Good day, ladies and gentlemen and welcome to the Third Quarter 2014 Kilroy Realty Corporation Earnings Conference Call. My name is Sarah and I will be your operator for today. At this time, all participants are in listen-only mode and later we will conduct a question-and-answer session. (Operator Instructions) And as a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Tyler Rose, Executive Vice President and Chief Financial Officer. Please proceed.

Good morning, everyone. Thank you for joining us. On the call with me today are John Kilroy, Jeff Hawken, Eli Khouri, David Simon, Heidi Roth and Michelle Ngo. At the outset, I need to say that some of the information we will be discussing is forward-looking in nature. Please refer to our supplemental package for a statement regarding the forward-looking information in this call and in the supplemental. This call is being telecast live on our website and will be available for replay for the next 7 days by both phone and over the Internet. Our press release and supplemental package have been filed on a Form 8-K with the SEC and both are also available on our website. John will start the call with a review of the quarter. Jeff will review conditions in our key markets. I will finish up with financial highlights and updated earnings guidance for 2014. Then we will be happy to take your questions. John?

Thanks, Tyler. Hello, everyone and thank you for joining us today. We had an another very strong quarter at KRC with West Coast market fundamentals continuing to exhibit strength, rental rates are rising, vacancies are falling, tenant demand is increasing and supply remains disciplined. Across our enterprise, our financial and operating results reflect the significant strategic investments we have made over the past several years in acquisitions, development, redevelopment, sustainability, and our expanded management team. 2014 is shaping up to be another exceptional year for us as we continue to deliver on all of our objectives and priorities. Highlights from the quarter include the following. In our stabilized portfolio, occupancy now exceeds 94%. And as of today, the portfolio is 96% leased. We are generating strong year-over-year growth in same-store net operating income benefiting from higher occupancies and strong rental rate increases. Our development program continues to create significant value with projected returns in all cases exceeding our original underwriting. We signed two development leases in the third quarter covering approximately 20% of our under construction square footage. We leased 100% of our Crossing/900 office project in Redwood City and 100% of Phase 1 office space at Columbia Square. While the acquisition market remains expensive, our established franchise continues to uncover new opportunities. We are now in escrow to acquire a fully leased Silicon Valley office campus for approximately $100 million that has the stabilized yield of almost 6.5% and includes a longer term redevelopment play. We expect to close the acquisition sometime next month. We were named by GRESB, the Global Real Estate Sustainability Benchmark, as the North American leader in sustainability and were ranked first among all asset types. Our capital recycling program remains on track. We sold one property in the quarter for $15 million. And we…

Hello, everyone. Real estate fundamentals continue to improve in the third quarter and step with a steadily expanded economic backdrop. California logged the largest increase in jobs of any state in the country in August adding 44,200 jobs since July and more than 313,000 jobs over the last 12 months. Unemployment continues to fall across all of our markets in the state and job totals continue to grow at a 2% to 3% year-over-year rate. The job growth is broad-based with nearly every industry sector adding employment for professional services to construction to government. The San Francisco Bay area continues to show the strongest overall numbers with September unemployment at 4.2% and year-over-year job growth in excess of 3.5%. Our greater Los Angeles has made a huge move over the last 12 months from an unemployment rate of nearly 10% to just under 8% while adding more than 70,000 new jobs. San Diego generated a healthy 2.5% year-over-year job growth during the quarter decreasing the unemployment rate to 5.9%. And the Seattle region continues to boom, with a recent unemployment rate of 4.9% and year-over-year job growth of nearly 75,000 jobs. Let’s take a look at each market start with the leader, San Francisco. San Francisco was once again on track to produce a record year in commercial real estate and fundamentals are at their strongest since 2001, but number of tenants seeking office space remains at impressive levels with more than 5 million square feet of demand and 15 tenants seeking blocks of space greater than 100,000 square feet with less than three blocks available. While technology remains a strong driving force of growth for the city with Google and Uber announcing large deals, fire category tenants are also expanding and needing a presence in the city to retain…

