x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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•	Combined reports better reflect how management and the analyst community view the business as a single operating unit;

•	Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

•	Combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and

•	Combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

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•	Item 6. Selected Financial Data – Kilroy Realty Corporation;

•	Item 6. Selected Financial Data – Kilroy Realty, L.P.;

•	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations:

◦	—Liquidity and Capital Resources of the Company; and

◦	—Liquidity and Capital Resources of the Operating Partnership;

•	consolidated financial statements;

•	the following notes to the consolidated financial statements:

◦	Note 8, Secured and Unsecured Debt of the Company;

◦	Note 9, Secured and Unsecured Debt of the Operating Partnership;

◦	Note 11, Noncontrolling Interests on the Company’s Consolidated Financial Statements;

◦	Note 12, Noncontrolling Interests on the Operating Partnership’s Consolidated Financial Statements;

◦	Note 13, Stockholders’ Equity of the Company;

◦	Note 14, Partners' Capital of the Operating Partnership;

◦	Note 20, Net Income Available to Common Stockholders Per Share of the Company;

◦	Note 21, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;

◦	Note 22, Supplemental Cash Flow Information of the Company;

◦	Note 23, Supplemental Cash Flow Information of the Operating Partnership;

◦	Note 25, Quarterly Financial Information of the Company (Unaudited); and

◦	Note 26, Quarterly Financial Information of the Operating Partnership (Unaudited).

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ITEM 1.	BUSINESS

(1)	Estimated rentable square feet upon completion. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations —Completed, In-Process and Future Development Pipeline” for more information.

(2)	Includes 86,000 square feet of Production, Distribution, and Repair (“PDR”) space. Development projects under construction also include 96,000 square feet of retail space and 237 residential units at One Paseo - Phase I in addition to the estimated rentable square feet noted above.

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•	Corporate Governance Guidelines;

•	Code of Business Conduct and Ethics;

•	Audit Committee Charter;

•	Executive Compensation Committee Charter; and

•	Nominating / Corporate Governance Committee Charter.

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•	the quality, geographic location, physical characteristics and operating sustainability of our properties;

•	our ability to efficiently manage our assets as a low cost provider of commercial real estate through our seasoned management team possessing core capabilities in all aspects of real estate ownership, including property management, leasing, marketing, financing, accounting, legal, and construction and development management;

•	our access to development, redevelopment, acquisition and leasing opportunities as a result of our extensive experience and significant working relationships with major West Coast property owners, corporate tenants, municipalities and landowners given our over 70-year presence in the West Coast markets;

•	our active development program and our near-term and future development pipeline of undeveloped land sites (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations” for additional information pertaining to the Company’s in-process, near-term and future development pipeline);

•	our capital recycling program (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources of the Operating Partnership” for additional information pertaining to the Company’s capital recycling program and related property and land dispositions);

•	our ability to capitalize on inflection points in a real estate cycle to add quality assets to our portfolio at substantial discounts to long-term value, through either acquisition, development or redevelopment; and

•	our strong financial position that has and will continue to allow us to pursue attractive acquisition and development and redevelopment opportunities.

•	maximizing cash flow from our properties through active leasing, early renewals and effective property management;

•	structuring leases to maximize returns;

•	managing portfolio credit risk through effective underwriting, including the use of credit enhancements and interests in collateral to mitigate portfolio credit risk;

•	managing operating expenses through the efficient use of internal property management, leasing, marketing, financing, accounting, legal, and construction and development management functions;

•	maintaining and developing long-term relationships with a diverse tenant base;

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•	continuing to effectively manage capital improvements to enhance our properties’ competitive advantages in their respective markets and improve the efficiency of building systems;

•	continuing to expand our management team with individuals who have extensive regional and product-type experience and are highly knowledgeable in their respective markets and product types; and

•	attracting and retaining motivated employees by providing financial and other incentives to meet our operating and financial goals.

•	be the premier provider of modern and collaborative office and mixed-use projects on the West Coast with a focus on design and environment;

•	maintain a disciplined approach by commencing development when appropriate based on market conditions, favoring pre-leasing, developing in stages or phasing, and cost control;

•	reinvest capital from dispositions of selective assets into new state-of-the-market development and acquisition opportunities with higher cash flow and rates of return;

•	execute on our development projects under construction and our near-term and future development pipeline, including expanding entitlements; and

•	evaluate redevelopment opportunities in supply-constrained markets because such efforts generally achieve similar returns to new development with reduced entitlement risk and shorter construction periods.

•	provide attractive yields and significant potential for growth in cash flow from property operations;

•	present growth opportunities in our existing or other strategic markets; and

•	demonstrate the potential for improved performance through intensive management, repositioning and leasing that should result in increased occupancy and rental revenues.

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•	maintaining financial flexibility, including a low secured to unsecured debt ratio;

•	maximizing our ability to access a variety of both public and private capital sources;

•	maintaining a staggered debt maturity schedule in which the maturity dates of our debt are spread over several years to limit risk exposure at any particular point in the capital and credit market cycles;

•	completing financing in advance of the need for capital;

•	managing interest rate exposure by generally maintaining a greater amount of fixed-rate debt as compared to variable-rate debt; and

•	maintaining our credit ratings.

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managing our properties to offer the maximum degree of utility and operational efficiency to tenants. We offer tenant sustainability programs focused on helping our tenants reduce their energy and water consumption and increase their recycling diversion rates. Many of our assets are in zones that have been impacted by drought, and as such face the risk of increased water costs and fines for high consumption. We have mitigated these risks through comprehensive, proactive water reductions throughout our portfolio, including domestic fixture upgrades, cooling tower optimizations, a comprehensive leak detection program, and irrigation systems retrofits. We also incorporate green lease language into 100% of our new leases, including a cost recovery clause for resource-efficiency related capital in full-service gross leases, which align tenant and landlord interests on energy, water and waste efficiency. Green leases (also known as aligned leases, high performance leases or energy efficient leases) align the financial and energy incentives of building owners and tenants so they can work together to save money, conserve resources and ensure the efficient operation of buildings. We were honored in 2014 to be part of the inaugural class of Green Lease Leaders, the Institute for Market Transformation's (“IMT's”) program to encourage green leasing in real estate. In 2016, IMT honored us again with two Green Lease Leaders Team Transaction awards. Energy and water consumption data for the last three years audited by DNV GL Business Assurance USA, Inc. are as follows:

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(1)	Full 2017 calendar year energy and water data is not available until March 30, 2018. 2016 is the most recent year for which full energy and water data is available and verified by a third party.

(2)	Floor area is considered to have complete energy consumption data coverage when energy consumption data (i.e., energy types and amounts consumed) is obtained by the Company for all types of energy consumed in the relevant floor area during the fiscal year, regardless of when such data was obtained.

(3)	The scope of energy includes energy purchased from sources external to the Company and its tenants or produced by the Company or its tenants themselves (self-generated) and energy from all sources, including direct fuel usage, purchased electricity, and heating, cooling and steam energy.

(4)	Data reported in MWh on a like-for-like comparison excludes assets which have been acquired, disposed, under development or have been largely refurbished over the past twenty-four months.

(5)	Floor area is considered to have complete water withdrawal data coverage when water withdrawal data (i.e., amounts withdrawn) is obtained by the registrant in the relevant floor area during the fiscal year, regardless of when such data was obtained.

(6)	Water sources include surface water (including water from wetlands, rivers, lakes and oceans), groundwater, rainwater collected directly and stored by the registrant, wastewater obtained from other entities, municipal water supplies or supply from other water utilities.

•	building our current development projects to Leadership in Energy and Environmental Design (“LEED”) specifications. All of our office development projects are now designed to achieve LEED certification, either LEED Platinum or Gold;

•

actively pursuing LEED certification for approximately 1.8 million square feet of office and/or mixed use space under construction. In addition, an analysis of energy performance is included in our standard due diligence process for acquisitions, and reducing energy use year over year is a comprehensive goal of our operational strategy. This is accomplished through systematic energy auditing, mechanical, lighting and other building upgrades, optimizing operations and engaging tenants. During the past few years we have significantly enhanced the sustainability profile of our portfolio, ending 2017 with 58% of our properties LEED certified and 72% of our properties ENERGY STAR certified. During 2017, the Company was recognized for our sustainability efforts with multiple industry leadership awards, including NAREIT’s 2017 Office Leader in the Light Award for the fourth consecutive year, and the ENERGY STAR Partner of the Year Sustained Excellence Award. The Company was also recognized by GRESB as the North American office leader in sustainability for the fourth year in a row, and we became one of only three American real estate companies to be listed in the Dow Jones Sustainability World Index.

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•	the financial condition of our tenants, many of which are technology; life science and healthcare; finance, insurance and real estate; media and professional business and other service firms, may be adversely affected, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;

•	significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

•	our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from our acquisition and development activities and increase our future interest expense;

•	reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and

•	one or more lenders under the Operating Partnership’s unsecured revolving credit facility could refuse to fund their financing commitment to us or could fail and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.

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•	local oversupply or reduction in demand for office, mixed-use or other commercial space, which may result in decreasing rental rates and greater concessions to tenants;

•	inability to collect rent from tenants;

•	vacancies or inability to rent space on favorable terms or at all;

•	inability to finance property development and acquisitions on favorable terms or at all;

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

•	costs of complying with changes in governmental regulations;

•	the relative illiquidity of real estate investments;

•	declines in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing;

•	changing submarket demographics;

•	changes in space utilization by our tenants due to technology, economic conditions and business culture;

•	the development of harmful mold or other airborne toxins or contaminants that could damage our properties or expose us to third-party liabilities; and

•	property damage resulting from seismic activity or other natural disasters.

