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 22, Net Income Available to Common Stockholders Per Share of the Company;

◦	Note 23, Net Income Available to Common Unitholders Per Unit of the Operating Partnership;

◦	Note 24, Supplemental Cash Flow Information of the Company;

◦	Note 25, Supplemental Cash Flow Information of the Operating Partnership;

◦	Note 27, Quarterly Financial Information of the Company (Unaudited); and

◦	Note 28, Quarterly Financial Information of the Operating Partnership (Unaudited).

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ITEM 1.	BUSINESS

(1)	See Note 4 “Dispositions and Real Estate Assets Held for Sale” to our consolidated financial statements included in this report for additional information.

(2)	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.

(3)	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.

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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 approximately 70-year presence in the West Coast markets;

•	our active development program and our extensive 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.

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•	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;

•	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.

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

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

•	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.

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•	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.

•	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.

•

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 impacted by California’s 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

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(1)	Full 2016 calendar year energy and water data is not available until March 30, 2017. 2015 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 1.1 million square feet of office 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 2016 with 51% of our properties LEED certified and 69% of eligible properties ENERGY STAR certified. During 2016, the Company was recognized for our sustainability efforts with multiple industry leadership awards, including NAREIT’s 2016 Office Leader in the Light Award and ENERGY STAR Partner of the Year Sustained Excellence award. The Company was also recognized by the Global Real Estate Sustainability Benchmark as the North American leader in sustainability for the third year in a row, and was ranked first among 178 North American participants across all asset types;

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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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•	95% of the Operating Partnership’s consolidated funds from operations (as defined in the agreements governing the unsecured revolving credit facility, unsecured term loan facility and unsecured term loan) for such year; and

•

an amount which results in distributions to us (excluding any preferred partnership distributions to the extent the same have been deducted from consolidated funds from operations (as so defined) for such year) in an amount sufficient to permit us to pay dividends to our stockholders that we reasonably believe are necessary to (a) maintain our qualification as a REIT for federal and state income tax purposes and (b) avoid the payment of federal or state income or excise tax.

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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;

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•	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;

•	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.

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•	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;

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

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•	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.

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

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•	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 result;

•	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;

•	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. As of December 31, 2016, 8,000,000 shares of the Company’s preferred stock were issued and outstanding, consisting of 4,000,000 shares of the Company’s Series G Preferred Stock and 4,000,000 shares of the Company’s Series H Preferred Stock; 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 the federal alternative minimum tax and possibly 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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ITEM 1B.	UNRESOLVED STAFF COMMENTS

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(1)	See Note 4 “Dispositions and Real Estate Assets Held for Sale” to our consolidated financial statements included in this report for additional information.

(2)	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.

(3)	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.

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(1)	Based on all leases at the respective properties in effect as of December 31, 2016. Includes month-to-month leases as of December 31, 2016.

(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, 2016.

(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 246,000 rentable square feet are written on a modified gross basis and approximately 53,000 rentable square feet are written on a full service gross basis.

(8)	For this property, leases of approximately 306,000 rentable square feet are written on a full service gross basis and approximately 16,000 rentable square feet are written on a triple net basis.

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

(10)	For this property, leases of approximately 49,000 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.

(11)	For this property, leases of approximately 15,000 rentable square feet are written on a full service gross basis, approximately 93,000 rentable square feet are written on a modified gross basis and approximately 25,000 rentable square feet are written on a gross basis.

(12)	For this property, leases of approximately 78,000 rentable square feet are written on a modified gross basis and approximately 10,000 rentable square feet are written on a full service gross basis.

(13)	These properties are vacant.

(14)	For this property, leases of approximately 33,000 rentable square feet are written on a full service gross basis, and approximately 85,000 rentable square feet are written on a modified gross basis.

(15)	For this property, leases of approximately 23,000 rentable square feet are written on a full service gross basis and approximately 92,000 rentable square feet are written on a modified gross basis.

(16)	For this property, leases of approximately 19,000 rentable square feet are written on a full service gross basis and approximately 117,000 rentable square feet are written on a modified gross basis.

(17)	For this property, leases of approximately 29,000 rentable square feet are written on a gross basis and approximately 17,000 rentable square feet are written on a full service gross basis.

(18)	For this property, leases of approximately 82,000 rentable square feet are written on a full service gross basis and approximately 22,000 rentable square feet are written on a gross basis.

