Q3 2024 Alexandria Real Estate Equities Inc Earnings Call
Good day and welcome to the Alexandria real estate equities third quarter 'twenty 'twenty four conference call.
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Speaker Change: 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.
Paula Schwartz: Actual results might differ materially from those projected in forward looking statements.
Paula Schwartz: 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.
Speaker Change: And now I'd like to turn the call over to Joel Marcus Executive Chairman and founder of Alexandria. Please go ahead.
Joel Marcus: Oh, Thank you Paula and welcome everybody to Alexandria third quarter, earning call.
Joel Marcus: I'm here today, with Halle, Pieter and Mark and first of all as I do every quarter I want to extend a profound thank you and huge congratulations to each and every member of our Alexandria family team for bringing up this third quarter to post an impressive operating and financial performance in a continuing lag stubborn.
Joel Marcus: Economic and operating environment to the team.
You are an inspiration to me each and every day in small ways and large thank you.
Joel Marcus: The continuing continuing lease stubborn economic backdrop for commercial real estate at risk on investments, Peter and Mark will address those but let me just give you a couple of quick comments driven by the huge and you know unnecessarily.
Joel Marcus: Unnecessary federal deficit over the last handful of years nine trillion dollars plus inflation in many areas remain sticky stubborn and structural despite with the labor Department is saying and reporting a.
Joel Marcus: Our cost of capital is also stubbornly high across much of the equity and debt capital markets again, despite the delayed and rather people responses. If the fed to date and main street is hurting in the United States, It's pretty clear.
Joel Marcus: Kelly will comment more in depth on the life science industry, but let me say a couple of things I've said many times in the past. This is one of the few crown remaining crown Jewel industries here in the United States and is the great bastion of true and novel innovation, and the only real and effective path to solve and.
Joel Marcus: Dress over 90% of human diseases, which remained unsolved today.
Which bear an unbearable burden on our citizens and our health care system is the translation of this innovation.
Joel Marcus: Since the downward spiral of biotech began in early 2021 and kind of hit its bottom and what appears to be October of <unk>.
Joel Marcus: 2023 and after up almost decade Bull run from 2014.
Joel Marcus: Oh through 2020, one unfortunately, the industry attracted and almost became drug addicted to too many and to free of capital flowing in and some of the really stupid outrageous moneys are both from the fed and investors, which caused a rocket ship.
Joel Marcus: Manned forex of what it normally is and really not wanted and sustainable.
Joel Marcus: And since then things have settled down here, we are almost four years later since the XP I started to tail off in February 2021 and we're in a.
Joel Marcus: Really a highly I would say and toughly disciplined funding market, but one in which I personally prefer to operate.
Joel Marcus: As an example of this markets to pity the less than half the biotech ipos from 2013 to 2019.
Joel Marcus: Remains standalone companies the majority of either seen successful exits, which is awesome less successful exits, which is less than awesome or disappeared altogether, which is not awesome.
Joel Marcus: Yeah.
Joel Marcus: A couple of thoughts my take on the third quarter of truly operationally excellent.
Speaker Change: Results, both operationally and financially and the continuing strong balance sheet management with great liquidity and kudos to our team still in a very difficult supply and demand impacted market with a challenging cost of capital.
Speaker Change: In the third quarter, we continued to deliver increasing F O per share and dividends per share growth. Despite the tough environment.
Speaker Change: And I think one of my key takes is b are our strong year to date rental rate growth, which is up I think pretty exceptional we continue with strong continued high occupancy collections, nearly 100%, which is sensational and I think what truly stands out in this third quarter is the leasing activity of almost.
Speaker Change: 1.5 million rentable square feet.
Speaker Change: At a 48 or 48% increase quarter to quarter.
Speaker Change: Future embedded NOI growth of $510 million, which mark will talk about and our very successful self funding capital recycling program. This.
Speaker Change: This year, which Peter and Mark will talk about going forward and finally as the Master industrial Warren Buffett has said it truly great business must have an enduring mode.
Speaker Change: And out of the depths of this bear market like I was like we experience and I feel.
Speaker Change: You know like the 2010 era of out of this market I.
Speaker Change: I still remain more optimistic than ever about the promise of unprecedented human health innovation from our precious industry.
Speaker Change: I mean, the government doesn't screw it up and Alexandria, continuing at the Vanguard.
Speaker Change: This industry to build a.
Speaker Change: Really building the future of lifesaving and life changing innovation.
Speaker Change: And finally, let me just say a couple more words before I turn it over to Halle much as predicted as we predicted the doubling of our revenues from 2017 to 2021, which we exceeded during an unprecedented bull market on the back of our strategic.
Speaker Change: Well, our I think long developed strategy on the back of our development pipeline created during.
Speaker Change: During the depths of the aftermath of the great financial crisis, when we really conceived of it in the 2010 to 2013 era in five short years by the end of this decade December 'twenty 'twenty nine our revenues will be overwhelmingly driven by our unique and highly competitive mega campuses.
Speaker Change: Best locations best assets Best services.
Speaker Change: That also compete and clearly demonstrates superior return on investment higher occupancy higher rental rates.
Speaker Change: Best talent recruitment and retention for our tenants and our multiple and very convenient convenient paths for growth and so with that I'll turn it over to Holly.
Speaker Change: Yeah.
Holly: Thank you Jill.
Holly: This is Holly Quinn senior Vice President of life Science in capital markets.
Holly Quinn: This afternoon, we will provide an update on the life science industry, starting with FDA approvals and solid buyer at you at the current funding environment across our diverse life science tenant base.
Holly Quinn: Taking a moment to reflect on the immense impact to the Biopharma industry. Since 2013, there have been 519 novel medicines approved by the FDA nearly half specifically 257 of these approvals have been developed.
Shall I say Alexandria tenants.
Holly Quinn: That's 257 approval that had extended and improve lives and it's what inspires Alexandria is deeply held mission supporting the companies at the leading edge of life Science innovation.
Let's look at an example that will resonate for every person on this call who have personally experienced are supported loved ones with cancer.
Holly Quinn: In the nineties, the FDA created an approval process known as the accelerated approval pathway with the goal of accelerating access to medicines for diseases with no effective medicines.
Holly Quinn: Well, where there are recent 16 year period 69 cancer medicines were approved for the Fda's accelerated approval pathway.
Holly Quinn: These medicines have treated an estimated 911000 patients and led to 262000 additional years of life that is more than a quarter of million years lives and it's truly stunning.
Holly Quinn: Now turning to life science fundamentals.