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•	we may potentially be unable to acquire a desired property because of competition from other real estate investors with significant capital, including both publicly traded and private REITs, institutional investment funds and other real estate investors;

•	even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price;

•	even if we enter into agreements for the acquisition of a desired property, we may be unable to complete such acquisitions because they remain subject to customary conditions to closing, including the completion of due diligence investigations to management’s satisfaction;

•	we may be unable to finance acquisitions on favorable terms or at all;

•	we may spend more than budgeted amounts in operating costs or to make necessary improvements or renovations to acquired properties;

•	we may lease acquired properties at economic lease terms different than projected;

•	we may acquire properties that are subject to liabilities for which we may have limited or no recourse; and

•	we may be unable to complete an acquisition after making a nonrefundable deposit and incurring certain other acquisition-related costs.

•	we may be unable to lease acquired, developed or redeveloped properties on lease terms projected at the time of acquisition, development or redevelopment or within budgeted timeframes;

•	the operating expenses at acquired, developed or redeveloped properties may be greater than projected at the time of acquisition, development or redevelopment, resulting in our investment being less profitable than we expected;

•	we may not commence or complete development or redevelopment properties on schedule or within budgeted amounts or at all;

•	we may not be able to develop or redevelop the estimated square footage and other features of our development and redevelopment properties;

•	we may suspend development or redevelopment projects after construction has begun due to changes in economic conditions or other factors, and this may result in the write-off of costs, payment of additional costs or increases in overall costs when the development or redevelopment project is restarted;

•	we may expend funds on and devote management’s time to acquisition, development or redevelopment properties that we may not complete and as a result we may lose deposits or fail to recover expenses already incurred;

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•	we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy, and other required governmental permits and authorizations;

•	we may encounter delays, refusals, unforeseen cost increases and other impairments resulting from third-party litigation; and

•	we may fail to obtain the financial results expected from properties we acquire, develop or redevelop.

•	we would not be able to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, which would allow for impasses on decisions that could restrict our ability to sell or transfer our interests in such entity or such entity’s ability to transfer or sell its assets;

•	partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, which could delay construction or development of a property or increase our financial commitment to the partnership or joint venture;

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•	partners or co-venturers may pursue economic or other business interests, policies or objectives that are competitive or inconsistent with ours;

•	if we become a limited partner or non-managing member in any partnership or limited liability company, and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity;

•	disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business; and

•	we may, in certain circumstances, be liable for the actions of our third-party partners or co-venturers.

•	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.

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•	direct obligations issued by the U.S. Treasury;

•	obligations issued or guaranteed by the U.S. government or its agencies;

•	taxable municipal securities;

•	obligations (including certificates of deposits) of banks and thrifts;

•	commercial paper and other instruments consisting of short-term U.S. dollar denominated obligations issued by corporations and banks;

•	repurchase agreements collateralized by corporate and asset-backed obligations;

•	both registered and unregistered money market funds; and

•	other highly rated short-term securities.

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•	result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally identifiable and account information that could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

•	result in unauthorized access to or changes to our financial accounting and reporting systems and related data;

•	result in our inability to maintain building systems relied on by our tenants;

•	require significant management attention and resources to remedy any damage that results;

•	subject us to regulatory penalties or claims for breach of contract, damages, credits, penalties or terminations of leases or other agreements; or

•	damage our reputation among our tenants and investors.

•	actual or anticipated variations in our operating results, funds from operations, cash flows, liquidity or distributions;

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•	our ability to successfully execute on our development program;

•	our ability to successfully complete acquisitions and operate acquired properties;

•	earthquakes;

•	changes in our earnings estimates or those of analysts;

•	publication of research reports about us, the real estate industry generally or the office and residential sectors in which we operate;

•	the failure to maintain our current credit ratings or comply with our debt covenants;

•	increases in market interest rates that lead purchasers of our common stock to demand a higher dividend yield;

•	actual or anticipated changes in tax laws and regulations;

•	changes in market valuations of similar companies;

•	adverse market reaction to any debt or equity securities we may issue or additional debt we incur in the future;

•	additions or departures of key management personnel;

•	actions by institutional stockholders;

•	speculation in the press or investment community;

•	high levels of volatility in the credit markets;

•	general market and economic conditions; and

•	the realization of any of the other risk factors included in this report.

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the Company’s charter authorizes the board of directors to issue up to 30,000,000 shares of the Company’s 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 was in our security holders’ interest; and

•	the Company’s charter states that any director, or the entire board of directors, may be removed from office at any time, but only for cause and then only by the affirmative vote of the holders of at least two thirds of the votes of the Company’s capital stock entitled to be cast in the election of directors.

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•	the Company would not be allowed a deduction for dividends paid to its stockholders in computing the Company’s taxable income and would be subject to federal income tax at regular corporate rates;

•	the Company could be subject to increased state and local taxes; and

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

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•	temporarily reducing individual U.S. federal income tax rates on ordinary income; the highest individual U.S. federal income tax rate has been reduced from 39.6% to 37% for taxable years beginning after December 31, 2017 and before January 1, 2026;

•	permanently eliminating the progressive corporate tax rate structure, which previously imposed a maximum corporate tax rate of 35%, and replacing it with a flat corporate tax rate of 21%;

•	permitting a deduction for certain pass-through business income, including dividends received by our stockholders from us that are not designated by us as capital gain dividends or qualified dividend income, which will allow individuals, trusts, and estates to deduct up to 20% of such amounts for taxable years beginning after December 31, 2017 and before January 1, 2026;

•	reducing the highest rate of withholding with respect to our distributions to non-U.S. stockholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;

•	limiting our deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of REIT taxable income;

•	generally limiting the deduction for net business interest expense in excess of 30% of a business’ “adjusted taxable income,” except for taxpayers (including most equity REITs) that engage in certain real estate businesses and elect out of this rule (provided that such electing taxpayers must use an alternative depreciation system with longer depreciation periods);

•	eliminating the corporate alternative minimum tax, for taxable years after December 31, 2017;

•	requiring us to take into account certain income no later than when we take it into account on applicable financial statements, even if financial statements take such income into account before it accrues under otherwise applicable Code rules; and

•	repealing the performance-based compensation exception to the $1 million deduction limit on executive compensation and expanding the scope of employees to whom the limit applies.

ITEM 1B.	UNRESOLVED STAFF COMMENTS

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(1)	Estimated rentable square feet upon completion. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Factors That May Influence Future Results of Operations —Completed, In-Process and Future Development Pipeline” for more information.

(2)	Includes 86,000 square feet of Production, Distribution, and Repair (“PDR”) space. Development projects under construction also include 96,000 square feet of retail space and 237 residential units at One Paseo - Phase I in addition to the estimated rentable square feet noted above.

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(1)	Based on all leases at the respective properties in effect as of December 31, 2017. Includes month-to-month leases as of December 31, 2017.

(2)

Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Excludes month-to-month leases and vacant space as of December 31, 2017. Includes 100% of annualized base rent of consolidated property partnerships.

(3)	For these properties, the leases are written on a full service gross basis.

(4)	For these properties, the leases are written on a modified gross basis.

(5)	For these properties, the leases are written on a triple net basis.

(6)	For these properties, the leases are written on a modified net basis.

(7)	For this property, leases of approximately 92,000 rentable square feet are written on a full service gross basis and approximately 4,000 rentable square feet are written on a modified gross basis.

(8)	For this property, leases of approximately 264,000 rentable square feet are written on a modified gross basis and approximately 35,000 rentable square feet are written on a full service gross basis.

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(9)	For this property, leases of approximately 226,000 rentable square feet are written on a full service gross basis and approximately 5,000 rentable square feet are written on a triple net basis.

(10)	For this property, leases of approximately 106,000 rentable square feet are written on a full service gross basis and approximately 9,000 rentable square feet are written on a gross basis.

(11)	For this property, leases of approximately 14,000 rentable square feet are written on a triple net basis and approximately 6,000 rentable square feet are written on a gross basis.

(12)	For this property, leases of approximately 236,000 rentable square feet are written on a modified gross basis and approximately 15,000 rentable square feet are written on a full service gross basis.

(13)	For this property, leases of approximately 280,000 rentable square feet are written on a full service gross basis, approximately 16,000 rentable square feet are written on a triple net basis and approximately 5,000 rentable square feet are written on a modified gross basis.

(14)	For this property, leases of approximately 7,000 rentable square feet are written on a modified gross basis and approximately 3,000 rentable square feet are written on a full service gross basis.

(15)	For this property, leases of approximately 50,000 rentable square feet are written on a full service gross basis and approximately 46,000 rentable square feet are written on a modified net basis.

(16)	For this property, leases of approximately 32,000 rentable square feet are written on a full service gross basis and approximately 8,000 rentable square feet are written on a triple net basis.

(17)	For this property, leases of approximately 107,000 rentable square feet are written on a modified gross basis, approximately 25,000 rentable square feet are written on a gross basis and approximately 9,000 rentable square feet are written on a full service gross basis.

(18)	This property is vacant.

(19)	For this property, leases of approximately 61,000 rentable square feet are written on a full service gross basis, and approximately 4,000 rentable square feet are written on a triple net basis.

(20)	For this property, leases of approximately 227,000 rentable square feet are written on a full service gross basis and approximately 8,000 rentable square feet are written on a modified gross basis.

