KILROY REALTY CORP
S-3, 2000-11-14
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>

   As filed with the Securities and Exchange Commission on November 14, 2000
                                                     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:
                            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>
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<CAPTION>
                                        Proposed        Proposed
 Title of each class of     Amount      maximum          maximum       Amount of
    securities to be        to be    offering price     aggregate     registration
       registered         registered  per share(2)  offering price(3)     Fee
----------------------------------------------------------------------------------
<S>                       <C>        <C>            <C>               <C>
Common Stock, par value
 $.01 per share........   424,719(1)    $26.0625       $11,069,239       $2,923
----------------------------------------------------------------------------------
Series B Junior Partici-
 pating Preferred Stock
 Purchase Rights(4)....   424,719(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 November 13, 2000, 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 424,719
shares of common stock of Kilroy Realty Corporation to the holders of units
representing common limited partnership interests in Kilroy Realty, L.P. 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 amended. We may +
+not sell these securities until we deliver a final prospectus. This           +
+prospectus are not an offer to sell nor are we seeking an offer to buy these  +
+securities in any state where the offer or sale is prohibited.                +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                 SUBJECT TO COMPLETION, DATED NOVEMBER 14, 2000
PROSPECTUS

                           KILROY REALTY CORPORATION

                         424,719 Shares of Common Stock

  This prospectus relates to the possible issuance of up to 424,719 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 currently own common limited
partnership units and may tender their common units to Kilroy Realty, L.P. for
cash redemption. We may 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.

  Our common stock is listed on the New York Stock Exchange under the symbol
"KRC." On November 13, 2000 the last reported sales price of our common stock
on the New York Stock Exchange was $26.1875 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 November   , 2000.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
RISK FACTORS...............................................................   1
FORWARD LOOKING STATEMENTS.................................................  12
THE COMPANY................................................................  14
USE OF PROCEEDS............................................................  15
DESCRIPTION OF CAPITAL STOCK...............................................  15
DESCRIPTION OF MATERIAL PROVISIONS OF THE PARTNERSHIP AGREEMENT OF
 KILROY REALTY, L.P. ......................................................  27
EXCHANGE OF COMMON UNITS FOR COMMON STOCK..................................  35
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS..........  42
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.................................  47
ERISA CONSIDERATIONS.......................................................  60
SELLING STOCKHOLDERS.......................................................  63
PLAN OF DISTRIBUTION.......................................................  64
LEGAL MATTERS..............................................................  65
EXPERTS....................................................................  65
WHERE YOU CAN FIND MORE INFORMATION........................................  65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................  66
</TABLE>

   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.

                               ----------------

  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 an 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 the date of the prospectus
contained in this registration statement, our business, financial condition,
results of operations and prospects may have changed.

                                       i
<PAGE>

                                  RISK FACTORS

   Investment in our common stock involves risks. 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 by this prospectus. The
occurrence of any of the following risks might cause you to lose all or a part
of your investment. Some statements in this prospectus, including statements in
the following risk factors, constitute forward looking statements. Please refer
to the section entitled "Forward Looking Statements."

Most of our properties depend upon the Southern California economy.

   Most of our properties are located in Southern California. As of September
30, 2000, these properties represented:

  .  approximately 89.5% of the aggregate square footage of our stabilized
     portfolio; and

  .  approximately 91.7% of our annualized base rent.

   Our annualized base rent means the monthly contractual rent under existing
leases on September 30, 2000, 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, as defined by the National
Association of Real Estate Trusts, 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
applicable to owners and operators of real property that are beyond our control
may decrease funds available for distribution and the value of our properties.
These events include:

  .  local oversupply or reduction in demand of office, industrial or other
     commercial space;

  .  inability to collect rent from tenants;

  .  vacancies or our inability to rent spaces on favorable terms;

  .  inability to finance property development and acquisitions on favorable
     terms;

  .  increased operating costs, including insurance premiums, utilities, and
     real estate taxes;

  .  costs of complying with changes in governmental regulation;

  .  the relative illiquidity of real estate investments;

  .  changing submarket demographics; and

  .  property damage resulting from seismic activity.

   The geographic concentration of our properties 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 you.

Our significant debt level reduces cash available for distribution and may
expose us to the risk of default under our debt obligations.

   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;


                                       1
<PAGE>

  .  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 any one of our mortgage loans 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 you could be adversely affected. In
addition, foreclosures could create taxable income without accompanying cash
proceeds, a circumstance which could hinder our ability to meet the strict REIT
distribution requirements imposed by the Internal Revenue Code of 1986, as
amended. As of September 30, 2000, we had $674 million aggregate principal
amount of indebtedness, $6.8 million of which was due prior to December 31,
2001. Our total debt represented 41.2% of our total market capitalization at
September 30, 2000.

We face significant competition which may decrease the occupancy and rental
rates of our properties.

   We compete with several developers, owners and operators of office,
industrial and other commercial real estate many of which have higher vacancy
rates. Substantially all of our properties are located in areas with similar
properties as our competitors. For instance, occupancy rates in our El Segundo
and San Diego office property portfolios at September 30, 2000 were 98.9% and
97.8%, respectively, in comparison to 94.0% and 95.0%, respectively, for the El
Segundo and San Diego office submarkets in total. In addition, the occupancy
rate in our Anaheim industrial property portfolio at September 30, 2000 was
96.5% in comparison to 95.4% for the Anaheim industrial property submarket in
total. We believe that our lower vacancy rates means that, on average, our
competitors have more space currently available for lease than we do. As a
result, our competitors have an incentive to decrease rental rates until their
available space is leased. If our competitors offer space at rental rates below
current market rates, we may be pressured to reduce our rental rates below
those currently charged in order to retain tenants when our tenant leases
expire. As a result, our financial condition, results of operations and cash
flows may be adversely affected.

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 God. 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, 2000, 77 of our office properties
aggregating 5.8 million square feet, representing 47.6% of our stabilized
portfolio based on aggregate square footage and 72.5% based on annualized base
rent, were located in areas known to be subject to earthquakes. As of September
30, 2000, 71 of our industrial properties aggregating 5.1 million square feet,
representing 41.9% of our stabilized portfolio based on aggregate square
footage and 27.5% based on 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 some or all of our properties in the future if the cost
of premiums for earthquake insurance exceeds the value of the coverage
discounted for the risk of loss.

   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.

                                       2
<PAGE>

We may be unable to complete acquisitions and successfully operate acquired
properties.

   We may acquire office and industrial properties when strategic opportunities
exist. Our ability to acquire properties on favorable terms and successfully
operate them is subject to the following risks:

  .  potential inability 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 be unable 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 rental 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 ability to pay distributions to you could be adversely affected.

We may be unable to successfully complete and operate developed properties.

   Property development involves the following 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 may 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.

  For example, during the fourth quarter of 1998, we withdrew our participation
from a master planned commercial development prior to the commencement of
construction. Also, during the third quarter of 2000, we delayed commencement
of construction on one of our projects by four months. The project was an
assemblage in an urban infill location that required the relocation of some
existing businesses. We encountered delays when one of the key tenants
experienced difficulty in relocating as a result of the high leasing demand and
tight supply constraints in that sub-market. If any one of these events were to
occur in connection with our other development projects currently under
development, our financial position, results of operations, cash flow, quoted
per share trading price of our common stock and ability to pay distributions to
you could be adversely affected.

   While we primarily develop office and industrial properties 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.


                                       3
<PAGE>

We could default on leases for land on which some of our properties are
located.

   We own ten office buildings located on various parcels each of which we
lease on a long-term basis. If we default under the terms of any particular
lease, we may lose the property subject to the lease. We may not be able to
renegotiate a new lease on favorable terms, if at all, upon expiration of the
lease and all of 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 you. We have approximately 1.5
million aggregate rentable square feet of rental space located on these
parcels. The leases for the land under the Kilroy Airport Center, Long Beach
expire in 2035. The leases for the land under the SeaTac Office Center,
including renewal options, expire in 2062. The primary lease for the land under
12312 West Olympic Boulevard in Santa Monica expires in January 2065 with a
smaller secondary lease expiring in September 2011. The lease for the land
under 9455 Towne Center in San Diego expires in October 2043.

We depend on significant tenants.

   At September 30, 2000, our ten largest office tenants represented
approximately 21.5% of our total annual base rental revenues and our ten
largest industrial tenants represented approximately 8.8% of our total annual
base rental revenues. Of this amount, our largest tenant, The Boeing Company,
currently leases approximately 733,245 rentable square feet of office space,
representing approximately 9.5% of our total annual base rental revenues. Our
revenue and cash available for distribution to you would be disproportionately
and materially adversely affected if any of our significant tenants were to
become bankrupt or insolvent, or suffer a downturn in their business, or fail
to renew their leases at all or on terms less favorable to us than their
current terms.

Downturns in our tenants' businesses may reduce our cash flow.

   We derived as of September 30, 2000, 96.6% of our revenues from rental
income and tenant reimbursements. 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. In the event of default by a tenant, we may
experience delays in enforcing our rights as landlord 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 the bankruptcy. On the other hand, the bankruptcy
court might authorize the tenant to reject and terminate its lease with us. Our
claim against the 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 re-let space as leases expire.

   As of September 30, 2000 leases representing 18.6% and 6.4% of the square
footage of our properties will expire in 2001 and 2002. Above market rental
rates on some of our properties may force us to renew or re-lease some expiring
leases at lower rates. While we believe that the average rental rates for most
of our properties are below quoted market rates in each of our submarkets, we
cannot assure you that leases will be renewed or that our properties will be
re-leased at rental rates equal to or above the current rental rates. If the
rental rates for our properties decrease, our existing tenants do not renew
their leases or we do not re-lease 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
you would be adversely affected.


                                       4
<PAGE>

Real estate assets are illiquid and we may not be able to sell our properties
when we desire.

   Our investments in our properties are relatively illiquid which limits our
ability to sell our properties quickly in response to changes in economic or
other conditions. In addition, the Internal Revenue Code of 1986, as amended,
generally imposes a 100% prohibited transaction tax on profits we derive from
sales of properties held primarily for sale to customers in the ordinary course
of business, which could affect 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 repay indebtedness and to
pay distributions to you.