Venture capital deployment to private biotech tenants, which is 10% of our air or is healthy. This year is tracking to eclipse 2023, and maybe the third highest year on record.
Speaker Change: As Joel mentioned investors are highly disciplined focused on rational valuations de risk technology is and near term milestones the.
Speaker Change: The translation to demand on the ground is steady and conservative transitioning to a just in time model for space.
Speaker Change: Scale and flexibility are core to this growth model and it's why Alexandria is distinctive Mega campus strategy is extremely well positioned to meet this trend in demand.
With respect to pre commercial public biotech company is 9% of our era.
Speaker Change: Sure.
Speaker Change: Follow on financing, it's robust already clinching the second highest year on record.
Speaker Change: These financings are focused on a subset of companies with compelling clinical data well at those without their catalysts continue to struggle to access additional capital.
Speaker Change: Okay.
Speaker Change: The IPO market has also narrowly opened particularly for companies with meaningful assets Derisked with clinical data.
Speaker Change: The number of Ipos third quarter 24 has surpassed 2023.
Speaker Change: Where half of the companies that went public this year are trading about their issue price.
Speaker Change: Further opening of the IPO markets will be a positive indicator for future leasing demand as these companies grow and as Investor and board conservatism thoughts more broadly.
Speaker Change: Commercial stage public Biopharma, which makes up 16% a R R and large multinational pharma, which makes up around 20% a R. R.
Speaker Change: <unk> to Quebec considerable dollars to R&D, both to internal programs and externally via partnerships and M&A.
Importantly, they remain very well capitalized with over 200 billion cash on hand, amongst the top 25 biopharma.
Speaker Change: Next life science products service and device tenants, which represent 20% IRR.
Speaker Change: Notably the bias of Cure Act has passed the house and is awaiting a vote in the Senate.
If passed the legislation will limit utilization of select Chinese contract research organizations.
Speaker Change: We view this legislation is largely positive net income.
Speaker Change: The grandfathering provisions to minimize near term impact of Biopharma, while creating an incentive for U S based contract manufacturing and research organizations to onshore capabilities.
Speaker Change: Long term this could provide a tailwind for demand across this segment.
Speaker Change: Last biomedical and government institutions, which represent 12% a R. R.
Institutions continue to be the catalyst for early discoveries that form the next generation of medicines.
Speaker Change: With our sale of 11 65 Eastlake to the Fred Hutch Cancer Institute in our Seattle region and their expansion into our neighboring 12 O. One and 12 away you slipped buildings were flat.
Speaker Change: These institutions plant deep long term really focused on the right location right ecosystem right infrastructure and trusted relationship with landlord partners such as Alexandria.
Speaker Change: Widening the lens on health care more broadly as we concluded the $4 five trillion in health care costs annually spent in the U S less than 15% goes towards medicines to put that in perspective, nearly 25% of health care spending is estimated to be unnecessarily or.
Speaker Change: Wasted administrative spend.
Speaker Change: All to say that novel medicines have the incredible opportunity to both have a positive impact on individuals' health and drive long term savings to the health care system by preventing managing anything hearing the thousands of diseases with limited or no treatment options.
With that I will pass it over to Peter.
Peter: Thank you Holly before I get into my update on the development pipeline leasing supply and asset sales I wanted to comment on the improving health of the office market because it's helpful to life Science real estate in a couple of ways.
Speaker Change: First to help you out.
Speaker Change: It can create competition for life science tenants as tech tenants have historically been attracted to our locations in centers of innovation and the appeal of our floor plates ceiling heights and amenities.
Office offers an alternative for some of the misguided life Science real estate supply that's been added since the pandemic.
Speaker Change: We are seeing it real time with the boom of the office leasing taking place in mission Bay.
Speaker Change: Oh, but a I completed a 490000 square foot Sublease Center $40 55, and 15 15 third Street property in the fourth quarter of 2023 and last quarter added another 315000 square feet at the neighboring 550, Cherry Francois building, which by the way was being marketed as <unk>.
Speaker Change: <unk> space.
Speaker Change: Our understanding is that two other tenants that we're competing for that building, including a tech company.
Speaker Change: And that one of them is now negotiating a mission rock, which was also once identified this future lab supply.
Speaker Change: Yeah.
Speaker Change: In the third quarter, we delivered 316000 square feet of development redevelopment pipeline, a 100% leased with 100% of the space contained in Mega campuses located in our high barrier to entry Submarkets the annual incremental NOI delivered during the quarter equaled $21 million, bringing the.
Speaker Change: Year to date total to $63 million the weighted average stabilized yield that the deliveries was strong at seven 7%.
Speaker Change: After a strong second quarter development and redevelopment leasing was light at 39121 square feet, bringing the total for the year to 480342 square feet. We suspect. The result was driven by the fact that most of the space available for lease in the pipeline.
Speaker Change: We won't be available for occupancy until 2026 or later.
Speaker Change: In today's market project leasing accelerates as projects near completion.
As illustrated by our 2024, and 2025 deliveries being 91% leased.
Projects expected to stabilize in 2026 and beyond our 35% leased.
And overall activity of these projects is encouraging because most of them are in greater Boston and we have active proposals for touring activity at each one of them.
Speaker Change: Transitioning to leasing in supply overall leasing volume was very robust at 1.49 million square feet up 33% quarter over quarter.
This leasing was significantly driven by renewals with a strong 84% retention rate, which illustrates the power of Omega tapestry platform and trust in our brand built by our internal long tenured asset services teams, providing unmatched operational excellence and knowhow in the running of our vision.
Speaker Change: Critical facilities.
Speaker Change: GAAP and cash rental increases were one 5% and five 1% respectively.
Speaker Change: It's materially by a large non laboratory at lease renewal with a high credit tech tenant.
Speaker Change: Although the increases were modest we are pleased with the longer lease durations coming in at a weighted average of nine seven years for renewed and re leased space.
Speaker Change: On competitive supply.
Speaker Change: As a reminder, 'twenty 'twenty four is going to be the peak year for new deliveries and most of that has been delivered through the third quarter.
Speaker Change: Inclusive of 2026.
Speaker Change: There is approximately 8 million square feet of competitive supply remaining to be delivered in our three largest markets.
Speaker Change: Greater Boston approximately 200000 square feet will be delivered in the fourth quarter of 2024, and it is 100% leased.
Speaker Change: In 2025, $2 4 million square feet is anticipated to be delivered and that space is 65% pre leased and 2026. Another 900000 square feet will be delivered in greater Boston and its 3.5% leased.