(21)	For this property, leases of approximately 72,000 rentable square feet are written on a modified gross basis and approximately 3,000 rentable square feet are written on a full service gross basis.

(22)	For this property, leases of approximately 36,000 rentable square feet are written on a full service gross basis and approximately 3,000 rentable square feet are written on a modified gross basis.

(23)	For this property, leases of approximately 125,000 rentable square feet are written on a modified gross basis and approximately 5,000 rentable square feet are written on a full service gross basis.

(24)	For this property, leases of approximately 80,000 rentable square feet are written on a modified gross basis, approximately 26,000 rentable square feet are written on a full service gross basis and approximately 17,000 rentable square feet are written on a gross basis.

(25)	For this property, leases of approximately 91,000 rentable square feet are written on a modified gross basis and approximately 24,000 rentable square feet are written on a full service gross basis.

(26)	For this property, leases of approximately 77,000 rentable square feet are written on a modified gross basis and approximately 2,000 rentable square feet are written on a full service gross basis.

(27)	For this property, leases of approximately 108,000 rentable square feet are written on a modified gross basis and approximately 20,000 rentable square feet are written on a full service gross basis.

(28)	For this property, leases of approximately 79,000 rentable square feet are written on a full service gross basis, approximately 22,000 rentable square feet are written on a gross basis and approximately 3,000 rentable square feet are written on a modified gross basis.

(29)	For this property, leases of approximately 25,000 rentable square feet are written on a triple net basis and approximately 20,000 rentable square feet are written on a gross basis.

(30)	For this property, leases of approximately 305,000 rentable square feet are written on a modified gross basis, approximately 286,000 rentable square feet are written on a full service gross basis, approximately 38,000 rentable square feet are written on a gross basis and approximately 24,000 rentable square feet are written on a triple net basis.

(31)	For this property, leases of approximately 353,000 rentable square feet are written on a full service gross basis, approximately 84,000 rentable square feet are written on a gross basis and approximately 8,000 rentable square feet are written on a triple net basis.

(32)	For this property, leases of approximately 254,000 rentable square feet are written on a full service gross basis, approximately 19,000 rentable square feet are written on a modified gross basis, approximately 11,000 rentable square feet are written on a triple net basis and approximately 1,000 rentable square feet are written on a gross basis.

(33)	For this property, leases of approximately 370,000 rentable square feet are written on a modified gross basis, approximately 57,000 rentable square feet are written on a full service gross basis and approximately 3,000 rentable square feet are written on a triple net basis.

(34)	For this property, leases of approximately 182,000 rentable square feet are written on a modified gross basis and approximately 4,000 rentable square feet are written on a triple net basis.

(35)	For this property, leases of approximately 472,000 rentable square feet are written on a triple net basis and approximately 7,000 rentable square feet are written on a modified gross basis.

(36)	For this property, leases of approximately 378,000 rentable square feet are written on a full service gross basis and approximately 20,000 rentable square feet are written on a triple net basis.

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(1)	This project was 95.3% occupied at December 31, 2017.

(1)	Represents the earlier of the anticipated stabilization date or one year from building shell substantial completion.

(2)	During the year ended December 31, 2017, the Company signed a 15-year lease for 100% of the office space with Dropbox, Inc. The lease with Dropbox, Inc. will commence in phases beginning in the fourth quarter of 2018 through the fourth quarter of 2019. Estimated stabilization date represents one year from building shell completion.

(3)

This project is comprised of approximately 314,000 square feet of office and 86,000 square feet of Production, Distribution, and Repair (“PDR”) space. During the year ended December 31, 2017, the Company entered into a long term lease with Adobe for the entire 314,000 square feet of office space. The Company is developing an adjacent 59,000 square foot building located at 150 Hooper with a total estimated investment of approximately $22.0 million.

(4)	Development for this project will occur in phases. Phase I includes the project’s overall infrastructure and site work, 237 residential units and approximately 96,000 square feet of retail space.

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(1)	Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one or more of the following: any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new office supply, regulatory and entitlement processes or project design.

(2)	The Company acquired this development site located in the Little Italy submarket of San Diego during the fourth quarter of 2017.

(3)	Development for this project will occur in phases. Phases II and III, comprised of residential and office will commence subject to market conditions and economic factors.

(1)

Annualized base rental revenue includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Excludes month-to-month leases and vacant space as of December 31, 2017.

(2)	Includes 100% of the annualized base rental revenues of consolidated property partnerships.

(3)	The LinkedIn Corporation leases, which contribute $2.2 million and $26.1 million, expire in July 2019 and September 2026, respectively.

(4)	The salesforce.com, inc. leases, which contribute $0.4 million, $12.9 million, $5.7 million and $4.9 million, will expire in August 2018, March 2029, December 2030 and September 2032, respectively.

(5)	The Box, Inc. leases, which contribute $2.0 million and $20.4 million, expire in August 2021 and June 2028, respectively.

(6)	The Dropbox, Inc. leases, which contribute $5.7 million and $14.8 million, expire in September 2019 and August 2027, respectively.

(7)	The Bridgepoint Education Inc. leases, which contribute $6.3 million and $7.8 million, expire in July 2018 and September 2018, respectively.

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(8)	The Riot Games, Inc. leases, which contribute $5.6 million, $2.1 million, and $5.1 million, expire in September 2020, November 2020, and November 2024, respectively.

(9)	The Concur Technologies leases, which contribute $1.8 million and $8.9 million, expire in April 2025 and December 2025, respectively.

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(1)

Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Amounts represent percentage of total portfolio annualized contractual base rental revenue.

(2)	Includes 100% of annualized based rent of consolidated property partnerships.

(3)	For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of December 31, 2017, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2017.

ITEM 3.	LEGAL PROCEEDINGS

ITEM 4.	MINE SAFETY DISCLOSURES

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ITEM 5.	MARKET FOR KILROY REALTY CORPORATION’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(1)	Includes a special cash dividend of $1.90 per share of common stock that was paid on January 13, 2017.

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(1)	Includes a special cash distribution of $1.90 per common unit that was paid on January 13, 2017.

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ITEM 6.	SELECTED FINANCIAL DATA – KILROY REALTY CORPORATION

(1)

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-08 effective January 1, 2015 (see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report for additional information). As a result, results of operations for properties classified as held for sale and/or disposed of subsequent to January 1, 2015 are presented in continuing operations. Prior to January 1, 2015, properties classified as held for sale and/or disposed of are presented in discontinued operations.

(2)	Dividends declared for the year ended December 31, 2016 includes a special dividend of $1.90 per share of common stock that was paid on January 13, 2017.

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(1)

On January 1, 2016, the Company adopted FASB ASU No. 2015-03 and 2015-15 which require deferred financing costs, except costs paid for the unsecured line of credit, to be reclassified as a reduction to the debt liability balance instead of being reported as an asset as historically presented. As a result, total assets and total debt have been adjusted from prior amounts reported to reflect this change for all periods presented.

(2)	Includes the noncontrolling interests of the common units of the Operating Partnership and consolidated property partnerships (see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report for additional information).

(3)

We calculate FFO in accordance with the White Paper on FFO approved by the Board of Governors of NAREIT. The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding extraordinary items, as defined by GAAP, gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets) and after adjustment for unconsolidated partnerships and joint ventures. Our calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. We also add back net income attributable to noncontrolling common units of the Operating Partnership because we report FFO attributable to common stockholders and common unitholders.

(4)	FFO includes amortization of deferred revenue related to tenant-funded tenant improvements of $16.8 million, $13.2 million, $13.3 million, $11.0 million and $10.7 million for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectively.

(5)

On January 1, 2017, the Company adopted FASB ASU No. 2016-18 which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, cash flows provided by (used in) investing activities have been adjusted from prior amounts reported to reflect this change for all periods presented.

(6)	For the year ended December 31, 2016, represents occupancy at December 31, 2016.

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(1)

The Company adopted FASB ASU No. 2014-08 effective January 1, 2015 (see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report for additional information). As a result, results of operations for properties classified as held for sale and/or disposed of subsequent to January 1, 2015 are presented in continuing operations. Prior to January 1, 2015, properties classified as held for sale and/or disposed of are presented in discontinued operations.

(2)	The year ended December 31, 2016 includes a special distribution of $1.90 per common unit that was paid on January 13, 2017.

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(1)

On January 1, 2016, the Company adopted FASB ASU No. 2015-03 and 2015-15 which require deferred financing costs, except costs paid for the unsecured line of credit, to be reclassified as a reduction to the debt liability balance instead of being reported as an asset as historically presented. As a result, total assets and total debt have been adjusted from prior amounts reported to reflect this change for all periods presented.

(2)	Includes the noncontrolling interests in consolidated property partnerships and subsidiaries (see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report for additional information).

(3)

On January 1, 2017, the Company adopted FASB ASU No. 2016-18 which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, cash flows provided by (used in) investing activities have been adjusted from prior amounts reported to reflect this change for all periods presented.

