, the transfer shall be
null and void in its entirety, and the intended transferee will acquire no
rights to the stock.
 
   If our board of directors shall at any time determine in good faith that a
person intends to acquire or own, has attempted to acquire or own, or may
acquire or own our capital stock in violation of the limits described above, it
shall take actions to refuse to give effect to or to prevent the ownership or
acquisition. These actions include but are not limited to authorizing us to
repurchase stock, refusing to give effect to such ownership or acquisition on
our books, or instituting proceedings to enjoin such ownership or acquisition.
 
   All certificates representing shares of our capital stock bear a legend
referring to the restrictions described above.
 
   All persons who own at least a specified percentage of the outstanding
shares of our stock must file with us a completed questionnaire annually
containing information about their ownership of the shares, as set forth in the
Treasury Regulations. Under current Treasury Regulations, the percentage will
be set between 0.5% and 5.0%, depending on the number of record holders of
shares. In addition, each stockholder may be required to disclose to us in
writing information about the actual and constructive ownership of shares as
our board of directors deems necessary to comply with the provisions of the
Code applicable to a REIT or to comply with the requirements of any taxing
authority or governmental agency.
 
   These ownership limitations could discourage a takeover or other transaction
in which holders of some, or a majority, of our shares of capital stock might
receive a premium for their shares over the then prevailing market price or
which stockholders might believe to be otherwise in their best interest.
 
Transfer agent and registrar for shares of capital stock.

   ChaseMellon Shareholder Services, LLC is the transfer agent and registrar
for our shares of preferred stock and common stock.
 
                                       25
<PAGE>
 
                   DESCRIPTION OF MATERIAL PROVISIONS OF THE
                  PARTNERSHIP AGREEMENT OF KILROY REALTY, L.P.
 
  We have summarized the material terms and provisions of the Fourth Amended
and Restated Agreement of Limited Partnership of Kilroy Realty L.P. which we
refer to as the "partnership agreement." This summary is not complete. For more
detail, you should refer to the partnership agreement itself, which we have
previously filed with the SEC and which we incorporate by reference as an
exhibit to the registration statement of which this prospectus is a part.
 
Management of the partnership.
 
  Kilroy Realty, L.P. is a Delaware limited partnership. We are the sole
general partner of Kilroy Realty, L.P. and conduct substantially all of our
business through it, except for development and certain other services which
are conducted through Kilroy Services, Inc. Kilroy Realty, L.P. owns a 95%
economic interest in Kilroy Services, Inc.
 
  As the sole general partner of Kilroy Realty, L.P., we exercise exclusive and
complete discretion in its day-to-day management and control. We can cause
Kilroy Realty, L.P. to enter into certain major transactions including
acquisitions, dispositions and refinancings and cause changes in its line of
business, capital structure and distribution policies. Kilroy Realty, L.P. has
both preferred limited partnership interests and common limited partnership
interests. As of the date of this prospectus, Kilroy Realty, L.P. has issued
1,500,000 Series A Preferred Units, no Series B Preferred Units, 700,000 Series
C Preferred Units and [4,208,639] common units. We refer collectively to the
Series A Preferred Units, Series B Preferred Units, Series C Preferred Units
and the common units as the "units." Limited partners may not transact business
for, or participate in the management activities or decisions of, Kilroy
Realty, L.P., except as provided in the partnership agreement and as required
by applicable law.
 
Indemnification of our officers and directors.
 
  To the extent permitted by applicable law, the partnership agreement
indemnifies us, as general partner, and our officers and directors and any
other persons we may designate, to the same extent that our charter provides
for indemnification of our officers and directors. Similarly, the partnership
agreement limits our liability, as well as that of our officers and directors,
to Kilroy Realty, L.P. to the same extent that our charter limits the liability
of our officers and directors.
 
Transferability of partnership interests.
 
  Except under certain circumstances, we may not voluntarily withdraw from
Kilroy Realty, L.P., or transfer or assign our interest in it, without the
consent of the holders of at least 60% of the common partnership interests
including our interests. The limited partners may not transfer, assign, sell,
encumber or otherwise dispose of their interest in Kilroy Realty, L.P., other
than to family members or accredited investors. Such family members and
accredited investors must agree to assume the transferor's obligations under
the partnership agreements. Such a transfer is subject to our right of first
refusal to purchase the limited partner's units for our benefit.
 
  In addition, without our consent, limited partners may not transfer their
units:
 
  .  to any person who lacks the legal capacity to own the units;
 
  .  in violation of applicable law;
 
  .  where the transfer is for only a portion of the rights represented by
     the units (such as the partner's capital account or right to
     distributions), without our prior consent;
 
  .  if we believe the transfer would cause the termination of Kilroy Realty,
     L.P. or would cause it to no longer be classified as a partnership for
     federal or state income tax purposes;
 
                                       26
<PAGE>
 
  .  if the transfer would cause Kilroy Realty, L.P. to become a party-in-
     interest within the meaning of ERISA or would cause its assets to
     constitute assets of an employee benefit plan under applicable
     regulations;
 
  .if the transfer would require registration under applicable federal
   securities laws;
 
  .  if the transfer could cause Kilroy Realty, L.P. to become a "publicly
     traded partnership" under applicable Treasury Regulations;
 
  .  if the transfer could cause Kilroy Realty, L.P. to be regulated under
     the Investment Company Act of 1940 or the Employee Retirement Income
     Security Act of 1974; and
 
  .  if the transfer would adversely affect our ability to maintain our
     qualification as a REIT.
 
  We may not engage in any "termination transaction" without the approval of at
least 60% of the common units in Kilroy Realty L.P., including our general
partner interest in Kilroy Realty L.P. Examples of termination transactions
include:
 
  .  a merger;
 
  .  a consolidation or other combination with or into another entity;
 
  .  a sale of all or substantially all of our assets; or
 
  .  a reclassification, recapitalization or change of our outstanding equity
     interests.
 
  In connection with a termination transaction, all common limited partners
must either receive, or have the right to elect to receive, for each common
unit an amount of cash, securities or other property equal to the product of:
 
  .  the number of shares of common stock into which each common unit is then
     exchangeable; and
 
  .  the greatest amount of cash, securities or other property paid to the
     holder of one share of common stock in consideration for one share of
     common stock pursuant to the termination transaction.
 
  If, in connection with a termination transaction, a purchase, tender or
exchange offer is made to holders of our common stock, and the common
stockholders accept such purchase, tender or exchange offer, each holder of
common units must either receive, or must have the right to elect to receive,
the greatest amount of cash, securities or other property which that holder
would have received if immediately prior to the purchase, tender or exchange
offer it had exercised its right to redemption, received shares of common stock
in exchange for its common units, and accepted the purchase, tender or exchange
offer.
 
  We also may merge or otherwise combine our assets with another entity with
the approval of at least 60% of the common units if:
 
  .  substantially all of the assets directly or indirectly owned by the
     surviving entity are held directly or indirectly by Kilroy Realty, L.P.
     as the surviving partnership or another limited partnership or limited
     liability company is the surviving partnership of a merger,
     consolidation or combination of assets with Kilroy Realty, L.P.;
 
  .  the common limited partners own a percentage interest of the surviving
     partnership based on the relative fair market value of the net assets of
     Kilroy Realty, L.P. and the other net assets of the surviving
     partnership immediately prior to the consummation of such transaction;
 
  .  the rights, preferences and privileges of the common limited partners in
     the surviving partnership are at least as favorable as those in effect
     immediately prior to the consummation of the transaction and as those
     applicable to any other limited partners or non-managing members of the
     surviving partnership; and
 
                                       27
<PAGE>
 
  .the common limited partners may exchange their interests in the surviving
   partnership for either:
 
    l  the consideration available to the common limited partner pursuant
       to the preceding paragraph, or
 
    l  if the ultimate controlling person of the surviving partnership has
       publicly traded common equity securities, shares of those common
       equity securities, at an exchange ratio based on the relative fair
       market value of those securities and our common stock.
 
  The board of directors will reasonably determine relative fair market values
and rights, preferences and privileges of the limited partners as of the time
of the termination transaction. These values may not be less favorable to the
limited partners than the relative values reflected in the terms of the
termination transaction.
 
  We must use commercially reasonable efforts to structure transactions like
those described above to avoid causing the common limited partners to recognize
gain for federal income tax purposes by virtue of the occurrence of or their
participation in such transaction. In addition, Kilroy Realty, L.P. must use
commercially reasonable efforts to cooperate with the common limited partners
to minimize any taxes payable in connection with any repayment, refinancing,
replacement or restructuring of indebtedness, or any sale, exchange or other
disposition of its assets.
 
Issuance of additional units representing partnership interests.
 
  As sole general partner of Kilroy Realty, L.P., we have the ability to cause
it to issue additional units representing general and limited partnership
interests. These units may include units representing preferred limited
partnership interests, subject to the approval rights of holders of the Series
A Preferred Units with respect to the issuance of preferred units ranking
senior to the Series A Preferred Units, and of holders of Series C Preferred
Units with respect to the issuance of preferred units ranking senior to the
Series C Preferred Units as described under the sections entitled "--8.075%
Series A Cumulative Redeemable Preferred Units" and "--9.375% Series C
Cumulative Redeemable Preferred Units."
 
Capital contributions by us to Kilroy Realty, L.P.
 
  We may borrow additional funds in excess of the funds available from
borrowings or capital contributions from a financial institution or other
lender or through public or private debt offerings. We may then lend these
funds to Kilroy Realty, L.P. on the same terms and conditions that applied to
us. Alternatively, we may contribute these funds as an additional capital
contribution to Kilroy Realty, L.P. and increase our interest in it on a
proportionate basis and decrease the interests of the limited partners on a
proportionate basis.
 
The effect of awards granted under our stock incentive plan.
 
  If options to purchase shares of our common stock granted in connection with
our 1997 Stock Option and Incentive Plan are exercised at any time, or
restricted shares of common stock are issued under the plan, we must contribute
to Kilroy Realty, L.P. the exercise price that we receive in connection with
the issuance of the shares of common stock to the exercising participant or the
proceeds that we receive when we issue the shares. In exchange, we will be
issued units in Kilroy Realty, L.P. equal to the number of shares of common
stock issued to the exercising participant in the plan.
 
Tax matters which affect Kilroy Realty, L.P.
 
  We have the authority under the partnership agreement to make tax elections
under the Internal Revenue Code on Kilroy Realty, L.P.'s behalf.
 
                                       28
<PAGE>
 
Allocations of net income and net losses to partners.
 
  The net income of Kilroy Realty, L.P. will generally be allocated as follows:
 
  .  first, to the extent holders of units have been allocated net losses,
     net income shall be allocated to such holders to offset such losses, in
     an order of priority which is the reverse of the priority of the
     allocation of such losses;
 
  .  next pro rata among the holders of Series A Preferred Units in an amount
     equal to an 8.075% per annum cumulative return on the stated value of
     $50.00 per Series A Preferred Unit, and holders of Series C Preferred
     Units in an amount equal to a 9.375% per annum cumulative return on the
     stated value of $50.00 per Series C Preferred Unit; and
 
  .  the remaining net income, if any, will be allocated to us and to the
     common limited partners in accordance with our respective percentage
     interests;
 
  Net losses of Kilroy Realty, L.P. will be allocated as follows:
 
  .  first to us and the common limited partners in accordance with our
     respective percentage interests, but only to the extent the allocation
     does not cause a partner to have a negative adjusted capital account;
 
  .  in addition, to the extent we issue Series B Preferred Units, the
     partnership agreement will be amended to provide for the allocation of
     income and loss which is preferred with respect to common units and
     subordinate to Series A Preferred Stock and Series C Preferred Units;
 
  .  next, pro rata among the holders of the Series A Preferred Units and the
     Series C Preferred Units, but only to the extent that the allocation
     does not cause a partner to have a negative adjusted capital account;
     and
 
  .  the remainder, if any, will be allocated to us.
 
  These allocations are subject to certain special allocations relating to
depreciation deductions and to compliance with the provisions of Sections
704(b) and 704(c) of the Code and the associated Treasury Regulations. See the
section entitled "Material Federal Income Tax Consequences--Tax Aspects of the
Kilroy Realty, L.P."
 
Operations and management of Kilroy Realty, L.P.
 
  Kilroy Realty, L.P. must be operated in a manner that will enable us to
maintain our qualification as a REIT and avoid any federal income tax
liability. The partnership agreement provides that we will determine from time
to time, but not less frequently than quarterly, the net operating cash
revenues of Kilroy Realty, L.P., as well as net sales and refinancing proceeds,
pro rata in accordance with the partners' respective percentage interests,
subject to the distribution preferences with respect to the Series A Preferred
Units, Series B Preferred Units and Series C Preferred Units. The partnership
agreement further provides that Kilroy Realty, L.P. will assume and pay when
due, or reimburse us for payment of, all expenses that we incur relating to the
ownership and operation of, or for the benefit of, Kilroy Realty, L.P. and all
costs and expenses relating to our operations.
 
Term of the partnership agreement.
 
  Kilroy Realty, L.P. will continue in full force and effect until December 31,
2095, or until sooner dissolved in accordance with its terms.
 
8.075% Series A Cumulative Redeemable Preferred Units and 9.375% Series C
Cumulative Redeemable Preferred Units.
 
   General. Kilroy Realty, L.P. has designated classes of preferred limited
partnership units as the 8.075% Series A Cumulative Redeemable Preferred Units
and the 9.375% Series C Cumulative Redeemable Preferred
 
                                       29
<PAGE>
 
Units representing preferred limited partnership interests. As of the date of
this prospectus, 1,500,000 Series A Preferred Units and 700,000 Series C
Preferred Units are issued and outstanding.
 
   Distributions. Each Series A Preferred Unit and Series C Preferred Unit is
entitled to receive cumulative preferential distributions payable on or before
the 15th of February, May, August and November of each year. Series A Preferred
Units will be entitled to distributions at a rate of 8.075% pre annum and
Series C Preferred Units will be entitled to distributions at a rate of 9.375%
pre annum. The cumulative preferential distributions will be paid in preference
to any payment made on any other class or series of partnership interest of
Kilroy Realty, L.P., other than any other class or series of partnership
interest expressly designated as ranking on parity with or senior to the
Series A Preferred Units and the Series C Preferred Units.
 
   Ranking. The Series A Preferred Units and the Series C Preferred Units will
rank:
 
  .  on parity with each other and with all other classes or series of
     preferred partnership units designated as ranking on a parity with the
     Series A Preferred Units and the Series C Preferred Units with respect
     to distributions and rights upon liquidation, dissolution, or winding-
     up,
 
  .  senior to the Series B Preferred Units and to all classes or series of
     preferred partnership units designated as ranking junior to the Series A
     Preferred Units and the Series C Preferred Units, and
 
  .  junior to all other classes or series of preferred partnership units
     designated as ranking senior to the Series A Preferred Units and the
     Series C Preferred Units.
 
   Limited approval rights. For as long as any Series A Preferred Units and the
Series C Preferred Units remain outstanding, Kilroy Realty, L.P. will not,
without the affirmative vote of the holders of at least two-thirds of the units
of such class, as applicable:
 
  .  authorize, create or increase the authorized or issued amount of any
     class or series of partnership interests ranking senior to the Series A
     Preferred Units and the Series C Preferred Units or reclassify any
     partnership interests of Kilroy Realty, L.P. into any class or series of
     partnership interest ranking senior to the Series A Preferred Units and
     the Series C Preferred Units, or create, authorize or issue any
     obligations or security convertible into or evidencing the right to
     purchase any class or series of partnership interests ranking senior to
     the Series A Preferred Units,
 
  .  authorize or create, or increase the authorized or issued amount of any
     preferred partnership units on parity with the Series A Preferred Units
     and the Series C Preferred Units or reclassify any partnership interest
     into any preferred partnership units on parity with the Series A
     Preferred Units and the Series C Preferred Units or create, authorize or
     issue any obligations or security convertible into or evidencing the
     right to purchase any preferred partnership units on parity with the
     Series A Preferred Units and the Series C Preferred Units, but only to
     the extent such preferred partnership units on parity with the Series A
     Preferred Units and the Series C Preferred Units are issued to an
     affiliate of Kilroy Realty, L.P., other than to us to the extent the
     issuance of such interests was to allow us to issue corresponding
     preferred stock to persons who are not affiliates of Kilroy Realty,
     L.P., or
 
  .  either consolidate, merge into or with, or convey, transfer or lease its
     assets substantially as an entirety to, any corporation or other entity
     or amend, alter or repeal the provisions of the partnership agreement,
     whether by merger, consolidation or otherwise, in each case in a manner
     that would materially and adversely affect the powers, special rights,
     preferences, privileges or voting power of the Series A Preferred Units
     and the Series C Preferred Units or the holders of Series A Preferred
     Units and the Series C Preferred Units.
 
   Redemption and exchange. We may redeem the Series A Preferred Units on and
after February 6, 2003, and we may redeem the Series C Preferred Units on and
after November 24, 2003, in each case out of proceeds from issuances of our
capital stock at a redemption price equal to $50.00 per unit, plus accrued and
unpaid distributions to the date of redemption. The Series A Preferred Units
may be exchanged on and after
 
                                       30
<PAGE>
 
February 6, 2003, and the Series C Preferred Units may be exchanged on and
after November 24, 2003, in each case, in whole but not in part, into shares of
our Series A Preferred Stock or Series C Preferred Stock, as applicable at the
option of 51% of the holders of the applicable series of units. In addition,
the Series A Preferred Units and the Series C Preferred Units may be exchanged,
in whole but not in part, into shares of Series A Preferred Stock or Series C
Preferred Stock, as applicable at any time at the option of 51% of the holders
if:
 
  .  distributions on the Series A Preferred Units or Series C Preferred
     Units, as applicable, have not been made for six prior quarterly
     distribution periods, whether or not consecutive or
 
  .  Kilroy Realty, L.P. is or is likely to become a "publicly traded
     partnership" for federal income tax purposes.
 
   In addition, the Series A Preferred Units may be exchanged, on or after
February 6, 2001 and prior to February 6, 2008, and the Series C Preferred
Units may be exchanged on or after November 24, 2001 and prior to November 24,
2008, in each case in whole but not in part at the option of the holders of 51%
of the applicable series if the Series A Preferred Units or the Series C
Preferred Units, as applicable would not be considered "stock and securities"
for federal income tax purposes.
 
