Alexandria Real Estate Equities Q4 2025 Alexandria Real Estate Equities Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Alexandria Real Estate Equities Inc Earnings Call
Paula Schwartz: Good afternoon, everyone, and welcome to the Alexandria Real Estate Equities fourth quarter and year-end 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star and then one on your touchtone telephones. To withdraw your questions, you may press Star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Paula Schwartz with Investor Relations. Ma'am, please go ahead.
Operator: Good afternoon, everyone, and welcome to the Alexandria Real Estate Equities fourth quarter and year-end 2025 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star and then one on your touchtone telephones. To withdraw your questions, you may press Star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Paula Schwartz with Investor Relations. Ma'am, please go ahead.
Speaker #1: Good afternoon, everyone, and welcome to the Alexandria Real Estate Equities fourth quarter and year-end 2025 conference call. All participants will be in a listen-only mode.
Speaker #1: Should you need assistance, please send a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones.
Speaker #1: To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Paula Schwartz with Investor Relations.
Speaker #1: Ma'am, please go
Speaker #1: ahead. Thank you.
[Company Representative] (Alexandria Real Estate Equities): 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.
Q4 2025 Alexandria Real Estate Equities Inc Earnings Call
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.
Speaker #2: Good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the Federal Securities Law. The company's actual results might differ materially from those projected in the forward-looking statements.
Speaker #2: 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 #2: And I would like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead.
Speaker #2: And I would like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel. Thank you.
Joel Marcus: Thank you, Paula, and welcome everybody to our Q4 and year-end 2025 conference call. With me today are Peter, Mark, and Hallie, and I want to wish everybody a happy new year and remember, most importantly, health is wealth. I want to thank our family team for their exceptional efforts during 2025, and particularly a very busy fourth quarter. In 2025, we witnessed the fifth year of a life science bear market. Our 2025 timeline clearly evidences that no one could have predicted with the February 2025 nomination of HHS Secretary, the intense cascade of events from February 2025 on to the numerous key departures toward year-end at the FDA. And in fact, sadly, measles and polio may be back to some extent.
Speaker #3: Thank you, Paula, and welcome, everybody, to our fourth quarter and year-end 2025 conference call. With me today are Peter Mark and Hallie. I want to wish everybody a happy New Year and remember, most importantly, health is wealth.
Joel Marcus: Thank you, Paula, and welcome everybody to our Q4 and year-end 2025 conference call. With me today are Peter, Mark, and Hallie, and I want to wish everybody a happy new year and remember, most importantly, health is wealth. I want to thank our family team for their exceptional efforts during 2025, and particularly a very busy fourth quarter. In 2025, we witnessed the fifth year of a life science bear market. Our 2025 timeline clearly evidences that no one could have predicted with the February 2025 nomination of HHS Secretary, the intense cascade of events from February 2025 on to the numerous key departures toward year-end at the FDA. And in fact, sadly, measles and polio may be back to some extent.
Speaker #3: I want to thank our family team for their exceptional efforts during 2025, and particularly a very busy fourth quarter. In 2025, we witnessed the fifth year of a life science bear market.
Speaker #3: Our 2025 timeline clearly evidences that no one could have predicted, with the February 2025 nomination of HHS Secretary, the intense cascade of events from February 2025 on to the numerous key departures toward year-end at the FDA.
Speaker #3: And, in fact, sadly, measles and polio may be back to some extent. We have been navigating a fast-changing life science industry landscape throughout 2025, which has been front and center for our team.
Joel Marcus: We have been navigating a fast-changing life science industry landscape throughout 2025, which has been front and center for our team. Our Investor Day path forward is our North Star for 2026. As the industry begins to adapt to the fast-changing landscape, 2026 is all about timely execution of our plan, heavily focused on dispositions and maintaining a strong and flexible balance sheet, driving occupancy with intense leasing focus on vacant space, rollover space, and redevelopment and development space, and meeting the marketplace. We also plan to continue to significantly reduce CapEx. And with that, let me turn it over to Mark to highlight Q4 in 2025 briefly, and then we'll turn it over to everybody for questions. Since we had Investor Day less than 60 days ago, and we just reported yesterday, we'll try to make our comments brief. So Mark?
We have been navigating a fast-changing life science industry landscape throughout 2025, which has been front and center for our team. Our Investor Day path forward is our North Star for 2026. As the industry begins to adapt to the fast-changing landscape, 2026 is all about timely execution of our plan, heavily focused on dispositions and maintaining a strong and flexible balance sheet, driving occupancy with intense leasing focus on vacant space, rollover space, and redevelopment and development space, and meeting the marketplace. We also plan to continue to significantly reduce CapEx. And with that, let me turn it over to Mark to highlight Q4 in 2025 briefly, and then we'll turn it over to everybody for questions. Since we had Investor Day less than 60 days ago, and we just reported yesterday, we'll try to make our comments brief. So Mark?
Speaker #3: Our Investor Day path forward is our North Star for 2026. As the industry begins to adapt to the fast-changing landscape, 2026 is all about timely execution of our plan—heavily focused on dispositions and maintaining a strong and flexible balance sheet, driving occupancy with intense leasing focus on vacant space, rollover space, and redevelopment and development space, and meeting the marketplace.
Speaker #3: We also plan to continue to significantly reduce CapEx. And with that, let me turn it over to Mark to highlight for Q1 2025 briefly.
Speaker #3: And then we'll turn it over to everybody for questions, since we had Investor Day less than 60 days ago and we just reported yesterday.
Speaker #3: We'll try to make our comments brief. So,
Speaker #3: Mark? Thank you, Joel.
Marc Binda: Thank you, Joel. This is Mark Binda, Chief Financial Officer. Good afternoon, everyone. First, a congratulations to the entire Alexandria team for that outstanding operational execution during the Q4, including the completion of $1.5 billion of dispositions spread across 26 transactions and 1.2 million sq ft of total leasing volume for the Q4, which was the highest quarter in the last year. We are focused on taking all the 7 steps to our path forward that we outlined at our recent Investor Day and are also included on page 4 of the press release. Our team continues to navigate a challenging macro industry and regulatory environment. Please refer to our earnings release for our EPS results.
Marc Binda: Thank you, Joel. This is Mark Binda, Chief Financial Officer. Good afternoon, everyone. First, a congratulations to the entire Alexandria team for that outstanding operational execution during the Q4, including the completion of $1.5 billion of dispositions spread across 26 transactions and 1.2 million sq ft of total leasing volume for the Q4, which was the highest quarter in the last year. We are focused on taking all the 7 steps to our path forward that we outlined at our recent Investor Day and are also included on page 4 of the press release. Our team continues to navigate a challenging macro industry and regulatory environment. Please refer to our earnings release for our EPS results.
Speaker #4: This is Marc Binda, Chief Financial Officer. Good afternoon, everyone. First, a congratulations to the entire Alexandria team for that outstanding operational execution during the fourth quarter.
Speaker #4: Including the completion of $1.5 billion of dispositions spread across 26 transactions and 1.2 million square feet of total leasing volume for the fourth quarter, which was the highest quarter in the last year.
Speaker #4: We are focused on taking all seven steps to our path forward that we outlined at our recent investor day and are also included on page four of the press release.
Speaker #4: Our team continues to navigate a challenging macro industry and regulatory release for our EPS results. FFO per environment. Please refer to our earnings; share diluted as adjusted was $2.16 for Q4 2025 and $9.01 for the year, which represents the midpoint of our prior guidance provided on our last quarterly call.
Marc Binda: FFO per share, diluted as adjusted, was $2.16 for Q4 2025, and $9.01 for the year, which represents the midpoint of our prior guidance provided on our last quarterly call. Leasing volume for the quarter of 1.2 million sq ft was up 14% over the prior 4-quarter average and up 10% over the prior 8-quarter average. An important takeaway for the quarter is that the leasing of vacant space completed during the fourth quarter of 393,000 rentable sq ft was almost double the quarterly average over the last 5 quarters. Free rent and rental rate changes on renewed and released space were under pressure this quarter, which reflects the market realities and included two large deals, one in Canada and one in our Sorrento Mesa submarket.
FFO per share, diluted as adjusted, was $2.16 for Q4 2025, and $9.01 for the year, which represents the midpoint of our prior guidance provided on our last quarterly call. Leasing volume for the quarter of 1.2 million sq ft was up 14% over the prior 4-quarter average and up 10% over the prior 8-quarter average. An important takeaway for the quarter is that the leasing of vacant space completed during the fourth quarter of 393,000 rentable sq ft was almost double the quarterly average over the last 5 quarters. Free rent and rental rate changes on renewed and released space were under pressure this quarter, which reflects the market realities and included two large deals, one in Canada and one in our Sorrento Mesa submarket.
Speaker #4: Leasing volume for the quarter of 1.2 million square feet was up 14% over the prior four-quarter average and up 10% over the prior eight-quarter average.
Speaker #4: An important takeaway for the quarter is that the leasing of vacant space completed during the fourth quarter, of 393,000 rentable square feet, was almost double the quarterly average over the last five quarters.
Speaker #4: Free rent and rental rate changes on renewed and released space were under pressure this quarter, which reflects the market realities. And included two large deals: one in Canada and one in our Sereno Mesa submarket.
Speaker #4: Lease terms for the quarter of just over seven and a half years were consistent with the prior three-year average of right around eight years.
Marc Binda: Lease terms for the quarter of just over 7.5 years were consistent with the prior three-year average of right around 8 years. Occupancy at the end of 2025 was 90.9%, which was up 30 basis points from the prior quarter and was up 10 basis points over the midpoint of our prior guidance. In addition, we've signed leases of almost 900,000 rentable sq ft, or about 2.5% of the portfolio, that are expected to commence in Q3 2026 on average, upon completion of construction, and will generate incremental annual rental revenue of $52 million.
Lease terms for the quarter of just over 7.5 years were consistent with the prior three-year average of right around 8 years. Occupancy at the end of 2025 was 90.9%, which was up 30 basis points from the prior quarter and was up 10 basis points over the midpoint of our prior guidance. In addition, we've signed leases of almost 900,000 rentable sq ft, or about 2.5% of the portfolio, that are expected to commence in Q3 2026 on average, upon completion of construction, and will generate incremental annual rental revenue of $52 million.
Speaker #4: Occupancy at the end of 2025 was 90.9%, which was up 30 basis points from the prior quarter and was up 10 basis points over the midpoint of our prior guidance.
Speaker #4: In addition, we've signed leases for almost 900,000 rentable square feet, or about 2.5% of the portfolio, that are expected to commence in the third quarter of 2026 on average upon completion of construction and will generate incremental annual rental revenue of $52 million.
Speaker #4: It's important to emphasize that our asset quality, location, best-in-class operations, sponsorship, and brand trust continue to be a major distinguishing factor for tenants, as our mega campuses—which represent about 78% of our annual rental revenue—outperform the total market occupancy in our largest three markets by 19% for occupancy.
Marc Binda: It's important to emphasize that our asset quality, location, best-in-class operations, sponsorship, and brand trust continue to be a major distinguishing factor for tenants, as our mega campuses, which represent about 78% of our annual rental revenue, outperform the total market occupancy in our largest three markets by 19% for occupancy. We reiterated our year-end 2026 occupancy range of 87.7% to 89.3% that was provided at our Investor Day this past December. A key takeaway on our outlook for 2026 is that we expect occupancy to dip in Q1 of 2026, and we expect occupancy growth in the second half of 2026.
It's important to emphasize that our asset quality, location, best-in-class operations, sponsorship, and brand trust continue to be a major distinguishing factor for tenants, as our mega campuses, which represent about 78% of our annual rental revenue, outperform the total market occupancy in our largest three markets by 19% for occupancy. We reiterated our year-end 2026 occupancy range of 87.7% to 89.3% that was provided at our Investor Day this past December. A key takeaway on our outlook for 2026 is that we expect occupancy to dip in Q1 of 2026, and we expect occupancy growth in the second half of 2026.
Speaker #4: We reiterated our year-end 2026 occupancy range of 87.7% to 89.3% that was provided at our Investor Day this past December. A key takeaway on our outlook for 2026 is that we expect occupancy to dip in the first quarter of 2026, and we expect occupancy growth in the second half of 2026.
Speaker #4: The projected decline in occupancy for the first quarter is primarily driven by the 1.2 million square feet of key lease expirations with expected downtime that we highlighted on page 22 of our supplemental package, consistent with our outlook from Investor Day.
Marc Binda: The projected decline in occupancy for Q1 is primarily driven by the 1.2 million sq ft of key lease expirations with expected downtime that we highlighted on page 22 of our supplemental package, consistent with our outlook from Investor Day. We're making good progress across these spaces with 13% that's either lease negotiating, and we've identified prospects or in early negotiations on another approximately 40% of these spaces. Same Property Net Operating Income was down 6% and 1.7% on a cash basis for Q4, and down 3.5% and up 0.9% on a cash basis for 2025. The results for the year were at or better than the guidance midpoint we provided on our last earnings call.
The projected decline in occupancy for Q1 is primarily driven by the 1.2 million sq ft of key lease expirations with expected downtime that we highlighted on page 22 of our supplemental package, consistent with our outlook from Investor Day. We're making good progress across these spaces with 13% that's either lease negotiating, and we've identified prospects or in early negotiations on another approximately 40% of these spaces. Same Property Net Operating Income was down 6% and 1.7% on a cash basis for Q4, and down 3.5% and up 0.9% on a cash basis for 2025. The results for the year were at or better than the guidance midpoint we provided on our last earnings call.
Speaker #4: We're making good progress across these spaces, with 13% that's either in lease negotiation or where we've identified prospects, and we're in early negotiations on another approximately 40% of these spaces.
Speaker #4: Same property net operating income was down 6% and 1.7% on a cash basis for the fourth quarter, and down 3.5% and up 0.9% on a cash basis for 2025.
Speaker #4: The results for the year were at or better than the guidance midpoint we provided on our last earnings call. The full-year 2025 results were primarily driven by a decline in occupancy, which occurred in early 2025, and the cash results had a boost from the burn-off of free rent in the first half of 2025.
Marc Binda: The full year 2025 results were primarily driven by a decline in occupancy, which occurred in early 2025, and the cash results had a boost from the burn-off of free rent in the first half of 2025. We reiterated our outlook for same-property performance for 2026, down 8.5% at the midpoint of our guidance range, which is expected to be driven by lower occupancy. Despite the anticipated decline in occupancy in Q1 2026, I previously mentioned, we continue to benefit from a very high-quality tenant base, with 53% of our annual rental revenue coming from investment-grade or publicly traded large cap tenants, long remaining lease terms of 7.5 years, average rent steps approaching 3% on 97% of our leases, and strong Adjusted EBITDA margins of 70% for the fourth quarter.
The full year 2025 results were primarily driven by a decline in occupancy, which occurred in early 2025, and the cash results had a boost from the burn-off of free rent in the first half of 2025. We reiterated our outlook for same-property performance for 2026, down 8.5% at the midpoint of our guidance range, which is expected to be driven by lower occupancy. Despite the anticipated decline in occupancy in Q1 2026, I previously mentioned, we continue to benefit from a very high-quality tenant base, with 53% of our annual rental revenue coming from investment-grade or publicly traded large cap tenants, long remaining lease terms of 7.5 years, average rent steps approaching 3% on 97% of our leases, and strong Adjusted EBITDA margins of 70% for the fourth quarter.
Speaker #4: We reiterated our outlook for same property performance for 2026 of down eight and a half percent at the midpoint of our guidance range, which is expected to be driven by lower occupancy.
Speaker #4: And despite the anticipated decline in occupancy in one Q2 '26 I previously mentioned, we continue to benefit from a very high-quality tenant base, with 53% of our annual rental revenue coming from investment-grade or publicly traded large-cap tenants, long remaining lease terms of seven and a half years, average rent steps approaching 3% on 97% of our leases, and strong adjusted EBITDA margins of 70% for the fourth quarter.
Speaker #4: We expect same property NOI performance to be weaker in the first half of 2026, driven by lower occupancy, with stronger performance in the back half of 2026.
Marc Binda: We expect same-property NOI performance to be weaker in the first half of 2026, driven by lower occupancy and stronger performance in the back half of 2026. Our guidance assumes the delivery of nearly 900,000 sq ft of signed leases commencing in Q3 2026 on average, as well as about a 2% to 3% assumed benefit from a range of assets that could be sold or designated as held for sale in the second half of 2026. We highlighted several considerations for Q1 2026 on page 5 of our supplemental package, including the following three items that we expect to impact same-property performance. First, the 1.2 million sq ft of key lease expirations with expected downtime, of which around 60% expire in mid-January on average.
We expect same-property NOI performance to be weaker in the first half of 2026, driven by lower occupancy and stronger performance in the back half of 2026. Our guidance assumes the delivery of nearly 900,000 sq ft of signed leases commencing in Q3 2026 on average, as well as about a 2% to 3% assumed benefit from a range of assets that could be sold or designated as held for sale in the second half of 2026. We highlighted several considerations for Q1 2026 on page 5 of our supplemental package, including the following three items that we expect to impact same-property performance. First, the 1.2 million sq ft of key lease expirations with expected downtime, of which around 60% expire in mid-January on average.
