<PAGE>

                                                                     EXHIBIT 4.7


                         REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 9, 1999 (this
"Agreement"), is entered into by and among Kilroy Realty Corporation, a Maryland
 ---------
corporation (the "Company" or the "REIT"), Kilroy Realty, L.P., a Delaware
                  -------          ----
limited partnership (the "Operating Partnership"), and Montebello Realty Corp.,
                          ---------------------
a Delaware corporation (the "Unit Holder").
                             -----------

                                    RECITALS
                                    --------

          WHEREAS, in connection with the offering of 780,000 9 1/4%  Series D
Cumulative Redeemable Preferred Units of the Operating Partnership (the

"Units"), the Unit Holder (the "Contributor"), contributed to the Operating
 -----                          -----------
Partnership cash in return for the Units on terms and conditions set forth in
the Contribution Agreement, dated December 9, 1999 (the "Contribution
                                                         ------------
Agreement"), by and among the Company, the Operating Partnership and the
Contributor;

          WHEREAS, the Unit Holder will receive the Units in exchange for cash
contributed to Operating Partnership;

          WHEREAS, pursuant to the Partnership Agreement (as defined below), the
Units owned by the Unit Holder will be redeemable for cash or exchangeable for
shares of the Company's 9 1/4% Series D Cumulative Redeemable Preferred Stock
(the "Preferred Stock") upon the terms and subject to the conditions contained
      ---------------
therein; and

          WHEREAS, in order to induce the Contributor to enter into the
Contribution Agreement, the Company and the Operating Partnership have agreed to
provide the registration rights set forth herein to the Contributor and any
subsequent holder or holders of the Units.

          NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

          SECTION 1.1.  Definitions.  In addition to the definitions set forth
                        -----------
above, the following terms, as used herein, shall have the following meanings:

          "Affiliate" of any Person means any other Person directly or
           ---------
indirectly controlling or controlled by or under common control with such
Person.  For the purposes of this definition, "control" when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

                                       1
<PAGE>

          "Agreement" has the meaning given to such term in the recitals hereto.
           ---------

          "Contribution Agreement" means the Contribution Agreement, dated
           ----------------------
December 9, 1999, by and among the Company, the Operating Partnership and the
Contributor.

          "Articles of Incorporation" means the Articles of Amendment and
           -------------------------
Restatement of the Company, as the same may be amended, modified or restated
from time to time.

          "Articles Supplementary" means the Articles Supplementary of the
           ----------------------
Company, filed with the Maryland State Department of Assessments and Taxation on
December 9, 1999, designating the 9 1/4% Series D Cumulative Redeemable
Preferred Stock.

          "Business Day" means any day except a Saturday, Sunday or other day on
           ------------
which commercial banks in New York, New York or Los Angeles, California are
authorized by law to close.

          "Code" means the Internal Revenue Code of 1986, as amended from time
           ----
to time or any successor statute thereto, as interpreted by the applicable
regulations thereunder.

          "Commission" means the Securities and Exchange Commission.
           ----------

          "Company" means Kilroy Realty Corporation, a Maryland corporation.
           -------

          "Contributor" shall have the meaning given to such term in the
           -----------
recitals hereto.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
           ------------
and the rules and regulations of the Commission promulgated thereunder.

          "Exchangeable Units" means Units which may be redeemable for cash
           ------------------
pursuant to Section 17.4 of the Partnership Agreement or exchangeable for
Preferred Stock or redeemable for cash pursuant to Section 17.7 of the
Partnership Agreement; (without regard to any limitations on the exercise of
such exchange right as a result of the Ownership Limit Provisions, as defined
below).

          "General Partner" means the Company or its successors as general
           ---------------
partner of the Operating Partnership.

          "Holder" means any Person who is the record or beneficial owner of any
           ------
Registrable Security or any assignee or transferee of such Registrable Security
(including assignments or transfers of Registrable Securities to such assignees
or transferees as a result of the foreclosure on any loans secured by such
Registrable Securities) unless such Registrable Security is acquired in a public
distribution pursuant to a registration statement under the Securities Act or
pursuant to transactions exempt from registration under the Securities Act, in
each such case where securities sold in such transaction may be resold without
subsequent registration under the Securities Act.

          "Incapacitated" shall have the meaning set forth in the Partnership
           -------------
Agreement.

                                       2
<PAGE>

          "Indemnified Party" shall have the meaning set forth in Section 2.8
           -----------------
hereof.