   The Series A Preferred Units and the Series C Preferred Units also are
exchangeable, in whole but not in part, if Kilroy Realty, L.P. believes, or the
initial holder believes, based upon the opinion of counsel, that the character
of Kilroy Realty, L.P.'s assets and income would not allow it to qualify as a
REIT if it were a corporation. We may, in lieu of exchanging the Series A
Preferred Units for shares of Series A Preferred Stock, or the Series C
Preferred Units for shares of Series C Preferred Stock, elect to redeem all or
a portion of the Series A Preferred Units or the Series C Preferred Units for
cash in an amount equal to $50.00 per unit plus accrued and unpaid
distributions. The right of the holders of Series A Preferred Units and Series
C Preferred Units to exchange their units for shares of Series A Preferred
Stock or Series C Preferred Stock, as applicable, will in each case be subject
to the ownership limitations in our charter in order for us to maintain our
qualification as a REIT for federal income tax purposes.
 
   Liquidation preference. The distribution and income allocation provisions of
the partnership agreement have the effect of providing each Series A Preferred
Unit and Series C Preferred Unit with a liquidation preference to each holder
equal to their capital contributions, plus any accrued but unpaid
distributions, in preference to any other class or series of partnership
interest.
 
Series B Junior Participating Preferred Units.
 
   General. Under the terms of the partnership agreement, if we issue any
shares of Series B Preferred Stock, we must contribute the proceeds to Kilroy
Realty, L.P. In exchange for the contribution of these proceeds, Kilroy Realty,
L.P. will issue to us Series B Preferred Units equal to the number of shares of
Series B Preferred Stock that we issued. As of the date of this prospectus, no
Series B Preferred Units have been issued.
 
   Distributions. Each Series B Preferred Unit is entitled to receive
preferential cumulative distributions payable on or before the first day of
March, June, September and December, of each year at a rate in an amount per
unit equal to the greater of:
 
  .  $1.00, and
 
  .  an aggregate distribution of 100 times the distribution, if any,
     declared per unit on the common units since the last quarterly
     distribution payment date.
 
   The preferential distributions will be paid in preference to any payment
made on any other class or series of partnership interest of Kilroy Realty,
L.P., other than the Series A Preferred Units, the Series C Preferred Units and
any other class or series of partnership interest expressly designated as
ranking on parity with or senior to the Series B Preferred Units.
 
                                       31
<PAGE>
 
   Ranking. The Series B Preferred Units will rank:
 
  .  on parity with all classes or series of preferred partnership units
     designated as ranking on a parity with the Series B Preferred Units with
     respect to distributions and rights upon liquidation, dissolution, or
     winding-up,
 
  .  senior to all classes or series of preferred partnership units
     designated as ranking junior to the Series B Preferred Units, and
 
  .  junior to the Series A Preferred Units, the Series C Preferred Units and
     all other classes or series of preferred partnership units designated as
     ranking senior to the Series B Preferred Units.
 
   Approval rights. The Series B Preferred Units have no approval rights.
 
   Redemption and exchange. Kilroy Realty, L.P. may not redeem the Series B
Units at any time and the Series B Preferred Units are not exchangeable into
any of our securities or any other security of Kilroy Realty, L.P.
 
   Liquidation preference. The distribution and income allocation provisions of
the partnership agreement have the effect of providing each Series B Preferred
Unit with a liquidation preference to us equal to our capital contributions,
plus any accrued but unpaid distributions, in preference to any other class or
series of partnership interest ranking junior to the Series B Preferred Units.
 
Common limited partnership units.
 
   General. The partnership agreement provides that, subject to the
distribution preferences of the Series A Preferred Units, Series B Preferred
Units and the Series C Preferred Units, common units are entitled to receive
quarterly distributions of available cash on a pro rata basis in accordance
with their respective percentage interests.
 
   Redemption/Exchange rights. Common limited partners have the right to
require Kilroy Realty, L.P. to redeem part or all of their common units for
cash based upon the fair market value of an equivalent number of shares of
common stock at the time of such redemption. Alternatively, we may elect to
acquire those units in exchange for shares of our common stock. Our acquisition
will be on a one-for-one basis, subject to adjustment in the event of stock
splits, stock dividends, issuance of certain rights, certain extraordinary
distributions and similar events. However, even if we elect not to acquire
tendered units in exchange for shares of common stock, holders of common units
that are corporations or limited liability companies may require that we issue
common stock in exchange for their common units, subject to applicable
ownership limits or any other limit as provided in our charter or as otherwise
determined by our board of directors, as applicable. We presently anticipate
that we will elect to issue shares of common stock in exchange for common units
in connection with each redemption request, rather than having Kilroy Realty,
L.P. redeem the common units for cash. With each redemption or exchange, we
increase our percentage ownership interest in Kilroy Realty, L.P. Common
limited partners may exercise this redemption right from time to time, in whole
or in part, except when, as a consequence of shares of common stock being
issued, any person's actual or constructive stock ownership would exceed the
Ownership Limits, or any other limit as provided in our charter or as otherwise
determined by our board of directors as described under the section entitled
"Description of capital stock--Restrictions on the ownership and transfer of
shares of our capital stock."
 
   Common limited partner approval rights. The partnership agreement provides
that if the common limited partners own at least 5% of the outstanding common
units, including those common units held by us, we will not, on behalf of
Kilroy Realty, L.P. and without the prior consent of the holders of more than
50% of the common units representing limited partner interests and excluding
common units held by us, take any of the following actions:
 
  .  dissolve Kilroy Realty, L.P., or
 
                                       32
<PAGE>
 
  .  prior to January 31, 2004, sell the office property located at 2260 E.
     Imperial Highway, at Kilroy Airport Center-El Segundo,
 
unless the dissolution or sale is incident to a merger or a sale of
substantially all of our assets.
 
  In addition, we may not sell in a taxable transaction 11 of our properties
prior to October 31, 2002 without the consent of the limited partners that
contributed the properties to Kilroy Realty, L.P., except in connection the
sale or transfer of all or substantially all of our assets or those of Kilroy
Realty, L.P.
 
                                       33
<PAGE>
 
                   EXCHANGE OF COMMON UNITS FOR COMMON STOCK
 
Terms of the exchange.
 
   Beginning on January 31, 1999, the limited partners of Kilroy Realty, L.P.
who hold common units issued on January 31, 1997 and June 18, 1997 (the selling
stockholders under this prospectus) may require Kilroy Realty, L.P. to redeem
up to 2,817,476 of their common units for cash by delivering to us, as general
partner of Kilroy Realty, L.P., a notice of redemption. Upon receipt of the
notice of redemption, we may, in our sole and absolute discretion, subject to
the limitations on ownership and transfer of common stock set forth in our
charter, elect to exchange those common units for shares of common stock on a
one-for-one basis, subject to adjustment as described in the section entitled
"Description of Material Provisions of the Partnership Agreement of Kilroy
Realty L.P.--Common limited partnership units--Redemption/Exchange rights."
However, even if we elect not to acquire tendered units in exchange for shares
of common stock, holders of common units that are corporations or limited
liability companies may require us to issue shares of common stock in exchange
for their common units, subject to applicable ownership limits or any other
limit as provided in our charter or as otherwise determined by our board of
directors.

   Once we receive a notice of redemption from a common limited partner, we
will determine whether to redeem the tendering partner's common units for cash
or exchange the tendering partner's common units for shares of common stock. We
will promptly notify the tendering partner if we decide to exchange the
tendering partner's common units for shares of common stock. Any shares of
common stock that we issue will be duly authorized, validly issued, fully paid
and nonassessable shares, free of any pledge, lien, encumbrance or restriction
other than those provided in:
 
  .  our charter,
 
  .  our bylaws,
 
  .  the Securities Act,
 
  .  relevant state securities or blue sky laws, and
 
  .  any applicable registration rights agreement with respect to the shares
     entered into by the tendering partner.
 
   Each tendering partner will continue to own all common units subject to any
redemption or exchange, and be treated as a limited partner with respect to the
common units for all purposes, until the limited partner transfers the common
units to us, is paid for them or receives shares of common stock in exchange
for them. Until that time, the limited partner will have no rights as one of
our stockholders.
 
Certain conditions to the exchange.
 
   We will issue shares of common stock in exchange for the common units to a
tendering partner if each of the following conditions is satisfied or waived:
 
  .  the exchange would not cause the tendering partner or any other person
     to violate the Ownership Limits;
 
  .  the redemption is for more than 500 common units, or if the tendering
     partner holds less than 500 common units, the redemption is for all of
     the common units held by the tendering partner.
 
  .  redemption is effected during the period before the record date that we
     established for a distribution from Kilroy Realty, L.P. to its partners
     and after the record date that we established for a distribution to our
     common stockholders.
 
  .  the consummation of any redemption or exchange will be subject to the
     expiration or termination of any applicable waiting period under the
     Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
 
                                       34
<PAGE>
 
Comparison of the rights, privileges and preferences of ownership of common
units and common stock.
 
   Generally, the nature of an investment in our common stock is similar in
several respects to an investment in common units of Kilroy Realty, L.P.
Holders of common stock and holders of common units generally receive the same
distributions. Common stockholders and holders of common units generally share
in the risks and rewards of ownership in our business conducted through Kilroy
Realty, L.P. However, there are also differences between ownership of units and
ownership of common stock, some of which may be material to investors.
 
   The information below highlights a number of the significant differences
between Kilroy Realty, L.P. and us relating to, among other things, form of
organization, management control, voting rights, liquidity and federal income
tax considerations. These comparisons are intended to assist limited partners
in understanding how their investment changes if they exchange their common
units for shares of our common stock. This discussion is summary in nature and
does not constitute a complete discussion of these matters, and holders of
common units should carefully review the rest of this prospectus and the
registration statement of which this prospectus is a part for additional
important information about us.
 
                     Form of Organization and Assets Owned
                     -------------------------------------
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Kilroy Realty, L.P. is organized as a Delaware limited partnership. Kilroy
Realty, L.P. directly owns substantially all of the real property which
comprises our real estate operations. Substantially all of our business is
conducted through Kilroy Realty, L.P. Kilroy Realty, L.P.'s purpose is to
conduct any business that may be lawfully conducted by a limited partnership
organized pursuant to the Delaware Revised Uniform Limited Partnership Act,
provided that it must conduct its business in a manner that allows us to
maintain our qualification as a REIT, unless we cease to qualify as a REIT for
reasons other than the conduct of the business of Kilroy Realty, L.P.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

We are a Maryland corporation. We elected to be taxed as a REIT under the Code,
commencing with our taxable year ending December 31, 1997. We intend to
maintain our qualification as a REIT. Our only substantial asset is our
interest in Kilroy Realty, L.P., which gives us an indirect investment in its
properties. Under our charter, we may engage in any lawful activity permitted
by the Maryland General Corporation Law.
                               Additional Equity
                               -----------------
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Kilroy Realty, L.P. has sole discretion to authorize and issue common units and
other partnership interests of different series or classes that may be senior
to the common units, as determined by us as its general partner. Kilroy Realty,
L.P. may issue units to us, as long as the units are issued in connection with
a comparable issuance of shares of our capital stock, and we contribute to
Kilroy Realty, L.P. the proceeds from the issuance of such shares of capital
stock. Limited partners do not have a preemptive right to additional units.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

Our board of directors may issue, in its discretion, additional shares of
common stock or additional shares of preferred stock without exceeding the
authorized number of shares of capital stock stated in our charter. As long as
Kilroy Realty, L.P. is in existence, we are required to contribute to Kilroy
Realty, L.P., in exchange for units in Kilroy Realty, L.P., the proceeds of all
equity capital raised by us.
 
                                       35
<PAGE>
 
 
                               Management Control
                               ------------------

- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

As general partner, we exclusively manage the day-to-day business and affairs
of Kilroy Realty, L.P. Limited partners may not participate in or exercise
control or management power over the business and affairs except as provided
below under "--Voting and Consent Rights." Limited Partners may not remove the
general partner, with or without cause. However, we may not, without the
consent of partners holding 60% of the common units, including the common units
we hold in our capacity as general partner:
 
 .  amend the partnership agreement, other than to admit limited partners and
   for certain permitted non-material amendments,
 
 .  take certain actions with respect to bankruptcy or insolvency of Kilroy
   Realty, L.P. or
 
In addition, we may not transfer our general partnership interest or admit
another general partner without the approval of common limited partners
representing a majority of the common limited partnership interests, except in
the case of "termination transactions" described in the section entitled
"Description of Material Provisions of the Partnership Agreement of Kilroy
Realty L.P.--Transferability of partnership interests" which requires the
approval of the holders of 60% of the common units, including the common units
we hold in our capacity as general partner.
 
Further, we may not, without the consent of each common limited partner that
would be adversely affected:
 
 .  convert a limited partnership interest into a general partnership interest,
 
 .  modify the limited liability of a limited partner,
 
 .  alter the rights of a partner to receive distributions, except as permitted
   in the partnership agreement, or
 
 .  alter or modify the rights of redemption provided in the partnership
   agreement.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

 .  Our board of directors has exclusive control over our business affairs
   subject only to the restrictions in our charter and bylaws.
 
 .  At each annual meeting of stockholders, our stockholders elect directors for
   staggered three-year terms.
 
 .  The board of directors may alter or eliminate its policies without a vote of
   the stockholders.
 
 .  Stockholders have no control over our ordinary business policies, except for
   their vote to elect the directors.
 
 .  The approval of holders of two-thirds of the shares of our capital stock
   outstanding and entitled to vote is required to change our policy of
   maintaining our REIT status.
 
 .  Our charter may be amended with the approval of two-thirds of the shares of
   capital stock entitled to vote. Our bylaws may be amended by the vote of a
   majority of our board of directors or a majority of the votes entitled to be
   cast by our stockholders, except that certain of our bylaws may be awarded
   only by the vote of two-thirds of the votes entitled to be cast by our
   stockholders.
 
                                       36
<PAGE>
 
 
                                Fiduciary Duties
                                ----------------


- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                         
- --------------------------------------------------------------------------------

 .  Under Delaware law, we are accountable to Kilroy Realty, L.P. as a
   fiduciary. Consequently, we are required to exercise good faith and
   integrity in all of our dealings with respect to Kilroy Realty, L.P.'s
   affairs. However, under the partnership agreement, we are not liable for
   monetary damages for losses sustained, liabilities incurred or benefits not
   derived by partners as a result of errors of judgment or mistakes of fact or
   law or any act or omission, provided that we acted in good faith.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

 .  Under Maryland law, our board of directors must perform their duties in good
   faith, in a manner that they reasonably believe to be in our best interests
   and with the care of an ordinarily prudent person in a like position.
   Directors who act in such a manner generally will not be liable to us for
   monetary damages arising from their activities.

                            Antitakeover Provisions
                            -----------------------
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                         
- --------------------------------------------------------------------------------

We, as general partner, have exclusive management powers over the day-to-day
business and affairs of Kilroy Realty, L.P. Limited partners may not remove us
as the general partner, with or without cause. A limited partner generally can
transfer its limited partnership interests, subject to our right of first
refusal. We may not engage in any "termination transaction" without the
approval of at least 60% of the common units, including the common units we
hold in our capacity as general partner. Examples of termination transactions
include:
 
 .  a merger;
 
 .  a consolidation or other combination with or into another entity;
 
 .  a sale of all or substantially all of our assets; or
 
 .  a reclassification, recapitalization or change of our outstanding equity
   interests.
 
- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

Our charter and bylaws have a number of provisions that delay or discourage any
unsolicited proposal to acquire us or remove our board of directors. These
provisions include:
 
 .  our staggered board of directors;
 
 .  authorized stock that our board of directors may issue in their discretion
   as preferred stock with voting and other rights superior to our common
   stock;
 
 .  a requirement that members of our board of directors may be removed only for
   cause and only by the affirmative vote of two-thirds of the aggregate number
   of votes then entitled to be case by stockholders in the election of
   directors;
 
 .  limitations on the ownership of our capital stock in order for us to
   maintain our status as a REIT; and
 
 .  our stockholders' rights plan which would cause substantial dilution to a
   person or group that attempts to acquire us on terms that our board of
   directors does not approve;
 
 .  a requirement that nominations of persons for election to our board of
   directors and proposals of other business to be considered by our
   stockholders at the annual meeting may be made only:
 
   .  pursuant to our notice of the meeting;
 
   .  by or at the direction of our board of directors; or
 
   .  by a stockholder who is entitled to vote at the meeting and has complied
      with the advance notice procedures set forth in our bylaws.
 
                                       37
<PAGE>
 
                           Voting and Consent Rights
                           -------------------------
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Under the partnership agreement, the common limited partners have voting rights
only as to the dissolution of Kilroy Realty, L.P. a merger or the sale of all
or substantially all of its assets and amendments of the partnership agreement,
as described more fully below. Otherwise, all decisions relating to the day-to-
day operation and management of Kilroy Realty, L.P. are made by us in our
capacity as general partner. As of December 31, 1998, we owned a 86.8% interest
in Kilroy Realty, L.P. As units are redeemed or exchanged by limited partners,
our percentage ownership will increase. If additional units are issued to third
parties, our percentage ownership will decrease.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
We are managed and controlled by our board of directors. Stockholders elect the
directors to staggered three-year terms at our annual meetings. Maryland law
requires that certain major corporate transactions, including most amendments
to the charter, may not be consummated without the approval of stockholders as
set forth below. All holders of common stock have one vote per share. Our
charter permits our board of directors to classify and issue preferred stock in
one or more classes having voting power which may differ from that of the
common stock. See the section entitled "Description of capital stock."
 
   The following is a comparison of the voting rights of the common limited
partners of Kilroy Realty, L.P. and our common stockholders as they relate to
certain major events or transactions:
 
      A. Amendment of the Partnership Agreement or our Charter and Bylaws
         ----------------------------------------------------------------
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------
 
The partnership agreement may be amended through a proposal by the general
partner or common limited partners holding 25% or more of the then outstanding
common units. The partnership agreement may be amended in the following manner:
 
 .  generally, if approved by partners holding 60% of the common units;
 
 .  to cause the transfer of our general partner interest to any person other
   than Kilroy Realty, L.P. if approved by limited partners holding a majority
   of the common limited partnership interests.
 
 .  with our approval and the approval of each limited partner that would be
   adversely affected, for amendments to:
 
   .  convert a limited partnership interest into a general partnership
      interest,
 
   .  modify the limited liability of a limited partner,
 
   .  alter the rights of a partner to receive distributions, except as
      permitted in the partnership agreement, or
 
   .  alter or modify the rights of redemption provided in the partnership
      agreement; and
 
 .  with only our approval as general partner for amendments affecting
   ministerial matters and for the admission of limited partners pursuant to
   the partnership agreement.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
The approval of a majority vote of our board of directors and the approval of
the holders of at least two-thirds of the shares entitled to vote at a meeting
of our stockholders is required to amend our charter. Our bylaws generally may
be amended either by a majority of the members of our board of directors or by
the holders of a majority of the shares entitled to vote.
 
However, the following bylaw provisions may be amended only by the approval of
a majority of the shares of capital stock entitled to vote:
 
 .  provisions opting out of the control share acquisition statute;
 
 .  provisions requiring approval by the independent directors for selection of
   operators of our properties or of transactions involving John B. Kilroy, Sr.
   and John B. Kilroy, Jr. and their affiliates; and
 
 .  provisions governing amendment of our bylaws.
 