Speaker #4: Our guidance assumes the delivery of the nearly 900,000 square feet of signed leases commencing in the third quarter of 2026 on average, as well as about a 2% to 3% assumed benefit from a range of assets that could be sold or designated as held for sale in the second half of 2026.
Speaker #4: We highlighted several considerations for the first quarter of 2026 on page five of our supplemental package, including the following three items that we expect to impact same property performance.
Speaker #4: First, the 1.2 million square feet of key lease expirations with expected downtime, of which around 60% expired mid-January on average. Second, we terminated one lease for nearly 171,000 rentable square feet in South San Francisco in Q4 '25 that had annual rental revenue of $11.4 million.
Marc Binda: Second, we terminated one lease for nearly 171,000 rentable square feet in South San Francisco in Q4 2025, that had annual rental revenue of $11.4 million. We are announcing that we re-leased 100% of the space to a new tenant. But the new lease isn't expected to commence until beginning in the second half of 2026, so there will be some additional temporary vacancy in the first half of 2026. Third, our guidance assumes a reduction of rent of approximately $6 million per quarter, starting in the first quarter of 2026, related to potential tenant wind downs.
Second, we terminated one lease for nearly 171,000 rentable square feet in South San Francisco in Q4 2025, that had annual rental revenue of $11.4 million. We are announcing that we re-leased 100% of the space to a new tenant. But the new lease isn't expected to commence until beginning in the second half of 2026, so there will be some additional temporary vacancy in the first half of 2026. Third, our guidance assumes a reduction of rent of approximately $6 million per quarter, starting in the first quarter of 2026, related to potential tenant wind downs.
Speaker #4: And we are announcing that we released 100% of the space to a new tenant. But the new lease isn't expected to commence until the beginning of the second half of 2026.
Speaker #4: So, there will be some additional temporary vacancy in the first half of 2026. And third, our guidance assumes a reduction of rent of approximately $6 million per quarter, starting in the first quarter of 2026, related to potential tenant wind-downs.
Speaker #4: During 2025, we achieved tremendous general and administrative cost savings of $51.3 million, or 30% compared to the prior year. And our G&A costs as a percentage of NOI were about half the average for other S&P 500 REITs at 5.6% for 2025.
Marc Binda: During 2025, we achieved tremendous general and administrative cost savings of $51.3 million, or 30% compared to the prior year, and our G&A costs as a percentage of NOI was about half the average for other S&P 500 REITs, at 5.6% for 2025. As we've guided in the past, we expect those annual savings in 2026, relative to 2024, to be cut roughly in half, given the temporary nature of some of the 2025 savings. We reiterated our guidance for capitalized interest for 2026 of $250 million, down 24% from 2025.
During 2025, we achieved tremendous general and administrative cost savings of $51.3 million, or 30% compared to the prior year, and our G&A costs as a percentage of NOI was about half the average for other S&P 500 REITs, at 5.6% for 2025. As we've guided in the past, we expect those annual savings in 2026, relative to 2024, to be cut roughly in half, given the temporary nature of some of the 2025 savings. We reiterated our guidance for capitalized interest for 2026 of $250 million, down 24% from 2025.
Speaker #4: As we've guided in the past, we expect those annual savings in 2026 relative to 2024 to be cut roughly in half, given the temporary nature of some of the 2025 savings.
Speaker #4: We reiterated our guidance for capitalized interest for 2026 of $250 million, down 24% from 2025. With projects under construction and expected to generate significant NOI over the next few years, and other earlier-stage projects undergoing important entitlement, design, and site work necessary to be ready for future ground-up development, we are required to capitalize a portion of our gross interest cost.
Marc Binda: With projects under construction and expected to generate significant NOI over the next few years, and other earlier stage projects undergoing important entitlement, design, and site work necessary to be ready for future ground-up development, we are required to capitalize a portion of our growth interest cost. Part of our strategic path forward includes goals to reduce the size of our pipeline and construction spending needs, and to substantially complete our large-scale non-core disposition plan in 2026. During December 2025, we sold or designated for held for sale projects with more than $1 billion of basis that had previously been subject to interest capitalization.
With projects under construction and expected to generate significant NOI over the next few years, and other earlier stage projects undergoing important entitlement, design, and site work necessary to be ready for future ground-up development, we are required to capitalize a portion of our growth interest cost. Part of our strategic path forward includes goals to reduce the size of our pipeline and construction spending needs, and to substantially complete our large-scale non-core disposition plan in 2026. During December 2025, we sold or designated for held for sale projects with more than $1 billion of basis that had previously been subject to interest capitalization.
Speaker #4: To reduce the size of our part of our strategic path forward includes goals, pipeline and construction spending needs, and to substantially complete our large-scale non-core disposition plan in 2026.
Speaker #4: During December 2025, we sold or designated for held for sale projects with more than $1 billion of basis that had previously been subject to interest capitalization.
Speaker #4: As a result, we expected a decline in capitalized interest headed into the first quarter of under construction, where we are evaluating the business strategy and a number of future pipeline projects undergoing pre-construction activities, with milestones in May 2026 on average.
Marc Binda: As a result, we expect a decline in capitalized interest headed into Q1 2026, and we have a number of projects under construction where we are evaluating the business strategy, and a number of future pipeline projects undergoing pre-construction activities with milestones in May 2026 on average. To the extent that we decide in the future to either pause or sell any of those projects, capitalization, interest, and other costs would cease. While those ultimate decisions have not yet been made, we would like our disposition program for 2026 to include a significant component of land, which will also help us achieve one of our strategic objectives to significantly reduce the size of our land bank. During Q4, realized gains from our venture investments was $21 million, down from the approximate $32 million quarterly average for the preceding 3 quarters.
As a result, we expect a decline in capitalized interest headed into Q1 2026, and we have a number of projects under construction where we are evaluating the business strategy, and a number of future pipeline projects undergoing pre-construction activities with milestones in May 2026 on average. To the extent that we decide in the future to either pause or sell any of those projects, capitalization, interest, and other costs would cease. While those ultimate decisions have not yet been made, we would like our disposition program for 2026 to include a significant component of land, which will also help us achieve one of our strategic objectives to significantly reduce the size of our land bank. During Q4, realized gains from our venture investments was $21 million, down from the approximate $32 million quarterly average for the preceding 3 quarters.
Speaker #4: To the extent that we decide in the future to either pause or sell any of those projects, capitalization of interest and other costs would cease.
Speaker #4: While those ultimate decisions have not yet been made, we would like our disposition program for 2026 to include a significant component of land, which will also help us achieve one of our strategic objectives—to significantly reduce the size of our land bank.
Speaker #4: During the fourth quarter, realized gains from our venture investments were $21 million, down from the approximate $32 million quarterly average for the preceding three quarters.
Speaker #4: For 2026, we reiterated our guidance range for realized investment gains of $60 to $90 million, or approximately $19 million per quarter at the midpoint.
Marc Binda: For 2026, we reiterated our guidance range for realized investment gains of $60 to 90 million, or approximately $19 million per quarter at the midpoint. We continue to have one of the strongest balance sheets among all publicly traded US REITs. Our corporate credit ratings continue to rank in the top 15 percent of all publicly traded US REITs. We have tremendous liquidity of $5.3 billion, the longest average remaining debt maturity among all S&P 500 REITs at just over 12 years, and modest leverage of 5.7x for net debt to Adjusted EBITDA for the Q4 annualized. We reiterated our guidance range for Q4 2026 net debt to annualized Adjusted EBITDA of 5.6 to 6.2x.
For 2026, we reiterated our guidance range for realized investment gains of $60 to 90 million, or approximately $19 million per quarter at the midpoint. We continue to have one of the strongest balance sheets among all publicly traded US REITs. Our corporate credit ratings continue to rank in the top 15 percent of all publicly traded US REITs. We have tremendous liquidity of $5.3 billion, the longest average remaining debt maturity among all S&P 500 REITs at just over 12 years, and modest leverage of 5.7x for net debt to Adjusted EBITDA for the Q4 annualized. We reiterated our guidance range for Q4 2026 net debt to annualized Adjusted EBITDA of 5.6 to 6.2x.
Speaker #4: We continue to have one of the strongest balance sheets among all publicly traded U.S. REITs. Our corporate credit ratings continue to rank in the top 15% of all publicly traded U.S. REITs.
Speaker #4: We have tremendous liquidity of $5.3 billion, the longest average remaining debt maturity among all S&P 500 REITs at just over 12 years, and modest leverage of 5.7 times for net debt to adjusted EBITDA for the fourth quarter annualized.
Speaker #4: We reiterated our guidance range for Q4 2026 net debt to annualized adjusted EBITDA of 5.6 to 6.2 times. While we remain on track to achieve our leverage goals for year-end 2026, we expect leverage in the first quarter of 2026, measured on a quarterly annualized basis, to temporarily increase by one to one and a half times, driven by a reduction in quarterly adjusted EBITDA.
Marc Binda: While we remain on track to achieve our leverage goals for year-end 2026 leverage, we expect leverage in Q1 2026, measured on a quarterly annualized basis, to temporarily increase by 1 to 1.5 times higher, driven by a reduction in quarterly Adjusted EBITDA. Please refer to page 5 of our supplemental package for detailed assumptions specific to the first quarter. We expect Q1 2026 leverage to significantly improve over the balance of 2026 as we make progress on our dispositions and sales of partial interests. As we announced at our Investor Day, we sold one of our campuses in South San Francisco. We expect to sell two redevelopment projects in 2026, and we pivoted to office on one project in the Fenway. These changes reduced our future funding needs by more than $300 million.
While we remain on track to achieve our leverage goals for year-end 2026 leverage, we expect leverage in Q1 2026, measured on a quarterly annualized basis, to temporarily increase by 1 to 1.5 times higher, driven by a reduction in quarterly Adjusted EBITDA. Please refer to page 5 of our supplemental package for detailed assumptions specific to the first quarter. We expect Q1 2026 leverage to significantly improve over the balance of 2026 as we make progress on our dispositions and sales of partial interests. As we announced at our Investor Day, we sold one of our campuses in South San Francisco. We expect to sell two redevelopment projects in 2026, and we pivoted to office on one project in the Fenway. These changes reduced our future funding needs by more than $300 million.
Speaker #4: Please refer to page five of our supplemental package for detailed assumptions specific to the first quarter. We expect 1Q'26 leverage to significantly improve over the balance of 2026 as we make progress on our dispositions and sales of partial interest.
Speaker #4: As we announced at our Investor Day, we sold one of our campuses in South San Francisco redevelopment projects. We expect to sell two in 2026, and we pivoted to office on one project in the Fenway.
Speaker #4: And these changes reduced our future funding needs by more than $300 million. In addition, we are evaluating the go-forward business strategy for four additional projects that are currently under construction and have significant remaining capital needs.
Marc Binda: In addition, we are evaluating the go-forward business strategy for four additional projects that are currently under construction and have significant remaining capital needs. Again, a huge congratulations to the Alexandria team for the tremendous execution during Q4, with $1.5 billion of dispositions that completed across 26 different transactions, which allowed us to achieve our leverage target of 5.7 times for Q4. Over the course of 2025, we also made significant progress in reducing our investment in non-income producing assets as a percentage of gross assets from 20% at the end of 2024 to 17% at the end of 2025, and we expect that ratio to continue to decline by the end of 2026.
In addition, we are evaluating the go-forward business strategy for four additional projects that are currently under construction and have significant remaining capital needs. Again, a huge congratulations to the Alexandria team for the tremendous execution during Q4, with $1.5 billion of dispositions that completed across 26 different transactions, which allowed us to achieve our leverage target of 5.7 times for Q4. Over the course of 2025, we also made significant progress in reducing our investment in non-income producing assets as a percentage of gross assets from 20% at the end of 2024 to 17% at the end of 2025, and we expect that ratio to continue to decline by the end of 2026.
Speaker #4: Again, a huge congratulations to the Alexandria team for the tremendous execution during the fourth quarter, with $1.5 billion of dispositions completed across 26 different transactions, which allowed us to achieve our leverage target of 5.7 times.
Speaker #4: For the fourth quarter, over the course of 2025, we also made significant progress in reducing our investment in non-income-producing assets as a percentage of gross assets from 20% at the end of 2024 to 17% at the end of 2025.
Speaker #4: And we expect that ratio to continue to decline by the end of 2026. In connection with our disposition program, we recognized our share of impairments of $1.45 billion in the fourth quarter.
Marc Binda: In connection with our disposition program, we recognized our share of impairments of $1.45 billion in Q4. Five important items to highlight here. First, approximately 90% of that number was previously announced with our 8-K on 3 December, and the remaining 10% was primarily related to one land parcel located in Greater Boston, which was designated as held for sale later in December. Second, 50% to 60% of our share of the real estate impairments recognized in Q4 was related to land, which is notable given the oversupply in numerous submarkets. Third, the two largest impairments comprised 37% of the total, and included our future development project at 88 Bluxome Street in SoMa, located in San Francisco, and our Gateway Campus in South San Francisco, which was owned through a consolidated joint venture.
In connection with our disposition program, we recognized our share of impairments of $1.45 billion in Q4. Five important items to highlight here. First, approximately 90% of that number was previously announced with our 8-K on 3 December, and the remaining 10% was primarily related to one land parcel located in Greater Boston, which was designated as held for sale later in December. Second, 50% to 60% of our share of the real estate impairments recognized in Q4 was related to land, which is notable given the oversupply in numerous submarkets. Third, the two largest impairments comprised 37% of the total, and included our future development project at 88 Bluxome Street in SoMa, located in San Francisco, and our Gateway Campus in South San Francisco, which was owned through a consolidated joint venture.
Speaker #4: Five important items to highlight here. First, approximately 90% of that number was previously announced with our 8-K on December 3rd, and the remaining 10% was primarily related to one land parcel located in Greater Boston, which was designated as held for sale later in December.
Speaker #4: Second, 50% to 60% of our share of the real estate impairments recognized in the fourth quarter was related to land, which is notable given the oversupply in numerous submarkets.
Speaker #4: Third, the two largest impairments comprised 37% of the total and included our future development project at 88 Buxom Street in SoMa, located in San Francisco, and our Gateway campus in South San Francisco, which was owned through a consolidated joint venture.
Speaker #4: Fourth, we sold our interest in the Gateway campus in South San Francisco in December. Ultimately, we decided to exit this investment given the challenging supply and demand dynamics in South San Francisco, and the very significant capital required over time to redevelop the campus.
Marc Binda: Fourth, we sold our interest in the Gateway Campus in South San Francisco in December. Ultimately, we decided to exit this investment, given the challenging supply and demand dynamics in South San Francisco and the very significant capital required over time to redevelop the campus. And fifth, we expect to complete the sale of 88 Bluxome Street, our only asset located in SoMa, over the next few quarters. We originally acquired this site in 2017 with the intent to expand the Mission Bay cluster. However, Pinterest terminated their lease with us in 2020 and paid us an $89.5 million fee, and we ultimately decided the sale proceeds from this project would be better recycled into our Mega Campus platform and to address our current funding needs.
Fourth, we sold our interest in the Gateway Campus in South San Francisco in December. Ultimately, we decided to exit this investment, given the challenging supply and demand dynamics in South San Francisco and the very significant capital required over time to redevelop the campus. And fifth, we expect to complete the sale of 88 Bluxome Street, our only asset located in SoMa, over the next few quarters. We originally acquired this site in 2017 with the intent to expand the Mission Bay cluster. However, Pinterest terminated their lease with us in 2020 and paid us an $89.5 million fee, and we ultimately decided the sale proceeds from this project would be better recycled into our Mega Campus platform and to address our current funding needs.
Speaker #4: And fifth, we expect to complete the sale of 88 Buxom Street, our only asset located in SoMa, over the next few quarters. We originally acquired this site in 2017 with the intent to expand the Mission Bay cluster; however, Pinterest terminated their lease with us in 2020 and paid us an $89.5 million fee.
Speaker #4: And we ultimately decided the sale proceeds from this project would be better recycled into our mega campus platform and to address our current funding needs.
Speaker #4: We continue to focus on our disciplined strategy to recycle capital from dispositions and partial interest sales to support our funding needs, with a focus on the substantial completion of the large-scale non-core asset program in 2026.
Marc Binda: We continue to focus on our disciplined strategy to recycle capital from dispositions and partial interest sales to support our funding needs, with a focus on the substantial completion of the large-scale non-core asset program in 2026. We expect non-core assets and land to comprise around 65% to 75% of the $2.9 billion midpoint of our guidance for 2026 dispositions and sales of partial interests. We expect most of our dispositions and partial interest sales to close in the Q2, Q3, and Q4, with a weighted average closing date in the Q3. In early December, our board also authorized a reload and extension of the common stock repurchase program of up to $500 million, and our guidance does not assume any common stock repurchase in 2026, based upon current market conditions.