          "Indemnifying Party" shall have the meaning set forth in Section 2.8
           ------------------
hereof.

          "Inspectors" shall have the meaning set forth in Section 2.4(g).
           ----------

          "Operating Partnership" shall have the meaning given to such term in
           ---------------------
the recitals hereto.

          "Ownership Limit Provisions" mean the various provisions of the
           --------------------------
Articles Supplementary set forth in Section 7 of Article III thereof restricting
the ownership of Preferred Stock by certain Persons to specified percentages of
the outstanding Preferred Stock.

          "Partnership Agreement" means the Fourth Amended and Restated
           ---------------------
Agreement of Limited Partnership of the Operating Partnership dated as of
November 24, 1998, as supplemented by that First Supplement, dated January 6,
1999; Second Supplement dated February 22, 1999; Third Supplement dated March 9,
1999, Fourth Supplement dated March 31, 1999; and Fifth Supplement, dated March
26, 1999, and as amended by a First Amendment, dated as of the date hereof, and
as the same may be amended, modified or restated from time to time.

          "Person" means an individual or a corporation, partnership, limited
           ------
liability company, association, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

          "Piggy-Back Registration" shall have the meaning set forth in Section
           -----------------------
2.2 hereof.

          "Primary Registration" shall have the meaning set forth in Section 2.2
           --------------------
hereof.

          "Preferred Stock" shall have the meaning given to such term in the
           ---------------
recitals hereto.

          "REIT" means a real estate investment trust under Section 856 through
           ----
Section 860 of the Code.

          "Registrable Securities" means shares of Preferred Stock at any time
           ----------------------
owned, either of record or beneficially, by any Holder and no matter how
acquired (including, without limitation, shares of Preferred Stock issued or
issuable upon exchange of Exchangeable Units or issued or issuable by way of
stock dividend or stock split, or in connection with a merger, consolidation,
combination of shares, recapitalization or other reorganization and any other
securities issued pursuant to any other distribution with respect to the
Preferred Shares or in exchange for or replacement of such Preferred Shares)
until (i) a registration statement covering such securities has been declared
effective by the Commission and such shares have been sold or transferred
pursuant to such effective registration statement, (ii) such shares are sold
under circumstances in which all of the applicable conditions of Rule 144 under
the Securities Act (or any similar provisions then in force) under the
Securities Act are met or under which such shares may be sold pursuant to Rule
144(k) under the Securities Act or (iii) such shares have been otherwise
transferred in a transaction that would constitute a sale thereof under the
Securities

                                       3
<PAGE>

Act, the Company has delivered a new certificate or other evidence of ownership
for such shares not bearing the Securities Act restricted stock legend and such
shares may be resold without subsequent registration under the Securities Act.

          "Registration Expenses" shall have the meaning set forth in Section
           ---------------------
2.5 hereof.

          "Rule 144" means Rule 144 promulgated under the Securities Act, as
           --------
such rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the Commission providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of the Company of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.

          "Rule 144A" means Rule 144A promulgated under the Securities Act, as
           ---------
such rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the Commission.

          "Rule 415" means Rule 415 promulgated under the Securities Act, as
           --------
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.

          "Secondary Registration" shall have the meaning set forth in Section
           ----------------------
2.2 hereof.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the Commission promulgated thereunder.

          "Selling Holder" means a Holder who is selling Registrable Securities
           --------------
pursuant to a registration statement under the Securities Act pursuant to this
Agreement.

          "Shelf Registration" shall have the meaning set forth in Section 2.1
           ------------------
hereof.

          "Shelf Registration Statement" means any registration statement
           ----------------------------
relating to a Shelf Registration that covers any of the Preferred Stock of the
Company filed with the Commission under the Securities Act, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.

          "Underwriter" means a securities dealer who purchases any Registrable
           -----------
Securities as principal and not as part of such dealer's market-making
activities.

          "Unit Holder" shall have the meaning set forth in the recitals hereto.
           -----------

          "Units" shall have the meaning given to such term in the recitals
           -----
hereto.

