Earnings Call: Q3 2020

Oct 27, 2020

Good day, and welcome to the Alexandria Real Estate Equities Third Quarter 2020 Conference Call. All participants will be in listen only mode. 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 the federal securities laws. The company's actual results might differ materially from those projected in the forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. And now, I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel. Thank you, Paul, and welcome everybody to Alexandria's Q3 call. With me today are Dean Shigenaga, Steve Richardson, Peter Moglia, and Jenna Foger. I'd like to welcome everybody and from the Alexandria team and family, wishing hoping you're all well, safe and COVID free. As all of us know, 2020 has been an astounding year of the never imagined confluence of an international pandemic from Wuhan, China, a deep shutdown recession, civil strife coupled with a heated and complex election upcoming here next week. 2020 started off very sadly with the untimely death of Kobe Bryant, not only a Graft athlete, but a special human being. And I want to make just a brief quote from one of his great sayings. He often said that great things come from hard work and perseverance. And those of you who knew or watched or admired Koby, always he was the last guy to finish up and the 1st guy to start and was one of the hardest working people anyone could ever imagine. And that really exemplifies our team and want to thank our team from the bottom of my heart and our team's heart for doing such a great job. Alexandria has really uniquely achieved 3 outputs that are very rare in corporate America today that define a truly great company, continuing superior results, continuing distinctive impact and lasting endurance. And again, we want to thank our entire team for a stellar third quarter as we are all building the future of life changing innovation literally during COVID-nineteen. One could never imagine that. So, a couple of different comments. I wanted to comment on the recent Blackstone transaction where Blackstone announced the recapitalization of its life science real estate business and it only serves I think to reconfirm once again the great vote of confidence in the life science real estate niche we pioneered in 1994. The transaction implies an approximate $10.70 price per square foot for that 13,000,000 square foot portfolio. And I think compared to where Alexandria trades more or less today at about $9.50 a square foot, I think that's, I think, very good benchmark for us. Blackstone timed its, I think, 2015 purchase really quite ideally as the biotech industry was emerging from about a 5 or 6 year bear market in the 201320 14 timeframe. And at that time, when they acquired the assets, they were by and large most of the buildings were older than Alexandria's and they were not in as strong locations as we were. They've clearly enhanced that portfolio since and kudos to them for doing that. I want to take particular mention on 3rd quarter activity on our Research Triangle acquisition, which is really a particular note, a large acquisition about $590,000,000 purchase price, about $2.65 a square foot, 2,200,000 square feet over about 300 acres, 20 buildings with very high credit tenant, but also significant value add. This acquisition substantially increased our footprint in Research Triangle and particularly was motivated by our need to accommodate numerous inbound substantial tenant requirements, both who needed existing solutions and build to suit capabilities. We now have 3 mega campuses in the Triangle, this newly branded campus, the Alexandria Center of Life Science Durham, the Alexandria Center for AgTech, and the Alexandria Center For Advanced Technologies. We see continuing strong demand for life science base across our markets, but particularly pointed are the many requirements from our own tenant base within. Also, it's important to remember 2 key truths have really been revealed by COVID-nineteen. 1 is the resilience of and the need for domestic medical supply chains to be here based in the United States, crucial for national security and for medical supply. And I think it only reinforces that complex medicines are really the future of healthcare, and I guess the famous COVID-nineteen antibody cocktails would be a good example of that. I wanted to mention a little bit about Operation Warp Speed. This was initiated by the Trump administration and supported by more than $10,000,000,000 in funding through the CARES Act. Operation Warp Speed led by really a legendary, probably one of the most skilled vaccine developers in the entire world, Mansef Slawi, aims to deliver 300,000,000 doses of a safe and effective COVID-nineteen vaccine in Q1 as part of a broader strategy to accelerate the development, manufacturing and distribution of COVID-nineteen vaccines, therapeutics and diagnostics, really all in tandem, very different than the government has ever operated before and really a great credit to public private partnerships. The Warp Speed partnership is between selected biopharma companies and key federal science agencies, including BARDA, CDC, DoD, FDA, HHS and the NIH. As of October 21, the initiative announced funding decisions totaling over $13,000,000,000 for more than 10 companies to support vaccine therapy and manufacturing efforts. These included virtually all of which, maybe except 1, our tenants of Alexandria, Moderna, GSK Sanofi, Pfizer, Novavax, AstraZeneca, J and J, Merck, Regeneron, Emergent Bio and Fujifilm. So quite a humongous feat, I think, given the onset of this pandemic in a pretty odd fashion. I think to this date there is certainly speculation that this was not a natural occurring virus, but one that was man made in a lab in Wuhan. A couple of comments about the life science industry, and again, a real shout out to the great private public partnerships that have deformed in so many different fashions. The life science fundamentals throughout 2020 have remained fundamentally strong, especially given the critical nature of the fight against COVID-nineteen. This has helped lead to substantial progress and acceleration, including late stage vaccine trials and therapeutics, along with improved and expanded testing. The life science industry has not slowed down its pace. It's important to remember of investment in innovation well beyond COVID-nineteen. The industry's commitment and investment in innovation along with the FDA's ability to continue to operate at a high level despite the pandemic has led to 40 new drug approvals as of the end of September, which puts us on a pace to meet or exceed the 51 average of the past couple of years. I was on a call last week with Kushner Hahn and it's a great credit to he and the entire professional workforce at the FDA for their really 20 fourseven effort in this time. Life science venture funding has continued to flow at a strong pace in the 3rd quarter, setting new quarterly records at almost $12,000,000,000 with more than $30,000,000,000 raised through the 1st three quarters really surpassing all previous annual totals. It's important to remember that most of this investment, 80% comes from Alexandria's core markets and especially Greater Boston and San Francisco, which capture about 60%. Capital flows to early stage companies in the public markets continue at a fast pace. There have been 47 pharma and biotech IPOs in the 1st 3 quarters of this year, raising almost $9,000,000,000 larger than any previous year, and the companies have been able to access capital markets at historic levels, approximating almost $35,000,000,000 in follow on offerings, surpassing the previous high of about $29,000,000,000 in 2015. So all in all, it's been a pretty strong tailwind for the Jenna Foger, our Senior VP of our Science and Tech team and she is going to talk about the latest developments in the vaccine therapeutic area. So, Jenna, please. Thank you, Joel, and good afternoon, everyone. So, as this unprecedented pandemic rages on, giving rise to a new record high resurgence in COVID cases across the country and forging an indelible mark on the global economy, society, and of course, the future of public health. The imminent need for safe and effective treatments of vaccines to combat this coronavirus is paramount. And those skepticism and impatience have set in as each and every one of us navigates this uncomfortably discomforting human experience of waiting. Never before has the work of our tenants in the life science industry been more important. The mission critical and absolutely essential