Q2 2019 Earnings Call

July 30, 2019

Michael Vich: Good day and welcome to the Alexandria Real Estate Equities Second Quarter 2019 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 then one on your telephone keypad. Please note, this event is being recorded. I would now like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.

All participants will be listen only mode should you need assistance. Please signal a conference specialist pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

Please note this event is being recorded.

I would now like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. This conference call contains forward looking statements within the meaning of 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 I would like to turn the call over to Joel Marcus Executive Chairman and founder. Please go ahead Joel.

Paula Schwartz: Thank you and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of 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. Now I would like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Thank you Paula and welcome everybody to our second quarter call with me today are Dean Shigenaga, Steve Richardson and Peter Moglia.

Joel Marcus: Thank you, Paula, and welcome everybody to our second quarter call. With me today are Dean A. Shigenaga, Steve Richardson, and Peter Moglia. I want to start with focusing on the cover page to our Q2 2019 press release and supplemental, which features our recently developed Vertex Pharmaceuticals West Coast research base, designed in the shape of two human lungs together with a quote from the mother of two children suffering from cystic fibrosis, which I quoted in the first quarter call. This is our solemn mission: to build a future of life-changing innovation as we have each and every day over the past 25 years as the originator and innovator of the life science real estate niche. We thank each and every team member of the Alexandria family for their important contribution each and every day.

I want to start with focusing on the cover page to our 20 or to Q1 9 press release, and supplemental which features our recently developed vertex Pharmaceuticals West Coast Research base [laughter] designed in the shape of Tucuman belongs together with a quote from the mother of two children suffering from cystic fibrosis, which I quoted in the first quarter call.

This sales our solemn mission to build the future of life changing innovation as we have each and every day over the past 25 years as the originator in innovator whole life science real estate niche and we thank each and every team member of the Alexandria family for their important contribution each and every day.

Joel Marcus: As we sit here after the close of Q2, we really are very proud on a couple of aspects. I think we've reached a point where we can say we really have built a fortress balance sheet with over $3.4 billion in liquidity and a weighted average remaining debt term of greater than 10 years. Dean will highlight some of the capital accomplishments this past quarter. We also have a pipeline which could enable us to double rental revenue from January of 2018 to December 2022. The strongest client tenant base with 53% of our annual rental revenue from investment-grade, or publicly traded, large-cap client tenants with a weighted average lease term of 8.4 years. In addition, a robust Q2 cash same-store growth number that Dean will talk about as well. Steve will highlight our robust cash releasing spreads this past quarter.

As we sit here after the close of Q2, we really are very proud on a couple of aspects. I think we've reached a point where we can say we really have built a fortress balance sheet with over $3.4 billion in liquidity and a weighted average remaining debt term of greater than 10 years. Dean will highlight some of the capital accomplishments this past quarter. We also have a pipeline which could enable us to double rental revenue from January of 2018 to December 2022. The strongest client tenant base with 53% of our annual rental revenue from investment-grade, or publicly traded, large-cap client tenants with a weighted average lease term of 8.4 years. In addition, a robust Q2 cash same-store growth number that Dean will talk about as well. Steve will highlight our robust cash releasing spreads this past quarter.

As we sit here after the close of the second quarter were really are very proud on a couple of aspects I think weve reached a point, where we can say, we really have built a fortress balance sheet.

With over $3.4 billion on liquidity and a weighted average remaining term of greater than 10 years and Dean will highlight some of the capital.

Accomplishments. This past quarter, we also have a pipeline, which will enable which could enable us to double rental revenue from January 2018 to December 2022.

The strongest client tenant base with 53% of our annual rental revenue from investment grade or publicly traded large cap client tenants with a weighted average lease term of 8.4 years. In addition, a robust two Q cash same store growth number that Dean will talk about as well and Steve will highlight our robust cash re leasing spreads this past quarter.

Joel Marcus: We're very proud of a very strong value-add pipeline leading into 2020 with significant positive activity in each one of our markets, including the 88 Bluxome win, which is a really big win and a very unique one Steve will talk about. Notably, we increased our quarterly dividend 3.1% during Q2 as well. In July, we were proud to be notified that we were selected by NAIOP as the 2019 NAIOP Developer of the Year for our outstanding design work, sustainable outcomes, scientific prowess, and connected campuses driven by our unique and differentiated mission and deep thoughtfulness toward enhancing the communities in which we work. If we focus for a moment on the next life science frontier, it's pretty clear that the sheer scale of unmet medical need for patients suffering from diseases of the brain is quite staggering. The cost to society is enormous.

And we're very proud of a very strong value add pipeline, leading into 2020 with significant positive activity in each one of our.

We're very proud of a very strong value-add pipeline leading into 2020 with significant positive activity in each one of our markets, including the 88 Bluxome win, which is a really big win and a very unique one Steve will talk about. Notably, we increased our quarterly dividend 3.1% during Q2 as well. In July, we were proud to be notified that we were selected by NAIOP as the 2019 NAIOP Developer of the Year for our outstanding design work, sustainable outcomes, scientific prowess, and connected campuses driven by our unique and differentiated mission and deep thoughtfulness toward enhancing the communities in which we work. If we focus for a moment on the next life science frontier, it's pretty clear that the sheer scale of unmet medical need for patients suffering from diseases of the brain is quite staggering. The cost to society is enormous.

Hum markets, including the 88 Bloxom win which is a really big win in a very unique one stable.

Talk about.

Notably, we increased our dividends our quarterly dividend, 3.1% during the second quarter as well.

In July we are proud to be notified that we were selected by May up as the 2019 day up developer of the year.

For our outstanding design.

Work sustainable outcomes scientific prowess and connected campuses driven by our unique and differentiated mission and deep thoughtful mess toward enhancing.

The communities in which we work.

And if we focus for a moment on the next life Science frontier.

It's pretty clear that the sheer scale of unmet medical need for patients suffering from diseases of the brain is quite staggering the cost to society enormous.

Just the nine most common neurological diseases are estimated to cost the United States 800 billion a year.

Joel Marcus: Just the nine most common neurological diseases are estimated to cost the United States $800 billion a year. Dementia today affects 50 million people worldwide and 10 million new cases diagnosed every year. Alzheimer's alone affects almost 6 million Americans, and more than 1 million Americans live with Parkinson's at a total cost of about $50+ billion a year, nearly double previous estimates. It's estimated by 2050 that more than 12 million Americans will suffer from some form of neurodegenerative disease.

Just the nine most common neurological diseases are estimated to cost the United States $800 billion a year. Dementia today affects 50 million people worldwide and 10 million new cases diagnosed every year. Alzheimer's alone affects almost 6 million Americans, and more than 1 million Americans live with Parkinson's at a total cost of about $50+ billion a year, nearly double previous estimates. It's estimated by 2050 that more than 12 million Americans will suffer from some form of neurodegenerative disease.

Dimension today effects 50 million people worldwide, and 10 million new cases diagnosed every year Alzheimer's alone effects, almost 6 million Americans and more than 1 million Americans live with Parkinson's.

At a total cost of about 50 plus billion dollars a year nearly double previous estimates.

It's estimated by 2050 that more than 12 million Americans will suffer from some form of Neurodegenerative disease in the realm of psychiatric diseases nearly one in five adults almost 50 million people experienced some form of mental illness in a given year costing our economy almost $200 billion in lost earnings alone while approximately one in 25 people 11 million.

Joel Marcus: In the realm of psychiatric diseases, nearly one in five adults, almost 50 million people, experience some form of mental illness in a given year, costing our economy almost $200 billion in lost earnings alone, while approximately one in 25 people, 11 million daily, suffer from a form of mental illness, depression, now the leading cause of disability worldwide, and has become the major contributor to global burden of disease. On the addiction front, and we touched upon our efforts in the opioid abuse area last quarter, the abuse of illicit drugs as well as alcohol and tobacco in the US is costing us almost three-quarters of a billion, I'm sorry, three-quarters of a trillion dollars annually, related and cost-related to crime, lost work, productivity, and healthcare.

In the realm of psychiatric diseases, nearly one in five adults, almost 50 million people, experience some form of mental illness in a given year, costing our economy almost $200 billion in lost earnings alone, while approximately one in 25 people, 11 million daily, suffer from a form of mental illness, depression, now the leading cause of disability worldwide, and has become the major contributor to global burden of disease. On the addiction front, and we touched upon our efforts in the opioid abuse area last quarter, the abuse of illicit drugs as well as alcohol and tobacco in the US is costing us almost three-quarters of a billion, I'm sorry, three-quarters of a trillion dollars annually, related and cost-related to crime, lost work, productivity, and healthcare.

Daily.

Suffer from a form of mental illness depression, now the leading cause of disability worldwide and has become the major contributor to global burden of disease on the addiction front and we touched upon our efforts in the opioid abuse.

Area last quarter, the abuse of illicit illicit drugs as well as alcohol and tobacco in the US is costing us almost three quarters of a billion Im sorry, three quarters of a trillion dollars annually.

Related and costs related to crime loss work productivity in healthcare the ongoing epidemic.

Joel Marcus: The ongoing opioid epidemic is now estimated to cost the US over $500 billion annually, largely driven by the immense scale of preventable fatalities caused by opioid overdoses, where on average 130 Americans die each and every day. Imagine if that was in a war, how that would be covered by the press. Discovering new treatments and cures for disease of the brain has become a goal of ever-increasing urgency and one on which Alexandria is super laser-focused on with our financial capital as well as our human capital. And with that, let me turn it over to Steve to give some highlights of the quarter.

The ongoing opioid epidemic is now estimated to cost the US over $500 billion annually, largely driven by the immense scale of preventable fatalities caused by opioid overdoses, where on average 130 Americans die each and every day. Imagine if that was in a war, how that would be covered by the press. Discovering new treatments and cures for disease of the brain has become a goal of ever-increasing urgency and one on which Alexandria is super laser-focused on with our financial capital as well as our human capital. And with that, let me turn it over to Steve to give some highlights of the quarter.

Uhhuh epidemic is now estimated cost of the U.S. over $500 billion annually annually largely driven by the immense scale up preventable.

Fatalities caused by.

Opioid overdoses were on average 130 Americans die each and every day I imagine if that was in a war how that would be covered by the press discovering new treatments and cures for diseases of the brain is become a goal of ever increasing urgency and one on which Alexandria.

Super laser focused on with our financial capital as well as our human capital and with that let me turn it over to Steve to give some highlights of the quarter.

Steve Richardson: Thank you, Joel. Steve here. We're very pleased to report the company's unique cluster campus business model is not only driving superior operating and financial results, but it continues to provide tremendous value to our tenants and stakeholders. Alexandria's dominant franchise and brand, its best-in-class team and highly differentiated campuses, continue to exceed expectations and drive significant internal and external growth opportunities for the company. I'll provide a granular analysis of the following key clusters and metrics. In the Mission Bay SOMA submarket, Alexandria's leadership role dating back from 2004 in establishing Mission Bay as one of the country's most vital life science translational research clusters has and continues to provide significant value. Our campuses, totaling 2.7 million sq ft, have been nearly 100% leased for a number of years. Our lab vacancy is 0%, and the tech vacancy in the market is 1.3%.

Thank you Joel Steve here, we're very pleased to report the company's unique cluster campus business model is not only driving superior operating and financial results, but it continues to provide tremendous value to our tenants and stakeholders.

Alexandria is dominant franchise and brand its best in class team and highly differentiated campuses continue to exceed expectations and drive significant internal and external growth opportunities for the company.

I will provide a granular analysis of the following key clusters and metrics.

In the mission Bay Soma Submarket Alexandrias leadership role dating back from 2004 in establishing mission Bay is one of the country's most vital life science translational research clusters has.

And continues to provide significant value.

Our campuses totaling 2.7 million square feet have been nearly 100% leased for a number of years.

Or lab vacancy is zero percent and the tech they can see in the market is 1.3%.

Steve Richardson: Lease rates for existing lab and tech space are now in the high 60s to low 70s triple net, while we anticipate new deliveries to exceed 80s triple net. Significant lease transactions include Pinterest's 488,000 sq ft lease at Alexandria's unique 88 Bluxome project in SOMA, which we'll discuss later, as well as Sony leasing 130,000 sq ft, Autodesk 117,000 sq ft, Glassdoor 116,000 sq ft, Samsara 116,000 sq ft, Workday 74,000 sq ft, and Zoom 64,000 sq ft. Just want to highlight it's very important to note the overall high regard, respect, and leadership position of Alexandria, as was epitomized by last week's decision by the San Francisco Planning Commission to provide Alexandria with the only full project approval and Prop M allocation for our new Class A+ game-changing 88 Bluxome mixed-use urban campus in SOMA.

Lease rates for existing lab and tech space are now in the high 60s to low 70s triple net, while we anticipate new deliveries to exceed 80s triple net. Significant lease transactions include Pinterest's 488,000 sq ft lease at Alexandria's unique 88 Bluxome project in SOMA, which we'll discuss later, as well as Sony leasing 130,000 sq ft, Autodesk 117,000 sq ft, Glassdoor 116,000 sq ft, Samsara 116,000 sq ft, Workday 74,000 sq ft, and Zoom 64,000 sq ft. Just want to highlight it's very important to note the overall high regard, respect, and leadership position of Alexandria, as was epitomized by last week's decision by the San Francisco Planning Commission to provide Alexandria with the only full project approval and Prop M allocation for our new Class A+ game-changing 88 Bluxome mixed-use urban campus in SOMA.

Lease rates for existing lab and tech space is now in the high Sixtys to low Seventys Triple net.

While we anticipate new deliveries to exceed Eightys triple net.

Significant lease transactions include Pentrust 488000 square feet lease at Alexandria. This unique 88 Bucks on project in Soma, which we'll discuss later as well as Sony leasing 130000 square feet Autodesk 117000 square feet.

Last year were 116000 square feet same Sarah 116000 square feet Workdays 74000 square feet engines 64000 square feet.