Kilroy Services, Inc. is subject to tax liabilities on net income which reduces
our cash flow.

   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 you.

We cannot depend upon distributions from Kilroy Services, Inc. because we do
not control its business.

   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., the Chairman of the board
     of directors and President and, Chief Executive Officer, respectively
     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 on our
investment in its preferred stock. However, we cannot influence Kilroy
Services, Inc.'s operations, elect its directors, appoint its 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 you.

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 government regulation and private
litigation over environmental matters.

   Environmental laws and regulations may hold us liable for the costs of
removal or remediation of 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 or release of hazardous substances on a property could result
in personal injury or similar claims by private plaintiffs. For instance, third
parties might seek recovery from us for personal injuries associated with
asbestos-containing materials and other hazardous or toxic substances if found
on our properties. As of September 30, 2000, Phase I site assessments indicated
asbestos-containing materials were present at 22 of our properties. Various
laws also impose liability on persons who arrange for the disposal or treatment
of hazardous or toxic substances 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

                                       5
<PAGE>

facility. As the owner and operator of our properties, we may be considered to
have arranged for the disposal or treatment of hazardous or toxic substances.

The use of hazardous materials by some of our tenants may expose us to
liability.

   Some of our tenants routinely handle hazardous substances and wastes as part
of their routine operations on our properties. Environmental laws and
regulations subject our tenants, and potentially us, to liability resulting
from these activities. We require our tenants, in their leases, to comply with
these environmental laws and regulations and to indemnify us for any related
liabilities. As of September 30, 2000, less than 5% of our tenants routinely
handled hazardous substances and/or wastes on our properties as part of their
routine operations. These tenants were primarily involved in the light
industrial and warehouse business and more specifically the light electronics
assembly business. We do not believe that these activities by our tenants 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.

Existing conditions at some of our properties may expose us to liability
related to environmental matters.

   Independent environmental consultants have conducted Phase I or similar
environmental site assessments on all of our properties. Site assessments
generally include a 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:

  .  asbestos-containing materials are present at 22 of our properties; and

  .  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 clean-up of contamination in
the soils on the properties, and we do not believe that further clean-up of the
soils is required. None of our site assessments revealed any other
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 that would give rise to
material environmental liability. 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.

We cannot give assurance that costs of future environmental compliance will not
affect our ability to make distributions to you.

Potential environmental liabilities may exceed our environmental insurance
coverage limits.

   We carry what we believe to be sufficient environmental insurance to cover
any potential liability for soil and groundwater contamination at the affected
sites identified in our environmental site assessments. However, we cannot
provide any assurance 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 ability to pay distributions to you.

                                       6
<PAGE>

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 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. If one or more of our properties
is not in compliance with the act, then we would be required to incur
additional costs to bring the property into compliance. Additional federal,
state and local laws also may require modifications to our properties, or
restrict our ability to renovate our properties. We cannot predict the ultimate
amount of the cost of compliance with the act or other legislation. If we incur
substantial costs to comply with the act and any other legislation, our
financial condition, results of operations, cash flow, quoted per share trading
price of our common stock and our ability to pay distributions to you could be
adversely affected.

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
failed 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 adversely 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 areas particularly 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 conducted within the last five years, 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 you could be adversely affected.

Common limited partners of Kilroy Realty, L.P. have limited approval rights
which may prevent us from completing a change of control transaction which may
be in the best interests of stockholders.

   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 unitholders except in the case of a
"termination transaction" 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 60% of
the common unitholders, including the common units we hold in our capacity as
general partner. The right of common limited partners to vote on these
transactions could limit our ability to complete a change of control
transaction that might otherwise be in the best interest of our stockholders.

Limited partners of Kilroy Realty, L.P. must approve the dissolution of Kilroy
Realty, L.P. and the disposition of properties they contributed.

   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.

                                       7
<PAGE>

   In addition, we may not sell 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. or in
connection with a transaction which does not cause the limited partners that
contributed the property to recognize taxable income. 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. The exercise of one or more of
these approval rights by the limited partners could delay or prevent us from
completing a transaction which may be in the best interest of our stockholders.

The chairman of our board of directors and our president and chief executive
officer each have potential conflicts of interest with us.

   The Chairman of our Board of Directors and our President and Chief Executive
Officer own a majority interest in real estate in which Kilroy Realty, L.P.
owns a minority interest. 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 75% interest in a complex
of three office buildings which Kilroy Realty, L.P. owns a 25% interest.
Consequently, Messrs. Kilroy have substantial influence on the management and
operation of the property and they could exercise their influence in a manner
that is not in the best interest of our stockholders.

   The Chairman of our Board of Directors and our President and Chief Executive
Officer each 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
and Chief Executive Officer. Together, Messrs. Kilroy hold two of the six seats
on our board of directors. They also beneficially own common limited
partnership units exchangeable for an aggregate of 1,794,439 shares of common
stock and currently vested options to purchase an aggregate of 350,000 shares
of common stock, representing a total of approximately 8.1% of the total
outstanding shares of common stock as of September 30, 2000. Pursuant to our
charter no other stockholder may own, actually or constructively, more than
7.0% of our common stock. The board of directors has already waived the
ownership limits with respect to John B. Kilroy, Sr., John B. Kilroy, Jr.,
members of the family and some affiliated entities. Consequently, Messrs.
Kilroy have substantial influence on us and they could exercise their influence
in a manner that is not in the best interest of our stockholders. Also, they
may in the future have a substantial influence on the outcome of any matters
submitted to our stockholders for approval.

We limit the ownership of our capital stock which limits the opportunities for
a change of control at a premium to existing stockholders.

   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 Internal Revenue 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 some entities,
     during the last half of a taxable year;

  .  subject to 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 Internal Revenue Code's REIT gross income tests
     regardless of whether we receive the rents directly or through a
     partnership.

                                       8
<PAGE>

   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, Series C Preferred Stock and Series D 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., members of their families and some affiliated entities.
These named individuals and entities may own either actually or constructively,
in the aggregate, up to 21% 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 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 Cumulative Redeemable Preferred units which in the future may be exchanged
one-for-one into shares of 8.075% Series A Cumulative Redeemable Preferred
stock, 700,000 Series C Cumulative Redeemable Preferred units which in the
future may be exchanged one-for-one into shares of 9.375% Series C Cumulative
Redeemable Preferred Stock and 900,000 Series D Cumulative Redeemable Preferred
units which in the future may be exchanged one-for-one into shares of 9.25%
Series D Cumulative Redeemable Preferred stock. In addition, we have designated
and authorized the issuance of up to 400,000 shares of Series B Junior
Participating Preferred stock. However, no shares of Series B preferred stock
are currently issued or outstanding.

   We have a stockholders' 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 have anti-takeover effects and 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 approved by our Board of Directors.

                                       9
<PAGE>

   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 be 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 Internal Revenue Code.

   If we lose our REIT status, we will face serious tax consequences that would
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; and

  .  unless we are entitled to relief under statutory provisions, we could
     not elect to be taxed as a REIT for four taxable years following the
     year during which we were disqualified.

   In addition, if we fail to qualify as a REIT, we will not be required to
make distributions to stockholders, and all distributions to stockholders will
be subject to tax as ordinary income to the extent of our current and
accumulated earnings and profits.

   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 Internal Revenue Code provisions for which there are only limited
judicial and administrative interpretations. The complexity of these provisions
and of the applicable treasury regulations that have been promulgated under the
Internal Revenue Code is greater in the case of a REIT that, like us, holds its
assets through a partnership. 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, or 90% beginning January 1, 2001, 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 a manner so as to qualify as a REIT, no assurance can be given
that we have been or will continue to be organized, or 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.

   To qualify as a REIT, we generally must distribute to our stockholders at
least 95% (90% beginning January 1, 2001) of our net taxable income each year,
excluding capital gains, and we will be subject to regular corporate income
taxes to the extent that we distribute less than 100% of our net taxable income
each year. In addition, we will be subject to a 4% nondeductible excise tax on
the amount, if any, by which distributions

                                       10
<PAGE>

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. In order to maintain our REIT status and avoid the payment of
income and excise taxes, 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. 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 which are outside of our
control.

   We are required under the Internal Revenue Code to distribute at least 95%
of our net taxable income (90% beginning January 1, 2001), 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 any necessary acquisition financing, from operating
cash flow. Consequently, we rely on third-party sources 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;

  .  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.

Our board of directors may change our investment and financing policies without
stockholder approval and become more highly leveraged which may increase our
risk of default under our debt obligations.

   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 and units exchangeable for shares of capital
stock, 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 you. Higher leverage also increases the risk of
default on our obligations.

   We may issue additional shares of capital stock without stockholder approval
which may dilute your investment. 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 may dilute a
stockholder's investment.

                                       11
<PAGE>

   We may invest in securities related to real estate which could adversely
affect our ability to make distributions to you. 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 these securities, which
could adversely affect our ability to make distributions to you.

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 September 30, 2000, 26,445,400 shares of our common stock were issued
and outstanding and we had reserved for future issuance the following shares of
common stock:

  .  3,747,412 shares issuable upon the exchange, at our option, of common
     units issued in connection with the formation of Kilroy Realty, L.P. and
     in connection with the acquisition of properties, including the shares
     offered pursuant to this prospectus and the shares previously registered
     by the Company with respect to common units that have not been exchanged
     as of September 30, 2000.

  .  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 26,445,400 shares of common stock outstanding at September 30, 2000, all
but 215,000 restricted shares may be freely traded in the public market. 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.

                           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,"

                                       12
<PAGE>

"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 other
matters discussed above in the section entitled "Risk Factors." We caution you,
however, that any list of risk factors may not be exhaustive.