efforts of our nearly 100 tenants with meaningful COVID programs represent the beacon of hope for an end to this COVID-nineteen pandemic. In aggregate, our tenants in the life science industry also represent the solution for the longer term impacts of human health, which COVID has urged us all to rethink. An increased focus on prevention, overdue innovation in infectious disease and other neglected therapeutic areas and new paradigms for R and D collaboration, next generation manufacturing, supply chain efficiency and improved distribution and access to new medicines. Clearly, a safe and effective vaccine should help bring about the effective end of the COVID-nineteen pandemic and is absolutely requisite to meaningfully reopen society of stores the global economy. As such, researchers around the world are working with unprecedented speed and collaboration on at least 135 distinct coronavirus vaccine programs, of which nearly 50 vaccine candidates are already in human trials. As Joel mentioned, a cornerstone of the U. S. Government's effort to expedite the development, manufacturing and distribution of COVID-nineteen treatments and vaccines is of course the Operation Warp Speed initiative with the vast majority of its grant recipients being to Alexandria Tenant. So among these efforts, I want to call your attention to 4 of the most advanced vaccine programs from Pfizer, Moderna, AstraZeneca and Novavax, each a top tenant for Alexandria in their respective regions, and each applying a slightly different underlying technology and approach to vaccine development. Each one of these companies has reported clinical data that suggests initial safety and efficacy and each are currently conducting major Phase 3 studies with tens of thousands of subjects around the world. Key data readouts from each of these companies are expected in the Q4 of this year spanning between now probably November December. Together, these four companies alone are building capacity to provide over 6,000,000,000 doses next year. So what can we make of all of this amidst the constant flow of headlines? It is highly likely that at least one and likely more than one of these initial Phase 3 trials will report interim efficacy results in November December of this year. If they do, the FDA could grant emergency use authorization by year end or very early into 2021, which would enable the highest risk populations like healthcare workers and others to begin to receive the vaccine over the coming months. The FDA has set the minimum standard efficacy threshold for all COVID vaccines at 50%, meaning that a vaccine will have to protect at least 50% of those receiving it to receive emergency use authorization. And based on some of the data that's come out to date and the time that it's taken for companies like Pfizer, Moderna and others to report their data, healthcare analysts have begun to predict efficacy more likely in the range of at least 70%, but all obviously remains to be seen. As more data becomes available and the vaccines begin to be distributed, if safety and efficacy persists, these companies and others could receive FDA approval in the first half of twenty twenty one with widespread distribution of safe and effective vaccines to the public sometime mid next year. Given the addressable population, pretty much the entire world, this will not be a winner take all opportunity and no one company alone will supply the global demand in the near term. Over time, the most effective vaccines will likely have more upside. Of course, many questions remain and we'll continue to learn more in the coming months as more data rolls out. Just as it remains unclear how long natural immunity lasts after a person becomes infected with COVID-nineteen, similarly, the durability of a COVID-nineteen vaccine is still a wide open question. Will COVID be a pandemic like SARS or MERS that will subside over time or will it be more endemic or flu like creating a longer term market opportunity for the current treatments and developments? In addition to safety and efficacy questions, challenges related to capacity, access, distribution logistics and early adoption are all being navigated in real time. Meaningful strides are being taken by our tenants in the life science industry to preempt as many of these complexities as possible. And of course, in the meantime, new antibody therapies by companies such as Tennant's Deere in collaboration with GSK, Eli Lilly and AstraZeneca could serve as a bridge to a vaccine taken prophylactically or to help reduce the severity of COVID-nineteen, especially if taken early in the course of disease as we see now with Eli Lilly's antibody. Key data readouts will be forthcoming over the next few months, while Eli Lilly's single agent antibody and Regeneron's antibody cocktail have filed for emergency use authorization and await approval. Other notable advances in the treatment of COVID-nineteen include the FDA's first COVID specific approval of Tennant Gilead's antiviral drug BECLORI or remdesivir for the treatment of COVID-nineteen patients requiring hospitalization. The FDA has also granted emergency use authorization for the use of convalescent plasma in hospitalized patients with severe disease and the NIH has also included within its guidance the use of dexamethasone or steroids in hospitalized COVID patients requiring supplemental oxygen. These notable and expedient efforts across our tenant base and the life science industry owe in large part to the fact that as the coronavirus made itself known to the world almost a year ago now, these companies were already well equipped with the R and D infrastructure, technology platforms, resources and talent in place such that they were able to mobilize quickly and meaningfully to combat this global health crisis. It is our honor to continue to serve at the vanguard of this essential life science industry and to support the heroic work of our tenants and campus communities focused on bringing an end to this pandemic, addressing the 10,000 plus diseases already known to us today and innovating the future of drug discovery to solve tomorrow's threats to human health. And with that, I'll turn it over Steve. Thank you. Thank you, Jenna. Good afternoon, everyone. The very strong results we've achieved during the Q3 are a testament to both the clear vision the company has had since its inception more than 25 years ago and the highly creative and entrepreneurial team that has skillfully adapted to this tumultuous time. Alexandria's mega campuses are now not only essential and mission critical, but they are also especially desirable and capturing a significant majority of the life science growth in the place. The Alexandria brand is highly valued across the entire life cycle life science ecosystem for its well earned trusted relationships, impeccable integrity and unparalleled expertise and experience. These timeless elements are the foundation for our tenants' decisions to continue to seek out a collaborative and mutually beneficial multidimensional platform for their growth with Alexandria. As the challenges only increase for navigating success in the quest to eradicate disease and improve nutrition globally, particularly with a once in a century pandemic upon us, Alexandria stands out as recognized as an innovative, insightful and unique partner as the following results clearly demonstrate. In the realm of operational excellence, company has collected 99.7 percent of its accounts receivable during the Q3 and 99.7% during October. The 20 fourseven nature of these labs and the fundamental value they provide to our tenants is clearly evident with these operational statistics. On the leasing front, we have continued outperformance. During the Q3, we outperformed the 2nd quarter leasing activity with a total of 1,200,000 square feet leased, which brings us to nearly 3,000,000 square feet leased year to date during 2020, which is pretty impressive considering our 10 year leasing average is 3,900,000 square feet. Alexandria's team is fully engaged and our tenant base is thriving and continuing to grow. To underscore the leasing outperformance, this quarterly run rate during the time of COVID is approximately equal to or better than the leasing run rate during the Q1, the Q2 and the Q3 of 2019. In a particular note is the 80% lease or negotiation status of the development pipeline for the same set of projects detailed in our Q2 supplemental, so very solid progress with our on balance sheet growth engine and Peter will provide further details during his remarks. Our core continues to be