Just want to highlight its very important to note. The overall high regard respect and leadership position of Alexandria.

As was epitomized by last week's decision by the San Francisco Planning Commission to provide Alexandria with the only full project approval in prop M allocation for our new class a plus game changing 88 Bucks a mixed use urban campus in Soma.

Steve Richardson: I just want to step back and take a moment to say how proud we are of the company and the team for this accomplishment, as we were very thoughtful at the very outset to embrace exceptional design, sustainability, and very importantly, the community and its needs, all resulting in a full project approval and the only central SOMA project to have secured an anchor tenant, Pinterest, and now nearly 60% leased. We are very honored to have received this overwhelmingly positive endorsement from both the city and the community. Moving further south in South San Francisco, we're very well positioned in this submarket. Our campuses, totaling 2.2 million sq ft, are 99.3% leased, including the delivery of Merck's Class A 300,000 sq ft innovation center at the start of 2019.

I just want to step back and take a moment to say how proud we are of the company and the team for this accomplishment, as we were very thoughtful at the very outset to embrace exceptional design, sustainability, and very importantly, the community and its needs, all resulting in a full project approval and the only central SOMA project to have secured an anchor tenant, Pinterest, and now nearly 60% leased. We are very honored to have received this overwhelmingly positive endorsement from both the city and the community. Moving further south in South San Francisco, we're very well positioned in this submarket. Our campuses, totaling 2.2 million sq ft, are 99.3% leased, including the delivery of Merck's Class A 300,000 sq ft innovation center at the start of 2019.

I just want to step back and take a moment to say how proud we are.

Of the company in the team for this accomplishment as we were very thoughtful at the very outset to embrace exceptional design sustainability and very importantly, the community and its needs all resulting in.

A full project approval and the only central Soma project to have secured an anchor tenant interest and now nearly 60% leased we're very honored to have received this overwhelmingly positive endorsement from both the city and the community.

Moving further south in South San Francisco, we're very well positioned in this submarket our campuses totaling 2.2 million square feet are 99.3% leased including the delivery of Merck's class a 300000 square foot innovation center at the start of 2019.

We've taken a balanced and prudent approach to expanding or sell to read Cisco campuses and are very pleased with the leasing progress at our new ground up 315000 square foot two building campus on Haskins drive with assigned L. alive for nearly 30% of this space.

Steve Richardson: We've taken a balanced and prudent approach to expanding our South San Francisco campuses, and we're very pleased with the leasing progress at our new ground-up 315,000 square feet two-building campus on Haskins Drive with a signed LOI for nearly 30% of the space. The South San Francisco vacancy rate is just 2.9%, but we are closely watching the supply pipeline with the potential for significant blocks of space coming to market if speculative construction by others were to advance, as this is ultimately a submarket and not a cluster centered around a world-class institution like UCSF. Thus, our careful prudence here. Lease rates are now in the mid- to high $60s triple net, and new leases in South San Francisco include Atreca for 75,000 square feet, Cytokinetics for 235,000 square feet, and Tolerion for 25,000 square feet.

We've taken a balanced and prudent approach to expanding our South San Francisco campuses, and we're very pleased with the leasing progress at our new ground-up 315,000 square feet two-building campus on Haskins Drive with a signed LOI for nearly 30% of the space. The South San Francisco vacancy rate is just 2.9%, but we are closely watching the supply pipeline with the potential for significant blocks of space coming to market if speculative construction by others were to advance, as this is ultimately a submarket and not a cluster centered around a world-class institution like UCSF. Thus, our careful prudence here. Lease rates are now in the mid- to high $60s triple net, and new leases in South San Francisco include Atreca for 75,000 square feet, Cytokinetics for 235,000 square feet, and Tolerion for 25,000 square feet.

The South San Francisco vacancy rate is just 2.9%.

But we are closely watching the supply pipeline with the potential for significant blocks of space coming to market in speculative construction by others were to advance as this is ultimately a sub market and not a cluster centered around a world class institution like you CSF, thus our careful prudence here.

Lease rates are now in the mid to high 60, Triple net and new leases in South San Francisco include a trigger for 75000 square feet Cytogenetics for 235000 square feet and to Larry on for 25000 square feet.

Finally.

Steve Richardson: Finally, talking about leasing and same-store performance, which was stellar this past quarter, we leased 819,000 sq ft this quarter for a total now of 2 million sq ft in the first half of 2019. Again, a testament to Alexandria's world-class leasing and operations team. 61% of these leases are early renewals, so it's very clear that there's a continued sense of urgency in our campuses. Historical increases in renewals and releasing rates for this quarter: 17.8% cash and 32.5% gap for the 580,000 sq ft in this pool. And when you look at a same-store growth of 9.5% cash basis split roughly between the burn-off of concessions and step-ups, a very, very healthy and a very stellar quarter. And on that note, I'll hand it off to Peter.

Finally, talking about leasing and same-store performance, which was stellar this past quarter, we leased 819,000 sq ft this quarter for a total now of 2 million sq ft in the first half of 2019. Again, a testament to Alexandria's world-class leasing and operations team. 61% of these leases are early renewals, so it's very clear that there's a continued sense of urgency in our campuses. Historical increases in renewals and releasing rates for this quarter: 17.8% cash and 32.5% gap for the 580,000 sq ft in this pool. And when you look at a same-store growth of 9.5% cash basis split roughly between the burn-off of concessions and step-ups, a very, very healthy and a very stellar quarter. And on that note, I'll hand it off to Peter.

Talking about leasing and same store performance, which was stellar this past quarter.

We leased 819000 square feet this quarter for a total now of 2 million square feet in the first half of 2019.

Again, a testament to Alexandria is world class leasing and operations team.

61% of these leases are early renewals. So it's very clear that there is a continued sense of urgency.

In our campuses.

Historical increases in renewals and re leasing rates for this quarter, 17.8% cash and 32.5% gap for the 580000 square feet in this pool.

And when you look at a same store growth of 9.5% cash basis.

Split roughly between the burn off of concessions and step ups.

A very very healthy in a very stellar quarter and on that note I'll hand, it off to Peter.

Thank you Steve This is Peter Moglia everybody.

Peter M. Moglia: Thank you, Steve. This is Peter M. Moglia, everybody. I'm going to spend the next few minutes updating you on our near-term pipeline, our acquisition in the Seaport area of Boston, and give you some thoughts on recent capital flows into the life science real estate area. During Q2, we placed 218,061 sq ft into service from six different 2019 deliveries that I'll touch on. In South San Francisco, we delivered 24,396 sq ft of our 279 East Grand project anchored by Alphabet's life science subsidiary Verily. We've now delivered 78% of that project at a very strong yield of over 8%.

Peter Moglia: Thank you, Steve. This is Peter M. Moglia, everybody. I'm going to spend the next few minutes updating you on our near-term pipeline, our acquisition in the Seaport area of Boston, and give you some thoughts on recent capital flows into the life science real estate area. During Q2, we placed 218,061 sq ft into service from six different 2019 deliveries that I'll touch on. In South San Francisco, we delivered 24,396 sq ft of our 279 East Grand project anchored by Alphabet's life science subsidiary Verily. We've now delivered 78% of that project at a very strong yield of over 8%.

Im going to spend the next few minutes updating you on our near term pipeline our acquisition in the seaport area of Boston and give you some thoughts on recent capital flows into the life Science real estate area.

During the second quarter, we placed 218061 square feet into service from six different 2019 deliveries that I'll touch on in South San Francisco, We delivered 24396 square feet of our 200 279 East Grand project anchored by alphabet life Science subsidiary Virally.

We've now delivered 78% of that project at a very strong yield of over 8%.

Peter M. Moglia: We delivered another 27,164 sq ft at 188 East Blaine, our new flagship property on Lake Union in Seattle, and are on track to meet or exceed our pro forma cash yield on cost of 6.7%, which is very strong when considering Class A operating assets in this market continue to trade at sub 4.5% yields. 12,822 sq ft was delivered at 266 and 275 Second Avenue in Waltham, and that property is now fully leased with the remaining 19,000 sq ft under construction and expected to be delivered in Q4. The initial stabilized cash yield on this redevelopment is 7.1% in a market where stabilized lab buildings have historically traded in the low 6% range.

We delivered another 27,164 sq ft at 188 East Blaine, our new flagship property on Lake Union in Seattle, and are on track to meet or exceed our pro forma cash yield on cost of 6.7%, which is very strong when considering Class A operating assets in this market continue to trade at sub 4.5% yields. 12,822 sq ft was delivered at 266 and 275 Second Avenue in Waltham, and that property is now fully leased with the remaining 19,000 sq ft under construction and expected to be delivered in Q4. The initial stabilized cash yield on this redevelopment is 7.1% in a market where stabilized lab buildings have historically traded in the low 6% range.

We delivered another 27164 square feet at one eight A. East Blaine, our new flagship property on Lake Union, and Seattle and are on track to meet or exceed our pro forma cash yield on cost of 6.7%, which is very strong when considering class a operating assets in this market continue to trade at sub 4.5% yields.

12822 square feet was delivered at 266 in 275 second Avenue in Waltham and that property is now fully leased with the remaining 19000 square feet under construction.

And expected to be delivered in the fourth quarter.

The initial stabilized cash yield on this redevelopment is 7.1% in a market where stabilized lab buildings have historically traded in the low 6% range.

A significant portion of phase one of Alexandria Center for AG Tech located in the research triangle market was delivered in the second quarter, bringing that highly unique 97% leased project to 74% delivered.

Peter M. Moglia: A significant portion of Phase I of Alexandria's Center for AgTech located in the Research Triangle market was delivered in Q2, bringing that highly unique 97% leased project to 74% delivered. We delivered the remaining 76,400sq ft of 681 Gateway in South San Francisco this quarter and, more importantly, increased the pro forma initial cash yield from 7.9% to 8.2%. Completing Q2 deliveries was 3,450sq ft at our multi-tenant 80,000sq ft building at 704 Quince Orchard Road in Gaithersburg, Maryland, where we remain on track to deliver an outsized 8.8% initial stabilized cash yield. Looking further out, our 2020 development redevelopment pipeline currently consists of about 2.2 million sq ft, and Dean provides some high-level information on his commentary. Next, I'd like to talk a little bit about our Seaport acquisition.

A significant portion of Phase I of Alexandria's Center for AgTech located in the Research Triangle market was delivered in Q2, bringing that highly unique 97% leased project to 74% delivered. We delivered the remaining 76,400sq ft of 681 Gateway in South San Francisco this quarter and, more importantly, increased the pro forma initial cash yield from 7.9% to 8.2%. Completing Q2 deliveries was 3,450sq ft at our multi-tenant 80,000sq ft building at 704 Quince Orchard Road in Gaithersburg, Maryland, where we remain on track to deliver an outsized 8.8% initial stabilized cash yield. Looking further out, our 2020 development redevelopment pipeline currently consists of about 2.2 million sq ft, and Dean provides some high-level information on his commentary. Next, I'd like to talk a little bit about our Seaport acquisition.

We delivered the remaining 76400 square feet of 681 gateway in South San Francisco this quarter.

And more importantly increase the pro forma initial cash yield cash yield from 7.9% to 8.2%.

Completing second quarter deliveries was 3450 square feet at our multi tenant 80000 square foot building at seven or four Quince Orchard Road and get his brick, Maryland, where we remain on track to deliver an outsized 8.8% initial stabilized cash yield.

Looking further out our 2020 development redevelopment pipeline. Currently consists of about 2.2 million square feet and Dean will provide some high level information on this commentary are on his commentary next I'd like to talk a little bit about our seaport acquisition the acquisition of five and 15 nacco.

Peter M. Moglia: The acquisition of 5 and 15 Necco, also known as Innovation Point, represents a strategic opportunity to expand Alexandria's unparalleled world-class franchise in the greater Boston area. Innovation Point, in part, delivers a fully renovated 95,000 sq ft historic building, 5 Necco Street, that will be the global headquarters for GE. GE will occupy approximately 75,000 sq ft or all of the office space in the building for a 12-year term. It also provides Alexandria the opportunity to deliver an iconic 330,000- to 360,000-sq ft world-class life science building with a robust and vibrant set of retail and ground floor amenities at 15 Necco Street, and the existing approvals that reside there will enable us to expedite the entitlements and likely put us in a position to break ground in early 2020.

The acquisition of 5 and 15 Necco, also known as Innovation Point, represents a strategic opportunity to expand Alexandria's unparalleled world-class franchise in the greater Boston area. Innovation Point, in part, delivers a fully renovated 95,000 sq ft historic building, 5 Necco Street, that will be the global headquarters for GE. GE will occupy approximately 75,000 sq ft or all of the office space in the building for a 12-year term. It also provides Alexandria the opportunity to deliver an iconic 330,000- to 360,000-sq ft world-class life science building with a robust and vibrant set of retail and ground floor amenities at 15 Necco Street, and the existing approvals that reside there will enable us to expedite the entitlements and likely put us in a position to break ground in early 2020.

Also known as innovation point represents a strategic opportunity to expand Alexandrias unparalleled world class franchise in the greater Boston area.

Innovation point in part delivers a fully renovated 95000 square foot historic building five Nacco Street that will be the global headquarters for GE GE will occupy approximately 75000 square feet or all of the office space in the building for a 12 year term. It also provides alexandria the opportunity to deliver an iconic 330000 to 360000 square foot World Class Life Science building with a robust and vibrant set of retail and ground floor amenities at 15, Nacco Street and the existing approvals that reside there will enable us to expedite the entitlements and likely put us in a position to break ground in early 2020.