Thanks, Jeff. FFO was $0.69 per share in the third quarter driven by higher occupancy and stronger rents as John and Jeff discussed earlier. We ended the third quarter with stabilized occupancy at 94.1%, up from 93.6% at the end of the second quarter. The additional 50 basis points of occupancy was mainly driven by a San Diego lease and the LinkedIn campus being as the stabilized portfolio. As John noted, our stabilized portfolio continues to generate strong growth in same-store NOI. For the third quarter, it rose 8.7% on a GAAP basis and 15.2% on a cash basis. Adjusting for a San Diego lease termination payment we previously discussed, same-store cash NOI increased 6.2% and same-store GAAP NOI increased 6.5%. Higher rents and higher average occupancy continue to drive the improvement in both numbers. On the development front, all projects continue to be on schedule and on average under budget. With regard to our development under construction, we expect that our 2014 and 2015 deliveries will include the Synopsys campus in the fourth quarter of this year, the first phase of Columbia Square in the spring of 2015, both 333 Brannan and the first phase of Crossing/900 in the third quarter of 2015, and 350 Mission on a phase basis beginning in the fourth quarter of 2015. As we signaled last year, we accelerated the timing, upsized the amount and extended the term of our bond offering in early August. We raised $400 million of 15-year bonds at 4.25% coupon. We used the proceeds to repay $83 million of senior unsecured notes that matured in August, along with $37 million of early redemptions on our exchangeable notes. We currently have $150 million of unrestricted cash and the full $600 million of availability under our 5-year bank line, not including…

Okay. (Operator Instructions) Our first question comes from Craig Mailman from KeyBanc Capital Markets.

Hi, guys. Tyler, how much of the guidance increases from the pending acquisition in Sunnyvale?

It’s not material. I think it’s maybe half a penny.

Okay, so this is all just operational?

It’s operational, it’s the impact of the new – the development coming online, LinkedIn came in a little bit earlier.

Okay. And then maybe could you guys just talk about the 2 million square feet of tenant interest in Mission Bay, is that – how is that broken out? Is that full building users versus multi-tenanted users, just curious?

Okay. Well, there is two phases to that project total 680,000 feet. Each phase has a six-storied building and a 12-storied building with related parking. We right now have several tenants in discussion and paper going back and forth for the number. In some cases, it’s for all of it, meaning all 680,000 feet and in number of cases, it’s for roughly half to 400,000, 500,000 feet and then we have a few that are in the 150,000 to 200,000 feet.

Okay. And then just on the Flower Mart side I know there has been some recent headlines in the news about community pushback, just what are your current thoughts on that kind of what are you guys thinking for timing and development build out there?

Well, we can’t get into a lot of detail until we have had a press conference with the city and on the project and there is a couple of NDAs that don’t allow us to speak at great length for a few more weeks, but let’s just say that the 1.9 acres we have acquired, we have been working on the adjacent sites. We have made very good progress there. The intent is to keep the Flower Mart, but in a different configuration on the property, which we think the so-called activists will be enthusiastic about and the Flower vendors and so forth are going to be very enthusiastic about. So, we think we are going to have a terrific project there. And I think at our next conference call or perhaps before, we will be able to talk about that in much greater detail. We are very excited about it.

Okay, that’s helpful. And then just lastly 2015 expiration any large known move-outs?

Yes, this is Jeff. If you recall, we originally had about 125,000 square feet expiring in 2015, which was 17.7% of the portfolio. And we have been very proactive over the last year or so. We have renewed about 750,000 square feet. So, we now have 1.375 square feet remaining to enroll next year and we will have won leases over 100,000 square feet. This particular 123,000 square foot expiration of San Diego building that’s currently 70% leased and we are in discussions with existing tenants whose leases can expire in April. The tenant is likely to downsize or move out of the building. We are not projecting significant revenue for the property after April.

Okay, great. Thank you.

Our next question comes from David Toti from Cantor Fitzgerald.

Good morning out there. Couple of questions on the development pipeline if I might. Have you disclosed the stabilized yields in the four assets that are currently fully pre-leased?

