Alexandria Real Estate Equitie [ARE] Conference call transcript for 2023 q3
2023-10-24 20:27:04
Fiscal: 2023 q3
Operator: Good day, and welcome to the Alexandria Real Estate Equities Third Quarter 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.
Paula Schwartz: Thank you, and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The Company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's periodic reports filed with the Securities and Exchange Commission. And now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.
Joel Marcus: Thank you, Paula, and welcome, everybody, to our third quarter conference call and the order of speaking today will be, I’ll kick off, Hallie will follow, Peter will follow Hallie and then Marc will do clean up as most of you know, Dean Shigenaga stepped down as Chief Financial Officer on September 15th. He'll remain full-time employee and will be on our Q&A call. But Marc is going to, and Dean is mostly responsible for the quarter. But Marc will handle today's call on the presentation. I want to start off with two quotes. First by one of the most legendary, by two legendary investors. First one is Warren Buffett who has said and many know, this quote, be fearful when others are greedy and opportunistic when others are fearful and so we are. And a quote from one of the most legendary institutional investors on Alexandria. Alexandria is a life science industry leader solely publicly traded pure-play REIT at its current discounted valuation we believe concerns about competitive supply and distress for some of the company’s life science tenants were overblown and sufficiently discounted in the company’s valuation. We believe the management team has assembled a desirable real estate portfolio, enjoys a leading market share position in its geographic markets and has solid expectations for long-term demand-driven growth. So I want to thank each and every member of the Alexandria family team for a strong and operationally outstanding third quarter for this one of a kind read, especially in a very challenging, and continuing disruptive macro environment. Our size, scale and the dominance we've chosen to undertake in our key submarkets coupled with our irreplaceable brand of importance to our over 1800 tenants represents a distinctive impact few other REITs will ever enjoy. We continue to dominate those of our key submarkets where we have created a leading position and continue to maintain pricing power for a highly desirable mega campuses which enable life science entities to meet their mission-critical needs and also a path for future growth. Couple of thoughts on the third quarter. We continue to maintain a fortress balance sheet, one of the best in the entire REIT industry. We continue our consistent strong and increasing dividend with a focus on retaining significant cash flows after dividend payment for reinvestment. We're well on track for a 7% FFO per share growth for 2023, fueled by our onboarding of substantial net operating income, the first half approximately $81 million, the third quarter approximately $39 million and the fourth quarter, approximately $114 million. A few comments on FDA drug approvals, which is the holy grail of the life science industry and Hallie will have more to say. During the period, which was the bull biotech market 2015 to 2021, almost three quarters of approvals were biotech and 25% were pharma. So biotech continues to be the mainstay of innovation. This year as Hallie will detail, 45 approvals to-date and it could surpass the all-time high of 59 in 2018. Hallie will address the health of the life science industry and the demand generators. But third quarter leasing of approximately 870,000 rentable square feet was very solid and especially with a weighted average lease term of an amazing 13 years and very strong, leasing spreads, almost 20% on the cash basis and almost 29% on a GAAP basis while leasing costs were decreasing. Life science tenant health is one of the most frequently asked questions and again Hallie will address that in depth. We are in a de facto recession and in the self-inflicted inflationary and high interest rate environment. So that is driving caution, but the life science industry is unequivocally healthy thriving, and the key to improved healthcare outcomes which are desperately needed for all of us. Internal growth remains steady and solid with same-store cash NOI growth for the year at a strong 5.6%, occupancy on course for about 95% plus as of yearend and Mark will have much more to say on internal growth. Peter will detail external growth and our strong efforts of onboarding the substantial net operating income as I just referred to, and he will also update as he does each quarter supply dynamics. Peter will also give a brief update on the status of our self-funding for the balance of 2023 and the year as a whole. Let me say in summary, we know this is a tough show me market filled with many skeptics. Many of those skeptics doubting the health of life science industry despite clear facts to the contrary over blowing the impact of the elevated levels of new construction, no matter the quality location and/or sponsor or operations and we know of numerous operating debacles causing substantial damage to tenants by so-called other operators to their science doubting the ability of Alexandria, the self-funded business, despite clear facts to the contrary. Each and every reporting quarter, we intend to continue our world-class operational excellence with exceptionalism in all we do and we intend to capture virtually all of the future demand of our over 800 tenants and virtually all of the future demand of non-tenants who meet our underwriting requirements. And we intend to execute a perfect thread the needle self-funding plan for the remainder of 2023, as well, as 2024 as our assets continue to remain scarce and still in demand. And then finally, before I turn it over to Hallie, I would say remembering that CREDO of the Navy Navy SEALs, the only easy day is yesterday. So Hallie take it away.