Peter M. Moglia: When combined with our adjacent 10 Necco asset, the acquisition provides Alexandria the opportunity to scale this campus to between 600,000 and 650,000 sq ft over time. Finally, in light of substantial capital flowing into the life science real estate niche, we created and pioneered. We'd like to remind investors and analysts that there have been others in many of our markets for a number of years. It has not affected our ability to grow and thrive in any of them because Alexandria is much more than a landlord or capital allocator. We are a long-term, highly ethical, and trusted partner to our tenants who put their mission-critical facilities needs into our hands because they know we have the long-tenured and highly respected experience and expertise to build and operate them to the highest standard. We understand their science, business, and strategic goals.

When combined with our adjacent 10 Necco asset, the acquisition provides Alexandria the opportunity to scale this campus to between 600,000 and 650,000 sq ft over time. Finally, in light of substantial capital flowing into the life science real estate niche, we created and pioneered. We'd like to remind investors and analysts that there have been others in many of our markets for a number of years. It has not affected our ability to grow and thrive in any of them because Alexandria is much more than a landlord or capital allocator. We are a long-term, highly ethical, and trusted partner to our tenants who put their mission-critical facilities needs into our hands because they know we have the long-tenured and highly respected experience and expertise to build and operate them to the highest standard. We understand their science, business, and strategic goals.

When combined with our adjacent 10 Nacco asset the acquisition provides Alexandria, the opportunity to scale. This campus to between 606 hundred 50000 square feet over time.

Finally in light of substantial capital flowing into the life science real estate niche, we created and pioneered we'd like to remind investors and analysts that there have been others in many of our markets for a number of years. It has not affected our ability to grow and thrive in any of them because alexandria is much more than a landlord or capital allocator. We are a long term highly ethical and trusted partner to our tenants who put their mission critical facilities needs into our hands because they know we have a long tenured and highly respected experience and expertise to build and operate them to the highest standards.

We understand their science business and strategic goals, we provide highly curated cluster campus environments that accommodate their growth and allow them to recruit and retain the industry's best talent. We are solidly positioned to continue to lead this ecosystem and building the future of life changing innovation and with that I'll pass it over to Dave.

Peter M. Moglia: We provide highly curated cluster campus environments that accommodate their growth and allow them to recruit and retain the industry's best talent. We are solidly positioned to continue to lead this ecosystem in building the future of life-changing innovation. And with that, I'll pass it over to Dean. All right. Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. I'll briefly cover 5 key topics today, including our second quarter results and continued strength from both internal and external growth, our very strong balance sheet today, our recently published corporate responsibility report, venture investments, and then lastly, our updated guidance for 2019. Total revenues for the second quarter were up a significant 15% over the second quarter of 2018, reflecting continued outstanding execution by our best-in-class team. Our Adjusted EBITDA margins continue to remain near the top of the REIT industry at approximately 79% for the second quarter.

We provide highly curated cluster campus environments that accommodate their growth and allow them to recruit and retain the industry's best talent. We are solidly positioned to continue to lead this ecosystem in building the future of life-changing innovation. And with that, I'll pass it over to Dean.

Dean Shigenaga: All right. Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. I'll briefly cover 5 key topics today, including our second quarter results and continued strength from both internal and external growth, our very strong balance sheet today, our recently published corporate responsibility report, venture investments, and then lastly, our updated guidance for 2019. Total revenues for the second quarter were up a significant 15% over the second quarter of 2018, reflecting continued outstanding execution by our best-in-class team. Our Adjusted EBITDA margins continue to remain near the top of the REIT industry at approximately 79% for the second quarter.

Thanks, Peter Dean Shigenaga here good afternoon, everyone I'll briefly cover five key topics today, including our second quarter results and continued strength from both internal and external growth.

Our very strong balance sheet today, our recently published corporate responsibility report venture investments.

And then lastly, our updated guidance for 2019.

Total revenues for the second quarter were up a significant 15% over the second quarter of 2018, reflecting continued outstanding execution by our best in class team.

Our adjusted EBITDA margins continue to remain near the top of the Riet industry at approximately 79% for the second quarter.

Peter M. Moglia: Same-property NOI growth for Q2 was up 4.3% and significantly at 9.5% on a cash basis as compared to the second quarter of 2018. Our team executed very well across key drivers of our same-property results. We completed an outstanding volume of leasing activity in the first half of 2019, aggregating 2.1 million sq ft, including 1.1 million rentable sq ft related to lease renewals and re-leasing space, with very strong growth in rental rates of 32.6% and 20.1% on a cash basis over the expiring rental rates. Very strong execution of leasing supports our high and stable occupancy in our same-property pool, approximately 96% to 96.5% for both the second quarter and the first half of 2019. Our very favorable lease structure, with annual contractual rent escalations approximately about 3%, drives growth in same-property cash NOI year to year.

Same property NOI growth for Twoq, you was up 4.3%.

Same-property NOI growth for Q2 was up 4.3% and significantly at 9.5% on a cash basis as compared to the second quarter of 2018. Our team executed very well across key drivers of our same-property results. We completed an outstanding volume of leasing activity in the first half of 2019, aggregating 2.1 million sq ft, including 1.1 million rentable sq ft related to lease renewals and re-leasing space, with very strong growth in rental rates of 32.6% and 20.1% on a cash basis over the expiring rental rates. Very strong execution of leasing supports our high and stable occupancy in our same-property pool, approximately 96% to 96.5% for both the second quarter and the first half of 2019. Our very favorable lease structure, with annual contractual rent escalations approximately about 3%, drives growth in same-property cash NOI year to year.

And significantly at 9.5% on a cash basis as compared to the second quarter of 2018.

Our team executed very well across key drivers are of our same property results. We completed an outstanding volume of leasing activity in the first half of 19.

Our grading 2.1 million square feet, including 1.1 million rentable square feet related to lease renewals and releasing a space with very strong growth in rental rates of 32.6% and 20.1% on a cash basis over the expiring rental rates.

Very strong execution of leasing supports our high and stable occupancy in our same property pool approximating 96% to 96.5%.

For both both the second quarter and the first half of 2019.

And our very favorable lease structure with annual rent annual contractual rent escalations approximately about 3%.

Drives growth and same property cash NOI year to year.

Continued strong external growth and a few important key highlights for you today.

Peter M. Moglia: Continued strong external growth and a few important key highlights for you today. Now that we're just about mid-year through 2019, it's clear our team has executed extremely well on the delivery of projects in the first half of the year, with a number of highly leased projects aggregating about 1.5 million rentable sq ft targeted for the delivery through the remainder of 2019. Our team has also done an outstanding job this year working with key relationships in the life science industry and successfully executed almost 950,000 rentable sq ft of leasing related to the development and redevelopment projects. As Peter mentioned, we have grown our pipeline to about 2.2 million sq ft of projected deliveries with initial occupancy in 2020, which are weighted to the second half of 2020, and we will have more details to share over the next two quarters.

Continued strong external growth and a few important key highlights for you today. Now that we're just about mid-year through 2019, it's clear our team has executed extremely well on the delivery of projects in the first half of the year, with a number of highly leased projects aggregating about 1.5 million rentable sq ft targeted for the delivery through the remainder of 2019. Our team has also done an outstanding job this year working with key relationships in the life science industry and successfully executed almost 950,000 rentable sq ft of leasing related to the development and redevelopment projects. As Peter mentioned, we have grown our pipeline to about 2.2 million sq ft of projected deliveries with initial occupancy in 2020, which are weighted to the second half of 2020, and we will have more details to share over the next two quarters.

Now that we're about.

Just about mid year through 2019, it's clear our team has executed extremely well on the delivery of projects in the first half of the year with a number of highly leased projects aggregating about 1.5 million rentable square feet targeted for the delivery through the remainder of 2019.

Our team has also done an outstanding job this year working with key relationships in the life science industry and successfully executed almost 950000 rentable square feet of leasing related to the development and redevelopment projects.

As Peter mentioned, we have grown our pipeline to about 2.2 million square feet of projected deliveries with initial occupancy in 2020.

Which are weighted to the second half of 20.

And we will have more details to share over the next two quarters in aggregate our projects undergoing above ground vertical construction with initial delivery dates through 2020 are now 74% leased.

Peter M. Moglia: In aggregate, our projects undergoing above-ground vertical construction with initial delivery dates through 2020 are now 74% leased, plus an additional 5% under advanced negotiations. We also have a pipeline of strategic growth opportunities on balance sheet, including certain pending acquisitions, providing important visibility of potential deliveries beyond 2020, aggregating 10 million sq ft. Our team has placed our balance sheet in a very strong position today with significant flexibility. Our strategic pursuit of opportunities to refinance outstanding debt, and extend our maturity profile with attractive, low-cost, long-term fixed-rate debt continued into 2019 for the third year in a row. In March and July of 2019 alone, we raised $2.1 billion with a weighted average coupon of 3.86% and an amazing term of almost 18 years.

In aggregate, our projects undergoing above-ground vertical construction with initial delivery dates through 2020 are now 74% leased, plus an additional 5% under advanced negotiations. We also have a pipeline of strategic growth opportunities on balance sheet, including certain pending acquisitions, providing important visibility of potential deliveries beyond 2020, aggregating 10 million sq ft. Our team has placed our balance sheet in a very strong position today with significant flexibility. Our strategic pursuit of opportunities to refinance outstanding debt, and extend our maturity profile with attractive, low-cost, long-term fixed-rate debt continued into 2019 for the third year in a row. In March and July of 2019 alone, we raised $2.1 billion with a weighted average coupon of 3.86% and an amazing term of almost 18 years.

Plus an additional 5% under advanced negotiations.

We also have a pipeline of strategic growth opportunities on balance sheet, including certain pending acquisitions, providing important visibility of potential deliveries beyond 2020.

Aggregating 10 million square feet.

Our team has placed our balance sheet in a very strong position today with significant flexibility our strategic pursuit of opportunities to refinance outstanding debt and extend our maturity profile with attractive low cost long term fixed rate debt continued into 2019 for the third year in a row.

In March and July of 2019 alone, we raised 2.1 billion.

With a weighted average coupon of 3.86%.

And an amazing term of almost 18 years. The proceeds of our most recent 1.25 billion bond offering in July were used primarily to execute a tender and redemption of our outstanding bonds that were scheduled to mature in 2020 and 2022.

Peter M. Moglia: The proceeds of our most recent $1.25 billion bond offering in July were used primarily to execute a tender and redemption of our outstanding bonds that were scheduled to mature in 2020 and 2022. Upon completion of the redemption of our remaining outstanding 2020 and 2022 bonds later in August here, we will be in a really amazing position with no debt maturities until 2023. We have no significant remaining debt capital requirements for 2019. However, we are working with one of our JV partners on a potential early refinancing of a construction loan, which has a maturity today of 2021. Weighted average remaining term of our debt is truly outstanding and has been extended to 10.1 years and notably is longer than our weighted average remaining lease term of 8.4 years.

The proceeds of our most recent $1.25 billion bond offering in July were used primarily to execute a tender and redemption of our outstanding bonds that were scheduled to mature in 2020 and 2022. Upon completion of the redemption of our remaining outstanding 2020 and 2022 bonds later in August here, we will be in a really amazing position with no debt maturities until 2023. We have no significant remaining debt capital requirements for 2019. However, we are working with one of our JV partners on a potential early refinancing of a construction loan, which has a maturity today of 2021. Weighted average remaining term of our debt is truly outstanding and has been extended to 10.1 years and notably is longer than our weighted average remaining lease term of 8.4 years.

Upon completion of the redemption of our remaining outstanding 2020, and 2022 bonds.

Later in August here, we will be in a really amazing position with no debt maturities until 2023.

We have no significant remaining debt capital requirements for 2019. However, we are working with one of our JV partners on a potential early refinancing of a construction loan which has a maturity today of 2021.

Weighted average remaining term of our debt is truly outstanding and has been extended to 10.1 years, and notably is longer than our weighted average remaining lease term of 8.4 years.

Peter M. Moglia: During Q2, we also completed transactions aggregating 8.7 million shares of common stock at a weighted average price of $144.50 per share for proceeds that ultimately will generate $1.2 billion. $86 million of this closed in Q2. 8.1 million shares do remain subject to forward equity sale agreements that we expect to settle in 2019. We've got tremendous liquidity, as Joel highlighted earlier, of $3.4 billion. Our net debt to adjusted EBITDA and fixed charge coverage ratios remain very solid and is on track for our goal of 5.3 and greater than 4 times, respectively, by Q4. As a mission-driven urban office REIT really focused on making a positive and lasting impact on the world, we're truly honored to highlight our recently published annual corporate responsibility report and our focus on leadership in environmental, social, and governance matters.

During Q2, we also completed transactions aggregating 8.7 million shares of common stock at a weighted average price of $144.50 per share for proceeds that ultimately will generate $1.2 billion. $86 million of this closed in Q2. 8.1 million shares do remain subject to forward equity sale agreements that we expect to settle in 2019. We've got tremendous liquidity, as Joel highlighted earlier, of $3.4 billion. Our net debt to adjusted EBITDA and fixed charge coverage ratios remain very solid and is on track for our goal of 5.3 and greater than 4 times, respectively, by Q4. As a mission-driven urban office REIT really focused on making a positive and lasting impact on the world, we're truly honored to highlight our recently published annual corporate responsibility report and our focus on leadership in environmental, social, and governance matters.

During the second quarter. We also completed transactions aggregating 8.7 million shares of common stock at a weighted average price of $144.50 per share.

For proceeds that ultimately will generate $1.2 billion.

$86 million of this.

Closed in the second quarter.

8.1 million shares do remain subject to forward equity sale agreements that we expect to settle in 2019.

We've got tremendous liquidity as Joe highlighted highlighted earlier at 3.4 billion.

Our net debt to adjusted EBITDA and fixed charge coverage ratios remain very solid and is on track for our goal of 5.3 and greater than four times, respectively by the fourth quarter.

As a mission driven urban office rate really focused on making a positive and lasting impact on the world. We're truly honored to highlight our recently published annual corporate responsibility report and our focus on leadership in environmental social and governance matters. It's important to also recognize that our strategic business initiatives are well aligned with those of our highly innovative client tenants really highlighting the importance of our initiatives.