strong with rental rate increases of 30.9% cash and 39.9% GAAP for renewals and releases and early renewals for the Q3 are above our historic levels and reached 86%, so the sense of urgency remains strong for our tenant base. Our mark to market is at 16.4% cash, a 90 bps increase from the 2nd quarter and 17.1 percent GAAP, up 120 bps over the 2nd quarter. Occupancy continues to be solid at 94.9 percent across 31,200,000 square feet in the operating portfolio. And after taking into account the recently acquired lease up opportunities, we would otherwise be at 97.7 percent occupancy, up 60 bps from the 2nd quarter. Market health continues to be strong with robust lab demand of 3 point 2,000,000 square feet in the Bay Area of San Francisco, 2,500,000 square feet in the Greater Boston region and 2,100,000 square feet in San Diego. But importantly, there is a market acceleration to high quality COVID safe campuses and evidenced again by our ability to capture a dominant market share of promising and strong credit life science companies. So in conclusion, Alexandria's pioneering efforts have placed the company at the actual and virtual intersection of science and global health. The team is entrepreneurial, creative and fully prepared to meet and decisively capitalize on this opportunity to partner with our tenants for the benefit of health across the globe. With that, I'll hand it off to Peter. Thanks, Steve. I'm going to briefly update you all on our development pipeline, the impact of Prop 15 on Alexandria and touch on a recent third party asset sale in one of our submarkets. So as with developments, overall, the leasing activity was very robust. We had over 300,000 square feet of leases completed and approximately 490,000 square feet of space put under LOI in the development redevelopment in the quarter and that was led by significant demand at our 2 Bay Area projects 201 Haskins and the Alexandria District project in San Carlos. There have been a few adjustments to the development, redevelopment pipeline from last quarter. 975 Market Street in Soma was sold for $198,000,000 as noted in our dispositions disclosure. Accepting the unsolicited offer really made a lot of sense to us as an opportunity to really recycle that capital into our already robust pipeline. 704 Quince Orchard Road in Gaithersburg, Maryland and 9,880 Campus Pointe Drive in San Diego were have been added, including the Palmer Campus in Research Triangle that Joel referenced. That was acquired in the Q3 and has been rebranded as Alexander Center For Life Science Durham. Approximately 650,000 Square Feet of the 2,200,000 Square Foot Campus is slated for redevelopment into research and development lab space or manufacturing space and it has already been 50% pre leased. The second asset, Alexandria Center For Advanced Technologies is also in the Triangle and features research and manufacturing space in 2 buildings that are a combined 40% pre leased. We have also disclosed 3 new pre leased projects in our San Diego region, 3,115 Merrifield Road, also referred to as Spectrum 3, is 146,456 Square Foot Ground of Development. That will be the 4th and final phase of our Spectrum campus in Torrey Pines. The project has considerable interest, 80% of the building is already under letter of intent. At Alexandria Point, we have pre leased 100% of a new ground up 171-102 Square Foot Development on that mega campus to our credit tenant and at the San Diego Tech by Alexandria project, we've kicked off our first ground up development with a 59% pre leasing of 176,428 Square Foot Building to an exciting genetic sequencing company, a technology that's really a major strength of the San Diego region. On to Prop 15, we're sure everybody is aware of the details of California's Proposition 15 ballot measure that would overhaul the state's property tax limitation of 2% increases per year and replace it with market value assessments every 3 years for commercial properties that have values in excess of $3,000,000 If Proposition 15 is passed, the property taxes for some of our properties in California could substantially increase. Our current assessment is that we're in pretty good position to absorb the impact of this proposition should it pass as our California asset base is relatively young with approximately 60% of our California properties purchased or developed, redeveloped over the past 10 years and our triple net leases allow us to pass through among other costs substantially all real estate and rent related taxes to our tenants in the form of additional rent tenant recoveries. Consequently, as a result of having triple net leases and a relatively new asset base, we do not expect potential increases of property taxes resulting from tax reassessments to significantly impact our operating results and they will have almost no impact on our NOI. Moving to the asset sale I mentioned, so over the past two quarters, we've discussed strong interest in lab office assets from a diverse set of investors mentioning Healthpeak's purchase of the Post and Waltham at a 5.1% cap rate and a healthy price per square foot of $7.51 a foot for a suburban asset. Their purchase of 35 Cambridge Park Drive for almost $1500 a square foot and a 4.8% cap rate and Beacons versus I think referenced last quarter of 27 drydock subject to a very onerous ground lease in the Seaport area of Boston at a 4.8% cap rate and a $9.16 per square foot value. It is still a good time to be in the market with assets in Life Science Markets. During the Q3, Ventas purchased the Genesis Towers and 4000 Shoreline in South San Francisco for $1,020,000,000 or $1301 per square foot and a 4.75 percent cap rate. We were somewhat surprised by that valuation as the tower sit oddly and alone on the west side of the 101 Freeway and the south tower is an actual converted office building, which as we've been talking about at a number of recent meetings can cause less than ideal conditions for tenants. For instance, the low clear height of the base building design led to lower finished seat a lower finished ceiling than what you would normally find in a Class A lab building. And since the building had an office tenant in the top floors during its conversion, much of the ducting resides on the exterior of the building making for less than ideal aesthetics and the freight elevator does not reach the buildings ever for us. All of these things really put the project at a competitive disadvantage to others in the rental market. Look, despite the exuberance of our product type, we are going to continue to maintain our highly disciplined approach to underwriting and know that our deep knowledge, expertise and experience will continue to provide us with great opportunities to grow our asset base at reasonable evaluations. And with that, I will pass it over to Dean. Hey, thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. Our Essential Real Estate portfolio continues to provide highly innovative entities with mission critical research facilities, really focused on acceleration of innovation to advance human health. We're very proud to be the key partner to leading entities agtech and have a highly experienced team delivering operational excellence quarter to quarter and year to year. Our high quality Class A properties and future development sites, combined with our stellar tenant roster, continues to generate high quality and growing cash flows. Our growth in cash flows from operating activities continue to allow us to increase our common stock dividend, most recently $1.06 per common share or $4.12 per share on an annual basis, and that was up 6% over the previous 12 months. We are on track to retain over $200,000,000 in cash flows from operating activities after dividends in 2020 for reinvestment into our highly leased development pipeline. Our 3rd quarter results are very solid and 2020 is wrapping up as a strong year for our Essential Real Estate business. Total revenues for the Q3 were up almost 17 percent over the Q3 of 'nineteen, excluding the termination payment from Pinterest, really highlighting continued solid execution on both internal and external growth. Adjusted EBITDA margin was very strong at 67% for the 3rd quarter and remains one of the top stats within the REIT industry. The slight temporary decline in the 3rd quarter was due to 2 items, about 1 third of which was related to temporary vacancy for space that will be delivered for occupancy in the 4th quarter and about 2 thirds of that decline related to seasonal increases in utilities. Now the increase in utility expenses are recoverable