                                       13
<PAGE>

                                  THE COMPANY

  We are a REIT which develops, owns and operates office and industrial real
estate primarily in Southern California. 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 September 30, 2000, our stabilized
portfolio consisted of 80 office buildings encompassing approximately 6.3
million rentable square feet and 78 industrial buildings encompassing
approximately 5.8 million rentable square feet. Our stabilized portfolio as of
September 30, 2000 consisted of all of our office and industrial properties
excluding properties recently developed by the Company that had not yet reached
95% occupancy and projects under construction or predevelopment. The majority
of our properties are located in Southern California. As of September 30, 2000
we had 8 office buildings under construction which, when completed, are
expected to encompass approximately 606,000 rentable square feet. We had two
office properties in lease-up at September 30, 2000 which comprise 294,700
rentable square feet. All of our development projects are located in Southern
California.

  We conduct substantially all of our activities through Kilroy Realty, L.P. in
which, as of September 30, 2000, we owned an approximate 87.6% general
partnership interest. The remaining 12.4% limited partnership interest in
Kilroy Realty, L.P. is owned by John B. Kilroy, Sr. and John B. Kilroy, Jr.,
the chairman of our board of directors and our president and chief executive
officer and their affiliates, who collectively own 6.0%, with the remaining
interests owned by 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 137 properties of our 160 properties. The remaining properties, other than
five properties which are owned by Kilroy Realty, L.P. through KR-Carmel and
KR-Gateway Partners, two development LLCs in which we own a 50% managing
interest at December 31, 1999, are owned by Kilroy Realty Finance Partnership,
L.P., a limited partnership. 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

   We make regular quarterly distributions to the 8.075% Series A Cumulative
Redeemable Preferred unitholders, the 9.375% Series C Cumulative Redeemable
Preferred unitholders and the 9.250% Series D Cumulative Redeemable Preferred
unitholders on the 15th day of each February, May, August and November. On
August 15, 2000, we distributed approximately $1.5 million to the Series A
Preferred unitholders, approximately $0.8 million to the Series C Preferred
unitholders and approximately $1.0 million to the Series D Preferred
unitholders.

   In September 2000, our board of directors declared a regular quarterly cash
dividend of $0.45 per common share and common unit payable on October 17, 2000.
The dividend was payable to common stockholders and common unitholders of
record on September 30, 2000. The dividend is equivalent to an annual rate of
$1.80 per share and unit.

                                       14
<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 $65,000.

                          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 September 30, 2000, we had 26,455,400
shares of common stock issued and outstanding. The 26,455,400 outstanding
shares excludes the 3,747,412 shares of common stock, as of September 30, 2000,
which we may issue in exchange for presently outstanding common units which may
be tendered for redemption to Kilroy Realty, L.P., upon expiration of the
applicable lock-up period, including the 424,719 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; 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, the Series D 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 of these classes or series of
     capital stock;

  .  establish any preference rights, conversion rights and other rights,
     including voting powers, of each of these classes or series of capital
     stock;

  .  establish restrictions, such as limitations and restrictions on
     ownership, dividends or other distributions of each of these classes or
     series of capital stock; and

  .  establish qualifications and terms or conditions of redemption for each
     of these classes or series of capital stock.

                                       15
<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, we generally 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 this 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 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.

   The rights will be transferred only with shares of our common stock until
the earlier to occur of:

  (1) ten days following a public announcement that a person or group of
      affiliated or associated persons, which we refer to as an acquiring
      person, has acquired, or obtained the right to acquire, beneficial
      ownership of:

    .  15% or more of the shares of our common stock 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, of
       more than 21% of the shares of our common stock and

  (2) ten business days, or on a later date as may be determined by our board
      of directors prior to the time that 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 of the shares of our common stock
       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, of
       more than 21% of the shares of our common stock.

                                       16
<PAGE>

We refer to the earlier of these dates as the distribution date. The rights
will be transferred only with shares of our common stock until the distribution
date, 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 the distribution date, 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 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 are the surviving
corporation in a merger with an acquiring person or any affiliate or associate
of an acquiring person and shares of common stock are not changed or exchanged,
each holder of a right, other than rights that are or were acquired or
beneficially owned by the acquiring person, may 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 stock split or reverse stock split in our 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, 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 that 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 the 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;

  .  in its sole discretion may establish when the redemption of the rights
     may be made effective, on what basis and under what conditions; and

  .  amend any of the provisions of the rights agreement for so long as the
     rights are redeemable.

   Immediately upon any redemption of the rights, stockholder's right to
exercise the rights will terminate and the holders of rights may then only
receive the redemption price. After the rights are no longer redeemable, we may
amend or supplement the rights agreement only in a manner that does not
adversely affect the interests of the holders of the rights.

   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
     some 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.

                                       17
<PAGE>

   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 the 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.

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, 700,000 shares as Series C Preferred Stock
and 900,000 shares as Series D 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; and

  .  terms or conditions of redemption.

8.075% Series A Cumulative Redeemable Preferred Stock, 9.375% Series C
Cumulative Redeemable Preferred Stock and 9.25% Series D Cumulative Redeemable
Preferred Stock.

   General. Of our 30,000,000 authorized preferred shares, we designated
1,700,000 shares as Series A Preferred Stock, 700,000 shares as Series C
Preferred Stock and 900,000 shares as Series D 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. Shares of Series D Preferred
Stock are issuable on a one-for-one basis upon redemption or exchange of Kilroy
Realty, L.P's Series D Preferred Units.

                                       18
<PAGE>

   Dividends. Each share of Series A Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock will be entitled to receive dividends that are:

  .  cumulative preferential dividends, in cash, from the date of issue
     payable on or before the 15th of February, May, August and November of
     each year, including any accrued but unpaid distributions in respect of
     Series A Preferred Units, Series C Preferred Units and Series D
     Preferred Units at the time they are exchanged for shares of Series A
     Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
     as applicable;

  .  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, Series C Preferred Stock and Series D
     Preferred Stock; and

  .  at a rate of 8.075% per annum for shares of Series A Preferred Stock, at
     a rate of 9.375% per annum shares of Series C Preferred Stock and at a
     rate of 9.25% per annum shares of Series D Preferred Stock.

   Ranking. The Series A Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock will rank:

  .  on parity with each other and with all other preferred stock designated
     as ranking on a parity with the Series A Preferred Stock, Series C
     Preferred Stock and Series D Preferred Stock with respect to
     distributions and rights upon liquidation, dissolution, or winding-up,

  .  senior to the Series B Preferred Stock and all other preferred stock
     designated as ranking junior to the Series A Preferred Stock, Series C
     Preferred Stock and Series D Preferred Stock, and

  .  junior to all other preferred stock designated as ranking senior to
     Series A Preferred Stock, Series C Preferred Stock and Series D
     Preferred Stock.

   Redemption. At our option, we may redeem, in whole or in part from time to
time:

  .  shares of Series A Preferred Stock on and after February 6, 2003, shares
     of Series C Preferred Stock on and after November 24, 2003 and shares of
     Series D Preferred Stock on and after December 9, 2004, or prior to
     these dates to the extent necessary to maintain our qualification as a
     REIT;

  .  shares of Series A Preferred Stock, Series C Preferred Stock and Series
     D Preferred Stock at a redemption price payable in cash equal to $50.00
     per share, plus any accrued but unpaid dividends to the date of
     redemption; and

  .  by paying the redemption price of the Series A Preferred Stock, Series C
     Preferred Stock and Series D Preferred Stock, excluding the portion
     consisting of accumulated but unpaid dividends, solely out of proceeds
     from issuance of our capital stock.

   In the event of our capital reorganization or reclassification of capital
stock, any consolidation or merger, or any sale or transfer of all or
substantially all of our assets to another person which is

  .  initiated or implemented by any person other than us or any of our
     affiliates or officers or employee benefits plans, and

  .  implemented in a way that holders of our common stock will receive, per
     share, consideration, other than capital stock, valued in excess of 50%
     of the then market price of each share of our common stock with respect
     to, or in exchange for, the common stock,

then, immediately upon the occurrence of that event, we will redeem a number of
shares of Series D Preferred Stock of each holder thereof, at a price of $50
per share plus all accrued dividends with respect to that share, equal to a
fraction, the numerator of which is the per share value of such consideration
paid to the holders of the common stock and the denominator of which is the
then market price of each share of common stock.

                                       19
<PAGE>

   Limited voting rights. If we do not pay dividends on any shares of Series A
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock for six
or more quarterly periods, including any periods we did not make distributions
in respect of Series A Preferred Units, Series C Preferred Units and Series D
Preferred Units prior to their exchange into shares of Series A Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, as applicable,
whether or not consecutive, the holders of Series A Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock will vote as a single class with
all other shares of capital stock ranking on parity with the Series A Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock which have similar
vested voting rights for the election of two additional directors to our board
of 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 the 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, Series D Preferred Stock or the holders of shares of any other
     class or series of stock on parity with the Series A Preferred Stock,
     the Series C Preferred Stock and the Series D Preferred Stock with
     respect to which dividends are also accrued and unpaid if this request
     is received more than 90 days before the date fixed for our next annual
     or special meeting of stockholders or, if we receive the request for a
     special meeting 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, the Series C Preferred Stock and the Series D
     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, Series C Preferred Units and
     Series D 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
     the dividends is irrevocably set aside in trust for payment in full.

   When all of the dividends have been paid in full, the holders of Series A
Preferred Stock, Series C Preferred Stock and Series D 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, Series D Preferred Stock and holders of any other shares of
stock on parity with the Series A Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock will terminate.

   In addition, if any shares of Series A Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock are outstanding, without the consent of two-
thirds of the holders of the 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,
     the Series C Preferred Stock and the Series D Preferred Stock,

  .  reclassify any of our authorized shares of capital stock into any shares
     ranking senior to the Series A Preferred Stock, the Series C Preferred
     Stock and the Series D Preferred Stock,

  .  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, the Series C Preferred
     Stock and the Series D Preferred Stock, or create, authorize or issue
     any obligations or security convertible into or evidencing the right to
     purchase any shares, but only to the extent the shares on parity with
     the Series A Preferred Stock, the Series C Preferred Stock and the
     Series D Preferred Stock are issued to one or our affiliates, or

                                       20
<PAGE>

  .  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, Series C Preferred Stock and Series D Preferred Stock or the
       holders of Series A Preferred Stock, Series C Preferred Stock and
       Series D Preferred Stock.

   The Series A Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock will have no voting rights other than as discussed above.