Peter M. Moglia: It's important to also recognize that our strategic business initiatives are well aligned with those of our highly innovative client tenants, really highlighting the importance of our initiatives. Key highlights from our corporate responsibility report include 58 LEED certified or in-process certifications that, upon completion, represent over 50% of our annual rental revenue. Recognition as a leader in workplace health and wellness and key philanthropy initiatives with over 2,600 volunteer hours by our team and key social initiatives like our partnership with Verily and Alphabet Company, really to design and develop a fully integrated campus ecosystem in Dayton, Ohio, for the full and sustained recovery of people living with the opioid addiction. Lastly, continued progress on our 2025 goals to reduce energy consumption, carbon pollution, potable water consumption, and increase our waste diversion rate.

It's important to also recognize that our strategic business initiatives are well aligned with those of our highly innovative client tenants, really highlighting the importance of our initiatives. Key highlights from our corporate responsibility report include 58 LEED certified or in-process certifications that, upon completion, represent over 50% of our annual rental revenue. Recognition as a leader in workplace health and wellness and key philanthropy initiatives with over 2,600 volunteer hours by our team and key social initiatives like our partnership with Verily and Alphabet Company, really to design and develop a fully integrated campus ecosystem in Dayton, Ohio, for the full and sustained recovery of people living with the opioid addiction. Lastly, continued progress on our 2025 goals to reduce energy consumption, carbon pollution, potable water consumption, and increase our waste diversion rate.

Highlights from our corporate responsibility report include 58, LEED certified or in process certifications.

That upon its completion represent over 50% of our annual rental revenue.

Recognition as a leader in workplace health and wellness.

And Ki philanthropy initiatives with over 2600 volunteer hours of our team and key social initiatives like our partnership with fairly and alphabet company really to design and develop a fully integrated campus ecosystem in Dayton, Ohio for the full and sustained recovery of people living with the opioid addiction.

And lastly continued progress on our 2025 goals to reduce energy consumption carbon pollution portable water consumption and increase our waste diversion rate.

We also want to congratulate our awesome team on their fourth Navarrete Gold award for communication and reporting excellence and the large cap category.

Peter M. Moglia: We also want to congratulate our awesome team on their fourth NAREIT Gold Award for communication and reporting excellence in the large cap category. Our team is really proud to be recognized for their efforts to create clear, concise, and efficient disclosures for the investment community. Thanks to our entire team and truly great work, guys. During Q2, we recognized $21.5 million of investment income, including $11.1 million of unrealized gains. In Q2, importantly, we also recognized $10.4 million of realized gains. As you look back over the last several quarters, realized gains from venture investments have averaged about $10.7 million per quarter.

We also want to congratulate our awesome team on their fourth NAREIT Gold Award for communication and reporting excellence in the large cap category. Our team is really proud to be recognized for their efforts to create clear, concise, and efficient disclosures for the investment community. Thanks to our entire team and truly great work, guys. During Q2, we recognized $21.5 million of investment income, including $11.1 million of unrealized gains. In Q2, importantly, we also recognized $10.4 million of realized gains. As you look back over the last several quarters, realized gains from venture investments have averaged about $10.7 million per quarter.

Our team is really proud to be recognized for their efforts to create clear concise and efficient disclosures for the investment community.

Thanks to our entire team and truly great work guys.

During the second quarter, we recognized $21.5 million of investment income, including $11.1 million of unrealized gains.

In the second quarter importantly, we also recognized $10.4 million of realized gains.

As you look back over the last several quarters realized gains from venture investments have averaged about 10.7 million per quarter.

Closing here on Garland guidance since our first quarter earnings call. We updated guidance on June 20th through an 8-K filing and further updated our guidance yesterday, primarily for the improvement in our outlook for 2019 rental rate growth when you compare that to expiring rates on lease renewals and releasing a space.

Peter M. Moglia: Closing here on guidance, since our Q1 earnings call, we updated guidance on 20 June through an 8-K filing and further updated our guidance yesterday, primarily for the improvement in our outlook for 2019 rental rate growth when you compare that to expiring rates on lease renewals and re-leasing of space, and our range increased by 1% at the midpoint to 28.5% and 17.5% on a cash basis. Now, this represents our second increase in our outlook for rental rates for the year. Our EPS guidance was updated to a range from $2.39 to 2.47, and we increased the midpoint of our guidance for FFO per share diluted as adjusted by $0.01 to $6.96, with an increase of the lower end of our range of guidance by $0.02.

Closing here on guidance, since our Q1 earnings call, we updated guidance on 20 June through an 8-K filing and further updated our guidance yesterday, primarily for the improvement in our outlook for 2019 rental rate growth when you compare that to expiring rates on lease renewals and re-leasing of space, and our range increased by 1% at the midpoint to 28.5% and 17.5% on a cash basis. Now, this represents our second increase in our outlook for rental rates for the year. Our EPS guidance was updated to a range from $2.39 to 2.47, and we increased the midpoint of our guidance for FFO per share diluted as adjusted by $0.01 to $6.96, with an increase of the lower end of our range of guidance by $0.02.

In our range increased by 1%.

At the midpoint to 28.5.

And 17.5% on a cash basis now this represents our second increase in our outlook for rental rates for the year. Our EPS guidance was updated to a range from $2.39 to $2.47 and we increased the midpoint of our guidance for AFFO per share diluted as adjusted by one cents to $6.96 with an increase of the lower end of our range of guidance by two cents guidance was also updated for the outstanding execution by our team on the opportunistic bond offering and refinancing of our 2020 and 2022 bonds as I highlighted earlier.

Peter M. Moglia: Guidance was also updated for the outstanding execution by our team on the opportunistic bond offering and refinancing of our 2020 and 2022 bonds, as I highlighted earlier. Please note, as we have disclosed for a number of quarters now, Cray Court, 117,000-rentable-sq-ft property located in San Diego, is now vacant, resulting in a temporary 49 basis point decline in overall occupancy by September 30th while we renovate and re-tenant this property. Additionally, it's disclosed on page 4 and page 6 of our supplemental package an acquisition of an operating property in San Diego with several buildings aggregating 560,000 rentable sq ft with in-place leases has an occupancy of 76%, and this will reduce our overall occupancy by another 57 basis points and represents an opportunity for our team to grow cash flows from this property post-acquisition.

Guidance was also updated for the outstanding execution by our team on the opportunistic bond offering and refinancing of our 2020 and 2022 bonds, as I highlighted earlier. Please note, as we have disclosed for a number of quarters now, Cray Court, 117,000-rentable-sq-ft property located in San Diego, is now vacant, resulting in a temporary 49 basis point decline in overall occupancy by September 30th while we renovate and re-tenant this property. Additionally, it's disclosed on page 4 and page 6 of our supplemental package an acquisition of an operating property in San Diego with several buildings aggregating 560,000 rentable sq ft with in-place leases has an occupancy of 76%, and this will reduce our overall occupancy by another 57 basis points and represents an opportunity for our team to grow cash flows from this property post-acquisition.

And please note as we have disclosed for a number of quarters now create Cort 117000, rentable square foot property located in San Diego is now vacant resulting in temporary a temporary 49 basis point decline in overall occupancy by September Thirtyth, while we renovate and re tenant this property.

Additionally, as disclosed on page four in page six of our supplemental package and acquisition of an operating property in San Diego with several buildings aggregating 560000, rentable square feet with in place leases has an occupancy of 76%.

And this will reduce our overall occupancy by another 57 basis points and represents an opportunity for our team to grow cash flows from this property post acquisition.

Peter M. Moglia: Please refer to page 6 of our supplemental package for further details on our guidance assumptions for the year, and I'll turn it back to Joel.

Please refer to page 6 of our supplemental package for further details on our guidance assumptions for the year, and I'll turn it back to Joel.

Please refer to page six of our supplemental package for further details on our guidance assumptions for the year and I'll turn it back to Joel.

Operator, if we could go to question and answer please.

Joel Marcus: Operator, if we could go to question and answer, please.

Sure. Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Operator: Sure. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question will be from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.

If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble our roster.

The first question will be from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.

Great. Thank you.

[Analyst] (Bank of America Merrill Lynch): Great. Thank you. I guess starting with Dean, you've raised a lot of capital in the quarter and slightly after. Can you just give us your thoughts as you look out over the next through 2020 and the development spending, what you think next year's capital plan might look like compared to this year's?

Jamie Feldman: Great. Thank you. I guess starting with Dean, you've raised a lot of capital in the quarter and slightly after. Can you just give us your thoughts as you look out over the next through 2020 and the development spending, what you think next year's capital plan might look like compared to this year's?

I guess, starting with Dean you raised a lot of capital in the quarter and slightly after can you just give us your thoughts as you look out over the next through 2020 and the development spending what you think next year's capital plan might look like compared to this one this year.

So Jamie Thank you its dean here.

Peter M. Moglia: All right. So Jamie, thank you. It's Dean here. It's a good reminder that we do plan to hold our annual investor day event on Tuesday, 3 December, later this year at our New York Center in New York City. As we think about this time every year, we do get questions about the next year, and our preference is to respond to those questions about our outlook once we publish that on the morning of our annual investor day event. But Jamie, broadly, I think if you look back over the last several years, our objective with capital and our capital raising needs each year will remain to be very disciplined and prudent with funding our needs from various sources as we have historically.

Dean Shigenaga: All right. So Jamie, thank you. It's Dean here. It's a good reminder that we do plan to hold our annual investor day event on Tuesday, 3 December, later this year at our New York Center in New York City. As we think about this time every year, we do get questions about the next year, and our preference is to respond to those questions about our outlook once we publish that on the morning of our annual investor day event. But Jamie, broadly, I think if you look back over the last several years, our objective with capital and our capital raising needs each year will remain to be very disciplined and prudent with funding our needs from various sources as we have historically.

So good reminder, that we do plan to hold our annual Investor Day event on Tuesday December 3rd later this year at our New York Center in New York City.

As we think about this time every year, we do get questions about the next year and our preferences to respond to those questions about our outlook.

Once we publish that on the morning of our annual Investor Day event.

But but Jamie broadly I think if you look back over the last several years, our objective with capital on on our capital raising needs each year.

We will remain to be very disciplined.

And and.

Prudent.

With funding our needs.

From various sources as we have historically.

Okay.

[Analyst] (Bank of America Merrill Lynch): Okay. And then we've seen a pickup in kind of value add or kind of development-related acquisitions over the last couple of quarters. Can you just talk about maybe the returns you're getting or what is it lately that's made those types of opportunities come to the surface for you guys? Looks like you've even got more to close going forward.

Jamie Feldman: Okay. And then we've seen a pickup in kind of value add or kind of development-related acquisitions over the last couple of quarters. Can you just talk about maybe the returns you're getting or what is it lately that's made those types of opportunities come to the surface for you guys? Looks like you've even got more to close going forward.

And then we've seen a pickup in kind of value add or development.

Kind of developing related acquisitions over the last couple of quarters can you just talk about maybe the returns you're getting or what what is it lately. That's made those types of opportunities come to the surface for you guys. It looks like you even got more to close going forward.

Hey, Jamie its Peter Levy.

Peter M. Moglia: Hey, Jamie. It's Peter. Look, the volatility in interest rates latter part of last year, I think, woke up a lot of people that were holding real estate and decided if I'm going to sell, I'm going to sell soon. Of course, that has tempered, and we're looking at it continue to look at a low-rate environment. Nonetheless, a lot of opportunities have come into the market in great locations where we've wanted to expand. So we've been able to capitalize on that, especially considering our stock has performed well and our cost of debt has gone down due to Dean and his team's great work. So with all those things aligning, we've gone ahead and purchased some things, and we certainly strive for a good spread over exit cap rates of at least 150 basis points for something ground up, and we'll continue to maintain that.

Peter Moglia: Hey, Jamie. It's Peter. Look, the volatility in interest rates latter part of last year, I think, woke up a lot of people that were holding real estate and decided if I'm going to sell, I'm going to sell soon. Of course, that has tempered, and we're looking at it continue to look at a low-rate environment. Nonetheless, a lot of opportunities have come into the market in great locations where we've wanted to expand. So we've been able to capitalize on that, especially considering our stock has performed well and our cost of debt has gone down due to Dean and his team's great work. So with all those things aligning, we've gone ahead and purchased some things, and we certainly strive for a good spread over exit cap rates of at least 150 basis points for something ground up, and we'll continue to maintain that.

The volatility in interest rates latter part of last year, I think woke up a lot of people that were holding real estate decided if I'm going to sell I'm going to sell.

Soon of course that has tempered and we're looking at continue to look at a low rate environment. Nonetheless, a lot of opportunities.

Come into the market and in great locations, where we wanted to expand so we've been able to capitalize on that especially considering.

Our stock has performed well and our cost of debt has gone down due to dean and his team's great work. So.

With all those things aligning.

We have we've gone ahead and purchase some things and we.

Certainly.

Strive for a good spread over exit cap rates of at least a 150 basis points for something ground up and will continue to maintain that.

Okay.

[Analyst] (Bank of America Merrill Lynch): Okay. So you're saying the acquisitions you're underwriting, 150 basis points better than ground up?

Jamie Feldman: Okay. So you're saying the acquisitions you're underwriting, 150 basis points better than ground up?

Are you, saying the acquisitions, you're underwriting 150 basis points better than ground up.

Thats typically the target, we sometimes do better.

Peter M. Moglia: That's typically the target. We sometimes do better. It's going to depend on the risk, obviously, but we're certainly aware of risk-adjusted return concepts, and I think we do a good job of allocating capital that way.

Peter Moglia: That's typically the target. We sometimes do better. It's going to depend on the risk, obviously, but we're certainly aware of risk-adjusted return concepts, and I think we do a good job of allocating capital that way.

It's going to depend on the risk obviously.