Speaker Change: The San Francisco Bay region.
Speaker Change: 300000 square feet will be delivered in the fourth quarter and it's zero percent leased.
Speaker Change: 20, 517 million square feet will be delivered as it's currently 23% leased.
We're not tracking anything to be delivered in the bay area for 2026.
Speaker Change: In San Diego, one 3 million square feet will be delivered in the fourth quarter and it's 50% leased 700000 square feet is expected to deliver in 2025, it's 23% leased and then 'twenty 'twenty six we expect to see 400000 square feet of competitive supply to be delivered.
Speaker Change: And it's 100% leased.
Speaker Change: I'll conclude with an update on our value harvesting asset recycling program. We've commented on the past two calls that our value harvesting transactions will be heavily weighted towards the end of the year.
Speaker Change: With respect to the third quarter, we closed on just north of $300 million of asset sale transactions highlighted by the sale of $11 65, Eastlake Avenue East a core asset in the Lake Union Submarket of Seattle.
As you know, it's not our intent to sell core assets.
Speaker Change: But this transaction offers several constructive attributes burst as Holly mentioned the sale was to the Fred Hutchinson Cancer Research Center, which is one of the most prestigious clinical research institutions in the world.
Speaker Change: And then it afforded us an opportunity to recapitalize, our neighboring 12 O. One and 12 O 80, Slake Avenue east assets with them as well taking out an existing partner at a gain.
Speaker Change: This was a fantastic opportunity for us to deepen our relationship with the Hutch, who is a major driver of life science real estate demand in the region.
Speaker Change: Second the transaction provided for early renewals at those recap properties inclusive of a 20 year lease term at 112 O One East Lake, where the Hutch occupies the entire 106000 square foot building.
Speaker Change: Third it provides price discovery upon which analysts and investors can evaluate the envy of our core assets. We acknowledge that this was a user sale, but any rational buyers get a required pricing in the neighborhood of market value. So we think the 4.9% capitalization rate and one.
Speaker Change: $499 per square foot value is representative of the value of our core Mega campus assets.
Speaker Change: Rounding out the third quarter transaction was the completion of the previously announced $60 million sale of 219 East 42nd Street in New York City, and the sale of 14 255, New Brook drive in Northern Virginia at a seven 4% cap rate.
Speaker Change: At workhorse asset that no longer fits into our strategy, but it is a testament to the enduring value of our asset base as we acquired it pre IPO.
Speaker Change: As we look forward, we expect to end the year strong several value harvesting transactions on tap to close before year end.
Speaker Change: We have $577 $2 million of dispositions that are subject to nonrefundable deposits.
Speaker Change: Those assets include retail a retail development on excess land, we owned in Maryland.
Speaker Change: It went off class B asset and our greater Stanford Submarket that will be redeveloped for another use of one off out office building that was part of a land assemblage in the suburbs of Boston.
A pair of buildings in the research triangle located outside of our core Mega campuses and.
Speaker Change: And a set of buildings in the suburbs of greater Boston, which will be sold to a user.
Speaker Change: Rounding out our fourth quarter dispositions are assets that are subject to executed letters of intent or purchase and sale agreements approximately 48% of the $602 $5 billion in sales proceeds expected from these transactions come from our land bank and are expected to be.
Speaker Change: Developed for residential use.
Speaker Change: The balance is a pair of buildings that will be demolished for residential development.
Speaker Change: And a set of noncore standalone assets in Cambridge that will require significant capital to re lease and no longer fit into our strategy with that I'll pass it over to Mark.
Speaker Change: Thank you Peter this is mark <unk>, CFO, Hello, and good afternoon, everyone.
Mark: We reported solid operating and financial results for the second quarter total revenues and NOI for <unk> 24 were up 10, 9% and 12, 5% respectively. Over <unk> 23, primarily driven by solid same property performance and continued execution of our development and redevelopment strategy.
Mark: <unk> per share diluted as adjusted for the quarter was $2 37.
Up four 9% over <unk> 23, and is in line with consensus.
Mark: Our solid operating results for the quarter were driven by our disciplined execution of our Mega campus strategy tremendous scale longstanding tenant relationships and operational excellence by our team 76% of our annual rental revenue comes from our collaborative Mega campuses, we have high quality cash flows with 53% of our annual.
Mark: Rental revenue from investment grade and publicly traded large cap tenants collections remained very high at 99, 9% and adjusted EBITDA margins continue to be strong at 70% for the quarter.
Mark: An important takeaway for the quarter should be the very strong leasing volume results lease.
Mark: Leasing volume for the quarter was $1 5 million square feet, which was up 48% over the trailing four quarter average and was the highest.
Mark: Quarterly volumes since for Q2 two.
Mark: We continue to benefit from our tremendous scale high quality tenant roster and brand loyalty with 80% of our leasing activity over the last 12 months coming from our existing deep well of approximately 800 tenant relationships.
Mark: The rental rate increases for the first nine months of 2024 were strong at 16, 4% and eight 9% on a cash basis.
Mark: Our outlook for rental rate growth for the full year 'twenty four remains solid at 11% to 19% and 5% to 13% on a cash basis.
Mark: Rental rate growth for lease renewals and releasing of space for the quarter was five 1% to one 5% on a cash basis.
Mark: We did highlight the renewal than acquired lease in Texas for Tech R&D space that did weigh down the numbers during the quarter.
Mark: During the quarter. We also achieved very healthy lease terms on completed leases, which were almost 10 years on average the overall mark to market for cash rental rates related to in place leases for our entire asset base remained solid at about 10%.
Mark: Tenant improvements and leasing commissions on second generation leasing as a percentage of starting cash rent were around 8% this quarter, which is less than our historical average over the last three years of about 9%.
Mark: Our total non revenue enhancing expenditures, which includes tenant improvements on renewals and releasing of space is expected to be in the 10% to 11% range as a percentage of net operating income in 2024, which dismount amount is below our five year at our five year average of 15% and as.
Mark: Lower than that of several other REIT sectors and really highlights the durable nature nature of our laboratory infrastructure. This is the third year in a row that we've been in the 10% to 13% range. Although we do expect next year to be higher given some larger repositioning projects on the horizon.
Mark: Turning to same property results.
Mark: Same property NOI growth for <unk> 24 was solid at one 5% and six 5% on a cash basis.
Mark: Really driven by solid rental rate increases a pick up in occupancy and some burn off of free rent.
Mark: Our outlook for the full year 2020 for same property growth is consistent with our last update that solid growth of one 5% and 4% on a cash basis at the midpoint of our guidance.