   Liquidation preference. Each share of Series A Preferred Stock, Series C
Preferred Stock and Series D 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 those
equity securities expressly designated as ranking on a parity with or senior to
the Series A Preferred Stock, Series C Preferred Stock and Series D 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, Series C Preferred Stock and
     Series D 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 the greater of:

  .  a minimum preferential cumulative quarterly dividend payment of $1.00
     per share paid on the first day of March, June, September and December,
     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 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. Accrued and unpaid dividends shall not bear interest. Dividends
paid on shares of Series B Preferred Stock which are less than the total amount
of the dividends accrued and payable on these shares shall be allocated pro
rata on a share-by-share basis among all of the 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 any parity stock on
       which dividends are payable or in arrears in proportion to the total
       amounts to which the holders of all 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 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 the
       shares on terms that 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 the liquidation
payment be less than $100 per share plus any accrued and unpaid dividends. We
will adjust 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 100 times the
aggregate amount of stock, securities,

                                       22
<PAGE>

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
the amount of per share consideration to be received by holders of Series B
Preferred Stock upon any of these transactions 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 of capital stock.

 Internal Revenue Code requirements.

   To maintain our tax status as a REIT, five or fewer individuals, as that
term is defined in the Internal Revenue Code, which includes 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. Constructive ownership provisions in the Internal Revenue 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 is not
qualifying income for purposes of the gross income tests of the Internal
Revenue Code. The term "Related Party Tenants" is defined below under "Federal
Income Tax Considerations--Income Tests." 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 constructive ownership
provisions of the Internal Revenue 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 issued, more than 7%, by number of shares or value,
     whichever is more restrictive, of our Series B Preferred Stock; or

  .  if and when issued, shares of our Series A, Series C Preferred Stock
     and/or Series D 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 Internal Revenue Code, our charter
provides that no holder may own, either actually or constructively by virtue of
the constructive ownership provisions of the Internal Revenue Code, which
differ from the constructive ownership provisions used for purposes of 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 issued, more than 9.8% by number of shares or value,
     whichever is more restrictive, of our Series B Preferred Stock; or

  .  if and when issued, shares of our Series A, Series C Preferred Stock
     and/or Series D 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."

                                       23
<PAGE>

   The constructive ownership provisions set forth in the Internal Revenue 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 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, Series C Preferred Stock or Series D
Preferred Stock could occur as a result of a fluctuation in the relative value
of this stock and our common stock, even absent a transfer or other change in
actual or constructive ownership.

   Our board of directors may waive the ownership limits with respect to a
particular stockholder if it:

  .  determines that the ownership will not jeopardize our status as a REIT;
     and

  .  otherwise decides that this action would be in our best interest.

   As a condition of this 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 21% 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
Internal Revenue Code, any shares of any class of our capital stock if, as a
result of this ownership:

  .  more than 50% in value of our outstanding capital stock would be owned,
     either actually or constructively under the applicable constructive
     ownership provisions of the Internal Revenue Code, by five or fewer
     individuals, as defined in the Internal Revenue Code,

  .  our capital stock would be beneficially owned by less than 100 persons,
     determined without reference to any constructive ownership provisions,
     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 must give us
notice immediately and provide us with any other information that we may
request in order to determine the effect of the 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 the 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 the
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 of the excess shares shall cease to own any right or
interest in the excess shares.

                                       24
<PAGE>

   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.

   The trustee must:

  .  within 20 days of receiving notice from us of the transfer of shares to
     the trust,

    .  sell the excess shares to a person or entity who could own the
       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,

    .  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 the event or the sales proceeds received by the
       trust for the excess shares;

  .  in either case above, distribute any proceeds in excess of the amount
     distributable to the prohibited transferee or owner, as applicable, to
     the charitable organization selected by us as beneficiary of the trust.

   The trustee 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 receive, in trust for the beneficiary, all dividends
and other distributions paid by us with respect to the excess shares, and may
also exercise all voting rights with respect to the excess shares.

   Subject to Maryland law, effective as of the date that the shares have been
transferred to the trust, the trustee shall have the authority, at the
trustee's sole discretion,

  .  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

  .  to recast the 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 may not rescind and recast the vote. Any dividend or other distribution
paid to the prohibited transferee or owner, prior to our discovery that the
shares had been automatically transferred to a trust as described above, must
be repaid to the trustee upon demand for distribution to the beneficiary of the
trust. If 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 are transferred to any person in a manner which
would cause us to be beneficially owned by fewer than 100 persons, 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

                                       25
<PAGE>

above, it shall take actions to refuse to give effect to or to prevent the
ownership or acquisition, including, but not limited to:

  .  authorizing us to repurchase stock,

  .  refusing to give effect to the ownership or acquisition on our books, or

  .  instituting proceedings to enjoin the 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
treasury regulations. Under current treasury regulations, the percentage is
between 0.5% and 5.0%, depending on the number of record holders of our 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 Internal
Revenue 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.

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<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 September 30, 2000, Kilroy Realty, L.P. has issued and
outstanding 1,500,000 Series A Preferred Units, no Series B Preferred Units,
700,000 Series C Preferred Units, 900,000 Series D Preferred Units and
3,747,412 common units. We refer collectively to the Series A Preferred Units,
Series B Preferred Units, Series C Preferred Units, Series D 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.

  Generally, 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. These family members and accredited investors must agree
to assume the transferor's obligations under the partnership agreements. This
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;

  .  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;

                                       27
<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; or

  .  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 this 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 this 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

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<PAGE>

  .  the common limited partners may exchange their interests in the
     surviving partnership for either:

    .  the consideration available to the common limited partner pursuant
       to the preceding paragraph, or

    .  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 the 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, of holders of Series C Preferred Units
with respect to the issuance of preferred units ranking senior to the Series C
Preferred Units and holders of Series D Preferred Units with respect to the
issuance of preferred units ranking senior to the Series D Preferred Units as
described under the sections entitled "--8.075% Series A Cumulative Redeemable
Preferred Units," "--9.375% Series C Cumulative Redeemable Preferred Units" and
"--9.25% Series D 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.

                                       29
<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 these losses, in
     an order of priority which is the reverse of the priority of the
     allocation of these 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, 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 holders of Series D
     Preferred Units in an amount equal to a 9.25% per annum cumulative
     return on the stated value of $50.00 per Series D 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;

  .  next, pro rata among the holders of the Series A Preferred Units, the
     Series C Preferred Units and the Series D 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.

   Notwithstanding the foregoing, in some cases, losses may be
disproportionately allocated to partners who have guaranteed debt of Kilroy
Realty, L.P. The allocations described above are subject to special allocations
relating to depreciation deductions and to compliance with the provisions of
Sections 704(b) and 704(c) of the Internal Revenue Code and the associated
treasury regulations. 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 Units, Series C Preferred Units and Series D
Preferred Units. See the section entitled "Material Federal Income Tax
Consequences--Tax Aspects of the Partnership"

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, Series C Preferred Units and Series D
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.

                                       30
<PAGE>

8.075% Series A Cumulative Redeemable Preferred Units, 9.375% Series C
Cumulative Redeemable Preferred Units and 9.25% Series D 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,
the 9.375% Series C Cumulative Redeemable Preferred Units and the 9.25% Series
D Cumulative Redeemable Preferred Units representing preferred limited
partnership interests. As of the date of this prospectus, 1,500,000 Series A
Preferred Units, 700,000 Series C Preferred Units and 900,000 Series D
Preferred Units are issued and outstanding.

   Distributions. Each Series A Preferred Unit, Series C Preferred Unit and
Series D 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% per annum, Series C Preferred Units will be
entitled to distributions at a rate of 9.375% per annum and Series D Preferred
Units will be entitled to distributions at a rate of 9.25% per 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,
the Series C Preferred Units and the Series D Preferred Units.

   Ranking. The Series A Preferred Units, the Series C Preferred Units and the
Series D 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, the Series C Preferred Units and the Series D
     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, the Series C Preferred Units and the Series D Preferred
     Units, and

  .  junior to all other classes or series of preferred partnership units
     designated as ranking senior to the Series A Preferred Units, the Series
     C Preferred Units and the Series D Preferred Units.

   Limited approval rights. For as long as any Series A Preferred Units, the
Series C Preferred Units or the Series D 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 this 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, the Series C Preferred Units and the Series D 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, the Series C Preferred Units and the Series D
     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, Series C Preferred Units and the Series D 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,
     the Series C Preferred Units and the Series D Preferred Units or
     reclassify any partnership interest into any preferred partnership units
     on parity with the Series A Preferred Units, the Series C Preferred
     Units and the Series D 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, the Series C Preferred Units and the Series D Preferred
     Units, but only to the extent that these preferred partnership units on
     parity with the Series A Preferred Units, the Series C Preferred Units
     and the Series D Preferred Units are issued to an affiliate of Kilroy
     Realty, L.P., other than to us to the extent the issuance of these

                                       31
<PAGE>

     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,
     the Series C Preferred Units and the Series D Preferred Units or the
     holders of Series A Preferred Units, the Series C Preferred Units and
     the Series D Preferred Units.


   Furthermore, for so long as any Series D Preferred Units are outstanding,
Kilroy Realty Corporation will not in some circumstances, without the
affirmative vote of the holders of at least two-thirds of the Series D
Preferred Units, take any action, including the issuance of any securities, if
that action would require the consent of the holders of the Series D Preferred
Stock if any shares of Series D Preferred Stock were outstanding at the time.
This consent is not required in connection with the action if Kilroy Realty,
L.P. agrees to redeem the Series D Preferred Units for cash upon their
exchange.

   Redemption and exchange. We may redeem the Series A Preferred Units on and
after February 6, 2003, the Series C Preferred Units on and after November 24,
2003 and the Series D Preferred Units on or after December 9, 2004, in each
case out of proceeds from the issuance 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
February 6, 2003, the Series C Preferred Units may be exchanged on and after
November 24, 2003 and the Series D Preferred Units may be exchanged on and
after December 9, 2004, in each case, in whole but not in part, into shares of
our Series A Preferred Stock, Series C Preferred Stock or Series D 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, the Series C
Preferred Units and the Series D Preferred Units may be exchanged, in whole
but not in part, into shares of Series A Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, as applicable, at any time at the option of
51% of the holders if:

  .  distributions on the Series A Preferred Units, Series C Preferred Units
     or Series D 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, the Series C Preferred Units
may be exchanged on or after November 24, 2001 and prior to November 24, 2008
and the Series D Preferred Units may be exchanged, on or after December 9,
2002 and prior to December 9, 2009, 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, the Series C Preferred Units or the Series D Preferred Units,
as applicable, would not be considered "stock and securities" for federal
income tax purposes.