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

(20)	For this property, leases of approximately 458,000 rentable square feet are written on a full service gross basis, approximately 24,000 rentable square feet are written on a triple net basis, approximately 38,000 rentable square feet are written on a gross basis and approximately 185,000 rentable square feet are written on a modified gross basis.

(21)	For this property, leases of approximately 84,000 rentable square feet are written on a gross basis, approximately 334,000 rentable square feet are written on a full service gross basis and approximately 8,000 rentable square feet is written on a triple net basis.

(22)	For this property, leases of approximately 322,000 rentable square feet are written on a full service gross basis, approximately 12,000 rentable square feet are written on a triple net basis, and approximately 8,000 rentable square feet are written on a modified net basis.

(23)	For this property, leases of approximately 390,000 rentable square feet are written on a modified gross basis, approximately 37,000 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.

(24)	For this property, leases of approximately 480,000 rentable square feet are written on a triple net basis and approximately 6,000 rentable square feet are written on a modified gross basis.

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(1)	Committed space refers to executed leases or letters of intent. Commitments not supported by executed leases are not binding obligations and there can be no assurance that they will result in executed leases on the terms contemplated or at all.

(1)	Committed space refers to executed leases or letters of intent. Commitments not supported by executed leases are not binding obligations and there can be no assurance that they will result in executed leases on the terms contemplated or at all.

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(1)	Represents timing, estimated rentable square feet and total estimated investment for multi-tenant office project.

(2)

The project is comprised of approximately 314,000 square feet of office and 86,000 square feet of production, distribution and repair (“PDR”) space. The Company entered into a long term lease with Adobe Systems Inc. for 207,000 square feet of office space which was approximately 66% of the office component at December 31, 2016, As of the date of this filling the office component of the project was 100% pre-leased to Adobe Systems Inc. The Company intends to develop an adjacent 50,000 square foot building located at 150 Hooper with a total estimated investment of approximately $21.0 million.

(3)	In July 2016, the Company received final entitlement approval for this project. Development for this project will occur in phases. Phase I 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.

(1)	Approximate developable square feet could change materially from estimated data provided due to one of 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)	Consists of four adjacent parcels in the South Lake Union submarket of Seattle.

(3)	In July 2016, the Company received final entitlement approval for this project. Development for this project will occur in phases. Phases II and III, comprised of office and residential, will commence subject to market conditions and economic factors.

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(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, 2016.

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

(3)	The Company has entered into leases with various affiliates of the tenant.

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

(5)	The salesforce.com, inc leases, which contribute $0.4 million, $0.4 million, and $23.4 million, expire in August 2017, August 2018 and September 2032, respectively.

(6)	The Box, Inc. leases, which contribute $2.1 million and $20.4 million, expire in August 2021 and June 2028, respectively.

(7)	The Bridgepoint Education Inc. leases, which contribute $1.0 million, $6.3 million and $7.8 million, expire in February 2017, July 2018 and September 2018, respectively.

(8)	The Riot Games, Inc. leases, which contribute $0.1 million, $1.6 million, and $5.1 million, expire in September 2020, November 2020, and November 2024, respectively.

(9)	The Zenefits Insurance Service leases, which contribute $0.7 million and $6.1 million, expire in January 2017 and March 2023, respectively.

(10)	The Adobe Systems, Inc. leases, which contribute $4.4 million and $2.2 million, expire in July 2020 and May 2021, 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 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, 2016, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2016.

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.

(1)

Includes shares of common stock remitted to the Company to satisfy tax withholding obligations in connection with the distribution of, or the vesting and distribution of, restricted stock units or restricted stock in shares of common stock. The value of such shares of common stock remitted to the Company was based on the closing price of the Company’s common stock on the applicable withholding date.

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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 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 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 $13.2 million, $13.3 million, $11.0 million, $10.7 million and $9.1 million for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(5)	Occupancy percentages and total square feet reported are based on the Company’s stabilized office portfolio and one residential tower that was completed in 2016 for the periods presented.

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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)	Occupancy percentages and total square feet reported are based on the Company’s stabilized office portfolio and one residential tower that was completed in 2016 for the periods presented.

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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 remediation;

•	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;

•	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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•	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;

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•	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.

•	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;

•	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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•	350 Mission Street, SOMA, San Francisco, California, which we acquired in October 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately $277.8 million and encompasses approximately 455,340 rentable square feet. The office component of this project is 100% leased to salesforce.com, inc.