But we're certainly aware of risk adjusted return concepts and I think we do a good job of allocating capital that way.

Okay.

[Analyst] (Bank of America Merrill Lynch): Okay. And then just as you think about the legislative environment or regulatory environment, especially related to drug pricing, have you seen any change in tenant behavior or any thoughts that you can pass along on just either how your tenants are acting or how you think they might act going forward?

Jamie Feldman: Okay. And then just as you think about the legislative environment or regulatory environment, especially related to drug pricing, have you seen any change in tenant behavior or any thoughts that you can pass along on just either how your tenants are acting or how you think they might act going forward?

And then just if you think about the legislative environment or regulatory environment, especially related to drug pricing have you seen any change in tenant behavior or any thoughts that you can you can pass along.

Just how your tenants reacting or how you think they might act going forward.

Hey, Jamie this is Joel so we havent seen any real impact at the moment I think it is pretty clear, though that from the executive branch to the Legislative branch.

Joel Marcus: Hey, Jamie. This is Joel. So we haven't seen any real impact at the moment. I think it is pretty clear, though, that from the executive branch to the legislative branch, in light of the impending 2020 election, each party wants to have some talking points about what they've accomplished on drug pricing. Unfortunately, they've focused on the 10 to 12% of the healthcare pie and haven't appropriately focused on the big numbers. But I think it's fair to say, given some of the movement in the Senate Finance Committee, that we'll see something done over the next few months. And my sense is that it may reside in some adjustment to Part D of Medicare. Remember, outside of the 8 to 10% of Americans who are not insured, 2/3 of people are covered by private pay or self-insured plans, and 1/3 is Medicare.

In light of the impending 2020 election.

Each party wants to have some talking points about what they've accomplished on drug pricing.

You know unfortunately, they focused on the 10% to 12% of the healthcare pie.

And Haven appropriately focused on the big numbers.

But I think it's fair to say given some of the movement in the Senate Finance Committee.

That will see something done.

Over the next few months and my sense is that it may reside in a.

Some adjustment to.

Part D of Medicare remember.

Outside of the 8% to 10% of Americans, who are not insured.

Two thirds of people are covered by private pay or self insured plans and one third is Medicare. So the one third is going to be focused on the part B. It's also important to remember there's this notion of trying to index.

Joel Marcus: The 1/3 is going to be focused on the Part D. It's also important to remember there's this notion of trying to index somehow Medicare pricing to international standards, but that President can't enact that by executive order individually. That's something to think about.

The 1/3 is going to be focused on the Part D. It's also important to remember there's this notion of trying to index somehow Medicare pricing to international standards, but that President can't enact that by executive order individually. That's something to think about.

Somehow.

Medicare pricing to international standards, but that president camp and Mac that by executive order individually. So that's something to think about.

So if you had a boil it all down I mean, what's your view on how this plays out.

[Analyst] (Bank of America Merrill Lynch): So if you were to boil it all down, I mean, what's your view on how this plays out in terms of your business?

Jamie Feldman: So if you were to boil it all down, I mean, what's your view on how this plays out in terms of your business?

For you in terms of your business.

I think that.

Joel Marcus: I think that if there is a fix to Part D, that would impact what we call the oral oncology drug sector. And the two biggest players in oncology are Bristol-Myers, Celgene, and Roche; they have pretty dominant positions there. And so they'll have to think about how that impacts them. A company like Lilly wouldn't be impacted in any way, shape, or form. So I think it's selective. And remember, Medicare is about 1/3 of overall drug; Medicare covers 1/3 of US people, so it's not 100% by any means.

You know if there is a fixed to part D that would impact what we call the oral oncology drugs sector and the two biggest players in oncology our.

Bristol Myers, Celgene, and Roche have pretty dominant positions there and so they'll have to think about how that impacts them a company like Lilly wouldn't be impacted in any way shape or form so I think it's selective.

And remember Medicare is about a third of overall.

Drug.

Medicare covers a third if you ask people so its not a 100% by any means.

[Analyst] (Bank of America Merrill Lynch): Okay. All right. Thank you.

Jamie Feldman: Okay. All right. Thank you.

Okay all right. Thank you.

Joel Marcus: You're welcome. Thank you.

Welcome. Thank you.

The next question comes from Manny Korchman with Citi. Please go ahead.

Operator: The next question comes from Manny Korchman with City. Please go ahead.

Hey, good afternoon, everyone.

Peter M. Moglia: Hey. Good afternoon, everyone. Maybe this is a question for Dean. Dean, the accelerated acquisition pace in 2019, does that at all impact your goal of doubling revenues, and does it sort of speed that up, or was this all sort of contemplated and this is just going to be land bank, essentially, through those years?

Manny Korchman: Hey. Good afternoon, everyone. Maybe this is a question for Dean. Dean, the accelerated acquisition pace in 2019, does that at all impact your goal of doubling revenues, and does it sort of speed that up, or was this all sort of contemplated and this is just going to be land bank, essentially, through those years?

Maybe that's a question for Dean.

The accelerated acquisition pace in 2019.

Does that at all impact your goal of doubling revenues and does it sort of speed that up or was this all sort of contemplated and this is just going to be.

<unk> land bank essentially through those years.

Manny its dean here.

Peter M. Moglia: Manny, it's Dean here. The acquisition pipeline, as you can imagine, is very unpredictable. It does add to our five-year growth plan in that sense, so it does move along to that target nicely for us. But that was not critical in our initial outlook that we had contemplated in our five-year plan.

Dean Shigenaga: Manny, it's Dean here. The acquisition pipeline, as you can imagine, is very unpredictable. It does add to our five-year growth plan in that sense, so it does move along to that target nicely for us. But that was not critical in our initial outlook that we had contemplated in our five-year plan.

The acquisition pipeline as you can imagine.

Is very unpredictable.

It does.

Add to our.

Five year growth plan in that sense so it.

It doesn't move along on to that target nicely for us but that was.

Not critical in our initial outlook that we had contemplated in our five year plan.

And remember Thats a framework, we havent given definitive guidance on that since we only give one year guide.

Joel Marcus: And remember, that's a framework. We haven't given definitive guidance on that since we only give one-year guidance.

Okay, and then you talked about.

Peter M. Moglia: Okay. And then you talked about competition specifically, I guess, in South San Francisco. Have you seen anyone coming into more of your cluster markets that's more of a developer or an emerging developer that's just trying to put up and get out, or is that limited to that one market?

Manny Korchman: Okay. And then you talked about competition specifically, I guess, in South San Francisco. Have you seen anyone coming into more of your cluster markets that's more of a developer or an emerging developer that's just trying to put up and get out, or is that limited to that one market?

Well competition, specifically I guess in South San Francisco.

Have you seen any one coming into mortgage cluster markets Thats a.

More of a developer or a.

Margin development bolts sharp drop and get out or is that limited that one market.

Well I think historically certainly over the last 510 15 years there have been.

Joel Marcus: Well, I think historically, certainly over the last 5, 10, 15 years, there have been both national players and regional players in every single one of our markets. So I think that just is the way it is, and that hasn't really changed. There is a lot of capital moving into this sector, so that's why Peter made the mention that he did, because people are looking at this as, to some people, this almost becomes a valuable core asset, whereas when we started out for many, many years, this was looked at as kind of a funky, oddball niche that you wouldn't group with retail, housing, office, industrial, etc. But that's changed around, and that's why the cap rates have gone where they are. So that's a net plus for us in many ways.

Both national players and regional players in every single one of our markets. So I think that that just is the way it is and that hasn't really changed.

The rest of Asia.

Our capital moving into this sector. So thats why Peter made the mention that he did because people are looking at this as.

So some people this almost becomes a valuable core asset, whereas when we started out for many many years. This was looked at as kind of a funky odd ball niche that you Wouldnt group with retail.

You know housing.

Office, industrial et cetera, but that that's changed around and Thats why the cap rates have gone where they are.

So that's on that front.

Hi, Thanks, everyone.

Peter M. Moglia: Thanks, everyone.

Manny Korchman: Thanks, everyone.

Thank you.

Joel Marcus: Thank you.

The next question is from Rich Anderson with MBC. Please go ahead.

Operator: The next question is from Rich Anderson with SMBC. Please go ahead.

[Analyst] (Bank of America Merrill Lynch): Hey. Thanks. Good afternoon. Dean, first to you, why do a forward deal if you plan to settle it as soon as this year? I can understand having a longer tail to the plan. I'm just curious what your line of thinking was there.

Rich Anderson: Hey. Thanks. Good afternoon. Dean, first to you, why do a forward deal if you plan to settle it as soon as this year? I can understand having a longer tail to the plan. I'm just curious what your line of thinking was there.

Hey, Thanks, good afternoon.

Dana first to you.

Why do a forward deal.

If you plan to settle it as soon as this year I can understand having a longer tail to to the the plan I'm just curious what your line of thinking was there.

Sure rich its dean here.

Peter M. Moglia: Sure, Rich. It's Dean here. Forward equity sale agreements, generally, most of them are set for about a 12-month term contractually. Very few of them extend meaningfully beyond that. You might go to 15 months, but not much beyond that. So I think conceptually, Rich, forward transactions are short-term settlements. I would say that most useful transactions on a forward is really focused on settling somewhere in the near term over several quarters to match your funding requirements. And that's the reason why we use it, Rich. It's really to align with our timing of funding.

Dean Shigenaga: Sure, Rich. It's Dean here. Forward equity sale agreements, generally, most of them are set for about a 12-month term contractually. Very few of them extend meaningfully beyond that. You might go to 15 months, but not much beyond that. So I think conceptually, Rich, forward transactions are short-term settlements. I would say that most useful transactions on a forward is really focused on settling somewhere in the near term over several quarters to match your funding requirements. And that's the reason why we use it, Rich. It's really to align with our timing of funding.

Forward forward.

Equity sale agreements generally most of them are set for about a 12 month term contractually very few of them extend meaningfully beyond that you might go to 15 months, but not much beyond that so I think conceptually rich forward transactions, our short term settlements.

I would say that most.

Useful transactions on a forward has really is really focused on settling somewhere in the near term over several quarters to match your funding requirements and Thats. The reason why we use it.

Hi, rich, it's really to align with our timing of funding.

Sure Fair enough and just just curious usually it's a next year sort of event.

[Analyst] (Bank of America Merrill Lynch): Fair enough. I'm just curious. Usually, it's a next-year sort of event, but I understand the answer. So the second question is somewhat conceptual. You guys are doing a lot in the way of early renewal activity, 61% again this quarter. I'm curious if there's any impact on your ability to negotiate those rents. In other words, if someone's coming to you early, do you think about the current market rent, or do you think about what the future market rent would be for them had they waited until they were contractually expiring, and hence, you kind of get a bigger number out of that in negotiation? Is that something that makes any sense at all, or is the market just the market?

Rich Anderson: Fair enough. I'm just curious. Usually, it's a next-year sort of event, but I understand the answer. So the second question is somewhat conceptual. You guys are doing a lot in the way of early renewal activity, 61% again this quarter. I'm curious if there's any impact on your ability to negotiate those rents. In other words, if someone's coming to you early, do you think about the current market rent, or do you think about what the future market rent would be for them had they waited until they were contractually expiring, and hence, you kind of get a bigger number out of that in negotiation? Is that something that makes any sense at all, or is the market just the market?

But I understand that the answer.

So.

Second question is.

Somewhat conceptual.

You guys are doing a lot in the way of early renewal activity, 61% again this.

This quarter I'm curious if there's any impact.

On your ability to negotiate those rents in other words, if someone's coming to you early do you think about the current market rent or do you think about what the future market rent would be for them had they waited until they were.

Contractually expiring and hence you kind of get a bigger number out of that negotiation is that something that makes any sense at all or is it is the market just the market.

Rich its Steve Richardson.

Operator: Rich, it's Steve Richardson. No, as you might imagine, it is all a balance, and we are certainly looking at an increasing rental rate environment, how to tackle that. So I think with that balance, we get the benefit of locking the tenant down. I think we are getting upside beyond what the rent is today. And really importantly, and this is a metric that we've noted for a long time now, the reusability of these improvements, the lower CapEx requirement is really enhanced when we can renew somebody in their existing space that they've already invested in. So I really do think we end up with an optimal balance where we get the best of all worlds there.

Steve Richardson: Rich, it's Steve Richardson. No, as you might imagine, it is all a balance, and we are certainly looking at an increasing rental rate environment, how to tackle that. So I think with that balance, we get the benefit of locking the tenant down. I think we are getting upside beyond what the rent is today. And really importantly, and this is a metric that we've noted for a long time now, the reusability of these improvements, the lower CapEx requirement is really enhanced when we can renew somebody in their existing space that they've already invested in. So I really do think we end up with an optimal balance where we get the best of all worlds there.

No. It as you might imagine that it is all a balance and we are certainly looking at you know and increasing rental rate environment, how to tackle that so I think with that balance we get the benefit of locking the tenant down I think we are getting upside beyond what the rent is today and really importantly, and this is a metric that we've noted for a long time now and the reuse ability of these improvements the lower capex requirement.

It is really enhanced when we can renew somebody in their existing space that they've already invested in so I really do think we end up with an optimal balance where we get the best of all worlds there, but we're also mindful of relationships and we're not pushing the last dollar and.

Joel Marcus: But we're also mindful of relationships, and we're not pushing the last dollar and the last cent because you can be penny-wise and pound-foolish in a sense, because these relationships are long-term, and we want to be a partner, not a financial landlord who's pressing every last cent out of the property.

The last cent.

As you can be penny wise and pound foolish in a sense.

Because these relationships are long term and.

We want to be a partner not a financial landlord who's pressing every last sent out of the property.