from our tenants and did not impact net operating income. Importantly, our adjusted EBITDA margin is expected to improve to 68% in the 4th quarter. Rent collections have been very strong, as Steve highlighted, at 99.7% for both 3Q and for October and in line with our expectations for our mission critical essential real estate. Now occupancy has been solid this year at 97.7% before the impact of vacancy from recently acquired properties. And please refer to Page 24 of our supplemental package for a detailed list of vacancy that was acquired recently. Now the key takeaway is that recently acquired recently acquired properties vacancy will provide growth and cash flows as our team executes on these lease up opportunities. Now our operating results continue to benefit from contractual annual rent escalations averaging approximately 3% from 1 of the highest quality tenant rosters in the REIT and contractual rents commenced in 3Q, pushing through 3rd quarter same property results in line for our expectations for 2020. Now same property NOI growth was 2.9% and 4.9% on a cash basis for the 3rd quarter. We reported continued and very strong rental rate growth on lease renewals and releasing the space at almost 40% and almost 31% on a cash basis for the 3rd quarter. And quick comment on leasing activity for the quarter and for the 9 months. Two leases did impact the amount of TIs and leasing commitments related to lease renewals and releasing a space. 1 lease executed in the quarter related to re tenanting of an older building that was occupied by a single tenant for 15 to 20 years and the infrastructure was not really our traditional generic lab improvements. Also consistent with our assumptions related to a recent acquisition, we successfully released a portion of the property along with the TI allowance to bring the space up to ARE standard really for high quality facilities. Now these two leases are unusual and did impact our quarterly average for TIs and leasing commissions. Excluding these two leases, our average TIs and LCs for the 3 months 9 months ended September 30 would have been in line with historical amounts at approximately $17 $20 per square foot, respectively. During the quarter, our General Counsel resigned for family reasons. She really was one of our top leaders in the company. She built a really great team and had an amazing 2 decade career at Alexandria. We truly wish her well. In connection with her departure, we recognized a $4,500,000 compensation expense in the 3rd quarter. Now turning briefly to Venture Investments. Over the past year or so, we have been taking advantage of the strength of the portfolio and overall capital markets. Our net cash flows from have been about neutral for the 1st 3 quarters of 2020, highlighting that we have been strategically monetizing certain holdings. Unrealized gains have grown significantly to $542,000,000 as of September 30, and realized gains have averaged about $16,100,000 per quarter over the last 4 quarters and was $17,400,000 for the 3rd quarter. Now our team has been working diligently on our active and near term development and redevelopment projects. Peter touched on a lot of the details, but key highlights included 4,100,000 square feet of active and near term projects that are highly leased or negotiating at 74% that will generate significant cash flows. This consisted of great progress on the active pipeline that we presented last quarter, which is now 80% leased and or negotiating. We added over 900,000 square feet to our active pipeline in the quarter, which is now those projects are 54% leased and negotiating. And we also have an additional 500,000 square feet of near term projects, which are 80% leased and negotiating with vertical construction starts ranging from the 4th quarter to the Q2 of 'twenty one. So huge thanks to our entire team for their outstanding execution on our development and redevelopment pipeline. Moving to our balance sheet, just want to say thank you to our relationship lenders and our team for completing an amendment to our unsecured senior line of credit providing aggregate commitments of $3,000,000,000 up $800,000,000 and extending the maturity date by 2 years to early 2026. We completed a record low 12 year bond deal at 1.875 percent in August of 2020. The all in rate for 10 year bonds today for Alexandria remains very attractive at approximately 2%. Now we remain committed to our strong and improving credit profile and are on track to hit our year end goal for net debt to adjusted EBITDA of 5.3x. Now we're very proud to highlight one of the strongest balance sheet in the REIT industry, ranking in the top 10 among all publicly traded REITs. We have liquidity of about $3,900,000,000 reflecting the increase in commitments from our October 2020 amendment to our line of credit, and our weighted average remaining term at outstanding debt was very solid at 10.6 years with very minimal debt maturities until 2024. We updated our 2020 guidance and narrowed the range for EPS diluted from $3 to $3.11 and FFO per share diluted as adjusted from $7.29 to 7.31 Now our targeted dispositions for the remainder of 2020 include 2 key transactions, both of which are moving along very well, with one expected to close real soon. Both of the deals are in process and subject to confidentiality agreements, and therefore, we are unable to comment on either transaction until after closing. Now as usual, please refer to detailed underlying assumptions included in our 2020 guidance beginning on Page 10 of our supplemental package. Additionally, consistent with prior years, we plan to provide our detailed guidance assumptions for 2021 later on at our Annual Investor Day on December 1, and therefore, we are unable to comment on 2021 until then. Let me turn it back over to Joel. Thank you. We'll go to question and answer operator, please. Yes, sir. We will now begin the question and answer session. The first question comes from Anthony Paolone of JPMorgan. Please go ahead. Okay. Thank you. I think Peter, you'd mentioned some of the challenges with some of the conversions to lab, but with a lot of the capital circling, some conversions, new submarkets and new markets, can you just comment whether you think there's enough demand to go around for everybody? Well, yes, let me jump in before Peter comments, Tony. I think you have to look at where these are happening and where the demand wants to be and those don't always match up. I mean, I think if you look at Cambridge, the ability to add supply there is pretty, pretty tough and the demand is strong. Same thing, I think, in different parts of San Francisco. So I think you have to isolate where these either are or might be converted and you heard a little bit about the downside of conversions, they oftentimes don't work out all that well and where the demand is coming from and where they want to go. But Peter, you can comment. Yes. I mean, just yesterday an article came out in the BizNow Web site of San Francisco, titled Too Low, Too Fragile, Too Short Term. Life science conversions are popular, but hard to pull off by author's name was Dean Borner. And I think it's just it's a pretty summary level article, but like we've been talking about for the last couple of quarters, office buildings just don't have the infrastructure needed for a laboratory that will be efficient and flexible at the end of the day. So, invert 1, you can, but the tenants are going to have to make sacrifices in order to occupy that space and they could be very material as far as like how many chemicals they can store, where they can put equipment. It's very inefficient compared to Alexandria's portfolio, which was purpose built for labs. So we feel like any requirement in any of our submarkets that comes around, we're going to be the 1st choice, we're going to have a building that's flexible, that works, and has a staff that knows how to run it. I mean, that's the other thing. There's more than just bricks and mortar here. There's operational expertise, and that can get very technical. And these are mission critical facilities. Our companies can't really afford to go into a building when somebody doesn't know what they're doing because time is money and especially in the life science industry. Okay. Thanks for that. And then my second question, Joel, I think it was either last quarter or maybe the quarter before, you had made some comments about the election and it sounded like a blue wave would be bad. Can you give some updated thoughts on if we get a so called Blue Wave, what the near term impact might be on