   The Series A Preferred Units, the Series C Preferred Units and Series D
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, the Series C Preferred Units for shares of Series C Preferred
Stock or the Series D Preferred Units for shares of Series D Preferred Stock,
elect to redeem all or a portion of the Series A Preferred Units, the Series C
Preferred Units or the Series D 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, Series C Preferred Units and Series D
Preferred Units to exchange their units for shares of Series A Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, as applicable,
will in each case be subject to the

                                      32
<PAGE>

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, Series C Preferred Unit and Series D 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,
the Series D 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.

   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,
     the Series D 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.

                                       33
<PAGE>

Common limited partnership units.

   General. The partnership agreement provides that, subject to the
distribution preferences of the Series A, Series B, Series C and Series D
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. As of the date of this prospectus, 3,747,412 common units
are issued and outstanding, including the 424,719 common units which may be
redeemed for shares of common stock offered pursuant to this prospectus.

   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 the 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 some rights, some 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

  .  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.

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<PAGE>

                   EXCHANGE OF COMMON UNITS FOR COMMON STOCK

Terms of the exchange.

   The holders of common units of Kilroy Realty, L.P. who hold common units
which may be currently redeemed for shares of our common stock issued under
this prospectus are referred to as the selling stockholders. These selling
stockholders may require Kilroy Realty, L.P. to redeem up to 424,719 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.

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.

  .  the 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.

                                       35
<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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

We are a Maryland corporation. We elected to be taxed as a REIT under the
Internal Revenue 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 these shares of capital
stock. Limited partners do not have a preemptive right to additional units.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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.

                                       36
<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 permitted non-material amendments,

 .  take some actions with respect to bankruptcy or insolvency of Kilroy Realty,
   L.P.

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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

 .  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 by our board of directors and 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 generally 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 some provisions may be amended only by the vote of
   two-thirds of the votes entitled to be cast by our stockholders.

                                       37
<PAGE>

                              Duties of Directors
                              -------------------

--------------------------------------------------------------------------------
         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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

 .  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 this 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; and

 .  a reclassification, recapitalization or change of our outstanding equity
   interests.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

Our charter and bylaws have a number of provisions that may 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 cast 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;

 .  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.

                                       38
<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 September 30, 2000, we owned an 87.6%
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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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 some 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
some 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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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--We are not subject to the Maryland business
combinations statute."

                                       39
<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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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, we 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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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 all mergers or the sale of less
than all or substantially all of our assets.

                      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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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

                                       40
<PAGE>

                             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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------
                                                KILROY REALTY CORPORATION
--------------------------------------------------------------------------------

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 his, her or
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.

                                       41
<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 one. 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.

We are not subject to the Maryland business combination statute.

   We are not subject to the "business combination" provisions of the Maryland
General Corporation Law (sections 3-601 through 3-604) and we cannot elect to
be subject to their business combination provisions without the approval of
holders of a majority of the shares entitled to vote.

                                       42
<PAGE>

   In the event that we decide to be subject to the business combinations
provision, "business combinations" between a Maryland corporation and an
interested stockholder or an affiliate of an interested stockholder are
generally 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 or share exchange. A business
combination may also include 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.

   As a result of our decision not to be subject to the business combinations
statute, an interested stockholder would be able to effect a "business
combination" without complying with the requirements discussed above, which may
make it easier for stockholders who become interested stockholders to
consummate a business combination involving us. However, we cannot assure you
that any business combinations will be consummated or, if consummated, will
result in a purchase of shares of common stock from our stockholders at a
premium.

We are not subject to the Maryland control share acquisition statute.

   We are not subject to the "control share acquisition" statute of the
Maryland General Corporation Law (sections 3-701 through 3-710). If we want to
be subject to these provisions, our bylaws would need to be amended. Such
amendments would require the approval of the holders of a majority of the
shares entitled to vote.

   Maryland 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 vote, 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-tenth or more but less than one-third;

  .  one-third or more but less than a majority; or

  .  a majority of all voting power.

                                       43
<PAGE>

   "Control shares" do not include shares of stock the acquiring person is
entitled to vote having obtained prior stockholder approval. Generally,
"control share acquisition" means the acquisition of control shares.

   A person who has made or proposes to make a control share acquisition 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, we may 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 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. 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.
Because we are not subject to 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 of these control share
stockholders to effect a business combination with us. However, we cannot
assure you that any business combinations will be consummated or, if
consummated, will result in a purchase of shares of common stock from any
stockholder at a premium.

Amendment of our charter and bylaws.

   Our charter may generally be amended only if the amendment is declared
advisable by our board of directors and approved by our stockholders by the
affirmative vote of at least two-thirds of the shares entitled to vote on the
amendment. Our bylaws generally may be amended by the affirmative vote of a
majority of the board of directors or of a majority of our shares entitled to
vote. However, the following bylaw provisions may be amended only by the
approval of a majority of our 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. In addition, a special meeting of
stockholders may be called by:

  .  the president;

  .  the board of directors;

  .  the chairman of the board;

  .  holders of 50% or more of our outstanding common stock entitled to vote
     may also make a written request;

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<PAGE>

  .  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;

  .  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;
     and

  .  holders of 10% of our Series D Preferred Stock may also call a special
     meeting of stockholders of Series D Preferred Stock and all other
     classes or series of preferred stock ranking on parity with the Series D
     Preferred Stock to elect two additional directors to our board of
     directors if dividends on any shares of Series D 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 of 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 determines by resolution that
dissolution is advisable and submits a proposal for dissolution for
consideration at any annual or special meeting of stockholders, and this
proposal is approved, by the vote of the holders of two-thirds of the shares of
our capital stock 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 liabilities to the fullest extent permitted by
the Maryland General Corporation Law, as amended from time to time.

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<PAGE>

   The Maryland General Corporation Law permits us to indemnify our directors
and officers and 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.

   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
found 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 found 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
discussion in this prospectus under 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;

                                       46
<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.

   Our indemnification agreements with our officers and directors offer
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 CONSIDERATIONS

   The following is a summary of the federal income tax considerations we
believe are material to you. This summary is based on current law, is for
general information only and is not tax advice. Your tax treatment will vary
depending on your 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 stockholders or unitholders who receive 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 and unitholders receiving 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 you as a holder of our
common units or our common stock.

   The information in this section is based on:

  .  the Internal Revenue Code;

  .  current, temporary and proposed treasury regulations promulgated under
     the Internal Revenue Code;

  .  the legislative history of the Internal Revenue Code;

  .  current administrative interpretations and practices of the Internal
     Revenue Service; and

  .  court decisions;

in each case, as of the date of this prospectus. In addition, the
administrative interpretations and practices of the Internal Revenue Service
include its practices and policies as expressed in private letter rulings which
are not binding on the Internal Revenue Service except with respect to the
particular taxpayers who requested and received those rulings. Future
legislation, treasury regulations, administrative interpretations and practices
and/or court decisions may adversely affect the tax considerations contained in
this discussion. Any 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 Internal Revenue Service concerning our tax treatment, and the
statements in this prospectus are not binding on the Internal Revenue Service
or any court. Thus, we can provide no assurance that the tax considerations
contained in this discussion will not be challenged by the Internal Revenue
Service or if so challenged, will be sustained by a court.

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<PAGE>

   You are urged to consult your tax advisor regarding the specific tax
consequences to you of:

  .  the ownership and disposition of common units;

  .  the acquisition, ownership and sale or other disposition of our common
     stock, including the federal, state, local, foreign and other tax
     consequences;

  .  our election to be taxed as a REIT for federal income tax purposes; and

  .  potential changes in the tax laws.

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 our common stock, the exchange will be a fully
taxable transaction, and you will generally recognize gain in an amount equal
to the value of our common stock received, plus the amount of liabilities of
Kilroy Realty, L.P. allocable to your common units being exchanged, less your
tax basis in those common units. The recognition of any loss is subject to a
number of limitations set forth in the Internal Revenue Code. The character of
any 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 the
acquisition of your common units by Kilroy Realty, L.P. in exchange for cash
may be similar, depending on your circumstances.

Taxation of Kilroy Realty Corporation.

   General. We elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code, commencing with our taxable year ended December 31,
1997. We believe we have been organized and have operated in a manner which
allows us to qualify for taxation as a REIT under the Internal Revenue Code
commencing with our taxable year ended December 31, 1997. 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 Internal Revenue Code.
Accordingly, we can not assure you that we have operated or will continue to
operate in a manner so as to qualify or remain qualified as a REIT. See "--
Failure to qualify."

   The sections of the Internal Revenue Code that relate to qualification and
operation as a REIT are highly technical and complex. The following describes
the material aspects of the sections of the Internal Revenue Code that govern
the federal income tax treatment of a REIT and its stockholders. This summary
is qualified in its entirety by the Internal Revenue Code, relevant rules and
treasury regulations promulgated under the Internal Revenue Code, and
administrative and judicial interpretations of the Internal Revenue Code and
these rules and treasury regulations.

   The law firm of Latham & Watkins has acted as our tax counsel in connection
with our election to be taxed as a real estate investment trust. In the opinion
of Latham & Watkins, commencing with our taxable year ended December 31, 1997,
we have been organized and have operated in conformity with the requirements
for qualification and taxation as a REIT under the Internal Revenue Code, and
our proposed method of operation will enable us to continue to meet the
requirements for qualification and taxation as a real estate investment trust
under the Internal Revenue Code. This opinion was rendered as of November 14,
2000, and Latham & Watkins undertakes no obligation to update its opinion
subsequent to this date.

