Good afternoon, ladies and gentlemen, and welcome to the Alexandria Real Estate Equities second quarter 2018 conference call. All participants will be in 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. To withdraw from the queue, please press star then two. Please note this event is being recorded. At this time, I would like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.
Thank you. 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. Now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.
Thank you, Paula. Welcome everybody to our second quarter call. With me today are Steve Richardson, Peter Moglia, Dean Shigenaga, Dan Ryan, Tom Andrews, John Cunningham. Once again, I have the distinct pleasure and honor to thank our first-in-class team for delivering a truly outstanding second quarter with superb operational excellence and really outstanding. Life science tenants in each and every one of our clusters and sub-markets recognize the Alexandria brand for highest quality, highest reliability, best-in-class service, and best collaborative partnering. These qualities substantially enhance our pricing power in each of our markets, and the statistics bear that out. We're also in the first year 2018 of the five-year growth plan we announced at Investor Day 2017 to double the revenues of the company.
As Steve will talk about, we have and continue to expect to have strong per-share FFO performance during 2018 and have great visibility for growth into 2019. As all of you know, our urban clustering strategy is based on the belief that clustering similar businesses together boosts productivity, operating efficiency, and innovation, a concept promoted by Harvard economist Michael Porter. About a year after we came public and read one of his many works, but the one on competition and a particular chapter entitled Clusters and the New Economics of Competition, he noted successful businesses are typically found within close proximity of one another or in clusters, despite technological advances allowing companies to operate really from anywhere. That clustering approach, which we adopted, has been a smart strategy that's paid off in great locations and clusters like Cambridge, San Diego, San Francisco, Seattle, New York City, and so forth.
I think underpinning the growth, as I've said a number of times, is we're still in the early innings of discovery of diagnostics, therapeutics, whether they be cures or really effective treatments. We've only addressed about 5% of the diseases that are known to mankind. I think it's also good to note, as we did last quarter, the five key reasons why this industry is working on all cylinders right now is we've seen now historic growth in the funding for the National Institutes of Health, a very strong and innovative Food and Drug Administration, more research spending on medical philanthropy than ever. We're really experiencing record years in venture capital, and we continue to see robust spending on R&D by commercial stage biopharma companies. In fact, I think Ian Read of Pfizer this morning announced an increase in their R&D spending, which is good news.
Want to comment briefly before I turn it over to Steve on our New York City life science cluster, of which I was proud to lead the launch with an amazing and talented team. That team has built, leased, and operated our flagship campus at the Alexandria Center for Life Science in New York City in a truly outstanding fashion and has helped start and/or recruit its world-class tenant base. Keep in mind, we've had to truly create a commercial life science tenant base there where none has existed.
With the recently announced acquisition of 219 East 42nd Street, one of Pfizer's current headquarters buildings within a short 13 blocks of our ACLS campus, close to Grand Central and ensconced in the middle of Manhattan's dense East Side Medical Corridor, we made an outstanding purchase at $580 a square foot with a strong current yield and a medium-term leaseback to Pfizer. What's particularly of interest to us is the future 350,000 square foot of ideal lab office redevelopment. East Side Medical Corridor, be simple, proximity to Grand Central, proximity to our own anchor campus, medium-term leaseback with Pfizer at strong yields, excellent cost per square foot, and difficult to locate Manhattan buildings with convertibility. Finally, I want to address something that is, I think, near and dear to all our hearts. What really matters to employees and team members, in general and here at Alexandria.
Recently, there was a study by Harvard Business Review that spoke about a single word, respect. There is owed respect, which we accord equally to all members of our team. There's earned respect, which recognizes individuals who display valued qualities or behaviors and acknowledges that each member has specific strengths and talents. There is identity development, self-respect, and a sense of unique self. Just as incivility can spiral, as we witness daily on social media, so too can a culture of respect, and that is why we at Alexandria deeply care about respect in our workplace. Steve, take it away.