•	333 Brannan Street, SOMA, San Francisco, California, which we acquired in July 2012 and was stabilized in March 2016. This development project has a total estimated investment of approximately $101.5 million and

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•

The Heights at Del Mar, Del Mar, California, a 73,000 square foot office project that has a total estimated investment of approximately $45.0 million. The building core and shell of the project were completed in the fourth quarter of 2015. As of December 31, 2016, the project was 65% committed and was moved from “lease-up” to the stabilized portfolio in the fourth quarter of 2016 since the project had reached one year from building shell substantial completion.

•

Columbia Square - Residential, Hollywood, California, the 21-story residential component of the Columbia Square project, which is comprised of 200 units, is a mix of high-end long-term rentals and extended stay apartment homes and has a total estimated investment of approximately $160.0 million. As of December 31, 2016, the project was 57% leased. Construction on the project was completed in the second quarter of 2016.

•

Columbia Square Phase 2 - Office, Hollywood, California, 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 377,000 rentable square feet with a total estimated investment of $230.0 million. The building core and shell of the project were completed in the first quarter of 2016. The project is currently 86% committed and 74% occupied and is expected to be added to the stabilized portfolio in the first quarter of 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 700,000 gross rentable square feet of office space in four buildings at a total estimated investment of approximately $485.0 million. Construction is currently in process and the building and core shell are estimated to be completed in the second half of 2017. The timing, estimated gross rentable square feet and total estimated investment are for a multi-tenant office project.

•

100 Hooper, San Francisco, California, which we acquired in July 2015 and commenced construction on in November 2016. This project is fully entitled for approximately 314,000 square feet of office and approximately 86,000 square feet of 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 is currently expected to be completed in the first half of 2018. The office portion of the project was 66% pre-leased to Adobe Systems Inc. at December 31, 2016 and is currently 100% pre-leased to Adobe Systems Inc as of the date of this filing. In connection with 100 Hooper, the Company also intends to develop an adjacent 50,000 square foot PDR space located at 150 Hooper with a total estimated investment of approximately $21.0 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 project is approximately $225.0 million. Construction is currently in process and is currently expected to be completed in the second quarter of 2019.

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(1)	Project timing, costs, developable square feet and scope could change materially from estimated data provided due to one of 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)	Potential start dates assume successfully obtaining all entitlements and approvals necessary to commence construction. Actual commencement is subject to extensive consideration of market conditions and economic factors.

(3)	Represents cash paid and costs incurred as of December 31, 2016.

(4)	Consists of four adjacent parcels in the South Lake Union submarket of Seattle.

(5)	In July 2016, the Company received final entitlement approval for this project. 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. Phases II and III, comprised of office and residential, will commence subject to market conditions and economic factors.

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(1)	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.

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

(3)	Amounts exclude tenant-funded tenant improvements.

(4)	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.

(5)	Excludes commenced and executed leases of approximately 169,837 and 157,531 rentable square feet, respectively, for the year ended December 31, 2016, 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 meaningful market comparison.

(6)	Calculated as the change between stated cash 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.

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

(8)	For the year ended December 31, 2016, 20 new leases totaling 437,592 rentable square feet were signed but not commenced as of December 31, 2016.

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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, 2016, space leased under month-to-month leases, storage leases, vacant space and future lease renewal options not executed as of December 31, 2016.

(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.”

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(1)	See Note 4 “Dispositions and Real Estate Assets Held for Sale” to our consolidated financial statements included in this report for additional information.

(2)	Estimated rentable square feet upon completion.

(3)	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 2016 undeveloped land acquisitions.

(2)	Excludes dispositions of properties held for sale as of December 31, 2015.

(3)	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.

(2)	Occupancy percentages reported are based on office properties owned and stabilized as of January 1, 2015 and still owned and stabilized as of December 31, 2016. See discussion under “Results of Operations” for additional information.

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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, 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:

◦	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

◦	$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

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•	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 2016 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

◦	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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•	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, 2014 and still owned and included in the stabilized portfolio as of December 31, 2015;

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

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

◦	One office development project comprising two office buildings that was completed and stabilized in the fourth quarter of 2014;

◦	One office development project consisting of three office buildings that was completed and stabilized in the third quarter of 2014; and

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◦	One office redevelopment property that was stabilized in the first quarter of 2014 following its one year lease-up period.