Tyler?

We don’t publicly put out our supplemental returns. I think we have generally said what those estimated returns are and they range from mid 7s in some cases to much higher for like 333 Brannan, it’s closer to 10%. So, but we don’t disclose them specifically.

Okay, and that’s fully stabilized?

Well, they are fully pre-leased. They haven’t – 333 Brannan is under construction, the buildings that we stabilize in the most recent, this year we have stabilized one project, which is the LinkedIn campus and it’s in that mid 7% range that we have talked about.

Okay. And then for projects that you have in the pipeline today, how would you compare those yields to that basket, are they tighter by 100, 200 basis points, is there sort of a general tightening across the board in the pipeline?

In terms of the projected yields?

Yes.

I think the yields, in many cases, is going to be higher, but that remains to be seen. Our underwriting has been very conservative and in many cases below where rents are today. So, I think we have room for upside more to come. We are just now marketing our flaw or rather our Kilroy Mission Bay project. We have just started the marketing of the little building we are doing down at The Heights. We think we have been very conservative in our underwriting. And if what – as we were we think when we did the $1.5 billion that we had underway as with the last quarter and as we said in our comments, we exceeded the yields projected on all of those. So hopefully, that’s going to continue to be the case.

Okay. And frankly just take on one last question with regard to the pipeline, what are you seeing in terms of densification trends in some of the new developments on a sort of per square feet basis for employees. Are you seeing that to continue to compress to the sort of below 150 range or are you guys experiencing maybe a reversion off of those lows? We have heard there is different trends in the market.

Yes, it depends on the type of user. Obviously, we do a lot of work here on the West Coast, so you have technology and entertainment companies as well as lot of the fire category folks and many of those people reflect the kind of space that their clients have. They will look more like their clients. So, densification across the markets continues. Many companies already were in the space they have taken were densely occupied. So, whether they will continue to densify, I don’t know. There is a point at which you don’t densify any further, but there are still lot of people that haven’t. And the lawyers and so forth certainly fit into that category as to some of the insurance companies. In terms of the amount of square feet per person, I think we have been talking about this from 5 or 6 years that this trend has been very prevalent and it’s generally – we generally see sort of 6 plus people. I think our average is something well, a little over 6 to 6.5 people per 1,000 square feet through our enterprise with some folks that tenure more.

Okay, that’s helpful. Thank you.

Our next question comes from Jamie Feldman from Bank of America/Merrill Lynch. Jamie Feldman - Bank of America/Merrill Lynch: Great, thank you. I am hoping you could talk a little bit more about the pickup in San Diego this quarter and what do you think this means for demand going forward and the different submarkets?

Well, I will start with that just kind of the broad comment and put you over to David. We are seeing good math for a little building. We have been unable to really market the office space at One Paseo until we get approval, which we hope to do in January. We think we are hitting the market just right. The markets have really tightened. There is very little Class A space. Jeff mentioned the vacancy rates in both the Sorrento Mesa and the Del Mar market, where we have vacant property which are now single-digit. We are seeing no good or very little high-quality space available, but increasing demand for it. So, we think that sort of brings this back to where we were back in sort of ‘99/2000 and again in sort of 2003/2004, where we had similar characteristics and we are able to significantly increase the prices of or rather the rents, Jamie, as well as respond to demand with new product by developing new products. So, David, you have got the numbers there. I happen to be in San Francisco, David is in LA. David, can you speak a little bit to the rents there?

Yes. So, Jamie in particular, where we are doing our new project down in The Heights in Del Mar, markets tie for the Class A product as Jeff mentioned 7% to 8%. So, the rents are in the low 40s on a triple net basis for new product and that’s what’s signaled to us with over 500,000, 600,000 square feet of demand just in the Del Mar submarket that the timing was right to move forward on The Heights building, but overall as you have heard in the other comments with employment going down, supply limited of new product, there has been a lot of focus. From the fire categories in Del Mar and bioscience, life science throughout the balance of Central County, so we feel pretty good about we are positioned. Jamie Feldman - Bank of America/Merrill Lynch: Okay. And you said its fire and then in terms of the tenant size are these larger companies, smaller companies that are growing?