[Analyst] (Bank of America Merrill Lynch): Perfect answer. Thank you. And then last, on the, I think, perhaps one of the jewels of the story is your pre-leasing of your development pipeline upwards to 80%. I'm curious how much of that is you start a deal, and you are almost amazed by the level that you're able to get to in a relatively short period of time, or do you manage it? And I guess the short question is, where are you on what type of pre-leasing you need to just get the engine rolling on a development, and how does that vary from one market to the next? I imagine you'd be more willing to go spec in Cambridge and less so in maybe San Diego or something.

Rich Anderson: Perfect answer. Thank you. And then last, on the, I think, perhaps one of the jewels of the story is your pre-leasing of your development pipeline upwards to 80%. I'm curious how much of that is you start a deal, and you are almost amazed by the level that you're able to get to in a relatively short period of time, or do you manage it? And I guess the short question is, where are you on what type of pre-leasing you need to just get the engine rolling on a development, and how does that vary from one market to the next? I imagine you'd be more willing to go spec in Cambridge and less so in maybe San Diego or something.

Perfect answer Thank you and then last.

On the on the I think perhaps the one of the jewels of the story is your Preleasing of your development pipeline.

Boards to 80%.

Curious how much of that is.

You know you started you started deal and and you are almost.

Amazed by the the level that you are able to get to in a relatively short period of time or do you do you manage it and I guess the short question is.

Where are you on what what type of pre leasing you need to just get the engine rolling on a development and how does that vary from one market to the next imagine be more willing to go spec in Cambridge and less so and maybe.

San Diego or something yes, I think since the since the financial crisis, we've tried to match.

Joel Marcus: Yeah. I think since the financial crisis, we've tried to match going vertical with commitments in hand. And I think, fortunately, we've been fortunate, and also with relationships, we've been able to match those over the last many years with a very comfortable kind of dovetail. There's no magical number. Obviously, as you could imagine, there would be more momentum in Cambridge than there would be, say, in New York City, but it's one that just you have to have kind of the touch and feel of that particular submarket, so it's pretty differentiated.

Going vertical with.

Commitments in hand, and I think Fortunately we've been.

We've been fortunate and also with relationships, we've been able to match those after the last over the last many years with a.

Very comfortable kind of dovetail there is no magical number obviously as you could imagine there would be more momentum in Cambridge, then there would be say in New York City, but.

You know if it's one that just you have to have kind of the touch and feel of that particular sub market. So it's pretty differentiated.

Peter M. Moglia: Hey. This is Peter Moglia. I mean, the other thing I think I would add is that it's a testament to how ingrained we are in the fabric of the industry in each market, that we are well aware of the demand well before the market is. So that allows us to plan for these things. If you plan well, you can deliver quickly, and that's what our tenants need. So really, our long-term presence in these markets and our teams that are highly experienced and with long tenure pays off in the ability to forecast when we should be delivering product.

Peter Moglia: Hey. This is Peter Moglia. I mean, the other thing I think I would add is that it's a testament to how ingrained we are in the fabric of the industry in each market, that we are well aware of the demand well before the market is. So that allows us to plan for these things. If you plan well, you can deliver quickly, and that's what our tenants need. So really, our long-term presence in these markets and our teams that are highly experienced and with long tenure pays off in the ability to forecast when we should be delivering product.

Hey, and this is Peter Moglia I mean, the other thing I think I would add is that it's a testament to how.

Ingrained, we are in the fabric of the industry in each market that we are well aware of the demand well before the market is.

So that allows us to plan for these things and.

If you plan well you can deliver quickly and that's what our tenants need so really our long term.

Presence in these markets and our teams that are highly experienced and with long tenure.

Pays off and the ability to forecast when we should be delivering product.

Okay last question can you mentioned, who the San Diego seller was.

[Analyst] (Bank of America Merrill Lynch): Okay. Lastly, can you mention who the San Diego seller was?

Rich Anderson: Okay. Lastly, can you mention who the San Diego seller was?

Now we need to keep that confidential.

Peter M. Moglia: No. We need to keep that confidential.

Peter Moglia: No. We need to keep that confidential.

[Analyst] (Bank of America Merrill Lynch): Oh, okay. Fair enough. Thank you.

Rich Anderson: Oh, okay. Fair enough. Thank you.

Okay.

Fair enough. Thank you.

Thanks Rich.

Joel Marcus: Thanks, Rich.

The next question will be from Sheila Mcgrath with Evercore ISI. Please go ahead.

Operator: The next question will be from Sheila McGrath with Evercore ISI. Please go ahead.

Hi, guys good afternoon.

[Analyst] (Evercore ISI): Yes. Good afternoon. On 88 Bluxome, you have the approvals. That's great news. Just wondering the status of any lawsuits there and what you expect the timing to be. And is this going to be in two phases, or is it all one phase?

Sheila McGrath: Yes. Good afternoon. On 88 Bluxome, you have the approvals. That's great news. Just wondering the status of any lawsuits there and what you expect the timing to be. And is this going to be in two phases, or is it all one phase?

88 bloxham.

You have the approvals that's great news Im just wondering the status of any lawsuits.

There and what you expect the timing to be and is this going to be in two phases or is it all one phase.

Joel Marcus: Yeah. Sheila, I'm going to kick it over to Steve in a moment, but I think, remember what Steve said. We're the only project to get full one-time approval for the entire project, and we don't have to go back for any prior approval and a full Prop M allocation. No other developer in Central Soma has that. They must come back. But Steve can speak to the lawsuits that I think we're pretty optimistic on.

Yes, she alignment.

Kick it over to Steve in a moment, but I think remember what.

Steve said, we are the only project to get full onetime approval for the entire project and we don't have to go back for any prior approval and a full prop M allocation no other developer in central Soma have that they must come back, but Steve can speak to the lawsuits that I think we're pretty optimistic going.

Yes, Hi, Sheila Steve that's exactly right.

Operator: Yeah. Hi, Sheila. It's Steve. That's exactly right. There are ongoing discussions. Everybody is reasonably encouraged, and we would hope through the balance of the year that we would be able to resolve those, enabling us to be in a position to go ahead and kick off construction. So again, we're very hopeful. And again, that would be for the entire project, as Joel just emphasized there. We do not need to go back to the city, so we could, in fact, kick off the entire 1 million sq ft project.

Steve Richardson: Yeah. Hi, Sheila. It's Steve. That's exactly right. There are ongoing discussions. Everybody is reasonably encouraged, and we would hope through the balance of the year that we would be able to resolve those, enabling us to be in a position to go ahead and kick off construction. So again, we're very hopeful. And again, that would be for the entire project, as Joel just emphasized there. We do not need to go back to the city, so we could, in fact, kick off the entire 1 million sq ft project.

There are ongoing discussions everybody is reasonably encouraged and we would hope through the balance of the year.

That we would be able to resolve those.

Enabling us to be in a position to go ahead and kick off construction.

And so.

Again, we're we're very hopeful.

And that again that would be for the entire project as Joel just emphasize there we do not need to go back to the city.

So we could in fact kick off the entire 1 million square foot project.

Okay great.

[Analyst] (Evercore ISI): Okay. Great. And then just a question on Alexandria District for Science in the greater Stanford area. That's a big project. It's already 37% leased. Just wondered if you could give us an update on that. And is that a ground-up development, or was that redevelopment?

Sheila McGrath: Okay. Great. And then just a question on Alexandria District for Science in the greater Stanford area. That's a big project. It's already 37% leased. Just wondered if you could give us an update on that. And is that a ground-up development, or was that redevelopment?

And then.

Just a question on Alexandria District for Science on Integrator Stanford area. That's a big project is already 37% lease just wondered if you could give us an update on that and is that a ground up development or was that redevelopment.

That is a ground up development, yes, we're very pleased and I think this really speaks to what Peter had discussed with our long term presence there and the insight that we have with the teams on the ground that we've been able to have this type of success. This early in a ground up projects. So very pleased with the progress there.

Operator: That is a ground-up development. Yes. We're very pleased. And I think this really speaks to what Peter had discussed with our long-term presence there and the insight that we have with the teams on the ground that we've been able to have this type of success this early in a ground-up project. So very pleased with the progress there.

Steve Richardson: That is a ground-up development. Yes. We're very pleased. And I think this really speaks to what Peter had discussed with our long-term presence there and the insight that we have with the teams on the ground that we've been able to have this type of success this early in a ground-up project. So very pleased with the progress there.

Okay and then.

[Analyst] (Evercore ISI): Okay. And then 2 questions for Dean. On the forward equity, in terms of timing, should we assume that is back-end weighted to Q4?

Sheila McGrath: Okay. And then 2 questions for Dean. On the forward equity, in terms of timing, should we assume that is back-end weighted to Q4?

Two questions for Dean on the forward equity.

In terms of timing should we assume that is back end weighted.

The fourth quarter.

Yes, yes, thats fair to assume Sheila.

Peter M. Moglia: Yeah. Yeah. That's fair to assume, Sheila.

Dean Shigenaga: Yeah. Yeah. That's fair to assume, Sheila.

Okay, and then on the other investment gains.

[Analyst] (Evercore ISI): Okay. And then on the other investment gains, just wondering, is the active IPO market in biotech, is that driving these realized gains a little bit higher this year? And given current equity market conditions, should we assume a similar level as the first half of the year?

Sheila McGrath: Okay. And then on the other investment gains, just wondering, is the active IPO market in biotech, is that driving these realized gains a little bit higher this year? And given current equity market conditions, should we assume a similar level as the first half of the year?

Just wondering is that active IPO market in.

Biotech is that driving these realized gains.

A little bit higher this year and given current equity market conditions should we assume a similar level as the first half of the year.

Yes, Sheila so dean here again, I'd say when I think back several years now or maybe even longer than that because we have been.

Peter M. Moglia: Yeah. Sheila, it's Dean here again. I'd say when I think back several years now or maybe even longer than that because we've been investing in early-stage companies for quite a number of years, the liquidity events that drive realized gains have always been a combination of IPOs and M&A activity. And that seems to be pretty true for the last number of quarters. The IPO market has been fairly active since 2013, but you still see quite a bit of M&A driving liquidity events and gains for this business.

Dean Shigenaga: Yeah. Sheila, it's Dean here again. I'd say when I think back several years now or maybe even longer than that because we've been investing in early-stage companies for quite a number of years, the liquidity events that drive realized gains have always been a combination of IPOs and M&A activity. And that seems to be pretty true for the last number of quarters. The IPO market has been fairly active since 2013, but you still see quite a bit of M&A driving liquidity events and gains for this business.

Investing in early stage companies for quite a number of years.

The liquidity events that derive realized gains are always have always been a combination of.

Hi, Peos and M&A activity.

And that seems to be pretty true for the last number of quarters.

The IPO market has been fairly active since 2013, but you still see quite a bit of M&A driving liquidity events in and gains for this business.

Okay. Thank you.

[Analyst] (Evercore ISI): Okay. Thank you.

Sheila McGrath: Okay. Thank you.

The next question will come from Michael Carroll with RBC capital markets. Please go ahead.

Operator: The next question will come from Michael Carroll with RBC Capital Markets. Please go ahead.

Yes. Thanks, I wanted to see if you guys can touch on your investment activity I know Peter kind of discussed this a little bit earlier.

[Analyst] (Bank of America Merrill Lynch): Yeah. Thanks. I wanted to see if you guys can touch on your investment activity. I know Peter kind of discussed this a little bit earlier. I know you've been acquiring a lot of future development sites. I mean, how do you underwrite that, and when do you break ground on those projects? When could they potentially be stabilized down the road? And how willing are you to increase your land bank today?

Michael Carroll: Yeah. Thanks. I wanted to see if you guys can touch on your investment activity. I know Peter kind of discussed this a little bit earlier. I know you've been acquiring a lot of future development sites. I mean, how do you underwrite that, and when do you break ground on those projects? When could they potentially be stabilized down the road? And how willing are you to increase your land bank today?

I know you've been acquiring a lot of future development sites. I mean was how do you underwrite that and when do you break ground on those projects when say potentially be stabilized down the road and how willing are you to increase your land bank today.

So.

Joel Marcus: So Michael, it's Dean here. I think broadly, what we'd like to comment on is that what we've done here is, I think, given really nice visibility for our investors to think about how we can manage growth into the future because now we have a pipeline that goes beyond 2020 of about 10 million sq ft. So we just want to be able to provide strategic visibility for everybody, and I think we've accomplished that in recent quarters with adding to the pipeline.

Dean Shigenaga: So Michael, it's Dean here. I think broadly, what we'd like to comment on is that what we've done here is, I think, given really nice visibility for our investors to think about how we can manage growth into the future because now we have a pipeline that goes beyond 2020 of about 10 million sq ft. So we just want to be able to provide strategic visibility for everybody, and I think we've accomplished that in recent quarters with adding to the pipeline.

Michael its dean here I think broadly what we'd like to comment on is that.

What we've done here is I think given really nice visibility for our investors to think about how we can manage growth into the future. Because now we have a pipeline that goes beyond 20 of about.

10 million square feet. So.

We just want to.

Be able to provide strategic visibility for everybody and I think we've accomplished that in recent quarters with adding to the pipeline.

Okay is there a limit to how much land you want to add to your land bank or is it just the market fundamentals are so strong.

[Analyst] (Bank of America Merrill Lynch): Okay. Is there a limit to how much land you want to add to your land bank, or is it just the market fundamentals are so strong you're willing to grab high-quality sites when you can find them?

Michael Carroll: Okay. Is there a limit to how much land you want to add to your land bank, or is it just the market fundamentals are so strong you're willing to grab high-quality sites when you can find them?

We're willing to grab it.

High quality sites and you can find them.

We're always being very thoughtful on that regard Michael as it relates to the amount of product we have.

Joel Marcus: We're always being very thoughtful in that regard, Michael, as it relates to the amount of product we have. What we did on page 2 of our supplemental disclosure was add some visibility into that pipeline. About half of it is currently vertical, highly leased, 74% leased. Included in this bucket is the 88 Bluxome project, which is also about 60% pre-leased today. What I think that most of our investors should focus in on is what's behind that. It's a fairly modest number. This is land that's either i.e., nothing vertical is going on with these land sites, but it's really strategic sites for future growth. That number is only 6% of our gross investment in real estate, so it's pretty modest today.