We continue to focus on our disciplined strategy to recycle capital from dispositions and partial interest sales to support our funding needs, with a focus on the substantial completion of the large-scale non-core asset program in 2026. We expect non-core assets and land to comprise around 65% to 75% of the $2.9 billion midpoint of our guidance for 2026 dispositions and sales of partial interests. We expect most of our dispositions and partial interest sales to close in the Q2, Q3, and Q4, with a weighted average closing date in the Q3. In early December, our board also authorized a reload and extension of the common stock repurchase program of up to $500 million, and our guidance does not assume any common stock repurchase in 2026, based upon current market conditions.
Speaker #4: And we expect non-core assets and land to comprise around 65% to 75% of the $2.9 billion midpoint of our guidance for 2026 dispositions and sales of partial interest.
Speaker #4: We expect most of our dispositions and partial interest sales to close in the second, third, and fourth quarters, with a weighted average closing date in the third quarter.
Speaker #4: In early December, our board also authorized a reload and extension of the common stock repurchase program of up to $500 million, and our guidance does not assume any common stock repurchase in 2026 based upon current market conditions.
Speaker #4: And lastly, we reaffirmed our guidance for 2026 FFO per share, diluted as adjusted, as well as the key components of guidance. Now, I'll turn it back to
Marc Binda: And lastly, we reaffirmed our guidance for 2026 FFO per share, diluted as adjusted, as well as the key components of guidance. Now I'll turn it back to Joel.
And lastly, we reaffirmed our guidance for 2026 FFO per share, diluted as adjusted, as well as the key components of guidance. Now I'll turn it back to Joel.
Speaker #4: Joel. So can
Joel Marcus: So, can we go to questions, operator, please?
Joel Marcus: So, can we go to questions, operator, please?
Speaker #2: we go to questions, operator,
Speaker #2: At this time, we'll begin.
Paula Schwartz: At this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your touchtone telephones. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two at any time. Once again, that is star and then one to join the question queue. Our first question today comes from Farrell Granath from Bank of America. Please go ahead with your question.
Operator: At this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your touchtone telephones. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two at any time. Once again, that is star and then one to join the question queue. Our first question today comes from Farrell Granath from Bank of America. Please go ahead with your question.
Speaker #3: The question and answer session. To ask a question, you may press star and then one on your touch-tone telephones. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Speaker #3: To withdraw your question, you may press star and two at any time. Once again, that is star and then one to join the question queue.
Speaker #3: Our first question today comes from Pharrell Granoth from Bank of America. Please go ahead with your question.
Speaker #4: Hello, this is Pharrell Granoth. Thank you for taking my question. I want to start it off—I know that we spoke about a month ago, but just given the sustained and slightly up quarter-over-quarter leasing that you've seen, and recent commentary around better VC funding that we've seen in the broader biotech market, has that changed your outlook at all on expectations into 2026, or are you at least receiving greater inbounds in terms of sentiment as people are potentially making more decisions?
Farrell Granath: Hello, this is Farrell Granath. Thank you for taking my question. I want to start it off. I know that we, we spoke about a month ago, but just given the sustained and slightly up quarter-over-quarter leasing that you've seen and recent commentary around better VC funding that we've seen in the broader biotech market, has that changed your outlook at all on expectations into 2026, or are you at least receiving greater inbounds, in terms of sentiment, as people are potentially making more decisions?
Farrell Granath: Hello, this is Farrell Granath. Thank you for taking my question. I want to start it off. I know that we, we spoke about a month ago, but just given the sustained and slightly up quarter-over-quarter leasing that you've seen and recent commentary around better VC funding that we've seen in the broader biotech market, has that changed your outlook at all on expectations into 2026, or are you at least receiving greater inbounds, in terms of sentiment, as people are potentially making more decisions?
Speaker #2: Okay. So, Pharrell, is your question aimed broadly at leasing, or is it aimed at venture-backed private? I'm not sure how broad or narrow your question is.
Joel Marcus: Okay, so Farrell, is your question aimed broadly at leasing, or is it aimed at, you know, venture-backed private? So I'm not sure how broad or narrow your question is.
Joel Marcus: Okay, so Farrell, is your question aimed broadly at leasing, or is it aimed at, you know, venture-backed private? So I'm not sure how broad or narrow your question is.
Speaker #4: I want to connect the headlines for broader VC funding and how that may be connecting to leasing and sentiment towards leasing.
Farrell Granath: I want to just connect the dots between what we've seen as positive headlines for broader VC funding and how that may be connecting to leasing and sentiment towards leasing.
Farrell Granath: I want to just connect the dots between what we've seen as positive headlines for broader VC funding and how that may be connecting to leasing and sentiment towards leasing.
Speaker #2: Okay. Because that's one segment of a very broad market. So Hallie, maybe take her through a little bit of venture and the private side, but then maybe—
Speaker #2: Okay. Because that's one segment of a very broad market. So, Hallie, maybe take her through a little bit of venture and the private side, but then maybe overall.
Joel Marcus: Okay, because that's one segment of a very broad market. So Hallie, maybe, maybe take her through a little bit of, you know, venture and the private side, but then maybe overall.
Joel Marcus: Okay, because that's one segment of a very broad market. So Hallie, maybe, maybe take her through a little bit of, you know, venture and the private side, but then maybe overall.
Speaker #5: Yeah. Thanks. And hi, Pharrell. This is Hallie. As Joel mentioned, when we think about VC dollars going into this industry, it's very much tied to a specific segment—our private biotechnology segment.
Hallie Kuhn: Yeah, thanks, and hi, Farrell. This is Hallie. As Joel mentioned, you know, when we think about VC dollars going into this industry, it's very much tied to a specific segment, our private biotechnology segment. And we have seen over the course of this year, sustained funding, numbers are similar, if not slightly higher, to the last couple of years. This is money that is going into new companies. On the other hand, venture funds have raised the lowest amount of dollars in the last decade, so this is LPs investing in these funds. And so we have this, you know, kind of interesting dynamic going on here, where it's certainly not back to a healthy, robust environment that we would fully like to see. And what we see that manifesting in is that VCs and these companies continue to be very conservative.
Hallie Kuhn: Yeah, thanks, and hi, Farrell. This is Hallie. As Joel mentioned, you know, when we think about VC dollars going into this industry, it's very much tied to a specific segment, our private biotechnology segment. And we have seen over the course of this year, sustained funding, numbers are similar, if not slightly higher, to the last couple of years. This is money that is going into new companies. On the other hand, venture funds have raised the lowest amount of dollars in the last decade, so this is LPs investing in these funds. And so we have this, you know, kind of interesting dynamic going on here, where it's certainly not back to a healthy, robust environment that we would fully like to see. And what we see that manifesting in is that VCs and these companies continue to be very conservative.
Speaker #5: And we have sustained funding; numbers are similar, if not slightly higher, to the last couple of years. This is money that is going into new companies.
Speaker #5: On the other hand, venture funds have raised the lowest amount of dollars in the last—these funds. And so we have this kind of interesting dynamic going on here where it's certainly not back to a healthy, robust environment that we would fully like to see.
Speaker #5: And what we see that manifesting in is that VCs and these companies continue to be very conservative. So we certainly are seeing demand; Peter can talk to tours increasing, there are some great companies out there.
Hallie Kuhn: We certainly are seeing demand. We, you know, have Peter can talk to, you know, tours increasing. There's some great companies out there. I do think by and large, decision-making is still taking longer, and companies are very cautious in terms of how they think about taking on new space or expanding. While we're cautiously optimistic, you know we, we are monitoring it closely because we don't necessarily think that we're, you know, back to a fully robust environment that we may have been in in the past. More broadly speaking on headlines, the other big one is the XBI has certainly performed incredibly well over the past year, outperformed broader indices. As mentioned in the Investor Day, the majority of those companies are commercial or near commercial companies, which don't typically drive lab space needs.
We certainly are seeing demand. We, you know, have Peter can talk to, you know, tours increasing. There's some great companies out there. I do think by and large, decision-making is still taking longer, and companies are very cautious in terms of how they think about taking on new space or expanding. While we're cautiously optimistic, you know we, we are monitoring it closely because we don't necessarily think that we're, you know, back to a fully robust environment that we may have been in in the past. More broadly speaking on headlines, the other big one is the XBI has certainly performed incredibly well over the past year, outperformed broader indices. As mentioned in the Investor Day, the majority of those companies are commercial or near commercial companies, which don't typically drive lab space needs.
Speaker #5: I do think, by and large, decision-making is still taking longer, and companies are very cautious in terms of how they think about taking on new space or expanding.
Speaker #5: So while we're cautiously optimistic, we are monitoring it closely because we don't necessarily think that we're back to a fully robust environment that we may have been in in the past.
Speaker #5: More broadly speaking on headlines, the other big one is the XBI has certainly performed incredibly well over the past year—outperformed broader indices, as mentioned in Investor Day.
Speaker #5: The majority of those companies are commercial or near-commercial companies, which don't typically drive lab space needs. So we're not seeing the immediate translation of that activity to leasing.
Hallie Kuhn: So we're not seeing the immediate translation of that activity to leasing. So, you know, altogether, while we do feel that, you know, we're moving in the right direction in terms of positive sentiment, we still have a lot more work to do. There's still a lot of volatility on the regulatory, and, you know, pricing side of things. And so, you know, we just continue to monitor, and for the demand that is out in the market, meet the market and really capture, you know, our outsized share of leasing.
So we're not seeing the immediate translation of that activity to leasing. So, you know, altogether, while we do feel that, you know, we're moving in the right direction in terms of positive sentiment, we still have a lot more work to do. There's still a lot of volatility on the regulatory, and, you know, pricing side of things. And so, you know, we just continue to monitor, and for the demand that is out in the market, meet the market and really capture, you know, our outsized share of leasing.
Speaker #5: So, altogether, while we do feel that we're moving in the right direction in terms of positive sentiment, we still have a lot more work to do.
Speaker #5: There's still a lot of volatility on the regulatory and pricing side of things, and so we just continue to monitor. And for the demand that is out in the market, meet the market and really capture our outsized share of leasing.
Speaker #2: Yeah. Let me put one footnote on that, Pharrell. If you look at the pie chart of our leasing for the year and the fourth quarter, you'll see in the fourth quarter a notably very small amount of leasing for public biotech. That's something that we're hoping turns around in 2026 because that's a critical mainstay of this industry.
Joel Marcus: Yeah. Let me, let me put one footnote on that, Carol. If you look at the pie chart of our leasing for the year and the fourth quarter, you'll see in the fourth quarter a notable, very small amount of leasing for public biotech. That's something that we're hoping turns around in 2026, because that's a critical mainstay of this industry, and much of that has to do with the lack of availability of secondary offerings, except on data, or, you know, the lack of a real robust open IPO market. Gabe?
Joel Marcus: Yeah. Let me, let me put one footnote on that, Carol. If you look at the pie chart of our leasing for the year and the fourth quarter, you'll see in the fourth quarter a notable, very small amount of leasing for public biotech. That's something that we're hoping turns around in 2026, because that's a critical mainstay of this industry, and much of that has to do with the lack of availability of secondary offerings, except on data, or, you know, the lack of a real robust open IPO market. Gabe?
Speaker #2: And much of that has to do with the lack of availability of secondary offerings, except on data, or the lack of a real, robust, open IPO market.
Speaker #2: Okay.
Speaker #4: Thank you for the color on that. And I also wanted to ask about your strategy of retaining the Fenway office property and looking to lease it as an office.
Farrell Granath: Thank you for the color on that. And I also wanted to ask about your strategy of retaining the Fenway office property, and looking to lease as an office. Was that a one-off transaction that you're looking to maintain, or is that something that you could see doing across other properties as well?
Farrell Granath: Thank you for the color on that. And I also wanted to ask about your strategy of retaining the Fenway office property, and looking to lease as an office. Was that a one-off transaction that you're looking to maintain, or is that something that you could see doing across other properties as well?
Speaker #4: Is that a one-off transaction that you're looking to maintain, or is that something that you could see doing across other properties as well?
Speaker #2: Well, yeah, I'll have Peter comment on that. But they have to remember that the Fenway is made up of multiple buildings. The one we're speaking about is, in fact, an office building.
Joel Marcus: Well, yeah, I'll have Peter comment on that. But you have to remember that, the Fenway is made up of multiple buildings. The one we're speaking about is, in fact, an office building, and in fact, has multiple long-term leases with some of the best institutions, in LMA and the Fenway. And so, you know, we sometimes you think about, would you create lab space or other things, out of vacant space, or stick with, what makes sense? And the demand there, we think is, you know, will, on a go-forward basis, be pretty good, office-wise. But Peter, do you want to comment on that, I think 401?
Joel Marcus: Well, yeah, I'll have Peter comment on that. But you have to remember that, the Fenway is made up of multiple buildings. The one we're speaking about is, in fact, an office building, and in fact, has multiple long-term leases with some of the best institutions, in LMA and the Fenway. And so, you know, we sometimes you think about, would you create lab space or other things, out of vacant space, or stick with, what makes sense? And the demand there, we think is, you know, will, on a go-forward basis, be pretty good, office-wise. But Peter, do you want to comment on that, I think 401?
Speaker #2: And in fact, has multiple long-term leases with some of the best institutions in LMA and the Fenway. And so sometimes you think about, would you create lab space or other things out of vacant space, or stick with what makes sense in the demand there?
Speaker #2: We think as we go forward, the basis will be pretty good office-wise. But Peter, do you want to comment on that? I think 401.
Speaker #3: Yeah, I mean, I agree exactly with what you just said. We have seen an increase in demand for office space. And given the availability we have elsewhere in the Fenway for lab, it made more sense to just go ahead and follow a business plan to lease it as office and not create any more lab space in the near term.
Peter Moglia: Yeah, I mean, I would agree exactly with what you just said. We have seen an increase in demand for office space, and given the availability we have elsewhere in the Fenway for lab, it made more sense to just go ahead and follow a business plan to lease it as office and not create any more lab space in the near future.
Peter Moglia: Yeah, I mean, I would agree exactly with what you just said. We have seen an increase in demand for office space, and given the availability we have elsewhere in the Fenway for lab, it made more sense to just go ahead and follow a business plan to lease it as office and not create any more lab space in the near future.
Speaker #3: future. Okay.
Farrell Granath: Okay, thank you very much.
Farrell Granath: Okay, thank you very much.
Speaker #4: Thank you very
Speaker #4: much. Yeah.
Joel Marcus: Yeah. So that's more building and submarket specific, as opposed to something much broader.
Joel Marcus: Yeah. So that's more building and submarket specific, as opposed to something much broader.
Speaker #2: So, that's more building, and sub-market specific as opposed to something much—
Speaker #2: broader. And
Paula Schwartz: Our next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead with your question.
Speaker #1: Our next question comes from Ronald Camden from Morgan Stanley. Please go ahead with your question.
Operator: Our next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead with your question.
Speaker #1: question. Hey, two quick ones.
Ronald Kamdem: Hey, two quick ones. Just on starting with the dispositions, you know, I saw some of the, the cap rates on the stabilized assets, and the supplemental, which was helpful. But as you're sort of thinking about that, that $2.9 billion, appreciate a lot of it is gonna be land, but any sort of commentary on, you know, cap rate trends, sort of the interest, price discovery, how that's been going relative to your expectations? Thanks.
Ronald Kamdem: Hey, two quick ones. Just on starting with the dispositions, you know, I saw some of the, the cap rates on the stabilized assets, and the supplemental, which was helpful. But as you're sort of thinking about that, that $2.9 billion, appreciate a lot of it is gonna be land, but any sort of commentary on, you know, cap rate trends, sort of the interest, price discovery, how that's been going relative to your expectations? Thanks.
Speaker #6: Just as I'm starting with the dispositions, I saw some of the cap rates on the stabilized assets and the supplemental, which was helpful. But as you're sort of thinking about that $2.9 billion, I appreciate a lot of it is going to be land, but any sort of commentary on cap rate trends, sort of the interest, price discovery, how that's been going relative to your expectations?
Speaker #6: Thanks.
Speaker #2: Yeah. Yeah. Peter?
Joel Marcus: Yeah. Yeah. Peter?
Joel Marcus: Yeah. Yeah. Peter?
Speaker #3: Yeah, I mean, there's still going to be a considerable amount of non-core assets that we're selling, and you've seen cap rates for those in the mid-6s all the way up to the mid-9s.
Peter Moglia: Yeah, I mean, there's still gonna be a considerable amount of non-core assets that we're selling, and, you know, you, you've seen cap rates for those in the, you know, mid-6s all the way up to the mid-9s. A lot has to do with what markets they're in, what the WALT is. You know, the lower the WALT, the higher the cap rate. We do plan on a couple of executions during the year that would involve more core assets. So you should be able to get more discovery on, you know, what our NAV could be for what we're holding on to. But I'm not gonna speculate on those cap rates yet.
Peter Moglia: Yeah, I mean, there's still gonna be a considerable amount of non-core assets that we're selling, and, you know, you, you've seen cap rates for those in the, you know, mid-6s all the way up to the mid-9s. A lot has to do with what markets they're in, what the WALT is. You know, the lower the WALT, the higher the cap rate. We do plan on a couple of executions during the year that would involve more core assets. So you should be able to get more discovery on, you know, what our NAV could be for what we're holding on to. But I'm not gonna speculate on those cap rates yet.