But I think – I think the fire categories it’s a little bit about you are seeing some larger uses from law firms, wealth management firms and things like that. You are seeing your small entrepreneurial companies as well. So I think it’s a mix across the board depending on where you are at particularly in the county, but overall demand is up. Jamie Feldman - Bank of America/Merrill Lynch: And what about tech and media are they less active?

You have some tech and media as you know specific a lot of its in Northern Cal and predominantly in LA, where you are seeing a lot of that. But with your big companies down at Qualcomm’s of the world, you are starting to see some of that. But that’s kind of where we see it. Jamie Feldman - Bank of America/Merrill Lynch: Okay. And then if I can just ask more about your – growing more in Silicon Valley and down in the Peninsula and Mission Bay, I just is there a shift here in what – types of demand that’s out there or is it more you just can’t find good opportunities in Southern market and in the core CBD?

Jamie, are you speaking a shift locationally? Jamie Feldman - Bank of America/Merrill Lynch: Correct?

Well, I think of some and as a zero percent vacancy. I mean I always say it’s hard I know zero percent is actually I am – maybe I should go out and look and see if I can find a square foot somewhere and prove that number wrong. But the market reports zero percent. What happens and the way I characterize Mission Bay when I first started looking at step up here 5, 6 years ago and of course we made our first purchase a little over 4 years ago. I thought Mission Bay is absolutely going to happen, but it was probably going to happen in 10 years. And 3 years ago I thought it was probably going to happen in 6 or 7 years. Two years ago, I thought it was probably in 5 year. Last year I said it’s happening right now and that’s exactly what happened. Mission Bay is becoming an extension basically of the Greater SOMA market here. And you have seen any number of companies Dropbox and Uber are two of the bigger ones. But there is a whole flow of companies that are down there. It’s where the greatest concentration of new apartment development is happening Mission Bay, Potrero Hill, Dogpatch, etcetera and it’s where more apartments are coming. The Central SOMA subway and rail system is going to connect from market to which is BART system to Caltrain and it will stop a block from the flower mart and then down through Mission Bay and ultimately down further south. So I think you are going to continue to see a progression of San Francisco move south. And then with regards to the other markets in Silicon Valley and so forth, I mean there are some huge users down there that are gobbling up everything Google, Facebook being the two most notorious, Apple of course is on the expansion. So basically what’s happening is that people are in a race in a fight to find to space and if you are a company that wants to own you are in a race to find a property, which means you are probably buying a lot of property from other people with the idea of future – in the future developing it for your own needs. So these are all very strong characteristics and obviously we are going to ride that wave. Jamie Feldman - Bank of America/Merrill Lynch: Okay. And then last question just for Tyler, can you help us think through the sources and uses going forward given more development growth here?

Yes. Well, we have on the uses side we said we have a little over $100 million in development spending remaining in this year. And we have the acquisition of the Silicon Valley asset and we have some debt that’s maturing. We have talked about those numbers. On the sources side, we still have $200 million of cash in the bank. We continue to fund with our strategy of a combination of more dispositions, more bonds when it’s necessary and some ATM usage on the equity side. So nothing has changed on our funding strategy we have plenty of capacity right now where we don’t have any need to do a transaction. But as both John and I said the disposition program is the strategic priority, so that’s going to be first and foremost how we are looking to fund a lot of the development. Jamie Feldman - Bank of America/Merrill Lynch: Okay, great. Thank you.

Our next question comes from Emmanuel Korchman from Citi.

Hey guys. John you commented that there is a fight for space going on, do you worry the companies are taking too much shadow space and sort of doing it now before it all goes away rather than having a business need or plan for that space?