(4)	For the year ended December 31, 2016, represents occupancy at December 31, 2016.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants;

•	adverse economic or real estate conditions generally, and specifically, in the States of California and Washington;

•	risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry;

•	defaults on or non-renewal of leases by tenants;

•	any significant downturn in tenants’ businesses;

•	our ability to re-lease property at or above current market rates;

•	costs to comply with government regulations, including environmental remediations;

•	the availability of cash for distribution and debt service and exposure to risk of default under debt obligations;

•	increases in interest rates and our ability to manage interest rate exposure;

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•	the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt;

•	a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges;

•	significant competition, which may decrease the occupancy and rental rates of properties;

•	potential losses that may not be covered by insurance;

•	the ability to successfully complete acquisitions and dispositions on announced terms;

•	the ability to successfully operate acquired, developed and redeveloped properties;

•	the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts;

•	delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties;

•	increases in anticipated capital expenditures, tenant improvement and/or leasing costs;

•	defaults on leases for land on which some of our properties are located;

•	adverse changes to, or implementations of, applicable laws, regulations or legislation, as well as business and consumer reactions to such changes;

•	risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers;

•	environmental uncertainties and risks related to natural disasters; and

•	our ability to maintain our status as a REIT.

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•	Issued 4,427,500 shares of common stock for aggregate net proceeds of $308.8 million in an underwritten public offering;

•	Issued 235,077 shares of common stock for aggregate net proceeds of $17.5 million under the Company’s at-the-market (“ATM”) offering program;

•	Increased the size of the unsecured revolving credit facility from $600.0 million to $750.0 million and reduced the borrowing costs;

•	Repaid a $39.0 million unsecured term loan;

•	Redeemed 8,000,000 shares of 6.875% Series G and 6.375% Series H preferred stock at the contractual redemption price of $25.00 per share for a total cost of $200.0 million in cash;

•	Completed the early redemption of all $325.0 million of the company’s 4.800% unsecured senior notes due July 2018 for a cash price of approximately $330.0 million, resulting in a loss on early extinguishment of debt;

•	Repaid a total of $124.5 million of secured debt at par, of which $123.5 million was a mortgage note that was held by 303 Second LLC, a property partnership in which we have a 56% equity interest. NBREM contributed $54.4 million to fund their proportionate share of the repayment of this mortgage debt;

•	Issued $175.0 million of 10-year 3.350% unsecured senior notes (the “Series A Notes”) and $75.0 million of 12-year 3.450% unsecured senior notes (the “Series B Notes” and, together with the Series A Notes, the “Series A and B Notes”) maturing in February 2027 and February 2029, respectively, pursuant to a delayed draw option in connection with a private note placement in September 2016; and

•	Issued $425.0 million aggregate principal amount of 7-year, 3.450% senior unsecured notes maturing in December 2024 in an underwritten public offering.

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•	whether the lease agreement requires landlord approval of how the tenant improvement allowance is spent prior to installation of the tenant improvements;

•	whether the lease agreement requires the tenant to provide evidence to the landlord supporting the cost and what the tenant improvement allowance was spent on prior to payment by the landlord for such tenant improvements;

•	whether the tenant improvements are unique to the tenant or reusable by other tenants;

•	whether the tenant is permitted to alter or remove the tenant improvements without the consent of the landlord or without compensating the landlord for any lost utility or diminution in fair value; and

•	whether the ownership of the tenant improvements remains with the landlord or remains with the tenant at the end of the lease term.

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•	estimating the final expenses, net of accruals, that are recoverable;

•	estimating the fixed and variable components of operating expenses for each building;

•	conforming recoverable expense pools to those used in establishing the base year or base allowance for the applicable underlying lease; and

•	concluding whether an expense or capital expenditure is recoverable pursuant to the terms of the underlying lease.

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•	low occupancy levels, forecasted low occupancy levels or near term lease expirations at a specific property;

•	current period operating or cash flow losses combined with a historical pattern or future projection of potential continued operating or cash flow losses at a specific property;

•	deterioration in rental rates for a specific property as evidenced by sudden significant rental rate decreases or continuous rental rate decreases over numerous quarters, which could signal a continued decrease in future cash flow for that property;

•	deterioration of a given rental submarket as evidenced by significant increases in market vacancy and/or negative absorption rates or continuous increases in market vacancy and/or negative absorption rates over numerous quarters, which could signal a decrease in future cash flow for properties within that submarket;

•	significant increases in property sales yields, continuous increases in property sales yields over several quarters, or recent property sales at a loss within a given submarket, each of which could signal a decrease in the market value of properties;

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•	significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay;

•	evidence of material physical damage to the property; and

•	default by a significant tenant when any of the other indicators above are present.

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•	provide benefit in future periods;

•	extend the useful life of the asset beyond our original estimates; and

•	increase the quality of the asset beyond our original estimates.

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•

Columbia Square Phase 2 - Office, located in the heart of Hollywood, California, two blocks from the corner of Sunset Boulevard and Vine Street. This project is comprised of three buildings totaling approximately 365,359 rentable square feet with a total estimated investment of approximately $230.0 million. The project was added to the stabilized portfolio during the first quarter of 2017 and was 95.3% occupied and 100% leased as of December 31, 2017.

•

The Exchange on 16th, Mission Bay, San Francisco, California, which we acquired in May 2014 and commenced construction on in June 2015. This project is currently anticipated to encompass approximately 750,000 gross rentable square feet consisting of 736,000 square feet of office space and 14,000 square feet of retail space at a total estimated investment of $570.0 million. Construction is currently in progress and the building and core shell are currently estimated to be completed in the first half of 2018. The office space in the project is 100% leased to Dropbox, Inc. The lease with Dropbox, Inc. will commence in phases beginning in the fourth quarter of 2018 through the fourth quarter of 2019.

•	333 Dexter, South Lake Union, Washington, which we acquired in February 2015 and commenced construction on in June 2017. This project encompasses approximately 650,000 gross rentable square feet of office space at a total estimated investment of $380.0 million. Construction is currently in progress and the building core and shell are currently estimated to be completed in the second half of 2019.

•

100 Hooper, San Francisco, California, which we acquired in July 2015 and commenced construction on in November 2016. This project will encompass approximately 314,000 square feet of office and approximately 86,000 square feet of production, distribution and repair (“PDR”) space configured in two, four-story buildings. The total estimated cost for this project is approximately $270.0 million. Construction is currently in process and the core and shell of the project are currently expected to be completed in the first half of 2018. The office portion of the project is 100% pre-leased to Adobe Systems Inc. In connection with 100 Hooper, the Company is also developing an adjacent 59,000 square foot PDR building located at 150 Hooper with a total estimated investment of approximately $22.0 million.

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One Paseo - Phase I (Retail and Residential), San Diego, California, which we acquired in November 2007 and commenced construction on in December 2016. Phase I of this mixed-use project includes site work and related infrastructure for the entire project, as well as 237 residential units and approximately 96,000 square feet of retail space. The total estimated investment for this phase of the project is approximately $235.0 million. Construction is currently in process and is currently expected to be completed in phases beginning in the third quarter of 2018.

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(1)	Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one or more of the following:  any significant changes in the economy, market conditions, our markets, tenant requirements and demands, construction costs, new office supply, regulatory and entitlement processes, and project design.

(2)	Actual commencement is subject to extensive evaluation and consideration of market conditions and economic factors.

(3)	Represents cash paid and costs incurred as of December 31, 2017.

(4)	In January 2018, we commenced construction on Phase I of this project.

(5)	The Company acquired this development site located in the Little Italy submarket of San Diego during the fourth quarter.

(6)	Development for this project will occur in phases. Phases II and III, comprised of residential and office, will commence subject to market conditions and economic factors.

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(1)	Includes 100% of consolidated property partnerships.

(2)	First generation leasing includes space where we have made capital expenditures that result in additional revenue generated when the space is re-leased. Second generation leasing includes space where we have made capital expenditures to maintain the current market revenue stream.

(3)	Represents leasing activity for leases that commenced or were signed during the period, including first and second generation space, net of month-to-month leases. Excludes leasing on new construction.

(4)	Tenant improvements and leasing commissions per square foot exclude tenant-funded tenant improvements.

(5)	Calculated as the change between GAAP rents for new/renewed leases and the expiring GAAP rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.

(6)	Excludes commenced and executed leases of approximately 260,775 and 497,423 rentable square feet, respectively, for the year ended December 31, 2017, for which the space was vacant longer than one year or being leased for the first time. Space vacant for more than one year is excluded from our change in rents calculations to provide a more meaningful market comparison.

(7)	Calculated as the change between stated rents for new/renewed leases and the expiring stated rents for the same space. Excludes leases for which the space was vacant longer than one year or vacant when the property was acquired.

(8)	Calculated as the percentage of space either renewed or expanded into by existing tenants or subtenants at lease expiration.

(9)	For the year ended December 31, 2017, 31 new leases totaling 587,450 rentable square feet were signed but not commenced as of December 31, 2017.

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(1)	For leases that have been renewed early with existing tenants, the expiration date and annualized base rent information presented takes into consideration the renewed lease terms. Excludes leases not commenced as of December 31, 2017, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2017.

(2)

Annualized base rent includes the impact of straight-lining rent escalations and the amortization of free rent periods and excludes the impact of the following: amortization of deferred revenue related tenant-funded tenant improvements, amortization of above/below market rents, amortization for lease incentives due under existing leases, and expense reimbursement revenue. Additionally, the underlying leases contain various expense structures including full service gross, modified gross and triple net. Percentages represent percentage of total portfolio annualized contractual base rental revenue. For additional information on tenant improvement and leasing commission costs incurred by the Company for the current reporting period, please see further discussion under the caption “Information on Leases Commenced and Executed.”

(3)	Includes 100% of annualized base rent of consolidated property partnerships.

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(1)	Estimated rentable square feet upon completion.