Thank you, Joel. I'll be covering the markets this afternoon, but before I do that, I'd like to build on Joel's comments and underscore the profound shift in the sciences that is driving the success of Alexandria's highly differentiated strategy. We had the pleasure of listening to George D. Demetri, a world-renowned doctor and director for one of the key oncology centers at the Dana-Farber in Cambridge, expressing his strong enthusiasm for this shift in a compelling interview with one of his patients who has survived cancer for several years due to these new therapies. These breakthroughs underpin our stellar results and differentiated strategy. Several highlights include we have an industry-leading investment-grade large market cap tenant quality comprising 55% of ARR, 83% of top 20 tenants' ARR is from this class of investment-grade or large market cap companies.
78% of our ARR is from Class A facilities in key gateway markets on the East and West Coast, with AAA locations adjacent to the country's leading research universities and institutions. The product type we work with day in and day out is mission-critical. The tenants absolutely demand sophistication and deep expertise in design, construction, leasing, and operations, and a long-term partnership approach. Our science and technology team's unique expertise underwriting cutting-edge companies provides unmatched insight into the life science industry. Finally, as Peter Moglia will touch on later in the call, the clearly visible pipeline driving growth through 2018 and 2019, totaling 2.6 million square feet, is 84% leased at great yields, generating significant NAV. Let's take a look at the markets. We're really seeing robust and high-quality demand evident across all of our core clusters.
As you can see from the supplemental, 65% of leasing this quarter is early renewals and 58% year-to-date are early renewals, clearly indicating a strong sense of urgency in the market. As we look at market to market, Cambridge had a 1.6 vacancy rate at our investor day during November of 2017. Today, it's 0.7%. Demand was at 1.8 million square feet then. It's 2.2 million square feet today. San Francisco at that time had a 5.5 vacancy rate. Now it's 3.3%. There was 2.5 million square feet of demand then, now we have 2.8 million square feet of demand. San Diego had a 7% vacancy rate during November of 2017. It's now at 5.2%, demand remains solid with about 859,000 square feet. Maryland's vacancy rate has remained about the same at 3%, but demand has increased from 379,000 feet to 511,000 feet.
It's important to note that VC funding has more than doubled to $370 million, 52 life science companies have been started the past 18 months, providing important diversification from NIH-related entities. Finally, Seattle's vacancy rate has stayed strong at just 1%, demand is healthy as well at about 575,000 square feet. Our 1818 Fairview development has 169,000 feet of active life science demand in addition to the lease negotiating spaces referenced in the supplemental, so we expect to substantially resolve the balance of the leasing during the second half of 2018, well ahead of pro forma. Just a couple notable leases to highlight, this one in particular I think really speaks to the differentiated strategy here at Alexandria. The 106,000 square feet in Seattle with the Fred Hutch at our flagship waterfront Steam Plant sports a 35% GAAP increase.
A perfect example of the breakthroughs in therapies noted above and the virtuous cycle in our clusters. Fred Hutch had licensed key CAR T technology to Juno Therapeutics. Juno in turn delivered groundbreaking clinical outcomes with these novel therapies. Celgene then acquired Juno for $9 billion, and a portion of the proceeds flow to the Fred Hutch as a shareholder, and the Hutch in turn is now expanding its research efforts at 1201. Truly an excellent outcome. Seattle is quickly becoming a center of innovation for immunology, especially immune oncology, and it has a long-standing reputation as a center for global health and infectious disease research. A 50,000 sq ft lease with AstraZeneca in Gaithersburg, Maryland, is a clear indication of the health of that market, as we referenced above.
Finally, one of the especially notable leases this quarter was in Cambridge, 152,000 sq ft with Sarepta at 215 First Street with a huge 53% GAAP increase. The markets are very strong in all of our key clusters. With that, I'll turn it over to Peter.
Thanks, Steve. Those are outstanding fundamentals and the reason probably driving what I'm going to say right now as I update everybody on our near-term pipeline
After that, I'm going to touch on cap rates, and then I'm going to address CapEx, since it's become a top-of-mind topic since the Green Street July 19th report on the subject. With a cost to complete of $868 million to deliver another 2.6 million sq ft of Class A facilities in triple-A locations of gateway markets, we are well-positioned to continue driving significant NAV growth well into 2019. The projects to be delivered through the balance of 2018 and 2019 are a combined 84% leased, giving investors clear visibility of the value creation ahead. In the second half of 2018, we're going to deliver half a million sq ft, including 399 Binney Street in Cambridge, which is 75% leased, with all but the retail space under negotiation.