Dean Shigenaga: We're always being very thoughtful in that regard, Michael, as it relates to the amount of product we have. What we did on page 2 of our supplemental disclosure was add some visibility into that pipeline. About half of it is currently vertical, highly leased, 74% leased. Included in this bucket is the 88 Bluxome project, which is also about 60% pre-leased today. What I think that most of our investors should focus in on is what's behind that. It's a fairly modest number. This is land that's either i.e., nothing vertical is going on with these land sites, but it's really strategic sites for future growth. That number is only 6% of our gross investment in real estate, so it's pretty modest today.

What we did on page two of our supplemental disclosure was add some visibility into.

That pipeline.

About half of it.

Is currently.

Vertical highly leased 74% leased.

And included in this bucket is the plug some project, which is also about 60% preleased today.

What I think that most of our investors should focus in on is what's behind that.

And it's a fairly modest number. So this is land that see there.

Nothing nothing vertical is going on with these land sites, but it's really strategic sites for future growth.

That number is only 6% of our gross investment in real estate, so it's pretty modest today.

Okay, Great and then Steve can you talk a little bit of bound to your comments on the South San Francisco market I know demand has been pretty strong and I know one of your competitors had some good leasing activity on one other development projects mean to supply where are you in that market and then maybe can you touch on about the if you can the acquisitions you put in the.

[Analyst] (Bank of America Merrill Lynch): Okay. Great. And then, Steve, can you talk a little bit about your comments on the South San Francisco market? I know demand has been pretty strong, and I know one of your competitors had some good leasing activity on one of their development projects. I mean, does supply worry you in that market? And then maybe you can touch on about, if you can, the acquisitions you put in this up regarding the three sites in the San Francisco Bay Area, that pending acquisition right now?

Michael Carroll: Okay. Great. And then, Steve, can you talk a little bit about your comments on the South San Francisco market? I know demand has been pretty strong, and I know one of your competitors had some good leasing activity on one of their development projects. I mean, does supply worry you in that market? And then maybe you can touch on about, if you can, the acquisitions you put in this up regarding the three sites in the San Francisco Bay Area, that pending acquisition right now?

In the Sop regarding the three.

Sites in the San Francisco Bay area that.

Thats pending acquisition right now.

Yeah, Michael Hi, it's Steve.

Operator: Yeah. Michael. Hi. It's Steve. Yeah. We'll provide further color when we're able on the pending acquisition, certainly in the Bay Area. And on South San Francisco, yeah, I think as we've said for a while, we've just been very thoughtful and prudent in the approach there. We've got a tremendous set of campuses. They are essentially fully leased. Adding product like we're doing at Haskins is the right thing to do at the right time. And we are watching the supply very closely there with a number of different projects that, if people choose to build on a speculative basis, could add more supply than we've seen there for a while. So we monitor this extremely closely, but right now, we're taking a very balanced approach.

Steve Richardson: Yeah. Michael. Hi. It's Steve. Yeah. We'll provide further color when we're able on the pending acquisition, certainly in the Bay Area. And on South San Francisco, yeah, I think as we've said for a while, we've just been very thoughtful and prudent in the approach there. We've got a tremendous set of campuses. They are essentially fully leased. Adding product like we're doing at Haskins is the right thing to do at the right time. And we are watching the supply very closely there with a number of different projects that, if people choose to build on a speculative basis, could add more supply than we've seen there for a while. So we monitor this extremely closely, but right now, we're taking a very balanced approach.

Yes, we will provide further color when were able on the pending acquisition certainly in the in the Bay area and until San Francisco I think as we've said for a while weve.

Just been very thoughtful and prudent in the approach there.

We've got a tremendous set of campuses. They are essentially fully leased adding product like we're doing at haskins.

Is the right thing to do at the right time, and we are watching this supply.

Very closely there with a number of different projects that if people choose to build on a speculative basis could add more supply than we've seen there for a while so we monitor this extremely closely.

But right now we're taking a very balanced approach.

Okay, great. Thank you.

[Analyst] (Bank of America Merrill Lynch): Okay. Great. Thank you.

Michael Carroll: Okay. Great. Thank you.

The next question is from Daniel Ismail with Green Street Advisors. Please go ahead.

Operator: The next question is from Daniel Ismail with Green Street Advisors. Please go ahead.

Great. Thank you Peter you mentioned the amount of new capital.

[Analyst] (Bank of America Merrill Lynch): Great. Thank you. Peter, you mentioned the amount of new capital flowing into the space and with potentially lower rates. I'm curious to get your thoughts on where you see cap rates across your markets, and have you noticed any accelerating cap rate compression in any specific markets?

Daniel Ismail: Great. Thank you. Peter, you mentioned the amount of new capital flowing into the space and with potentially lower rates. I'm curious to get your thoughts on where you see cap rates across your markets, and have you noticed any accelerating cap rate compression in any specific markets?

Flowing into the space and with potentially lower rates.

Curious to get your thoughts on where you see cap rates.

Across your markets and have you noticed any.

Accelerating cap rate compression any specific markets.

Yes, Thanks, Daniel Yes, Peter.

Peter M. Moglia: Yeah. Thanks, Daniel. Yeah. It's Peter. I wouldn't say that we've seen accelerated cap rate compression, but it has ticked down. I don't think anybody would have forecasted that at the end of last year. But I may have had this conversation with you in the past, but right now, a well-located lab building in a core market is probably more valuable on a cap rate basis than an office building, which is unique considering what Joel said about how people looked at our assets back when we started. So obviously, that has been a terrific or had terrific impact on our NAV, and we expect that it'll continue. We do get contacted quite a bit from people interested in our assets when we do put things out for sale. We do have some pending transactions that had very high-quality investors interested.

Peter Moglia: Yeah. Thanks, Daniel. Yeah. It's Peter. I wouldn't say that we've seen accelerated cap rate compression, but it has ticked down. I don't think anybody would have forecasted that at the end of last year. But I may have had this conversation with you in the past, but right now, a well-located lab building in a core market is probably more valuable on a cap rate basis than an office building, which is unique considering what Joel said about how people looked at our assets back when we started. So obviously, that has been a terrific or had terrific impact on our NAV, and we expect that it'll continue. We do get contacted quite a bit from people interested in our assets when we do put things out for sale. We do have some pending transactions that had very high-quality investors interested.

I wouldn't say that weve seen accelerated.

Cap rate compression, but it has ticked down.

I don't think anybody.

It would have forecasted that at the end of last year.

But I think I may have had this conversation with you in the past, but right now.

A great look well located lab building.

In a core market is.

Probably more valuable on a cap rate basis than an office building, which is unique considering what Joel said about how people looked at our assets back when we started.

So.

Obviously.

That has been a terrific had terrific impact on our end Avi.

And.

We we expect that it will continue we do get contacted quite a bit from people interested in our assets. When we do put things out for sale. We do have some pending transactions with that had very high quality investors interested and out.

Peter M. Moglia: Next quarter, we'll be giving some news on that. I think everyone will be pleasantly not surprised but satisfied with the cap rates that we'll show. It's a good time to be a laboratory owner for us, and that's another reason we continue to create value through some acquisitions because we want to create even more.

Next quarter, we'll be giving some news on that. I think everyone will be pleasantly not surprised but satisfied with the cap rates that we'll show. It's a good time to be a laboratory owner for us, and that's another reason we continue to create value through some acquisitions because we want to create even more.

Next quarter, we'll be giving some news on that I think everyone will be.

Pleasantly not surprised but satisfied with with the cap rates that will show so.

It's a good time to be a laboratory owner for us and.

That's another reason, we continue to create value through some acquisitions because we.

Wanted to create even more.

And just a quick one for gain.

[Analyst] (Bank of America Merrill Lynch): Just a quick one for Dean. Notice expenses ticked up a little bit this year or this quarter again. Anything we should know driving that and maybe that outlook for the rest of the year?

Daniel Ismail: Just a quick one for Dean. Notice expenses ticked up a little bit this year or this quarter again. Anything we should know driving that and maybe that outlook for the rest of the year?

Notice expenses ticked up.

A little bit this year or this quarter again anything we should know driving that's and maybe the outlook for the rest of the year.

Daniel I think I missed the key part of your question.

Joel Marcus: Daniel, I think I missed the key part of your question.

Dean Shigenaga: Daniel, I think I missed the key part of your question.

[Analyst] (Bank of America Merrill Lynch): Oh, just the expense, excuse me. Expense growth this quarter looked like it ticked up again, about 8%. Anything driving that we should know?

Daniel Ismail: Oh, just the expense, excuse me. Expense growth this quarter looked like it ticked up again, about 8%. Anything driving that we should know?

Oh Express express excuse me expense growth this quarter looks like it ticked up again, a point about eight for sites.

Anything driving that we should now.

Nothing unusual in our operating expense growth I think you probably had.

Joel Marcus: Nothing unusual in our operating expense growth. I think you probably had a little bit of repairs and maintenance. And property taxes is a driver lately over the last few years. I think what you find as we build out and renovate product through redevelopment or development, the different regions are sometimes slow to assess the values, and that creeps in over time. And it doesn't necessarily all commence in the year that we actually deliver product in. So importantly, though, Daniel, as you know, our leases are triple net, so we're able to pass through almost all of our operating costs to our tenants. And I think that's really important because that mitigates volatility to earnings or net operating income.

Dean Shigenaga: Nothing unusual in our operating expense growth. I think you probably had a little bit of repairs and maintenance. And property taxes is a driver lately over the last few years. I think what you find as we build out and renovate product through redevelopment or development, the different regions are sometimes slow to assess the values, and that creeps in over time. And it doesn't necessarily all commence in the year that we actually deliver product in. So importantly, though, Daniel, as you know, our leases are triple net, so we're able to pass through almost all of our operating costs to our tenants. And I think that's really important because that mitigates volatility to earnings or net operating income.

A little bit of repairs and maintenance.

And property taxes as a.

Driver lately over the last few years.

I think what you find in our as we build out and renovate product through redevelopment or development.

The different.

Regions.

Our sometimes slow to assess the values.

And that creeps in overtime and it doesn't necessarily all commence in the year that we actually deliver product so.

Importantly, though Dan who as you know our leases are triple net so we're able to pass through almost all of our operating costs to our tenants.

I think thats really important because that mitigates volatility to earnings or net operating income.

Great. Thanks, guys.

[Analyst] (Bank of America Merrill Lynch): Great. Thanks, Az.

Daniel Ismail: Great. Thanks, guys.

The next question comes from Tom Catherwood with BTG. Please go ahead.

Operator: The next question comes from Tom Catherwood with BTIG. Please go ahead.

Thank you so question in San Diego.

[Analyst] (Bank of America Merrill Lynch): Thank you. So, question in San Diego. This cluster has always been somewhat unique for you guys in that it's been more spread out than some of your other markets. But in this quarter, you've taken down more land adjacent to your Campus Point projects, and you're looking at kind of a pretty substantially sized, dense cluster there. Is this a case of just taking advantage of adjacent assets that came up for sale, or do you think that a denser cluster in San Diego could help drive demand and rent growth?

Tom Catherwood: Thank you. So, question in San Diego. This cluster has always been somewhat unique for you guys in that it's been more spread out than some of your other markets. But in this quarter, you've taken down more land adjacent to your Campus Point projects, and you're looking at kind of a pretty substantially sized, dense cluster there. Is this a case of just taking advantage of adjacent assets that came up for sale, or do you think that a denser cluster in San Diego could help drive demand and rent growth?

This cluster has always been somewhat unique for you guys in that it's been more spread out.

Than some of your other markets, but in this quarter.

You've taken down more land adjacent to your campus point.

Projects and you're looking at kind of a pretty substantially sized dense cluster there.

Is this a case of just taking advantage of adjacent assets that came up for sale or do you think.

That denser cluster and cluster in San Diego can help drive demand and rent growth.

So this is Joel I remember San Diego was our first market and I think campus point is pretty unique because it's it's essentially as part of a University town center, which is a more urban like market than you would normally find in say other parts of.

Joel Marcus: So this is Joel. I remember San Diego was our first market. And I think Campus Point is pretty unique because it sits essentially as part of a University Town Center, which is a more urban-like market than you would normally find in, say, other parts of San Diego per se, say, as compared to Torrey Pines, which is one of the most beautiful, but it's not so urban. So I think that is an important factor. And then obviously, we have the preeminent campus and a world-class set of client tenants there, both life science and tech. And so the opportunity to expand that campus by adjacencies is, I think, super prudent. So those things play into our mindset.

Now.

San Diego per se as compared to Torrey Pines, which is one of the most beautiful, but it's not so urban.

So I think that is an important factor and then obviously, we have the preeminent campus and a world class set of.

Client tenants there.

Both life science and tech and so the opportunity to expand that campus.

By adjacent sees is I think.

Super prudent so about those things play into our mindset.

So it would be fair to say that you're starting to see some.

[Analyst] (Bank of America Merrill Lynch): So it would be fair to say that you're starting to see some interest by tenants in getting those adjacencies to similar companies that you've seen, obviously not the same level, but that you've seen in a Cambridge or an Mission Bay?

Tom Catherwood: So it would be fair to say that you're starting to see some interest by tenants in getting those adjacencies to similar companies that you've seen, obviously not the same level, but that you've seen in a Cambridge or an Mission Bay?

Interest by tenants and getting those adjacencies to similar companies that you've seen obviously not the same level, but that you've seen in a cambridge or an admission.

I think yes, and also we've been fortunate that existing tenants have wanted to expand so having the ability to both build or provide product that there may be some near term.

Joel Marcus: I think yes. And also, we've been fortunate that existing tenants have wanted to expand. So having the ability to both build or provide product that there may be some near-term vacancy ability is a real plus.