In addition, the holders of a majority of the outstanding shares of our common
stock must approve an election to be subject to the "business combinations"
statute, as discussed in the section entitled "Material Provisions of Maryland
Law and of our Charter and Bylaws--Business combinations statue."
 
                                       38
<PAGE>

                  B. Dissolution of Kilroy Realty, L.P. or Us
                     ---------------------------------------- 
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------
 
As long as common limited partners represent at least 5% of the outstanding
partnership interests in the partnership, we may not dissolve or enter into any
transaction that would result in the dissolution of Kilroy Realty, L.P. without
the prior consent of the holders of a majority of the outstanding common
limited partnership units.
 
Subject to the preceding paragraph, we may not withdraw as general partner, or
transfer or assign our general partner interest in connection with a merger,
consolidation or sale of substantially all of our assets without the approval
of 60% of the partners holding common units, including the common units we hold
in our capacity as general partner.
 
- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

Under applicable Maryland law, a decision causing us to dissolve requires:
 
 .  approval by a majority of our entire board of directors; and
 
 .  approval by at least two-thirds of the total number of shares of capital
   stock outstanding and entitled to vote.


             C. Vote Required to Merge, Consolidate or Sell Assets
                --------------------------------------------------
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

As long as common limited partners represent at least 5% of the outstanding
partnership interests in the partnership, cannot enter into any merger or
consolidation transaction which results in the dissolution of Kilroy Realty,
L.P. or, prior to January 31, 2004, sell the office property located at 2260 E.
Imperial Highway, at Kilroy Airport Center--El Segundo, except in each case in
connection with a transaction described in the following paragraph. In
addition, we may not sell in a taxable transaction 11 of our other properties
prior to October 31, 2002 without the consent of the limited partners that
contributed the properties to Kilroy Realty, L.P., except in connection with a
transaction described in the following paragraph.
 
We may with enter into a merger, consolidation or sale of substantially all of
our assets with the approval of 60% of the partners holding common units,
including the common units we hold in our capacity as general partner.
 
- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------

Under Maryland law, the sale of all or substantially all our assets or our
merger or consolidation generally requires the approval of:
 
 .  a majority of the members of our board of directors; and
 
 .  the holders of two-thirds of the shares entitled to vote on the matter.
 
Our stockholders are not required to approve certain mergers or the sale of
less than all or substantially all of our assets.
 
                                       39
<PAGE>
 
 
                      Compensation, Fees and Distributions
                      ------------------------------------
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

We do not receive any compensation for our services as general partner. As a
partner, however, we have a right to allocations and distributions similar to
other partners. In addition, Kilroy Realty, L.P. will reimburse us for all
expenses incurred relating to our ongoing operations and any issuance of
additional partnership interests.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
Our non-employee directors and officers receive compensation for their
services.

 
                             Liability of Investors
                             ----------------------
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Under the partnership agreement and applicable Delaware law, the liability of
the limited partners for debts and obligations is generally limited to the
amount of their current investment in Kilroy Realty, L.P. [,measured as an
amount equal to their respective capital account balance].

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
Under Maryland law, our stockholders generally are not personally liable for
our debts or obligations.

 
                                   Liquidity
                                   ---------
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Limited partners may generally transfer their units to accredited investors
without restriction, provided that we have a right of first refusal for any
proposed transfer. Transfer of partnership interests must also satisfy certain
other requirements described in the section entitled "Description of material
provisions of the partnership agreement of Kilroy Realty, L.P." contained in
this prospectus.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
A stockholder is entitled to freely transfer the shares of common stock
received in exchange for units, subject to prospectus delivery and other
requirements for registered securities and subject to the restrictions or
ownership and transfer of shares of our stock contained in our charter. Our
common stock is listed on the New York Stock Exchange. The success of the
secondary market for shares of our common stock depends, among other things,
upon the number of shares outstanding, our financial results and prospects, the
general interest in us and other real estate investments, and our dividend
yield compared to that of other debt and equity securities.

 
                                     Taxes
                                     -----
 
- --------------------------------------------------------------------------------
         KILROY REALTY L.P.                              
- --------------------------------------------------------------------------------

Kilroy Realty, L.P. itself is not subject to federal income taxes. Instead,
each holder of units includes its allocable share of partnership taxable income
or loss in determining its individual federal income tax liability. Income and
loss generally is subject to "passive activity" limitations. Under the "passive
activity" rules, partners can generally offset income and loss that is
considered "passive" against income and loss from other investments that
constitute "passive activities."
 
Partnership cash distributions are generally not taxable to a holder of units
except to the extent they exceed the holder's basis in its partnership
interest, which will include such holder's allocable share of nonrecourse debt.
 
Holders of units are required, in some cases, to file state income tax returns
and/or pay state income taxes in the states in which Kilroy Realty, L.P. owns
property, even if they are not residents of those states.

- --------------------------------------------------------------------------------
         COMPANY
- --------------------------------------------------------------------------------
 
Distributions made by us to our taxable domestic stockholders out of current or
accumulated earnings and profits generally will be taxed as dividends,
resulting in ordinary income. However, distributions that are designated as
capital gain dividends generally will be taxed as gains from the sale or
disposition of a capital asset. Dividends paid by us will be treated as
"portfolio" income to stockholders and stockholders cannot offset these
dividends with losses from "passive activities." Distributions in excess of
current or accumulated earnings and profits will be treated as a nontaxable
return of basis to the extent of a stockholder's adjusted basis in its common
stock, with the excess taxed as capital gain.
 
Stockholders who are individuals generally will not be required to file state
income tax returns and/or pay state income taxes outside of their state of
residence with respect to our operations and distributions. We may be required
to pay state income taxes in certain states.
 
                                       40
<PAGE>
 
                   MATERIAL PROVISIONS OF MARYLAND LAW AND OF
                             OUR CHARTER AND BYLAWS
 
   We have summarized the material terms and provisions of the Maryland General
Corporation Law and our charter and bylaws. This summary is not complete and is
qualified by the provisions of our charter and bylaws, and the Maryland General
Corporation Law. For more detail, you should refer to our charter and bylaws,
which we have previously filed with the SEC and which we incorporate by
reference as exhibits to the registration statement of which this prospectus is
a part.
 
The board of directors.
 
   Our charter provides that the number of our directors shall be established
by our bylaws, but cannot be less than the minimum number required by the
Maryland General Corporation Law, which is three. Our bylaws allow our board of
directors to fix or change the number to not fewer than three nor more than 13
members. The number of directors is currently fixed at seven. A majority of our
remaining board of directors may fill any vacancy, other than a vacancy caused
by removal. A majority of our board of directors may fill a vacancy resulting
from an increase in the number of directors. The stockholders entitled to vote
for the election of directors at an annual or special meeting of our
stockholders may fill a vacancy resulting from the removal of a director.
 
   Our charter and bylaws provide that a majority of the board of directors
must be "independent directors." An "independent director" is a director who is
not:
 
   .  an employee, officer or affiliate of us or one of our subsidiaries or
      divisions;
 
   .  a relative of a principal executive officer; or
 
   .  an individual member of an organization acting as advisor, consultant or
      legal counsel, who receives compensation on a continuing basis from us
      in addition to director's fees.
 
   Classified board of directors. Our charter divides our board of directors
into three classes. Each class of director serves a staggered three-year term.
As the term of each class expires, stockholders elect directors in that class
for a term of three years and until their successors are duly elected and
qualified. The directors in the other two classes continue in office, serving
the remaining portion of their respective three-year term. We believe that
classification of our board of directors helps to assure the continuity and
stability of our business strategies and policies.
 
   The classified board of directors makes removing incumbent directors more
time consuming and difficult and discourages a third party from making a tender
offer for our capital stock or otherwise attempting to obtain control of us,
even if it might benefit us and our stockholders. The classified board
increases the likelihood that incumbent directors will retain their positions
by requiring at least two annual meetings of stockholders, rather than one, to
elect a new majority of the board of directors. Holders of shares of common
stock have no right to cumulative voting for the election of directors.
Consequently, at each annual meeting of our stockholders, the holders of a
majority of the shares of common stock entitled to vote will be able to elect
all of the successors of the class of directors whose term expires at that
meeting.
 
   Removal of directors. Our charter provides that our stockholders may remove
a director only for "cause" and only by the affirmative vote of at least two-
thirds of the shares entitled to vote in the election of directors. The
Maryland General Corporation Law does not define the term "cause." As a result,
removal for "cause" is subject to Maryland common law and to judicial
interpretation and review in the context of the unique facts and circumstances
of any particular situation.

                                       41
<PAGE>
 
Business combinations statute.
 
   Under Maryland law, certain "business combinations" between a Maryland
corporation and an interested stockholder or an affiliate of an interested
stockholder are prohibited for five years after the most recent date on which
the interested stockholder becomes an interested stockholder. A business
combination includes a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities. An interested stockholder is defined in the Maryland General
Corporation Law as:
 
  .  any person who beneficially owns, directly or indirectly, ten percent or
     more of the voting power of the corporation's shares; or
 
  .  an affiliate of the corporation who, at any time within the two-year
     period prior to the date in question, was the beneficial owner of ten
     percent or more of the voting power of the then outstanding voting stock
     of the corporation.
 
   At the conclusion of the five-year prohibition, any business combination
between the Maryland corporation and an interested stockholder generally must
be recommended by the board of directors of the corporation and approved by the
affirmative vote of at least:
 
  .  80% of the votes entitled to be cast by holders of outstanding shares of
     voting stock of the corporation; and
 
  .  two-thirds of the votes entitled to be cast by holders of voting stock
     of the corporation other than shares held by the interested stockholder
     with whom or with whose affiliate the business combination is to be
     effected.
 
   These super-majority vote requirements do not apply if the corporation's
common stockholders receive a minimum price, as defined under Maryland law, for
their shares in the form of cash or other consideration in the same form as
previously paid by the interested stockholder for its shares. None of these
provisions of the Maryland law will apply, however, to business combinations
that are approved or exempted by the board of directors of the corporation
prior to the time that the interested stockholder becomes an interested
stockholder.
 
   Our board of directors determined by resolution that we will not be governed
by the "business combinations" provisions of the Maryland General Corporation
Law (3-601 through 3-6-4). The resolution provides that we cannot later
determine to be governed by the business combination provisions of the Maryland
General Corporation Law without the approval of holders of a majority of the
shares of our common stock. As a result of our decision to opt out of the
business combinations provisions of the Maryland General Corporation Law, an
interested stockholder would be able to effect a "business combination" without
complying with the requirements in the business combination provision of the
Maryland General Corporation Law. Our decision not to be governed by these
provisions may make it easier for stockholders who become interested
stockholders to consummate a business combination involving us. We cannot
assure you that any such business combination will be consummated or, if
consummated, will result in a purchase of shares of common stock from any
stockholder at a premium.
 
Control share acquisitions.

   The Maryland General Corporation Law provides that "control shares" of a
company acquired in a "control share acquisition" have no voting rights except
to the extent approved by a vote of two-thirds of the votes entitled to be cast
on the matter, excluding shares owned by the acquiror or by officers or
directors who are employees of the company. "Control shares" are voting shares
of stock which, if aggregated with all other voting shares of stock previously
acquired by the acquiror, or over which the acquiror is able to directly or
indirectly exercise voting power (except solely by revocable proxy), would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power:
 
  .  one-fifth or more but less than one-third;
 
  .  one-third or more but less than a majority; or
 
  .  a majority of all voting power.
 
                                       42
<PAGE>
 
   "Control shares" do not include shares of stock the acquiring person is
entitled to vote having obtained prior stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
 
   A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions and expenses, may compel the board of
directors to call a special meeting of stockholders to consider voting rights
for the shares. The meeting must be held within 50 days of demand. If no
request for a meeting is made, the company may itself present the question at
any stockholders' meeting.
 
   If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights
previously have been approved) for fair value. Fair value is determined without
regard to the absence of voting rights for control shares, as of the date of
the last control share acquisition or of any meeting of stockholders at which
the voting rights of control shares are considered and not approved. If voting
rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote,
all other stockholders may exercise appraisal rights. The fair value of the
shares as determined for purposes of these appraisal rights may not be less
than the highest price per share paid in the control share acquisition. Certain
limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
 
   The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the company is a party to the
transaction, or to acquisitions approved or exempted by it charter or bylaws.
We have elected in our bylaws not to be governed by the "control share
acquisition" statute of the Maryland General Corporation Law (sections 3-701
through 3-709). If we want to be governed by these provisions at a future date,
our bylaws require the affirmative vote of a majority of all votes entitled to
be cast by the holders of the issued and outstanding shares of common stock.
Because we decided to opt out of these provisions, stockholders who acquire a
substantial block of common stock do not need approval of the other
stockholders before exercising full voting rights with respect to their shares
on all matters. This may make it easier for any such control share stockholder
to effect a business combination with us. However, we cannot assure you that
any such business combination will be consummated or, if consummated, will
result in a purchase of shares of common stock from any stockholder at a
premium.
 
Amendment to our charter and bylaws.
 
   Our charter may generally be amended only if any such amendment if declared
advisable by our board of directors and approved by our stockholders by the
affirmative vote of at least two-thirds of the shares of our capital stock
outstanding and entitled to vote on the amendment. Our bylaws may be amended by
the affirmative vote of a majority of the board of directors or of a majority
of the issued and outstanding shares of our capital stock entitled to vote.
However, the following bylaw provisions may be amended only by the approval of
a majority of the shares of capital stock entitled to vote:
 
  .  provisions opting out of the control share acquisition statute;
 
  .  provisions requiring approval by the independent directors for selection
     of operators of our properties or of transactions involving John B.
     Kilroy, Sr. and John B. Kilroy, Jr. and their affiliates; and
 
  .  provisions governing amendment of our bylaws.
 
Meetings of stockholders.
 
   Our bylaws provide for annual meetings of our stockholders to elect one
class of directors to our board of directors and to transact other business
properly be brought before the meeting. The president, the board of directors
or the chairman of the board may call a special meeting of the stockholders.
The holders of 50% or

                                       43
<PAGE>
 
more of our outstanding common stock entitled to vote may also make a written
request to call a special meeting of stockholders. In addition, holders of 10%
of our Series A Preferred Stock may also call a special meeting of stockholders
of Series A Preferred Stock and all other classes or series of preferred stock
ranking on parity with the Series A Preferred Stock to elect two additional
directors to our board of directors if dividends on any shares of Series A
Preferred Stock remain unpaid for six or more quarterly periods, whether or not
consecutive. Similarly, holders of 10% of our Series C Preferred Stock may also
call a special meeting of stockholders of Series C Preferred Stock and all
other classes or series of preferred stock ranking on parity with the Series C
Preferred Stock to elect two additional directors to our board of directors if
dividends on any shares of Series C Preferred Stock remain unpaid for six or
more quarterly periods, whether or not consecutive.
 
   The Maryland General Corporation Law provides that our stockholders also may
act by unanimous written consent without a meeting with respect to any action
that they are required or permitted to take at a meeting. To do so, each
stockholder entitled to vote on the matter must sign the consent setting forth
the action. In addition, each stockholder entitled to notice of the meeting but
not entitled to vote at the meeting must sign a written waiver of any right to
dissent.
 
Advance notice of director nominations and new business.
 
   Our bylaws provide that with respect to an annual meeting of stockholders,
nominations of persons for election to our board of directors and the proposal
of other business to be considered by stockholders at the meeting may be made
only:
 
  .  pursuant to our notice of the meeting;
 
  .  by or at the direction of our board of directors; or
 
  .  by a stockholder who is entitled to vote at the meeting and has complied
     with the advance notice procedures set forth in our bylaws.
 
   Our bylaws also provide that with respect to special meetings of
stockholders, only the business specified in the notice of meeting may be
brought before the meeting.
 
   The advance notice provisions of our bylaws could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of common stock might receive a premium for their
shares over the then prevailing market price or which holders of our common
stock believe is in their best interests.
 
Dissolution of the Company.
 
   Under the Maryland General Corporation Law, we may be dissolved if a
majority of our entire board of directors determine by resolution that
dissolution is advisable and submit a proposal for dissolution for
consideration at any annual or special meeting of stockholders, and such
proposal is approved by our stockholders, by the affirmative vote of the
holders of two-thirds of the total number of shares of our capital stock
outstanding and entitled to vote on the dissolution.
 
Indemnification and limitation of directors' and officers' liability.
 
   Our charter and the partnership agreement provide for indemnification of our
officers and directors against certain liabilities to the fullest extent
permitted by the Maryland General Corporation Law, as amended from time to
time.
 
                                       44
<PAGE>
 
   The Maryland General Corporation Law permits us to indemnify our directors
and officers and certain other parties against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless:
 
  .  the act or omission of the director or officer was material to the
     matter giving rise to the proceeding and was committed in bad faith or
     was the result of active and deliberate dishonesty;
 
  .  the director or officer actually received an improper personal benefit
     in money, property or services; or
 
  .  in the case of any criminal proceeding, the director or officer had
     reasonable cause to believe that the act or omission was unlawful.
 
   Under the Maryland General Corporation Law, we may indemnify our directors
or officers against judgments, penalties, fines, settlements and reasonable
expenses that they actually incur in connection with the proceeding unless the
proceeding is one by us or in our right and the director or officer has been
adjudged to be liable to us. In addition, we may not indemnify a director or
officer in any proceeding charging improper personal benefit to them if they
were adjudged to be liable on the basis that personal benefit was received. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be permitted.
 
   As permitted by the Maryland General Corporation Law, our charter limits the
liability of our directors and officers to us and our stockholders for money
damages, subject to specified restrictions. However, the liability of our
directors and officers to us and our stockholders is not limited if:
 
  .  it is proved that the director or officer actually received an improper
     personal benefit in money, property or services; or
 
  .  a judgment or other final adjudication is entered in a proceeding based
     on a finding that the director's or officer's action, or failure to act,
     was committed in bad faith or was the result of active and deliberate
     dishonesty and was material to the cause of action adjudicated in the
     proceeding.
 
   This provision does not limit our ability or our stockholders' ability to
obtain other relief, such as an injunction or rescission.
 
   The partnership agreement provides that we, as general partner, and our
officers and directors are indemnified to the same extent our officers and
directors are indemnified in our charter. The partnership agreement limits our
liability and the liability of our officers and directors to Kilroy Realty,
L.P. and its partners to the same extent liability of our officers and
directors to us and our stockholders is limited under our charter. See the
section entitled "Description of material provisions of the partnership
agreement of Kilroy Realty L.P.--Indemnification of our officers and
directors."
 