(2)	Development projects under construction also include 96,000 square feet of retail space and 237 residential units in addition to the estimated office rentable square feet noted above.

(1)	Excludes the disposition of a property reported as held for sale as of December 31, 2016.

(2)	Includes four properties owned by consolidated property partnerships (see Note 2 “Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included in this report for additional information).

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(1)	Occupancy percentages reported are based on our stabilized office portfolio as of the end of the period presented and exclude occupancy percentages of properties held for sale.

(2)	Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2016 and still owned and stabilized as of December 31, 2017. See discussion under “Results of Operations” for additional information.

(3)	Our residential portfolio consists of our 200-unit residential tower located in Hollywood, California. For the year ended December 31, 2016, represents occupancy at December 31, 2016.

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•	Same Store Properties – includes the consolidated results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2016 and still owned and included in the stabilized portfolio as of December 31, 2017;

•	Stabilized Development Properties – includes the results generated by the following:

◦	One office development project that was added to the stabilized portfolio in the first quarter of 2017;

◦	Two office development projects that were completed and stabilized in March 2016;

◦	Our residential project that was completed in June 2016; and

◦	One office development project that was added to the stabilized portfolio in the fourth quarter of 2016;

•	Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the four office and three retail buildings we acquired in during 2016; and

•	Dispositions and Other Properties – includes the results of the ten properties disposed of in the third quarter of 2017, the one property disposed of during the first quarter of 2017, the six properties disposed of in 2016 and expenses for certain of our in-process, near-term and future development projects.

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•	An increase of $4.8 million attributable to the Same Store Properties primarily resulting from:

•	An increase in rental income of $4.5 million primarily due to the following:

◦	$14.3 million increase due primarily to new leases and renewals at higher overall average rental rates in the San Francisco Bay Area, Los Angeles and Greater Seattle regions; partially offset by

◦	$9.8 million decrease due to lease expirations and early terminations primarily in the San Francisco Bay Area;

•	An increase in tenant reimbursements of $6.9 million primarily due to:

◦	$3.8 million increase due to higher recurring expenses related to utilities, security, parking, contract services, repairs and maintenance and property taxes at certain properties;

◦	$0.9 million increase due to higher reimbursable supplemental in 2017 at two properties related to supplemental property tax adjustments and $1.6 million increase due to lower reimbursable supplemental taxes in 2016 as a result of a change in estimate at one property;

◦	$1.1 million increase due to lower abated tenant reimbursements as compared to the prior year in addition to increased tenant reimbursements from tenants with 2016 base years; partially offset by

◦	$0.5 million decrease due to lower occupancy primarily for two properties in the Greater Seattle region that are 100% and 83% leased as of the date of this filing;

•	An increase in other property income of $4.6 million primarily due to early lease termination fees in the San Francisco Bay Area and San Diego regions, of which $2.3 million was attributed to one lease; partially offset by

•	An increase in property and related expenses of $11.3 million primarily resulting from:

•	An increase of $6.8 million in property expenses primarily resulting from:

◦	$5.1 million increase in certain recurring operating costs due to increased demand and higher rates related to utilities, security, parking and contract services, as well as higher repairs and maintenance and various other reimbursable expenses;

◦	$1.2 million increase in non-reimbursable expenses primarily due to $0.5 million of non-recurring legal expenses and a $0.4 million increase due to non-recurring parking facility costs;

◦	$0.5 million increase in property management personnel costs;

•	An increase of $2.1 million in real estate taxes primarily due to:

◦	$1.8 million from regular annual property tax increases in 2017;

◦	$2.9 million of lower supplemental taxes at three properties in the San Francisco Bay Area region in 2016; partially offset by

◦	$2.6 million reduction in 2017 supplemental taxes at one property that was redeveloped in 2013;

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•	An increase of $1.9 million in provision for bad debts primarily related to one tenant; and

•	An increase of $0.6 million in ground rent primarily due to higher percentage ground rent for one of our ground leases in the Greater Seattle Area due to higher operating revenues at the related property;

•	An increase of $27.7 million attributable to the Stabilized Development Properties;

•	An increase of $18.5 million attributable to the Acquisition Properties; and

•	A decrease of $7.9 million attributable to the Dispositions & Other Properties primarily due to the following:

◦	$5.0 million of other property income received in 2016 relating to a property damage settlement; and

◦	$2.9 million of lower Net Operating Income primarily due dispositions that occurred in the third quarter of 2017.

•	An increase of approximately $2.3 million related to higher payroll costs and office expenses related to the growth of the company; and

•	An increase of $1.3 million attributable to compensation expense related to the mark-to-market adjustment for the Company’s deferred compensation plan. The compensation expense was offset by gains on the underlying marketable securities included in interest income and other net investment gains in the consolidated statements of operations.

•	An increase of $3.9 million attributable to the Same Store Properties;

•	An increase of $9.7 million attributable to the Stabilized Development Properties;

•	An increase of $18.0 million attributable to the Acquisition Properties; partially offset by

•	A decrease of $2.9 million attributable to the Dispositions & Other Properties.

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•	Same Store Properties – includes the results of all of the office properties that were owned and included in our stabilized portfolio for two comparable reporting periods, i.e., owned and included in our stabilized portfolio as of January 1, 2015 and still owned and included in the stabilized portfolio as of December 31, 2016;

•	Stabilized Development Properties – includes the results generated by the following:

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◦	One office development project that was added to the stabilized portfolio in the fourth quarter of 2016;

◦	Two office development projects that were completed and stabilized in March 2016; and

◦	Two office development projects comprising four office buildings that were completed and stabilized in the fourth quarter of 2015;

•	Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the four office and three retail buildings we acquired in three transactions during 2016; and

•

2016 Held for Sale, Dispositions, and Other Properties – includes the results of the six properties disposed of in 2016, the ten properties disposed of in 2015, one property held for sale at December 31, 2016, one office project in “lease-up” at December 31, 2016, the residential property completed in June 2016, and expenses for certain of our in-process, near-term and future development projects.

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•	An increase of $17.8 million attributable to the Same Store Properties primarily resulting from:

•	An increase in rental income of $15.7 million primarily due to the following:

◦	$14.0 million increase due to new leases at higher rates and increased occupancy;

◦	$0.9 million increase due to amortization of tenant-funded tenant improvements revenue; and

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◦	$0.8 million increase in parking income resulting from increased occupancy and rates at certain of our buildings;

•	A partially offsetting decrease in tenant reimbursements of $0.7 million primarily due to:

◦	$2.1 million decrease due to reduced supplemental property taxes at three development properties;

◦	$0.5 million decrease due to base year resets and adjustments for a number of tenants across the portfolio;

◦	$1.4 million increase due to higher expenses at certain properties; and

◦	$0.5 million increase due to lower abatements;

•	A decrease in property and related expenses of $2.8 million primarily resulting from:

•	A decrease of $1.4 million in property expenses primarily resulting from:

◦	A $1.0 million decrease in certain recurring operating costs related to electricity, insurance, repairs and maintenance, and various other reimbursable expenses; and

◦	A decrease of $0.4 million due to a $1.0 million decrease in non-recurring expenses as compared to the prior year, offset by the impact of $0.6 million of property damage insurance proceeds received in 2015;

•	A decrease of $0.9 million in real estate taxes primarily due to:

◦	A $3.1 million decrease in supplemental taxes primarily at three properties that we developed and stabilized in 2014 resulting from lower assessed values than previously estimated and successful appeals; partially offset by

◦	$2.2 million due to higher refunds received in 2015 as a result of successful property tax appeals;

•	A decrease of $0.8 million in provision for bad debts due to the evaluation of reserves at the end of each period; and

•	An increase of $0.3 million in ground rent primarily due to higher percentage rent as a result of one property that became fully leased in 2016;

•	An increase of $50.6 million attributable to the Stabilized Development Properties;

•	An increase of $4.2 million attributable to the Acquisition Properties; and

•	A decrease of $24.6 million attributable to the 2016 Held for Sale, Dispositions & Other Properties primarily due to the following:

◦	A net decrease of $28.4 million due to the sale of six buildings during the year ended December 31, 2016, the sale of ten buildings during the year ended December 31, 2015 and the one property held for sale as of December 31, 2016, partially offset by $5.0 million due to a property damage settlement received in 2017 for a property that was disposed of in 2016;

◦	A net decrease of $4.0 million attributable to the residential property that was completed in June 2016, consisting of $2.1 million in rental income offset by $6.1 million in property expenses given that the residential property is still in the early stages of operations; offset by

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◦	An increase of $2.8 million attributable to our one property in “lease-up” at December 31, 2016.

•	An increase of $5.4 million attributable to share-based compensation expense related to the 2016 restricted stock unit grants;

•	An increase of approximately $1.7 million related to higher payroll costs and office expenses related to the growth of the company; and

•	An increase of $0.8 million attributable to compensation expense related to the mark-to-market adjustment for the Company’s deferred compensation plan. The compensation expense was offset by gains on the underlying marketable securities included in interest income and other net investment gains (losses) in the consolidated statements of operations.

•	An increase of $13.7 million attributable to the Stabilized Development Properties;

•	An increase of $2.8 million attributable to the Same Store Properties;

•	An increase of $2.2 million attributable to the Acquisition Properties; partially offset by

•	A decrease of $5.8 million attributable to the 2016 Held for Sale, Dispositions & Other Properties.

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(1)	Represents gross aggregate principal amount due at maturity before the effect of the following at December 31, 2017: $13.6 million of unamortized deferred financing costs, $6.3 million of unamortized discounts for the unsecured senior notes and $2.6 million of unamortized premiums for the secured debt.