•	2014 Acquisition Properties – includes the results, from the dates of acquisition through the periods presented, for the five office buildings we acquired during 2014; and

•	2015 Held for Sale, Dispositions, and Other Properties – includes the results for both periods presented of the four properties held for sale at December 31, 2015, the ten properties disposed of in 2015, and expenses for certain of our in-process, near-term and future development projects.

(1)

The Company adopted ASU 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.

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•	An increase of $42.1 million attributable to the Stabilized Development and Redevelopment Properties primarily due to the following:

•	$6.3 million increase from the properties completed and/or stabilized in the fourth quarter of 2015;

•	$13.8 million increase from the properties completed and/or stabilized in the fourth quarter of 2014;

•	$18.6 million increase from the properties completed and/or stabilized in the third quarter of 2014; and

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•	$3.4 million increase from the properties completed and/or stabilized in the first quarter of 2014;

•	An increase of $8.0 million attributable to the Same Store Properties primarily resulting from:

•	An increase in rental income of $18.5 million primarily due to the following:

◦	$16.7 million increase due to new leases at higher rates and increased occupancy;

◦	$1.0 million increase due to amortization of tenant funded improvements revenue; and

◦	$1.0 million increase in parking income resulting from increased occupancy and rates at certain of our buildings;

•	A partially offsetting decrease in tenant reimbursements of $1.5 million primarily due to base year resets for a number of tenants across the portfolio;

•	A partially offsetting decrease in other property income of $6.5 million due to $6.8 million of lease termination fees, primarily related to one tenant, that were recognized during the year ended December 31, 2014; and

•	A partially offsetting increase in property and related expenses of $2.5 million primarily resulting from:

•	An increase of $2.3 million in property expenses primarily resulting from:

◦	$3.3 million increase in certain recurring operating costs related to security, parking, other contract services, repairs and maintenance, and various other reimbursable expenses;

◦	A partially offsetting decrease of $1.0 million due to a property damage settlement received in 2015 and lower non-recurring legal fees in 2015; and

•	An increase of $0.8 million in provision for bad debts primarily related to two tenants;

•	A partially offsetting net decrease of $0.7 million in real estate taxes primarily due to property tax refunds related to successful assessment reductions net of customary annual property tax increases at other properties; and

•	An increase of $8.7 million attributable to the 2014 Acquisition Properties.

•	An increase of $3.3 million in compensation related expense primarily related to the growth of the Company; partially offset by

•	A decrease of $1.2 million primarily related to a decrease in professional services fees.

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•	95% of the Operating Partnership’s consolidated funds from operations (as defined in the agreements governing the unsecured revolving credit facility, unsecured term loan facility and unsecured term loan) for such year; and

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an amount which results in distributions to us (excluding any preferred partnership distributions to the extent the same have been deducted from consolidated funds from operations (as so defined) for such year) in an amount sufficient to permit us to pay dividends to our stockholders that we reasonably believe are necessary to (a) maintain our qualification as a REIT for federal and state income tax purposes and (b) avoid the payment of federal or state income or excise tax.

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(1)	In September, the Company completed a private placement of $175.0 million of ten-year, 3.35% unsecured senior notes and $75.0 million of twelve-year, 3.45% unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes because there were no amounts drawn or outstanding as of December 31, 2016.

(2)	There was no outstanding balance on the unsecured line of credit as of December 31, 2016.

(3)	Represents gross aggregate principal amount due at maturity before the effect of the following at December 31, 2016: $11.5 million of unamortized deferred financing costs, $6.6 million of unamortized discounts for the unsecured senior notes and $4.4 million of unamortized premiums for the secured debt.

(4)	In November 2016, the Company entered into a $170.0 million, 10-year mortgage note due in December 2026 with a fixed interest rate of 3.57%.

(5)	Value based on $25.00 per share liquidation preference.

(6)	Represents common units not owned by the Company.

(7)	Value based on closing price per share of our common stock of $73.22 as of December 31, 2016.

•	Net cash flow from operations;

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

•	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

•	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 2016, we generated approximately $783.6 million in cash from our capital recycling program including non-strategic property and land dispositions and two strategic ventures with a third party:

◦	During the year ended December 31, 2016, we completed the sale of six office buildings and five undeveloped land parcels to unaffiliated third parties for gross sales proceeds totaling approximately $330.7 million. In addition, in January 2017 we completed the sale of the operating property that was held for sale at December 31, 2016 for total gross proceeds of $12.1 million.