Hallie Kuhn : Thank you, Joel and good afternoon, everyone. This is Hallie Kuhn, SVP of Science and Technology and Capital Markets. Alexandria is at the Vanguard and Heart of the $5 trillion secularly growing life science industry, which translates into numerous demand drivers for Alexandria's mission-critical lab space and we are the go-to partner for the life science industry. Today I am going to review these demand drivers and exciting new areas of life science, research and development all of which translates into a healthy and expanding tenant base and increasing long-term revenue. So first, what do we mean when we say the life science industry is secularly growing? First, massive unmet medical need with over 90% of known diseases having no available treatments drives the life science industry providing a tremendous opportunity for innovation, new company formation and life science industry growth. This opportunity set does not change at the whims of the market. It is non-cyclical and non-discretionary. Second, tenant growth and demand are event and milestone-driven. Important milestones include new biological discoveries, successful advancement of experimental therapies into the clinic and ultimately the demonstration of safety and efficacy of new medicines. Expansion of new therapeutic modalities such as cell, gene and RNA medicines; better diagnostic tools to accurately identify and diagnose patients, and increasingly efficient and predictive clinical trial designs have the potential to increase the number of new medicines over the coming years. Third, multifaceted and differentiated funding sources ensure that life science companies founded on impactful and differentiated technologies with experienced management teams continue to thrive Altogether, we estimate over $400 billion will be deployed to support life science companies in 2023 across venture funding, biopharma R&D, philanthropy, government, grants and public equity financings. Notably, 2023 has already exceeded the previous 10 year average of $360 billion and the total market capitalization of public life science companies currently exceeds five trillion. Together, the massive unmet medical need, event-driven growth, and robust and diverse funding sources result in secular growth of the life science industry that drive additional demand for Alexandria lab space, even amid an economic downturn. The output of this significant investment is longer, healthier lives. As Joel commented, 43 new therapies have been approved this year by the FDA, and six novel gene, cell and RNA-based therapies have been approved. These numbers are on track to meet or exceed the all-time high for annual FDA approvals. That was in 2018 when 59 novel therapies were approved by the FDA. This is extremely positive above all for the patients that need these medicines. An example of important new therapies on track for approval include the class of GLP1 medicines for obesity, a disease, which accounts for direct costs of over a $170 billion in healthcare spending in the US per year and afflicts, one, and three children and one in five adults. A decade ago, obesity was considered a minefield for drug development and the industry sentiment was that medicine could not address such a complex disease. Fast forward, and pharma has unlocked an entirely new class of anti-obesity medicines and analyst estimate upwards of 10% of the US population will have been treated with a GLP1 by 2030 with an estimated market size of $40 billion to $50 billion. Another exciting area is artificial intelligence and machine learning tools. As highlighted in our recent press release, AI is not new to the life science industry. In 2021, there were over a hundred drug and biologic submissions to the FDA developed using AI components. Nor do AI tools negate the need for lab space. In many cases, AI focused life science companies require significant lab footprints to generate the immense biological and chemical datasets needed to effectively train AI ML models. To this end, the acceleration of AI may in fact, increase the need for laboratory footprints. And we already see this manifesting as an exciting emerging segment of demand. Now, moving to the health of our diverse life science tenant base. While some analysts and investors have a misconception that small and mid-cap biotech are a proxy for the entire life science industry, and its growth, the reality is broader, and far more complex. Starting with multinational pharma, which account for 18% of our ARR, companies are leveraging healthy balance sheets to double down on R&D and in licensing, acquire innovative products. Biopharma alone invested $278 billion in R&D in 2022, representing a 66% increase, compared to 10 years prior. Biopharma also has an estimated $500 million in M&A firepower to continue to bring external innovation into their portfolios. To that end, M&A has regained momentum with $112 billion in acquisitions in 2023 exceeding the 2021 and 2022 levels. Large pharma continues to heavily rely on innovation from smaller biotechs to backfill their pipelines. For example, BMS’ top five products in. 2022 were all derived from acquisitions. For J&J, Merck and Pfizer, four out of five of the company's top selling therapies were from licensing or M&A deals. So how does M&A impacts net absorption within our clusters? The specific impact of M&A events needs to be looked at on a case-by-case basis, but it’s broadly positive. Platform companies acquired not just for their clinical assets, but for their R&D platform and scientific talent, lend tend to land and expand so to speak. A great example is in San Diego where the significant presence of large pharma tenants including BMS, Eli Lily, Takeda, and Vertex were all driven by acquisitions of smaller biotech companies. We are also in the process of supporting the significant expansion of a pharma acquired company in Greater Boston more to come on this at Investor Day. Companies acquired for specific assets may not lead to additional expansion, but we do benefit from an upgrading credit in all cases as the acquirer will be responsible for each in place lease. M&A also leads to capital being returned to investors and can drive formation of new companies within our ecosystems as experienced scientists and entrepreneurs start their next new endeavors, which also creates additional demand for Alexandria lab space. Critically, for pharma to remain competitive and ensure a steady stream of successful, innovative medicines over the next decade, they need to attract the best talent and have the infrastructure and operational supports to accelerate and safeguard their mission-critical science. This need is driving several significant requirements in key R&D clusters and Alexandria is the go-to brand. Transitioning to public biotechnology companies, 14% ARR is represented by companies with marketed products and 10% ARR by preclinical and clinical companies. For our commercial stage biotech tenants, they notched a $108 billion in revenue through the third quarter of 2023, including the likes of Gilead, Vertex and Amgen. For our pre-commercial companies, the public market for small and mid cap biotechs certainly remains challenging. However, companies that meet expected milestones have executed significant follow-on financings and stock prices have responded positively. Through 3Q $14 billion has been raised in follow on offerings, which is on track to beat total 2022 follow-ons of $14.5 billion. This includes tenant vaccite which earlier this year netted $545 million in total proceeds to fund their potentially best-in-class, pneumonia vaccine and others including Editas and Etera. There are also some green shoots in the IPO market for companies with the right pedigree, namely deep clinical pipelines with line of sight to important inflection points. In September, San Diego tenant RayzeBio raised an oversubscribed $358 million IPO driven by near-term clinical trial data readouts, testing their first-in-class radio pharmaceutical therapies for rare forms of cancer. On to private biotech which makes up 9% ARR, while life science funding has largely reverted to pre-pandemic levels, it remains robust. Annualized projections of life science venture funding for 2023 are trending towards an estimated $27 billion which exceeds 2019 levels of nearly $24 billion. Further while a frequent assumption is that many financings are being propped up by current insiders, the data highlights that this is just not true. In a detailed analysis by Oppenheimer of Series A and B financings year-to-date, nearly 80% of all financings were led or co-led by outside investors speaking to a healthy appetite from investors to fund new deals. Our new lease with Altos Labs on our One Alexandria Square Mega Campus in San Diego is one example of a stellar private company, having raised a historic $3 billion to deploy towards self reprogramming to treat diseases associated with aging. Last, life science products, service and devices which represent 22% of our ARR continue to be the workhorse of the industry, providing the hardware and software so to speak that fueled experiments in the lab. There are challenges that exist post-COVID as some companies ramped up products and services, either directly or indirectly driven by COVID-19 and are now resetting strategic priorities. But novel areas of science and successful products are emerging and generating new forms of demand such as the new obesity drugs, which will require significant CDMO capacity to manufacture and new forms of drug discovery such as proteonics highlighted by the recent acquisition of Olink for a $3.1 billion by Thermo Fisher. Altogether, the results of the current market conditions is that companies are highly conscious of every dollar spent. They do not have the luxury of risking their science and unreliable lab space or in locations where they can't recruit the right talent. We continue to see increasing demand for companies looking - by companies for looking for just in time availability of high quality lab space in amenitized campuses in the best locations with the infrastructure and operations that ensure their mission-critical work is supported 24/7 and that there is a path for future growth needs. And this is what Alexandria's one of a kind lab space within our world-class mega campuses is uniquely positioned to deliver. To end, I want to share some insight from Dr. Robert Langer, an MIT professor Moderna co-founder and luminary in the field of drug development. When recently asked what scientific innovations, he is most excited about his answer was simple, but profound. The science and medicines that have not yet been discovered. So, as we traverse challenging times, remember that the resilience of this industry is rooted in a truly vast opportunity for new discoveries that will improve the lives of everyone on this call today. The most impactful of which is yet to come. With that, I will pass it to Peter.