Mark: We do expect some pressure on fourth quarter same property results, resulting from a lease termination that occurred at four nine, Illinois Street, and our mission Bay Submarket, where the lease will be expiring at the at the beginning of 2025 and.
Mark: And we expect little to no rent in the fourth quarter of <unk> 24.
Mark: As a reminder, our same property results do include a 100% of consolidated results. So even though we only have a 25% interest in this particular property.
Mark: The approximately $17 million of annual rental revenue going away related to this tenant in the fourth quarter will be fully reflected in our same property results, even though the bottom line <unk> results will only pick up our 25% share.
Mark: Turning to occupancy.
Mark: For the quarter occupancy was very solid at 94, 7%, which is up 10 basis points over the prior quarter and continues the steady results over the last four quarters, we expect year end occupancy to be on the low end of our guidance range of 94, 6% to 95, 6%.
Mark: On lease explorations are our team has done a great job of addressing the 24 lease expirations with very strong leasing volume again are completed in the quarter.
Mark: A million and a half square feet and the unresolved lease expirations remaining for the balance of 2024 are modest at only 134000 rentable square feet.
Mark: Looking at the first quarter of 2025, we highlighted a few key lease exploration spread across four projects aggregating 768000, rentable square feet with $47 million of annual rental revenue that are expected to add 12 to 24 months of downtime on a weighted average basis.
Mark: 75% to 80% of the total of $47 million annual rental revenue is related to our Alexandria technology Square and 409, Illinois Street projects, which are expected to remain as operating properties with the same property pool. Following the lease exploration, even though these spaces may require.
Mark: Some time and capital to release or repositioning buildings for multi tenancy.
Mark: The Alexandria Technology Square project, primarily relates to the move out of Modena and the expansion into their new 462000 square foot building, we delivered late last year at 325 Binney.
Mark: And we are in early discussions with attempt to lease approximately half of the four nine Illinois Street property.
Mark: Please refer to footnote four on page 24 of our supplemental package for additional details there.
Mark: On external growth during the quarter, we continued to execute on our development and redevelopment strategy by delivering 316691 rentable square feet from the pipeline, which will generate $21 million of incremental annual net operating income.
Mark: We have five and a half million rentable square feet of development and redevelopment projects that are 55% leased or negotiating and are projected to generate $510 million of incremental net operating income over the next three and a half years, including $158 million over the next five quarters.
Transitioning next to the balance sheet, we continue to have one of the strongest balance sheets amongst all publicly traded U S. Reits are corporate credit ratings are in the top 10% of all publicly traded U S. Reits, we remain on track to achieve our targeted net debt to adjusted EBITDA leverage ratio of five one times on a quarterly annualize.
Mark: Bassist by year end, we have tremendous liquidity of $5 4 billion.
Mark: And our attractive debt profile highlights our commitment to long term funding of our business with a weighted average remaining term of debt of 12 six years and the average year end percentage of fixed rate debt over the last five years of 97, 7%.
Mark: We continue to focus on our disciplined funding strategy to recycle capital from dispositions into minimize the issuance of common stock.
Common stock issuances have amounted to less than 2% of our total funding sources in 2023, and 2024 and we do not expect to issue any new equity in the fourth quarter of 2024.
Our disposition strategy for 'twenty 'twenty four is focused primarily on outright dispositions of noncore assets not integral to our Mega campus strategy, allowing us to enhance the quality of our asset base.
Mark: It includes stabilized properties non stabilized properties with vacancy or near term lease expirations and land parcels.
Speaker Change: To date, we've completed $319 million of asset sales, including the sale Peter mentioned at $11 65, Eastlake Avenue, which is located in our Lake Union Submarket.
Mark: So to the Fred Hutchinson Cancer Research Institute.
Mark: We have another 1.2 billion of pending dispositions subject to nonrefundable deposits or executed letters of intent or Psa agreements.
Mark: About half of the pending dispositions represent stabilized property sales most of which are expected to be sold to users with a blended expected capitalization rate of eight 5% and 7% on a cash basis. The other half represents the sales of land in properties with vacancy or near term lease expiration.
Mark: <unk>.
Mark: The <unk> 24 annualized NOI associated with the $1 2 billion of pending sales is $95 8 million and $91 million on a cash basis. It is important to note that the $95 8 million is a backwards looking amount and does not consider certain lease explorations for some of the non.
Mark: Stabilized properties expected to occur over the next 12 months, including a significant amount of non laboratory space on a forward looking 12 months basis for these non stabilized disposition assets, we expect that NOI will decline by 30% to $35 million and given that these assets no longer fit our strategy.
Mark: Gee, we've elected to sell these assets and allow the buyer to invested capital to reposition those assets.
Included in the $1 2 billion pending dispositions are two key items aggregating nearly $700 million first a suburban campus with specialty non traditional lab space and our greater Boston market to the existing tenant for 369 million, which represents a six three cash cap rate and second.
Mark: Various sites in Sorrento Mesa in University town center to residential developers for $314 million, which will allow us to monetize some of our future pipeline without adding to the lab supply.
Mark: The aggregate total of the completed and pending dispositions is $1 5 billion, which puts us right around the midpoint of our guidance and we're reasonably confident we can close all of this by the end of the year.
Mark: We also expect to fund a meaningful amount of our equity needs with retained cash flows from operating activities after dividends of $450 million at the midpoint of our guidance for 2024, and our high quality cash flows continue to support the growth in our annual common stock dividend with an average annual increase in dividends per share of $5 four.
Mark: <unk> percent since 2020, and we continue to have a conservative <unk> payout ratio of 55% for <unk> 24.
Mark: Realized gains for the venture investments, including <unk> <unk> per share as adjusted for the quarter were $23 million and $85 2 million for the nine months ended September quarterly realized gains since 2021 have averaged about $25 million.
Mark: Through the first three quarters of 2024, we've averaged about 28 million, so pretty close to the historical run rate and consistent with our guidance range for the full year of 95 million to $125 million.
Mark: Turning to guidance there were a few moving pieces in our underlying guidance, including lower straight line rent revenue and lower G&A, which we highlighted on page five of our supplemental.
Mark: We've updated our guidance for 2024 for EPS of $2 60 to $2.64 and we maintained the midpoint of our guidance for <unk> per share diluted as adjusted of $9 47.
Mark: Which represents a solid five 6% growth in <unk> per share for 2024.
Mark: As we look ahead beyond <unk> 'twenty four we continue to have conviction to reinforce our core to our differentiated Mega campus strategy, which is the driving force behind our disposition strategy.