Yes, there are always going to be a couple economies that take down more, but I am – we talked with the DCs, the angel investors that corporate users from the big companies, from the little companies to the brokers, everybody else, it is best we can see it and I think the market confirms this that while there is always going to be something that probably takes more space than they need, by and large, people have been far more disciplined. They have far more financial discipline imposed upon them by their funding sources and whatnot then in years past. And we are not seeing – mostly what we are seeing is real growth, but there is in fact the reality that people are very concerned about the ability to find space. If you are down in the shadow of Google or Apple or Facebook or whatever and you are a company that needs space, you might decide to go out and contract for it, a year or two early or buy the property a little bit earlier just to protect yourself. There is certainly going to be some of that. Here in the city, there is this crazy propping thing. I want to go on record that I am never a favor from a policy standpoint, those kinds of things. But as long as they exist, you want to figure out how you profit by them and the way you do is that you make sure you go out and get properties that are either entitled that are in the path of growth or that you believe will get approval because of the significant or public benefit or whatever it might be that you are providing. And there is a real recognition as we have been saying now for a couple of years there is a real recognition that there is a shortage of space, particularly a shortage of a most desirable kind of space. The most desirable kind of space for the biggest consumers of space in this market would be sort of 15 storeys and under big floor plates, high ceilings, where you can really densify fairly close to public transportation.

Got it. And as you do more mixed use, where can we expect your percentage of residential to end up?

Well, I don’t know that we have a particular – you mean percentage of the company?

Sure.

It’s still fairly de minimis. I mean, we have got, David, forgive me everybody that I don’t know these numbers on the back of my – to have them on the back of my tongue like I used to. I used to know every square foot in every deal and every rent. I just can’t compute that much anymore. The residences there at Columbia Square, the 20-storey luxury residences, which are just starting construction, that’s about $130 million, David?

Yes.

Okay. And down in One Paseo, which isn’t under construction yet, but when that gets going at 600 units and what’s the kind of round cost for that, do we know?

It will be about $300 million.

Yes, call it $300 million or so. Academy Square which is downstream, there is another, call it another $100 million, $120 million. I mean, this kind of gives you a feel for the size of that versus the enterprise. It’s a substantial dollar amount, but the percentage of the company is pretty small. And we haven’t decided what to do with that yet. We simply want to develop, but make sure that we get the benefit, our shareholders get the benefit of value creation and then we have the optionality to sell a joint venture at our own.

Great, thank you very much.

You’re welcome.

Our next question comes from Vance Edelson from Morgan Stanley.

Great, thank you. On the LinkedIn campus in Sunnyvale, I gathered from some of the LinkedIn filings that it’s a fairly long-term lease, is there anything you can share on the specifics of the duration? And then related to that, LinkedIn itself is doing very well, some of the other tech names have been a bit shaky. So, when that lease does expire or if it comes a day that LinkedIn is no longer the tenant, can we assume that these assets would be very attractive to other potential tenants?

Well, let me speak to the second – Tyler, let me speak to the second part of the question first. Everything, we are doing that we are building, we are not trying to build anything its just specialized. We won’t build something specialized for somebody. They may have some special improvements and so forth they put in, but basically everything we are developing or at locations where a multitude of people, a great cross-section of users want to be there is a kind of poor place in Heights and now the amenities and the parking ratios that they’re suburban are more suburban now that the broad market want. So we don’t want to build something that’s specialized and if a tenant has a problem, we get caught. Secondly, with regard to the length of the term, Tyler, do you want to get into that?

It’s a 12-year term and as we said revenue recognition has started lately in the third quarter and cash rents starts in early in the second quarter of next year.

Okay. Congrats on that. And then in Hollywood with residential occupancy I think it’s in the high 90s now. Could you update us on the timing for when you can start selling Columbia Square units in relation to the completion date, can you get a jump on that process at all?

I mean typically – this is David. Typically what happens six to eight months before you deliver, you’re out in the world marketing and we’ll be marketing at call it first quarter of this year marketing materials prepared, we talk to people but usually it’s about six to eight months and you’re right, the occupancy levels are really tight. Our products pretty special so there is a lot of interest already that end up for the product so I think we’re in good shape.

I just want to clarify because you used the word rents that – yeah exactly, these are rentals they’re not condos.