   The opinion of Latham & Watkins is based on various assumptions, and
representations made by us as to factual matters, including representations
made by us in this prospectus and a factual certificate provided by our
officers. Moreover, our qualification and taxation as a real estate investment
trust depends upon our ability to meet the various qualification tests imposed
under the Internal Revenue Code and discussed below, relating to our actual
annual operating results, asset diversification, distribution levels and
diversity of stock ownership,

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<PAGE>

the results of which have not been and will not be reviewed by Latham &
Watkins. Accordingly, no assurance can be given that the actual results of our
operations for any particular taxable year will satisfy these requirements. See
"--Failure to Qualify" in this prospectus. Further, the anticipated income tax
treatment described in this prospectus may be changed at any time, perhaps
retroactively, by legislative, administrative or judicial action. With respect
to the enforceability of the stock ownership limits in our charter, Latham &
Watkins has relied on the opinion of Ballard, Spahr, Andrews & Ingersohn, LLP,
our Maryland counsel.

   If we qualify for taxation as a REIT, we generally will not be required to
pay 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 means taxation once at the corporate level when income is
earned and once again at the stockholder level when this income is distributed.
We will be required to pay federal income tax, however, as follows:

  .  We will be required to pay tax at regular corporate rates on any
     undistributed "real estate investment trust taxable income," including
     undistributed net capital gains.

  .  We may be required to pay 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 required to pay 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 required to pay a 100% tax on any net income from prohibited
     transactions. Prohibited transactions are, in general, sales or other
     taxable dispositions of property, other than foreclosure property, held
     primarily for sale to customers in the ordinary course of business.

  .  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 required to pay 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.

  .  We will be required to pay 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 (a) 5% of our
     ordinary income for the year, (b) 95% of our capital gain net income for
     the year, and (c) any undistributed taxable income from prior periods.

  .  If we acquire any asset from a corporation which is or has been a C
     corporation in a transaction in which the basis of the 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 beginning on the
     date on which we acquired the asset, then we will be required to pay tax
     at the highest regular corporate tax rate on this gain to the extent of
     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 date on
     which we acquired the asset. A C corporation is generally defined as a
     corporation required to pay full corporate-level tax. The results
     described in this paragraph with respect to the recognition of gain
     assume that we will make an election under Treasury Regulation Section
     1.337(d)-5T.

   Requirements for qualification as a REIT. The Internal Revenue 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 Internal Revenue Code;

                                       49
<PAGE>

     (4) that is not a financial institution or an insurance company within
  the meaning of the Internal Revenue 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, including
  specified entities, during the last half of each taxable year; and

     (7) that meets other tests, described below, regarding the nature of its
  income and assets and the amount of its distributions.

   The Internal Revenue 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
other specified tax-exempt entities generally are treated as individuals,
except that a "look-through" exception applies with respect to pension funds.

   We believe that we have satisfied conditions (1) through (7) inclusive. 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 "Description of
Capital Stock--Restrictions on ownership and transfer of 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. If, however, we comply with
the rules contained in the 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 "--Failure to qualify."

   In addition, we may not maintain our status as a REIT unless our taxable
year is the calendar year. We have and will continue to have a calendar taxable
year.

   Ownership of a partnership interest. Treasury regulations provide that if we
are a partner in a partnership, we will be deemed to own our proportionate
share of the assets of the partnership. Also, we will be deemed to be entitled
to our proportionate share of the income of the partnership. The character of
the assets and gross income of the partnership retains the same character in
our hands for purposes of Section 856 of the Internal Revenue 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. 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. In addition, for these purposes, Kilroy Realty, L.P.'s assets and items
of income include its share of assets and items of income of any partnership in
which it owns an interest. 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. The treatment described above also
applies with respect to the ownership of interests in limited liability
companies that are treated as partnerships for tax purposes.

                                       50
<PAGE>

   Income tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT:

  .  First, each taxable year we must derive directly or indirectly at least
     75% of our gross income, excluding gross income from prohibited
     transactions, from (a) investments relating to real property or
     mortgages on real property, including "rents from real property" and, in
     some circumstances, interest, or (b) some types of temporary
     investments;

  .  Second, each taxable year we must derive at least 95% of our gross
     income, excluding gross income from prohibited transactions, from (a)
     the real property investments described above, or (b) dividends,
     interest and gain from the sale or disposition of stock or securities or
     (c) 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 all
or some of the amount depends in any way 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 from a tenant 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 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;

  .  we, or an actual or constructive owner of 10% or more of our capital
     stock, do not actually or constructively own 10% or more of the
     interests in the tenant;

  .  rent attributable to personal property, leased in connection with a
     lease of real property, is not greater than 15% of the total rent
     received under the lease. If this condition is not met, then the portion
     of the rent attributable to personal property will not qualify as "rents
     from real property"; and

  .  we generally must not operate or manage our property or furnish or
     render services to our tenants, subject to a 1% de minimis exception,
     other than through an independent contractor from whom we derive no
     revenue. We may, however, directly perform 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 these services include the
     provision of light, heat, or other utilities, trash removal and general
     maintenance of common areas. Under recently enacted legislation,
     described in greater detail below, beginning in 2001, we may employ a
     "taxable REIT subsidiary" which may be wholly or partially owned by us,
     to provide both customary and noncustomary services to our tenants
     without causing the rent we receive from those tenants to fail to
     qualify as "rents from real property."

   We generally do not intend to receive rent which fails to satisfy any of the
above conditions. Notwithstanding the foregoing, we may have taken and may
continue to take actions which fail to satisfy one or more of the above
conditions to the extent that we determine, based on the advice of our tax
counsel, that those actions will not jeopardize our status as a REIT.

   Kilroy Services, Inc. generally receives fees in exchange for the
performance of specified development activities. These 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.

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<PAGE>

   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 the Internal Revenue 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 in "--
Taxation of the Company--General," 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
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. Our gain includes
our share of any gain realized by Kilroy Realty, L.P. or its subsidiary
partnership. 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. Kilroy Realty, L.P. intends to make, and has made, occasional sales
of the properties as are consistent with Kilroy Realty, L.P.'s investment
objectives. Kilroy Realty, L.P. does not believe that any of its sales were
prohibited transactions. 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.

  .  First, at least 75% of the value of our total assets must be represented
     by real estate assets, cash, cash items, and government securities and
     specified temporary instruments. 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 public debt offering with a
     term of at least five years, but only for the one-year period beginning
     on the date we receive these proceeds.

  .  Second, not more than 25% of our total assets may be represented by
     securities, other than those securities includable in the 75% asset
     test.

  .  Third, 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 own any of the voting securities of Kilroy Services, Inc., and
therefore we are not considered to own more than 10% of its voting securities.
In addition, we believe that the value of our shares 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 this 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%

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<PAGE>

value limitation. The 5% value test must be satisfied not only on the date that
we acquired, through Kilroy Realty, L.P., securities in Kilroy Services, Inc.,
but also each time we increase our ownership in Kilroy Services, Inc.,
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 this test for any quarter
with respect to which retesting is to occur, we cannot assure our stockholders
that these 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, we can cure this failure by disposing of sufficient nonqualifying
assets within 30 days after the close of that quarter. For this purpose, an
increase in our interests in Kilroy Realty L.P. will be treated as an
acquisition of a portion of the securities or other property owned by this
partnership. 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. In addition, we intend to take action 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.

   As discussed above, a REIT cannot currently own more than 10% of the
outstanding voting securities of any one issuer. Recently, legislation was
enacted that, beginning in 2001, limits a REIT's ability to own more than 10%
by vote or value of the securities of any single issuer. This legislation,
however, allows a REIT to own up to 100% of the vote and/or value of a
corporation which jointly elects with the REIT to be treated as a "taxable REIT
subsidiary," provided that, in the aggregate, a REIT's total investment in its
taxable REIT subsidiaries does not exceed 20% of the REIT's total assets, and
at least 75% of the REIT's total assets are real estate or other qualifying
assets. In addition, dividends from taxable REIT subsidiaries will be
nonqualifying income for purposes of the 75%, but not the 95%, gross income
test. Other than certain activities relating to lodging and health care
facilities, a taxable REIT subsidiary may generally engage in any business,
including the provision of customary or noncustomary services to tenants of its
parent REIT.

   This new legislation contains provisions generally intended to insure that
transactions between a REIT and its taxable REIT subsidiary occur "at arm's
length" and on commercially reasonable terms. These requirements include a
provision that prevents a taxable REIT subsidiary from deducting interest on
direct or indirect indebtedness to its parent REIT if, under a specified series
of tests, the taxable REIT subsidiary is considered to have an excessive
interest expense level or debt to equity ratio. In some cases the new
legislation also imposes a 100% tax on the REIT if its or its tenant's rental,
service and/or other agreements with its taxable REIT subsidiary are not on
arm's length terms.

   This new legislation may require us to restructure our investment in Kilroy
Services, Inc., possibly by jointly electing to treat Kilroy Services, Inc. as
a taxable REIT subsidiary. It will also be necessary for us to monitor our
investments in other entities and, in some circumstances, modify those
investments if we own more than 10% of the voting power or value of another
entity. The legislation concerning taxable REIT subsidiaries is generally
effective only for taxable years beginning after December 31, 2000.

   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 specified items of our noncash income items
     over 5% of "REIT taxable income" as described above.

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<PAGE>

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 that year and paid on or before the first regular dividend
payment following their declarations. 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. To avoid being
preferential, every stockholder of the class of stock to which a distribution
is made must be treated the same as every other stockholder of that class, and
no class of stock may be treated otherwise than according to 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 required to pay tax on this income 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 whatever steps
are 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 computing 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, 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. In
addition, pursuant to recently enacted legislation, the 95% distribution
requirement discussed above will be reduced to 90%, effective for taxable years
beginning after December 31, 2000.

   We may be able to rectify an inadvertent failure to meet the 95%
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 will be required to pay 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 that year, at least the sum
of 85% of our ordinary income for the year, 95% of our capital gain net income
for the year plus, in each case, any undistributed taxable income from prior
periods. Any ordinary income or capital gain net income 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.

   Distributions with declaration and record dates falling in the last three
months of the calendar year, which are paid to our stockholders by the end of
January immediately following that year, will be treated for federal income tax
purposes as having been paid on December 31 of the prior year.