Mark: With 76% of our annual rental revenue coming from Mega campuses today and aspirations to enhance this number over time with the non core dispositions that land and properties as well as disciplined development and redevelopment on these mega campuses, we expect to continue increasing the quality and resilience of our dominant platform and ask.
Speaker Change: That base with that let me turn it over to you Joe Okay Paula could you.
Have the moderator open it up for questions. Please.
Paula Schwartz: Yes, please do.
Speaker Change: Rocco.
Speaker Change: Absolutely.
Ask a question. Please press Star then one on your telephone keypad.
Speaker Change: Question has already been addressed you like to remove yourself from the queue. Please press Star then two.
Speaker Change: Today's first question comes from Joshua done or alignment with Bofa Merrill Lynch. Please go ahead.
Joshua Done: Yeah, Hey, guys I appreciate the time I appreciated the comments on the Seattle asset sell at a four nine and then the pending sales that are stabilized 75 cash cap rate is there any other additional color you can provide I like what's driving the gap between those two I know you touched.
Speaker Change: Touched a little bit on your opening remarks.
It looks like the second part of that would be like should we assume like the stuff that's not in the Mega Mega campuses, but it has stabilized maybe it was closer to that 75 cash cap rate.
Speaker Change: I don't think that's a.
Speaker Change: Reasonable assumption, but mark do you want to talk about Seattle and maybe.
Speaker Change: How to think about.
Uh huh.
Yeah, sorry, Yeah, Josh I think on the on the stabilized cap rate I think perhaps what you're referring to is I think it was a 7% cash and eight and a half gap.
Speaker Change: The Big reason for the Delta there between cash and GAAP was the big chunk of that is the <unk>.
Speaker Change: The suburban greater Boston market.
Speaker Change: That actually had some really long lease term in place. So you had a pretty big spread there.
Speaker Change: Between cash and GAAP.
Speaker Change: I think if you think about you know what to expect in terms of stabilized asset sales.
Speaker Change: We've given you the number for this year.
Speaker Change: And they're noncore so yeah.
Speaker Change: Yeah, Let me just.
Speaker Change: Interrupt that that was not a that's not traditional lab space.
Oh.
Speaker Change: Pending half that's not stabilized that you're selling that's not.
Speaker Change: That's not like traditional life science, that's where office I was like Oh Oh.
Speaker Change: Land play recovered lamp I kind of look at.
Speaker Change: Way to think about it or.
Speaker Change: Yeah, So mark do you want to comment.
Speaker Change: Yeah, Josh you're talking specifically about the greater Boston asset.
Speaker Change: No I thought I thought I heard you say like half the pending dispositions at 1.2 billion, we're gonna be like sold for like a gap.
Speaker Change: GAAP eight and a half of cash seven I was just trying to like contracts like that pool of assets for sale four nine that was sold in Seattle.
Speaker Change: Right.
Speaker Change: Yeah, Yeah. So.
Speaker Change: About half of the $1 2 billion is stabilized assets that that includes the one particular asset we mentioned in greater Boston that I think we had a $6 three cash cap rate and the net.
Speaker Change: A much wider gap cap rate given the long terms duck. The other half of the $1 2 billion is a mixture of Miami and and also some non stabilized properties.
Speaker Change: If you if you kind of reverse engineer the math, it's somewhere in the high Sevens in terms of the GAAP NOI coming offline.
What I was trying to say in the prepared commentary is.
Speaker Change: There's a there's a fair amount of that NOI that for those particular assets that we're selling that happened to be in Boston that will be.
Speaker Change: Going away next year.
Speaker Change: And so the decision the decision there was really to to allow the buyer to invest that capital since those assets really just don't fit our strategy and a longer.
Speaker Change: Peter any cut further comments.
Yeah.
Speaker Change: Yeah, I mean part of your question I think referenced the seven six cap rate, maybe that I mentioned.
Speaker Change: One of our workhorse assets versus the.
Speaker Change: Core asset for nine.
Speaker Change: Yeah.
Speaker Change: Seven six was in northern Virginia.
It is lab space, but it is more clinical lab space. So not the R&D type space that is in our core mega campuses.
Speaker Change: But what I was trying to get across in.
Speaker Change: In my commentary was.
Speaker Change: We wanted to make sure that everyone was aware.
Speaker Change: There's a lot of what we've been selling has been noncore almost everything is noncore unless it's been a partial interest sale, we haven't done a partial interest sale in awhile.
Speaker Change: So we just sold a core asset.
Speaker Change: In Lake Union and I explained why.
Speaker Change: And it was at a four nine and even though it was a user sale.
Speaker Change: Certainly.
Speaker Change: It influences value.
Speaker Change: It has to be in the ballpark of market value right, I mean from Iraq, and irrational buyers not going our way overpay for anything no matter, whether they're user or not so I thought it was a good example, and reminder to everybody that we're on our way to making everything that we own or you know a good portion of what we.
Speaker Change: One core Mega campus assets and.
Speaker Change: Once we're done with our disposition program.
Speaker Change: So we are what we have left is highly valuable.
Speaker Change: That comp reflects that and that's what I was trying to get across Yep, that's really good and Josh just one other comment.
Speaker Change: You have to remember so the company's 30 years old and so its acquired developed or Redeveloped assets over a long period of time that doubt that now don't fit the go forward Bank campus strategy. So that's pretty.
Pretty obvious.
Speaker Change: Okay I appreciate the color guys. Thank you yep. Thank you.
Speaker Change: Thank you and our next question today comes from Rich Anderson at Wedbush. Please go ahead.
Thanks, Good afternoon. So in terms of the the the dollar value of what you can still do in terms of non core assets, you mentioned, 76% Mega campuses I, just sort of did a 24% of your enterprise value and got to $99 billion, but I assume that's a bit simpler.
Speaker Change: Stick, but it is as the pipeline for additional sales to meet your development obligations in that sort of five to 10 billion range would you agree with that number or am I way off.
Speaker Change: Yeah, Mark do you want to respond to them.
Speaker Change: Yeah I think.
Speaker Change: It's true that some of that.
Speaker Change: 4% of IRR that resides in non Mega campuses some of that would be stuff that we would we may look to exit over time, but.
But there are some really good assets in there that are located in good markets that that.
Speaker Change: May be things, we hang on to.
Speaker Change: The other thing I would say is that we do have some land on the books that is also not located in mega campuses. So that that could also be another capital source that we look to go after I think about a 31% or so of the square footage.