(2)	As of December 31, 2017, there were no outstanding balances on the unsecured revolving credit facility and the unsecured term loan facility. In January 2018, the Company borrowed $75.0 million under the unsecured term loan facility. The Company intends to borrow the remaining $75.0 million by July 2018.

(3)	Includes common units of the Operating Partnership not owned by the Company; does not include noncontrolling interests in consolidated property partnerships.

(4)	Value based on closing price per share of our common stock of $74.65 as of December 31, 2017.

•	Net cash flow from operations;

•	Borrowings under the Operating Partnership’s unsecured revolving credit facility and term loan facility;

•	Proceeds from our capital recycling program, including the disposition of nonstrategic assets and the formation of strategic ventures;

•	Proceeds from additional secured or unsecured debt financings; and

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•	Proceeds from public or private issuance of debt or equity securities.

•	Development and redevelopment costs;

•	Operating property or undeveloped land acquisitions;

•	Property operating and corporate expenses;

•	Capital expenditures, tenant improvement and leasing costs;

•	Debt service and principal payments, including debt maturities;

•	Distributions to common and preferred security holders;

•	Repurchases and redemptions of outstanding common or preferred stock of the Company; and

•	Outstanding debt repurchases, redemptions and repayments.

•	During the year ended December 31, 2017, we completed the sale of eleven office buildings and one undeveloped land parcel to unaffiliated third parties for gross sales proceeds totaling approximately $186.6 million.

•

In 2017, we raised approximately $764.8 million in new equity and debt, redeemed approximately $689.0 million in more expensive debt and preferred stock, and expanded our unsecured credit facility and unsecured term loan facility to $900.0 million. Refer to our 2017 Financing Highlights in “—Overview and Background” for a list of financing transactions completed in 2017 and Notes 9 and 13, “Secured and Unsecured Debt of the Operating Partnership” and “Stockholders’ Equity of the Company,” respectively, to our consolidated financial statements included in this report for additional information regarding our debt and capital market activity.

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(1)

As of December 31, 2017, we may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $600.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility. As of December 31, 2016, we had the option to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $311.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term loan facility.

(2)	Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.000% and LIBOR plus 1.050% as of December 31, 2017 and December 31, 2016, respectively.

(3)

Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2017 and 2016, $6.0 million and $3.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the respective maturity dates of our unsecured revolving credit facility.

(1)

In July 2017, the unsecured term loan facility was paid down and the Facility was amended to include a 12-month delayed draw option (subject to a specified reduction in commitments unless 50% drawn within six months) on the unsecured term loan facility. The Company may draw on the unsecured term loan facility through July 2018, at which time the outstanding balance will become the balance of the unsecured term loan facility and no additional draws may be made. In January 2018, the Company borrowed $75.0 million under the unsecured term loan facility.

(2)	As of December 31, 2017 and December 31, 2016, $1.2 million and $0.7 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.

(3)	Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.100% and LIBOR plus 1.150% as of December 31, 2017 and December 31, 2016, respectively.

(4)	In July 2017, the Facility was amended to include a facility fee on the remaining borrowing capacity of the unsecured term loan facility.

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(1)	As of December 31, 2017, there were no outstanding balances on both the unsecured revolving credit facility and the unsecured term loan facility. In January 2018, the Company borrowed $75.0 million under the unsecured term loan facility. The Company currently intends to borrow the remaining $75.0 million by July 2018.

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(1)	As of the end of the period presented.

(2)	Excludes the impact of the amortization of any debt discounts/premiums and deferred financing costs

(3)	As of December 31, 2017, there were no outstanding balances on both the unsecured revolving credit facility and the unsecured term loan facility.

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(1)	Represents gross aggregate principal amount before the effect of the unamortized premium and deferred financing costs of approximately $2.6 million and $1.2 million as of December 31, 2017.

(2)	Represents gross aggregate principal amount before the effect of the unamortized discount and deferred financing costs of approximately $6.3 million and $12.5 million as of December 31, 2017.

(3)	As of December 31, 2017, 100.0% of our debt was contractually fixed. The information in the table above reflects our projected interest rate obligations for these fixed-rate payments based on the contractual interest rates on an accrual basis and scheduled maturity dates.

(4)	Reflects minimum lease payments through the contractual lease expiration date before the impact of extension options. See Note 18 “Commitment and Contingencies” to our consolidated financial statements included in this report for further information.

(5)	Amounts represent cash commitments under signed leases and contracts for operating properties, excluding tenant-funded tenant improvements, and for other contractual commitments. The timing of these expenditures may fluctuate.

(6)

Amounts represent commitments under signed leases for pre-leased development projects and contractual commitments for projects under construction, as of December 31, 2017, and also includes $15.0 million for three recently completed office projects. The timing of these expenditures may fluctuate based on the ultimate progress of construction. We may start additional construction in 2018 (see “—Development” for additional information).

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(1)	Excludes development properties and includes 100% of consolidated property partnerships.

(2)	Includes tenants with lease terms of 12 months or longer. Excludes leases for month-to-month and first generation tenants.

(3)	Excludes leases for which the space was vacant for longer than one year, or vacant when the property was acquired by the Company.

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•	Decreases in our cash flows from operations, which could create further dependence on the unsecured revolving credit facility;

•	An increase in the proportion of variable-rate debt, which could increase our sensitivity to interest rate fluctuations in the future; and

•	A decrease in the value of our properties, which could have an adverse effect on the Operating Partnership’s ability to incur additional debt, refinance existing debt at competitive rates, or comply with its existing debt obligations.

(1)

As of December 31, 2017, the covenant performance under the Unsecured Senior Notes Series A and B due 2027 and 2029 (“private placement notes”), was substantially similar to the Facility; however, the unsecured debt ratio under the private placement notes was 3.44x reflecting definitional differences on unencumbered value. The Operating Partnership was in compliance under the credit agreement of the private placement notes as of December 31, 2017.

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(1)	Reported amounts are attributable to common stockholders, common unitholders and restricted stock unitholders.

(2)	FFO available to common stockholders and unitholders includes amortization of deferred revenue related to tenant-funded tenant improvements of $16.8 million, $13.2 million, $13.3 million, $11.0 million and $10.7 million for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectively.

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ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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ITEM 9A.	CONTROLS AND PROCEDURES

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ITEM 9B.	OTHER INFORMATION

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

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ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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1.	Organization and Ownership

(1)	Estimated rentable square feet upon completion.

(2)	Includes 86,000 square feet of Production, Distribution, and Repair (“PDR”) space. Development projects under construction also include 96,000 square feet of retail space and 237 residential units at One Paseo - Phase I in addition to the estimated office rentable square feet noted above.

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2.	Basis of Presentation and Significant Accounting Policies

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•	For office development and redevelopment properties that are pre-leased, we cease capitalization when revenue recognition commences, which is upon substantial completion of tenant improvements deemed to be the Company's asset for accounting purposes.

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For office development and redevelopment properties that are not pre-leased, we may not immediately build out the tenant improvements. Therefore, we cease capitalization when revenue recognition commences upon substantial completion of the tenant improvements deemed to be the Company's asset for accounting purposes, but in any event, no later than one year after the cessation of major construction activities. We also cease capitalization on a development or redevelopment property when activities necessary to prepare the property for its intended use have been suspended.

•	For office development or redevelopment properties with multiple tenants and staged leasing, we cease capitalization and begin depreciation on the portion of the development or redevelopment property for which revenue recognition has commenced.

•	For residential development properties, we cease capitalization when the property is substantially complete and available for occupancy.

(1)	Tenant improvements are amortized over the shorter of the lease term or the estimated useful life.

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•	Level 1 – quoted prices for identical instruments in active markets;

•	Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

•	Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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3.	Acquisitions

(1)	Excludes acquisition-related costs and non-lease related accrued liabilities assumed. Includes assumed unpaid leasing commissions and tenant improvements.

(2)	In connection with this acquisition, the Company assumed $0.2 million in accrued liabilities that are not included in the purchase price above.

(3)	This acquisition encompasses a 10-story office tower, three retail buildings, a four-level subterranean parking structure and three billboards. In connection with this acquisition, the Company assumed $0.1 million in accrued liabilities that are not included in the purchase price above.

(4)	In connection with this acquisition, the Company entered into a long-term ground lease expiring in December 2067.

(5)	The results of operations for the properties acquired during 2016 contributed $5.2 million and $1.7 million to revenue and net income from continuing operations, respectively, for the year ended December 31, 2016.

(1)	The purchase price of the three acquisitions completed during the year ended December 31, 2016 were individually less than 5% and in aggregate less than 10% of the Company’s total assets as of December 31, 2015.

(2)	Represents buildings, building improvements and tenant improvements.

(3)	Represents in-place leases (approximately $27.1 million with a weighted average amortization period of 3.9 years), above-market leases (approximately $0.6 million with weighted average amortization period of 15.8 years) and leasing commissions (approximately $5.8 million with a weighted average amortization period of 5.1 years).

(4)	Represents below-market leases (approximately $18.1 million with a weighted average amortization period of 8.4 years)

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(1)	Represents gross sales price before the impact of broker commissions and closing costs.

(2)	This property was classified as held for sale at December 31, 2016.