                                       4
<PAGE>

                                   ARTICLE II
                              REGISTRATION RIGHTS
                              -------------------

          SECTION 2.1.  Shelf Registration.
                        ------------------

          The Company shall prepare and file a "shelf" registration statement
(the "Shelf Registration Statement") with respect to the Registrable Securities
      ----------------------------
covering the resale thereof by the Holders on an appropriate form for an
offering to be made on a continuous or delayed basis pursuant to Rule 415 (the
"Shelf Registration") within 60 days after the date the Exchangeable Units are
-------------------
exchanged for shares of Preferred Stock and shall use its best efforts to cause
the Shelf Registration Statement to be declared effective within 120 days after
the date of such exchange.  The Company shall use its best efforts to keep such
Shelf Registration Statement continuously effective until the earliest of (A) 24
months following the effective date of the Shelf Registration Statement, (B)
such time as all of the Registrable Securities have been sold pursuant to the
Shelf Registration Statement or Rule 144 and (C) the date on which the
Registrable Securities may be sold without volume restrictions in accordance
with Rule 144.

          SECTION 2.2.  Piggy-Back Registration.
                        -----------------------

          (a) If the Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company of equity securities
for its own account (a "Primary Registration") or for the account of any of its
                        --------------------
respective securityholders (other than (i) any registration statement filed by
the Company under the Securities Act relating to an offering of capital stock
for its own account as a result of the exercise of the exchange rights set forth
in Section 8.6 of the Partnership Agreement, and covering the resale by the
Holders of the shares of capital stock received in such exchange, or (ii) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the Commission) or filed in connection with an exchange offer or
offering of securities solely to the Company's existing securityholders) (a
"Secondary Registration"), then the Company shall give written notice of such
-----------------------
proposed filing to the Holders of Registrable Securities as soon as practicable
(but in no event less than ten (10) days before the anticipated filing date),
and such notice shall offer such Holders the opportunity to include in such
filing such number of shares of Registrable Securities as each such Holder may
request (a "Piggy-Back Registration").  The Company shall use its commercially
            -----------------------
reasonable efforts to cause the managing Underwriter or Underwriters of a
proposed underwritten offering to permit the Registrable Securities requested to
be included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company included therein.

          (b) Withdrawal from Registration.  Any Holder requesting inclusion of
              ----------------------------
Registrable Securities pursuant to this Section 2.2 may, at any time prior to
the effective date of the registration statement relating to such registration,
revoke such request by delivering written notice of such revocation to the
Company; provided, however, that if the Company, in consultation with its
         --------  -------
financial and legal advisors, determines that such revocation would materially
delay the registration or otherwise require a recirculation of the prospectus
contained in the registration statement, then such Holder shall have no such
right to revoke its request.  If

                                       5
<PAGE>

the withdrawal of any Registrable Securities would allow, within the marketing
limitations set forth above, the inclusion in the underwriting of a greater
number of shares of Registrable Securities, then, to the extent practicable and
without delaying the underwriting, the Company shall offer to the Holders an
opportunity to include additional shares of Registrable Securities in the
proportions discussed in Section 2.3 below.

          (c) Termination or Withdrawal by the Company.  The Company shall have
              ----------------------------------------
the right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.

      SECTION 2.3.  Reduction of Offering.  Notwithstanding anything
                    ---------------------
contained herein, if the managing Underwriter or Underwriters of an offering
described in Section 2.2 hereof are of the opinion that (i) the size of the
offering that the Holders, the Company and/or such other persons intend to make
or (ii) the kind of securities that the Holders, the Company and/or any other
persons or entities intend to include in such offering are such that the success
of the offering would be materially and adversely affected by inclusion of the
Registrable Securities requested to be included, then (A) if the size of the
offering is the basis of such Underwriter's opinion, the amount of securities to
be offered for the accounts of Holders shall be reduced pro rata (according to
the Registrable Securities proposed for registration) to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter or Underwriters; provided that
                                                                 --------
if securities are being offered for the account of other persons or entities as
well as the Company, then (1) in the case of a Primary Registration, the
reduction in the amount of securities requested to be offered shall be made
first pro rata among securities offered for the accounts of Holders and such
other persons or entities, and (2) in the case of a Secondary Registration, the
reduction in the amount of securities requested to be offered shall be made in
accordance with the terms of the registration rights agreement pursuant to which
such Secondary Registration is made, provided that if any such registration
                                     --------
rights agreement is silent with respect to reductions in shares being registered
thereunder, then with respect to the Registrable Securities intended to be
offered by Holders, the proportion by which the amount of such class of
securities intended to be offered by Holders is reduced shall not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other persons or entities is reduced and (B) if the combination
of securities to be offered is the basis of such Underwriter's opinion, (x) the
Registrable Securities to be included in such offering shall be reduced as
described in clause (A) above (subject to the proviso in clause (A)) or, (y) if
the actions described in clause (x) would, in the judgment of the managing
Underwriter, be insufficient to substantially eliminate the adverse effect that
inclusion of the Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be excluded from such offering.