Okay. And then nearby any update on the entitlement process at Academy how that’s going and the timing in particular, is that likely to take until I guess late 2015?

I mean everything is going well with the city, the neighborhood and all the things that we need to happen late ’15 fourth quarter ’15, early ’16 is when we expect to have entitlements in place.

Okay. Thanks guys.

Our next question comes from Brendan Maiorana from Wells Fargo.

Thanks. Good morning. Tyler, I think you mentioned that asset sales next year is $150 million to $400 million is reasonably wide band and John you said cap rates Downtown San Francisco 3% to 4% LA 4% to 5%. Characteristics of what you guys are likely to sell, is it similar to what’s been sold this year or do you think you may sell something that call them core assets in downtown locations that are commanding this very low cap rates?

This is Eli. Look, we’re always open to doing opportunistic sales but what’s in the pipeline right now I think we’ll look fairly somewhat to some of the things you seen us do in the past if there will be a few more regions involved but it will probably be heavily Southern California based as we go through these things, we’re actively always being very toppled about how to construct these portfolios to draw a deep interest in the long term. And so what’s currently in the pipeline right now is not a prime San Francisco asset, that doesn’t mean that we won’t and couldn’t in the short period of time make a decision that we might want to do that that’s always on the table and we get approach to about it all the time. But the current pipeline are things that are little more outlined in that.

Okay.

But there is very strong interest.

Sure. That’s helpful. Eli, thanks. There was a comment in the press release that given where occupancy levels are you’re effectively now and kind of frictional vacancy. Is it pretty fair to assume that from year on now that sort of high 93s 94% is kind of about as high as your occupancy levels are likely to go over in any given quarter or few quarters shrunk together?

It’s really hard to figure out because I mean we’ve had in the past five, six years ago we had seven, eight years ago whenever it was, we were in the high 90s. And when you get into high 90s we always worry about that everybody thinks that that’s the new norm and we all know that sort of 95% if you’re going to operate 93%, 94%, 95%, that’s pretty dug on goodness business. Right now with what we’re seeing with the quality of our portfolio because we’ve spent so much money and time over the last several years making sure that buildings we want to keep on really terrific shape and of course building space you get to build the latest and greatest. We felt pretty good given the demand characteristics and we could move up for sure. But also remember that when we buy something generally it’s because there is some opportunity, there is either some vacancy or a future redevelopment play and so that could lower – through acquisitions, can lower your occupancy a little bit. Obviously, we’re very active developers. So, if the space comes on stream, if it’s not entirely leased that and it become further core that can lower your occupancy a little bit, it’s really hard to predict. Let’s just say that right now it’s a very good time in this business in the markets with the kind – that we are in but a kind of products that we have.

Okay, great. And then just last one John, if you went back a year ago when you sort of thought about where we were in the cycle, you guys did a great job buying early and then migrating your strategy by core, by value add and develop and you kind of think about this cycle going forward, do you feel like the goal post of maybe when this cycle ends have moved given that dynamics remain very good this year or do you feel like maybe we are inching a little bit closer to the end of the cycle relative to where you might have thought a year or so ago?

I am I guess because I have been around a long time and I always wish that I would have done something differently and high insight when I look back at some of these cycles particularly the great recession and all that kind of stuff. I have to tell you I think the field has gotten longer particularly here in San Francisco with everything I see going on. But everybody has heard me speak before whether it’s and they read individually or whether it’s been bib panels or keynotes speakers or whatever the thing that when I asked about what worry about, I worry about the people in Washington. I worry about what’s going in the macro thing of the world it’s the reason we operate with low debt particularly when we are active developers and so forth. I just don’t want to believe it’s always different this time to the point where you do something stupid. And so I – because it’s the goal posts are even they have LinkedIn I think the field has LinkedIn probably down much more conservative because I just I am 65 years old. I have been knocked off my skies a couple of times I didn’t lag it.

Alright. Thanks.

Our next question comes from Jed Reagan from Green Street Advisors.

Hi, good morning guys. I am just wondering if you can talk about how rents on the Columbia Square LOI compared to your initial underwriting and then maybe just how activity is looking for the remaining office space there?