(3)

The Sorrento Mesa and Mission Valley Properties includes the following properties: 10390, 10394, 10398, 10421, 10445 and 10455 Pacific Center Court, 2355, 2365, 2375 and 2385 Northside Drive and Pacific Corporate Center - Lot 8, a 5.0 acre undeveloped land parcel. We recognized a gain on sale of land of $0.4 million related to the sale of Pacific Corporate Center - Lot 8 during the year ended December 31, 2017.

(4)	The Torrey Santa Fe Properties include the following properties: 7525, 7535, 7545 and 7555 Torrey Santa Fe. These properties were classified as held for sale at December 31, 2015.

(5)	Includes two operating properties totaling 136,908 rentable square feet and a 7.0 acre undeveloped land parcel.

(6)	The San Diego Properties - Tranche 1 includes the following properties: 10770 Wateridge Circle, 6200 and 6220 Greenwich Drive. The San Diego Properties - Tranche 2 includes the following properties: 6260, 6290, 6310, 6340, 6350 Sequence Drive and 4921 Directors Place.

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(1)	In January 2017, the Company completed the sale of this property for a total sales price of $12.1 million as indicated on the table above.

(1)	Represents gross sales price before the impact of commissions and closing costs.

(2)	This land parcel was classified as held for sale as of December 31, 2015.

(3)	In connection with these land dispositions, $2.3 million of secured debt was assumed by the buyers.

(4)	The 2016 land dispositions resulted in a net loss on sales of $0.3 million and the 2015 land disposition resulted in gain on sale of $17.3 million.

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5.	Deferred Leasing Costs and Acquisition-related Intangible Assets and Liabilities, net

(1)	Included in deferred revenue and acquisition-related intangible liabilities, net in the consolidated balance sheets.

(1)	The amortization of deferred leasing costs and in-place leases is recorded to depreciation and amortization expense and the amortization of lease incentives is recorded as a reduction to rental income in the consolidated statements of operations for the periods presented.

(2)	The amortization of above-market operating leases is recorded as a decrease to rental income in the consolidated statements of operations for the periods presented.

(3)	The amortization of the below-market ground lease obligation is recorded as an increase to ground lease expense in the consolidated statements of operations for the periods presented.

(4)	The amortization of below-market operating leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.

(5)	The amortization of the above-market ground lease obligation is recorded as a decrease to ground lease expense in the consolidated statements of operations for the periods presented.

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(1)	Represents estimated annual amortization related to above-market operating leases. Amounts will be recorded as a decrease to rental income in the consolidated statements of operations.

(2)	Represents estimated annual amortization related to below-market ground lease obligations. Amounts will be recorded as an increase to ground lease expense in the consolidated statements of operations.

(3)	Represents estimated annual amortization related to below-market operating leases. Amounts will be recorded as an increase to rental income in the consolidated statements of operations.

(4)	Represents estimated annual amortization related to above-market ground lease obligations. Amounts will be recorded as a decrease to ground lease expense in the consolidated statements of operations.

6.	Receivables

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7.	Prepaid Expenses and Other Assets, Net

(1)	Our notes receivables are held by two unrelated third parties. Approximately $15.1 million of our notes receivable balance was secured by real estate as of December 31, 2017 and 2016.

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(1)	All interest rates presented are fixed-rate interest rates.

(2)	Represents the effective interest rate including the amortization of initial issuance discounts/premiums excluding the amortization of deferred financing costs.

(3)	The secured debt and the related properties that secure the debt are held in a special purpose entity and the properties are not available to satisfy the debts and other obligations of the Company or the Operating Partnership.

(4)	As of December 31, 2017 and 2016, the mortgage loan had unamortized debt premiums of $2.6 million and $4.4 million, respectively.

(5)	This mortgage note payable, held by a consolidated property partnership, was repaid in November 2017 at par. NBREM contributed $54.4 million to fund their proportionate share of the payoff. Refer to Note 11 “Noncontrolling Interests on Company’s Consolidated Financial Statements” for additional information.

(6)	This mortgage note payable was repaid in February 2017 at par.

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(1)	Represents the effective interest rate including the amortization of initial issuance discounts, excluding the amortization of deferred financing costs.

(2)	Interest on these notes is payable semi-annually in arrears on June 15th and December 15th of each year.

(3)	Interest on these notes is payable semi-annually in arrears on February 17th and August 17th of each year.

(4)	Interest on these notes is payable semi-annually in arrears on April 1st and October 1st of each year.

(5)	Interest on these notes is payable semi-annually in arrears on February 15th and August 15th of each year.

(6)	Interest on these notes is payable semi-annually in arrears on January 15th and July 15th of each year.

(7)

Certain common limited partners in the Operating Partnership that previously contributed their interests in the property at 6255 W. Sunset Blvd., Los Angeles, California to the Operating Partnership entered into an agreement with the Company. Pursuant to this agreement, such common limited partners will reimburse the Company for a portion of any amounts the Company may be required to pay pursuant to its guarantee of the Operating Partnership's 4.800% Senior Notes due 2018 or that the Company may otherwise become required to pay under applicable law with respect to such notes. These notes were redeemed by the Company in December 2017.

(8)	Interest on these notes is payable semi-annually in arrears on June 1st and December 1st of each year.

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(1)	As of December 31, 2017, we may elect to borrow, subject to bank approval and obtaining commitments for any additional borrowing capacity, up to an additional $600.0 million under an accordion feature under the terms of the unsecured revolving credit facility and unsecured term

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(2)	Our unsecured revolving credit facility interest rate was calculated based on an annual rate of LIBOR plus 1.000% and LIBOR plus 1.050% as of December 31, 2017 and December 31, 2016, respectively.

(3)

Our facility fee is paid on a quarterly basis and is calculated based on the total borrowing capacity. In addition to the facility fee, we incurred debt origination and legal costs. As of December 31, 2017 and 2016, $6.0 million and $3.3 million of unamortized deferred financing costs, respectively, which are included in prepaid expenses and other assets, net on our consolidated balance sheets, remained to be amortized through the respective maturity date of our unsecured revolving credit facility,

(1)

In July 2017, the unsecured term loan facility was paid down and the Facility was amended to include a 12-month delayed draw option (subject to a specified reduction in commitments unless 50% drawn within six months) on the unsecured term loan facility. The Company may draw on the unsecured term loan facility through July 2018, at which time the outstanding balance will become the balance of the unsecured term loan facility and no additional draws may be made. In January 2018, the Company borrowed $75.0 million under the unsecured term loan facility.

(2)	As of December 31, 2017 and December 31, 2016, $1.2 million and $0.7 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.

(3)	Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.100% and LIBOR plus 1.150% as of December 31, 2017 and December 31, 2016, respectively.

(4)	In July 2017, the Facility was amended to include a facility fee on the remaining borrowing capacity of the unsecured term loan facility, which is paid on a monthly basis.

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(1)	Includes gross principal balance of outstanding debt before the effect of the following at December 31, 2017: $13.6 million of unamortized deferred financing costs for the unsecured senior notes and secured debt, $6.3 million of unamortized discounts for the unsecured senior notes and $2.6 million of unamortized premiums for the secured debt.

10.	Deferred Revenue and Acquisition Related Liabilities, net

(1)	See Note 5 “Deferred Leasing Costs and Acquisition-related Intangible Assets and Liabilities, net” for additional information regarding our acquisition-related intangible liabilities.

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13.	Stockholders’ Equity of the Company

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(1)

Dividends and distributions payable to common stockholders, noncontrolling common unitholders of the Operating Partnership and RSU holders in 2016 include a special cash dividend of $1.90 per share that was declared by the Company’s Board of Directors on December 13, 2016. On January 13, 2017, the Company paid $184.3 million of special cash dividends to stockholders of record on December 30, 2016. This special dividend payment was in addition to the $36.4 million of regular dividends also paid on January 13, 2017 to common stockholders, unitholders and RSU holders of record on December 30, 2016.

(2)	The amount includes the value of the dividend equivalents that will be paid with additional RSUs (see Note 15 “Share-Based Compensation” for additional information).

(3)	The Series G and Series H Preferred stock were redeemed in March 2017 and August 2017, respectively, and the Company did not have any preferred stock outstanding as of December 31, 2017.

(1)	The amount includes nonvested shares.

(2)	The amount includes nonvested RSUs. Does not include 665,110 and 659,051 market measure-based RSUs because not all the necessary performance conditions have been met as of December 31, 2017 and 2016, respectively. Refer to Note 15 “Share-Based Compensation” for additional information.

(3)	The Series G and Series H Preferred stock were redeemed in March 2017 and August 2017, respectively.

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14.	Partners' Capital of the Operating Partnership

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(1)

Distributions payable to the general partner, noncontrolling common unitholders of the Operating Partnership and RSU holders in 2016 include a special cash dividend of $1.90 per share that was declared by the Company’s Board of Directors on December 13, 2016. On January 13, 2017, the Company paid $184.3 million of special cash dividends to unitholders of record on December 30, 2016. This special dividend payment was in addition to the $36.4 million of regular dividends also paid on January 13, 2017 to common stockholders, unitholders and RSU holders of record on December 30, 2016.

(2)	The amount includes the value of the dividend equivalents that will be paid with additional RSUs (see Note 15 “Share-Based Compensation” for additional information).

(3)	The Series G and Series H Preferred units were redeemed in March 2017 and August 2017, respectively, and the Company did not have any preferred stock outstanding at December 31, 2017.

(1)	Does not include 665,110 and 659,051 market measure-based RSUs because not all the necessary performance conditions have been met as of December 31, 2017 and 2016, respectively. Refer to Note 15 “Share-Based Compensation” for additional information.