   Kilroy Realty, L.P. has disposed of a number of properties resulting in
gains that will be allocable to its partners, including us, in accordance with
the terms of the partnership agreement. Kilroy Realty, L.P. currently expects
to defer recognition of all or a substantial portion of the gains for some of
these properties by acquiring replacement properties pursuant to the like kind
exchange provisions of Section 1031 of the Internal Revenue Code. However,
there can be no assurance that Kilroy Realty, L.P. will be able to defer these
gains.

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<PAGE>

Failure to qualify.

   If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions of the Internal Revenue Code do not apply, we will be
required to pay tax, including any 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 at
ordinary income rates to the extent of our current and accumulated earnings and
profits. In this event, corporate distributees may be eligible for the
dividends-received deduction. Unless 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 in which we lose our qualification.
It is not possible to state whether in all circumstances we would be entitled
to this statutory relief.

Tax aspects of the partnerships.

   General. Substantially all of our investments are held indirectly through
Kilroy Realty, L.P. and subsidiary partnerships and limited liability companies
including Kilroy Realty Finance Partnership, L.P. In general, partnerships and
limited liability companies are "pass-through" entities which are not required
to pay federal income tax. Rather, partners or members are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit
of a partnership or limited liability company, and are potentially required to
pay tax on this income, without regard to whether they receive a distribution
from the partnership or limited liability company. We will include in our
income our proportionate share of these partnership and limited liability
company 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 its subsidiary partnerships and limited liability companies
including Kilroy Realty Finance Partnership, L.P.

   Entity classification. Our ownership of an interest in Kilroy Realty, L.P.
involves special tax considerations. These special tax considerations include,
for example, the possibility that the IRS might challenge the status of Kilroy
Realty, L.P. or its subsidiary partnerships or limited liability companies as
partnerships, as opposed to associations taxable as corporations, for federal
income tax purposes. If Kilroy Realty, L.P. or one or more of its subsidiary
partnerships or limited liability companies 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 this 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 the tax status of Kilroy Realty,
L.P. or its subsidiary partnerships or limited liability companies 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 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 its subsidiary partnerships and limited liability companies intend to claim
classification as partnerships under the final regulations. As a result, we
believe that these partnerships and limited liability companies will be
classified as partnerships for federal income tax purposes.

   Allocations of Kilroy Realty, L.P.'s income, gain, loss and deduction. A
partnership or limited liability company agreement will generally determine the
allocation of income and losses among partners or members.

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<PAGE>

These allocations, however, will be disregarded for tax purposes if they do not
comply with the provisions of Section 704(b) of the Internal Revenue Code and
the treasury regulations. Generally, Section 704(b) of the Internal Revenue
Code and the related treasury regulations require that partnership and limited
liability company allocations respect the economic arrangement of the partners
or members.

   The Kilroy Realty, L.P. partnership agreement provides for preferred
distributions of cash and preferred allocations of income to the Company with
respect to the holders of Series A, Series C and Series D 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 these distributions and allocations will be subordinate to the
Series A, Series C and Series D 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, Series B, Series C or Series D Preferred Stock before any other
partner in Kilroy Realty, L.P. receives a distribution, other than a holder of
Series A, Series C or Series D Preferred Units, if these 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 to the extent possible be equal to or in excess of the amount that we
must pay on any issued shares of Series A, Series B, Series C or Series D
Preferred Stock upon liquidation or redemption. As long as we do not hold the
Series A, Series C or Series D Preferred Units, similar preferred distributions
and allocations will be made for the benefit of the holders of these units. In
general, all remaining items of income and loss will be allocated to the
holders of common units in proportion to the number of common units held by
each unitholder. Some 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
relevant item will be reallocated according to the partners' or members'
interests in the partnership or limited liability company. This reallocation
will be determined by taking into account all of the facts and circumstances
relating to the economic arrangement of the partners or members 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 Internal
Revenue Code and the treasury regulations thereunder.

   Tax allocations with respect to the properties. Under Section 704(c) of the
Internal Revenue Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership or
limited liability company in exchange for an interest in the partnership or
limited liability company must be allocated in a manner so that the
contributing partner or member 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 or book value and the
adjusted tax basis of the contributed property at the time of contribution.
These allocations are solely for federal income tax purposes. These allocations
do not affect the book capital accounts or other economic or legal arrangements
among the partners or members. 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
Internal Revenue 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 that 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 an unrealized gain or loss attributable to a

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<PAGE>

difference between the fair market or book value and the adjusted tax basis of
the asset at the time of contribution, all income attributable to this book-tax
difference will generally be allocated to the limited partners who contributed
the property. We will generally be allocated only our share of income
attributable to appreciation or depreciation, if any, occurring after the date
of contribution to Kilroy Realty L.P. 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) of the Internal Revenue Code 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 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 these
contributed assets in excess of the economic or book income allocated to us as
a result of the sale. This may cause us to recognize taxable income in excess
of cash proceeds, which might adversely affect our ability to comply with the
REIT distribution requirements.

   Treasury regulations issued under Section 704(c) of the Internal Revenue
Code provide partnerships and limited liability companies with a choice of
several methods of accounting for book-tax differences, including retention of
the "traditional method" or the election of other 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 some assets acquired 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 Internal Revenue Code will not apply.

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 or in the District
     of Columbia, unless, in the case of a partnership, treasury regulations
     provide otherwise;

  .  an estate which is required to pay United States federal income tax
     regardless of the source of its income; or

  .  a trust whose administration is under 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, some 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 our outstanding preferred
stock, if any, and then to our common stock.

   To the extent that we make distributions, other than capital gain dividends
discussed below, in excess of our current and accumulated earnings and profits,
these distributions will be treated first as a tax-free return of

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<PAGE>

capital to each U.S. stockholder. This treatment will reduce the adjusted basis
that 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 gain, provided the shares were held as capital assets. This gain will
be taxable as long-term capital gain if the shares were 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
will 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 these gains
do not exceed our actual net capital gain for the taxable year. Depending on
the tax characteristics of the assets which produced these gains, and on
specified 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 some 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, may not be treated as
investment income depending upon your particular situation.

   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 his or her proportionate share of our undistributed long-term
     capital gains in computing his or her long-term capital gains in the
     return for the 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 him or
     her;

  .  increase the adjusted basis of his or her common stock by the difference
     between the amount of includable gains and the tax deemed to have been
     paid by him or her; and

  .  in the case of a U.S. stockholder that is a corporation, appropriately
     adjust its earnings and profits for the retained capital gains as
     required by 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. This gain or loss
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, then after applying the relevant 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.


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<PAGE>

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 is otherwise exempt 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 the backup withholding rules. A
U.S. stockholder who 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, except as described below, dividend income
from us and gain from the sale of our shares will not be unrelated business
taxable income to a tax-exempt stockholder. This income or gain will be
unrelated business taxable income, however, if the tax-exempt stockholder holds
its shares as "debt financed property" within the meaning of the Internal
Revenue Code or if the shares are used in a trade or business of the tax-exempt
stockholder. Generally, debt financed property is property, the acquisition or
holding of which was financed through a borrowing by the tax-exempt
stockholder.

   For tax-exempt stockholders that 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 Internal Revenue Code,
respectively, income from an investment in our shares will constitute unrelated
business taxable income unless the organization is able to properly claim a
deduction for amounts set aside or placed in reserve for specific 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" will be treated as unrelated business taxable income as to
specified tax exempt trusts which hold more than 10%, by value, of the
interests in the REIT. A REIT's tax status as a "pension held REIT" depends, in
part, on the ownership of its stock. As a result of the limitations on the
transfer and ownership of stock contained in our charter, we 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
that are non-U.S. stockholders. When we use the term "non-U.S. stockholder" we
mean stockholders who are not 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 this 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.

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<PAGE>

Other tax consequences.

   We may be required to pay state or local taxes in various state or local
jurisdictions, including those in which we transact business. Our stockholders
may be required to pay state or local taxes 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 Internal Revenue Code
that may be relevant to a prospective purchaser. The following summary may also
be relevant to 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, which we refer to
collectively as an "IRA." This discussion does not address all aspects of ERISA
or Section 4975 of the Internal Revenue Code or, to the extent not preempted,
state law that may be relevant to particular employee benefit plan stockholders
in light of their particular circumstances, 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 Internal Revenue Code, and
governmental plans and church plans that are exempt from ERISA and Section 4975
of the Internal Revenue Code but that may be subject to state law requirements.

   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 Internal Revenue Code, and, to the extent not pre-empted,
state law with respect to the purchase, ownership or sale of shares of common
stock by the 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.

                                       60
<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 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 Internal Revenue Code, or because it does not
cover common law employees (a "Non-ERISA Plan") should consider that it may
only make investments that are either authorized or not prohibited by the
appropriate governing documents, not prohibited under Section 4975 of the
Internal Revenue 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 these assets. In
some 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 Internal Revenue Code, but the United States Department of Labor has
issued regulations 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 some 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 these
     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 the 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.

   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.


                                       61
<PAGE>

   Under the Department of Labor regulations, a "real estate operating company"
is defined as an entity which on 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 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 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.

                                       62
<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
                          Common        of                        Number
                          Shares   Common Shares   Common Shares    of    Common shares
                          Owned   Issuable in the Owned Following Common   Owned after
                         Prior to  Exchange and   the Exchange(1) Shares    Resale(2)
                           the     Available for  ---------------  to be  --------------
          Name           Exchange     Resale      Shares  Percent Resold  Shares Percent
          ----           -------- --------------- ------- ------- ------- ------ -------
<S>                      <C>      <C>             <C>     <C>     <C>     <C>    <C>
Commercial Management
 Corporation............    --        227,507     227,507     *   227,507   --      --
Allen Investments,
 Inc....................    --        178,548     178,548     *   178,548   --      --
Allen Capital Partners,
 LLC....................    --         18,664      18,664     *    18,664   --      --
                           ---        -------     -------   ---   -------  ---     ---
Total...................    --        424,719     424,719   1.6%  424,719   --      --
                           ===        =======     =======         =======  ===
</TABLE>
--------
  *  Represents less than 1% of the total outstanding shares of common stock.