   Insofar as the foregoing provisions permit indemnification of directors,
officers or persons controlling us for liability arising under the Securities
Act, we have been informed that in the opinion of the SEC, this indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.
 
Indemnification agreements.
 
   We have entered into indemnification agreements with each of our executive
officers and directors. The indemnification agreements provide that:
 
  .  we must indemnify our executive officers and directors to the fullest
     extent permitted by applicable law and advance to our executive officers
     and directors all expenses related to the defense of indemnifiable
     claims against them, subject to reimbursement if it is subsequently
     determined that indemnification is not permitted;
 
                                       45
<PAGE>
 
  .  we must indemnify and advance all expenses incurred by executive
     officers and directors seeking to enforce their rights under the
     indemnification agreements; and
 
  .  we may cover executive officers and directors under our directors' and
     officers' liability insurance.
 
   The form of our indemnification agreement offers substantially the same
scope of coverage afforded by applicable law. In addition, as a contract it
provides greater assurance to our directors and executive officers that
indemnification will be available, because it cannot be modified unilaterally
in the future by the board of directors or the stockholders to eliminate the
rights it provides.
 
                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES
 
   The following summary of certain federal income tax considerations regarding
us and our common stock we are registering is based on current law, is for
general information only and is not tax advice. The information set forth
below, to the extent that it constitutes matters of law, summaries of legal
matters or legal conclusions, is the opinion of Latham & Watkins our tax
counsel, as to the material federal income tax considerations relevant to
holders of Kilroy Realty, L.P. common units with respect to their acquisition
of our common stock. The tax treatment to holders of common stock or common
units will vary depending on a holder's particular situation and this
discussion does not purport to deal with all aspects of taxation that may be
relevant to a holder of common stock or common units in light of his or her
personal investments or tax circumstances, or to certain types of stockholders,
subject to special treatment under the federal income tax laws except to the
extent discussed under the headings "--Taxation of tax-exempt stockholders" and
"--Taxation of non-U.S. stockholders." Stockholders subject to special
treatment include, without limitation:
 
  .  insurance companies;
 
  .  financial institutions or broker-dealers;
 
  .  tax-exempt organizations;
 
  .  stockholders holding securities as part of a conversion transaction, or
     a hedge or hedging transaction, or as a position in a straddle for tax
     purposes;
 
  .  foreign corporations or partnerships; and
 
  .  persons who are not citizens or residents of the United States.
 
   In addition, the summary below does not consider the effect of any foreign,
state, local or other tax laws that may be applicable to holders of our common
units or our common stock.
 
   The information in this section is based on the Code, current, temporary and
proposed Treasury Regulations promulgated under the Code, the legislative
history of the Code, current administrative interpretations and practices of
the Internal Revenue Service (including its practices and policies as expressed
in certain private letter rulings which are not binding on the IRS except with
respect to the particular taxpayers who requested and received such rulings),
and court decisions, all as of the date of this prospectus. Future legislation,
Treasury Regulations, administrative interpretations and practices and/or court
decisions may adversely affect the tax considerations described herein. Any
such change could apply retroactively to transactions preceding the date of the
change. We have not requested, and do not plan to request, any rulings from the
IRS concerning our tax treatment and the statements in this prospectus are not
binding on the IRS or any court. Thus, we can provide no assurance that these
statements will not be challenged by the IRS or that such challenge will not be
sustained by a court.
 
   You are urged to consult your tax advisor regarding the specific tax
consequences to you of (1) the disposition of common units, (2) the
acquisition, ownership and sale or other disposition of our common stock, in
each case including the federal, state, local, foreign and other tax
consequences, (3) our election to be taxed as a REIT for federal income tax
purposes, and (4) potential changes in applicable tax laws.
 
 
                                       46
<PAGE>
 
Tax consequences of the exercise of exchange rights.
 
   If you exercise your right to require Kilroy Realty, L.P. to acquire all or
part of your common units, and instead, we elect to acquire some or all of your
common units in exchange for common stock (an "Exchange"), the Exchange will be
a fully taxable transaction, and you will generally recognize gain in an amount
equal to the value of the common stock received pursuant to the Exchange, plus
the amount of liabilities of Kilroy Realty, L.P. allocable to the common units
being exchanged, less your tax basis in such common units. The recognition of
any loss resulting from an Exchange is subject to a number of limitations set
forth in the Code. The character of any such gain or loss as capital or
ordinary will depend on the nature of the assets of Kilroy Realty, L.P. at the
time of the Exchange. The tax treatment of any acquisition of common units by
Kilroy Realty, L.P. in exchange for cash may be similar, depending on your
circumstances.
 
Taxation of the Company.
 
   General. We elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with our taxable year ended December 31, 1997. We believe
that, commencing with such taxable year, we have been organized and have
operated in a manner which allows us to qualify for taxation as a REIT under
the Code. We intend to continue to operate in this manner. However, our
qualification and taxation as a REIT depends upon our ability to meet (through
actual annual operating results, asset diversification, distribution levels and
diversity of stock ownership) the various qualification tests imposed under the
Code. Accordingly, no assurance can be given that we have operated or will
continue to operate in a manner so as to qualify or remain qualified as a REIT.
See the section below entitled "--Failure to qualify."
 
   The sections of the Code that relate to the qualification and operation as a
REIT are highly technical and complex. The following sets forth the material
aspects of the sections of the Code that govern the federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, relevant rules and regulations
promulgated under the Code, and administrative and judicial interpretations of
the Code and these rules and regulations.
 
   If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income taxes on our net income that is currently distributed
to our stockholders. This treatment substantially eliminates the "double
taxation" that ordinarily results from investment in a corporation. Double
taxation refers to taxation that occurs once at the corporate level when income
is earned and once again at the stockholder level when such income is
distributed. We will be subject to federal income tax as follows:
 
  .  We will be taxed at regular corporate rates on any undistributed REIT
     taxable income, including undistributed net capital gains.
 
  .  We may be subject to the "alternative minimum tax" on our items of tax
     preference.
 
  .  If we have: (a) net income from the sale or other disposition of
     "foreclosure property" which is held primarily for sale to customers in
     the ordinary course of business; or (b) other nonqualifying income from
     foreclosure property, we will be subject to tax at the highest corporate
     rate on this income. Foreclosure property is generally defined as
     property acquired through foreclosure or after a default on a loan
     secured by the property or a lease of the property.
 
  .  We will be subject to a 100% tax on any net income from prohibited
     transactions. Prohibited transactions are, in general, sales or other
     taxable dispositions of property held primarily for sale to customers in
     the ordinary course of business other than foreclosure property.
 
  .  If we fail to satisfy the 75% or 95% gross income test, as described
     below, but have otherwise maintained our qualification as a REIT, we
     will be subject to a 100% tax on an amount equal to (a) the gross income
     attributable to the greater of the amount by which we fail the 75% or
     95% gross income test multiplied by (b) a fraction intended to reflect
     our profitability.
 
                                       47
<PAGE>
 
  .  We will be subject to a 4% excise tax on the excess of the required
     distribution over the amounts actually distributed if we fail to
     distribute during each calendar year at least the sum of (i) 85% of our
     REIT ordinary income for the year, (ii) 95% of our REIT capital gain net
     income for the year, and (iii) any undistributed taxable income from
     prior periods.
 
  .  If we acquire any asset (a "Built-In Gain Asset") from a corporation
     which is or has been a C corporation (i.e., generally a corporation
     subject to full corporate-level tax) in a transaction in which the basis
     of the Built-In Gain Asset in our hands is determined by reference to
     the basis of the asset in the hands of the C corporation, and we
     subsequently recognize gain on the disposition of the asset during the
     ten-year period (the "Recognition Period") beginning on the date on
     which we acquired the asset, then under Treasury Regulations not yet
     promulgated we will be subject to tax at the highest regular corporate
     tax rate on this gain to the extent of the Built-In Gain. For this
     purpose, the term "Built-In Gain" means the excess of (a) the fair
     market value of the asset over (b) our adjusted basis in the asset, in
     each case determined as of the beginning of the Recognition Period. The
     results described in this paragraph with respect to the recognition of
     Built-In Gain assume that we will make an election pursuant to IRS
     Notice 88-19 and that the availability or nature of such election is not
     modified as proposed in President Clinton's 2000 Federal Budget
     Proposal.
 
   Requirements for qualification as a REIT. The Code defines a REIT as a
corporation, trust or association:
 
     (1) that is managed by one or more trustees or directors;
 
     (2) that issues transferable shares or transferable certificates to
  evidence beneficial ownership;
 
     (3) that would be taxable as a domestic corporation but for Sections 856
  through 860 of the Code;
 
     (4) that is not a financial institution or an insurance company within
  the meaning of certain provisions of the Code;
 
     (5) that is beneficially owned by 100 or more persons;
 
     (6) not more than 50% in value of the outstanding stock of which is
  owned, actually or constructively, by five or fewer individuals (as defined
  in the Code to include certain entities) during the last half of each
  taxable year; and
 
     (7) that meets certain other tests, described below, regarding the
  nature of its income and assets and the amount of its distributions.
 
   The Code provides that conditions (1) to (4), inclusive, must be met during
the entire taxable year and that condition (5) must be met during at least 335
days of a taxable year of twelve months, or during a proportionate part of a
taxable year of less than twelve months. Conditions (5) and (6) do not apply
until after the first taxable year for which an election is made to be taxed
as a REIT. For purposes of condition (6), pension funds and certain other tax-
exempt entities are treated as individuals, subject to a "look-through"
exception with respect to pension funds.
 
   We believe that we have satisfied each of the above conditions. In
addition, our charter provides for restrictions regarding ownership and
transfer of shares. These restrictions are intended to assist us in continuing
to satisfy the share ownership requirements described in (5) and (6) above.
These ownership and transfer restrictions are described in the section
entitled "Description of capital stock--Restrictions on ownership and transfer
of shares of our capital stock." These restrictions, however, may not ensure
that we will, in all cases, be able to satisfy the share ownership
requirements described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as
a REIT will terminate. However, if we comply with the rules contained in
applicable Treasury Regulations that require us to ascertain the actual
ownership of our shares and we do not know, or would not have known through
the exercise of reasonable diligence, that we failed to meet the requirement
described in condition (6) above, we will be treated as having met this
requirement. See the section below entitled "--Failure to qualify."
 
                                      48
<PAGE>
 
   In addition, we may not maintain our status as a REIT unless our taxable
year is a calendar year. We have and will continue to have a calendar taxable
year.
 
   Ownership of a partnership interest. In the case of a REIT which is a
partner in a partnership, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of the assets of the partnership. Also,
the REIT will be deemed to be entitled to its proportionate share of the income
of the partnership. The character of the assets and gross income of the
partnership retains the same character in the hands of the REIT for purposes of
Section 856 of the Code, including satisfying the gross income tests and the
asset tests. Thus, our proportionate share of the assets and items of income of
Kilroy Realty, L.P. (including Kilroy Realty, L.P.'s share of these items for
any partnership in which it owns an interest) are treated as our assets and
items of income for purposes of applying the requirements described in this
prospectus, including the income and asset tests described below. We have
included a brief summary of the rules governing the Federal income taxation of
partnerships and their partners below in "--Tax Aspects of the Partnerships."
We have direct control of Kilroy Realty, L.P. and will continue to operate it
in a manner consistent with the requirements for qualification as a REIT.
 
   Income tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT. First, in each taxable year we must
derive directly or indirectly at least 75% of our gross income (excluding gross
income from prohibited transactions) from investments relating to real property
or mortgages on real property (including "rents from real property" and, in
certain circumstances, interest) or from certain types of temporary
investments. Second, in each taxable year we must derive at least 95% of our
gross income (excluding gross income from prohibited transactions) from the
real property investments described above, or from dividends, interest and gain
from the sale or disposition of stock or securities (or from any combination of
the foregoing). For these purposes, the term "interest" generally does not
include any amount received or accrued, directly or indirectly, if the
determination of the amount depends in whole or in part on the income or
profits of any person. An amount received or accrued generally will not be
excluded from the term "interest," however, solely by reason of being based on
a fixed percentage or percentages of receipts or sales.
 
   Rents we receive will qualify as "rents from real property" in satisfying
the gross income requirements for a REIT described above only if the following
conditions are met:
 
  .  the amount of rent must not be based in whole or in part on the income
     or profits of any person. An amount received or accrued generally will
     not be excluded from the term "rents from real property" solely because
     it is based on a fixed percentage or percentages of receipts or sales;
 
  .  the Code provides that rents received from a tenant will not qualify as
     "rents from real property" in satisfying the gross income tests if the
     REIT, or an actual or constructive owner of 10% or more of the REIT,
     actually or constructively owns 10% or more of the interests in such
     tenant (a "Related Party Tenant");
 
  .  if rent attributable to personal property, leased in connection with a
     lease of real property, is greater than 15% of the total rent received
     under the lease, then the portion of rent attributable to personal
     property will not qualify as "rents from real property"; and
 
  .  for rents received to qualify as "rents from real property," the REIT
     generally must not operate or manage the property or furnish or render
     services to the tenants of the property, subject to a 1% de minimis
     exception, other than through an independent contractor from whom the
     REIT derives no revenue. The REIT may, however, directly perform certain
     services that are "usually or customarily rendered" in connection with
     the rental of space for occupancy only and are not otherwise considered
     "rendered to the occupant" of the property. Examples of such services
     include the provision of light, heat, or other utilities, trash removal
     and general maintenance of common areas.
 
   We do not and will not, and as general partner of Kilroy Realty, L.P., will
not permit it to:
 
  .  charge rent for any property that is based in whole or in part on the
     income or profits of any person (except by reason of being based on a
     percentage of receipts or sales, as described above);
 
                                       49
<PAGE>
 
  .  rent any property to a Related Party Tenant;
 
  .  derive rental income attributable to personal property (other than
     personal property leased in connection with the lease of real property,
     the amount of which is less than 15% of the total rent received under
     the lease); or
 
  .  perform services considered to be rendered to the occupant of the
     property, other than through an independent contractor from whom we
     derive no revenue.
 
Notwithstanding the foregoing, we may have taken and may continue to take
certain of the actions set forth above to the extent that we determine, based
on the advice of our tax counsel, that such actions will not jeopardize our
status as a REIT.
 
   Kilroy Services, Inc. receives fees in exchange for the performance of
certain development activities. Such fees do not accrue to us, but we derive
our allocable share of dividends from Kilroy Services, Inc. through our
interest in Kilroy Realty, L.P., which qualify under the 95% gross income test,
but not the 75% gross income test. We believe that the aggregate amount of our
nonqualifying income, from all sources, in any taxable year will not exceed the
limit on nonqualifying income under the gross income tests.
 
   If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT for the year if we are
entitled to relief under certain provisions of the Code. Generally, we may
avail ourselves of the relief provisions if:
 
  .  our failure to meet these tests was due to reasonable cause and not due
     to willful neglect;
 
  .  we attach a schedule of the sources of our income to our federal income
     tax return; and
 
  .  any incorrect information on the schedule was not due to fraud with
     intent to evade tax.
 
   It is not possible, however, to state whether in all circumstances we would
be entitled to the benefit of these relief provisions. For example, if we fail
to satisfy the gross income tests because nonqualifying income that we
intentionally accrue or receive exceeds the limits on nonqualifying income, the
IRS could conclude that our failure to satisfy the tests was not due to
reasonable cause. If these relief provisions do not apply to a particular set
of circumstances, we will not qualify as a REIT. As discussed above, even if
these relief provisions apply, and we retain our status as a REIT, a tax would
be imposed with respect to our non-qualifying income. We may not always be able
to maintain compliance with the gross income tests for REIT qualification
despite our periodic monitoring of our income.
 
   Prohibited transaction income. Any gain that we realize on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business (including our share of any such
gain realized by Kilroy Realty, L.P. or Kilroy Realty Finance Partnership,
L.P.) will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. This prohibited transaction income may also adversely
affect our ability to satisfy the income tests for qualification as a REIT.
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a trade or business depends on all the
facts and circumstances surrounding the particular transaction. Kilroy Realty,
L.P. intends to hold its properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing and owning its
properties, and to make occasional sales of the properties as are consistent
with Kilroy Realty, L.P.'s investment objectives. The IRS may contend, however,
that that one or more of these sales is subject to the 100% penalty tax.
 
   Asset tests. At the close of each quarter of our taxable year, we also must
satisfy three tests relating to the nature and diversification of our assets.
 
  .  At least 75% of the value of our total assets must be represented by
     real estate assets, cash, cash items and government securities. For
     purposes of this test, real estate assets include stock or debt
     instruments that are purchased with the proceeds of a stock offering or
     a long-term (at least five
 
                                       50
<PAGE>
 
     years) public debt offering, but only for the one-year period beginning
     on the date we receive such proceeds.
 
  .  Not more than 25% of our total assets may be represented by securities,
     other than those securities includable in the 75% asset test.
 
  .  Of the investments included in the 25% asset class, the value of any one
     issuer's securities may not exceed 5% of the value of our total assets,
     and we may not own more than 10% of any one issuer's outstanding voting
     securities.
 
   Kilroy Realty, L.P. owns 100% of the non-voting preferred stock of Kilroy
Services, Inc., and by virtue of our ownership of interests in Kilroy Realty,
L.P., we are considered to own these shares. The preferred stock of Kilroy
Services, Inc. held by us is not a qualifying real estate asset. Kilroy Realty,
L.P. does not and will not own any of the voting securities of Kilroy Services,
Inc., and therefore we will not be considered to own more than 10% of its
voting securities. In addition, we believe that the value of our share of the
preferred stock held by Kilroy Realty, L.P. does not exceed 5% of the total
value of our assets, and will not exceed such amount in the future. No
independent appraisals have been obtained to support this conclusion. We cannot
assure our stockholders that the IRS will not contend that the value of the
securities of Kilroy Services, Inc. held by us exceeds the 5% value limitation.
The 5% value test must be satisfied not only on the date that we (directly or
through Kilroy Realty, L.P.) acquired securities in Kilroy Services, Inc., but
also each time we increase our ownership, including as a result of increasing
our interest in Kilroy Realty, L.P. whether as a result of a capital
contribution or the redemption of common units of Kilroy Realty, L.P. Although
we believe that we presently satisfy the 5% value test and plan to take steps
to ensure that we satisfy such test for any quarter with respect to which
retesting is to occur, we cannot assure our stockholders that such steps will
always be successful, or will not require a reduction in Kilroy Realty, L.P.'s
interest in Kilroy Services, Inc.
 
   After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT for failure to satisfy the asset tests at the end
of a later quarter solely by reason of changes in asset values. If we fail to
satisfy the asset tests because we acquire securities or other property during
a quarter or increase our interests in Kilroy Realty, L.P., we can cure this
failure by disposing of sufficient nonqualifying assets within 30 days after
the close of that quarter. We believe we have maintained and intend to continue
to maintain adequate records of the value of our assets to ensure compliance
with the asset tests, and we intend to take such other actions within the 30
days after the close of any quarter as may be required to cure any
noncompliance. If we fail to cure noncompliance with the asset tests within
this time period, we would cease to qualify as a REIT.
 