Peter Moglia: Thanks, Hallie. Before I launch into my commentary, I’d like to acknowledge the great contributions we've received from Dean Shigenaga, Dean is one of the smartest and hardest working people I've come across in my 33 year career. He's played a huge part in the building of Alexandria and to what it is today, and wanting to thank him very much for everything he's done for this company. Thanks Dean. On our fourth quarter 2022 call, I spoke about our optimism for the future of the life science industry referencing that we are in the early innings of the golden age of biology. And I pointed out that we've only had the blueprint of the human genome for 20 years. And in that time, we've developed more new modalities to attack disease than in the previous 100. On Friday, October 13th, buried on the third page of Section A in the Wall Street Journal, another scientific revelation was reported. One that scientists liked into the human genome project and that could yield similar results in neuroscience. And the international team of scientists unveiled the most comprehensive map of the human brain ever completed. A map that the article stated will set a critical foundation for the understanding and eventually treating brain-related diseases, such as Alzheimer's, epilepsy, schizophrenia, autism and depression. As I watched my own mother declined daily due to Alzheimer's and experienced the enormous emotional, monetary and time burden and inflicts on our family, I have a full appreciation of what this map being do for mankind. It's yet another example of how important the life science industry is to improving our lives and how it's only going to grow and influence. And that ladies and gentlemen, is why this $5 trillion secular growth industry is poised to drive our business for decades to come. I'm going to discuss our development pipeline, leasing supply and asset sales, and then hand it over to our very capable new CFO, Marc Binda. In the third quarter, we delivered 450,134 square feet and seven projects into our high barrier to entry submarkets, bringing total deliveries year-to-date to one million, two hundred ninety thousand seven hundred and twenty one square feet covering 10 projects. Annual NOI for this quarter’s deliveries totals $39 million bringing the year-to-date total incremental additions to NOI to $120 million. The initial weighted average stabilized yield is 6.5%. Six of the 10 projects delivering spaces here have initial stabilized yields ranging from 7% to 9.5%. Two are at 6.3% and two are in the mid fives. One of those developments in the mid fives is located in Cambridge and is 99% leased and the other is in our Shady Grove mega campus and successfully leased 23% of its space in the third quarter. The Cambridge asset is in a prime location and its yield reflects the cost to acquire it, which was justified, because we had commitments to fill 100% of it before closing making it a build-to-suit core investment that expanded our ACKS mega campus. The Maryland asset’s yield has been driven down by complex site conditions, but it has been very well received by the market and we are bullish on its long-term performance as part of our Shady Grove mega campus. Development and redevelopment, leasing activity at approximately 205,000 square feet was higher quarter-over-quarter for the second quarter in a row, which we are pleased to see in an environment where tight financing markets have focused tenant demand on turnkey space. In addition to the increase in development, redevelopment, leasing during the quarter, we signed LOI's covering nearly 230,000 square feet of space in our pipeline, including one for 185,000 square feet, with a high quality tenant - high quality credit tenant that may materially expand into the mega campus as they refine their programming indicating a continuation of positive momentum. During the quarter, we executed a lease termination with a tenant at our 10935 and 10945 Alexandria Way mega campus development in Torrey Pines, and leased approximately 89% of the space to a stronger credit tenant. This is a win for Alexandria as we were able to substitute a higher credit tenant into the new development, increase the term for that space by three years and receive higher rents. We did increased the TI allowance for the new tenant, but the incremental rent we are receiving yields at 14% return over that incremental TI allowance, all in all a great outcome. At quarter end, our pipeline of current and near-term projects is 63% leased and 66% leased in negotiating which includes executed LOIs and is expected to generate $580 million of annual incremental NOI through the end or through the third quarter of 2026. The decline from 70% lease last quarter despite leasing approximately 205,000 square feet was mainly due to the, to the delivery of fully leased projects at 141st Street and 751 Gateway and the addition of 10075 Barnes Canyon Road in Sorrento Mesa, which has 17% of its future space underwhelm LOI and significant additional activity underway. Transitioning to leasing and supply, Alexandria's pioneering establishment of highly curated mega campuses featuring Class A, A plus facilities at main and main and the world's most desirable high buried entry life science clusters provides an enduring foundation for our existing asset base to perform in even the most challenging times. We are executing and winning nearly every high quality leasing opportunity when we have available product, a testament to the daily operational excellence demanded and required by our mission-critical tenants. We leased 867,582 square feet and the third quarter of ‘23 with Maryland significantly supporting the leasing activity led by San Diego and Greater Boston. Leasing activity has come from a broad base of our regions, both this quarter and year-to-date in which we have leased a total of 3.41 million square feet with Seattle San Francisco, San Diego, Greater Boston, and Maryland all materially contributing to our overall leasing activity. These quarterly and year-to-date leasing volumes are consistent with our pre-COVID levels. As you can see in the company highlights section of the Q3 supplemental on pages little Roman numeral, 19 and 20. Although below our historic average of a million square feet, this leasing volume is strong considering the amount of expiring leases available for lease for the rest of the year is relatively low at approximately 623,000 square feet. Very strong cash rent increases of 19.7% and GAAP rent increases of 28.8% during the third quarter, provide clear evidence of the long-term enduring value of Alexandria’s brand and platform and are consistent with our year-to-date stats of 18.1% and 33.9% for cash and GAAP increases respectively. We'd like to call your attention to the year-to-date weighted average lease term of 11 years, which you can find on page little Roman numeral 22 of the supplemental that significantly exceeds our weighted average lease earned since 2014 of 8.7 years. In our first quarter earnings call, we noted that demand has slowed from the rocket shift COVID period of 2020 and 2021. And last quarter, we reported that we were seeing demand increase especially in our Greater Boston, San Francisco and San Diego markets. We see demand holding steady