Vacancy ability is a real plus.

Got it.

[Analyst] (Bank of America Merrill Lynch): Got it. And then I know it was a small deal, but you announced the LaunchLabs partnership with Columbia University this quarter. I assume that that's the West Harlem campus. Is that correct?

Tom Catherwood: Got it. And then I know it was a small deal, but you announced the LaunchLabs partnership with Columbia University this quarter. I assume that that's the West Harlem campus. Is that correct?

And then.

I know it was small deal, but you announce announce the launch lab a partnership with Columbia University This quarter I assume that.

The West Harlem.

Campus is that correct.

That's correct.

Joel Marcus: That's correct. The motivation for that is a little different than you might imagine, broadly speaking. New York really is an early-stage cluster. Clusters take about a generation, 25 years, to really evolve and develop. Boston, Cambridge, is in their second generation, so is San Francisco. But New York is really in the first decade, so there's not a long waiting line of tenants like there is in Cambridge. It really is an early-stage market and one that you really have to create. So we've tried to meet that reality with a product that makes sense. And we've partnered with, by far, the largest and most dominant institution in that market.

The the motivation for that is a little different than you might imagine broadly speaking New York really is a early stage company. It is.

Clusters take about a generation 25 years to really evolve and develop.

Boston, Cambridge is in their second generation, so with San Francisco, but New York is really in the first decade, so theres not a long light weighting line of tenants like there is in Cambridge. It really is an early stage market and one that you really have to create so we've tried to meet that reality with a product that makes sense and we partnered with the by far the largest and most dominant institution.

In that market.

Very fair and I think along those lines we've seen.

[Analyst] (Bank of America Merrill Lynch): Very fair. And I think along those lines, we've seen new lab space development both happen, and it's also ongoing in West Harlem. There's an incubator up there right now, and there's been a number of companies that have formed of tech transfers out of Columbia up there. Is this kind of a test-the-waters kind of move where you get to feel out a potential growing cluster in New York, or was this just the connection to Columbia that was really the benefit?

Tom Catherwood: Very fair. And I think along those lines, we've seen new lab space development both happen, and it's also ongoing in West Harlem. There's an incubator up there right now, and there's been a number of companies that have formed of tech transfers out of Columbia up there. Is this kind of a test-the-waters kind of move where you get to feel out a potential growing cluster in New York, or was this just the connection to Columbia that was really the benefit?

New lab space development, both happen and it is also ongoing in west Harlem Theres, an incubator up there right now and Theres been a number of companies that have formed of tech transfers out of Colombia. There is this kind of a test the waters kind of move where you get to fill out a potential.

Grilling cluster in New York or was this just the connection to Columbia that was really the benefit.

Well I think most of the.

Joel Marcus: Well, I think most of the demand, and you have to take it kind of with a grain of salt in New York. There is some institutional demand, and I think that's been the focus of some of the developers there because there's not a line of companies waiting like there is, as they say, in San Francisco or Cambridge as pretty prototypical examples. Columbia is the biggest and most dominant institution. They have a huge amount of NIH funding. So it's really part of a strategic ability to take advantage of that opportunity. I'm not sure whether there will be a sub-cluster of any effort up there. You mentioned one incubator. That's the Harlem Biospace, but that's 3,000sq ft. So I think you can't assume that's some massive amount of incubation space.

And you have to take demand the kind of with the green to sold in New York. There is some institutional demand and I think that's been the focus with some of the developers there because there is not a line of companies waiting like there is as you say in San Francisco or Cambridge as.

Pretty prototypical examples.

Colombia is the biggest and most dominant institution they have a huge amount of NIH funding. So its really part of a strategic ability to take advantage of that opportunity I'm not sure whether there will be a cluster of any.

No effort up there. There is you mentioned one incubator, that's the Harlem Biospace, but that 3000 square feet. So thank you can't assume that some massive amount of incubation space.

Very fair Thanks Joel.

[Analyst] (Bank of America Merrill Lynch): Very fair. Thanks, Joel.

Tom Catherwood: Very fair. Thanks, Joel.

Joel Marcus: Yep.

Yes.

The next question comes from Dave Rodgers with Robert W. Baird. Please go ahead.

Operator: The next question comes from Dave Rogers with Robert W. Baird. Please go ahead.

Hey, good afternoon, Steve wanted to start with you on the 88 Bucks them property I think you quoted in a couple of them like 60% leased or committed and interest only gets you a portion of the way there so.

[Analyst] (Bank of America Merrill Lynch): Yeah. Good afternoon. Steve, wanted to start with you on the 88 Bluxome property. I think you've quoted now a couple of times like 60% leased or committed, and Pinterest only gets you a portion of the way there. So if you had said it earlier, I missed it, and you mentioned a lot of leases at the beginning of the call. But have you announced a second lease there, or can you give a little more color on that?

Dave Rodgers: Yeah. Good afternoon. Steve, wanted to start with you on the 88 Bluxome property. I think you've quoted now a couple of times like 60% leased or committed, and Pinterest only gets you a portion of the way there. So if you had said it earlier, I missed it, and you mentioned a lot of leases at the beginning of the call. But have you announced a second lease there, or can you give a little more color on that?

If you had said it earlier I missed it and you mentioned a lot of leases at the beginning of the call, but have you announced the second lease there can you give a little more color on that.

Hi, its Steve Yes. This is the historical kind of relationship we had with the Bay club.

Operator: Dave. Hi. It's Steve. Yeah. This is the historical kind of relationship we had with the Bay Club. So that's the other lease that's counting towards that occupancy percentage of the overall mixed-use complex.

Steve Richardson: Dave. Hi. It's Steve. Yeah. This is the historical kind of relationship we had with the Bay Club. So that's the other lease that's counting towards that occupancy percentage of the overall mixed-use complex.

So thats the other leasebacks counting towards that occupancy percentage of the overall mixed use complex.

Got you Thats helpful. Thank you.

[Analyst] (Bank of America Merrill Lynch): Gotcha. That's helpful. Thank you.

Dave Rodgers: Gotcha. That's helpful. Thank you.

Operator: Sure.

Steve Richardson: Sure.

Charting the increased in.

[Analyst] (Bank of America Merrill Lynch): Dean, the increase in capitalized interest, I think, for this year, was that just purely a function of more land kind of acquired in the most recent quarter? Were there any other changes as you looked at kind of that bucket of capitalized properties?

Dave Rodgers: Dean, the increase in capitalized interest, I think, for this year, was that just purely a function of more land kind of acquired in the most recent quarter? Were there any other changes as you looked at kind of that bucket of capitalized properties?

Capitalized interest I think for this year was that just purely a function of more lands kind of acquired in the most recent quarter are there any other changes.

As you looked at kind of that bucket of capitalized properties.

No I just.

Joel Marcus: No. What has increased is the dollar basis on average, Dave, under qualifying activities, which could be construction, vertical construction, or free construction, which is entitlements. So we have more activity today than we did last year, as an example. And that's, I think, apparent as you look at our disclosures for product beyond 2019, as an example.

Dean Shigenaga: No. What has increased is the dollar basis on average, Dave, under qualifying activities, which could be construction, vertical construction, or free construction, which is entitlements. So we have more activity today than we did last year, as an example. And that's, I think, apparent as you look at our disclosures for product beyond 2019, as an example.

What has increased as the dollar basis on average I'm, Dave and you're qualifying activities, which could be construction vertical construction or preconstruction, which its entitlements.

So we have more activity today than we did last year as an example.

And Thats I think apparent as you look at our disclosures for product beyond 2019, as an example.

Right. It is and I guess I was just thinking it was in the guidance that went up not necessarily versus last year, but in your own guidance I guess I was just trying to reconcile.

[Analyst] (Bank of America Merrill Lynch): Right, it is. I guess I was just thinking it was in the guidance that went up, not necessarily versus last year, but in your own guidance. So I guess I was just trying to reconcile the changes.

Dave Rodgers: Right, it is. I guess I was just thinking it was in the guidance that went up, not necessarily versus last year, but in your own guidance. So I guess I was just trying to reconcile the changes.

Joel Marcus: Oh, yeah. Yeah. Yeah. I'm sorry. Dave, you're right. On 20 June, we filed an 8-K, which highlighted an increase in our acquisition guidance. And a significant portion of that is future redevelopment and development opportunities. And that results in almost all those projects have qualifying activities that require capitalization of interest. So our guidance for cap interest went up at that point, and net interest went down because there weren't any increases in interest costs anticipated. And just to round that out a little bit, Dave, we fund that with common equity because that's non-income producing. There's no cash flows on the future development product. So that kind of helps you understand why there's no increase in interest cost. It's equity-funded projects.

Dean Shigenaga: Oh, yeah. Yeah. Yeah. I'm sorry. Dave, you're right. On 20 June, we filed an 8-K, which highlighted an increase in our acquisition guidance. And a significant portion of that is future redevelopment and development opportunities. And that results in almost all those projects have qualifying activities that require capitalization of interest. So our guidance for cap interest went up at that point, and net interest went down because there weren't any increases in interest costs anticipated. And just to round that out a little bit, Dave, we fund that with common equity because that's non-income producing. There's no cash flows on the future development product. So that kind of helps you understand why there's no increase in interest cost. It's equity-funded projects.

Im sorry, Dave you are right.

In June on June Twentyth, we filed an 8-K, which highlighted an increase in our acquisition guidance.

And a portion a significant portion of that is future redevelopment and development opportunities.

And that results in.

Almost all those projects have qualifying activities.

That required capitalization of interest to our guidance for cap interest went up at that point.

And net interest went down because there weren't any increases in interest costs anticipated.

And just to round that out a little bit Dave we funded that with common equity because that's non income producing theres no cash flows on the future development product.

So that kind of helps you understand why there is no increase in interest cost is equity funded projects.

And you are capitalizing on data about the debt I assume so that change.

[Analyst] (Bank of America Merrill Lynch): You're capitalizing on the average cost of debt, I assume. That's the change?

Dave Rodgers: You're capitalizing on the average cost of debt, I assume. That's the change?

Im sorry.

Joel Marcus: I'm sorry?

Dean Shigenaga: I'm sorry?

Yes, Yes, I got you that's helpful. I appreciate that and then.

[Analyst] (Bank of America Merrill Lynch): Yeah. I get you. That's helpful. I appreciate that. And then maybe last question for Joel. Joel, I think in the last cycle, you go back to kind of early 2000s. You guys were very aggressive buying buildings, land, redevelopment, etc. But I guess I was wondering, aside from the balance sheet, which has been much improved from that point in time, have you guys done anything different, or is it really just the market that's cooperating this time versus last time kind of the market fell out, if you will, for a couple of years?

Dave Rodgers: Yeah. I get you. That's helpful. I appreciate that. And then maybe last question for Joel. Joel, I think in the last cycle, you go back to kind of early 2000s. You guys were very aggressive buying buildings, land, redevelopment, etc. But I guess I was wondering, aside from the balance sheet, which has been much improved from that point in time, have you guys done anything different, or is it really just the market that's cooperating this time versus last time kind of the market fell out, if you will, for a couple of years?

Maybe last question for Joel Joel I think in the last cycle you go back to kind of early two thousands you guys are very aggressive buying buildings land redevelopment et cetera.

I guess I was wondering aside from the balance sheet.

Which hasn't been much improved from that point in time have you guys done anything different or is it really just the market thats cooperating this time versus last time kind of the market sell out if you will for a couple of years.

Well I think if you listen to the store you would realize that.

Joel Marcus: Well, I think if you listened to the story, you would realize that Mission Bay took place in 2004, 2005, and beyond, where we shifted from single asset to a campus cluster strategy. In 2006, we moved big time into Cambridge with Tech Square and the entire Binney Street development of over 2 million sq ft. And we won the RFP in New York. So the pivot in the days of 2004, 2005, and 2006 have vastly impacted our growth over the last number of years. And I think the deleveraging and the investment grade that we achieved in 2011 have significantly enhanced our balance sheet to where we are today. We believe we've got what people sometimes refer to as a fortress balance sheet, and that has enabled us to continue to grow. I think there's nobody who has this kind of a unique business.

Mission Bay took place in 2004, 2005, and beyond where we shifted from single asset to carry a campus cluster strategy. We in 2006, we moved big time in the Cambridge with Tech square and.

The entire Binney Street development over 2 million square feet and we won the RFP in New York, So the pivot in the.

In the days of 2004, five and six.

Have vastly impacted our growth over the last.

A number of years and I think the.

The de leveraging and the investment grade that we achieved in 2011.

Have significantly enhanced our balance sheet to where we are today. We believe we've got what people sometimes referred to as a fortress balance sheet and that has enabled us to continue to grow I think there is nobody who has this kind of a unique business. So I think nothing has ever the same if you look at some of the things that we've done and some of the.

Joel Marcus: So I think nothing is ever the same. If you look at some of the things that we've done and some of the approaches we've taken in each of the markets, I think they're pretty highly differentiated than where we were, say, even 5 years ago or 10 years ago.

So I think nothing is ever the same. If you look at some of the things that we've done and some of the approaches we've taken in each of the markets, I think they're pretty highly differentiated than where we were, say, even 5 years ago or 10 years ago.

Approaches we've taken in each of the markets I think they're pretty highly differentiated than where we were saving five years ago or 10 years ago.

Great. Thank you.

[Analyst] (Bank of America Merrill Lynch): Great. Thank you.

Dave Rodgers: Great. Thank you.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Joel Marcus for any closing remarks.

Operator: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Joel Marcus for any closing remarks.

Joel Marcus: Oh, exactly at 60 minutes, 1:00PM and 4:00PM on the East Coast. Thank you very much, and we look forward to talking to you on the Q3 call. Be safe.

Exactly 60 minutes one o'clock in four o'clock in these go. Thank you very much and we look forward to talking to you on the third quarter call be safe.

Thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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