Speaker #3: A lot has to do with what markets they're in. How much leasing or what the wallet is—the lower the wallet, the higher the cap rate.
Speaker #3: We do plan on a couple of executions during the year that would involve more core assets. So you should be able to get more discovery on what our NAV could be for what we're holding on to.
Speaker #3: But I'm not going to speculate on those cap rates yet. We have talked in the past and mentioned at Investor Day that we do think our top-end properties should have a five handle, and one or two of those types of properties could be involved in this execution. We'll report on that when it happens.
Peter Moglia: We have talked in the past and mentioned at Investor Day that we do think our top-end properties should have a five handle. And, you know, one or two of those types of properties could be involved in this execution, and we'll report on that when it happens.
We have talked in the past and mentioned at Investor Day that we do think our top-end properties should have a five handle. And, you know, one or two of those types of properties could be involved in this execution, and we'll report on that when it happens.
Speaker #6: Great, just my follow-up—I had sort of a similar question on the leasing chart, but maybe I’m asking it a different way. Can you just comment on the leasing pipeline in terms of how it’s rebuilt after the quarter?
Ronald Kamdem: Great. Just my follow-up, I had sort of a similar question on the leasing chart, but maybe asking it a different way. Can you just comment on the leasing pipeline in terms of how it's rebuilt after the quarter, and if any sort of notable groups are in the pipeline or are not in the pipeline? That'd be helpful. Thanks.
Ronald Kamdem: Great. Just my follow-up, I had sort of a similar question on the leasing chart, but maybe asking it a different way. Can you just comment on the leasing pipeline in terms of how it's rebuilt after the quarter, and if any sort of notable groups are in the pipeline or are not in the pipeline? That'd be helpful. Thanks.
Speaker #6: And if any sort of notable groups are in the pipeline or are not in the pipeline, that'd be—
Speaker #6: helpful. Thanks. Well,
Joel Marcus: Well, yeah, that, that's kind of secret sauce. I'm not sure I want to say much, but Peter, do you have any overall comments?
Joel Marcus: Well, yeah, that, that's kind of secret sauce. I'm not sure I want to say much, but Peter, do you have any overall comments?
Speaker #2: Yeah, that's kind of the secret sauce. I don't have any overall comments.
Speaker #2: Sure, I want to say much, but Peter, do you have—well,
Peter Moglia: Well, yeah, look, in practically all of our markets, the smaller spaces under 50,000 sq ft are still what is moving. Most of the tours are in that range. There is, as Joel mentioned and Hallie mentioned, a bit of a dearth of biotech public biotech type of companies, which are usually the middle of the barbell, 50 to 150,000 sq ft. We're not seeing a lot of that, but we do have in certain markets some good activity in the 100,000 sq ft plus range, so we're pleased to see that. But you know, as Joel mentioned, we really need to see the public biotech sector contribute to the leasing pipeline in order for it to really start to turn around.
Peter Moglia: Well, yeah, look, in practically all of our markets, the smaller spaces under 50,000 sq ft are still what is moving. Most of the tours are in that range. There is, as Joel mentioned and Hallie mentioned, a bit of a dearth of biotech public biotech type of companies, which are usually the middle of the barbell, 50 to 150,000 sq ft. We're not seeing a lot of that, but we do have in certain markets some good activity in the 100,000 sq ft plus range, so we're pleased to see that. But you know, as Joel mentioned, we really need to see the public biotech sector contribute to the leasing pipeline in order for it to really start to turn around.
Speaker #3: Yeah, look, in practically all of our markets, the smaller spaces under 50,000 square feet are still what is moving. Most of the tours are in that range.
Speaker #3: There is, as Joel mentioned, and Hallie mentioned, there is a bit of a dearth of public biotech-type companies, which are usually the middle of the barbell—50,000 to 150,000 square feet.
Speaker #3: We're not seeing a lot of that, but we do have, in certain markets, some good activity in the 100,000-square-foot-plus range. So we're pleased to see that.
Speaker #3: But, as Joel mentioned, we really need to see the public biotech sector contribute to the leasing pipeline in order for it to really start to turn around.
Peter Moglia: But there is some good, you know, there is some good green shoots. We're very cautiously optimistic. But, you know, one example is that the Greater Boston region did see an 11% increase in tenants in the market, and that was really the first time we've seen an increase in a number of quarters. So we're happy to see that. And you know, we'll keep you informed as we go.
But there is some good, you know, there is some good green shoots. We're very cautiously optimistic. But, you know, one example is that the Greater Boston region did see an 11% increase in tenants in the market, and that was really the first time we've seen an increase in a number of quarters. So we're happy to see that. And you know, we'll keep you informed as we go.
Speaker #3: There is some good—there are some good green shoots. We're very cautiously optimistic, but one example is that the Greater Boston region did see an 11% increase in tenants in the market.
Speaker #3: And that was really the first time we've seen an increase in the number of quarters, so we're happy to see that. And we'll keep you informed as we go.
Speaker #6: Really helpful.
Operator: Really helpful. Thanks so much.
Ronald Kamdem: Really helpful. Thanks so much.
Speaker #6: Thanks so much. Thank
Speaker #2: You. Our next question comes from John Kim from...
Joel Marcus: Thank you.
Joel Marcus: Thank you.
Paula Schwartz: Our next question comes from John Kim from BMO Capital Markets. Please go ahead with your question.
Operator: Our next question comes from John Kim from BMO Capital Markets. Please go ahead with your question.
Speaker #1: BMO Capital Markets, please go ahead with your question.
Speaker #7: Thank you. I was wondering if you still feel comfortable with the previous guidance you gave for the fourth quarter '26 FFO of $1.40 to $1.60, as stated at your investor day.
John Kim: Thank you. I was wondering if you still felt comfortable with the previous guidance you gave for Q4 2026 FFO of $1.40 to $1.60, stated at your Investor Day, and whether or not you believe this would represent trough earnings. I think in that presentation, you mentioned that earnings will be flattening out in the second half of the year, but there are some dispositions that looks like that's falling into Q4.
John Kim: Thank you. I was wondering if you still felt comfortable with the previous guidance you gave for Q4 2026 FFO of $1.40 to $1.60, stated at your Investor Day, and whether or not you believe this would represent trough earnings. I think in that presentation, you mentioned that earnings will be flattening out in the second half of the year, but there are some dispositions that looks like that's falling into Q4.
Speaker #7: And whether or not you believe this would represent trough earnings? I think in that presentation, you mentioned that year. But there are some earnings that will be flattening out in the second half of the dispositions that look like that's falling into the—
Speaker #7: fourth quarter.
Speaker #2: Yep.
Joel Marcus: Yep. So, Mark?
Joel Marcus: Yep. So, Mark?
Speaker #2: So Mark?
Speaker #8: Yeah, hey, John. Yeah, we're still tracking within that range that we gave for the fourth quarter of '26, which I think was $1.40 to $1.60.
Marc Binda: Yeah. Hey, hey, John. Yeah, we're still tracking within that range that we gave for the fourth quarter of 2026, which I think was $1.40 to $1.60. And that does represent kind of the trough for the year, at least for 2026.
Marc Binda: Yeah. Hey, hey, John. Yeah, we're still tracking within that range that we gave for the fourth quarter of 2026, which I think was $1.40 to $1.60. And that does represent kind of the trough for the year, at least for 2026.
Speaker #8: And that does represent kind of the trough for the year, at least for—
Speaker #8: 2026. But as far as
John Kim: But as far as 2027, I know you don't want to give guidance for that, but,
John Kim: But as far as 2027, I know you don't want to give guidance for that, but,
Speaker #1: 27, I know you don't want to give guidance for that, but.
Speaker #2: Yeah, we haven't and can't—yeah, we haven't and can't give guidance at this point for '27. But that was the point of saying that's a good run rate to think.
Joel Marcus: Yeah, we-
Joel Marcus: Yeah, we-
John Kim: Any-
John Kim: Any-
Joel Marcus: Yeah, we haven't and can't give guidance at this point for 2027. But that was the point of saying that's a good run rate to think about as a base.
Joel Marcus: Yeah, we haven't and can't give guidance at this point for 2027. But that was the point of saying that's a good run rate to think about as a base.
Speaker #2: about. Okay.
John Kim: Okay. And then can you comment on the dispositions you've completed year to date and what you've planned for the year in terms of type of buyers you're talking to, as far as owner users, other REITs, developers looking to convert some of that space potentially, or other buyers?
John Kim: Okay. And then can you comment on the dispositions you've completed year to date and what you've planned for the year in terms of type of buyers you're talking to, as far as owner users, other REITs, developers looking to convert some of that space potentially, or other buyers?
Speaker #1: And then, can you comment on dispositions you've completed year to date, and what you've planned for the year in terms of type of buyers?
Speaker #1: You're talking to, as far as owner-users, other REITs, developers looking to convert some of that space potentially, or other—
Speaker #1: buyers? Yeah.
Joel Marcus: Yeah. So maybe, Mark, do you want to just talk about the percentages of dispositions through the year and then maybe ask Peter to come in on the, you know, buyer pool?
Joel Marcus: Yeah. So maybe, Mark, do you want to just talk about the percentages of dispositions through the year and then maybe ask Peter to come in on the, you know, buyer pool?
Speaker #2: So maybe, Mark, do you want to just talk about the percentages of dispositions through the year, and then maybe ask Peter to comment on the buyer pool?
Speaker #8: Yeah, sure. The mix of dispositions was pretty consistent with what we kind of set out at Investor Day—about 20% stabilized, 21% land, and then 59% non-stabilized.
Marc Binda: Yeah, sure. Yeah, the mix of dispositions was pretty consistent with what we kind of set out at Investor Day. So about 20% stabilized, you know, 21% land, and then 59% non-stabilized. So, I mean, the biggest, obviously, the biggest pot or portion was the non-stabilized properties, which is gonna attract a certain type of buyer. Maybe I'll hand it over to Peter to kind of go a little bit more deeply.
Marc Binda: Yeah, sure. Yeah, the mix of dispositions was pretty consistent with what we kind of set out at Investor Day. So about 20% stabilized, you know, 21% land, and then 59% non-stabilized. So, I mean, the biggest, obviously, the biggest pot or portion was the non-stabilized properties, which is gonna attract a certain type of buyer. Maybe I'll hand it over to Peter to kind of go a little bit more deeply.
Speaker #8: So, I mean, the biggest—obviously, the biggest pot or portion was the non-stabilized properties, which is going to attract a certain type of buyer. Maybe I'll hand it over to Peter to kind of get a—
Speaker #8: So, I mean, the biggest—obviously, the biggest pot or portion was the non-stabilized properties, which is going to attract a certain type of buyer. Maybe I'll hand it over to Peter to kind of get a little bit more clarity.
Speaker #2: Yeah, before you do, talk about timing, quarter by quarter, because I think that's—
Joel Marcus: Yeah, before you do, talk about timing quarter by quarter, because I think that's-
Joel Marcus: Yeah, before you do, talk about timing quarter by quarter, because I think that's-
Marc Binda: Oh, sure. Yeah, yeah. So as we look forward to 2026, we've got, you know, we've got, you know, just under $200 million of stuff that we're, you know, under contract or under PSA negotiations. We've got about $580 million of assets on balance sheet today that have been designated as held for sale. And the... So I think the first quarter closings will be, you know, pretty small. We expect the bulk of the closings to occur over Q2, Q3, Q4. And again, I think if you, on a weighted average basis, it's probably closer to third quarter as a kind of a blended average for the closings for 2026.
Speaker #8: Oh, oh, sure. Yeah, yeah. So as we look forward to 2026, we've got just under $200 million of stuff that we're under contract or under PSA negotiations.
Marc Binda: Oh, sure. Yeah, yeah. So as we look forward to 2026, we've got, you know, we've got, you know, just under $200 million of stuff that we're, you know, under contract or under PSA negotiations. We've got about $580 million of assets on balance sheet today that have been designated as held for sale. And the... So I think the first quarter closings will be, you know, pretty small. We expect the bulk of the closings to occur over Q2, Q3, Q4. And again, I think if you, on a weighted average basis, it's probably closer to third quarter as a kind of a blended average for the closings for 2026.
Speaker #8: We've got about $580 million of assets on the balance sheet today that have been designated as held for sale. And so, I think that the first quarter closings will be pretty small.
Speaker #8: We expect the bulk of the closings to occur over 2Q, 3Q, 4Q. And again, I think if you kind of weighted average basis, it's probably closer to third quarter as a kind of a blended average for the closings for
Speaker #8: 2026. Yep.
Joel Marcus: Yep, thanks. Yeah, Peter buyer.
Joel Marcus: Yep, thanks. Yeah, Peter buyer.
Speaker #2: Thanks. Yeah. Peter Buyer.
Speaker #3: Yeah, so on our guidance page, we did indicate that we've got about $180 million under contract or in negotiations that we expect to close in the near term.
Peter Moglia: Yeah. Hey, so on our guidance page, we did indicate that we've got about $180 million under contract or in negotiations that we expect to close in the near term. That's essentially three assets. One is a portfolio that is being purchased by what we would classify as an investment fund. Investment fund buyers have been our fourth largest over the last couple of years, taking down about 12% to 15% of our inventory. That's the-- an investment fund is someone who's buying it to hold long term and is usually private capital. The other two assets are residential conversions.
Peter Moglia: Yeah. Hey, so on our guidance page, we did indicate that we've got about $180 million under contract or in negotiations that we expect to close in the near term. That's essentially three assets. One is a portfolio that is being purchased by what we would classify as an investment fund. Investment fund buyers have been our fourth largest over the last couple of years, taking down about 12% to 15% of our inventory. That's the-- an investment fund is someone who's buying it to hold long term and is usually private capital. The other two assets are residential conversions.
Speaker #3: That's essentially three assets. One is a portfolio that is being purchased by what we would classify as an investment fund. Investment fund buyers have been our fourth largest over the last couple of years, taking down about 12% to 15% of our inventory.
Speaker #3: An investment fund is someone who's buying it to hold long-term and is usually private capital. The other two assets are residential conversions—they're land or assets that are at the end of their useful life that will be demolished and turned into a residential type of use.
Peter Moglia: They're land or assets that are at the end of their useful life that will be demolished and turned into a residential type of use, and that was another one of our largest segments of buyers last year. We anticipate that will continue this year. More than 55% of our available land is either zoned or could have an allowable residential use and is in urban environments that could use the housing. So we expect that out of the $2.9 billion midpoint this year, though, as Marc said, there'll be a considerable amount of land, 25% to 35%, and we do expect the majority of that to go to residential developers. But,
They're land or assets that are at the end of their useful life that will be demolished and turned into a residential type of use, and that was another one of our largest segments of buyers last year. We anticipate that will continue this year. More than 55% of our available land is either zoned or could have an allowable residential use and is in urban environments that could use the housing. So we expect that out of the $2.9 billion midpoint this year, though, as Marc said, there'll be a considerable amount of land, 25% to 35%, and we do expect the majority of that to go to residential developers. But,
Speaker #3: And that was another one of our largest segments of buyers last year, and we anticipate that will continue this year. More than 55% of our available land is either zoned or could have an allowable residential use.
Speaker #3: And is in urban environments that could use the housing. So we expect that out of the $2.9 billion midpoint this year, though, as Mark said, there'll be a considerable amount of land—25 to 35 percent.
Speaker #3: And we do expect the majority of that to go to residential developers. But there has not been a problem getting assets sold. There's a number of buyers.
Joel Marcus: ... There has not been a problem getting assets sold. There's a number of buyers. You know, the biggest issue is just, you know, the yields that these buyers are looking for, and that has created, you know, some impairments. But the good news is, when we need to get things sold, we do, and we fully are confident we'll do the same thing this year, even though it's a larger amount that we have to execute on.
Joel Marcus: ... There has not been a problem getting assets sold. There's a number of buyers. You know, the biggest issue is just, you know, the yields that these buyers are looking for, and that has created, you know, some impairments. But the good news is, when we need to get things sold, we do, and we fully are confident we'll do the same thing this year, even though it's a larger amount that we have to execute on.
Speaker #3: The biggest issue is just the yields that these buyers are looking for, and that has created some impairments. But the good news is, when we need to get things sold, we do.
Speaker #3: And we are fully confident we'll do the same thing this year, even though it's a larger amount that we have to execute on.
Speaker #1: Thank you. Our next question comes from Vikram Malhotra from Mizuho. Please go ahead with your question.
Hallie Kuhn: Thank you.
John Kim: Thank you.
Paula Schwartz: And our next question comes from Vikram Malhotra from Mizuho. Please go ahead with your question.
Paula Schwartz: And our next question comes from Vikram Malhotra from Mizuho. Please go ahead with your question.
Vikram Malhotra: Morning. I just wanted to clarify kind of the earnings, I guess, trajectory through the year. You know, with the, you know, the vacancies or the move outs you mentioned, you know, some of the fees, et cetera, one-time items in Q4 2025. I'm just wondering, sort of the cadence that you showed at Investor Day trending down to that $140 to 160, is that cadence still intact?