Let me start with the rent, we are not going to get into that right now because we don’t have a signed lease yet. But I will standby what we said earlier which is we have exceeded our yields across our development pipeline have exceeded our underwriting. So I think you will be happy but I am not going to get into that. David you want to take the demand for the rest?

Yes, so Jed the activity has been really good ever since the building has come out of the ground we have seen a ton of activity comes through on various sizes. We are trading paper with a variety of groups for the space 20,000, 50,000 then and larger. It’s even evidenced on the 6255 building where I think as of yesterday we are pushing upper 90s on the lease basis. And there has been a lot of pressure in the right direction on the rent. So markets accepted it, recognized it and really appreciates the fantastic product and the environment we are creating and so it’s been all good.

Okay, great. And I think you had bracketed cap rates in San Francisco and LAs somewhere between Caltrain 5% today I am just curious if you could provide a similar range on what you are seeing in San Diego because there haven’t been a lot of meaningful comps in that market recently and also maybe just touch on Seattle as well?

Yes. This is Eli and with respect to San Diego I mean I think the best comps because we have been very active sellers down there. And our cap rates have been in the 5s and the low 5s and it depends on the product and if you have something super well leased that’s over market it can be out of that. But we have seen sort of in the 5% range not really quite dip down on this. You can still dip down with the core asset into the high 4s in San Diego if that’s what you had. And then up in Seattle I think it’s very close to what the Bay Area is I mean it’s probably mid-4s for core product. They are about and that could range from I will call it high-3s to low-5s with variation there in products and market rents and place rents and all of that, so.

Okay, that’s helpful. And then just last one from me. It sounds like you guys were finalist in the running for large office site near the Transbay Terminal but ultimately another bidder laying at that one. Just wonder if you could talk about how that process unfolded. And then maybe just in general how much land values moves up in San Fran, whether you’re still chasing new development deals there other than the Flower Mart side or if you feel like that’s just kind of no longer pencils in the harder place in the city?

Well, Block 5 is a great site, it’s at the eastern end of the Transbay Terminal, has lot of experiences associated with things related to the Transbay in a physical sense, so it was an expensive building. And then it has the Mello-Roos tax which is the better part of $5 per square foot per year. So that has a significant impact on its underwriting. I think that probably publish what the numbers are, let’s just say that we are told that the four bidders, we were the lowest and the winning bid was more than twice what we were willing to pay for the land. So, we didn’t win that one. And we had a design that we felt was much more attractive to what we feel the demand is in the market than what some others were putting together. Let’s look at San Francisco for a second. There is Prop M, there is 3 million square feet round numbers in the available entitlements that’s kind of there is far more than that in a way of folks trying to get projects entitled. There is going to be a big restraint on folks that can get their properties entitled in the near term. The city is going to – some people call it’s a beauty pageant or a beauty contest. Cities generally wanted to have projects approved that further the aspirations and planning of the city whether that’s related to a transportation or whether that’s related to a mix used project that has housing and so forth or whether that’s related towards things that are viewed to be in the public interest. And so it’s a different Vega, it’s a different ballgame up here now. If you look at where how Kilroy is positioned this property that we bought…

Great. Thanks a lot guys.

Thank you.

Next question comes from Dave Rodgers from Baird.

Good morning. May be Tyler start with you and I don’t know if John if have some thoughts around this, maybe talk about the Crossing/900 site the least that you signed there recently with Box how you got comfortable with credit going out so far at that particular site and with that particular tenant and any contingencies that might be in that lease or milestones that they would have to hit other than just simply moving in?

Well, John can talk about the physical property on the credit side we did a lot of analysis, we met with the companies several times, we talk to outside people a lot. So, we did a full review of the company. We have a very large letter of credit that’s cash by letter of credit, so we spend a lot of time on it, you never know what’s going to happen but we think we are really well protected and John you can comment on the physical side of the building?