This wonderful addition to our 1 Kendall Square campus is expected to stabilize at a 6.7% cash yield in a market that is at least 4% cap rate. 9625 Town Center Drive in the University Town Center submarket of San Diego will be delivered to investment-grade tenant Takeda in the fourth quarter at a 7% stabilized cash yield. Our 5 Laboratory Drive project in the Research Triangle Park is quickly becoming a focal point of the ag tech community, with 38% of the project leased and serious prospects for another 30% of that space. Yields on this project are expected to be in the high sevens.
In 2019, we'll be delivering over 2.1 million square feet, including the first phase of our Alexandria Park redevelopment in Palo Alto, which has already been fully leased to a tenant that was subsequently purchased by a $27 billion publicly traded company, enhancing our credit before the paint was even dry. 681 Gateway in South San Francisco, that is essentially 100% leased or under negotiation, with strong initial cash and GAAP yields of 7.9% and 8.5% respectively. 279 East Grand, also in South San Francisco, anchored by Alphabet subsidiary Verily, and in various stages of negotiation for all of the remaining space, is expected to deliver spectacular 8.1% cash and 7.8% GAAP yields. 1818 Fairview in Seattle, which is making excellent progress with 24% under lease or negotiation and another 115,000 square feet of serious prospects actively engaged.
All the activity there is life science related, and it's confirming that Seattle's life science market is certainly gaining momentum. Initial stabilized yields for this project are projected to be 6.7% on both a cash and GAAP basis in a sub five cap rate investment market. Speaking of cap rates, as you recall on the last earnings call, we described a sizable deal that was pending in Cambridge. Since that time, it's been disclosed that Forest City and its partners bought out MIT's 50% interest in a portion of lab office product at University Park in East Cambridge. We understand that the purchase price implies a low 4% cap rate. In addition, we wanted to add to the Seattle commentary by mentioning two new sales comps at South Lake Union.
Both 400 Fairview Avenue North, a 350,000 square foot office building, and 202 Westlake Avenue North, 130,000 square foot office building, recently sold to institutional investors at 4.2% cap rates at prices in the high $900 per square foot range, illustrating that Seattle is indeed one of the most desirable investment markets in the country, and that investors are still willing to pay healthy prices for core assets in gateway markets. To wrap up our comments, we wanted to touch briefly on Green Street's CapEx report of July 19th. One of the differentiating factors of our business model is the reusability of our building improvements. Green Street's analysis of our office peers revealed annual CapEx in the range of 26%-31%. Those of you who attended our investor day may recall our five-year average being approximately half the lower end of that range.
With that, I'm going to go ahead and pass it along to Dean.
Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. I want to briefly cover first our inaugural Corporate Responsibility Report, our third time Nareit's Gold Award for Communication and Reporting Excellence, second quarter results and significant revenue and cash NOI growth, our continued strong internal growth, provide a brief overview of our highly leased value creation pipeline, cover our balance sheet and improving credit metrics, and I'll close out with comments on our updated guidance, importantly on our $0.03 increase in the midpoint of our FFO per share growth. Corporate responsibility, just want to thank Jennifer Banks, our Co-COO and General Counsel, Vince Ceruzzi, and our Chief Development Officer, Ari Frankel, AVP of Sustainability and High-Performance Buildings, and his team, and Katie O'Brien, our Executive Director of Corporate Communications, for their excellent work on our inaugural Corporate Responsibility Report that we issued in June.
This report captures our efforts focused on important environmental, social, and governance matters, and our goal of making a positive and meaningful impact on the health, safety, and well-being of our tenants, stockholders, employees, and the communities in which we live and work. This report also includes our 2025 sustainability goals for ground-up development, environmental impact reduction of energy, carbon, water, and waste, and healthy building certifications. We are, again, very honored to have been selected for the third time as Nareit 's Gold Award winner as the number 1 REIT in the large cap category by an independent panel of judges for Communication and Reporting Excellence to the investment community. Huge congrats to our entire team. Thank you, guys. We reported very strong second quarter results that highlight excellent and efficient execution by our team on our strategic and operational goals.