(2)	The Series G and Series H Preferred units were redeemed in March 2017 and August 2017, respectively.

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(1)

Estimated RSUs earned for the 2017 Performance-Based RSUs are based on the actual achievement of the 2017 FFO Performance Condition and assumes target level achievement of the 2017 Market Condition and Other Performance Conditions. Estimated RSUs earned for the 2016 Performance-Based RSUs are based on the actual achievement of the 2016 FFO Performance Condition and assumes target level achievement of the 2016 Market Condition. The 2015 Performance-Based RSUs earned are based on actual performance of the 2015 FFO Performance Condition and the 2015 Market Condition.

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(1)	The 2017 Time-Based RSUs consist of 41,119 RSUs granted on February 3, 2017 at a fair value per share of $73.30 and 57,901 RSUs granted on February 24, 2017 at a fair value per share of $77.16.

(1)	Represents the grant-date fair value for all awards, excluding the 2014 Performance-Based RSU Grant, which was re-measured upon stockholder approval of the amended 2006 Plan on May 22, 2014, as an insufficient number of shares were available to settle these RSUs upon initial grant on January 29, 2014.

(2)

Represents vested RSUs that were settled in shares of the Company’s common stock. Total shares settled include 72,938 shares that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the RSUs settled. We accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy tax obligations.

(3)	Represents the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

(4)

Outstanding RSUs as of December 31, 2017 represent the actual achievement of the FFO performance conditions and assumes target levels for the market and other performance conditions. The number of restricted stock units ultimately earned is subject to change based upon actual performance over the three-year vesting period. Dividend equivalents earned will vest along with the underlying award and are also subject to changes based on the number of RSUs ultimately earned for each underlying award.

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(1)

Non-vested RSUs granted during the years ended December 31, 2017 and 2016 are based on the actual achievement of the FFO performance conditions and assumes target level achievement for the market and other performance conditions. Non-vested RSUs granted during the year ended December 31, 2015 are based on the final performance of both the 2015 FFO performance and market conditions, and are non-vested as of December 31, 2017 as they are subject to the Compensation Committee’s confirmation of final performance.

(2)	Represents the grant-date fair value for all awards, excluding the 2014 Performance-Based RSU Grant, which was re-measured upon stockholder approval of the amended 2006 Plan on May 22, 2014, as an insufficient number of shares were available to settle these RSUs upon initial grant on January 29, 2014.

(1)	Represents the grant-date fair value for all awards, excluding the 2014 Performance-Based RSU Grant, which was re-measured upon stockholder approval of the amended 2006 Plan on May 22, 2014, as an insufficient number of shares were available to settle these RSUs upon initial grant on January 29, 2014.

(2)

Represents vested RSUs that were settled in shares of the Company’s common stock. Total shares settled include 77,866 shares that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the RSUs settled. We accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy tax obligations.

(3)	Represents the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

(4)	During January 2017, RSUs were transferred to restricted stock based on the elected distribution date.

(5)	For shares vested but not yet settled, we accept the return of RSUs at the current quoted closing share price of the Company’s common stock to satisfy minimum statutory tax-withholding requirements related to either the settlement or vesting of RSUs in accordance with the terms of the 2006 Plan.

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(1)	Total fair value of RSUs vested was calculated based on the quoted closing share price of the Company’s common stock on the NYSE on the day of vesting. Excludes the issuance of dividend equivalents earned on the underlying RSUs. The dividend equivalents vest based on terms specified under the related RSU award agreement.

(1)	The total shares vested includes 10,792 shares that were tendered in accordance with the terms of the 2006 Plan to satisfy minimum statutory tax withholding requirements related to the restricted shares that have vested. We accept the return of shares at the current quoted closing share price of the Company’s common stock to satisfy tax withholding obligations.

(1)	Total fair value of shares vested was calculated based on the quoted closing share price of the Company’s common stock on the NYSE on the date of vesting.

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(1)	The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of an option. The fair value of the underlying stock was determined by using the closing share price on the NYSE on the date of exercise, forfeiture or respective period end.

(2)	As of December 31, 2017, the average remaining life of stock options outstanding was 4.1 years.

(3)	As of December 31, 2017, the average remaining life of stock options exercisable was approximately 4.1 years.

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16.	Employee Benefit Plans

17.	Future Minimum Rent

(1)	Excludes residential leases and leases with a term of one year or less.

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18.	Commitments and Contingencies

(1)	Reflects the contractual expiration date prior to the impact of any extension or purchase options held by the Company.

(2)	The Company has three 10-year and one 45-year extension options for this ground lease, which if exercised would extend the expiration date to December 2116.

(2)

One of our ground lease obligations is subject to a fair market value adjustment every five years; however, the lease includes ground rent subprotection and infrastructure rent credits which currently limit our annual rental obligations to $1.0 million. The contractual obligations for that ground lease included above assumes the lesser of $1.0 million or annual lease rental obligation in effect as of December 31, 2017.

(3)

One of our ground lease obligations includes a component which is based on the percentage of gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every five years based on 50% of the average annual percentage rent for the previous five years. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at December 31, 2017 for the remainder of the lease term since we cannot predict future adjustments.

(4)

One of our ground lease obligations is subject to a fair market value adjustment every five years based on a combination of CPI adjustments and third-party appraisals limited to maximum increases annually. The contractual obligations for that lease included above assume the current annual ground lease obligation in effect at December 31, 2017 for the remainder of the lease term since we cannot predict future adjustments.

(5)

One of our ground lease obligations includes a component which is based on the percentage of adjusted gross income that exceeds the minimum ground rent. The minimum rent is subject to increases every 10 years by an amount equal to 60% of the average annual percentage rent for the previous three years. The contractual obligations for this lease included above assume the current annual ground lease obligation in effect at December 31, 2017 for the remainder of the lease term since we cannot predict future adjustments.

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(1)	Based on quoted prices in active markets for identical securities.

(2)	The marketable securities are held in a limited rabbi trust.

(1)	Fair value calculated using Level II inputs, which are based on model-derived valuations in which significant inputs and significant value drivers are observable in active markets.

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20.	Net Income Available to Common Stockholders Per Share of the Company

(1)	Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.

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21.	Net Income Available to Common Unitholders Per Unit of the Operating Partnership

(1)	Participating securities include nonvested shares, certain time-based RSUs and vested market measure-based RSUs.

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(1)

The fourth quarter 2016 dividend of $2.275 per share of common stock consists of a special cash dividend of $1.90 per share of common stock and a regular quarterly cash dividend of $0.375 per share of common stock. The $1.90 per share special distribution is treated as paid in two tax years for income tax purposes: $1.587 is treated as paid on December 31, 2016 and $0.313 is treated as paid on January 13, 2017. The $0.375 per share regular quarterly distribution is considered a 2017 dividend distribution for income tax purposes.

(1)	Capital gains are comprised entirely of 20% rate gains.

(1)	Capital gains are comprised entirely of 20% rate gains.

(1)	Capital gains are comprised entirely of 20% rate gains.

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25.	Quarterly Financial Information of the Company (Unaudited)

(1)

The summation of the quarterly financial data may not equal the annual number reported on the consolidated statements of operations due to rounding. For the year ended December 31, 2016, the summation of the quarterly net income available to common stockholders per share does not equal the annual number reported on the consolidated statements of operations due to the Company’s repurchase of common stock and its at-the-market stock offering programs that occurred during the year.

26.	Quarterly Financial Information of the Operating Partnership (Unaudited)

(1)

The summation of the quarterly financial data may not equal the annual number reported on the consolidated statements of operations due to rounding. For the year ended December 31, 2016, the summation of the quarterly net income available to common stockholders per share does not equal the annual number reported on the consolidated statements of operations due to the issuance of common units in connection with an acquisition, the Company’s repurchase of common stock and the its at-the-market stock offering programs that occurred during the year.

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27.	Subsequent Events

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(1)	The initial costs of buildings and improvements are depreciated over 35 years using a straight-line method of accounting; improvements capitalized subsequent to acquisition are depreciated over the shorter of the lease term or useful life, generally ranging from one to 20 years.

(2)	Represents our date of construction or acquisition, or of our predecessor, the Kilroy Group.

(3)	Includes square footage from our stabilized portfolio.

(4)	These properties include the costs of a shared parking structure for a complex comprised of five office buildings and one residential tower. The costs of the parking structure are allocated amongst the six buildings.

(5)	This property represents the 200-unit Columbia Square - Residential tower that stabilized in 2016.

(6)	These costs represent infrastructure costs incurred in 1989. During the third quarter of 2009, we exercised our option to terminate the ground lease at Kilroy Airport Center, Phase IV in Long Beach, California. We had previously leased this land, which is adjacent to our Office Properties at Kilroy Airport Center, Long Beach, for potential future development opportunities.

(7)	These properties secure a $170.0 million mortgage note.

(8)	These properties secure a $93.1 million mortgage note.

(9)	These properties secure intercompany promissory notes between KRLP and consolidated property partnerships.

(10)	These properties are owned by Redwood City Partners LLC, a consolidated property partnership.

(11)	This property is owned by 303 Second Street Member LLC, a consolidated property partnership.

(12)	This property is owned by 100 First Street Member LLC, a consolidated property partnership.

(13)	These properties secure a $76.3 million mortgage note.

(14)	Represents gross aggregate principal amount before the effect of the unamortized premium of approximately $2.6 million and deferred financing costs of $1.2 million as of December 31, 2017.

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