          SECTION 2.4.  Registration Procedures; Filings; Information.  In
                        ---------------------------------------------
connection with any Shelf Registration Statement under Section 2.1 hereof, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable (and in any event within the
periods referred to in Section 2.1), and in connection with any such request:

                                       6
<PAGE>

          (a) As provided in Section 2.1 hereof, the Company will as
expeditiously as possible prepare and file with the Commission a registration
statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale by the Selling Holders of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof and
which shall comply as to form in all material respects with the requirements of
the applicable form and include or incorporate by reference all financial
statements required by the Commission to be filed therewith, and use its best
efforts to cause such filed registration statement to become and remain
effective.

          (b) The Company will, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, notify each Holder of
Registrable Securities that a Shelf Registration Statement is being filed and
advise such Holder that an offering of Registrable Securities will be made in
accordance with the method elected (which method may also include an
underwritten offering) by the Holders of a majority of the Registrable
Securities, furnish to each Selling Holder and each Underwriter, if any, of the
Registrable Securities covered by such registration statement or prospectus
copies of such registration statement or prospectus or any amendment or
supplement thereto as proposed to be filed, and thereafter furnish to such
Selling Holder and Underwriter, if any, such number of conformed copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or
Underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder.

          (c) The Company will notify each Holder of Registrable Securities and
counsel for such Holder promptly and, if requested by such Holder or counsel,
confirm such advice in writing promptly (i) when a registration statement has
become effective and when any post-effective amendments and supplements thereto
become effective, (ii) of any request by the Commission or any state securities
authority for post-effective amendments and supplements to a registration
statement has become effective, (iii) of the issuance by the Commission or any
state securities authority of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that purpose,
(iv) if, during the period a registration statement is effective, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material respects,
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (vi) of any determination by the Company that a post-effective
amendment to a registration statement would be appropriate.

          (d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States (where an exemption is not available) as any
Selling Holder or managing Underwriter or Underwriters, if any, reasonably (in
light of such Selling Holder's intended plan

                                       7
<PAGE>

of distribution) requests by the time the registration statement relating
thereto is declared effective by the Commission and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities, including the National Association of Securities Dealers
("NASD"), as may be necessary by virtue of the business and operations of the
  ----
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder; provided
                                                                        --------
that the Company will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction except as may
be required by the Securities Act.

          (e) The Company will immediately notify each Selling Holder or
Underwriter of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus and shall file with the Commission such amendments and
supplements to such prospectus and deliver copies of the same to the Selling
Holders or Underwriters, as the case may be, so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances then existing, not misleading and promptly make
available to each Selling Holder a reasonable number of copies of any such
supplement or amendment.

          (f) The Company will enter into customary agreements (including an
underwriting agreement or securities sale agreement, if any, in customary form)
containing such representations and warranties to the Holders of such
Registrable Securities and the Underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in similar underwritten
offerings as may be reasonably requested by them and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities.

          (g) The Company will make available for inspection by any Selling
Holder of such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other professional retained by any such Selling Holder or Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
                    ----------
corporate documents and properties of the Company (collectively, the "Records")
                                                                      -------
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection with
such registration statement.  Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction.  Each
Selling Holder of such Registrable

                                       8
<PAGE>

Securities agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the company or its
Affiliates or otherwise disclosed by it unless and until such is made generally
available to the public. Each Selling Holder of such Registrable Securities
further agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.

          (h) The Company will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder or
Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company's independent public
accountants (to the extent permitted by the standards of the American Institute
of Certified Public Accountants), each in customary form and covering such
matters of the type customarily covered by opinions or comfort letters, as the
case may be, as the Holders of a majority of the Registrable Securities included
in such offering or the managing Underwriter or Underwriters therefor reasonably
request.

          (i) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder (or any successor rule or regulation
hereafter adopted by the Commission).

          (j) The Company will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which similar
securities issued by the Company are then listed.

          (k) The Company will use its best efforts to obtain CUSIP numbers for
the Preferred Stock not later than the effective date of the Shelf Registration
Statement.