today and believe it will trend upward, but are fully aware that the volatile geopolitical environment we are in can create the uncertainty that sometimes slows decision making. As we've discussed in a number of investor meetings since our last earnings call, the demand profile is best described as a barbell. We're seeing most of the requirements in the 5,000 to 30,000 square foot range coming from either emerging stage companies that have achieved milestones and need growth space or large requirements of a hundred thousand square feet or more from large pharma and biotech looking to grow or establish a footprint in our clusters, driven by specific new modalities prevalent in those clusters coupled with the talent available on those locations. Alexandria is well positioned to capture this demand because many of these opportunities are coming from existing relationships, which typically account for a significant amount of our leasing. Over the past year 80% of our leasing has been generated from existing tenants. In addition, our mega campus offerings provide the ability to scale in a wide variety of amenities making them the clear choice for high quality companies. I am sure you are all interested to hear analysis of supply, so I’ll conclude this section with an update on these statistics, which will include our projected competitive supply additions delivering in 2025. As a reminder, we perform a robust building-by-building analysis to identify and track new supply from high quality projects we believe are competitive to ours in our high barrier to entry submarkets. We focus primarily on high barrier to entry markets and our brand mega campus offerings in triple A locations and operational excellence enables us to continually mine our vast deep and loyal tenant base to drive our leasing activity, which will likely lessen the impacts of generic supply. The slides we provided on pages Roman numeral 8 through Roman numeral 13 of the supplemental illustrate this and are hopefully helpful. In Greater Boston, unleased competitive supply remaining to be delivered in 2023 is estimated to be 1.1% of market inventory, a 0.5%, decrease over last quarter. In 2024, the unleased competitive supply will increase market inventory by 6.1%, a 1.1% increase driven by the addition of a new competitive project. In 2025, the unleased competitive supply will increase market inventory by 3.7% an expected slowdown from 2024 levels. In San Francisco Bay, unleased competitive supply remaining to be delivered in the second quarter of ‘23 is estimated to be 5% of market inventory, which is a reduction of 1.6% over last quarter due mainly from deliveries. In 2024, the unleased competitive supply will increase market inventory by 8%, a 0.8% reduction unfortunately not driven by leasing, but due to a downward revision of estimated square footage to be delivered during the year. In 2025, the unleased competitive supply will increase market inventory by only 1.2%, which is a good indication that developers in this market are beginning to act rationally. In San Diego, unleased competitive supply remaining to be delivered in the third quarter of ‘23 is estimated to be 1.9% of market inventory, which is a decrease of 1.6% due mainly to projects being delayed into 2024 or delivered with unleased space now reflected in direct vacancy and one project developer deciding not to pursue a laboratory use. In 2024, the unleased competitive supply will increase market inventory by 6.9%, a 1.9% increase driven primarily by the aforementioned projects delivering in 2024 instead of 2023. In 2025, the unleased competitive supply will increase market inventory by 3.3%, driven primarily by our 75% pre-leased 10935, 10945 and 10955, Alexandria Way project. Direct and sublease market vacancy for our core submarkets is updated as follows: Greater Boston, direct vacancy increased 1.7% to 4.5% and subleased vacancy increased slightly to 5.6% for a net increase in available space in operation quarter-over-quarter of 1.9%. San Francisco, direct vacancy increased by 7.4% to 9.7% driven mainly by the inclusion of the Mission Rock projects into laboratory inventory when it was previously thought to be leasing as an office project. Move outs and delivery of new inventory are also drivers. Sub lease vacancy remains stable at 6.2% for a net increase in available space in operation of 7.4%. San Diego direct vacancy increased from 4.8% to 6.8%, largely due to delivered unleased new supply and move outs. And sublease vacancy remains stable at 4.1% for a net increase in available space in operation of 2% quarter-over-quarter. I'll conclude with an update on our value harvesting asset recycling program. We continue to be fortunate that there is a considerable demand for Alexandria's assets and life science assets broadly. As you can see on page 7 of the supplemental, we are approximately 95% through completing dispositions needed to hit the midpoint of our guidance, when totaling completed sales and those under LOI or executed purchased and sale agreements not yet closed. Our overall strategy for the full year of 2023 has been to execute on a combination of partial interest sales and sales in whole of non-core workhorse assets. These sales will provide the capital needed to recycle our high quality development redevelopment mega campus pipeline which will widen our moat by expanding our highly differentiated mega campuses offering unmatched scale and amenities highly sought after by the full spectrum of tenants we serve. And the identified supply I just mentioned can't compete with. We only closed on one asset this quarter we can report on, but to give some color on dispositions that are pending, they are all non-core, solid workhorse assets. Obviously, it's a challenging interest rate environment and economic volatility has reduced overall transactional activity, but demand for our assets has remains resilient. As mentioned, we are on track to meet our goals. In September, we closed on the previously announced sale of a vertical ownership unit comprising approximately 268,000 rental square feet or approximately 44% of Alexandria's 660,000, 34 square foot 421, part drive purpose built ground ups life science development in the Fenway submarket of Greater Boston to Boston Children's Hospital. The units sold will house Boston, Children's Hospital future medical research facilities. The sale serves the dual purpose of providing substantial funding for the significant development project and brings in a key bedrock anchor to the project and our Fenway campus in whole. Austin Children's is a long-term strategic partner of Alexandria who invests heavily in basic clinical and translational research to accelerate the discovery of new treatments for devastating diseases to improve the health of both children and adults. They ranked number one in NIH funding among all US children's hospitals in fiscal year 2023. Their presence will help attract tenant companies looking to collaborate with world-class research institutions much like our campuses in Cambridge benefit from those looking to collaborate with MIT. Alexandria will receive development fees as well as the significant capital to the fund the project. With that long update, I'm going to go ahead and pass it over to Marc.