Speaker Change: And the land bank is not located in Mega campuses.
Speaker Change: Okay, Great and then just a quick second question here on the realized gains our guidance for the full year, it's still over $100 million I think you've done 47 as of the third quarter year to date does that imply another 50, plus in the fourth quarter or my again am I missing something.
Speaker Change: Yeah, you're missing it mark.
Speaker Change: Yeah, Yeah realized gains for the quarter were $23 million and I think were $85 2 million for the nine months. So.
Speaker Change: If you annualize that.
Speaker Change: That kind of puts you square in the middle are pretty close to the middle of our guidance range of <unk> $95 million to $125 million I thought I saw the disclosure for 47 million year to date I must I must have yeah.
Speaker Change: We look at that Iran is yep, Okay. That's all I got thanks, yeah. Thanks.
Speaker Change: And our next question today comes from Michael Griffin with Citi. Please go ahead.
Speaker Change: Thanks, It's Nick Joseph here with Michael maybe just first on the five year lease extension with the tech tenants are in.
Speaker Change: And Texas, just hoping to get some more color on that and kind of what your long term plans are you still plan to convert this lab space and kind of the considerations that went into that decision.
Speaker Change: So we're under strict confidentiality as you probably can imagine all big Tech tenants don't want their name used I don't allow you to put other tech tenants in the building, they're pretty strict on what they do so we can say very little other than.
Speaker Change: We felt that this renewal was integral to their own campus, which is actually adjacent to our site.
Speaker Change: These are highly improved buildings for their particular use so they arent just some kind of a how.
Speaker Change: How fast Tech you know office kind of thing, they're actually quite quite valuable and quite improved Ah I don't know where it goes over time, but clearly having the cash flow is better than in this market environment with cost of capital than trying to reposition them, but they may be an ultimate buyer.
Speaker Change: Here as well so we'll see how the story plays out.
Speaker Change: Thanks, that's helpful. And then just on you've seen more broadly have you started to see larger space requirements kind of demand pick up or is it still more from the medium sized 20 to 40000 square foot tenants.
Speaker Change: Well I think it's pretty good in the early and steady on the on the you know on the.
Speaker Change: Revenue generating side I think in the middle of this where it still remains challenging and when you've got good clinical data run approval generally you've got good news and if not you know, it's it's kind of sluggish. So I don't think that's materially changed.
Speaker Change: Thank you very much.
Speaker Change: Thank you and our next question comes from Michael Carroll with RBC capital markets. Please go ahead.
Michael Carroll: Yeah. Thanks, Mark I wanted to circle back on the the valuations on some of the dispositions that you provided to make sure I'm thinking about everything correctly. So.
Michael Carroll: So I know on the $1 2 billion of pending sales. The supplement says there's $96 million of GAAP NOI associated to that which reflects about 8.1 cap rate do you have the cash number for there. So how much cash NOI should we expect kind of goes away once those sales are completed.
Speaker Change: Yeah that number's around 91 million Michael.
Michael Carroll: Okay, Great and then.
Speaker Change: Then Peter in your comments earlier, you were saying once you're done with the noncore asset sales and the portfolio quality is going to be significantly improved I mean, how much should we think about the timing of that I mean is this going to be a longer term process or is there a line of sight. When you kind of gave us that that idea well yeah.
Speaker Change: Let me, let me say something before Peter answers I don't think you could say the quality of the portfolio is going to be substantially improved. It is already first in class best assets Best location Best services best tenants. So I don't think how you're thinking about that is quite correct. We have.
Speaker Change: A variety of assets land redevelopments and developments that no longer fit the Mega campus strategy, and we will harvest those assets over the coming years.
As we deem appropriate to match sources and uses and also in light of.
Speaker Change: The valuation in the marketplace. So that that's kind of how we look at it but Peter you could comment further.
Speaker Change: Yeah like.
Speaker Change: The best.
Speaker Change: Strategy for us to mitigate the supply that's gone into our core markets is because our Mega campus strategy. So we were you know we're going all in on it.
Speaker Change: And as Joe mentioned, we feel like all the assets we have are our good assets, but.
Speaker Change: You know, we deem some of them to no longer be part of our strategy.
And were you know those are the ones that were selling in order to fund our pipeline, which is increasing our percentage of Mega campus assets, how long, it's going to take is hard to say.
Speaker Change: But what.
Speaker Change: We're doing it incrementally as we.
Speaker Change: As we build out our Mega campus platform.
Speaker Change: It's it's you know.
Speaker Change: It's good it's at it we feel like it's it's good that we're able to fund this transition by selling assets that.
<unk>.
Speaker Change: Are no longer part of our strategy versus using common so.
Speaker Change: The net effect is not.
Speaker Change: We're funding the business without.
Speaker Change: Without issuing common equity and.
Speaker Change: At the same time as those sales occur we increase the percentage of our Mega campus assets and maintaining a great balance sheet in the meantime.
Speaker Change: Okay, Great and then just one last question for me. It does look like 99, Coolidge and the development schedule kind of stabilization got pushed out a year can you kind of provide some color. The reasoning of why that kind of got pushed out yeah, well, it's pretty simple a this is a brand new building. It's one of the most.
Speaker Change: Highlighted buildings in all of the Watertown.
Speaker Change: Now campus and and Submarket and it's pretty clear that it's going to take us more time to build out space to deliver to tenants.
Speaker Change: Rather than having just in time space available. So it was part of the development, where we're doing that but that takes time.
Speaker Change: In this marketplace.
Speaker Change: But we did just sign a lease I don't know maybe after the end of the quarter or another leased there which will be reported I think it was.
Speaker Change: October 13th or something like that for part of the space there, but the challenge there is to lease space and have available space that people can move into and that's what we're trying to get to that point.
Speaker Change: Okay. Thanks.
Speaker Change: Yeah.
Speaker Change: Thank you I don't know this question comes from Omar Saad with Deutsche Bank. Please go ahead.
Hi, Yes. Good afternoon, everyone just wanted to follow up on Rob's question.
Speaker Change: Mark you mentioned the cash NOI disappearing was about it was about 91 million on the $1 2 billion of sales.
So I'm looking at it kind of say, that's about a seven and a half cash.
Speaker Change: Our yield but developments are being done at a stabilized six four.
Speaker Change: So I'm a little I'm.
Speaker Change: I'm, just kind of trying to understand again selling at seven five to fund assets at six four.
Speaker Change: I mean are we looking at that being something dilutive to F. O. What should we be thinking more about because you had suddenly not dealing with a bunch of our recurring capex. It still gonna be accretive on an <unk> on our free cash flow basis.