the business? Well, I think first of all, the ideal is always in government that there is a balanced government and balanced between the parties. I think it's hard to speculate on a blue wave and what it means, because the Democratic Party is really a pretty highly, I would say, a party that encompasses pretty broad spectrum of thoughts from socialized medicine free market with some guidance. So it's hard to know what that really means. I think there are 2 areas that so called Biden Align Group said early on, if there were things they could do pretty quickly, what would they do? One might be to try to get Medicare to negotiate for those drugs administered by doctors. That's one that they might likely try to go after pretty quickly. And then another one is, if they could show that intellectual property was created outside of the company, maybe a more revenue sharing basis with, say, federal lab or a university or whatever. So those are 2 ones that I have heard that they might go to. But I think it's hard to predict and hard to speculate. And anyway, so that's kind of my knee jerk reaction at this point. Do you think in that scenario there's any pause in leasing as tenants try to just figure out what the environment might hold? No. Okay. Thank you. Yes. Good to talk to you, Tony. The next question comes from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead. Thank you. I guess just sticking with the supply topic, are there any markets where you are kind of second guessing or thinking twice about new starts given how much capital is flowing into them? Well, I think, and maybe I will have Steve comment, but I think one that we've certainly flagged over the past couple of years, which certainly has turned out to be way better than we thought, we tend to be pretty conservative in our thinking with South San Francisco, when Kilroy announced the Oyster Point and a number of other groups have built there. I think Healthpeak has done a good job of building and so has Blackstone. And it looked like there might be a tip, more the potential for more oversupply than demand, but it's turned out that the demand has been healthy and the supply issue has been pretty in check. So we have been pretty careful there over the past couple of years, but we certainly have a very strong position. And I think as either Peter or Steve mentioned, we are making great progress on our 201 Haskins project. But Steve, you could comment. Yes. I would add, Jamie, that our South San Francisco portfolio for the lab product is essentially 100% leased. At Haskins now, we're at 88% leased and negotiating. So very well positioned there. The entirety of Phase 1 of Kilroy's project is 100% leased. Blackstone is substantially leased. Peak is substantially leased. So we did monitor it, as Joel mentioned, a couple of years ago. But there has been very robust demand. You have a combination of big pharma coming into South San Francisco that's anchored it with probably 4 or 5 global pharma companies coming in that were not there before. You have a second cohort of companies that have matured to commercialization. So we continue to see that very healthy and do monitor supply certainly very closely, but not overly worried as we might have been a couple of years ago. Yes. Steve, maybe mention straight moving there to the Kilroy project because that's kind of an interesting trend that we haven't really seen before, a little bit like Mission Bay was in the early days when it was life science and suddenly tech came in, in a big way. Right. Yes, I think that was really a unique situation as the market was extremely tight, when they were making that decision, they were looking for opportunities to have additional buildings for expansion. So they did make the move to South San Francisco. You had a particular tax regime in San Francisco that might have been troublesome as well. So that we'll see if that's a harbinger for future tech locations, which will only increase demand in South San Francisco. But it is it was an important and kind of unique situation. Okay. Thank you. And are there any other markets you are thinking about as even monitoring as high risk for supply? Well, I think you always think about Research Triangle because there is a lot of land in and around the Triangle. But that's the reason we have gone to a mega campus strategy because people don't want to just be in isolated locations and many tenants, including one we are under LOI with right now in a pretty big expansion. We are looking for existing solutions. So I think that's one we always have historically been watching, but we are pretty comfortable given our recent dollar commitment there. Okay, thank you. Yeah, thanks Jamie. Next question comes from Manny Korchman of Citi. Please go ahead. Hey, guys. Thanks for the comments earlier on the amount of capital looking at the space. Just in that light, you guys have also increased the number of acquisitions you're doing and there's a couple of big deals out there. I know you don't really talk about future deals, but how interested would you be in big deals, especially in a market like Cambridge? Yes. So let me maybe react to that. First of all, it's always hard at the beginning of any year to know, especially this year of 20 20, I mean, my gosh, in March April, we had cut and we are planning to cut further CapEx, because no one knew if this was going to be a repeat of 'eight, 'nine in a sense. But by May, it was pretty clear that that wasn't the case. It was a different kind of market shock. So nobody knows at the beginning of any year or during the year what assets might come to market for what reasons. So I think it's always hard to speculate on acquisitions and we are always looking for ones that have an ability to satisfy internal tenant demand that we have. Now we have hundreds and hundreds of tenants that we know where what they want to do going forward. So that gives us a huge competitive advantage. And I think trying to match that up with solutions that either exist or we can create. I think when it comes to big portfolios, I mentioned Blackstone 4. I think their recapitalization and move from one fund to another and I guess if there was an offer out there. We know that the base portfolio well back in 2015, I described it, there would be, we didn't have interest then and we wouldn't have interest now. It doesn't do anything for us particularly and adding gigantic scale doesn't really make sense. But I think they've done a great job of calling that portfolio and then really adding quality buildings which weren't there so much many years ago. And I think on the other big portfolio in Cambridge, we don't have any comment on that. But I would say that's kind of an A-, B plus location. We have 3 mega campuses in the heart of Kendall Square, which are AAA locations. So I think that gives you some insight on how we think about that. Great. And Joel, maybe you'll take this one as well. How are you guys thinking about maybe the amount of manufacturing space that's in your portfolio now and how much that might ramp over time. One of the pictures you highlighted in the supplemental this time around was a manufacturing facility, which I think you've done in the past. Just kind of curious how much of your space might not be labs or office, but more manufacturing? Yes. Well, we have done manufacturing before. We don't do remote manufacturing. If somebody wants to build a plant in Puerto Rico or Iowa or Kansas or West Virginia or someplace, we don't go to locations where we think that there is no long term inherent value in the real estate. It's just an investment. It's amortized over the term of the lease and then when it's gone, you have kind of written down your asset. So that's never of interest. But I think given today, remember what I said in my comments, there are really 2 fundamental things going, things that have been evidenced by COVID-nineteen. 