Marc Binda : Thank you, Peter. Hello and good afternoon. This is Marc Binda, CFO and I'm going to cover some of the key financial metrics for the quarter. We reported very solid operating and financial results for the third quarter and nine months ended 3Q ’23, which was driven by strong core results and reflects the strength of our brand, scale, high quality and well-located campuses and operational excellence. Total revenues for 3Q were up 8.2% over the prior year. NOI was also up 8.2% over the prior quarter and the prior year driven primarily by the commencement of a $120 million of annual NOI related to 1.3 million rentable square feet of development, redevelopment projects, placed into service year-to-date through 3Q ‘23 coupled with strong same-property performance. FFO per shared diluted as adjusted was $2.26, up 6.1% over 3Q ‘22 and we are on track to generate another solid year of growth in FFO per share of 6.7% at the midpoint of our guidance for 2023. Our tenants continue to appreciate our brand, the mega a campus strategy and operational excellence by our team. 49% of our ARR is from investment-grade and publicly traded large cap tenants and we have one of the highest quality client rosters in the REIT industry. Collections remain very high at 99.9%, adjusted EBITDA margins remain very strong at 69%. The weighted average lease terms for leases completed in 2023 has far outpaced our historical averages at 11 years on average. And 96% of our leases contain annual rent escalations approximating 3%. Same-property NOI growth was solid and in line with guidance for 2023. 3Q ‘23 was up 3.1% and 4.6% on a cash basis and for the year-to-date period up 3.7% and 5.6% on a cash basis. Our outlook for 2023 same-property NOI growth remained solid at a midpoint of 3% and 5% on a cash basis. We do expect our fourth quarter same-property results to be somewhat impacted by the timing of free rents and some temporary vacancy, including a hundred thousand square foot lease termination in the fourth quarter, by our tenant Atreka at our, San Carlos mega campus. Important to note that we don't expect any income to be recognized on this space for same-property purposes in the fourth quarter, since termination fees are excluded from our same-property results. The good news is that we have a signed LOI with a new tenant to potentially take that space as early as December. Turning to leasing, quarterly leasing volume was 867,000 square feet for the quarter and $3.4 million for the first nine months, which on an annualized basis is in line with our historical annual average from 2013 to 2020. Also after stripping out spaces already leased and projects going into redevelopment, the 2023 expirations at the beginning of the quarter were relatively low at only 623,000 square feet. 3Q ‘23 rental rate growth for lease renewals and re-leasing of space was very strong at 28.8% and 19.7% on a cash basis. Rental rate growth in 3Q was driven by transactions in Seattle Maryland and Greater Boston, and these results were driven by a mix of transactions in markets which can vary from quarter to quarter. Our outlook for rental rate growth on leased renewals and re-leasing space remains solid at a midpoint of 30.5% and 14.5% on a cash basis. The overall mark-to-market for cash run rates related to in place leases for the entire asset base remains very strong at up 18%. Turning next to capital expenditures, they generally fall into two buckets. The first category being focused on development and redevelopment, which includes the first time conversion of non-lab space to lab space through redevelopment. The second category is non-revenue enhancing capital expenditures. Our non-revenue enhancing capital expenditures over the last 5 years have averaged 15% of NOI and that rate has been trending lower with 13% last year, and 12% for 2023. Tenant improvement allowances and leasing commissions related to lease renewals and releasing of space, which is included in non-revenue enhancing expenditures were very low for the quarter at $19 per square foot. Turning to occupancy, 3Q occupancy was in line with our expectation at 93.7%, up 10 basis points from the prior quarter. This included vacancy of 2.1% or approximately 870,000 square feet from properties acquired in 2021 and ‘22. 30% of that recently acquired vacancy is leased and will be ready for occupancy in the next number of quarters. Our outlook for 2023 reflects occupancy growth by the end of 4Q ’23. The midpoint of our occupancy guidance is 95.1%, which implies 140, basis point increase by the end of the year. The bridge to our range for yearend occupancy breaks down as follows: About 50% is related to spaces already leased and expected to deliver by year end. Another 20% relates to assets that were designated as held for sale in October that contains some vacancy. This leaves about 30% left to resolve, which includes the 100,000 square feet space at our San Carlos mega campus which I mentioned earlier, which is under negotiation. I'd also like to highlight that it's often difficult to reconcile leasing activity to changes in occupancy, given that leasing activity doesn't always result in immediate occupancy. The main driver of the expected ramp up in occupancy related to previously leased space delivering in 4Q 2023 I just mentioned is a perfect example. Turning to the balance sheet, we have a very strong balance sheet with $5.9 billion of liquidity, no debt maturities until 2025, 99% of our debt is subject to fixed interest rates and we remain on track to achieve our net debt to adjusted EBITDA goal of 5.1 times on a quarterly annualized basis by 4Q ’23. We continue to focus on our self-funding strategy through the execution dispositions and partial interest sales with no common equity expected for 2023 other than the $100 million of forward equity sales agreements from 2022, which are still outstanding. Our strategy for dispositions and sales of partial interest for 2023 reflects our focus on the enhancement of the overall asset base through it outright disposition to properties no longer integral to our mega campus strategy with fewer sales of partial interests. For the year, we expect about 90% of the proceeds from our program to be focused on outright dispositions. Our team has made excellent progress with $875 million completed and another $699 million under LOI or purchase and sale contract, which are expected to be closed in the fourth quarter, which is primarily comprised of outright dispositions. Our targeted fourth quarter dispositions include land, non-core assets and some properties which require significant capital to lease and are expected to have a higher FFO cap rate, compared to the transactions we closed in the first half of the year. We have a low and conservative FFO payout ratio of 55% for 3Q ‘23 annualized with a 5.2% increase in common stock dividends over the last 12 months. We're projecting $375 million in net cash flows from operating activities after dividends for reinvestment, for this year, which represents a three-year run rate of over $1.1 billion. Turning to venture gains, realized gains from venture investments included in FFO for 3Q ‘23 was $25 million, which is the same as our eight prior quarter average. Gross unrealized gains in our venture investments as of 3Q ‘23 were $311 million on a cost basis of just under $1.2 billion. On external growth, we have $580 million of the incremental annual NOI coming online from our pipeline of $6.4 million square feet. In the fourth quarter, we expect to deliver two key projects at 325 Binney and 15 Necco, which will generate a whopping $114 million of incremental annual NOI. We expect to place these projects into service in mid to late November on average, which will drive significant NOI growth in the fourth quarter, as well as the first quarter of 2024. For 2024, we expect another $1.8 million square feet, which is 94% leased to stabilize around mid to late summer on average and generate another $127 million of incremental annual NOI. Additionally, we have another 3.8 million square feet that's expected to reach stabilization after 2024 and will generate another $339 million of incremental annual NOI. With the expected significant deliveries at 325 Binney and 15 Necco in 4Q ‘23, we expect a slight decline in capitalized interest in 4Q 2023. Capitalized interest for 3Q, was up about $4 million over the prior quarter, which resulted from some shifts in timing on the delivery of our 140 First Street redevelopment project and the sale of a portion of our 421 Park project. It's important to note that these changes were slightly dilutive to FFO per share results for the quarter, but were offset by strong core operations during the quarter. Turning to guidance, our detailed updated underlying guidance assumptions are disclosed beginning on Page 4 of our supplemental package. Our per share outlook for 2023 was updated to a range of plus or minus $0.01 from the midpoint of guidance. Our range of guidance for EPS is a $1.36 to $1.38 and our range for FFO per shared diluted as adjusted is 897 to 899 which represents a $0.02 increase in the midpoint of 898. This represents a very strong 6.7% growth in FFO per share following excellent growth last year of 8.5%. As a reminder, we're about a month away from the issuance of our detailed guidance for 2024 and therefore, we're unable to comment on details for ‘24. Lastly, just want to extend this special thank you to Dean Shigenaga for all his years of leadership and service to the company, as well as his tremendous mentorship. Next I’ll turn it over to Joel to open it up for questions.