Speaker Change: Yeah sure Yeah no.
Speaker Change: Youre right that you know what we're selling is.
Speaker Change: Obviously has a higher cap rate than then well what we're developing and if you just look at a moment in time, but I think the a bunch of those assets, particularly for the non stabilized ones will absolutely need or will require significant capital to re tenant those so I think the choice there was real.
Speaker Change: Really just to allow the buyer to to do that.
Speaker Change: Those assets don't fit our strategy any longer.
Speaker Change: And take take take those proceeds and redeploy them into into the pipeline, where a significant amount of the product in the pipeline is all concentrated in the mega campuses.
Speaker Change: Okay. That's helpful. And then if I may ask you. Another one the reduction in guidance for straight line rents and I know part of it was just write offs of a you know associated with some some tenants in some lease terminations I mean, when you look up the overall portfolio today, you know and you kind of think of of a watch list if I may use.
Speaker Change: Those words I mean, how does one kind of think about that and kind of start thinking about 2025, whether we may see a few more of these instances of straight line rent write offs.
Speaker Change: Yes, maybe Ali I'll, maybe pumped that whenever you just to talk about kind of how we look at the well bore right frame.
Speaker Change: Frame it for her first.
Speaker Change: Yeah, Yeah look I think.
Speaker Change: Was this was this was a kind of a discrete event with this particular tenant.
It was a large tenant it was actually.
Speaker Change: A tenant that we inherited when we bought the asset over a decade ago. They had been in there for a very long time.
Speaker Change: Close to not quite 20 years, but pretty close to it.
Speaker Change: <unk> been operating in there.
Speaker Change: And we sold out of that particular that.
Speaker Change: <unk> campus, a number of years ago in mission Bay to reduce our exposure.
Speaker Change: But I think I think what I wanted to just communicate is that.
Speaker Change: These things do happen.
Speaker Change: But that was just kind of a one off event.
Speaker Change: Yeah, and I'll I'll I'll, maybe answer on how long you can hold your fire for another question. So it's important to keep in mind too that this tenant who Mark said was in there when we bought the building in 2000 and town.
Speaker Change: It had been.
Speaker Change: Signed a lease with the shorenstein team Ah in 2006 I believe.
Speaker Change: The company actually when we underwrote it and I personally was involved in the underwriting in 2010.
Speaker Change: Looked to have one of the most promising blockbuster drugs replacement for amgen's erythropoietin, but instead of injectable. It was a pill, but over the course of time through a variety of management changes and just a.
Speaker Change: A combination of maybe.
Speaker Change: Strategy Science.
And a whole lot of other issues that come to bear it if they had lost that opportunity and so you know was faced with the prospect of continuing its business in China and winding down in the U S. So I think we did everything prudent we could during all those years and very proud of the fact that.
Speaker Change: You know we are.
Speaker Change: We have one of the best track records of underwriting tenants are I think the best in the industry by far no. One has our capability. So thank you for the question.
Speaker Change: Joe Thank you.
Speaker Change: Our next question today comes from George even called with Mizuho. Please go ahead.
George Even: Hey, This is Georgia on for Vikram are what is the potential for exceeding the midpoint of the disposition guidance and I just have a sense of what is the best use of this capital.
Speaker Change: Yeah Mark.
Speaker Change: Yeah look I think we're almost in late October so.
Speaker Change: I don't know that I would expect to do much beyond what we have laid out in terms of the.
Speaker Change: The actual amounts that are either under contract or under.
Speaker Change: Hard deposit.
Speaker Change: There are other things we're looking at that we're moving along that will continue to work on but for now I probably wouldn't assume much beyond that.
Speaker Change: And the second part of the question.
Speaker Change: Sorry could you repeat the second part, Georgia, Yeah, Yeah. What is the best use of this capital as you sell assets you are in your view.
Speaker Change: Oh right, yes, so look we.
Speaker Change: We plan since the beginning of the year or two.
Speaker Change: Really fund that construction.
Speaker Change: The pipeline with this capital so.
Speaker Change: That's been happening during the year and this money will be used to pay down debt, which we borrowed to.
Speaker Change: To fund the construction pipeline, we do expect.
Speaker Change: Just given where we are in.
Speaker Change: In the year would you expect to actually have a little bit more proceeds.
Speaker Change: From the sales that we wont have the ability to pay down debt, we expect that.
Speaker Change: Our revolver should be at or close to zero. So by the end of the year. So we do expect to hold onto some of that cash.
Speaker Change: And then be redeployed next year.
Speaker Change: That ought to reduce our debt needs going forward in 2025.
Speaker Change: But obviously as you look at funding construction, a given cost of capital given the fact that.
Speaker Change: Many of these projects in the pipeline we're committed in past years.
Speaker Change: We're only funding new pipeline opportunities are.
Speaker Change: Whether they be development or redevelopment where are you now.
Speaker Change: Returns can be well above cost of capital. So that's how we're looking at.
Speaker Change: Thank you and just one more for me how do you see demand evolving as funding improves and do you have any updated thoughts on AI and how does would drive lab space needs going forward.
Speaker Change: Yeah, So demand I think has been pretty.
Speaker Change: The word I used was the industry is in a highly disciplined.
Speaker Change: Capital deployment.
Speaker Change: Both capital raising and capital deployment, so we're dealing with that but you know we've got 800 tenants plus.
Speaker Change: And we have a high quality tenants that need lab space and so it was I think mark said, 80% of our.
Speaker Change: Tenants over the last year have come from our own tenants. So we we are out compete in those opportunities if we have space available.
Speaker Change: And that's that's good on the AI side I think it's very early days, although it's been around for quite a long time very early days.
Speaker Change: For AI, obviously, the best use of AI.
Speaker Change: And the world of AI is going to have to meet the world of drug development and at the moment.
Speaker Change: Language models and a lot of inhibitions.
Speaker Change: <unk> remained between those two but many companies in fact, most companies are trying to use AI to inform them to get to better targets and outcomes and ultimately my my own view is that AI is going to be maybe the most remarkable progress in a clinical setting where if over time.
Speaker Change: One could predict with greater certainty.
Speaker Change: The those who had respond positively versus no response or negative response that could save the largest amount of money and the entire drug development process, which is clinical trials.
Speaker Change: Thanks for that question.
Speaker Change: Okay can I just layer on that.
Speaker Change: Hi, everyone. This is Harley I was just going to respond to your first question in terms of tenant demand and just to you know as a reminder, as yes. As you think about medicine development, Unfortunately, and for public companies. It doesn't happen on a quarter to quarter basis right. It takes 10 years easily to bringing our new medicines from early.