1 is and whether it's the Trump administration or Biden push, he has kind of parroted what Trump has said, Whether he can do it or not, don't know or whether he will have the chance or not, don't know. But it's pretty critical that we do repatriate as much research development in manufacturing in the critical medical arena and healthcare arena back to the US for obvious reasons and where those become either adjacencies or in close proximity to headquarters and core R and D, then we clearly have interest. If they are in really random remote locations, there would be no interest. And you have to also remember, there is a new generation of companies today, particularly in cell and gene therapy and those manufacturing capabilities, whether they be at the clinical level or at full scale commercial level, are to a large extent worth more than the company's research and so those become mission critical. You can think of any number, I mean Bluebird is a good example, any number of companies that have highly specialized manufacturing for these complex medicines of the future. So we think it becomes an integral part of RDC and now M and I think it's a huge opportunity. I think it's a huge opportunity for everybody in the United States, because I hope it comes true. I think the one negative thing that sits on the horizon is if Biden happened to win and he happened to be able to increase corporate taxes, he is going to do the very thing that we have sought not to do, which is force companies overseas, move companies, cash overseas, why would you want to operate in a high cost US environment where you could operate overseas at a reduced price. And so that would undermine the purpose of bringing back manufacturing. So we hope that doesn't happen. Hey, Joel. It's Michael Bilerman here with Manny. Just one other one for you. As you talk about overseas and you talk about the highly competitive nature for buildings here in the U. S, either acquisitions, development deals, conversion plays, have you changed your thinking at all about putting incremental dollars outside the U. S. At all? And I recognize you've had fits and starts on global and the message pre COVID was focus on the core markets here in the U. S. I'm just wondering if the returns have been driven down to such low levels here and there's so much competition, whether you have an advantage of going global given your operational and investment expertise? Yes. So that's a really good question and you know a little bit of the history of back in the 2005, 2006, 2007 era pre crash. We entered both China and India. After getting into India, it became pretty clear the Indian Supreme Court invalidated the Gleevec patent. It was pretty clear that novel research wasn't going to India and it's a tough place to operate from a foreign corrupt practices act. So we terminated, we sold our operation there. China, we only did 2 projects. We sold 1. We have one remaining. The problem in China is and we refuse to tie up with a local partner, even though that was kind of recommended. But what happens is, the government builds crappy buildings around your nice building. It would be putting something like a mini storage unit next to a 1st class lab and then telling the Chinese to go in there and operate a lab, which they do at free rent because the government told them to do it. And so that's a hard business model to follow. But I think November 3rd or thereafter will be revealing of the answer to that question. I don't think I could answer it at the moment. But if it turned out there was a blue wave and it turned out that they dramatically increased corporate taxes, then I think the answer is you'd have to look at the possibility of thinking overseas, because the government would have just done the exact opposite of what makes compelling sense to keep companies in this country at competitive tax rates and keep their critical operations here. So I think November 3rd or thereafter, we'll be revealing of that question. Yes. I was thinking more so Europe, UK, Canada rather than going back to China or India. But we can certainly have the discussion at Investor Day. So thank you so much. Yes. And if we go into New Zealand, I am sure I will be down there to help start that office. The next question comes from Sheila McGrath of Evercore ISI. Please go ahead. Yes, good afternoon. On the acquisition in RTP, that was a market you previously had a smaller presence in. I was wondering if you could talk about the market dynamics there that may have changed you to be more bullish details on demand drivers and any insights on the embedded growth opportunity at that asset? Yes. So, we have been in the Triangle since 1990 8. We were early in there and we have always been attractive because in the early days, North Carolina was very aggressive in providing incentives to companies wanting to move down there for in the biotech space in particular. And we really like that market anchored by Duke, UNC and NC State, Duke and UNC in the healthcare arena and NC State more in the ag arena. And I think we saw that the market though had pretty slow growth and in fact lost rental rate increase momentum for quite a long time during the from like 2008 through say 2016 or something. So almost a decade, Italy struggled and when the urban cores were kind of being the most popular, people didn't want to go down to kind of sleepy research triangle and hang out in a wooded beautiful area by a lake. That has a little bit reversed its course as you could imagine given what's going on in New York and some of these other cities that have seen a lot of both rise in crime and obviously the impact of COVID and homelessness and things like that. So we have, as I mentioned in my comments, we have a large number or certainly an important number, large square footage of existing tenants who have expressed interest in creating either expansion or new space down in Research Triangle. And so that really motivated us in a substantial way. Also, our market share there now has moved to about 40%, which gives us the scale of 3 meg campuses where we have a lot of existing solutions and a lot of to be built solutions. So that's kind of where we wanted to get to. Okay, great. And then could you give us your updated thoughts on the Downtown San Francisco market, the plans for 88 LUXUM and insights on Stripe subleasing at space? Yes. Steve? Yes. Hi, Sheila. It's Steve here. Yes, Stripe's plans for subleasing, I think, were always the case with the relocation of South San Francisco. They haven't done anything official yet. I think they're just putting some fillers out. So that's very much a TBD. And then with ADA Bluxom, we have important preconstruction activities that we'll be undertaking the next several quarters here. When you look at that building, it is a lab ready shell. So as Peter was highlighting that contrast between office product and lab product, we'll have the floor to floor, the live load, the capability shipping, receiving. So when you start looking at a mid rise facility, a lot of outdoor space, the capability to go lab, we think it's going to be an extremely desirable product. So we'll see this time next year where we're at. The next question comes from Rich Anderson of SMBC Nikko. Please go ahead. Hey, thanks. Good afternoon, everyone. Peter, you referred to Prop 15 and the triple net nature of your leases pass through tenant recovery increases and all that sort of stuff. But someone's going to be left holding the bag if this thing passes. And I'm wondering how you guys might feel about the vulnerability of California in general. It's kind of a complicated state to begin with. If you think that Prop 50 passing ultimately does kind of slow down rent growth or create some sort of motivation for companies to exit at an increasing pace someplace else? Yes. So let me make a comment before I ask Peter to answer that question, Rich. I think everybody is looking carefully at California. Healthpeak just announced the relocation of their headquarters, I guess, from Long Beach area or wherever it is to, I think, Denver, if I am not, my memory serves me. The founding shareholder of our company, who put in the principal amount of money when we started Jacobs Engineering, left Pasadena for Plano, Texas a couple of years ago, obviously tax motivated. So there is a historic number of companies and people looking at California today and wondering, is this state going to save itself and are the cities going to save themselves. Obviously, homelessness has been a big problem in a number of cities. Obviously, you have got fires, you have got earthquakes, you have got the natural disasters different than other parts of the country, but everybody has got something. But more important is really governance, sensible governance. We are working pretty intensively. In fact, we had a long call internally yesterday on trying to assist the city of San Francisco on homeless solutions, thinking about could we bring the 115 Dayton solution for opioid addiction to homelessness in San Francisco as a model to try to help solve that problem. The numbers show something like over 70% or 80% of homeless people generally have some kind of addiction or mental health issue. So just putting them somewhere doesn't work, you