Total revenues for the quarter were $325 million, up 19% over the first quarter of 2017. Cash NOI for the second quarter annualized was $818 million, up $125 million, or 18.1% over cash net operating income for the fourth quarter annualized. FFO per share diluted as adjusted was reported at $1.64 and up 9.3% over second quarter of 2017. We reported continued and strong internal growth that reflects the strength of our real estate and life science industry fundamentals and our unique and differentiated business strategy. Occupancy remains very strong. It was up 50 basis points to 97.1%. Briefly on One Kendall Square, our team is well ahead of timing for capturing the mark-to-market opportunity for below-market leases. To date, our team has executed 280,000 rentable square feet of lease renewals and release into space, or approximately three times the leasing that we had originally anticipated by June 30th.
However, this accelerated leasing did result in temporary vacancy at One Kendall Square, with occupancy dipping to 80% for a couple of months before rebounding to about 88% as of June 30th. Rental rate growth on leasing activity continues to remain very strong. Over the past 4 years, rental rate growth on leasing activity has ranged from 20%-28% on a GAAP basis and 10%-14% on a cash basis. Rental rate growth for the second quarter was 24% and 12.8% on a cash basis. This is in line with this trend and puts us on track for our updated full-year guidance on rental rate growth. On our early renewals, Steve had touched on this briefly, roughly two-thirds of our lease renewals and re-lease into space in the first half of the year really related to early lease renewals.
One-third of these related to expirations in 2021, 2022, and 2023. Now that we're about halfway through 2018, we really have better visibility on a portion of early renewals, including the renewals that were executed in the second quarter and have increased our full-year guidance for rental rate growth. Additionally, as we look back at value creation leasing by our team in the first half of 2018, it really highlights truly amazing execution. Over 1 million rentable square feet related to new class A properties undergoing development and redevelopment, including 594,000 sq ft with Uber in Mission Bay, 133 rentable square feet with several very high-quality venture-backed biotechs at 399 Binney Street in Cambridge, 104,000 rentable square feet with Verily, that is a subsidiary of Alphabet, at 279 East Grand, 61,000 rentable square feet with a really exciting DNA synthesis company at 681 Gateway in South San Francisco.
34,000 square feet with several ag biotech entities at 5 Laboratory Drive in Research Triangle Park. Very recently, 26,000 rentable square feet with Lonza at 9900 Medical Center Drive in Shady Grove. The first half same-property NOI growth was very strong and in line with our guidance for the full year of 2018. Our second quarter same-property cash NOI growth was also solid, also reflected the temporary vacancy at One Kendall Square that I mentioned earlier, and also reflects no cash growth benefit from our recently completed development project at 75-125 Binney Street, since full cash rents commenced on April 1, 2017. Importantly, we remain on track with solid same-property performance for both the 6 and 12 months ending December 31, 2018. Peter had briefly covered our pipeline in detail.
Just to provide a brief overview summary, three and a half million square feet targeted for delivery in 2018, 2019, and 2020. 2.6 million of that is really targeted for 2018 and 2019. That's $1.8 billion at completion, 84% leased. That will generate very strong yields at 7.3% and 6.8% on a cash basis. Right behind that, we have about 908,000 rentable square feet undergoing marketing while we execute on pre-construction activities to reduce the time to deliver these projects. Turning to our balance sheet, we completed the issuance of $900 million of unsecured senior notes at a weighted average rate of 4.35% and a weighted average term of 8.8 years. $450 million of the notes were related to our sustainability initiatives, with proceeds allocated to fund certain eligible green development and redevelopment projects that either have or are expected to receive LEED Gold or Platinum certification.
In July, we also partially repaid $150 million of our outstanding construction loans. Later this year, we anticipate repaying the remaining $200 million outstanding under our 2019 unsecured term loan. As you look back over 2017 and including the full year of 2018, we will have refinanced over $940 million of variable rate LIBOR-based debt, further strengthening our balance sheet and our credit profile. We have just recently commenced an amendment process to our line of credit and our 2021 term loan, which is really focused primarily on extending the maturity date to 2024 with an opportunity to slightly improve pricing and increase the overall capacity under our line of credit. We expect to close this amendment in the third quarter and will provide more details shortly after closing.