          The Company may require, as a condition precedent to the obligations
of the Company under the Agreement, each Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding such Selling Holder, the Registrable Securities held by it and the
intended method of distribution of the Registrable Securities as the Company may
from time to time reasonably request and such other information as may be
legally required in connection with such registration.

          Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 2.4(e)
hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement and prospectus
covering such Registrable Securities until such Selling Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 2.4(e)
hereof, and, if so directed by the Company, such Selling Holder will deliver to
the Company all copies, other than permanent file copies then in such Selling
Holder's possession, of the most recent

                                       9
<PAGE>

prospectus covering such Registrable Securities at the time of receipt of such
notice. Each Selling Holder of Registrable Securities agrees that it will
immediately notify the Company at any time when a prospectus relating to the
registration of such Registrable securities is required to be delivered under
the Securities Act of the happening of an event as a result of which information
previously furnished by such Selling Holder to the Company in writing for
inclusion in such prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. In the event the Company shall give such notice, the
Company shall extend the period during which such registration statement shall
be maintained effective (including the period referred to in Section 2.4(a)
hereof) by the number of days during the period from and including the date of
the giving of notice pursuant to Section 2.4(e) hereof to the date when the
Company shall make available to the Selling Holders of Registrable Securities
covered by such registration statement a prospectus supplemented or amended to
conform with the requirements of Section 2.4(e) hereof.

          SECTION 2.5.  Registration Expenses.  In connection with any
                        ---------------------
registration statement required to be filed hereunder, the Company shall pay the
following registration expenses incurred in connection with the registration
hereunder (the "Registration Expenses"): (i) all Commission, stock exchange,
                ---------------------
NASD or other registration and filing fees, (ii) fees and expenses of compliance
with securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of U.S. and local counsel for any
Underwriters and Holders in connection with blue sky qualifications of the
Registrable Securities), (iii) printing expenses of any persons in preparing and
distributing any Shelf Registration Statement, any prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales agreements,
certificates representing the Preferred Stock and any other document relating to
the performance of, and compliance with, this Agreement, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange, (vi) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any special
audits or comfort letters or costs associated with compliance with such special
audits or with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 2.4(h) hereof),
(vii) the reasonable fees and expenses of any special experts retained by the
Company in connection with such registration, and (viii) reasonable fees and
expenses of one counsel (who shall be reasonably acceptable to the Company) for
the Selling Holders.  Except as expressly provided in the preceding sentence,
the Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, or any out-of-
pocket expenses of the Holders (or the agents who manage their accounts) or any
transfer taxes relating to the registration or sale of the Registrable
Securities.

          SECTION 2.6.  Indemnification by the Company.  The Company agrees to
                        ------------------------------
indemnify and hold harmless each Selling Holder of Registrable Securities, its
officers, directors and agents, and each Person, if any, who controls such
Selling Holder within the

                                       10
<PAGE>

meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages, expenses and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by such Selling Holder or on
such Selling Holder's behalf expressly for inclusion therein. The Company also
agrees to indemnify any Underwriters of the Registrable Securities, their
officers and directors and each Person who controls such Underwriters within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 2.6, provided that the foregoing indemnity with
                                      --------
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter of the Registrable Securities from whom the person asserting any
such losses, claims, damages or liabilities purchased the Registrable Securities
which are the subject thereof if (i) such person did not receive a copy of the
prospectus (or the prospectus as supplemented) at or prior to the confirmation
of the sale of such Registrable Securities to such person in any case where such
delivery is required by the Securities Act and the untrue statement or omission
of a material fact contained in such preliminary prospectus was corrected in the
prospectus (or the prospectus as supplemented), provided that such Underwriter
received prior notice that such prospectus (or the prospectus as supplemented)
corrected such untrue statement or omission of a material fact; or (ii) such
person received a prospectus at or prior to the confirmation of the sale of such
Registrable Securities to such person during the period when the use of such
prospectus has been suspended in accordance with Section 2.4, provided that such
                                                              --------
Underwriter received prior notice of such suspension.

          SECTION 2.7.  Indemnification by Holders of Registrable Securities.
                        ----------------------------------------------------
Each Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors and agents and each Person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Selling Holder, but only with
respect to information relating to such Selling Holder furnished in writing by
such Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus.  In case any
action or proceeding shall be brought against the Company or its officers,
directors or agents or any such controlling person, in respect of which
indemnity may be sought against such Selling Holder, such Selling Holder shall
have the rights and duties given to the Company, and the Company or its
officers, directors or agents or such controlling person shall have the rights
and duties given to such Selling Holder, by Section 2.6 hereof.