Joel Marcus : Yeah, let's go to Q&A. And sorry for the long presentation but important to get all the facts out there.
Operator: All right. Thank you. [Operator Instructions] Our first question today will come from Joshua Dennerlein of Bank of America. Please go ahead.
Joshua Dennerlein: Hey guys, I appreciate all the color in the new slides on the supply dynamic across your submarkets. Just kind of curious how we should think about that supply that's coming online and the vacancy you mentioned and just how that will impact market rents and GI's across maybe as in particular, Cambridge in South San Francisco?
Joel Marcus: Yeah. So, Peter thoughts comments?
Peter Moglia: Yeah, certainly, it's going to be part of the negotiation with tenants. What we believe is that our mega campus platform and our reliability and brand will - gives confidence to tenants that they're going to be well taken care of. And so there is a premium to that that will help us overcome the competitive supply dynamic when it comes to that.
Joel Marcus: Yeah, I would say also important to distinguish, we think in Cambridge the impact would be far less than South San Francisco. South San Francisco as you can see from the slide just adds too much stupid supply. The good news is a lot of that supply is in an area that people don't want to be in.
Joshua Dennerlein: Then one more question from me on the occupancy front going from your 3Q 93.7 to just the occupancy guide range of I think 94.6 to 95.6 just, what are the kind of moving pieces in there? Is there anything you still have to accomplish? Or is that kind of all baked in at this point?
Joel Marcus: Okay. I think Marc, just answered that question. But Marc, do you want to repeat that?
Marc Binda: Yes, sure. Hi, it's Marc. Yeah, so about - going from that 140 basis point increase, about half of it was from leases that we leased either in the current quarter or prior quarters that’s delivering next quarter. So a big chunk of it's in the bag. And then about another 20% was for some assets that were designated as held for sale after the end of the quarter, in October that we expect to sell. And then that that leaves about 30% and then of that, a big chunk of it relates to that space in San Carlos. It was the former - space which we do have a signed LOI there and hope to execute on.
Joshua Dennerlein: Okay. Thanks, sorry for missing that. Appreciate that.
Joel Marcus: Yeah, no problem. Our pleasure.
Operator: Our next question, we'll come from Georgi Dinkov of Mizuho. Please go ahead.
Georgi Dinkov: Hi, this is Georgi on for Vikram. Can you square your views on not losing more occupancy than the GFC given you have seen several tenant pay issues and lease terminations in the past two quarters. And even though you have limited expirations, good credit issues, depressed occupancy?
Joel Marcus: Well, I think number one, Marc just went through the details of occupancy and guidance in giving and he just answered the question from the analyst on what we're thinking about occupancy. And we said, for example, on a - we have a signed LOI and negotiating a lease for all that space. I'm not sure what else you referring to.
Georgi Dinkov: Okay. And can you just give, I guess more color on 270 Bio? I believe they're backed by Bluebird, but how would it would work if their cash position deteriorates going forward?
Joel Marcus: Well, at the moment they have over $300 million in cash. It gives them a runway out through 2026 as I recall. You have to remember both 270 Bio and Bluebird or both joint and severely liable on the lease. We expect that's a great location. It'll be subleased. And we don't see any challenge to yards successful collection or rent over the coming few years.
Georgi Dinkov: Right. Thank you.
Joel Marcus: Yes. Thank you.
Operator: Our next question will come from Michael Griffin of Citi. Please go ahead.
Michael Griffin: Great. Thanks. Maybe just a question on development starts. Kind of how you're thinking about that over the next couple years the funding needs for potential impact on capitalized interest will be helpful.
Joel Marcus: Yeah, so I think as Marc said, let's wait for Investor Day to do that.
Michael Griffin: All right. And then just on the pending asset sales I know Marc kind of talked about in a higher cap rates than expected. I was wondering if there's any numbers if you could maybe associate with that? And any color you can give around the buyer pool, their interest there would be helpful.
Joel Marcus: Yeah we're under confidentiality. So we can't. So stay tuned for Investor Day or year-round and we will give you know as much detail as we're able to.
Michael Griffin: All right.
Operator: Our next question will come from Rich Anderson of Wedbush. Please go ahead.
Rich Anderson: Hey, thanks. Good afternoon. So I was kind of doing some back reading and I looked at the second quarter of 2022 where it was the comment was beyond 2024 and beyond, we don't see large disruptive projects well underway in our core markets that are preparing to go vertical. Does that comment, I mean, I guess the question is, what change between that comment little bit more than a year ago and today because the market for developing only has gotten worse with that macro environment and all that? Or do you still - would you still agree that this is not disruptive relative to that comment that was made about a year and change ago?
Joel Marcus: Yep. Peter do you want to maybe address that?
Peter Moglia : Yeah. Rich, I mean, the comment, the intent of the comment was to express that 2024 was going to be a peak of supply deliveries and that the numbers that I just went through I think illustrated that. There will be some, some things that we thought would deliver in ‘24 that might get pushed into ‘25. But we're not seeing more than less and probably in total in all of our markets like a handful of things that have started in recent times meaning like the last few months. It does appear and the numbers themselves in San Francisco I think were really telling it does appear that developers are finally understanding that the market has plenty of supply underway. And not - there's not more needed on a speculative basis. And so that's good news for the coming years.
Rich Anderson: Okay. Fair enough. And then, real quick second question and then we're running along here. Joel, you said the word self-funding for this year and for 2024 and anticipating your response wait till Investor Day, but let me just ask anyway, is the disposition program kind of not infinite, but I mean, if you're always selling assets and funding something that's probably a better and newer asset to your development pipeline, is that something that can go on in perpetuity or is there a ceiling to which you have to sort of cut off the disposition program and reassess?