   Annual distribution requirements. To maintain our qualification as a REIT,
we are required to distribute dividends, other than capital gain dividends, to
our stockholders in an amount at least equal to
 
  .  the sum of 95% of our "REIT taxable income," and 95% of our after tax
     net income, if any, from foreclosure property, minus
 
  .  The excess of the sum of certain items of our noncash income over 5% of
     "REIT taxable income" as described above.
 
   Our "REIT taxable income" is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test,
non-cash income means income attributable to leveled stepped rents, original
issue discount on purchase money debt, or a like-kind exchange that is later
determined to be taxable.
 
   We must pay these distributions in the taxable year to which they relate, or
in the following taxable year if they are declared before we timely file our
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. Except as provided below, these distributions
are taxable to our stockholders (other than tax-exempt entities, as discussed
below) in the year in which paid. This is so even though these distributions
relate to the prior year for purposes of our 95% distribution requirement. The
amount distributed must not be preferential. For example, every stockholder of
the class of stock to which a distribution
 
                                       51
<PAGE>
 
is made must be treated the same as every other stockholder of that class, and
no class of stock may be treated otherwise than in accordance with its dividend
rights as a class. To the extent that we do not distribute all of our net
capital gain or distribute at least 95%, but less than 100%, of our "REIT
taxable income," as adjusted, we will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. We believe we have made and
intend to continue to make timely distributions sufficient to satisfy these
annual distribution requirements. In this regard, the Kilroy Realty, L.P.
partnership agreement authorizes us, as general partner, to take such steps as
may be necessary to cause Kilroy Realty, L.P. to distribute to its partners an
amount sufficient to permit us to meet these distribution requirements.
 
   We expect that our REIT taxable income will be less than our cash flow
because of depreciation and other non-cash charges included in our REIT taxable
income. Accordingly, we anticipate that we will generally have sufficient cash
or liquid assets to enable us to satisfy our distribution requirements.
However, from time to time, we may not have sufficient cash or other liquid
assets to meet these distribution requirements because of timing differences
between the actual receipt of income and actual payment of deductible expenses,
and the inclusion of income and deduction of expenses in determining our
taxable income. If these timing differences occur, we may need to arrange for
short-term, or possibly long-term, borrowings or need to pay dividends in the
form of taxable stock dividends in order to meet the distribution requirements.
 
   Under certain circumstances, we may be able to rectify a failure to meet our
distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which we may include in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will be required to
pay interest based upon the amount of any deduction taken for deficiency
dividends.
 
   In addition, we would be subject to a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following such year, at least the sum
of 85% of our REIT ordinary income for such year, 95% of our REIT capital gain
income for the year and any undistributed taxable income from prior periods.
Any REIT taxable income and net capital gain on which this excise tax is
imposed for any year is treated as an amount distributed during that year for
purposes of calculating the tax.
 
Failure to qualify.
 
   If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions of the Code applicable to REITs do not apply, we will be
subject to tax, including any applicable alternative minimum tax, on our
taxable income at regular corporate rates. Distributions to stockholders in any
year in which we fail to qualify as a REIT will not be deductible by us and we
will not be required to distribute any amounts to our stockholders. As a
result, we anticipate that our failure to qualify as a REIT would reduce the
cash available for distribution by us to our stockholders. In addition, if we
fail to qualify as a REIT, all distributions to stockholders will be taxable as
ordinary income to the extent of our current and accumulated earnings and
profits. Subject to certain limitations of the Code, corporate stockholders may
be eligible for the dividends-received deduction. Unless we are entitled to
relief under specific statutory provisions, we will also be disqualified from
taxation as a REIT for the four taxable years following the year during which
we lose our qualification. It is not possible to state whether in all
circumstances we would be entitled to this statutory relief. In addition,
President Clinton's 2000 Federal Budget Proposal contains a provision which, if
enacted in its present form, would result in the immediate taxation of all gain
inherent in a C corporation's assets upon an election by the corporation to
become a REIT in taxable years beginning after January 1, 2000. If enacted,
this provision could effectively preclude us from re-electing to be taxed as a
REIT following a loss of REIT status.
 
Tax aspects of The Partnerships.
 
   General. Substantially all of our investments are held indirectly through
Kilroy Realty, L.P. and Kilroy Realty Finance Partnership, L.P. In general,
partnerships are "pass-through" entities which are not subject to
 
                                       52
<PAGE>
 
federal income tax. Rather, partners are allocated their proportionate shares
of the items of income, gain, loss, deduction and credit of a partnership, and
are potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. We will include in our income our
proportionate share of these partnership items for purposes of the various REIT
income tests and in the computation of our REIT taxable income. Moreover, for
purposes of the REIT asset tests, we will include our proportionate share of
assets held by Kilroy Realty, L.P. and Kilroy Realty Finance Partnership, L.P.
 
   Entity classification. Our interests in Kilroy Realty, L.P. involve special
tax considerations, including the possibility that the IRS might challenge the
status of Kilroy Realty, L.P. or Kilroy Realty Finance Partnership, L.P. as
partnerships (as opposed to associations taxable as corporations) for federal
income tax purposes. If Kilroy Realty, L.P. or Kilroy Realty Finance
Partnership, L.P. were treated as an association, it would be taxable as a
corporation and therefore be subject to an entity-level tax on its income. In
such a situation, the character of our assets and items of gross income would
change and prevent us from satisfying the REIT asset tests and possibly the
REIT income tests. This, in turn, would prevent us from qualifying as a REIT.
In addition, a change in Kilroy Realty, L.P.'s or Kilroy Realty Finance
Partnership, L.P.'s tax status might be treated as a taxable event. If so, we
might incur a tax liability without any related cash distributions.
 
   Treasury Regulations that apply for tax periods beginning on or after
January 1, 1997, provide that a domestic business entity not otherwise
organized as a corporation and which has at least two members (an "eligible
entity") may elect to be treated as a partnership for federal income tax
purposes. Unless it elects otherwise, an eligible entity in existence prior to
January 1, 1997, will have the same classification for federal income tax
purposes that it claimed under the entity classification Treasury Regulations
in effect prior to this date. In addition, an eligible entity which did not
exist, or did not claim a classification, prior to January 1, 1997, will be
classified as a partnership for federal income tax purposes unless it elects
otherwise. Kilroy Realty, L.P. and Kilroy Realty Finance Partnership, L.P.
intend to claim classification as partnerships under the final regulations,
and, as a result, we believe these partnerships will be classified as
partnerships for federal income tax purposes.
 
   Allocations of Kilroy Realty, L.P.'s income, gain, loss and deduction. A
partnership agreement will generally determine the allocation of income and
losses among partners. These allocations, however, will be disregarded for tax
purposes if they do not comply with the provisions of Section 704(b) of the
Code and the Treasury Regulations promulgated thereunder. Generally, Section
704(b) and the Treasury Regulations require that partnership allocations
respect the economic arrangement of the partners.
 
   The partnership agreement provides for preferred distributions of cash and
preferred allocations of income to the Company with respect to the holders of
Series A Preferred Units and Series C Preferred Units. In addition, to the
extent that we issue Series B Preferred Stock, Kilroy Realty, L.P. will issue
Series B Preferred Units to us, [and the partnership agreement will be amended
to provide for similar preferred distributions of cash and preferred
allocations of income to us with respect to our Series B Preferred Units,
although such distributions and allocations will be subordinate to the Series A
and Series C Preferred Units]. As a consequence, we will receive distributions
from Kilroy Realty, L.P. and distributions attributable to our other assets
that we will use to pay dividends on any issued shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock before any other
partner in Kilroy Realty, L.P. receives a distribution, other than a holder of
Series A Preferred Units and Series C Preferred Units, if such units are not
then held by us. In addition, if necessary, income will be specially allocated
to us, and losses will be allocated to the other partners of Kilroy Realty,
L.P., in amounts necessary to ensure that the balance in our capital account
will at all times be equal to or in excess of the amount that we must pay on
any issued shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock upon liquidation or redemption. As long as we do not
hold the Series A Preferred Units or Series C Preferred Units, similar
preferred distributions and allocations will be made for the benefit of the
holders of such units. All remaining items of operating income and loss will be
allocated to the holders of common units in proportion to the number of common
units held by each unitholder. All remaining items of gain or loss relating to
the disposition of Kilroy Realty, L.P.'s assets upon liquidation will be
allocated first to the partners in the amounts necessary, in general, to
equalize our and the
 
                                       53
<PAGE>
 
limited partners' per common unit capital accounts. Certain limited partners
have agreed to guarantee debt of Kilroy Realty, L.P., either directly or
indirectly through an agreement to make capital contributions to it under
limited circumstances. As a result, and notwithstanding the above discussion of
allocations of income and loss to holders of common units, these limited
partners could under limited circumstances be allocated a disproportionate
amount of net loss upon a liquidation, which net loss would have otherwise been
allocable to us.
 
   If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership. This reallocation will be determined by taking
into account all of the facts and circumstances relating to the economic
arrangement of the partners with respect to such item. Kilroy Realty, L.P.'s
allocations of taxable income and loss are intended to comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
thereunder.
 
   Tax allocations with respect to the properties. Under Section 704(c) of the
Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership, must be allocated in a manner so that the
contributing partner is charged with the unrealized gain or benefits from the
unrealized loss associated with the property at the time of the contribution.
The amount of the unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of contributed property at the time of
contribution and the adjusted tax basis of the property at the time of
contribution. We refer to this difference as a "book-tax difference." These
allocations are solely for federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners. Kilroy Realty, L.P. was formed by way of contributions of appreciated
property. Moreover, subsequent to the formation of Kilroy Realty, L.P.,
additional appreciated property has been contributed to it in exchange for
partnership interests. The partnership agreement requires that these
allocations be made in a manner consistent with Section 704(c) of the Code.
 
   In general, the partners of Kilroy Realty, L.P., who acquired their limited
partnership interests through a contribution of appreciated property will be
allocated depreciation deductions for tax purposes which are lower than these
deductions would have been if they had been determined on a pro rata basis. In
addition, in the event of the disposition of any of the contributed assets
which have such a book-tax difference, all income attributable to the book-tax
difference will generally be allocated to the limited partner who contributed
the property, and we will generally be allocated only our share of capital
gains attributable to appreciation, if any, occurring after the date of
contribution. These allocations will tend to eliminate the book-tax difference
over the life of Kilroy Realty, L.P. However, the special allocation rules of
Section 704(c) do not always entirely eliminate the book-tax difference on an
annual basis or with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed assets in the hands of Kilroy
Realty, L.P. may cause us or other partners to be allocated lower depreciation
and other deductions. We could possibly be allocated an amount of taxable
income in the event of a sale of such contributed assets in excess of the
economic or book income allocated to us or other partners as a result of the
sale. Such an allocation might cause us or other partners to recognize taxable
income in excess of cash proceeds, which might adversely affect our ability to
comply with our REIT distribution requirements.
 
   Treasury Regulations issued under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for book-tax
differences, including retention of the "traditional method" or the election of
certain methods which would permit any distortions caused by a book-tax
difference to be entirely rectified on an annual basis or with respect to a
specific taxable transaction such as a sale. We and Kilroy Realty, L.P. have
determined to use the "traditional method" for accounting for book-tax
differences for the properties initially contributed to Kilroy Realty, L.P. and
for certain assets contributed subsequently. We and Kilroy Realty, L.P. have
not yet decided what method will be used to account for book-tax differences
for properties acquired by Kilroy Realty, L.P. in the future.
 
   Any property acquired by Kilroy Realty, L.P. in a taxable transaction will
initially have a tax basis equal to its fair market value, and Section 704(c)
of the Code will not apply.
 
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<PAGE>
 
Taxation of taxable U.S. stockholders.
 
   As used below, the term "U.S. stockholder" means a holder of shares of
common stock who is for United States federal income tax purposes:
 
  .  a citizen or resident of the United States;
 
  .  a corporation, partnership, or other entity created or organized in or
     under the laws of the United States or of any state thereof or in the
     District of Columbia, unless, in the case of a partnership, Treasury
     Regulations provide otherwise;
 
  .  an estate the income of which is subject to United States federal income
     taxation regardless of its source; or
 
  .  a trust whose administration is subject to the primary supervision of a
     United States court and which has one or more United States persons who
     have the authority to control all substantial decisions of the trust.
 
   Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to this date that elect to continue to be treated
as United States persons, shall also be considered U.S. Stockholders.
 
   Distributions generally. Distributions out of our current or accumulated
earnings and profits, other than capital gain dividends discussed below, will
constitute dividends taxable to our taxable U.S. stockholders as ordinary
income. As long as we qualify as a REIT, these distributions will not be
eligible for the dividends-received deduction in the case of U.S. stockholders
that are corporations. For purposes of determining whether distributions to
holders of common stock are out of current or accumulated earnings and profits,
our earnings and profits will be allocated first to the outstanding preferred
stock, if any, and then to the common stock.
 
   To the extent that we make distributions in excess of our current and
accumulated earnings and profits, these distributions will be treated first as
a tax-free return of capital to each U.S. stockholder. This treatment will
reduce the adjusted basis which each U.S. stockholder has in his or her shares
of stock for tax purposes by the amount of the distribution, but not below
zero. Distributions in excess of a U.S. stockholder's adjusted basis in his or
her shares will be taxable as capital gains, provided that the shares were held
as a capital asset, and will be taxable as long-term capital gain if the shares
have been held for more than one year. Dividends we declare in October,
November, or December of any year and payable to a stockholder of record on a
specified date in any of these months shall be treated as both paid by us and
received by the stockholder on December 31 of that year, provided we actually
pay the dividend on or before January 31 of the following calendar year.
Stockholders may not include in their own income tax returns any of our net
operating losses or capital losses.
 
   Capital gain distributions. Distributions that we properly designate as
capital gain dividends will be taxable to taxable U.S. stockholders as gains
from the sale or disposition of a capital asset to the extent that they do not
exceed our actual net capital gain for the taxable year. Depending on the
period of time the tax characteristics of the assets which produced these
gains, and on certain designations, if any, which we may make, these gains may
be taxable to non-corporate U.S. stockholders at a 20% or 25% rate. U.S.
stockholders that are corporations may, however, be required to treat up to 20%
of certain capital gain dividends as ordinary income.
 
   Passive activity losses and investment interest limitations. Distributions
we make and gain arising from the sale or exchange by a U.S. stockholder of our
shares will not be treated as passive activity income. As a result, U.S.
stockholders will generally be unable to apply any "passive losses" against
this income or gain. Distributions we make, to the extent they do not
constitute a return of capital, generally will be treated as investment income
for purposes of computing the investment interest limitation. Gain arising from
the sale or other disposition of our shares, however, will not be treated as
investment income under certain circumstances.
 
                                       55
<PAGE>
 
   Retention of net long-term capital gains. We may elect to retain, rather
than distribute as a capital gain dividend, our net long-term capital gains. If
we make this election, we would pay tax on our retained net long-term capital
gains. In addition, to the extent we designate, a U.S. stockholder generally
would:
 
  .  include its proportionate share of our undistributed long-term capital
     gains in computing its long-term capital gains in its return for its
     taxable year in which the last day of our taxable year falls;
 
  .  be deemed to have paid the capital gains tax imposed on us on the
     designated amounts included in the U.S. stockholder's long-term capital
     gains;
 
  .  receive a credit or refund for the amount of tax deemed paid by it;
 
  .  increase the adjusted basis of its common stock by the difference
     between the amount of includable gains and the tax deemed to have been
     paid by it; and
 
  .  in the case of a U.S. stockholder that is a corporation, appropriately
     adjust its earnings and profits for the retained capital gains in
     accordance with Treasury Regulations to be prescribed by the IRS.
 
Dispositions of common stock.
 
   If you are a U.S. stockholder and you sell or dispose of your shares of
common stock, you will recognize gain or loss for federal income tax purposes
in an amount equal to the difference between the amount of cash and the fair
market value of any property you receive on the sale or other disposition and
your adjusted basis in the shares for tax purposes. This gain or loss will be
capital if you have held the common stock as a capital asset and will be long-
term capital gain or loss if you have held the common stock for more than one
year. In general, if you are a U.S. stockholder and you recognize loss upon the
sale or other disposition of common stock that you have held for six months or
less (after applying certain holding period rules), the loss you recognize will
be treated as a long-term capital loss, to the extent you received
distributions from us which were required to be treated as long-term capital
gains.
 
Backup withholding.
 
   We report to our U.S. stockholders and the IRS the amount of dividends paid
during each calendar year and the amount of any tax withheld. Under the backup
withholding rules, a stockholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless the holder is a corporation
or comes within certain other exempt categories and, when required,
demonstrates this fact, or provides a taxpayer identification number, certifies
as to no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A U.S. stockholder
that does not provide us with his or her correct taxpayer identification number
may also be subject to penalties imposed by the IRS. Backup withholding is not
an additional tax. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability. In addition, we may be required
to withhold a portion of capital gain distributions to any stockholders who
fail to certify their non-foreign status.
 
Taxation of tax-exempt stockholders.
 
   The IRS has ruled that amounts distributed as dividends by a qualified REIT
do not constitute unrelated business taxable income when received by a tax-
exempt entity. Based on that ruling, provided that a tax-exempt shareholder
(except certain tax-exempt stockholders described below) has not held its
shares as "debt financed property" within the meaning of the Code, and the
shares are not otherwise used in a trade or business, dividend income from us
will not be UBTI to a tax-exempt stockholder. Similarly, income from the sale
of shares will not constitute UBTI unless a tax-exempt stockholder has held its
shares as "debt financed property" within the meaning of the Code or has used
the shares in its trade or business. Generally, debt financed property is
property, the acquisition or holding of which was financed through a borrowing
by the tax-exempt stockholder.
 
                                       56
<PAGE>
 
   For stockholders which are social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively, income from
an investment in our shares will constitute UBTI unless the organization is
able to properly claim a deduction for amounts set aside or placed in reserve
for certain purposes so as to offset the income generated by its investment in
our shares. These prospective investors should consult their tax advisors
concerning these "set aside" and reserve requirements.
 
   Notwithstanding the above, however, a portion of the dividends paid by a
"pension-held REIT" shall be treated as UBTI as to any trust which:
 
  .  is described in Section 401(a) of the Code;
 
  .  is tax-exempt under Section 501(a) of the Code; and
 
  .  holds more than 10%, by value, of the interests in the REIT.
 
   Tax-exempt pension funds that are described in Section 401(a) of the Code
are referred to below as "qualified trusts."
 