 (1) Assumes that we exchange the common units of each selling stockholder for
     shares of common stock. The percentage ownership is determined for each
     referenced selling stockholder by taking into account the issuance and
     sale of shares of common stock issued in exchange for common units of only
     the referenced stockholder and not any other selling stockholder. Also
     assumes that no transactions with respect to common stock or common units
     occur other than the exchange.

 (2) Assumes each selling stockholder sells all of her/his shares of common
     stock offered pursuant to this prospectus. The percentage ownership is
     determined for each referenced selling stockholder by taking into account
     the issuance and sale of shares of common stock issued in exchange for
     common units of only the referenced stockholder and not any other selling
     stockholder.


                                       63
<PAGE>

                              PLAN OF DISTRIBUTION

   This prospectus relates to:

  .  the issuance by us of up to 424,719 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 424,719 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 October 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 this 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 of
these 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,

                                       64
<PAGE>

  .  the selling stockholders may sell the common stock short and deliver the
     common stock to close out these short positions,

  .  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.

   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, has issued an
opinion to us regarding certain matters of Maryland law. Latham & Watkins has
issued an opinion to us regarding tax matters described under "Material Federal
Income Tax Consequences."

                                    EXPERTS

   The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.

                      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.

                                       65
<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, 1999
     (file number 001-12675);

  .  Quarterly Report on Form 10-Q for the quarters ended March 31, 2000,
     June 30, 2000 and September 30, 2000;

  .  our Current Report on Form 8-K filed on November 2, 2000 (file number
     001-12675);

  .  the description of our common stock contained in our Registration
     Statement on Form 8-A/A filed with the SEC on March 5, 1999 (file number
     001-12675), including any amendment or reports filed for the purpose of
     updating this 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.

                                       66
<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.............................................. $ 2,923
     NYSE Listing Fee.................................................. $ 1,487
     Printing and Engraving Expenses...................................  10,000
     Legal Fees and Expenses (other than Blue Sky).....................  35,000
     Accounting and Fees and Expenses..................................   3,500
     Blue Sky Fees and Expenses........................................   7,000
     Miscellaneous.....................................................   5,090
                                                                        -------
       Total........................................................... $65,000
                                                                        =======
</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 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>
   4.1   Articles of Amendment and Restatement of the Registrant(1)

   4.2   Amended and Restated Bylaws of the Registrant(1)
   4.3   Form of Certificate for Common Stock of the Registrant(1)
   4.4   Articles Supplementary of the Registrant designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(2)
   4.5   Articles Supplementary of the Registrant, designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(3)
   4.6   Articles Supplementary of the Registrant designating its Series B
          Junior Participating Preferred Stock(4)
   4.7   Certificate of Correction for the Articles Supplementary of the
          Registrant designating its Series B Junior Participating Preferred
          Stock(5)
   4.8   Articles Supplementary of the Registrant designating its 9.375% Series
          C Cumulative Redeemable Preferred Stock(6)
   4.9   Articles Supplementary of the Registrant designating 9.25% Series D
          Cumulative Redeemable Preferred Stock(7)
   4.10  Articles Supplementary of the Registrant designating 9.25% Series D
          Cumulative Redeemable Preferred Stock(10)
   4.11  Registration Rights Agreement, dated January 31, 1997(1)
   4.12  Registration Rights Agreement, dated February 6, 1998(2)
   4.13  Registration Rights Agreement, dated April 20, 1998(3)
   4.14  Registration Rights Agreement, dated November 24, 1998(6)
   4.15  Registration Rights Agreement, dated as of October 31, 1997(8)
</TABLE>

                                      II-2
<PAGE>

<TABLE>
 <C>    <S>
   4.16 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(9)
   4.17 Registration Rights Agreement, dated as of December 9, 1999(7)
   4.18 First Amendment to Registration Rights Agreement of December 9, 1999
         dated as of December 30, 1999(10)
  *4.19 Registration Rights Agreement, dated as of October 6, 2000
  *5.1  Opinion of Ballard Spahr Andrews & Ingersoll, LLP
  *8.1  Opinion of Latham & Watkins as to tax matters.
 *23.1  Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
         5.1)
 *23.2  Consent of Deloitte & Touche LLP
 *23.3  Consent of Latham & Watkins (included in Exhibit 8.1)
 *24.1  Power of Attorney (included on the Signature Page)
</TABLE>
--------
  *  filed herewith

 (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 an exhibit to the Registrant's Current Report on Form
     8-K dated February 6, 1998 and incorporated herein by reference.

 (3) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
     12675) dated April 20, 1998 and incorporated herein by reference.

 (4) Previously filed as an exhibit to the Registration Statement on Form S-3
     (No. 333-72229) as declared effective on September 13, 1999 and
     incorporated herein by reference.

 (5) Previously filed as an exhibit to the Registration Statement on Form S-3
     (No. 333-89151) dated October 15, 1999 and incorporated herein by
     reference.

 (6) 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.

 (7) Previously filed as an exhibit to the Annual Report on Form 10-K (No. 1-
     12675) dated December 31, 1999 and incorporated herein by reference.

 (8) Previously filed as an exhibit to the Current Report on Form 8-K/A, dated
     October 29, 1997, and incorporated herein by reference.

 (9) 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.

(10) Previously filed as an exhibit to the Registration Statement on Form S-3
     (No. 333-34638) dated April 12, 2000 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-3
<PAGE>

       (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;

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 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-4
<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 14th day of November, 2000.

                                          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>
    /s/ John B. Kilroy, Sr.          Chairman of the Board         November 14, 2000
____________________________________
        John B. Kilroy, Sr.

    /s/ John B. Kilroy, Jr.          President, Chief Executive    November 14, 2000
____________________________________  Officer and Director
        John B. Kilroy, Jr.           (Principal Executive
                                      Officer)

       /s/ John R. D'Eathe           Director                      November 14, 2000
____________________________________
          John R. D'Eathe

       /s/ Matthew J. Hart           Director                      November 14, 2000
____________________________________
          Matthew J. Hart
</TABLE>

                                      S-1
<PAGE>

<TABLE>
<CAPTION>
              Signature                           Title                    Date
              ---------                           -----                    ----

 <C>                                  <S>                            <C>
      /s/ William P. Dickey           Director                       November 14, 2000
 ____________________________________
          William P. Dickey


        /s/ Dale F. Kinsella          Director                       November 14, 2000
 ____________________________________
           Dale F. Kinsella

     /s/ Richard E. Moran Jr.         Executive Vice President,      November 14, 2000
 ____________________________________  Chief Financial Officer and
         Richard E. Moran Jr.          Secretary (Principal
                                       Financial Officer)

      /s/ Ann Marie Whitney           Senior Vice President and      November 14, 2000
 ____________________________________  Controller (Principal
          Ann Marie Whitney            Accounting Officer)

</TABLE>

                                      S-2
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 -------
 <C>     <S>
   4.1   Articles of Amendment and Restatement of the Registrant(1)

   4.2   Amended and Restated Bylaws of the Registrant(1)
   4.3   Form of Certificate for Common Stock of the Registrant(1)
   4.4   Articles Supplementary of the Registrant designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(2)
   4.5   Articles Supplementary of the Registrant, designating 8.075% Series A
          Cumulative Redeemable Preferred Stock(3)
   4.6   Articles Supplementary of the Registrant designating its Series B
          Junior Participating Preferred Stock(4)
   4.7   Certificate of Correction for the Articles Supplementary of the
          Registrant designating its Series B Junior Participating Preferred
          Stock(5)
   4.8   Articles Supplementary of the Registrant designating its 9.375% Series
          C Cumulative Redeemable Preferred Stock(6)
   4.9   Articles Supplementary of the Registrant designating 9.25% Series D
          Cumulative Redeemable Preferred Stock(7)
   4.10  Articles Supplementary of the Registrant designating 9.25% Series D
          Cumulative Redeemable Preferred Stock(10)
   4.11  Registration Rights Agreement, dated January 31, 1997(1)
   4.12  Registration Rights Agreement, dated February 6, 1998(2)
   4.13  Registration Rights Agreement, dated April 20, 1998(3)
   4.14  Registration Rights Agreement, dated November 24, 1998(6)
   4.15  Registration Rights Agreement, dated as of October 31, 1997(8)
   4.16  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(9)
   4.17  Registration Rights Agreement, dated as of December 9, 1999(7)
   4.18  First Amendment to Registration Rights Agreement of December 9, 1999
          dated as of December 30, 1999(10)
  *4.19  Registration Rights Agreement, dated as of October 6, 2000
  *5.1   Opinion of Ballard Spahr Andrews & Ingersoll, LLP

  *8.1   Opinion of Latham & Watkins as to tax matters
 *23.1   Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit
          5.1)
 *23.2   Consent of Deloitte & Touche LLP
 *23.3   Consent of Latham & Watkins (included in Exhibit 8.1)
 *24.1   Power of Attorney (included on the Signature Page)
</TABLE>
--------
  * filed herewith

(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 an exhibit to the Registrant's Current Report on Form
    8-K dated February 6, 1998 and incorporated herein by reference.
<PAGE>

(3) Previously filed as an exhibit to the Current Report on Form 8-K (No. 1-
    12675) dated April 20, 1998 and incorporated herein by reference.

(4) Previously filed as an exhibit to the Registration Statement on Form S-3
    (No. 333-72229) as declared effective on September 15, 1999 and
    incorporated herein by reference.

(5) Previously filed as an exhibit to the Registration Statement on Form S-3
    (No. 333-89151) dated October 15, 1999 and incorporated herein by
    reference.

(6) 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.

(7) Previously filed as an exhibit to the Annual Report in Form 10-K (No. 1-
    12675) dated December 31, 1999 and incorporated herein by reference.

(8) Previously filed as an exhibit to the Current Report on Form 8-K/A, dated
    October 29, 1997, and incorporated herein by reference.

(9) 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.

(10) Previously filed as an exhibit to the Registration Statement Form S-3 (No.
     333-34638) dated April 12, 2000 and incorporated herein by reference.

                                       2


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