◦	During the second half of 2016, we completed two strategic ventures with NBREM whereby NBREM contributed a total of $452.9 million for a 44% common equity interest in two existing previously

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•	In 2016, we raised more than $450.0 million in new debt and common equity from the following transactions:

◦	In November 2016, the Operating Partnership entered into a ten-year, non-recourse mortgage note for $170.0 million. The mortgage note bears interest at a fixed rate of 3.57% and matures on December 1, 2026. A portion of the proceeds from this note were used to repay a a total of $64.4 million of secured debt at par.

◦	During 2016, we issued and sold a total of 451,398 shares of our common stock under our at-the-market stock offering program at a weighted average price of $71.50 per share before selling commissions. The net offering proceeds (after deducting selling commissions) were approximately $31.9 million (see “—Liquidity Sources” below for additional information).

◦	In September 2016, the Operating Partnership completed a private placement of $175.0 million of ten-year, 3.35% unsecured senior notes and $75.0 million of twelve-year, 3.45% unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. No amounts were drawn or outstanding as of December 31, 2016.

•	In March 2016, the Company repurchased 52,199 shares of common stock at a weighted average price of $55.45 per share for $2.9 million. Simultaneously, the Operating Partnership repurchased 52,199 common units from the Company.

•	Subsequent to December 31, 2016, we had the following equity related transactions:

◦	In January 2017, we raised approximately $308.8 million of net proceeds through a public offering of 4,427,500 shares of common stock.

◦

On January 13, 2017, the Company and the Operating Partnership paid a special cash dividend and distribution, as applicable, of $1.90 per share of common stock and common unit, as applicable, to stockholders and unitholders, as applicable, of record on December 30, 2016. This special cash dividend was in addition to the regular quarterly cash dividend of $0.375 per share of common stock. The total amount of the regular quarterly cash dividend and the special cash dividend was approximately $35.9 million and $181.6 million, respectively.

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(1)	We may elect 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 1.050%.

(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, 2016 and 2015, $3.3 million and $4.6 million of deferred financing costs remained to be amortized through the amended maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

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(1)	In September, the Company completed a private placement of $175.0 million of ten-year, 3.35% unsecured senior notes and $75.0 million of twelve-year, 3.45% unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes because there were no amounts drawn or outstanding as of December 31, 2016.

(2)	There was no outstanding balance on the unsecured line of credit as of December 31, 2016.

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(1)

In September, the Company completed a private placement of $175.0 million of ten-year, 3.35% unsecured senior notes and $75.0 million of twelve-year, 3.45% unsecured senior notes with a delayed draw option required to be exercised by February 17, 2017. The table above does not reflect any amounts pertaining to these notes because there were no amounts drawn or outstanding as of December 31, 2016. The table above also does not reflect any amounts pertaining to the unsecured line of credit as there were no amounts outstanding as of December 31, 2016.

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

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

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(1)	Represents gross aggregate principal amount before the effect of the unamortized premium and deferred financing costs of approximately $4.4 million and $1.4 million as of December 31, 2016.

(2)

Represents gross aggregate principal amount before the effect of the unamortized discount and deferred financing costs of approximately $6.6 million and $10.1 million as of December 31, 2016. Includes $175.0 million of Series A Notes and $75.0 million of Series B Notes issuable pursuant to the Note Purchase Agreement for which no Series A or B Notes were issued and outstanding as of December 31, 2016 but the Company is committed to issuing by February 17, 2017.

(3)

As of December 31, 2016, 91.9% 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. Amounts include interest rate obligations for the Series A and B Notes issuable pursuant to the Note Purchase Agreement for which no Series A or B Notes were issued and outstanding as of December 31, 2016 but the Company is committed to issuing by February 17, 2017.

(4)

As of December 31, 2016, 8.1% of our debt bore interest at variable rates which was incurred under the unsecured term loan facility and unsecured term loan. The variable interest rate payments are based on LIBOR plus a spread of 1.150% as of December 31, 2016. The information in the table above reflects our projected interest rate obligations for these variable-rate payments based on outstanding principal balances as of December 31, 2016, the scheduled interest payment dates and the contractual maturity dates.

(5)	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.

(6)	Amounts represent 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.

(7)

Amounts represent commitments under signed leases for pre-leased development projects and contractual commitments for projects under construction, as of December 31, 2016, and also includes $45.0 million for three recently completed office projects, the project in “lease-up” and the completed residential project. The timing of these expenditures may fluctuate based on the ultimate progress of construction. We may start additional construction in 2017 (see “—Development Activities” for additional information).