Speaker #9: Good morning. I just wanted to clarify kind of the earnings, I guess, trajectory through the year. With the vacancies or the move-outs you mentioned, some of the fees, etc.—one-time items in Q4 '25—I'm just wondering about the cadence that you showed at Investor Day, trending down to that $140 to $160.
Vikram Malhotra: Morning. I just wanted to clarify kind of the earnings, I guess, trajectory through the year. You know, with the, you know, the vacancies or the move outs you mentioned, you know, some of the fees, et cetera, one-time items in Q4 2025. I'm just wondering, sort of the cadence that you showed at Investor Day trending down to that $140 to 160, is that cadence still intact?
Speaker #9: Is that cadence still
Speaker #9: intact? Yeah.
Marc Binda: Yeah. Hi, Vikram. Yeah, it - we still expect Q4 to kind of be the low point in earnings for the year, for 2026. We did, you know, I think there was some question around, you know, where Q1 goes and how steep of a decline that is, coming off, you know, Q4. And so we tried to give a lot of color about the components that go in there. But the general trajectory that, you know, Q4, things will even out in the back half of the year, and Q4 being in that $40 to $60 range still holds.
Marc Binda: Yeah. Hi, Vikram. Yeah, it - we still expect Q4 to kind of be the low point in earnings for the year, for 2026. We did, you know, I think there was some question around, you know, where Q1 goes and how steep of a decline that is, coming off, you know, Q4. And so we tried to give a lot of color about the components that go in there. But the general trajectory that, you know, Q4, things will even out in the back half of the year, and Q4 being in that $40 to $60 range still holds.
Speaker #8: Hi, Vikram. Yeah, we still expect the fourth quarter to kind of be the low point in earnings for the year, for 2026. We did—I think there was some question around where the first quarter goes and how steep of a decline that is.
Speaker #8: Coming off the fourth quarter, we tried to give a lot of color about the components that go in there, but the general trajectory is that in the fourth quarter, things will even out in the back half of the year.
Speaker #8: And the fourth quarter being in that $1.40 to $1.60 range still holds.
Speaker #9: Okay, great. And then I guess maybe Joel or Hallie, from a broader perspective— I understand it takes a while for all the changes on the macro front to translate to leasing.
Vikram Malhotra: Okay, great. And then I guess maybe Joel or Hallie, if, you know, from a broader perspective, I understand, like, it takes a while for all, for all the changes on the macro front to translate to leasing. But I don't know if you've had any, like, recent conversations with FDA officials or any larger VCs in terms of the shifts that you may be hearing as a precursor to new company formation, and hopefully then leasing down the pike. So, maybe just kind of update us any thoughts around the FDA and, like, early stage, series A, B type funding. Thanks.
Vikram Malhotra: Okay, great. And then I guess maybe Joel or Hallie, if, you know, from a broader perspective, I understand, like, it takes a while for all, for all the changes on the macro front to translate to leasing. But I don't know if you've had any, like, recent conversations with FDA officials or any larger VCs in terms of the shifts that you may be hearing as a precursor to new company formation, and hopefully then leasing down the pike. So, maybe just kind of update us any thoughts around the FDA and, like, early stage, series A, B type funding. Thanks.
Speaker #9: But I don't know if you've had any recent conversations with FDA officials or any larger VCs in terms of the shifts that you may be hearing as a precursor to new company formation, and hopefully then leasing down the pike.
Speaker #9: So maybe you can update us—any thoughts around the FDA and early-stage Series A, B-type funding?
Speaker #9: Thanks. Yeah.
Joel Marcus: Yeah. So maybe let me make a couple of comments and ask Hallie to fill in the blanks. I think it's fair to say that the FDA commissioner has been active. He's out a lot. He's certainly trying to head in the right direction and do the right things, given speed of approvals, looking at trying to get products into the clinic much quicker than otherwise. Remember, we talked about it at Investor Day. The things that the market really wants to see is a substantial compression of the 10 to 12 year billion dollar plus cycle of bringing up, you know, a compound from discovery to the market, and he's, I think, very much focused on that.
Joel Marcus: Yeah. So maybe let me make a couple of comments and ask Hallie to fill in the blanks. I think it's fair to say that the FDA commissioner has been active. He's out a lot. He's certainly trying to head in the right direction and do the right things, given speed of approvals, looking at trying to get products into the clinic much quicker than otherwise. Remember, we talked about it at Investor Day. The things that the market really wants to see is a substantial compression of the 10 to 12 year billion dollar plus cycle of bringing up, you know, a compound from discovery to the market, and he's, I think, very much focused on that.
Speaker #2: So maybe let me make a couple of comments, and ask Kelly to fill in the blanks. So, I think it's fair to say that the FDA commissioner has been active; he's out a lot.
Speaker #2: He's certainly trying to head in the right direction and do the right things, given the speed of approvals, looking at trying to get products into the clinic much quicker than otherwise.
Speaker #2: Remember, we talked about it. Investor Day—the things that the market really wants to see is a substantial compression of the 10- to 12-year, billion-dollar-plus cycle of bringing up a compound from discovery to the market.
Speaker #2: And he's, I think, very much focused on that now. Have defections, DOJ firings, resignations, and all that stuff at the FDA—how much does that practically impede the ability of the agency to do what they want to do, which I think they've got their mindset in the right place?
Joel Marcus: Now, have defections, DOGE firings, you know, resignations and all that stuff at the FDA. How much does that practically impede the ability of the agency to do what they wanna do, which I think they've got their mindset in the right place? I think is a big question for this year. You know, last year they did NDA approvals at 46, which was, you know, a very, very respectable number, but a lot of that was in the pipeline. This year is gonna be a much more telling result. But Callie, other thoughts, comments?
Now, have defections, DOGE firings, you know, resignations and all that stuff at the FDA. How much does that practically impede the ability of the agency to do what they wanna do, which I think they've got their mindset in the right place? I think is a big question for this year. You know, last year they did NDA approvals at 46, which was, you know, a very, very respectable number, but a lot of that was in the pipeline. This year is gonna be a much more telling result. But Callie, other thoughts, comments?
Speaker #2: I think it's a big question for this year. Last year, they did end up with approvals at 46, which was a very, very respectable number, but a lot of that was in the pipeline.
Speaker #2: This year is going to be a much more telling result. But Hallie, other thoughts, comments?
Speaker #4: Sure. So maybe, Vikram, to take a step back on this question as it continues to come up. On page 21 of the SUP, we break out our leasing volume by business type, both for the fourth quarter and for the full year '25.
Hallie Kuhn: Sure. So maybe, Vikram, to take a step back, on this question as it continues to come up. On page 21 of the sup, we break out our leasing volume by business type, both for the fourth quarter and for the full year, 2025. And if you look at private biotechnology, you know, in the last quarter, it made up about a fifth of all leasing volume. So to be clear, we still continue to see demand from this segment. You know, whether that's going to pick up and how long that takes, you know, I wish we could give you a specific timeframe. These things take a while, right?
Hallie Kuhn: Sure. So maybe, Vikram, to take a step back, on this question as it continues to come up. On page 21 of the sup, we break out our leasing volume by business type, both for the fourth quarter and for the full year, 2025. And if you look at private biotechnology, you know, in the last quarter, it made up about a fifth of all leasing volume. So to be clear, we still continue to see demand from this segment. You know, whether that's going to pick up and how long that takes, you know, I wish we could give you a specific timeframe. These things take a while, right?
Speaker #4: And if you look at private biotechnology, in the last quarter, it made up about a fifth of all leasing volume. So, to be clear, we still continue to see demand from this segment.
Speaker #4: Whether that's going to pick up—and how long that takes—I wish we could give you a specific timeframe. These things take a while, right?
Speaker #4: And I think, generally, we need a lot more confidence in terms of the broader landscape being able to return capital to LPs. The IPO window opening up is a really important source of capital for private companies.
Hallie Kuhn: I think generally, we need a lot more confidence in terms of the broader landscape, being able to return capital to LPs, the IPO window opening up, which is a really important source of capital, for private companies. But where we've really seen the drop-off, as Joel mentioned, is in that public biotechnology cohort. So in terms of overall impact to, you know, our leasing going forward, we think that segment in particular is critical. And we are seeing, you know, some demand out there from some really good companies. They still are tending to be more, more capital conservative, more commercial, near commercial. And without that next bolus of new companies that are IPO-ing, that tend to be earlier stage, they still seem to be on the back burner right now.
I think generally, we need a lot more confidence in terms of the broader landscape, being able to return capital to LPs, the IPO window opening up, which is a really important source of capital, for private companies. But where we've really seen the drop-off, as Joel mentioned, is in that public biotechnology cohort. So in terms of overall impact to, you know, our leasing going forward, we think that segment in particular is critical. And we are seeing, you know, some demand out there from some really good companies. They still are tending to be more, more capital conservative, more commercial, near commercial. And without that next bolus of new companies that are IPO-ing, that tend to be earlier stage, they still seem to be on the back burner right now.
Speaker #4: But where we've really seen the drop-off, as Joel mentioned, is in that public biotechnology cohort. So in terms of overall impact to our leasing going forward, we think that segment in particular is critical.
Speaker #4: And we are seeing some demand out there from some really good companies. They still are tending to be more capital conservative, more commercial, near commercial, and without that next bolus of new companies that are IPO-ing that tend to be earlier stage, they still seem to be on the back burner right now.
Hallie Kuhn: At JP Morgan, you know, there was a lot of, I would say, positive sentiment around the potential for some really strong companies to go public and raise capital. We haven't seen that yet, but that is really top of mind as we think about the next, you know, I would say 12 to 18 months.
At JP Morgan, you know, there was a lot of, I would say, positive sentiment around the potential for some really strong companies to go public and raise capital. We haven't seen that yet, but that is really top of mind as we think about the next, you know, I would say 12 to 18 months.
Speaker #4: At JP Morgan, there was a lot of, I would say, positive sentiment around the potential for some really strong companies to go public and raise capital.
Speaker #4: We haven't seen that yet. But that is really top of mind as we think about the next—I would say—12 to 18 months.
Speaker #4: months. Okay.
Vikram Malhotra: Okay, great. And then can I just clarify, like, the new leasing was really good this quarter, and hopefully the pipeline supports sort of that continuation. But where are we today in terms of, like, incentive packages, TIs, free rents to achieve that leasing? And I ask just because there have been a couple of leases, you know, in, say, South San Francisco, where we've heard, like, very big TI numbers. So I'm just wondering if you can give us a bit more granular color on the TI and free rents. Thanks.
Vikram Malhotra: Okay, great. And then can I just clarify, like, the new leasing was really good this quarter, and hopefully the pipeline supports sort of that continuation. But where are we today in terms of, like, incentive packages, TIs, free rents to achieve that leasing? And I ask just because there have been a couple of leases, you know, in, say, South San Francisco, where we've heard, like, very big TI numbers. So I'm just wondering if you can give us a bit more granular color on the TI and free rents. Thanks.
Speaker #9: Great. And then can I just clarify—the new leasing was really good this quarter? And hopefully, the pipeline supports sort of that continuation. But where are we today in terms of incentive packages, TIs, free rents, to achieve that leasing?
Speaker #9: And I asked just because there have been a couple of leases in South San Francisco where we've heard very big TI numbers. So I'm just wondering if you can give us a bit more granular color on the—
Speaker #9: TI and free rents. Thanks. Yeah.
Joel Marcus: Yeah. Peter?
Joel Marcus: Yeah. Peter?
Speaker #2: Peter? Yeah.
Peter Moglia: Yeah, I mean, tenant improvements haven't changed. They're still, you know, elevated for anything that's from shell. It's got to really be. It's either you get an allowance to build the whole thing out, or you have to spec build it. So on renewals and re-leasing, the TIs are also, you know, stable. The fact that the space is already built out, and the fact that people tend not to change much in the generic labs that we build, it's. That's an advantage to us. So really, where we continue to see weakening in fundamentals, is in the free rent category, and it's continued to elevate. We did have a couple of leases this quarter that really had significant amount of free rent in order to win the deal.
Peter Moglia: Yeah, I mean, tenant improvements haven't changed. They're still, you know, elevated for anything that's from shell. It's got to really be. It's either you get an allowance to build the whole thing out, or you have to spec build it. So on renewals and re-leasing, the TIs are also, you know, stable. The fact that the space is already built out, and the fact that people tend not to change much in the generic labs that we build, it's. That's an advantage to us. So really, where we continue to see weakening in fundamentals, is in the free rent category, and it's continued to elevate. We did have a couple of leases this quarter that really had significant amount of free rent in order to win the deal.
Speaker #3: I mean, tenant improvements haven't changed. They're still elevated for anything that's from shell. It's got to really be—it's either you get an allowance to build the whole thing out, or you have to spec build it.
Speaker #3: So, on renewals and releasing, the TIs are also stable. The fact that the space has already been built out, and the fact that people tend not to change much in the generic labs that we build—that's an advantage to us.
Speaker #3: So, really, where we continue to see weakening in fundamentals is in the free rent category. And it's continued to elevate. We have a couple of leases this quarter that really had a significant amount of free rent in order to win the deal.
Peter Moglia: And, you know, Joel mentioned in the very-- in his comments that, you know, we're meeting the market. It's in our best interest to meet the market, but keep rental rates as stable as possible, because as free rent burns off, then you get, you get the income that you can build upon. And hopefully, the next generation of leasing, you, you can increase it from there. If, you know, when you start taking rents down, then you're starting to destruct value. So, Alexandria and others that are competing in the market, free rent is, is the tool that we're using. Tenants really appreciate it because, obviously, it- it's good for their cash flow.
Speaker #3: And Joel mentioned in the comments that we're meeting the market. It's in our best interest to meet the market but keep rental rates as stable as possible.
And, you know, Joel mentioned in the very-- in his comments that, you know, we're meeting the market. It's in our best interest to meet the market, but keep rental rates as stable as possible, because as free rent burns off, then you get, you get the income that you can build upon. And hopefully, the next generation of leasing, you, you can increase it from there. If, you know, when you start taking rents down, then you're starting to destruct value. So, Alexandria and others that are competing in the market, free rent is, is the tool that we're using. Tenants really appreciate it because, obviously, it- it's good for their cash flow.
Speaker #3: Because as free rent burns off, then you get the income that you can build upon, and hopefully the next generation of leasing, you can increase it from there.
Speaker #3: When you start taking rents down, then you're starting to destruct value. So Alexandria and others that are competing in the market, free rent is the tool that we're using.
Speaker #3: Tenants really appreciate it because, obviously, it's good for their cash flow. And as long as we continue to have availability in the mid-20s to low-30s in the major markets, free rent is going to be the tool that people need to use in order to execute on deals.
Peter Moglia: And as long as we continue to have availability in the mid-20s to low 30s in the major markets, you know, free rent is gonna be the tool that people need to use in order to execute on deals. But outside of that, we are pretty happy to see that rental rates are stable, in certain cases, growing, and, you know, the net effectives to improve, but, that'll take a decrease in supply over time in order to start seeing that.
Peter Moglia: And as long as we continue to have availability in the mid-20s to low 30s in the major markets, you know, free rent is gonna be the tool that people need to use in order to execute on deals. But outside of that, we are pretty happy to see that rental rates are stable, in certain cases, growing, and, you know, the net effectives to improve, but, that'll take a decrease in supply over time in order to start seeing that.
Speaker #3: But outside of that, we are pretty happy to see that rental rates are stable, in certain cases growing. And we just have to get the net effective to improve.
Speaker #3: But that'll take a decrease in supply over time in order to start seeing that.
Speaker #1: Our next question comes from Jim Cammert from Evercore. Please go ahead with your question.
Paula Schwartz: Our next question comes from Jim Kammert from Evercore. Please go ahead with your question.
Paula Schwartz: Our next question comes from Jim Kammert from Evercore. Please go ahead with your question.
Speaker #10: Thank you very
Jim Kammert: Thank you very much. Just trying to triangulate on Peter and Hallie's comments regarding the public biotech. Is there any concern... I mean, you said they're both, you know, critical to sort of kickstarting demand again, but is it possible that some of these public biotechs, even if they raise more capital, already have sufficient space, or do you really think there's, you know, expansion space need there?
Jim Kammert: Thank you very much. Just trying to triangulate on Peter and Hallie's comments regarding the public biotech. Is there any concern... I mean, you said they're both, you know, critical to sort of kickstarting demand again, but is it possible that some of these public biotechs, even if they raise more capital, already have sufficient space, or do you really think there's, you know, expansion space need there?
Speaker #10: Much. Just trying to triangulate on the question. Peter and Hallie’s comments—regarding the public biotech, is there any concern? I mean, you said they're both critical to sort of kickstarting demand again.
Speaker #10: But is it possible that some of these public biotechs, even if they raise more capital, already have sufficient space? Or do you really think there's expansion?
Speaker #10: space need there?
Joel Marcus: Well, yeah, let me maybe give you an overarching comment, Jim. I think number 1, historically, public biotech has been the mainstay of, I mean, the broader industry is obviously, you know, institutional pharma, product tools, services, all that. But, you know, when you get to biotech itself, the public market has been the mainstay of this industry, going back 50 years this year to Genentech, and one would assume that it would continue to be the mainstay. And it's made up of really 3 things. 1, you get a good start at the venture level. You can get public through an IPO window that's reasonable, and you can continue to finance the company, even if you don't have, you know, immediately actionable data.