   A REIT is a "pension held REIT" if:
 
  .  it would not have qualified as a REIT but for the fact that Section
     856(h)(3) of the Code provides that stock owned by qualified trusts
     shall be treated, for purposes of the "not closely held" requirement, as
     owned by the beneficiaries of the trust, rather than by the trust
     itself; and
 
  .  either at least one such qualified trust holds more than 25%, by value,
     of the interests in the REIT, or one or more such qualified trusts, each
     of which owns more than 10%, by value, of the interests in the REIT,
     holds in the aggregate more than 50%, by value, of the interests in the
     REIT.
 
   The percentage of any REIT dividend treated as UBTI is equal to the ratio
of:
 
  .  the UBTI earned by the REIT, treating the REIT as if it were a qualified
     trust and therefore subject to tax on UBTI, to
 
  .  the total gross income of the REIT.
 
   A de minimis exception applies where the percentage is less than 5% for any
year. The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the "not
closely held" requirement without relying upon the "look-through" exception
with respect to qualified trusts. As a result of the limitations on the
transfer and ownership of stock contained in the charter, we are not and do not
expect to be classified as a "pension-held REIT."
 
Taxation of non-U.S. stockholders.
 
   The preceding discussion does not address the rules governing U.S. federal
income taxation of the ownership and disposition of common stock by persons who
are not U.S. stockholders ("non-U.S. stockholders"). In general, non-U.S.
stockholders may be subject to special tax withholding requirements on
distributions from us and with respect to their sale or other disposition of
our common stock, except to the extent reduced or eliminated by an income tax
treaty between the United States and the non-U.S. stockholder's country. A non-
U.S. stockholder who is a stockholder of record and is eligible for reduction
or elimination of withholding must file an appropriate form with us in order to
claim such treatment. Non-U.S. stockholders should consult their tax advisors
concerning the federal income tax consequences to them of an acquisition of
shares of common stock, including the federal income tax treatment of
dispositions of interests in, and the receipt of distributions from, us.
 
                                       57
<PAGE>
 
Other tax consequences.
 
   We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Our stockholders
may be subject to state or local taxation in various state or local
jurisdictions, including those in which they reside. Our state and local tax
treatment may not conform to the federal income tax consequences summarized
above. In addition, your state and local tax treatment may not conform to the
federal income tax consequences summarized above. Consequently, you should
consult your tax advisor regarding the effect of state and local tax laws on a
disposition of Kilroy Realty, L.P. common units or an investment in our common
stock.
 
                              ERISA CONSIDERATIONS
 
ERISA considerations.
 
   The following is a summary of material considerations arising under the
Employee Retirement Income Securities Act of 1974, as amended ("ERISA") and the
prohibited transaction provisions of Section 4975 of the Code that may be
relevant to a prospective purchaser (including a prospective purchaser that is
not an employee benefit plan which is subject to ERISA, but is a tax-qualified
retirement plan or an individual retirement account, individual retirement
annuity, medical savings account or education individual retirement account
(collectively, an "IRA")). This discussion does not purport to deal with all
aspects of ERISA or Section 4975 of the Code or, to the extent not preempted,
state law that may be relevant to particular employee benefit plan stockholders
(including plans subject to Title I of ERISA, other employee benefit plans and
IRAs subject to the prohibited transaction provisions of Section 4975 of the
Code, and governmental plans and church plans that are exempt from ERISA and
Section 4975 of the Code but that may be subject to state law requirements) in
light of their particular circumstances.
 
   A fiduciary making the decision to invest in shares of common stock on
behalf of a prospective purchaser which is an ERISA plan, a tax qualified
retirement plan, an IRA or other employee benefit plan is advised to consult
its legal advisor regarding the specific considerations arising under ERISA,
section 4975 of the Code, and (to the extent not pre-empted) state law with
respect to the purchase, ownership or sale of shares of common stock by such
plan or IRA.
 
   Plans should also consider the entire discussion under the heading "Material
federal income tax consequences," as material contained in that section is
relevant to any decision by an employee benefit plan, tax-qualified retirement
plan or IRA to purchase our common stock.
 
Employee benefit plans, tax-qualified retirement plans and IRAs.
 
   Each fiduciary of an "ERISA plan," which is an employee benefit plan subject
to Title I of ERISA, should carefully consider whether an investment in shares
of common stock is consistent with its fiduciary responsibilities under ERISA.
In particular, the fiduciary requirements of Part 4 of Title I of ERISA require
that:
 
  .  an ERISA plan make investments that are prudent and in the best
     interests of the ERISA Plan, its participants and beneficiaries;
 
  .  an ERISA plan make investments that are diversified in order to reduce
     the risk of large losses, unless it is clearly prudent for the ERISA
     plan not to do so;
 
  .  an ERISA plan's investments are authorized under ERISA and the terms of
     the governing documents of the ERISA plan; and
 
  .  the fiduciary not cause the ERISA plan to enter into transactions
     prohibited under Section 406 of ERISA.
 
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<PAGE>
 
   In determining whether an investment in shares of common stock is prudent
for ERISA purposes, the appropriate fiduciary of an ERISA plan should consider
all of the facts and circumstances, including whether the investment is
reasonably designed, as a part of the ERISA plan's portfolio for which the
fiduciary has investment responsibility, to meet the objectives of the ERISA
plan, taking into consideration the risk of loss and opportunity for gain (or
other return) from the investment, the diversification, cash flow and funding
requirements of the ERISA plan, and the liquidity and current return of the
ERISA plan's portfolio. A fiduciary should also take into account the nature of
our business, the length of our operating history and other matters described
in the section entitled "Risk factors."
 
   The fiduciary of an IRA or of an employee benefit plan not subject to Title
I of ERISA because it is a governmental or church plan (if no election has been
made under Section 410(d) of the Code) or because it does not cover common law
employees (a "Non-ERISA Plan") should consider that such an IRA or Non-ERISA
Plan may only make investments that are either authorized or not prohibited by
the appropriate governing documents, not prohibited under Section 4975 of the
Code and permitted under applicable state law.
 
Status of the company under ERISA.
 
   A prohibited transaction may occur if our assets are deemed to be assets of
the investing ERISA plans and disqualified persons deal with such assets. In
certain circumstances where an ERISA plan holds an interest in an entity, the
assets of the entity are deemed to be ERISA plan assets. This is known as the
"look-through rule." Under those circumstances, any person that exercises
authority or control with respect to the management or disposition of the
assets is an ERISA plan fiduciary. ERISA plan assets are not defined in ERISA
or the Code, but the United States Department of Labor has issued regulations,
effective March 13, 1987, that outline the circumstances under which an ERISA
plan's interest in an entity will be subject to the look-through rule.
 
   The Department of Labor regulations apply only to the purchase by an ERISA
plan of an "equity interest" in an entity, such as stock of a REIT. However,
the Department of Labor regulations provide an exception to the look-through
rule for equity interests that are "publicly-offered securities." The
Department of Labor regulations also provide exceptions to the look-through
rule for equity interests in certain types of entities, including any entity
which qualifies as either a "real estate operating company" or a "venture
capital operating company".
 
   Under the Department of Labor regulations, a "publicly-offered security" is
a security that is:
 
  .  freely transferable;
 
  .  part of a class of securities that is widely held; and
 
  .  either part of a class of securities that is registered under section
     12(b) or 12(g) of the Exchange Act or sold to an ERISA plan as part of
     an offering of securities to the public pursuant to an effective
     registration statement under the Securities Act, and the class of
     securities of which this security is a part is registered under the
     Exchange Act within 120 days (or longer if allowed by the SEC) after the
     end of the fiscal year of the issuer during which the offering of such
     securities to the public occurred.
 
   Whether a security is considered "freely transferable" depends on the facts
and circumstances of each case. Under the Department of Labor regulations, if
the security is part of an offering in which the minimum investment is $10,000
or less, then any restriction on or prohibition against any transfer or
assignment of this security for the purposes of preventing a termination or
reclassification of the entity for federal or state tax purposes will not
ordinarily prevent the security from being considered freely transferable.
Additionally, limitations or restrictions on the transfer or assignment of a
security which are created or imposed by persons other than the issuer of the
security or persons acting for or on behalf of the issuer will ordinarily not
prevent the security from being considered freely transferable.
 
                                       59
<PAGE>
 
   A class of securities is considered "widely held" if it is a class of
securities that is owned by 100 or more investors independent of the issuer and
of one another.
 
   Under the Department of Labor regulations, a real estate operating company
is defined as an entity which on certain testing dates has at least 50% of its
assets (other than short-term investments pending long-term commitment or
distribution to investors):
 
  .  valued at cost;
 
  .  invested in real estate which is managed or developed and with respect
     to which the entity has the right to substantially participate directly
     in the management or development activities; and
 
  .  which, in the ordinary course of its business, is engaged directly in
     real estate management or development activities.
 
   According to those same regulations, a venture capital operating company is
defined as an entity which on certain testing dates has at least 50% of its
assets (other than short-term investments pending long-term commitment or
distribution to investors):
 
  .  valued at cost;
 
  .  invested in one or more operating companies with respect to which the
     entity has management rights; and
 
  .  which, in the ordinary course of its business, actually exercises its
     management rights with respect to one or more of the operating companies
     in which it invests.
 
   We expect that the shares of our common stock offered in this prospectus
will meet the criteria of the publicly-offered securities exception to the
look-through rule. First, the common stock should be considered to be freely
transferable, as the minimum investment will be less than $10,000 and the only
restrictions upon its transfer are those required under federal tax laws to
maintain our status as a REIT, resale restrictions under applicable federal
securities laws with respect to securities not purchased pursuant to this
prospectus and those owned by our officers, directors and other affiliates, and
voluntary restrictions agreed to by the selling stockholders regarding volume
limitations.
 
   Second, we expect the common stock to be held by 100 or more investors, and
we expect that at least 100 or more of these investors will be independent of
us and of one another.
 
   Third, the shares of common stock will be part of an offering of securities
to the public pursuant to an effective registration statement under the
Securities Act and the common stock is registered under the Exchange Act. In
addition, we have obtained management rights with respect to Kilroy Realty,
L.P. and conduct our affairs in such a manner that we will qualify as either a
real estate operating company or venture capital operating company under the
Department of Labor regulations. Accordingly, we believe that if an ERISA plan
purchases the common stock, our assets should not be deemed to be ERISA plan
assets and, therefore, that any person who exercises authority or control with
respect to our assets should not be an ERISA plan fiduciary.
 
                                       60
<PAGE>
 
                              SELLING STOCKHOLDERS
 
   "Selling stockholders" are those persons who may receive shares of our
common stock registered pursuant to this registration statement upon exchange
of common units. The following table provides the names of the selling
stockholders, the maximum number of shares of common stock issuable to each of
the selling stockholders in the exchange and the aggregate number of shares of
common stock that will be owned by the selling stockholders after the exchange.
The number of shares on the following table represents the number of shares of
common stock into which common units held by the person are exchangeable. Since
the selling stockholders may sell all, some or none of their shares, we cannot
estimate the aggregate number of shares that the selling stockholders will
offer pursuant to this prospectus or that each selling stockholder will own
upon completion of the offering to which this prospectus relates.
 
   The selling stockholders named below may from time to time offer the shares
of common stock offered by this prospectus:
 
<TABLE>
<CAPTION>
                                      Maximum Number
                                            of          Common Shares
                           Common      Common Shares   Owned Following             Common shares
                           Shares     Issuable in the        the        Number of   Owned after
                         Owned Prior   Exchange and    Exchange(1)(2)    Common       Resale
                           to the      Available for  ----------------- Shares to ------------------
          Name           Exchange(1)      Resale       Shares   Percent be Resold Shares     Percent
          ----           -----------  --------------- --------- ------- --------- -------    -------
<S>                      <C>          <C>             <C>       <C>     <C>       <C>        <C>
John B. Kilroy, Sr. ....    10,000(3)      233,512      243,512    *      233,512  10,000(3)     *
John B. Kilroy, Jr. ....   166,666(4)    1,018,240    1,184,906   4.2%  1,018,240 166,666(4)     *
Kilroy Industries.......       --        1,251,752    1,251,752   4.5%  1,251,752     --        --
Patrice Bouzaid.........       --           35,695       35,695    *       35,695     --        --
Susan Hahn..............       --           35,696       35,696    *       35,696     --        --
Anne McCahon............       --           35,696       35,696    *       35,696     --        --
Dana Pantuso............       --           35,696       35,696    *       35,696     --        --
Marshall L. McDaniel....       --            1,739        1,739    *        1,739     --        --
Kilroy Technologies
 Company, LLC...........       --            4,348        4,348    *        4,348     --        --
Marc Brutten............       --           66,041       66,041    *       66,041     --        --
James Reynolds..........       --           45,403       45,403    *       45,403     --        --
Jay Shilder.............       --           45,403       45,403    *       45,403     --        --
Lawrence Taff...........       --            8,255        8,255    *        8,255     --        --
                           -------       ---------    ---------         --------- -------
  Total.................   176,666       2,817,476    2,394,112         2,817,476 176,666
                           =======       =========    =========         ========= =======
</TABLE>
- --------
 * Represents less than 1% of the total outstanding shares of common stock.
 
(1) Based on information available to us as of December 31, 1998.
 
(2) Assumes the selling stockholders exchange all of their common units for
    shares of common stock. Also assumes that no transactions with respect to
    common stock or common units occur other than the exchange.
 
(3) Represents 10,000 shares of common stock issuable upon the exercise of
    options exercisable within 60 days of December 31, 1998.
 
(4) Represents 166,666 shares of common stock issuable upon the exercise of
    options exercisable within 60 days of December 31, 1998.
 
                                       61
<PAGE>
 
                              PLAN OF DISTRIBUTION
 
   This prospectus relates to:
 
  .  the issuance by us of up to 2,817,476 shares of common stock if, and to
     the extent that, selling stockholders tender their common units for
     redemption and we elect, in our sole and absolute discretion, to
     exchange the common units for common stock in lieu of a cash redemption,
     and selling stockholders that are corporations or limited liability
     companies which may require us to exchange their units for shares of
     common stock, and
 
  .  the offer and sale from time to time of those 2,817,476 shares of common
     stock by the selling stockholders.
 
   We are registering the shares of common stock to provide the holders with
freely tradable securities, but the registration of these shares does not
necessarily mean that any of these shares will be offered or sold by the
holders.
 
   Pursuant to the terms and conditions of the registration rights agreement
dated as of January 31, 1997 among us, Kilroy Realty, L.P. and the selling
stockholders, prior to the date upon which the common units would be eligible
for resale under Rule 144(k) under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation is adopted by the
SEC, each of the selling stockholders generally is limited to resales of any
shares of common stock issued pursuant to this prospectus to the number of
shares which otherwise would be eligible for resale by that limited partner
pursuant to Rule 144, assuming the shares were issued on the same date as the
respective common units were issued.
 
   We will not receive any proceeds from the issuance of the shares of common
stock to the selling stockholders or from the sale of the shares by the selling
stockholders, but we have agreed to pay the following expenses of the
registration of the shares:
 
  .  all registration and filing fees;
 
  .  fees and expenses for complying with securities or blue sky laws,
     including reasonable fees and disbursements of counsel in connection
     with blue sky qualifications; and
 
  .  the fees and expenses incurred in connection with listing our common
     stock on each securities exchange on which our similar securities issued
     are then listed.
 
   We have no obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of our common stock. We also have no obligation to pay
any out-of-pocket expenses of the selling stockholders, or the agents who
manage their accounts, or any transfer taxes relating to the registration or
sale of the common stock.
 
   The selling stockholders may from time to time sell the shares directly to
purchasers. Alternatively, the selling stockholders may from time to time offer
the shares through dealers or agents, who may receive compensation in the form
of commissions from the selling stockholders and for the purchasers of the
shares for whom they may act as agent. The selling stockholders and any dealers
or agents that participate in the distribution of the shares may be deemed to
be "underwriters" within the meaning of the Securities Act and any profit on
the sale of the common stock by them and any commissions received by any such
dealers or agents might be deemed to be underwriting commissions under the
Securities Act.
 
   In connection with distribution of the shares of common stock covered by
this prospectus:
 
  .  the selling stockholders may enter into hedging transactions with
     broker-dealers,
 
  .  the broker-dealers may engage in short sales of the common stock in the
     course of hedging the positions they assume with the selling
     stockholders,
 
  .  the selling stockholders may sell the common stock short and deliver the
     common stock to close out such short positions,
 
                                       62
<PAGE>
 
  .  the selling stockholders may enter into option or other transactions
     with broker-dealers that involve the delivery of the shares to the
     broker-dealers, who may then resell or otherwise transfer the shares,
 
  .  the selling stockholders also may loan or pledge the shares to a broker-
     dealer and the broker-dealer may sell the shares so loaned or upon a
     default may sell or otherwise transfer the pledged shares.
 
   Certain persons participating in the distribution of the shares of our
common stock offered by this prospectus may engage in transactions that
stabilize the price of our common stock. The anti-manipulation rules of
Regulation M under the Securities Act of 1934, as amended, may apply to sales
of common stock in the market and to the activities of the selling
stockholders.
 
                                 LEGAL MATTERS
 
   Ballard, Spahr, Andrews & Ingersoll, LLP, Baltimore, Maryland, will issue an
opinion to us regarding certain matters of Maryland law. Latham & Watkins will
issue an opinion to us regarding certain tax matters described under "Material
Federal Income Tax Consequences."
 
                                    EXPERTS
 
   Deloitte & Touche LLP, independent auditors, have audited and issued reports
on the following documents:
 
  .  the consolidated financial statements incorporated into this prospectus
     by reference from our Annual Report on Form 10-K for the year ended
     December 31, 1997;
 
   In reliance upon their authority as experts in accounting and auditing,
Deloitte and Touche, LLP's reports are incorporated into this prospectus by
reference.
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
   We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the SEC at the SEC's public reference rooms at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC also maintains a web site
that contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the SEC
(http://www.sec.gov). You can inspect reports and other information we file at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
 
   We have filed a registration statement of which this prospectus is a part
and related exhibits with the SEC under the Securities Act of 1933, as amended.
The registration statement contains additional information about us. You may
inspect the registration statement and exhibits without charge at the office of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain
copies from the SEC at prescribed rates.
 