                                       11
<PAGE>

          SECTION 2.8.  Conduct of Indemnification Proceedings.  In case any
                        --------------------------------------
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Sections 2.6 or 2.7 hereof, such person (an "Indemnified Party") shall promptly
                                             -----------------
notify the person against whom such indemnity may be sought (an "Indemnifying
                                                                 ------------
Party") in writing and the Indemnifying Party shall assume the defense thereof,
-----
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all fees and expenses.  In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them.  It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred.  In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by (i) in the case
of Persons indemnified pursuant to Section 2.6 hereof, by the Selling Holders
which owned a majority of the Registrable Securities sold under the applicable
registration statement and (ii) in the case of Persons indemnified pursuant to
Section 2.7 hereof, the Company.  The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.  Notwithstanding the foregoing sentence,
if at any time an Indemnified Party shall have requested an Indemnifying Party
to reimburse the Indemnified Party for fees and expenses of counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
thirty (30) Business Days after receipt by such Indemnifying Party of the
aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the
Indemnified Party in accordance with such request prior to the date of such
settlement.  No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened
proceeding in which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such proceeding.

          SECTION 2.9.  Contribution.  If the indemnification provided for in
                        ------------
Sections 2.6 or 2.7 hereof is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Company and the Selling Holders on the one hand and the
Underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the

                                       12
<PAGE>

Selling Holders on the one hand and the Underwriters on the other from the
offering of the securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits but also the relative fault of the Company and the Selling Holders on
the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Company on the one hand and each Selling Holder on the other, in
such proportion as is appropriate to reflect the relative fault of the Company
and of each Selling Holder in connection with such statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Holders on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and the Selling Holders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Company and the Selling Holders on the one hand and of the Underwriters on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
and the Selling Holders or by the Underwriters. The relative fault of the
Company on the one hand and of each Selling Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or such Selling
Holder, and the Company's and the Selling Holder's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.

          The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 2.9 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph.  The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in Sections 2.6 and 2.7
hereof shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The

                                       13
<PAGE>

Selling Holder's obligations to contribute pursuant to this Section 2.9 are
several in the proportion that the proceeds of the offering received by such
Selling Holder bears to the total proceeds of the offering received by all the
Selling Holders and not joint.

          SECTION 2.10.  Participation in Underwritten Registrations.  No Person
                         -------------------------------------------
may participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents in customary
form and reasonably required under the terms of such underwriting arrangements
and these registration rights provided for in this Article II.

          SECTION 2.11.  Rule 144.  The Company covenants that it will file any
                         --------
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.  Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

          SECTION 2.12.  Holdback Agreements.
                         -------------------

          (a) Restrictions on Public Sale by Holder of Registrable Securities.
              ---------------------------------------------------------------
To the extent not inconsistent with applicable law, each Holder whose securities
are included in a registration statement pursuant to Section 2.2 agrees, upon
receipt of prior written notice from the Company received not later than 17 days
prior to the effective date of such registration statement, not to effect any
sale or distribution of the issue being registered or a similar security of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, including a "broker's transaction" pursuant to Rule 144, but
excluding any private sale during the 14 days prior to, and during the 90-day
period beginning on, the effective date of such registration statement (except
as part of such registration), if and to the extent requested in writing by the
Company in the case of a non-underwritten public offering or if and to the
extent requested in writing by the managing Underwriter or Underwriters in the
case of an underwritten public offering.

          (b) If the Company determines in its good faith judgment that the
filing of the Shelf Registration Statement under Section 2.1 hereof or the use
of any related prospectus would require the disclosure of non-public material
information that the Company has a bona fide business purpose for preserving as
confidential or the disclosure of which would impede the Company's ability to
consummate a material transaction, and that the Company is not otherwise
required by applicable securities laws or regulations to disclose, upon written
notice of such determination by the Company, the rights of the Holders to offer,
sell or distribute any Registrable Securities pursuant to the Shelf Registration
Statement or to require the Company to

                                       14
<PAGE>

take action with respect to the registration or sale of any Registrable
Securities pursuant to the Shelf Registration Statement shall be suspended until
the earlier of (i) the date upon which the Company notifies the Holders in
writing that suspension of such rights for the grounds set forth in this Section
2.12(b) is no longer necessary and (ii) 180 days. The Company agrees to give
such notice as promptly as practicable following the date that such suspension
of rights is no longer necessary.