Joel Marcus: Well, yeah, let me maybe give you an overarching comment, Jim. I think number 1, historically, public biotech has been the mainstay of, I mean, the broader industry is obviously, you know, institutional pharma, product tools, services, all that. But, you know, when you get to biotech itself, the public market has been the mainstay of this industry, going back 50 years this year to Genentech, and one would assume that it would continue to be the mainstay. And it's made up of really 3 things. 1, you get a good start at the venture level. You can get public through an IPO window that's reasonable, and you can continue to finance the company, even if you don't have, you know, immediately actionable data.
Speaker #3: you an overarching Well, yeah.
Speaker #3: Comment, Jim. I think, number one, historically, public biotech has been the mainstay of—I mean, the broader industry has, obviously, institutional pharma, product tools, services, all that.
Speaker #3: But when you get to biotech itself, the public market has been the mainstay of this industry going back 50 years, this year to Genentech.
Speaker #3: And one would assume that it would continue to be the mainstay. And it's made up of really three things. One, you get a good start at the venture level.
Speaker #3: You can get public through an IPO window that's reasonable. And you can continue to finance the company even if you don't have immediately actionable data.
Speaker #3: That's how it's worked over the last several decades, and that's what we're hoping to see a return to. Now, in any given case, it's hard to say.
Joel Marcus: That's how it's worked over the last, you know, several decades, and that's what we're hoping to see a return to. Now, in any given case, it's hard to say. Some will need more space, some will need less space, some will be able to keep the same. But I don't know, Hallie, thoughts there?
That's how it's worked over the last, you know, several decades, and that's what we're hoping to see a return to. Now, in any given case, it's hard to say. Some will need more space, some will need less space, some will be able to keep the same. But I don't know, Hallie, thoughts there?
Speaker #3: Some will need more space. Some will need less space. Some will be able to keep the same. But I don't know. Hallie, thoughts there?
Speaker #4: Yeah, Jim, I think that is, in a way, what we have been seeing. If you look at the XBI this past year and follow-on financings, which on an absolute numbers basis have been pretty strong, most of those have been for particularly commercial-stage companies.
Hallie Kuhn: Yeah, Jim, I think that is, in a way, what we have been seeing. If you look at the XBI this past year and follow-on financings, which on an absolute numbers basis have been pretty strong, most of those have been for particularly commercial stage companies, which is great in terms of sentiment for the industry, but these are by and large, not companies that are, you know, driving a lot of R&D expansion. So to Joel's point, we need to see that earlier funnel fill up. We need to see the venture stage companies go public, you know, gain more liquidity, expand their investor base. Those are more likely at that stage to drive additional R&D needs, which is what we've seen historically. I think Peter did mention, we have seen some requirements hit the market.
Hallie Kuhn: Yeah, Jim, I think that is, in a way, what we have been seeing. If you look at the XBI this past year and follow-on financings, which on an absolute numbers basis have been pretty strong, most of those have been for particularly commercial stage companies, which is great in terms of sentiment for the industry, but these are by and large, not companies that are, you know, driving a lot of R&D expansion. So to Joel's point, we need to see that earlier funnel fill up. We need to see the venture stage companies go public, you know, gain more liquidity, expand their investor base. Those are more likely at that stage to drive additional R&D needs, which is what we've seen historically. I think Peter did mention, we have seen some requirements hit the market.
Speaker #4: Which is great in terms of sentiment for the industry. But these are, by and large, not companies that are driving a lot of R&D expansion.
Speaker #4: So, to Joel's point, we need to see that earlier funnel fill up. We need to see the venture-stage companies go public, gain more liquidity, and expand their investor base.
Speaker #4: Those are more likely at that stage to drive additional R&D needs, which is what we've seen historically. I think Peter did mention we have seen some requirements hit the market.
Hallie Kuhn: Things take a while, but not to say that, you know, it's a complete desert, but, you know, it is few and far between than it has been in years past.
Hallie Kuhn: Things take a while, but not to say that, you know, it's a complete desert, but, you know, it is few and far between than it has been in years past.
Speaker #4: That it's a complete while. But not to say things take a desert. But it is farther and fewer between than it has been in years past.
Jim Kammert: Oh, that's very great color. And then one quick clarification. Peter, you also, I think, said that it's possible you might see a 5 handle on some of the core asset capital recycling in 2026. Would that be potentially, I mean, if it happens, on a JV, or would that also be for an outright sale? I'm just trying to think about any of the implications, sale versus JV. Thank you.
Jim Kammert: Oh, that's very great color. And then one quick clarification. Peter, you also, I think, said that it's possible you might see a 5 handle on some of the core asset capital recycling in 2026. Would that be potentially, I mean, if it happens, on a JV, or would that also be for an outright sale? I'm just trying to think about any of the implications, sale versus JV. Thank you.
Speaker #10: That's a very great color. And then one quick clarification—Peter, you also, I think, said that it's possible we might see a five-handle on some of the core asset capital recycling in '26.
Speaker #10: Would that be, potentially—I mean, if it happens—on a JV? Or would that also be for an outright sale? I'm just trying to think about NAV implications—sale versus JV.
Speaker #10: Thank you.
Peter Moglia: Yeah, very likely a JV that would happen. We are not planning on selling any core assets outright, unless there's a special situation.
Speaker #3: Yeah, very likely a JV—that would happen. We are not planning on selling any core assets outright unless there's a special situation.
Peter Moglia: Yeah, very likely a JV that would happen. We are not planning on selling any core assets outright, unless there's a special situation.
Speaker #10: Great. Thank you
Jim Kammert: Great. Thank you all.
Jim Kammert: Great. Thank you all.
Speaker #10: all. Our next question comes
Paula Schwartz: Our next question comes from Ray Jiang from JP Morgan. Please go ahead with your question.
Paula Schwartz: Our next question comes from Ray Jiang from JP Morgan. Please go ahead with your question.
Speaker #1: From Ray Zhong from JP Morgan. Question. Please go ahead with your question.
Speaker #11: Hi, thank you for taking my question. My first one is on the capital allocation side. It seems like you guys did above the midpoint of your guidance on dispos this year.
Ray Jiang: ... Hi, thank you for taking my question. My first one is on the capital allocation side. Seems like you guys did above midpoint of the guidance on dispo this year. And you guys, I think Mark mentioned, buyback is still not on the table at this point, but with the excess cash, is the thinking that, you know, the priority is on the debt side, or how should we think about that? And when would buyback be on the table with the excess cash?
Ray Jiang: ... Hi, thank you for taking my question. My first one is on the capital allocation side. Seems like you guys did above midpoint of the guidance on dispo this year. And you guys, I think Mark mentioned, buyback is still not on the table at this point, but with the excess cash, is the thinking that, you know, the priority is on the debt side, or how should we think about that? And when would buyback be on the table with the excess cash?
Speaker #11: And you guys, I think Mark mentioned buyback is still not on the table at this point. But with the excess cash, is the thinking that the priority is on the debt side?
Speaker #11: Or how should we think about that? And when would buyback be on the table with the excess cash?
Speaker #3: Yeah. So
Joel Marcus: Yeah. So Mark?
Joel Marcus: Yeah. So Mark?
Speaker #3: Mark? Yeah.
Marc Binda: Yeah, hi, Ray. I think in terms of the buyback, we'd like to get farther along on the disposition program, which is gonna involve paying down debt, to keep the balance sheet in check before we consider buybacks. Now, I say that given the current market conditions, and we'll remain flexible, but, you know, as we sit here today, that's kind of our current thinking.
Marc Binda: Yeah, hi, Ray. I think in terms of the buyback, we'd like to get farther along on the disposition program, which is gonna involve paying down debt, to keep the balance sheet in check before we consider buybacks. Now, I say that given the current market conditions, and we'll remain flexible, but, you know, as we sit here today, that's kind of our current thinking.
Speaker #2: Hi, Ray. I think, in terms of the buyback, we'd like to get farther along on the disposition program, which is going to involve paying down debt.
Speaker #2: To keep the balance sheet in check before we consider buybacks. Now, I say that given the current market conditions, and we'll remain flexible.
Speaker #1: But, you know, as we sit here today, that's kind of our current thinking.
Ray Jiang: Got it. And a follow-up question on uses of funding then. You guys disclosed how much you historically spent on the non-real estate investments in the K. If I'm looking at it correctly, I think, you know, between $200 to $250 a year. How should we think about that moving forward? Yeah, anything, any help on that front will be appreciated. Thank you.
Ray Jiang: Got it. And a follow-up question on uses of funding then. You guys disclosed how much you historically spent on the non-real estate investments in the K. If I'm looking at it correctly, I think, you know, between $200 to $250 a year. How should we think about that moving forward? Yeah, anything, any help on that front will be appreciated. Thank you.
Speaker #2: And a Got it . follow up question on uses of funding . Then you guys how disclosed much you historically spend on the non real estate investment uses of funding .
Speaker #2: Then you guys disclosed how much you historically spend on the estate investments in the K. If I'm looking at it, I think correctly, between $200 to $250 a year. Think moving about that forward, how should we?
Marc Binda: Yeah, sure. So we really look at the fund kind of net of the inflows and outflows. So I think if you look at the cash that came in, it was, you know, maybe a net outflow of somewhere between $60 to 70 million for the year. And that's been, I mean, I think it was a similar number in the prior year. So I think, you know, we'd like to see that the fund be, you know, as close to neutral as possible, so that we're, you know, we're not putting a ton of capital in there, but still continuing to be very active in the space.
Marc Binda: Yeah, sure. So we really look at the fund kind of net of the inflows and outflows. So I think if you look at the cash that came in, it was, you know, maybe a net outflow of somewhere between $60 to 70 million for the year. And that's been, I mean, I think it was a similar number in the prior year. So I think, you know, we'd like to see that the fund be, you know, as close to neutral as possible, so that we're, you know, we're not putting a ton of capital in there, but still continuing to be very active in the space.
Speaker #2: Yeah, any help on that front would be appreciated. Thank you.
Speaker #1: Yeah , sure . So we we really look at the fund kind of net of the inflows and outflows . So I think if you if you , if you look at the cash that came in , it was , you know , maybe a net outflow of somewhere between 60 to 70 million for the year .
Speaker #1: And that's been I mean , I think , I think it was a similar number in the prior year . So I think , you know , we'd like to see that be , you know , as the fund close to neutral as possible so that we're , you know , we're not putting a ton of capital in there , but still continuing to be very active in the space .
Ray Jiang: Got it. So the net will, you know, the expectation is hopefully gets to a net neutral on that front.
Ray Jiang: Got it. So the net will, you know, the expectation is hopefully gets to a net neutral on that front.
Marc Binda: That's right. Or at least a small number. Like I said, it's been $60 to 70 million in the last couple of years.
Marc Binda: That's right. Or at least a small number. Like I said, it's been $60 to 70 million in the last couple of years.
Speaker #2: So the net will, you know—got it. The expectation is it hopefully gets to a net neutral on that front.
Ray Jiang: Got it. Thank you so much.
Ray Jiang: Got it. Thank you so much.
Speaker #1: Or that's right. At least a small number. Like I said, it's been a couple of years—$60 to $70 million in the last.
Paula Schwartz: Our next question comes from Rich Anderson from Cantor Fitzgerald. Please go ahead with your question.
Operator: Our next question comes from Rich Anderson from Cantor Fitzgerald. Please go ahead with your question.
Speaker #2: Got it. Much thanks.
Rich Anderson: Hey, thanks. Still good morning out there. You know, the elephant in the room is, I guess, stock's up 20% this year. It's great, or 19%. And yet, you know, it still feels like pricing power is quite a ways off still with everything that's going on. Do you have any sense in on the people that you're talking to, you know, a different type of investor that's showing interest in the, in the stock? Do you think it's just pure rotation, people sort of profit-taking, looking for a bottom in life science? Do you have any sense of what's driving stock performance so far this year?
Richard Anderson: Hey, thanks. Still good morning out there. You know, the elephant in the room is, I guess, stock's up 20% this year. It's great, or 19%. And yet, you know, it still feels like pricing power is quite a ways off still with everything that's going on. Do you have any sense in on the people that you're talking to, you know, a different type of investor that's showing interest in the, in the stock? Do you think it's just pure rotation, people sort of profit-taking, looking for a bottom in life science? Do you have any sense of what's driving stock performance so far this year?
Speaker #3: And our question comes from Richie Anderson from Cantor Fitzgerald. Please go ahead with your question.
Speaker #4: thanks Hey , . And good morning out there still . You know , the the elephant in the room is I guess , stocks up 20% this year .
Speaker #4: It's great . Or 19% . And yeah , you know , it still feels like pricing power is quite a ways off . Still , with everything that's going on , do you have any sense you know , the you're talking to , you know , a different type of investor that's showing interest in in the stock ?
Speaker #4: Do you think it's just pure rotation ? People sort of profit taking , looking for a bottom in life science . Do you have any sense of what's driving stock performance so far this year ?
Joel Marcus: Well, I think it's all of the above, and I think it's pretty clear that, the slide that we showed at, Investor Day, when you looked at, stock price versus consensus NAV, certainly tells the story in many respects. I think if one believes in this industry, you know, 50 years after Genentech was founded this year, back in, 1976, again, we've only addressed 10% of, diseases, 90% are left. And if the, and if, you know, the public is willing to pay for therapies and, you know, addressable cures to the extent we can have that, that's, you know, one has to believe the industry has, has, you know, a promising future.
Joel Marcus: Well, I think it's all of the above, and I think it's pretty clear that, the slide that we showed at, Investor Day, when you looked at, stock price versus consensus NAV, certainly tells the story in many respects. I think if one believes in this industry, you know, 50 years after Genentech was founded this year, back in, 1976, again, we've only addressed 10% of, diseases, 90% are left. And if the, and if, you know, the public is willing to pay for therapies and, you know, addressable cures to the extent we can have that, that's, you know, one has to believe the industry has, has, you know, a promising future.
Speaker #5: Well, I think it's all of the above. And I think it's pretty clear that the slide that we showed today, when it tells the many respects.
Speaker #5: stock I certainly one believes at you looked story in Investor price consensus versus if Nav industry , you know , 50 years after Genentech was founded , this year , back in 1976 , again , we've only addressed 10% of diseases , 90% are left .
Speaker #5: And if the if and public is willing to pay , you know , the for therapies and you know , addressable cures , to the extent we can have , that's , you know , one has to believe the industry has has , you know , promising future .
Joel Marcus: You know, we are making some- we're slipping back, as I said, when you look at some of the vaccine policy stuff, which is a little distressing to a lot of people. But I think if you set that kind of mentality aside, and you look at what the FDA is trying to do, I think they're trying to do exactly the right thing to, you know, compress the time to go from discovery into the clinic, through the clinic, and out of the clinic into the commercial side, and assuming the policymakers and executive and legislative branches don't get too crazy to pay a fair return on, you know, on these innovative therapies.
You know, we are making some- we're slipping back, as I said, when you look at some of the vaccine policy stuff, which is a little distressing to a lot of people. But I think if you set that kind of mentality aside, and you look at what the FDA is trying to do, I think they're trying to do exactly the right thing to, you know, compress the time to go from discovery into the clinic, through the clinic, and out of the clinic into the commercial side, and assuming the policymakers and executive and legislative branches don't get too crazy to pay a fair return on, you know, on these innovative therapies.
Speaker #5: You know , we are making some slipping back . As I said , when you look at some of the vaccine policy stuff , which is a little distressing to a lot of people , but I think if you set that kind of mentality aside , you look at what the FDA is trying to do .
Speaker #5: I think they're trying to do exactly the right thing to compress the know , time to go discovery into the , you , through the clinic , and out of the clinic , into the commercial side , and assuming the policy makers and executive and legislative branches don't get too crazy to pay a fair return on know , on , you these on these innovative therapies .
Joel Marcus: I mean, just look at anybody who's been the beneficiary of, you know, any real therapy that saved somebody's life and made that more a, you know, ongoing chronic condition as opposed to, you know, life-threatening, if you will. I think that's where the great promise is here, Rich.
I mean, just look at anybody who's been the beneficiary of, you know, any real therapy that saved somebody's life and made that more a, you know, ongoing chronic condition as opposed to, you know, life-threatening, if you will. I think that's where the great promise is here, Rich.
Speaker #5: I mean , just look at anybody who's been the beneficiary of , you know , any real therapy that saves somebody's life and made it more a , you know , a ongoing chronic condition as opposed you will to , you know , life life .
Rich Anderson: Yeah.
Richard Anderson: Yeah.
Joel Marcus: You know, so I think that, you know, when you look at our locations, quality of assets, quality of sponsorship, I mean, it's not surprising that the sell-off, you know, after the third quarter was, I think, pretty radical.
Joel Marcus: You know, so I think that, you know, when you look at our locations, quality of assets, quality of sponsorship, I mean, it's not surprising that the sell-off, you know, after the third quarter was, I think, pretty radical.