Joel Marcus: Yeah. I think that's a really good question and that'll be a cornerstone of the Investor Day presentation. But I think it's fair to say Rich that the way to think about it is we continue to have, the company owns and operates 40 million square feet and has the capability to double our size and what we own beyond that. So there's a pretty deep pool for partial interest and sales of outright non-core assets, but we do have an approach to self-funding for next year in addition to that, which I think will be pretty, pretty exciting. So let us wait to announce that that at Investor Day.
Rich Anderson: You got it. Thanks very much, everyone.
Joel Marcus: Yep. Thank you guys.
Operator: And our next question today will come from Tom Catherwood of BTIG. Please go ahead.
Tom Catherwood: Thanks and good afternoon, everyone. Maybe Joel or Peter, we always think of your team doing such a great job partnering with tenants understanding their business, helping them solve real estate problems, Peter I think the examples you talked about in San Diego with the developments really speak to that this quarter. When we think of that partnership, how have you seen the needs and maybe the pain points of your tenants changed over the past six to 12 months?
Joel Marcus: Well, I think that the obvious one is one that a number of people mentioned throughout the commentary. And that is certainly in the small and medium size companies that are emerging that are dependent upon whether it be private financing or public market financing or cash on hand. The fact that we're in this de facto recession, inflation and high interest rate environment just makes the management of cash, the management of burn, the management of decisions, just more methodical. And yeah, maybe just more methodical. So our job is to understand those needs and work intimately with the clients to make sure that we're doing the best job that we can to meet their needs. And I think we've done a great job of that. And we have very, very close relationships. These are not ones they sign a lease and that's it. These are ongoing very deep relationships. So we're generally pretty intimately involved in a lot of the decision making.
Peter Moglia : And, remember, I mean, this isn't the first time we've hit hard times as a company. We've been around for, close to 30 years. And we've worked with our tenant base during all of these times. And the goodwill that accumulates and how we're able to help them is why 80% of our leasing comes from these existing tenants. I mean, we have the ability - we have the size, the ability to work with folks that need assistance and it provides great goodwill for future endeavors for those of the - those management teams that are in the buildings that we're helping them out with.
Tom Catherwood: Got it. Thank you. Thank you for those answers. And then, kind of following up on that, maybe if I switchover to Hallie, Hallie I appreciate - Hallie I apologize. Appreciate the detailed market update. I was kind of really interested in the comment you made around AI adoption potentially leading to the need for incremental lab space. And that you were potentially seeing the early signs of that. Can you provide more kind of color on that comment? And maybe what you're seeing in the market in that regard?
Hallie Kuhn : Sure. Happy to. A great example and we had a quote from the CEO, Roger Perlmutter the former CSO of Merck in our press release is icons, which we have a signed lease with a property under development in San Francisco. With AI you have to have data to train the models. And so, when folks kind of – there has been commentary thrown out that oh! AI is going to and, make it so that you don't have to run experiments as extensively in labs. What we see is actually the opposite, because you need such vast datasets to train the AI ML models in order to optimize and drive towards results that we see really large footprints whether it's robotic, high throughput, both chemical, and biological data these companies are generating in order to be able to actually apply AI and ML. It would be like applying generative AI to the internet in 1995, right? You have to have a really vast starting dataset in order to get something that's meaningful on the back end. So we're continuing to see that evolve I think across all of our clusters. There's some really interesting ways that companies are integrating this tool into their toolkit for developing new medicines and that the end results 10, 20 years from now it's hopefully a lot more medicines for patients and additional lab space demand.
Tom Catherwood: Appreciate the color. Thanks everyone.
Joel Marcus: Yep. Thanks, Tom.
Operator: Our next question will come from Connor Siversky of Wells Fargo. Please go ahead.
Connor Siversky: Good afternoon. Thanks for having me on the call. I got a question on 2025 deliveries. So correct me if I'm wrong here, but the pre-leasing rate of the 2025 delivery should have a significant impact on how we're looking at capitalized interests in this context. So, assuming the pre-lease rate remains stable as it was reported in the supplemental release last night, can you give us an idea of how this would impact the interest expense on the P&L?
Joel Marcus: So Marc you might want to comment on that, but that's kind of used in isolation because that's just one piece of the business. But Marc, go ahead and comment.
Marc Binda: Yeah. Hi Connor. So, yeah, so capitalized interest is really determined based upon the size and magnitude of the assets under construction activities or under broadly all types of activities to get that asset ready for its intended use. So, to the extent that deliveries outpace construction spending and assets that are going through, either redevelopment or development, then capitalized interest would go down and the opposite is true if construction costs exceed the pace of deliveries. What I'd say on 2025, if you're looking at the leasing percentages is, we've got some time on some of those and we've seen that that pre-leasing percentage pick up. Definitely, if those assets, we get to ‘25 and those assets seize activities and yeah, then capitalized interest would turn off. But we're, we got a long headway there. We got a long time and we've done - we've definitely done studies to look at the timing of pre-leasing and we're not quite in that sweet spot for some of these assets that are out in ‘25 and beyond in terms of when tenants are ready to make decisions. So, I guess, stay tuned.
Connor Siversky: I appreciate the color. Is there any way, I mean, let's just say we took the most simplistic form of the deliveries in that context, what a kind of breakeven pre-leased rate would look like as those projects come online?
Marc Binda: I'm not sure I understand your question, Connor.
Connor Siversky: Well, I mean, we can we can take it offline. What I mean to say is if we if we use the schedule of deliveries and when those projects are supposed to roll online is what would be the breakeven rate between say the NOI contribution and the interest expense, that would be absorbed on the P&L as those projects roll online and they are moved from capitalized to the P&L on the interest expense?
Marc Binda: Yeah. I guess the way to look at that, Connor is this, if you're looking at projects that has say just to make the math easy 7% yield and capitalization is in the high 3% range that that would, that would kind of tell you that, if half the building turned got delivered and half the building got turned off, you'd be neutral, but that's really, it's really not typically the case. I mean, that the pre-leasing on all the, all the assets that we have for ‘23 and ‘24 is extremely high. So, we'll have to wait and see, but like I said before, we've seen the pre-leasing on ‘25 pickup as we get closer and closer to delivery, which is, which is pretty typical for tenants that of smaller size that make decisions much closer to the point at which they can see the building coming out of the ground and can visualize it.