          (c) If all reports required to be filed by the Company pursuant to the
Exchange Act have not been filed by the required date without regard to any
extension, or if the consummation of any business combination by the Company has
occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-
X under the Act, upon written notice thereof by the Company to the Holders, the
rights of the Holders to offer, sell or distribute any Registrable Securities
pursuant to the Shelf Registration Statement or to require the Company to take
action with respect to the registration or sale of any Registrable Securities
pursuant to the Shelf Registration Statement shall be suspended until the date
on which the Company has filed such reports or obtained and filed the financial
information required by Rule 3-05 or Article 11 of Regulation S-X to be included
or incorporated by reference, as applicable, in the Shelf Registration
Statement, and the Company shall notify the Holders as promptly as practicable
when such suspension is no longer required.

                                  ARTICLE III

                                 MISCELLANEOUS
                                 -------------

          SECTION 3.1.  Remedies.  In addition to being entitled to exercise all
                        --------
rights provided herein and granted by law, including recovery of damages, the
Holders shall be entitled to specific performance of the rights under this
Agreement.  The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.

          SECTION 3.2.  Amendments and Waivers.  The provisions of this
                        ----------------------
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given without the prior written consent of the
Company and the Holders or any such Holder's representative if any such Holder
is Incapacitated.  No failure or delay by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon any breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.

          SECTION 3.3.  Notices.  All notices and other communications in
                        -------
connection with this Agreement shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:

                                       15
<PAGE>

               (1)  if to Unit Holder:

                    Montebello Realty Corp.
                    800 Scudder's Mill Road
                    Special Investments, Area 2-G
                    Plainsboro, NJ 08536
                    Attention: J. Timothy Ford
                    Facsimile Number:  (609) 282-5401

                    with a copy to:

                    Peter Blessing, Esq. (5543-10972)
                    Shearman & Sterling
                    599 Lexington Avenue
                    New York, NY  10022
                    Facsimile Number:  (212) 848-7179

               (2)  if to the Company or the Operating Partnership:

                    2250 East Imperial Highway
                    El Segundo, California 90245
                    Attention: President and Chief Executive Officer
                    Facsimile Number:  (310) 322-5981

                    or to such other address as the Company may hereafter
                    specify in writing.

          All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.

          SECTION 3.4.  Successors and Assigns.  Except as expressly provided in
                        ----------------------
this Agreement, the rights and obligations of the Holders under this Agreement
shall not be assignable by any Holder to any Person that is not a Holder.  This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.

          SECTION 3.5.  Counterparts; Facsimile Signatures.  This Agreement may
                        ----------------------------------
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto, which may be an original signature or facsimile thereof.

                                       16
<PAGE>

          SECTION 3.6.  Governing Law.  This Agreement shall be governed by and
                        -------------
construed in accordance with the internal laws of the State of California
without regard to the choice of law provisions thereof.

          SECTION 3.7.  Severability.  In the event that any one or more of the
                        ------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

          SECTION 3.8.  Entire Agreement.  This Agreement is intended by the
                        ----------------
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

          SECTION 3.9.  Headings.  The headings in this Agreement are for
                        --------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

          SECTION 3.10.  No Third Party Beneficiaries.  Nothing express or
                         ----------------------------
implied herein is intended or shall be construed to confer upon any person or
entity, other than the parties hereto and their respective successors and
assigns, any rights, remedies or other benefits under or by reason of this
Agreement.

                            (Signature Page Follows)

                                       17
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                              KILROY REALTY CORPORATION,
                              a Maryland corporation


                              By:  /s/ Tyler H. Rose
                                 -------------------------------------------
                                  Tyler H. Rose
                                  Senior Vice President and Treasurer



                              KILROY REALTY, L.P.,
                              a Delaware limited partnership

                              By: KILROY REALTY CORPORATION,
                                  its general partner


                              By: /s/ Tyler H. Rose
                                 -------------------------------------------
                                  Tyler H. Rose
                                  Senior Vice President and Treasurer


                              MONTEBELLO REALTY CORP., a Delaware corporation


                              By:    /s/ J. Timothy Ford
                                 -------------------------------------------
                                  Name:  J. Timothy Ford
                                  Title: Vice President


                                      S-1