                                       63
<PAGE>
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
   The SEC allows us to "incorporate by reference" the information we file with
the SEC, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically updated and
superseded if information contained in this prospectus, or information that we
later file with the SEC, modifies or replaces this information. We incorporate
by reference the following documents we filed with the SEC:
 
  .  our Annual Report on Form 10-K for the year ended December 31, 1997;
 
  .  our Quarterly Reports on Form 10-Q for the quarters ended March 31,
     1998, June 30, 1998 and September 30, 1998;
 
  .  our Current Reports on Form 8-K filed on January 20, 1998, February 11,
     1998, February 19, 1998, February 27, 1998, March 30, 1998, April 23,
     1998, April 24, 1998, October 8, 1998, and December 11, 1998;
 
  .  our Current Reports on Form 8-K/A filed on February 27, 1998, and April
     28, 1998;
 
  .  reports on the combined summaries of certain revenues and certain
     expenses for the Acquired Properties, Post IPO Acquisitions Through June
     30, 1997 and Acquired Properties and Pending Acquisitions, each included
     in our Registration Statement on Form S-11 (File number 333-32261);
 
  .  the description of our common stock contained in our Registration
     Statement on Form 8-A filed with the SEC on January 21, 1997 (file
     number 001-12675), including any amendment or reports filed for the
     purpose of updating such description; and
 
  .  all documents filed by us with the SEC pursuant to Sections 13(a),
     13(c), 14 or 15(d) pursuant to the Securities Exchange Act of 1934, as
     amended after the date of this prospectus and prior to the termination
     of the offering.
 
   To receive a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents), call or write Kilroy Realty Corporation, 2250
East Imperial Highway, El Segundo, CA 90245, Attention: Secretary (310) 563-
5500.
 
                                       64
<PAGE>
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
Item 14. Other expenses of issuance and distribution.
 
   The following table itemizes the expenses incurred by the registrant in
connection with the issuance and registration of the securities being
registered hereunder. All amounts shown are estimates except the Securities and
Exchange Commission registration fee.
 
<TABLE>
     <S>                                                               <C>
     SEC Registration Fee............................................. $ 16,742
     NYSE Listing Fee.................................................    8,500
     Printing and Engraving Expenses..................................   50,000
     Legal Fees and Expenses (other than Blue Sky)....................   50,000
     Accounting and Fees and Expenses.................................   10,000
     Blue Sky Fees and Expenses.......................................    7,000
     Miscellaneous....................................................    7,758
                                                                       --------
       Total.......................................................... $150,000
                                                                       ========
</TABLE>
 
   We will pay all of the costs identified above.
 
Item 15. Indemnification of directors and officers.
 
   Section 2-418 of the Maryland General Corporation Law permits a corporation
to indemnify its directors and officers and certain other parties against
judgments, penalties, fines, settlements, and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that:
 
  .  the act or omission of the director or officer was material to the
     matter giving rise to the proceeding and
 
     .  was committed in bad faith or
 
     .  was the result of active and deliberate dishonesty;
 
  .  the director or officer actually received an improper personal benefit
     in money, property or services; or
 
  .  in the case of any criminal proceeding, the director or officer had
     reasonable cause to believe that the act or omission was unlawful.
 
   Indemnification may be made against judgments, penalties, fines, settlements
and reasonable expenses actually incurred by the director or officer in
connection with the proceeding; provided, however, that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit
to the director or officer, whether or not involving action in the director's
or officer's official capacity, in which the director or officer was adjudged
to be liable on the basis that personal benefit was received. The termination
of any proceeding by conviction, or upon a plea of nolo contendere or its
equivalent, or an entry of any order of probation prior to judgment, creates a
rebuttable presumption that the director or officer did not meet the requisite
standard of conduct required for indemnification to be permitted.
 
   In addition, Section 2-418 of the Maryland General Corporation Law requires
that, unless prohibited by its charter, a corporation indemnify any director or
officer who is made a party to any proceeding by reason of service in that
capacity against reasonable expenses incurred by the director or officer in
connection with the proceeding, in the event that the director or officer is
successful, on the merits or otherwise, in the defense of the proceeding.
 
 
                                      II-1
<PAGE>
 
   Our charter and bylaws provide in effect that we will indemnify our
directors and officers to the fullest extent permitted by applicable law. We
have purchased directors' and officers' liability insurance for the benefit of
its directors and officers.
 
   We have entered into indemnification agreements with each of our executive
officers and directors. The indemnification agreements require, among other
matters, that we indemnify our executive officers and directors to the fullest
extent permitted by law and reimburse them for all related expenses as
incurred, subject to return if it is subsequently determined that
indemnification is not permitted.
 
   As permitted by the Maryland General Corporation Law, our charter limits the
liability of our directors and officers to us and our stockholders for money
damages, subject to specified restrictions. However, the liability of our
directors and officers to us and our stockholders is not limited if:
 
  .  it is proved that the director or officer actually received an improper
     personal benefit in money, property or services; or
 
  .  a judgment or other final adjudication is entered in a proceeding based
     on a finding that the director's or officer's action, or failure to act,
     was committed in bad faith or was the result of active and deliberate
     dishonesty and was material to the cause of action adjudicated in the
     proceeding.
 
   This provision does not limit our ability or our stockholders' ability to
obtain other relief, such as an injunction or rescission.
 
Item 16. Exhibits.
 
<TABLE>
<CAPTION>
 Exhibit
 -------
 <C>     <S>
  3.1    Articles of Amendment and Restatement of the Registrant(1)
  3.2    Amended and Restated Bylaws of the Registrant(1)
  3.3    Form of Certificate for Common Stock of the Registrant(1)
  3.4    Articles Supplementary of the Registrant designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(10)
  3.5    Articles Supplementary of the Registrant, designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(13)
  3.6    Articles Supplementary of the Registrant designating its Series B
          Junior Participating Preferred Stock (to be filed by amendment)
  3.7    Articles Supplementary of the Registrant designating its 9.375% Series
          C Cumulative Redeemable Preferred Stock(15)
  4.1    Registration Rights Agreement, dated January 31, 1997(1)
  4.2    Registration Rights Agreement, dated February 6, 1998(10)
  4.3    Registration Rights Agreement, dated April 20, 1998(13)
  4.4    Registration Rights Agreement, dated November 24, 1998(15)
  4.5    Registration Rights Agreement, dated as of October 31, 1997(7)
  4.6    Rights Agreement, dated as of October 2, 1998 between Kilroy Realty
          Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights
          Agent, which includes the form of Articles Supplementary of the
          Series B Junior Participating Preferred Stock of Kilroy Realty
          Corporation as Exhibit A, the form of Right Certificate as Exhibit B
          and the Summary of Rights to Purchase Preferred Shares as Exhibit
          C(16)
  5.1    Opinion of Ballard Spahr Andrews & Ingersoll, LLP (to be filed by
          amendment)
 10.1    Fourth Amended and Restated Agreement of Limited Partnership of Kilroy
          Realty, L.P., dated November 24, 1998(15)
</TABLE>
 
                                      II-2
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.2  Omnibus Agreement, dated as of October 30, 1996, by and among Kilroy
        Realty, L.P. and the parties named therein(1)
 10.3  Supplemental Representations, Warranties and Indemnity Agreement by and
        among Kilroy Realty, L.P. and the parties named therein(1)
 10.4  Pledge Agreement by and among Kilroy Realty, L.P., John B. Kilroy, Sr.,
        John B. Kilroy, Jr. and Kilroy Industries(1)
 10.5  1997 Stock Option and Incentive Plan of the Registrant and Kilroy
        Realty, L.P(1)
 10.6  Form of Indemnity Agreement of the Registrant and Kilroy Realty, L.P.
        with certain officers and directors(1)
 10.7  Lease Agreement, dated January 24, 1989, by and between Kilroy Long
        Beach Associates and the City of Long Beach for Kilroy Long Beach Phase
        I(1)
 10.8  First Amendment to Lease Agreement, dated December 28, 1990, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase I(1)
 10.9  Lease Agreement, dated July 17, 1985, by and between Kilroy Long Beach
        Associates and the City of Long Beach for Kilroy Long Beach Phase
        III(1)
 10.10 Lease Agreement, dated April 21, 1988, by and between Kilroy Long Beach
        Associates and the Board of Water Commissioners of the City of Long
        Beach, acting for and on behalf of the City of Long Beach, for Long
        Beach Phase IV(1)
 10.11 Lease Agreement, dated December 30, 1988, by and between Kilroy Long
        Beach Associates and City of Long Beach for Kilroy Long Beach Phase
        II(1)
 10.12 First Amendment to Lease, dated January 24, 1989, by and between Kilroy
        Long Beach Associates and the City of Long Beach for Kilroy Long Beach
        Phase III(1)
 10.13 Second Amendment to Lease Agreement, dated December 28, 1990, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase III(1)
 10.14 First Amendment to Lease Agreement, dated December 28, 1990, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase II(1)
 10.15 Third Amendment to Lease Agreement, dated October 10, 1994, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase III(1)
 10.16 Development Agreement by and between Kilroy Long Beach Associates and
        the City of Long Beach(1)
 10.17 Amendment No. 1 to Development Agreement by and between Kilroy Long
        Beach Associates and the City of Long Beach(1)
 10.18 Ground Lease by and between Frederick Boysen and Ted Boysen and Kilroy
        Industries, dated May 15, 1969, for SeaTac Office Center(1)
 10.19 Amendment No. 1 to Ground Lease and Grant of Easement, dated April 27,
        1973, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
        Boysen and Sea/Tac Properties(1)
 10.20 Amendment No. 2 to Ground Lease and Grant of Easement, dated May 17,
        1977, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
        Boysen and Sea/Tac Properties(1)
 10.21 Airspace Lease, dated July 10, 1980, by and among the Washington State
        Department of Transportation, as lessor, and Sea Tac Properties, Ltd.
        and Kilroy Industries, as lessee(1)
 10.22 Lease, dated April 1, 1980, by and among Bow Lake, Inc., as lessor, and
        Kilroy Industries and SeaTac Properties, Ltd., as lessees for Sea/Tac
        Office Center(1)
 10.23 Amendment No. 1 to Ground Lease, dated September 17, 1990, between Bow
        Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties,
        Ltd., as lessee(1)
 10.24 Amendment No. 2 to Ground Lease, dated March 21, 1991, between Bow Lake,
        Inc., as lessor, and Kilroy Industries and Sea/Tac Properties, Ltd., as
        lessee(1)
</TABLE>
 
                                      II-3
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.25 Property Management Agreement between Kilroy Realty Finance Partnership,
        L.P. and Kilroy Realty, L.P.(1)
 10.26 Environmental Indemnity Agreement(1)
 10.27 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Airport
        Imperial Co.(1)
 10.28 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Calabasas
        Associates(1)
 10.29 Employment Agreement between the Registrant and John B. Kilroy, Jr.(1)
 10.30 Employment Agreement between the Registrant and Richard E. Moran Jr.(1)
 10.31 Employment Agreement between the Registrant and Jeffrey C. Hawken(1)
 10.32 Employment Agreement between the Registrant and C. Hugh Greenup(1)
 10.33 Noncompetition Agreement by and between the Registrant and John B.
        Kilroy, Sr.(1)
 10.34 Noncompetition Agreement by and between the Registrant and John B.
        Kilroy, Jr.(1)
 10.35 License Agreement by and among the Registrant and the other persons
        named therein(1)
 10.36 Form of Indenture of Mortgage, Deed of Trust, Security Agreement,
        Financing Statement, Fixture Filing and Assignment of Leases, Rents and
        Security Deposits(1)
 10.37 Mortgage Note(1)
 10.38 Indemnity Agreement(1)
 10.39 Assignment of Leases, Rents and Security Deposits(1)
 10.40 Variable Interest Rate Indenture of Mortgage, Deed of Trust, Security
        Agreement, Financing Statement, Fixture Filing and Assignment of Leases
        and Rents(1)
 10.41 Environmental Indemnity Agreement(1)
 10.42 Assignment, Rents and Security Deposits(1)
 10.43 Form of Mortgage, Deed of Trust, Security Agreement, Financing
        Statement, Fixture Filing and Assignment of Leases and Rents(1)
 10.44 Assignment of Leases, Rents and Security Deposits(1)
 10.45 Purchase and Sale Agreement and Joint Escrow Instructions, dated April
        30, 1997, by and between Mission Land Company, Mission-Vacaville, L.P.
        and Kilroy Realty, L.P.(2)
 10.46 Agreement of Purchase and Sale and Joint Escrow Instructions, dated
        April 30, 1997, by and between Camarillo Partners and Kilroy Realty,
        L.P.(2)
 10.47 Purchase and Sale Agreement and Escrow Instructions, dated May 5, 1997,
        by and between Kilroy Realty, L.P. and Pullman Carnegie Associates(4)
 10.48 Amendment to Purchase and Sale Agreement and Escrow Instructions, dated
        June 27, 1997, by and between Pullman Carnegie Associates and Kilroy
        Realty, L.P.(4)
 10.49 Purchase and Sale Agreement, Contribution Agreement and Joint Escrow
        Instructions, dated May 12, 1997, by and between Shidler West
        Acquisition Company, LLC and Kilroy Realty, L.P.(3)
 10.50 First Amendment to Purchase and Sale Agreement, Contribution Agreement
        and Joint Escrow Instructions, dated June 6, 1997, between Kilroy
        Realty, L.P. and Shidler West Acquisition Company, L.L.C. and Kilroy
        Realty, L.P.(3)
 10.51 Second Amendment to Purchase and Sale Agreement, Contribution Agreement
        and Joint Escrow Instructions, dated June 12, 1997, by and between
        Shidler West Acquisition Company, LLC and Kilroy Realty, L.P.(3)
 10.52 Agreement of Purchase and Sale and Joint Escrow Instructions, dated June
        12, 1997, by and between Mazda Motor of America, Inc. and Kilroy
        Realty, L.P.(4)
</TABLE>
 
                                      II-4
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.53 Amendment to Agreement of Purchase and Sale and Joint Escrow
        Instructions, dated June 30, 1997, by and between Mazda Motor of
        America, Inc. and Kilroy Realty, L.P.(4)
 10.54 Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica,
        California, dated June 16, 1997, by and between Santa Monica Number
        Seven Associates L.P. and Kilroy Realty L.P.(4)
 10.55 Second Amendment to Credit Agreement and First Amendment to Variable
        Interest Rate Indenture of Mortgage, Deed of Trust, Security Agreement,
        Financing Statement, Fixture Filing and Assignment of Leases and Rent
        dated August 13, 1997(5)
 10.56 Purchase and Sale Agreement and Joint Escrow Instructions, dated July
        10, 1997, by and between Kilroy Realty, L.P. and Mission Square
        Partners(6)
 10.57 First Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated August 22, 1997(6)
 10.58 Second Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 5, 1997(6)
 10.59 Third Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 19, 1997(6)
 10.60 Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 22, 1997(6)
 10.61 Fifth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 23, 1997(6)
 10.62 Sixth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 25, 1997(6)
 10.63 Seventh Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 29, 1997(6)
 10.64 Eighth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated October 2, 1997(6)
 10.65 Ninth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated October 24, 1997(6)
 10.66 Contribution Agreement, dated October 21, 1997, by and between Kilroy
        Realty, L.P. and Kilroy Realty Corporation and The Allen Group and the
        Allens(8)
 10.67 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.(9)
 10.68 Amendment to the Contribution Agreement, dated October 14, 1998, by and
        between Kilroy Realty, L.P. and Kilroy Realty Corporation and The Allen
        Group and the Allens, dated October 21, 1997(14)
 10.69 Amended and Restated Revolving Credit Agreement, dated as of October 8,
        1998 among Kilroy Realty, L.P., Morgan Guaranty Trust Company of New
        York, as Bank and as Lead Agent for the Banks, and the Banks listed
        therein.(14)
 10.70 Amended and Restated Guaranty of Payment, dated as of October 8, 1998,
        between Kilroy Realty Corporation and Morgan Guaranty Trust Company of
        New York.(14)
 23.1  Consent of Ballard Spahr Andrews & Ingersoll, LLP (to be filed by
        amendment)
 23.2  Consent of Deloitte & Touche LLP (to be filed by amendment)
 24.1  Power of Attorney (included on the signature page to the registration
        statement)
 27.1  Financial Data Schedule
</TABLE>
- --------
 (1) Previously filed as an exhibit to the Registration Statement on Form S-11
     (No. 333-15553) as declared effective on January 28, 1997 and incorporated
     herein by reference.
 
                                      II-5
<PAGE>
 
 (2) Previously filed as Exhibit 10.11 and 10.12, respectively, to the Current
     Report on Form 8-K, dated May 22, 1997, and incorporated herein by
     reference.
 
 (3) Previously filed as Exhibit 10.57, 10.58 and 10.59, respectively, to the
     Current Report on Form 8-K, dated June 30, 1997, and incorporated herein
     by reference.
 
 (4) Previously filed as Exhibit 10.54, 10.59, 10.60, 10.61 and 10.62,
     respectively, to the Current Report on Form 8-K, dated June 30, 1997, and
     incorporated herein by reference.
 
 (5) Previously filed as an exhibit to the Registration Statement on Form S-11
     (No. 333-32261), and incorporated herein by reference.
 
 (6) Previously filed as an exhibit on Form 10-Q, for the quarterly period
     ended September 30, 1997, and incorporated herein by reference.
 
 (7) Previously filed as an exhibit to the Current Report on Form 8-K/A, dated
     October 29, 1997, and incorporated herein by reference.
 
 (8) Previously filed as Exhibit 10.70 and 10.71, respectively, to the Current
     Report on Form 8-K, dated November 7, 1997, and incorporated herein by
     reference.
 
 (9) Previously filed as Exhibit 10.70 to the Current Report on Form 8-K,
     dated December 17, 1997, and incorporated herein by reference.
 
(10) Previously filed as an exhibit to the Registrant's Current Report on Form
     8-K dated February 6, 1998 and incorporated herein by reference.
 
(11) Previously filed as an exhibits to the Current Report on Form 8-K (No. 1-
     12675) dated October 2, 1998 and incorporated herein by reference.
 
(12) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated October 29, 1997 and incorporated herein by reference.
 
(13) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated August 20, 1998 and incorporated herein by reference.
 
(14) Previously filed as an exhibit on Form 10-Q (No. 1-12675) for the
     quarterly period ended September 30, 1998 and incorporated herein by
     reference.
 
(15) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated November 24, 1998 and incorporated herein by reference.
 
(16) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated October 2, 1998 and incorporated herein by reference.
 
Item 17. Undertakings.
 
   The undersigned registrant hereby undertakes:
 
     (1) To file, during any period in which offers or sales are being made,
  a post-effective amendment to this registration statement:
 
       (i) To include any prospectus required by Section 10(a)(3) of the
    Securities Act of 1933, as amended;
 
       (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most recent
    post-effective amendment thereof) which, individually or in the
    aggregate, represent a fundamental change in the information set forth
    in the registration statement;
 
       (iii) To include any material information with respect to the plan
    of distribution not previously disclosed in the registration statement
    or any material change such information in the registration statement;
 
                                     II-6
<PAGE>
 
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, that
are incorporated by reference in the registration statement.
 