Connor Siversky: Got it. Understood. Thank you.
Operator: The next question will come from Steve Sakwa of Evercore ISI. Please go ahead.
Steve Sakwa: Thanks. Lot my questions have been asked. But I guess Joel, I'm just curious given the challenging funding market for maybe many of your private competitors. I'm just wondering to what extent are you gaining any kind of market share to the extent that you can do fit outs and build outs of smaller lab space and to what extent have your peers maybe not been able to do that? And is that maybe delaying some of the new supply coming to market?
Joel Marcus: Well. Yeah, hey Steve. So I think the way to think about that is other landlords who may have laboratory assets. If they're in - if you're in Cambridge or you're in other key markets that are directly competitive of ours, it always depends on their financial capability and also the needs of the tenant. I mean, it's really hard to say. I think at the moment we feel very good about our positioning because if you're a tenant and you need especially now just in time space and you need a path for future growth, you hit a valuation milestone, value inflection milestone, which is very typical today. A one-off building, no matter whether it's fitted out or not fitted out, doesn't really offer you that opportunity. You need a campus. You need a campus and generally you want one run by Alexandria because you want the best operator because a one-off building may get you some space, but oftentimes there's no path to future growth or expansion. And so that that's how we kind of see things. So we think we have an enormous competitive advantage and moat against one-off buildings by whether they be landlords who know what they're doing or landlords, who have no idea of what they're doing.
Peter Moglia : Hey, to dive a little - this is Peter. To dive a little bit deeper into that. You'll notice the big increase in vacancy in San Francisco of buildings essentially that delivered and they delivered in shell condition. I took a deep dive with the team as like guys, what does this product look like? And a lot of it is just our buildings that are basically waiting to see whether they should be office or lab. They were built with an ability to be lab and so we're counting them in our supply numbers, but they could very well go office because nobody is super committed. But you're also right in that those developers are not able to go ahead and just build out TI's because their financing isn't there for that. But I wanted to bring attention to that because you reminded me of it, you're seeing vacancy numbers, you're seeing supply numbers. A lot of these projects are agnostic about whether or not they're going to be office or lab especially in the larger markets. But we are counting on them on our competitive supply because they could be. But they may very well not be and they very well may fail if they don't have financing to provide TI's.
Steve Sakwa: Great. Thanks, guys. That's it for me.
Joel Marcus: Okay. Thanks, Peter.
Operator: The next question will come from Dylan Burzinski of Green Street. Please go ahead.
Dylan Burzinski: Hi guys. Thanks for taking the question this afternoon. Just curious, I know you guys touched a little bit on the development pipeline, but just wondering if there's any sort of interesting opportunities that are you guys are witnessing or seeing on the acquisitions front? And if not today, do you expect to sort of see any interesting opportunities come refreshing over the next, call it 12 to 18 months?
Joel Marcus: Yeah. So, first of all I think you noted we had a slow quarter. I don't think any quarter is slow. So you might rethink about that commentary. Second, yes, just remember the quote that I gave regarding Warren Buffett. So we think there may be some opportunities, but we certainly won't comment on them.
Dylan Burzinski: Thanks. That's all I had.
Operator: And our final questions today will come from Aditi Balachandran of RBC Capital Markets. Please go ahead.
Aditi Balachandran: Hi all. Just a quick one for me. I know how you mentioned that M&A is an overall positive. So do you have an idea of how much incremental demand it could possibly drive? And I guess, how much of that would be for pure lab space versus the product or drug manufacturing space?
Joel Marcus: Well, most of it. Hallie can comment. We see as a big, big opportunity as, if you look at these schedules of drugs coming off patent for the balance of the decade, it’s pretty large and virtually the only way to fill pipeline in that shorter time is to acquire technologies and pipelines that are available. And so we see it as a big opportunity, number one. And by and large most of that is R&D related. We're not so focused. Sometimes you have the new modalities that are you've got intimate manufacturing with the new modalities as part of the R&D Center, but kind of classic manufacturing. We don't really deal with that. And we don't see that as an opportunity for us. But Hallie, I don't know if you have any other comments.
Hallie Kuhn: Yeah, with M&A as I mentioned, you really have to look at it as a on a case-by-case basis for specific M&A, I think that the better way to look at it is holistically and as Joel mentioned, M&A and licensing is a huge component of large pharma strategy for the next decade and that will likely continue beyond that. They're looking to recoup something on the order of over $130 billion in revenue, that'll be lost due to patent expirations. And so when you look at that acquisition activity on a whole, the net positive is certainly going to lead to additional R&D needs and is also a benefit from the perspective of upgrades and credits. Given that when an acquirer comes in and buys a smaller company, we get the upgrade on the credit from the in place lease.
Aditi Balachandran: Great. That’s really Helpful. Thank you.
Joel Marcus: Yeah. Thank you.
Operator: And we did have an additional question coming from Wes Golladay of Baird. Please go ahead.
Wes Golladay: Hey everyone. Thanks for sticking around for the final question. I just had a quick question on the development pipeline, just like the ‘23 and the ‘24 pipeline that’s well leased. Do you have any, I guess plans to change any more of those tenants out like you did this quarter? Or is it pretty much locked in at this point?
Joel Marcus: Yeah, that's a kind of an unusual circumstance where we felt we had a robust client that needed space even a little more quickly than we anticipated. We had another client. We saw that maybe had taken on too much space. So it was actually an ideal mix and marriage of putting the two together. They come up from time to time. I'm not sure I'd read anything into that, but that's kind of normal, but that's how it happened.
Wes Golladay: Fantastic. And a quick follow-up. Are you seeing any - I guess pent-up demand to get into some of these mega campuses where they've been fully occupied for years and do you have a little bit of tenant churn? And do you have any situations where multiple tenants are going to the space?
Joel Marcus: The answer to that is yes. And but that tends to be more like Cambridge-centric. Maybe our San Carlos campus, not quite a mega campus yet. It's about 600,000 feet, but to grow much larger. So, Alexandria Center for Life Science in York City is another example. So, yes, some places we see that there are multiple tenants we're having to kind of juggle.
Wes Golladay: Thanks for paying attention to.
Joel Marcus: Yeah.
Operator: This will conclude our question and answer session. At this time, I'd like to turn the conference back over to Mr. Marcus for any closing remarks.
Joel Marcus: Okay, thank you very much for taking time to listen. And god bless everybody.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