have really got to bring incentive services there. So I think all companies are really looking at California in fairly realistic and important ways. But with that kind of long winded intro, Peter, fire away. Yes. Sure, Rich. And it's obviously a great question. Look, would it be much better if this doesn't pass? It would be because it would just maybe give people confidence that California isn't necessarily going to continue to search for revenue sources from business. That said, as I mentioned, we pass through the cost and you inferred well, eventually your occupancy cost is going to go up. It will, but our analysis is that it would be in the slow or low single digits overall for a company. And I would take you back to a lot of questions we get about just when rents are rising in a market very quickly, people are always like, well, at what point is it going to just get so expensive, people will go elsewhere? And the answer is, well, it really won't, because these companies need to be anchored where they are because they're typically located where they are because of institutions that they collaborate with. So the increase in operating expenses is not something anyone wants to see. Is it going to cause them to move? We would think probably not. And then the overwhelming amount of annual revenue that comes through Alexandria is from very large pharma and biotech where the OpEx that rent and operating expenses in the context of their overall cost structure is like 1% to 3%. So it's not going to move that needle. It's going to be an annoyance, but again, wanting to be near the institutions, which is why we're in these markets is going to really win the location selection at the end of the day and an annoyance of a property tax increase will ultimately be absorbed. Okay. In the interest of time, I just have a real quick yes or no one. On the Pinterest building, will that now be redesigned for lab use? Or how will that be modified since you haven't gone vertical yet? Rich, it's Steve. Again, from the very outset, we designed that as a lab ready shell. So we do not need to make any modifications and we have the ability to both accommodate lab and technology users. The next question comes from Michael Carroll of RBC Capital Markets. Please go ahead. Yes. I wanted to touch on the Research Triangle acquisition again. And I think you, Joel, you mentioned a little bit this earlier in the call. But with the Durham site, how different is that from the AgTech site and the Advanced Technology campus? I know the ag tech buildings have a different build out, but are each individual campus that you have down in North Carolina better suited for different tenants? Or could they take all types of tenants at either of these campuses? Well, the AgTech campus will and they're all in pretty close proximity. The AgTech campus is really dedicated to AgTech and the advanced technology campus will be primarily life science and it also sits next to a building we have that is chock full of small growing tenants. So there is a natural growth trajectory there. And then the Durham campus, we just bought and are in the process of doing quite a bit of retrofitting and redeveloping, will be primarily life science as well. Okay. And then the demand that you've seen in the Research Triangle market, I mean, is it from the life science demand or the ag tech demand? And I know you have a lot of space under construction right now, but is that enough demand to support another ground up development or you just want to complete what you guys have going on today? Well, it's primarily life science, although there is agtech activity. It's not quite as broad or as deep, obviously, because the industry is just a very different structured industry. But we do have 2 developments on our advanced technology campus going up and we have got pretty robust demand from existing tenants there and one build to suit that we are doing. And then on the Durham campus, we are accommodating a number of existing tenants or relationships that have expressed they want immediate existing solutions, which we really didn't have and that was a big motivator for us. So we hope to do both and we think there is good pent up demand. Hopefully, the tax, if there are tax changes, they won't screw it all up, because obviously some companies who might expand here in the USA today, maybe next year if things go in a different fashion, they might go overseas and we would be sad to see that happen. The next question comes from Dave Rodgers of Baird. Please go ahead. Yes. Maybe first question for Peter and Steve, just with regard to San Francisco, you talked specifically about 88. But maybe go back to your comments, Peter, on 9.70 5 market, just with respect to you said it made a lot of sense for a lot of reasons to sell that. But it was a pretty quick turnaround for you and obviously price maybe wasn't the motivation. So if you could talk about why exit that and then why that doesn't have an implication on how you think about blocks on that would be helpful. Steve, you want to take that? Sure. Hey, Dave, it's Steve. When we looked at that asset to receive an unsolicited offer and then also to look at its location along Market Street was somewhat of a one off kind of at the edge of the cluster at best of Soma. It really did make sense to go ahead and exit. I just think the scale and the size of ADA fluxum is much different and qualitatively in a different position, you're really at the edge of Mission Bay there. So I do think we have the opportunity at scale to have life science or technology, whereas the Market Street location was just a ultimately a smaller project there. We weren't really going to build a cluster adjacent to that. And again, as Peter said, receiving an unsolicited offer and recycling that capital with these other opportunities just made great sense. Thanks for that. Yes, Nadee, I would just add would just add that 88 Bluxem is a much closer extension of Mission Bay and Market Street. So it makes a lot more sense to be our next development to build on that cluster than Market Street would. And is that I mean the sale just indicative in your mind of maybe, I don't want to say shrinking San Francisco market, but obviously the lab market is going to be one component of it. But office maybe in a deterioration mode here, is that indicative of that thinking? And is that how we should think about it? I think you just have to look at that in isolation, Dave, in the circumstances that led us to make that decision. Okay. Thank you for that. And then maybe Dean, just on the Ares Ventures investments that you guys have, dollars 1,300,000,000 including the unrealized gains. Do you just anticipate continuing to want to sell more of that? I mean, do you want to manage that to a certain size of the portfolio and with the gains embedded in there, do you want to try to get that portfolio size down in any particular way? I guess maybe not necessarily guidance on quarter by quarter 2021, but how you want to kind of manage the gains in there to realize those as quickly as you can? Dave, Dean here. I'd say that the overall strategy for the venture portfolio has been to carefully manage that aspect of our business. If you look back over several years now, I think the aggregate dollars invested from a cost perspective has actually declined as a percentage of total assets or assets have grown on the real estate side over time. And like I shared in my commentary, we've from a cash flow perspective, the venture portfolio has been about neutral this year. So still always careful about selective new investment opportunities. But given what Joel had mentioned, if you look back over since 2013, there's been a real acceleration of innovation. So, we're seeing a lot of exciting opportunities, but still being very selective, Dave. I think we've commented that the size of the venture portfolio will always moderate in size somewhere in that 3% to 5 percent from a cost basis perspective and it's closer to 3.5% today, down from where it was a couple of years ago. Okay. That makes sense. Thanks, Dean. Appreciate it. Next question comes from Tom Catherwood of BTIG. Please go ahead. Great. Thanks and good afternoon everyone. Just a quick clarification on the RTP acquisition. I believe that the Palmer Park also had a few office assets in it that didn't look like they were part of your acquisition of the 16 buildings. Is that correct? Hey, Peter, you want to talk to that? Yes. No, there are I think it's I don't have the exact number, but there are a few assets that are currently used as office