Speaker #5: I think that's where the the great promise is here . Rich and , you know I , so think that , you know , and you look at our , quality of locations assets , quality of sponsorship , I mean , it's not surprising that the sell off , you know , after the third quarter was , I think , pretty radical .
Rich Anderson: But those are all good color, but do you think you're attracting a different investor? Do you think you're attracting a non-REIT investor, a biotech investor, a generalist investor to the name?
Richard Anderson: But those are all good color, but do you think you're attracting a different investor? Do you think you're attracting a non-REIT investor, a biotech investor, a generalist investor to the name?
Speaker #5: .
Speaker #4: but And those are all good . Good , good color . But do you think you're attracting a different investor . Do you think you're attracting a non REIT investor , a biotech investor generalist , a investor to to the name ?
Joel Marcus: I think the nature of investors change over time. I mean, think about when we went public, you know, there are a lot of long-term investors today. There's very few long-term investors, a lot of ETF investors. But, you know, there's a large cohort of value-driven investors that don't look at, you know, quarterly, day-to-day, monthly, year-to-year earnings. They look at, you know, quality of assets, generating quality of cash flows, obviously, people interested in the industry. So I think it's a whole, you know, a whole bunch of sets of different interests that have come to bear, because the sell-off just was, you know, I think, foolishness.
Joel Marcus: I think the nature of investors change over time. I mean, think about when we went public, you know, there are a lot of long-term investors today. There's very few long-term investors, a lot of ETF investors. But, you know, there's a large cohort of value-driven investors that don't look at, you know, quarterly, day-to-day, monthly, year-to-year earnings. They look at, you know, quality of assets, generating quality of cash flows, obviously, people interested in the industry. So I think it's a whole, you know, a whole bunch of sets of different interests that have come to bear, because the sell-off just was, you know, I think, foolishness.
Speaker #5: I think I think the nature of investors change over time . I mean , think about when we went public , you were a lot know , there of long term investors today .
Speaker #5: There's very few term long investors . A lot of ETF investors . But you know , there's a large cohort of value driven investors that don't look at , you know , quarterly day to day , monthly , year to year earnings .
Speaker #5: They look at , you know , quality of assets , generating quality of cash flows . Obviously people interested in the industry . So I think it's a whole , you know , a whole bunch of sets of different interests that have come to bear because the sell off just was you know , I think foolishness .
Rich Anderson: I thought Hallie was going to jump in there, but, maybe, maybe I misheard that. So, okay.
Richard Anderson: I thought Hallie was going to jump in there, but, maybe, maybe I misheard that. So, okay.
Hallie Kuhn: No, no problem. Keep, keep going.
Hallie Kuhn: No, no problem. Keep, keep going.
Rich Anderson: Okay.
Richard Anderson: Okay.
Hallie Kuhn: Joel covered it really well.
Hallie Kuhn: Joel covered it really well.
Speaker #4: I thought Haley was gonna jump in there , but maybe , maybe I misheard that . So . Okay .
Rich Anderson: Okay, perfect. Okay, second question for me is, let's say, you know, your development exposure as a percentage, just to use a simple way of looking at it, as a percentage of total assets, goes from 20%-ish to 15% this year. I'm assuming that that's sort of a step in the process, and I'm curious, Joel, Peter, whoever, you know, what do you think the appropriate run rate, you know, is for development exposure, you know, financing risk, need to access capital, all those things? Like, what is new Alexandria going to look like from a development exposure point of view, call it 2, 3 years from now, in your mind?
Richard Anderson: Okay, perfect. Okay, second question for me is, let's say, you know, your development exposure as a percentage, just to use a simple way of looking at it, as a percentage of total assets, goes from 20%-ish to 15% this year. I'm assuming that that's sort of a step in the process, and I'm curious, Joel, Peter, whoever, you know, what do you think the appropriate run rate, you know, is for development exposure, you know, financing risk, need to access capital, all those things? Like, what is new Alexandria going to look like from a development exposure point of view, call it 2, 3 years from now, in your mind?
Speaker #6: No problem. Keep going. I covered it really well.
Speaker #4: Okay . Perfect . Okay . Second question for me is , let's say , you know , your development exposure as a percentage just to use a looking at it simple way of total , percentage of assets goes from 20% to 15% this year .
Speaker #4: I'm assuming that that's sort of a step in the process . And I'm I'm curious . Joel . Peter , whoever , you know , what do you what do you think the appropriate run rate , you know , is for exposure .
Speaker #4: You know , you know development , financing risk need to access capital . All those things like what is what is new Alexandria going to look like from a development exposure point of view ?
Joel Marcus: Yeah, I think we kind of articulated that at Investor Day, and there's a slide there that talked about, we think we don't know precisely because we're still in a, I think, how shall I say, you know, a phase of trying to get used to a new reality.
Joel Marcus: Yeah, I think we kind of articulated that at Investor Day, and there's a slide there that talked about, we think we don't know precisely because we're still in a, I think, how shall I say, you know, a phase of trying to get used to a new reality.
Speaker #4: Call it two, three years from now in your mind.
Speaker #5: Yeah , I think we we kind of articulated that at Investor Day and there's a slide there that talked about we think we don't know precisely because we're still in a I think a how shall I say , you know , a phase of trying to get used to a new reality with the industry .
Rich Anderson: Yeah
Richard Anderson: Yeah
Joel Marcus: ... with the industry. But I think we've hypothesized that we think, you know, 10%, you know, somewhere 10+% as a percentage of non-productive or, you know, non-income producing land as a percentage of overall gross assets is probably where we want to be. Very different than GFC, where, you know, there were no supply issues. The prospects, you know, were kind of unlimited because there was no supply constraint issue, oversupply issue, if you will. So I think this is just a new reality, but, you know, we've got great opportunities on many or most of our mega campuses, and so those will be the instruments of future development and, you know, external growth, and we're excited about that.
Joel Marcus: ... with the industry. But I think we've hypothesized that we think, you know, 10%, you know, somewhere 10+% as a percentage of non-productive or, you know, non-income producing land as a percentage of overall gross assets is probably where we want to be. Very different than GFC, where, you know, there were no supply issues. The prospects, you know, were kind of unlimited because there was no supply constraint issue, oversupply issue, if you will. So I think this is just a new reality, but, you know, we've got great opportunities on many or most of our mega campuses, and so those will be the instruments of future development and, you know, external growth, and we're excited about that.
Speaker #5: But I think we've we've hypothesized that we think , you know , 10% , you know , somewhere ten plus percent as a percentage of nonproductive or , you know , non-income-producing land as a percentage of overall gross assets is probably where we want to be very different than GFC , where , you know , there were no supply issues .
Speaker #5: The prospects , you know , were kind of unlimited because there was no supply constraint issue , oversupply issue , if you will .
Speaker #5: So, I think this is just a new reality. But, you know, we've got great opportunities on many or most of our mega campuses.
Speaker #5: And so those will be the instruments of future development . And , you know , external growth . And we're excited about that .
Joel Marcus: You know, there isn't just biotech, there is a whole host of other interested parties, both in our current pie charts and pie charts beyond, that view those locations as, you know, top of mind.
Joel Marcus: You know, there isn't just biotech, there is a whole host of other interested parties, both in our current pie charts and pie charts beyond, that view those locations as, you know, top of mind.
Speaker #5: And you know, there isn't just biotech. There is a whole host of other interested parties, both in our current pie charts and pie charts.
Rich Anderson: Yeah. Okay, great. Thanks very much.
Richard Anderson: Yeah. Okay, great. Thanks very much.
Speaker #5: Beyond that view, those locations, as you know, are top of mind.
Joel Marcus: Yep, thank you.
Joel Marcus: Yep, thank you.
Paula Schwartz: Our next question comes from Seth Berge from Citi. Please go ahead with your question.
Paula Schwartz: Our next question comes from Seth Berge from Citi. Please go ahead with your question.
Speaker #4: Yeah, okay. Great. Thanks very much.
Speaker #5: Yep . Thank you .
Nick Joseph: Thanks. It's Nick Joseph, here with Seth Berge. I guess last month at the Investor Day, you talked about a 4- to 5-year recovery for life science broadly, and I recognize it's only been about 2 months, but you've been busy over those 2 months. So has anything changed that timeline, either moving it up or delaying it from what you've seen?
Nick Joseph: Thanks. It's Nick Joseph, here with Seth Berge. I guess last month at the Investor Day, you talked about a 4- to 5-year recovery for life science broadly, and I recognize it's only been about 2 months, but you've been busy over those 2 months. So has anything changed that timeline, either moving it up or delaying it from what you've seen?
Speaker #3: Our next question comes from Seth Bergey from Citi. Please go ahead with your question.
Speaker #1: It's Thanks . up here with Seth . I guess , last month at the Investor Day , you talked about a 4 to 5 year recovery for life science .
Speaker #1: Broadly . And I recognize it's only been about two But but you've been busy over those two months . So has anything changed that either moving timeline it up or delaying it ?
Joel Marcus: Yeah, so that's actually, I'm glad you teed this up, because Peter, I think, addressed this, but a lot of people came away reporting it a little bit unclear. And he basically said that he thought that the timeframe for recovery in our markets, where we were, you know, very active, would be in the 2 to 3-year range, and that it may be as much as 4 to 5 in submarkets where we were not particularly involved or active. But Peter, you want to comment on that?
Joel Marcus: Yeah, so that's actually, I'm glad you teed this up, because Peter, I think, addressed this, but a lot of people came away reporting it a little bit unclear. And he basically said that he thought that the timeframe for recovery in our markets, where we were, you know, very active, would be in the 2 to 3-year range, and that it may be as much as 4 to 5 in submarkets where we were not particularly involved or active. But Peter, you want to comment on that?
Speaker #1: From what you've seen ?
Speaker #5: Yeah . So that's actually I'm glad you teed this up because Peter , I think addressed this . But a lot people of came away reporting it a little bit unclear .
Speaker #5: And he basically said that he thought that the time frame for recovery in , in our markets , where we were , you know , very active would be in the 2 to 3 year range .
Speaker #5: And that it may be as much as 4 to 5. And in some markets where we were not particularly involved or active.
Peter Moglia: Yeah. Thanks for clarifying that. Exactly, like, you know, if you look at Greater Boston, for example, there's a significant amount of inventory in an area like Somerville, and other tertiary areas, and, you know, Alewife, that, where we're not at, which that's where we think that it's gonna take 4 to 5 years for that to resolve. But, you know, Cambridge and Watertown, Seaport, where we, where we're heavily invested, those- that's, you know, probably more like 2 to 3 years, and, you know, maybe even less, depending on the trend of, you know, a lot of people are starting to realize that, they should probably go a different path in life science. And, you know, we're hoping to continue to see that.
Peter Moglia: Yeah. Thanks for clarifying that. Exactly, like, you know, if you look at Greater Boston, for example, there's a significant amount of inventory in an area like Somerville, and other tertiary areas, and, you know, Alewife, that, where we're not at, which that's where we think that it's gonna take 4 to 5 years for that to resolve. But, you know, Cambridge and Watertown, Seaport, where we, where we're heavily invested, those- that's, you know, probably more like 2 to 3 years, and, you know, maybe even ess, depending on the trend of, you know, a lot of people are starting to realize that, they should probably go a different path in life science. And, you know, we're hoping to continue to see that.
Speaker #5: But, Peter, you want to comment on that.
Speaker #7: Yeah . Thanks for clarifying that . Exactly . Like , if you look you know , at Greater Boston , for example , there's a .
Speaker #7: Significant amount of inventory in an area like Somerville and other tertiary areas . And , you know , Alewife that where we're not at which that's where we think that it's going to take 4 to 5 years for that to resolve .
Speaker #7: But , you know , Cambridge and Watertown Seaport , where we where we're heavily invested , those that's , you know , probably more like 2 to 3 years and , you know , maybe even less , depending on the trend of , you know , a lot of people are starting to to that realize they should probably go a different path in life and science , you know , we're hoping to continue to see that .
Peter Moglia: So, if we, you know, obviously demand is going to be needed to take a lot of the lab space, but as a lot of it decides to change use, that, you know, even that 4 to 5 estimate could be reduced. But Joel's exactly on point. 4 to 5 years for the areas that are the new markets that really didn't ever need to be lab markets, those will need a long time to resolve because it's not gonna get resolved through lab demand. It's gonna get resolved by changing use. But the lab markets that we're in, that have been functional lab markets for decades, there has been some oversupply, and it'll take 2 to 3 years for that to resolve.
So, if we, you know, obviously demand is going to be needed to take a lot of the lab space, but as a lot of it decides to change use, that, you know, even that 4 to 5 estimate could be reduced. But Joel's exactly on point. 4 to 5 years for the areas that are the new markets that really didn't ever need to be lab markets, those will need a long time to resolve because it's not gonna get resolved through lab demand. It's gonna get resolved by changing use. But the lab markets that we're in, that have been functional lab markets for decades, there has been some oversupply, and it'll take 2 to 3 years for that to resolve.
Speaker #7: So if we if we , you know , obviously demand is going to be needed to take a lot of the lab space .
Speaker #7: But as a lot of it decides to change , use that , you know , even that 4 to 5 estimate could could be reduced .
Speaker #7: But Joel's on exactly point—four to five years for the areas that are the new markets that really didn't ever need to be lab markets.
Speaker #7: Those take a long time to resolve, because it's going to not get resolved through lab demand. It's going to get resolved by changing use.
Speaker #7: But the lab markets that we're in, that have been functional lab markets for decades, there has been some oversupply. And it'll take 2 to 3 years for that to resolve.
Nick Joseph: That's very helpful. Thank you.
Nick Joseph: That's very helpful. Thank you.
Paula Schwartz: Our next question comes from Tayo Okusanya, from Deutsche Bank. Please go ahead with your question.
Paula Schwartz: Our next question comes from Tayo Okusanya, from Deutsche Bank. Please go ahead with your question.
Speaker #1: That's helpful. Very thank you.
Omotayo Okusanya: Yes, good afternoon out there. In terms of the guidance there, you talked a little bit about, you know, about $6 million a quarter revenue headwinds from, from tenant wind down. Could you talk a little bit just about what's happening with that pool of tenants? Is it just they're not -- they didn't get, you know, their drug trials, you know, failed or they run out of cash? Or just kind of thematically, what's happening with that group? Just kind of understand what, what that headwind is.
Omotayo Okusanya: Yes, good afternoon out there. In terms of the guidance there, you talked a little bit about, you know, about $6 million a quarter revenue headwinds from, from tenant wind down. Could you talk a little bit just about what's happening with that pool of tenants? Is it just they're not -- they didn't get, you know, their drug trials, you know, failed or they run out of cash? Or just kind of thematically, what's happening with that group? Just kind of understand what, what that headwind is.
Speaker #3: Question comes from Tayo Okusanya from Deutsche Bank. Please go ahead with your question.
Speaker #8: Yes . Good afternoon Hi . out there . In terms of the guidance that you talked a little bit about , you know , 6 million a quarter revenue headwinds from from wind tenant down .
Speaker #8: Can you talk a little bit just about what's happening with that pool of tenants? Is it just they're not—they didn't get their drug trials?
Speaker #8: You know , failed or they run out of cash or just kind of thematically , what's happening with that group just kind of understand what what that headwind is .
Joel Marcus: Yeah. So I'll ask Mark to comment there, but I would say in this environment over the last handful of years, again, you know, we're in the fifth year of a bear market, hopefully turning that around. And when you find that happening, obviously more companies at the earlier stage or less companies are formed and more companies may be wound down. Some companies, you know, merged in the public markets. The bankers, certainly during the heyday of the last decade, let too many companies go public. So, you know, there has been a shakeout there over the last handful of years of companies that probably shouldn't have gone public. So this is a natural outgrowth of that, given, you know, where we are today. But, Mark, you could comment more specifically.
Joel Marcus: Yeah. So I'll ask Mark to comment there, but I would say in this environment over the last handful of years, again, you know, we're in the fifth year of a bear market, hopefully turning that around. And when you find that happening, obviously more companies at the earlier stage or less companies are formed and more companies may be wound down. Some companies, you know, merged in the public markets. The bankers, certainly during the heyday of the last decade, let too many companies go public. So, you know, there has been a shakeout there over the last handful of years of companies that probably shouldn't have gone public. So this is a natural outgrowth of that, given, you know, where we are today. But, Mark, you could comment more specifically.
Speaker #5: Yeah . So I'll ask Mark to comment there , but I would say in this environment over the handful last of years , again , you know , we're in the fifth year of a of a bear market .
Speaker #5: Hopefully turning that around . And when you find that happening , obviously more companies at the earlier stage or less companies are , more formed companies may wound be down .
Speaker #5: Some companies , you know , merged in the public markets . bankers The , certainly during the heyday of the last decade , many led to companies go public .
Speaker #5: You know, so, there has been a shakeout there over the last handful of years of companies that probably shouldn't have gone public. This is a natural.
Speaker #5: So outgrowth of that given , you know , where we are today . But , Mark , you could comment more specifically .