Speaker Change: Research too to a patient.
Speaker Change: And what we see on the ground is just incredible innovation right, we're still continuing to see discover.
Speaker Change: Discoveries and new forms of modality is that will continue to be developed and make their way to patients and so while we are in a conservative environment right now yeah. The outlook on the growth of the industry and that translating to needs over the long term is certainly positive and so you know that the lease we see for <unk>.
Speaker Change: In Poland, the obesity space right. There's so much unmet need across all timer is across and still other forms of cancer are that the industry.
Speaker Change: <unk> outlook and the innovation driving that demand will continue.
Speaker Change: Great. Thank you for taking my questions.
Speaker Change: Thank you and our next question comes from Peter Abramowitz with Jefferies. Please go ahead.
Peter Abramowitz: Thank you yeah. So I was just wondering if you could comment on sublease space, specifically in Boston. The Bay area is that thought of is it continuing to increase or.
Speaker Change: Does it seem like it's sort of stabilized yeah, Peter do you want to address that.
Speaker Change: Yeah, it's stabilized.
Yes.
Speaker Change: It has actually.
Speaker Change: Not stated.
Speaker Change: Good sublease space is not stayed on the market long.
Speaker Change: Anything that you know when you look at the percentages of things that are still available for sublease that space. That's been on there for a long long time, because it's just not good space or its not its shelf space.
Speaker Change: But we're not seeing.
Speaker Change: A lot of space being put back on the market now so.
Speaker Change: What is being absorbed is generally.
Speaker Change: Available vacant space or not.
Speaker Change: The directly the biggest space and not sublease space. So that's been a positive for the market. Although there is still some availabilities for sure tenants tend to want to go direct if at all possible because.
Speaker Change: They have no control over the space, if theyre going through the tenant that sub leasing it.
Speaker Change: Yeah.
Okay. That's helpful.
Speaker Change: And then just to go back to Joel's comments about.
I think tenants generally.
Speaker Change: Just being more thoughtful and disciplined in terms of our capital allocation.
Speaker Change: You sort of comment on like the timing deal cycles to actually get leases done.
Speaker Change: Sort of where that's at today versus where it's been historically and any sense of that changing anytime soon.
Peter Abramowitz: Yeah Peter.
Speaker Change: Yeah.
Speaker Change: Yes.
Michael Carroll: Michael of leasing has definitely taken a lot longer now than it used to.
Speaker Change: Certainly boards or screw.
Speaker Change: Scrutinizing any any growth space.
Speaker Change: And tenants are looking at all the options in the market before making decisions to make sure that they're doing all their diligence because.
Speaker Change: Boards are requiring them to get everything you know.
Speaker Change: Pretty much.
Speaker Change: At least for the earlier stage companies and maybe the early IPO companies.
Speaker Change: The boards are really.
Speaker Change: Looking at every dollar in and wanting to ensure that all the diligence was done.
Speaker Change: We feel confident.
Speaker Change: We're in the mix that we're going to win the deal, but the deals are taking longer to make for sure.
Speaker Change: Excellent that's all for me thanks for the time.
Speaker Change: Hugh.
Speaker Change: And our next question today comes from doing Brzezinski with Green Street. Please go.
Speaker Change: Sure.
Speaker Change: Good afternoon, and thanks for taking the question just one quick one on the transaction market given the commentary in the call. It seems like most of the dispositions. This year those that had been that happened and those that are set to close to a year and it seems like most of the debt to date has come from users. So just sort of curious on your appetite.
Speaker Change: Traditional real estate investors to put capital into work into the life science space today.
Speaker Change: Yeah Peter.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: We've been fortunate that.
Speaker Change: There've been users out there that I want to take advantage of the opportunity to buy the.
The real estate that they wouldn't have otherwise had the opportunity to buy because we werent sellers in the past.
Speaker Change: Transaction velocity to investors is really highly dependent on financing the financing market and although it is starting to improve it.
Speaker Change: It's still not where it needs to be for a lot of money to get off the sidelines and back into <unk>.
Speaker Change: Acquiring mode.
Speaker Change: There are some investor sales that we're doing for sure but.
Speaker Change: It.
Speaker Change: We think that coming into next year there'll be a lot more opportunity for us to do so one because rates hopefully will reverse we all.
Speaker Change: Thought they'd be going down not up.
Speaker Change: At this point, but we do have confidence that they will the 10 year will start to go down and then.
Speaker Change: We are seeing.
Lenders now start to get back into the market so that.
Speaker Change: That'll be.
Speaker Change: An opportunity to increase the velocity of transactions to Investor and also an opportunity to do better on valuations because.
Speaker Change: They'll be able to leverage them.
Speaker Change: Great. That's all I had thanks.
Speaker Change: No.
Speaker Change: And our next question. Our last question today comes from Jim Cameron with Evercore. Please go ahead.
Jim Cameron: Good afternoon. Thanks for taking the time to the extent you can where would you say are the better pockets of demand for new space lease up in other words in the development redevelopment is it the private biotech pre commercial biotechs Big pharma I'm. Just curious if you could put any sort of hanging the paper around that where the broader or deeper alright. Thank you.
Speaker Change: Yeah, Hi, Jim I think it would be earlier stage companies.
Jim Cameron:
Jim Cameron: By and large and if you get a commercial or I mean a.
Jim Cameron: A clinical stage company that has good news and it's got to move immediately.
Jim Cameron: Are probably the two most common pockets today.
Speaker Change: Great and if I get it.
After your last comment I make sure I understood you.
Speaker Change: Our response, you thought it would be really powerful AI in terms of clinical studies, Joel, but does that and I missed it. If you think that that that helps or hinders demand for space in terms of your portfolio.
Joel Marcus: I think it's it's it's positive in the sense that it'll provide way more opportunities for our targets medicines.
Joel Marcus: And shots on goal, if it AIDS and abets and the clinical trial process, we don't lease space to hospitals or others doing clinical trials, so that doesn't really matter to us, but what matters is the pipeline of <unk>.
Joel Marcus: Products that address the 90% plus disease that need to be solved. So I think that would be very good news for us.
Speaker Change: Got it thanks for the clarification yeah.
Speaker Change: Thank you and that concludes our question and answer session, Let's turn the conference back over to Joel Marcus for any closing remarks, okay. Thank you everybody and be safe and God bless.
Speaker Change: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: Okay.
Speaker Change: [music].