We also remain on track to achieve our key credit metric goals and remain committed to continued improvement in our credit metrics each year, including fourth quarter annualized net debt to adjusted EBITDA, as our goal for 2019 and 2020 is to move closer to 5x. Unhedged variable rate debt is targeted to be less than 5% at the end of this year. We are reviewing our options to cover our remaining equity capital for 2018 from additional real estate sales. Additionally, we do expect to file a new at-the-market offering program at some point over the next one to three quarters. In closing on guidance, we did update our guidance for earnings per share to a range of $2.87-$2.93, and FFO per share as adjusted, to a range of $6.57-$6.63.
This represents a $0.03 increase at the midpoint for FFO per share as adjusted, and the key drivers of the increase really is a combination of continued strength of our core operations, combined with growth from our recently announced acquisitions. I should point out that this $0.03 increase follows the $0.02 increase in our midpoint from last quarter. We also increased the midpoint of our guidance for occupancy up 20 basis points to a range of 97.1%-97.7%, and rental rate growth up 400 basis points and 200 basis points on a GAAP and cash basis, for each range. Our range for GAAP and cash rental rate growth is now 17%-20%, and 9.5%-12.5% respectively. Just as a reminder, everybody, we have a large pool of same-property assets that drive growth in net operating income.
$0.01 in bottom-line FFO per share growth only increases same-property NOI growth by about 15 basis points. As a result of the improvement in our outlook for occupancy and rental rate growth on leasing activity, it is really reflected in the strength of our range of guidance for strong same-property growth for 2018. With that, I'll close it out and turn it back over to Joel Marcus.
Okay. Operator, can we go to Q&A, please?
Absolutely. Ladies and gentlemen, 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 are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed, you may withdraw from the queue by pressing star then two. Your first question will be from Emmanuel Korchman of Citi. Please go ahead.
Hi, everyone. Good afternoon. Joel, you opened the call talking about cluster markets and both sort of your entry there and your success there. Was hoping that you could help us frame New York in a more specific light with the cluster markets as a focus. The building you're acquiring is, I guess, near your East River campus, but I wouldn't call it a cluster per se. Then you also have the risk of new developments that are already going on and will be going on near the new project. How do you sort of put all that together and connect it back to your cluster theory?
Well, Manny, thanks for asking the question. Well, first of all, a cluster, if you look at the two leading established clusters, both kind of the greater Boston cluster and the San Francisco Bay cluster, those really evolved in the late '70s and early '80s and took literally a generation to really grow and become what they are today. New York is really in the first decade of a 25-year process. What you may see in other clusters, you won't necessarily see today in New York. Manhattan, just given its limited geography and the density of buildings and people there, is going to evolve somewhat differently.
We do believe, and we've said this for a long time, the East Side Medical Corridor is really where people want to be with relatively, if there is such a thing, easy access or at least fairly good access to the institutions and to the ecosystem. That's kind of how we think about the shape of the Manhattan market. Over time, I think you'll see it evolve in ways that even today we can't actually necessarily predict. Our focus has been the East Side Corridor, and this is, in my view, a bullseye and a home run in that sweet spot.
Thanks, Joel, and maybe one for Dean. The acquisitions you've done to date are right at the midpoint of your guidance range, you only have $50 million left to hit the high end. Is that just guiding right now to what you see in the pipe and the numbers likely to move upwards, or is the acquisition environment just sort of more difficult and that $50 million is probably about accurate?
Manny, I think it's indicative of our view at the moment, it's probably also just to put that into perspective a little bit. At the beginning of every year, at Investor Day, we do give an outlook on acquisitions, and typically it's fairly nominal if it exists at all. That really has to do with the fact that we don't really know what will hit the market, Manny, that actually makes sense to acquire. Peter and the team keeps a pretty good pulse on activities in the market, and if something makes sense, we may bid on it, ultimately winning the project is a whole different conclusion. We really need to make sense of the deal. Right now we don't see a lot remaining on the horizon, something could come up, Manny, and if it does, we'll keep the market informed.