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(1)	Excludes development properties.

(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.

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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 $13.2 million, $13.3 million, $11.0 million, $10.7 million and $9.1 million for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, 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)	See Note 4 “Dispositions and Real Estate Assets Held for Sale” for additional information.

(2)	Estimated rentable square feet upon completion.

(3)	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.

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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.

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(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. As of December 31, 2016, this property was temporarily being held in a separate VIE to facilitate potential Section 1031 Exchanges. During January 2017, the Company closed out the Section 1031 Exchange related to this VIE. See Note 2 “Basis of Presentation and Significant Accounting Policies.” 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)	See Note 18 “Commitments and Contingencies” for additional information on certain accrued liabilities for these acquisitions.

(2)	Acquisition comprised of four adjacent parcels in the South Lake Union submarket of Seattle, Washington located at 330 Dexter Avenue North, 333 Dexter Avenue North, 401 Dexter Avenue North, and 400 Aurora Avenue North. In connection with this acquisition, we also assumed $2.4 million in accrued liabilities and acquisition costs that are not included in the purchase price above.

(3)	Includes the land parcel located at 150 Hooper. In connection with this acquisition, we assumed $4.1 million in accrued liabilities and acquisition costs that are not included in the purchase price above.

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

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

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

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

(5)

The Company adopted ASU 2014-08 effective January 1, 2015 (see Note 2 “Basis of Presentation and Significant Accounting Policies” for additional information). As a result, results of operations for properties disposed of subsequent of January 1, 2015 are presented in continuing operations because they did not represent strategic shifts. Properties disposed of prior to January 1, 2015 are presented in discontinued operations.

(6)	The San Diego Properties included the following properties: 10020 Pacific Mesa Boulevard, 6055 Lusk Avenue, 5010 and 5005 Wateridge Vista Drive, 15435 and 15445 Innovation Drive, and 15051, 15073, 15231, 15253, 15333 and 15378 Avenue of Science. These properties were held for sale as of December 31, 2013.

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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.

(2)	The Torrey Santa Fe Properties include the following properties: 7525 Torrey Santa Fe, 7535 Torrey Santa Fe, 7545 Torrey Santa Fe, and 7555 Torrey Santa Fe.

(3)	In January 2016, the Company completed the sale of these properties for a total sales price of $262.3 million.

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(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. See Note 9 “Secured and Unsecured Debt of the Operating Partnership” for additional information.

(4)	The 2016 land dispositions resulted in a net loss on sales of $0.3 million and the 2015 and 2014 land dispositions resulted in gain on sales of $17.3 million and $3.5 million, respectively.

(1)	During the year ended December 31, 2015, the Company recognized a loss relating to selling costs of approximately $0.2 million.

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

(1)	Excludes deferred leasing costs and acquisition-related intangible assets, net related to properties held for sale as of December 31, 2015.

(2)	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

(1)	Excludes deferred rent receivables, net related to real estate held for sale as of December 31, 2015.

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7.	Prepaid Expenses and Other Assets, Net

(1)	Approximately $15.1 million of our notes receivables are secured by real estate.

•	95% of the Operating Partnership’s consolidated funds from operations (as defined in the agreements governing the unsecured revolving credit facility, unsecured term loan facility and unsecured term loan) for such year; and

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an amount which results in distributions to us (excluding any preferred partnership distributions to the extent the same have been deducted from consolidated funds from operations (as so defined) for such year) in an amount sufficient to permit us to pay dividends to our stockholders that we reasonably believe are necessary to (a) maintain our qualification as a REIT for federal and state income tax purposes and (b) avoid the payment of federal or state income or excise tax.

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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)	This mortgage note payable was entered into in November 2016.

(4)	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.

(5)	As of December 31, 2016 and 2015, the mortgage loan had unamortized debt premiums of $4.4 million and $6.2 million, respectively.

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

(7)	This mortgage note payable was repaid in December 2016 at par.

(8)	Balance of $1.8 million as of December 31, 2015 included public facility bonds that were assumed by the buyers in connection with sales of land during the year ended December 31, 2016.

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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 April 1st and October 1st of each year.

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

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

(5)

In October 2015, 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.

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

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(1)	We may elect 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)	The interest rate on our unsecured revolving credit facility is based on an annual rate of LIBOR plus1.050%.