Marc Binda: Yeah. The thing I would add is, it's public and private biotech comprises the majority of it for the reasons that Joel and Hallie have mentioned. And, you know, some of it is kind of, you know, failure, which in their clinical milestones, which is normal in a market that that'll happen. But a lot of it is also ability to attract capital and just the kind of shorter runway that investors have given these companies that has caused part of the issue.
Marc Binda: Yeah. The thing I would add is, it's public and private biotech comprises the majority of it for the reasons that Joel and Hallie have mentioned. And, you know, some of it is kind of, you know, failure, which in their clinical milestones, which is normal in a market that that'll happen. But a lot of it is also ability to attract capital and just the kind of shorter runway that investors have given these companies that has caused part of the issue.
Speaker #1: Yeah thing I . add The is it's public and private biotech comprises the majority of it for the reasons that Joel have and Hawley mentioned .
Speaker #1: And , you know , some some of it is kind of , you know , failure , which in their clinical milestones , which is normal in a market , that'll happen .
Speaker #1: But but a lot of it is also ability to , to attract capital and just the kind of shorter runway that , that investors have have given these companies that has caused part of the the issue .
Omotayo Okusanya: Gotcha. That's helpful. And if I may ask one more, the four development assets that are still under strategic evaluation, could you, does it all basically boil down to just leasing around those assets to determine whether you kind of proceed or you go through strategic alternatives?
Omotayo Okusanya: Gotcha. That's helpful. And if I may ask one more, the four development assets that are still under strategic evaluation, could you, does it all basically boil down to just leasing around those assets to determine whether you kind of proceed or you go through strategic alternatives?
Speaker #8: Gotcha . That's helpful . And if I may ask one more , the for development assets that they're still under strategic evaluation . Does it all basically boil just down to you kind of go through around a proceed leasing assets to those through a strategic determine whether or you alternatives ?
Joel Marcus: No, I think it's much more granular than that. It's what is the prospect broadly in the sub-market, the nature of the asset, you know, any competitive product that we may have with that, with that asset? I mean, there's a whole set of variability or, you know, analysis that you go through. Leasing is clearly important, but it's not the sole determinant.
Joel Marcus: No, I think it's much more granular than that. It's what is the prospect broadly in the sub-market, the nature of the asset, you know, any competitive product that we may have with that, with that asset? I mean, there's a whole set of variability or, you know, analysis that you go through. Leasing is clearly important, but it's not the sole determinant.
Speaker #5: No , I think it's much more granular than that . It's what is the prospect broadly in the submarket , the nature of the asset , you know , any competitive product that we may have with that , with that asset , I mean , there's a whole set of variability or , you know , analysis that you go through .
Omotayo Okusanya: Gotcha. Thank you very much. All the best.
Omotayo Okusanya: Gotcha. Thank you very much. All the best.
Speaker #5: Leasing is clearly important, but it's not the sole determinant.
Paula Schwartz: Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead with your question.
Paula Schwartz: Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead with your question.
Speaker #8: Gotcha. Thank you very much. All the best.
Michael Carroll: Yeah, thanks. Joel or Peter, can you guys provide some color on the 400,000sq ft of leases that were signed at previously vacant space? I mean, I would imagine a good chunk of that relates to the backfill at 259 East Grand Avenue. I guess if that's true, where were the other leases signed within that bucket?
Michael Carroll: Yeah, thanks. Joel or Peter, can you guys provide some color on the 400,000sq ft of leases that were signed at previously vacant space? I mean, I would imagine a good chunk of that relates to the backfill at 259 East Grand Avenue. I guess if that's true, where were the other leases signed within that bucket?
Speaker #3: Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead with your question.
Speaker #9: Yeah, thanks. Joel or Peter, can you guys provide some color on the 400,000 ft² of leases that were signed at previously vacant space?
Speaker #9: I mean , I would imagine a good chunk of that relates to the backfill at two , 59 East Grand Avenue . I guess if that's true , where were the other leases signed within that bucket ?
Joel Marcus: Yeah, Peter, I don't know if you want to give any color there.
Joel Marcus: Yeah, Peter, I don't know if you want to give any color there.
Peter Moglia: I don't have the specific leases, but you are right that a significant amount of leasing was done at East Grand. I will say that one thing that we were asked about and did some investigation on is that, you know, a significant amount of that leasing was, you know, absolute new tenancy, not, you know, tenants relocating from one place to another, but new tenants actually coming in into our portfolio, which we really love to see.
Peter Moglia: I don't have the specific leases, but you are right that a significant amount of leasing was done at East Grand. I will say that one thing that we were asked about and did some investigation on is that, you know, a significant amount of that leasing was, you know, absolute new tenancy, not, you know, tenants relocating from one place to another, but new tenants actually coming in into our portfolio, which we really love to see.
Speaker #5: Yeah, Peter, I don't know if you want to give any color there.
Speaker #7: don't have I the specific leases , but you are right that a significant amount of leasing was done at East Grand . I will say that one thing that we were about asked and did some investigation on is that , you know amount , significant of that leasing was , was , you know , absolute new tenancy , not , you know , tenants relocating from one place to another , but new tenants actually coming in into our portfolio , which , which we really love to see .
Hallie Kuhn: This is Hallie. I do have that list in front of me, and so just to say, you know, it was pretty diverse from a regional perspective. You know, leasing in, you know, Cambridge, we have RT, Seattle, some in San Francisco. So, you know, in terms of just generally seeing positive momentum backfilling that vacant space across the board, we think that diversity across the regions is healthy.
Hallie Kuhn: This is Hallie. I do have that list in front of me, and so just to say, you know, it was pretty diverse from a regional perspective. You know, leasing in, you know, Cambridge, we have RT, Seattle, some in San Francisco. So, you know, in terms of just generally seeing positive momentum backfilling that vacant space across the board, we think that diversity across the regions is healthy.
Speaker #6: This , is Hallie , I do have that list in front of me . And so just to say , you know , it was a pretty diverse from a regional perspective , you know , in leasing Cambridge , we have .
Speaker #6: RT Seattle , some in San Francisco . So , you know , in terms of generally seeing positive momentum , backfilling that vacant space across the board , we think that diversity across the is regions healthy .
Joel Marcus: Yeah, and broader base than you might otherwise guess.
Joel Marcus: Yeah, and broader base than you might otherwise guess.
Hallie Kuhn: Mm-hmm.
Hallie Kuhn: Mm-hmm.
Michael Carroll: That's and that's, is there any common themes on why those tenants were willing to lease space, I guess, today in the fourth quarter?
Michael Carroll: That's and that's, is there any common themes on why those tenants were willing to lease space, I guess, today in the fourth quarter?
Speaker #5: Yeah, and a broader base than you might otherwise guess.
Joel Marcus: Yes, because we're great sponsors.
Joel Marcus: Yes, because we're great sponsors.
Speaker #9: That's—and is there any common themes on why those tenants were willing to lease space? I guess today in the fourth quarter.
Michael Carroll: Do they have, like, funding agreements where they just got funding, or is there-
Michael Carroll: Do they have, like, funding agreements where they just got funding, or is there-
Speaker #5: Yes, because we're great sponsors.
Joel Marcus: You know, it's so-
Joel Marcus: You know, it's so-
Michael Carroll: -into it?
Michael Carroll: -into it?
Joel Marcus: Yeah, yeah, Mike, it's so episodic in a sense, because, you know, if a company hits a clinical milestone, a data milestone, and they need to do something, I mean, that's, I mean, we've seen that with a couple of companies where they've doubled their space just on that one event. So it is very episodically driven. And, you know, I'm not sure I'd read anything into, you know, was the fourth quarter substantially different than the second quarter, you know, vis-à-vis leasing trends, because it tends to be very case specific.
Joel Marcus: Yeah, yeah, Mike, it's so episodic in a sense, because, you know, if a company hits a clinical milestone, a data milestone, and they need to do something, I mean, that's, I mean, we've seen that with a couple of companies where they've doubled their space just on that one event. So it is very episodically driven. And, you know, I'm not sure I'd read anything into, you know, was the fourth quarter substantially different than the second quarter, you know, vis-à-vis leasing trends, because it tends to be very case specific.
Speaker #9: Do they have, like, funding agreements where they just got funding, or is there...
Speaker #5: know , so You yeah . Yeah . so episodical in a sense because , you know , if a company hits a clinical milestone , a data milestone , and they need to do something , mean , that's I I mean , we've seen that with a couple of companies where they've doubled their space just on that one event .
Speaker #5: So it is very episodic driven . And you know , I'm not sure I'd read anything into , you know , was the fourth quarter substantially different than the second quarter ?
Michael Carroll: Okay, great. That's helpful. Then just one last one for me. On 401 Park, and I think I caught this earlier in the call, I just wanted to confirm and make sure I'm right. It's not necessarily that you have office tenants ready to lease that space. I don't know what type of interest. It's just that you had lab space available in that marketplace, and you didn't need... You decided: Okay, we have this building that could be lab or could be office. Let's kind of diversify our approach and kind of go office with this specific property. Is that the right way to think about it, or is there-
Michael Carroll: Okay, great. That's helpful. Then just one last one for me. On 401 Park, and I think I caught this earlier in the call, I just wanted to confirm and make sure I'm right. It's not necessarily that you have office tenants ready to lease that space. I don't know what type of interest. It's just that you had lab space available in that marketplace, and you didn't need... You decided: Okay, we have this building that could be lab or could be office. Let's kind of diversify our approach and kind of go office with this specific property. Is that the right way to think about it, or is there-
Speaker #5: You know , vis a vis leasing trends ? Because it tends to be very case specific .
Speaker #9: Okay , great . That's and then just one me last one for on 401 park , I think caught this earlier I in the call .
Speaker #9: I just wanted to confirm and make sure I'm right. It's not necessarily that you have office tenants ready to lease that space.
Speaker #9: I don't know what type of interest , it's just that you had lab space available in that marketplace and didn't you need you decided , okay , we have this that could be lab , or it building could be office .
Joel Marcus: Well, well, I-
Joel Marcus: Well, well, I-
Michael Carroll: like a vibrant office market ready for that asset?
Michael Carroll: like a vibrant office market ready for that asset?
Speaker #9: Let's kind of diversify our approach and kind of go office with this specific property. Is that the right way to think about it, or is there a vibrant office market ready for that asset?
Joel Marcus: Yeah, I think that is the answer. It's an iconic office building that's been known for a long time. The mainstay is primarily anchor Boston institutions, brand names that you would know that have very, very specific, you know, uses there. Some are pure office, some are, you know, more clinical-like or whatever. But in fundamental, this is part of and kind of adjacent to the LMA, Longwood Medical Area, so this is a big, big market for, you know, those institutions and their office and other adjacent, you know, or other kinds of uses other than, say, you know, traditional wet lab space.
Joel Marcus: Yeah, I think that is the answer. It's an iconic office building that's been known for a long time. The mainstay is primarily anchor Boston institutions, brand names that you would know that have very, very specific, you know, uses there. Some are pure office, some are, you know, more clinical-like or whatever. But in fundamental, this is part of and kind of adjacent to the LMA, Longwood Medical Area, so this is a big, big market for, you know, those institutions and their office and other adjacent, you know, or other kinds of uses other than, say, you know, traditional wet lab space.
Speaker #5: Yeah , I think answer is the that . It's a an iconic office building that's been known for a long time . The mainstay is primarily anchor Boston institutions , brand names that you would know that have very , very specific , you know , uses there .
Speaker #5: Some are pure office , some are , you know , more clinical like or whatever . But in fundamental this is part of and kind of adjacent to the LMA Longwood Medical Center .
Speaker #5: So this is a big , big market for , you know , those institutions and their office other and adjacent , you know , or other kinds of uses other than say , you know , traditional wet lab space .
Joel Marcus: So it's not so much that it's a hard call, it's the call was given the NIH's move on the 15% limitation on indirect costs. In a variety of ways, we saw a big decline of demand and immediate decision-making by a lot of medical institutions, and we've seen that across the country. You know, we did put in the-- there is a court decision that has overruled that. That may start to move institutions in a different direction, but at some point, institutions still need to get space, and both Fenway and the LMA are the best locations for that. So it actually is a pretty easy decision.
So it's not so much that it's a hard call, it's the call was given the NIH's move on the 15% limitation on indirect costs. In a variety of ways, we saw a big decline of demand and immediate decision-making by a lot of medical institutions, and we've seen that across the country. You know, we did put in the-- there is a court decision that has overruled that. That may start to move institutions in a different direction, but at some point, institutions still need to get space, and both Fenway and the LMA are the best locations for that. So it actually is a pretty easy decision.
Speaker #5: So it's not so much that it's a hard call. It's that the call was the given, nice move on the limitation, 15% on indirect costs, in a variety of ways.
Speaker #5: We saw a big decline of demand and immediate decision-making by a lot of medical, we've seen institutions, and that across the country.
Speaker #5: You know , we did put in this up . The there is a court decision is has that overruled that that may move start to institutions in a different direction .
Speaker #5: But at some point, institutions still need to get space. And both Fenway and the LMA are the best locations for that.
Operator: Okay, great. Thank you. I appreciate it.
Michael Carroll: Okay, great. Thank you. I appreciate it.
Speaker #5: So it actually is a pretty easy decision.
Paula Schwartz: Our final question today comes from Mason Gill from Baird. Please go ahead with your question.
Operator: Our final question today comes from Mason Gill from Baird. Please go ahead with your question.
Speaker #9: Great. Okay, thank you. I appreciate it.
Mason Gill: Hi, everyone. Thanks for the time. You had previously talked about San Carlos, San Bruno, Seattle, and Campus Point as Mega Campuses with large shadow pipelines, and that you may look to reevaluate some of these in the future. I guess, do you have any updates or do you expect to have any updates on any of these, over the next few quarters?
Mason Gill: Hi, everyone. Thanks for the time. You had previously talked about San Carlos, San Bruno, Seattle, and Campus Point as Mega Campuses with large shadow pipelines, and that you may look to reevaluate some of these in the future. I guess, do you have any updates or do you expect to have any updates on any of these, over the next few quarters?
Speaker #3: And our final question today comes from Mason Gill from Baird. Please go ahead with your question.
Speaker #10: Hi everyone . Thanks for the time you previously had talked about San Carlos , San Bruno , Seattle and Campus Point as mega campuses with large shadow pipelines and that you may look to reevaluate some of these in the future , I guess .
Joel Marcus: You're talking about the expansion?
Joel Marcus: You're talking about the expansion?
Speaker #10: Do you have any updates, or do you expect to have any updates on any of these over the next few quarters?
Mason Gill: Yeah.
Mason Gill: Yeah.
Joel Marcus: I'm not-
Joel Marcus: I'm not-
Mason Gill: The future shadow pipeline, for-
Mason Gill: The future shadow pipeline, for-
Speaker #5: Or you're talking about the expansion?
Joel Marcus: Yeah, I think those are all under pretty deep study in each market, and probably at this point, don't wanna get into that. But we, we clearly are looking to reduce our non-income producing assets, as we've said, as a percentage of the gross assets. And where we can carve off, you know, land that we have for other uses, or move into a monetization path at a much faster rate, we're trying to do that. And so I would say stay tuned there, certainly, for the Bay Area ones and Seattle.
Joel Marcus: Yeah, I think those are all under pretty deep study in each market, and probably at this point, don't wanna get into that. But we, we clearly are looking to reduce our non-income producing assets, as we've said, as a percentage of the gross assets. And where we can carve off, you know, land that we have for other uses, or move into a monetization path at a much faster rate, we're trying to do that. And so I would say stay tuned there, certainly, for the Bay Area ones and Seattle.
Speaker #10: I'm not sure about the future shadow, yeah, pipeline.
Speaker #5: Yeah, I think those are all under pretty deep study in each market. And probably, at this point, don't want to get into that.
Speaker #5: But we we clearly are looking to reduce our non-income producing assets . As we've said , as a percentage of the gross assets and where we can carve off , you know , land we that have for other uses or into a monetization path at a faster much rate .
Speaker #5: We're trying to do that . And so I would stay would I stay tuned . say There certainly ones and and Seattle the Bay for area .
Mason Gill: Great. That's it for me.
Mason Gill: Great. That's it for me.
Paula Schwartz: Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Joel Marcus for closing remarks.
Paula Schwartz: Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Joel Marcus for closing remarks.
Speaker #10: Great. That’s it for me.
Speaker #3: And, ladies and gentlemen, with that we will be concluding today's question and answer session. I'd like to turn the floor back over to Joel Marcus for closing remarks.
Joel Marcus: Okay. Well, thank you, everybody. We appreciate it and look forward to talking to everybody next quarter. Thank you, and stay safe.
Joel Marcus: Okay. Well, thank you, everybody. We appreciate it and look forward to talking to everybody next quarter. Thank you, and stay safe
Speaker #5: Okay . Well , thank you everybody . We appreciate it and look forward to talking to everybody next quarter . And Thank you .
Paula Schwartz: With that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Operator: With that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Speaker #5: stay safe .
Speaker #3: And with that , ladies and gentlemen , we'll conclude today's conference call . And presentation . We thank you for joining . You may now disconnect your lines .