Well, yes, Dave on the physical side of the building, its right next to the baby bullet train which is Caltrain which is the way people go up and down other than automobiles between north and south on the peninsula and into the city. The ride from the bullet train next to the project is how far is Stanford?

It’s 8 minutes.

Yes, to give you an idea.

20 minutes to San Francisco if you take a bullet.

Yes. So it’s just got fabulous transportation characteristics, it’s right there in the City of Redwood. City is becoming one of the hot little areas down there. It was late bloomer compared to Palo Alto and so forth, but it has many of the similar characteristics with our downtown with lots of restaurants and lots of apartments being build in the area which is obviously very important to the technology and other industries that are down there because there has been a shortage of affordable housing lot more of that to come. You have Stanford moving in at a big way. They are moving out a lot of their advent and what not on their campus because they are capped with regard to the number of people they can have or their average daily trips, so they are going to move not essentials out of there thousands of people into Redwood City. You have got Google expanding like mad in Redwood City and so forth. So we are very comfortable in the market, very comfortable on the attributes of the site with regard to amenities and housing and transportation. The physical nature of the buildings, it’s two buildings they are mid-raised big floor plates to handle high density also has terrific parking which is nice, so as an appeal to a broad range of users. And when we look at these things we look at – we could have done a multi-tenant thing and had a couple of law firms, a couple of tech companies we could have waited around and had more there are a lot of tech companies that were interested in the project. Box from what we can tell is it’s a terrific company. As Tyler mentioned we got a very large letter of credit and we told you what we got in a way of spread over underwriting on a yield base which we think is a pretty good risk adjusted return. If something would happen, tenant moves out, it’s got the physical characteristics, locational characteristics, it’s got the market characteristics, it’s got the transportation, it’s got all that stuff. I am very confident that we will be able to recover very nicely. We don’t expect that to happen. We don’t want that to happen, but you asked the question and I am giving you the best answer I can.

Thanks. Last question for me, maybe for Eli and John thoughts as well I am sure on your South Lake Union land acquisition you talked about I think you said that was a 4Q or a 1Q closing, clearly tight vacancy in that market, but quite a bit under-construction and still quite a bit and kind of in the speculative category that’s under-construction with more to come likely, so how do you think about that, is that an – in this cycle play, next cycle play, would you kind of do lab, it sounds like a big lag building but how do you think about playing into that market?

Well, first of all when we approach all of these things we would like to approach on with lots of optionality that site has a lot of things going for. I think being a full block being right across from the gate’s foundation, what I have heard is it’s got several attractive features that I don’t think are available throughout. It’s also in my view a multi-use site. And that’s how we have flexibility both in the entitlements as well as studying further what is the right mix on this site. So from – with respect to timing I mean your comment on the amount of products in the market right now I mean honestly most of that product is spoken for on the overall context things and I am not looking at the numbers right in front of me but I keep general tabs on it. That there isn’t the pipeline is coming relative to the growing demand in South Lake Union is not at the concerning levels at this point. Now there is always more that can be built and so forth and we will calibrate that and that will guide us as to when we might start and what kind of product mix we might have and but we will build just like we have in all these other cases. We will build a superior product that has the highest level of attractiveness to people in the market. And we will do – we will figure out the timing such that we are in the market at the right time. We have a lot of flexibility.

Okay, great. Thank you.

The other point I would make about that Dave is that I think our cost bases there is going to be terrific versus where properties are trading today?

Alright. Our next question comes from Gabriel Hilmoe from ISI Group.

Thanks. Just a quick one for Tyler or Eli, just going back to the disposition numbers for next year, the $400 million on the high end, is that full $400 million level currently being marketed for sale?

Eli, you want to cover that?

Say that again.

Can you, Tyler?

Just for the disposition guidance next year, the $400 million on the high end, I am just trying to get a sense if that full amount is currently kind of in the market for sale?

No, the full amount won’t currently be in the market. That would include some additional things that we are playing around with, but haven’t pulled the trigger on.

Okay, great. Thank you.

Alright, great. I will turn the call back over to Tyler Rose for closing remarks.

Thank for joining us today. We appreciate your interest in KRC.