(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, 2016 and 2015, $3.3 million and $4.6 million of deferred financing costs remained to be amortized through the maturity date of our unsecured revolving credit facility, which are included in prepaid expenses and other assets, net on our consolidated balance sheets.

(1)	As of December 31, 2016 and December 31, 2015, $0.7 million and $0.9 million of unamortized deferred financing costs, respectively, remained to be amortized through the maturity date of our unsecured term loan facility.

(2)	Our unsecured term loan facility interest rate was calculated based on an annual rate of LIBOR plus 1.150%.

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(1)	Includes gross principal balance of outstanding debt before the effect of the following at December 31, 2016: $11.5 million of unamortized deferred financing costs, $6.6 million of unamortized discounts for the unsecured senior notes and $4.4 million of unamortized premiums for the secured debt.

(2)	Excludes the Series A and B Notes issuable pursuant to the Note Purchase Agreement entered into in September 2016 as no Series A or B Notes were issued and outstanding under these notes as of December 31, 2016.

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10.	Deferred Revenue and Acquisition Related Liabilities, net

(1)	Excludes deferred revenue related to tenant-funded tenant improvements related to properties held for sale at December 31, 2015.

(2)	See Note 2 “Basis of Presentation and Significant Accounting Policies” and Note 5 “Deferred Leasing Costs and Acquisition-related Intangible Assets and Liabilities, net” for additional information.

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13.	Stockholders’ Equity of the Company

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(1)	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).

(1)	The amount includes nonvested shares.

(2)	The amount includes nonvested RSUs. Does not include the 659,051 and 425,452 market measure-based RSUs because not all the necessary performance conditions have been met as of December 31, 2016 and 2015, respectively.

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14.	Partners' Capital of the Operating Partnership

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(1)	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).

(1)	Does not include the 659,051 and 425,452 market measure-based RSUs because not all the necessary performance conditions have been met as of December 31, 2016 and 2015, respectively.

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(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 19,264 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, 2016 represent the achievement of the maximum performance conditions and assumed target levels for the market 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.

(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.

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(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 23,087 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)	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.

(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 12,661 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.

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(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, 2016, the average remaining life of stock options outstanding was 5.1 years

(3)	As of December 31, 2016, the average remaining life of stock options exercisable was approximately 5.1 years.

16.	Employee Benefit Plans

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17.	Future Minimum Rent

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

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.

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(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, 2016.

(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.

(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 included above assume the annual lease rental obligation in effect as of December 31, 2016.

(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.

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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.

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(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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21.	Discontinued Operations

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22.	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.

(2)	The Company adopted ASU 2014-08 effective January 1, 2015 (see Note 2 “Basis of Presentation and Significant Accounting Policies” for additional information). As a result, properties classified as held for sale and/or disposed of subsequent to January 1, 2015 that do not represent a strategic shift are no longer presented as discontinued operations.

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23.	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.

(2)	The Operating Partnership adopted ASU 2014-08 effective January 1, 2015 (see Note 2 “Basis of Presentation and Significant Accounting Policies” for additional information). As a result, properties classified as held for sale and/or disposed of subsequent to January 1, 2015 that do not represent a strategic shift are no longer presented as discontinued operations.

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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.

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

27.	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. For the year ended December 31, 2015, 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 public offerings of common stock and its at-the-market stock offering programs that occurred during the year.

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28.	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. For the year ended December 31, 2015, 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 public offerings of common stock and the Company’s at-the-market stock offering programs that occurred during the year.

29.	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 our predecessor, the Kilroy Group.

(3)	Includes square footage from our stabilized portfolio.

(4)	These properties secure a $1.2 million mortgage note.

(5)	These properties include the costs of a shared parking structure for a complex that will be comprised of five office buildings and one residential tower upon completion. Once completed, the costs of the parking structure will be reallocated amongst the six buildings.

(6)	These properties, comprised of 377,000 rentable square feet, are excluded from our stabilized portfolio as of December 31, 2016, as they are in the “lease-up” phase.

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

(8)	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.

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

(10)	These properties secure a $94.8 million mortgage note.

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

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

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

(14)	This property secures a $125.8 million mortgage note.

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

(16)	These properties secure a $78.0 million mortgage note.

(17)	Represents gross aggregate principal amount before the effect of the unamortized premium of approximately $4.4 million and unamortized deferred financing cost of approximately $1.4 million as of December 31, 2016.

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