and leased as office that we consider as future upside. There's either 1 or 2 story buildings that could be converted to labs. So, there are all all of the assets that were on the campus were sold to us and we own all of them. Got it. Got it. Got it. Okay. Then switching over to Cambridge, Joel, you had mentioned how hard it is to bring supply on in that market. And this quarter, you moved 325 Binney from the intermediate development bucket into near term and you were able to add another 48,000 square feet of density. How soon do you think you can get to that site and begin that project if you have a tenant? And are there differences between the types of tenants or tenant requirements that are looking at your Cambridge site versus 15 Necko in the Seaport or 57 Coolidge in Watertown? Yes. So maybe I'll give an intro to that and maybe let Peter talk about it. But we had substantially upzoned, I think, about 2x from what was the as of right square footage. I think the square footage we have got is north of 400,000. We just got design approval just the other night. So we are moving full steam ahead. We have a handful of existing tenants who are looking for expansion space. So we're likely this building will be a little bit like what we did in Seattle at 188 or 1818 East Lake 188 Blaine, I forgot the exact address there, where we created almost 200,000 square foot building, multi tenant life science building and accommodated most of our many of our existing tenants who needed more space. I think that's what's going to happen to 325 Binney. I think companies that are in Cambridge would prefer to be in Cambridge. The Seaport, I think, offers some nice opportunities, but I think Cambridge would be 1st choice. But Peter, you could comment. Yes, absolutely. I mean, Cambridge is still the place everybody wants to be. The opportunities there are very limited. We fortunately have 1, but we've been very proactive to figure out where people could go that need to be in close proximity. Watertown was one of our strategies, it's working out very well. The demand there has been even stronger than we would have imagined. And it makes a lot of sense that the Seaport would also be as attractive in a way maybe a bit more to those that are more Cambridge centric because it is linked by the red line you can get from South Station to Kendall Square in about 12 to 15 minutes. And obviously, the amenities in the 4th point channel area mimic what you can find in Cambridge as well. So we think it's a good natural extension for those that may not have the ability to be in Cambridge, but need to be close by. Got it. Thanks everyone. Thanks Tom. The next question comes from Tayo Okusanya from Mizuho. Please go ahead. Hi, yes. Good afternoon, everyone. I just wanted to go back to the Durham acquisition. I am trying to understand a little bit better the tenant base in that building. And I'm trying to understand a little bit better the tenant base in that building. You made some illusions of the proximity to Duke and UNC is the major reason for holding the asset. And I'm just curious, is this kind of more kind of traditional life sciences or does it have an aspect of kind of the university based R and D based life sciences that you often hear of Ben Card and Brandywine talk about in Philadelphia. And if it is, I'm just kind of curious why you're not kind of finding that type of life sciences attractive or not. Okay. I'm not sure I could hear you when you described about Philadelphia. Could you repeat that? Sure. I think again, Ben Thompson Brandywine, I mean, often talk about Philadelphia as university based life sciences. And again, I think with some of the comments around Durham about being close to Duke and UNC, I'm just kind of curious, do you also consider this university based live sciences? And if it is, are you thinking that a more Yes, I don't yes, we don't think like that. This is not yes, that's just a different, I don't know, way of thinking. This is originally the Glaxo campus that was bought and redeveloped. I think the timing and the job that was done by the seller was really good. We came in. There are a strong number of existing credit tenants, among which is Duke. Duke has an important lab presence there. That's attractive to us, but that wasn't the major reason for it. The major reason was it had good existing solutions and a number of future solutions that would accommodate existing tenants' expansion and growth of ours that we had and it gave us a 3 mega campus opportunity down in the Triangle. This is in the park. The park is not adjacent to Duke. It's not adjacent to UNC. It's some miles away or NC State. So I wouldn't compare it at all to, it's nothing like Philadelphia. It's just totally different ballgame. Yes. And Joel, it's Peter. I can add. I mean, there are total of 6 tenants there. 5 of the 6 are credit tenants. The 6th one is actually probably also a credit tenant now and only Duke is related. So I'll echo what Joel said, this is nothing like a university play that Ventas would have done. Yes. And the challenge if you do universities is, if you are entirely dependent on the university and universities can be up and down and so forth and you have no commercial tenant base, you are really at the mercy of the university, which we have never wanted to be. Previous comment, if not international, would you actually consider any new markets within the U. S? Yes. We've said we might. I think our hands are full in our existing markets because they are so vibrant and keeping us busy. We have a big budget this year to fulfill. And so, at the moment, we are not focused on or ready to announce any expansion markets, because we are pretty occupied in where we are. But who knows what the future may have given post election what may happen there. Great. Thank you. Yes. Thank you. And the last question today will come from Daniel Ismail of Green Street. Please go ahead. Great. Thank you. Just a few quick ones for me. Another good quarter of cash releasing spreads. So I'm curious on a portfolio wide basis where in place rents fit relative to markets? So Dean, maybe a comment? Yes. So I just want to be sure I was off mute. The overall portfolio, I think, over the last number of quarters have been in the upper teens on average, both GAAP and cash. So I think the continued overall constraints in supply and fundamentals in our core markets, I think has held up good upside on the overall portfolio. Okay. And I appreciate the clarity on the concessions and leasing costs. But can you frame how net effective rents have grown, say, year over year across your portfolio? Are we talking 5% up, 10% up? It turns out I don't have that specific analysis for this quarter. But if I think back to the last several quarters, net effective rents have trended nicely. I think the only change in that I can see that might make that picture a little bit harder to see as we go forward is you've got through the acquisitions, we've got a broader mix of assets in the portfolio, including this Research Triangle project, as well as the Arsenal and the Charles is a couple of examples. But net effective rent generally has been trending very well for the last number of years as well as the last several quarters. I can't tell you specifically for this quarter right now though. Okay. And just last one for me. The H-1B visa program and potential changes have been more highlighted towards the potential impact to the tech industry. But can you comment on the potential impact it might have in life science industry in terms of employment and hiring? Yes. I think, I am not an expert in that, but I think it's pretty clear that there are quite a number of scientists from other countries who have unique skill bases that are here under that visa category or designation and it would be on and there have been a bunch written about, on and there have been a bunch written about people coming over from China working in universities with professors and maybe there being some national security issues there that I know the government has looked pretty carefully at. But set that aside, I think it's been a very positive program and certainly very helpful to the life science industry. Great. Thanks everyone. Thank you very much. This concludes our question and answer session. I would like turn the conference back over to Joel Marcus for any closing remarks. Okay. Thank you very much. Sorry for a long call during this Q3 COVID. Look forward to talking to you on Q4 year end. Thank you and everybody please stay safe. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.