     (2) That, for the purpose of determining any liability under the
  Securities Act, each such post-effective amendment shall be deemed to be a
  new registration statement relating to the securities offered therein, and
  the offering of such securities at that time shall be deemed to be the
  initial bona fide offering thereof.
 
     (3) To remove from registration by means of a post-effective amendment
  any of the securities being registered which remain unsold at the
  termination of the offering.
 
   The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
 
   The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
 
   The undersigned registrant hereby further undertakes that:
 
     (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  registration statement in reliance under Rule 430A and contained in a form
  of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
  497(h) under the Securities Act shall be deemed to be part of this
  registration statement as of the time it was declared effective.
 
     (2) For the purpose of determining any liability under the Securities
  Act, each post-effective amendment that contains a form of prospectus shall
  be deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.
 
   Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Exchange Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Exchange Act and will be governed by
the final adjudication of such issue.
 
                                      II-7
<PAGE>
 
                                   SIGNATURES
 
   Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that the
registrant meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of El Segundo, State of
California, on this 11th day of February, 1999.
 
                                          KILROY REALTY CORPORATION
 
                                                /s/ John B. Kilroy, Jr.
                                          By: _________________________________
                                                    John B. Kilroy, Jr.
                                                 President, Chief Executive
                                                          Officer
                                                        and Director
 
                               POWER OF ATTORNEY
 
   KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John B. Kilroy, Jr., Jeffrey C. Hawken, Richard
E. Moran Jr., Tyler H. Rose, Ann Marie Whitney, and each of them, with full
power to act without the other, such person's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign this Registration
Statement, and any and all amendments thereto (including post-effective
amendments), and to file the same, with exhibits and schedules thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
 
   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
             Signature                           Title                    Date
             ---------                           -----                    ----
 
<S>                                  <C>                           <C>
                                     Chairman of the Board         February   , 1999
____________________________________
        John B. Kilroy, Sr.
 
    /s/ John B. Kilroy, Jr.          President, Chief Executive    February 11, 1999
____________________________________  Officer and Director
        John B. Kilroy, Jr.           (Principal Executive
                                      Officer)
 
                                     Director                      February   , 1999
____________________________________
          Richard S. Allen
 
                                     Director                      February   , 1999
____________________________________
          John R. D'Eathe
</TABLE>
 
                                      S-1
<PAGE>
 
<TABLE>
<CAPTION>
             Signature                           Title                    Date
             ---------                           -----                    ----
 
<S>                                  <C>                           <C>
      /s/ Matthew J. Hart            Director                      February 11, 1999
____________________________________
          Matthew J. Hart
 
     /s/ William P. Dickey           Director                      February 11, 1999
____________________________________
         William P. Dickey
 
      /s/ Dale F. Kinsella           Director                      February 11, 1999
____________________________________
          Dale F. Kinsella
 
    /s/ Richard E. Moran Jr.         Executive Vice President,     February 11, 1999
____________________________________  Chief Financial Officer and
        Richard E. Moran Jr.          Secretary (Principal
                                      Financial Officer)
 
     /s/ Ann Marie Whitney           Vice President and            February 11, 1999
____________________________________  Controller (Principal
         Ann Marie Whitney            Accounting Officer)
</TABLE>
 
                                      S-2
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 Exhibit
 -------
 <C>     <S>
  3.1    Articles of Amendment and Restatement of the Registrant(1)
  3.2    Amended and Restated Bylaws of the Registrant(1)
  3.3    Form of Certificate for Common Stock of the Registrant(1)
  3.4    Articles Supplementary of the Registrant designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(10)
  3.5    Articles Supplementary of the Registrant, designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(13)
  3.6    Articles Supplementary of the Registrant designating its Series B
          Junior Participating Preferred Stock (to be filed by amendment)
  3.7    Articles Supplementary of the Registrant designating its 9.375% Series
          C Cumulative Redeemable Preferred Stock(15)
  4.1    Registration Rights Agreement, dated January 31, 1997(1)
  4.2    Registration Rights Agreement, dated February 6, 1998(10)
  4.3    Registration Rights Agreement, dated April 20, 1998(13)
  4.4    Registration Rights Agreement, dated November 24, 1998(15)
  4.5    Registration Rights Agreement, dated as of October 31, 1997(7)
  4.6    Rights Agreement, dated as of October 2, 1998 between Kilroy Realty
          Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights
          Agent, which includes the form of Articles Supplementary of the
          Series B Junior Participating Preferred Stock of Kilroy Realty
          Corporation as Exhibit A, the form of Right Certificate as Exhibit B
          and the Summary of Rights to Purchase Preferred Shares as Exhibit
          C(16)
  5.1    Opinion of Ballard Spahr Andrews & Ingersoll, LLP (to be filed by
          amendment)
 10.1    Fourth Amended and Restated Agreement of Limited Partnership of Kilroy
          Realty, L.P., dated November 24, 1998(15)
 10.2    Omnibus Agreement, dated as of October 30, 1996, by and among Kilroy
          Realty, L.P. and the parties named therein(1)
 10.3    Supplemental Representations, Warranties and Indemnity Agreement by
          and among Kilroy Realty, L.P. and the parties named therein(1)
 10.4    Pledge Agreement by and among Kilroy Realty, L.P., John B. Kilroy,
          Sr., John B. Kilroy, Jr. and Kilroy Industries(1)
 10.5    1997 Stock Option and Incentive Plan of the Registrant and Kilroy
          Realty, L.P(1)
 10.6    Form of Indemnity Agreement of the Registrant and Kilroy Realty, L.P.
          with certain officers and directors(1)
 10.7    Lease Agreement, dated January 24, 1989, by and between Kilroy Long
          Beach Associates and the City of Long Beach for Kilroy Long Beach
          Phase I(1)
 10.8    First Amendment to Lease Agreement, dated December 28, 1990, by and
          between Kilroy Long Beach Associates and the City of Long Beach for
          Kilroy Long Beach Phase I(1)
 10.9    Lease Agreement, dated July 17, 1985, by and between Kilroy Long Beach
          Associates and the City of Long Beach for Kilroy Long Beach Phase
          III(1)
 10.10   Lease Agreement, dated April 21, 1988, by and between Kilroy Long
          Beach Associates and the Board of Water Commissioners of the City of
          Long Beach, acting for and on behalf of the City of Long Beach, for
          Long Beach Phase IV(1)
</TABLE>
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.11 Lease Agreement, dated December 30, 1988, by and between Kilroy Long
        Beach Associates and City of Long Beach for Kilroy Long Beach Phase
        II(1)
 10.12 First Amendment to Lease, dated January 24, 1989, by and between Kilroy
        Long Beach Associates and the City of Long Beach for Kilroy Long Beach
        Phase III(1)
 10.13 Second Amendment to Lease Agreement, dated December 28, 1990, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase III(1)
 10.14 First Amendment to Lease Agreement, dated December 28, 1990, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase II(1)
 10.15 Third Amendment to Lease Agreement, dated October 10, 1994, by and
        between Kilroy Long Beach Associates and the City of Long Beach for
        Kilroy Long Beach Phase III(1)
 10.16 Development Agreement by and between Kilroy Long Beach Associates and
        the City of Long Beach(1)
 10.17 Amendment No. 1 to Development Agreement by and between Kilroy Long
        Beach Associates and the City of Long Beach(1)
 10.18 Ground Lease by and between Frederick Boysen and Ted Boysen and Kilroy
        Industries, dated May 15, 1969, for SeaTac Office Center(1)
 10.19 Amendment No. 1 to Ground Lease and Grant of Easement, dated April 27,
        1973, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
        Boysen and Sea/Tac Properties(1)
 10.20 Amendment No. 2 to Ground Lease and Grant of Easement, dated May 17,
        1977, among Frederick Boysen and Dorothy Boysen, Ted Boysen and Rose
        Boysen and Sea/Tac Properties(1)
 10.21 Airspace Lease, dated July 10, 1980, by and among the Washington State
        Department of Transportation, as lessor, and Sea Tac Properties, Ltd.
        and Kilroy Industries, as lessee(1)
 10.22 Lease, dated April 1, 1980, by and among Bow Lake, Inc., as lessor, and
        Kilroy Industries and SeaTac Properties, Ltd., as lessees for Sea/Tac
        Office Center(1)
 10.23 Amendment No. 1 to Ground Lease, dated September 17, 1990, between Bow
        Lake, Inc., as lessor, and Kilroy Industries and Sea/Tac Properties,
        Ltd., as lessee(1)
 10.24 Amendment No. 2 to Ground Lease, dated March 21, 1991, between Bow Lake,
        Inc., as lessor, and Kilroy Industries and Sea/Tac Properties, Ltd., as
        lessee(1)
 10.25 Property Management Agreement between Kilroy Realty Finance Partnership,
        L.P. and Kilroy Realty, L.P.(1)
 10.26 Environmental Indemnity Agreement(1)
 10.27 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Airport
        Imperial Co.(1)
 10.28 Option Agreement by and between Kilroy Realty, L.P. and Kilroy Calabasas
        Associates(1)
 10.29 Employment Agreement between the Registrant and John B. Kilroy, Jr.(1)
 10.30 Employment Agreement between the Registrant and Richard E. Moran Jr.(1)
 10.31 Employment Agreement between the Registrant and Jeffrey C. Hawken(1)
 10.32 Employment Agreement between the Registrant and C. Hugh Greenup(1)
 10.33 Noncompetition Agreement by and between the Registrant and John B.
        Kilroy, Sr.(1)
 10.34 Noncompetition Agreement by and between the Registrant and John B.
        Kilroy, Jr.(1)
 10.35 License Agreement by and among the Registrant and the other persons
        named therein(1)
 10.36 Form of Indenture of Mortgage, Deed of Trust, Security Agreement,
        Financing Statement, Fixture Filing and Assignment of Leases, Rents and
        Security Deposits(1)
 10.37 Mortgage Note(1)
 10.38 Indemnity Agreement(1)
</TABLE>
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.39 Assignment of Leases, Rents and Security Deposits(1)
 10.40 Variable Interest Rate Indenture of Mortgage, Deed of Trust, Security
        Agreement, Financing Statement, Fixture Filing and Assignment of Leases
        and Rents(1)
 10.41 Environmental Indemnity Agreement(1)
 10.42 Assignment, Rents and Security Deposits(1)
 10.43 Form of Mortgage, Deed of Trust, Security Agreement, Financing
        Statement, Fixture Filing and Assignment of Leases and Rents(1)
 10.44 Assignment of Leases, Rents and Security Deposits(1)
 10.45 Purchase and Sale Agreement and Joint Escrow Instructions, dated April
        30, 1997, by and between Mission Land Company, Mission-Vacaville, L.P.
        and Kilroy Realty, L.P.(2)
 10.46 Agreement of Purchase and Sale and Joint Escrow Instructions, dated
        April 30, 1997, by and between Camarillo Partners and Kilroy Realty,
        L.P.(2)
 10.47 Purchase and Sale Agreement and Escrow Instructions, dated May 5, 1997,
        by and between Kilroy Realty, L.P. and Pullman Carnegie Associates(4)
 10.48 Amendment to Purchase and Sale Agreement and Escrow Instructions, dated
        June 27, 1997, by and between Pullman Carnegie Associates and Kilroy
        Realty, L.P.(4)
 10.49 Purchase and Sale Agreement, Contribution Agreement and Joint Escrow
        Instructions, dated May 12, 1997, by and between Shidler West
        Acquisition Company, LLC and Kilroy Realty, L.P.(3)
 10.50 First Amendment to Purchase and Sale Agreement, Contribution Agreement
        and Joint Escrow Instructions, dated June 6, 1997, between Kilroy
        Realty, L.P. and Shidler West Acquisition Company, L.L.C. and Kilroy
        Realty, L.P.(3)
 10.51 Second Amendment to Purchase and Sale Agreement, Contribution Agreement
        and Joint Escrow Instructions, dated June 12, 1997, by and between
        Shidler West Acquisition Company, LLC and Kilroy Realty, L.P.(3)
 10.52 Agreement of Purchase and Sale and Joint Escrow Instructions, dated June
        12, 1997, by and between Mazda Motor of America, Inc. and Kilroy
        Realty, L.P.(4)
 10.53 Amendment to Agreement of Purchase and Sale and Joint Escrow
        Instructions, dated June 30, 1997, by and between Mazda Motor of
        America, Inc. and Kilroy Realty, L.P.(4)
 10.54 Agreement for Purchase and Sale of 2100 Colorado Avenue, Santa Monica,
        California, dated June 16, 1997, by and between Santa Monica Number
        Seven Associates L.P. and Kilroy Realty L.P.(4)
 10.55 Second Amendment to Credit Agreement and First Amendment to Variable
        Interest Rate Indenture of Mortgage, Deed of Trust, Security Agreement,
        Financing Statement, Fixture Filing and Assignment of Leases and Rent
        dated August 13, 1997(5)
 10.56 Purchase and Sale Agreement and Joint Escrow Instructions, dated July
        10, 1997, by and between Kilroy Realty, L.P. and Mission Square
        Partners(6)
 10.57 First Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated August 22, 1997(6)
 10.58 Second Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 5, 1997(6)
 10.59 Third Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 19, 1997(6)
 10.60 Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 22, 1997(6)
 10.61 Fifth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 23, 1997(6)
</TABLE>
<PAGE>
 
 
<TABLE>
 <C>   <S>
 10.62 Sixth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 25, 1997(6)
 10.63 Seventh Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated September 29, 1997(6)
 10.64 Eighth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated October 2, 1997(6)
 10.65 Ninth Amendment to the Purchase and Sale Agreement and Joint Escrow
        Instructions, dated July 10, 1997, by and between Kilroy Realty, L.P.
        and Mission Square Partners, dated October 24, 1997(6)
 10.66 Contribution Agreement, dated October 21, 1997, by and between Kilroy
        Realty, L.P. and Kilroy Realty Corporation and The Allen Group and the
        Allens(8)
 10.67 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.(9)
 10.68 Amendment to the Contribution Agreement, dated October 14, 1998, by and
        between Kilroy Realty, L.P. and Kilroy Realty Corporation and The Allen
        Group and the Allens, dated October 21, 1997(14)
 10.69 Amended and Restated Revolving Credit Agreement, dated as of October 8,
        1998 among Kilroy Realty, L.P., Morgan Guaranty Trust Company of New
        York, as Bank and as Lead Agent for the Banks, and the Banks listed
        therein.(14)
 10.70 Amended and Restated Guaranty of Payment, dated as of October 8, 1998,
        between Kilroy Realty Corporation and Morgan Guaranty Trust Company of
        New York.(14)
 23.1  Consent of Ballard Spahr Andrews & Ingersoll, LLP (to be filed by
        amendment)
 23.2  Consent of Deloitte & Touche LLP (to be filed by amendment)
 24.1  Power of Attorney (included on the signature page to the registration
        statement)
 27.1  Financial Data Schedule
</TABLE>
- --------
 (1) Previously filed as an exhibit to the Registration Statement on Form S-11
     (No. 333-15553) as declared effective on January 28, 1997 and incorporated
     herein by reference.
 
 (2) Previously filed as Exhibit 10.11 and 10.12, respectively, to the Current
     Report on Form 8-K, dated May 22, 1997, and incorporated herein by
     reference.
 
 (3) Previously filed as Exhibit 10.57, 10.58 and 10.59, respectively, to the
     Current Report on Form 8-K, dated June 30, 1997, and incorporated herein
     by reference.
 
 (4) Previously filed as Exhibit 10.54, 10.59, 10.60, 10.61 and 10.62,
     respectively, to the Current Report on Form 8-K, dated June 30, 1997, and
     incorporated herein by reference.
 
 (5) Previously filed as an exhibit to the Registration Statement on Form S-11
     (No. 333-32261), and incorporated herein by reference.
 
 (6) Previously filed as an exhibit on Form 10-Q, for the quarterly period
     ended September 30, 1997, and incorporated herein by reference.
 
 (7) Previously filed as an exhibit to the Current Report on Form 8-K/A, dated
     October 29, 1997, and incorporated herein by reference.
 
 (8) Previously filed as Exhibit 10.70 and 10.71, respectively, to the Current
     Report on Form 8-K, dated November 7, 1997, and incorporated herein by
     reference.
 
 (9) Previously filed as Exhibit 10.70 to the Current Report on Form 8-K, dated
     December 17, 1997, and incorporated herein by reference.
 
(10) Previously filed as an exhibit to the Registrant's Current Report on Form
     8-K dated February 6, 1998 and incorporated herein by reference.
<PAGE>
 
(11) Previously filed as an exhibits to the Current Report on Form 8-K (No. 1-
     12675) dated October 2, 1998 and incorporated herein by reference.
 
(12) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated October 29, 1997 and incorporated herein by reference.
 
(13) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated August 20, 1998 and incorporated herein by reference.
 
(14) Previously filed as an exhibit on Form 10-Q (No. 1-12675) for the
     quarterly period ended September 30, 1998 and incorporated herein by
     reference.
 
(15) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated November 24, 1998 and incorporated herein by reference.
 
(16) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated October 2, 1998 and incorporated herein by reference.

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   9-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1998             DEC-31-1997
<PERIOD-START>                             JAN-01-1998             JAN-01-1997
<PERIOD-END>                               SEP-30-1998             SEP-30-1997
<CASH>                                          27,311                   8,929
<SECURITIES>                                         0                       0
<RECEIVABLES>                                   19,951                   7,875
<ALLOWANCES>                                     (494)                   (508)
<INVENTORY>                                          0                       0
<CURRENT-ASSETS>                                     0                       0
<PP&E>                                       1,132,158                 834,690
<DEPRECIATION>                               (139,170)               (121,780)
<TOTAL-ASSETS>                               1,063,670                 757,654
<CURRENT-LIABILITIES>                                0                       0
<BONDS>                                              0                       0
                                0                       0
                                          0                       0
<COMMON>                                           276                     245
<OTHER-SE>                                     476,122                 396,905
<TOTAL-LIABILITY-AND-EQUITY>                 1,063,670                 757,654
<SALES>                                              0                       0
<TOTAL-REVENUES>                                96,990                  45,701
<CGS>                                                0                       0
<TOTAL-COSTS>                                   45,878                  22,310
<OTHER-EXPENSES>                                     0                       0
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                              14,462                   8,609
<INCOME-PRETAX>                                 36,740                  14,782
<INCOME-TAX>                                         0                       0
<INCOME-CONTINUING>                             36,740                  14,782
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                   3,204
<CHANGES>                                            0                       0
<NET-INCOME>                                    28,649<F1>              15,942
<EPS-PRIMARY>                                     1.07                    0.82
<EPS-DILUTED>                                     1.07                    0.81
<FN>
<F1>NET INCOME IS AFTER EQUITY IN LOSS OF UNCONSOLIDATED SUBSIDIARY OF ($24) AND
MINORITY INTERESTS OF ($7,797)
</FN>
        

</TABLE>


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