Thanks, guys.
The next question will be from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead.
Great. Thank you. I guess sticking with Dean here. You had a decent amount of recognized gains from the investment portfolio in the quarter. Can you just talk about how you've included those in guidance for the year, whether how much was in your guidance for the quarter or just as you think about the year overall, how much you include or have you included?
Manny, I'm sorry, Jamie. That question may have come up last quarter or the quarter before, and I think my reference was that just look back historically of where we've been. Every year does vary a little. I think over the last three, four, five years, it's probably been in the $10 million to $20 million range. Currently, it's on a path to probably get to the upper end of that. I would say that much of our activity is really event-driven. We do, from time to time, sell some of the public securities as a result of a company reaching its IPO or being acquired by a public company. As an example, in the second quarter, this gain was really event-driven.
It was related to an acquisition of a biotech company, and that resulted in the majority of that gain that was recognized this quarter. Leading into the quarter, we had no idea that that particular transaction would have occurred. I think that's the most important thing to keep in mind. We don't necessarily control the gains that are being realized. They do occur because of great events that are occurring in the marketplace.
Okay. You typically assume a $10 million-$20 million per year, is the right way to think about it?
That's where it's been for the last three, four, five years, if I recall correctly, Jamie.
Okay. Then, I guess, just thinking more about the Pfizer acquisition and redevelopment. I mean, clearly this is investment in infill market with a redevelopment component in an older building, older market. Do you think, as you think about your business going forward and where you do see these cluster markets, we'll see more of that rather than kind of greenfield ground up from Alexandria?
Well, I think, again, it depends on the market, but we've done some of that all along in a number of markets, and we still have, obviously, in other markets or even in some of those same markets, a robust development pipeline. I think you'll see some of both. This was an unusual situation. One knew that Pfizer was looking over time to do something. As Dean said early on, when things come to the market, you react to them. You don't necessarily know a year or two out or even sometimes quarters out exactly what's going on. I think you'll see us do a combination of those two. That's been our bread and butter.
Okay. Last one for me is, any thoughts on a tenant credit watch list, or are there any tenants you're concerned about right now?
Jamie, it's Dean here. If you look at the top 20 tenants that we've got disclosed, they're all in really great position today. 83% of that top 20 list is either investment-grade or $10 billion or greater in valuation. Really no significant concerns out there.
I think our number 1 tenant, Illumina, had a good day today. I think they're up about 10%, very good. Our underwriting is very thorough, very in-depth, ongoing, and at the moment, as Dean said, I think we feel very comfortable with our tenants. Very frankly, we've avoided I can think of 1 case in the Bay Area. In fact, I think I was interviewed on this at CNBC Power Lunch a couple of months ago. We decided not to take on the Theranos building. It went for sale up in the Stanford Research Park because of the belief that the business was going to fail and there would be repercussions from that, both financially and reputationally. We thought it was good real estate, but it was something we just didn't feel appropriate in pursuing. We're pretty careful about what we do.
Okay. Thank you.
Yep. Thank you, Jamie.
The next question will be from Sheila McGrath of Evercore ISI. Please go ahead.
Yes. Another question on the New York Pfizer acquisition. Just to clarify, the current cap rate on that is 6.7%. What kind of returns do you expect on the redevelopment? Is there any excess development rights given rezoning changes in that area?
Yeah. John Cunningham is on. John, do you want to maybe just highlight, at least initially? Not in too much depth there.
Yeah. Hey, Sheila.
Hi, John.
As far as the additional density, the nice thing about the asset is that we bought it at a 9.6 FAR. By right, it is currently at 15 FAR. There's an additional 230,000 square feet of additional density available. Given the additional changes based on the Midtown East rezoning, it could go up to a 21 FAR, 21.4. We have not really considered in utilizing that level of FAR for the site, but are confident that we will keep our options open going forward in the future.
Yeah. Hey, Sheila, it's Peter Moglia. I guess, just I confirm the cap rate was 6.7%. I think, and I think Joel touched on it, I think one of the key things to this is the $580 per square foot value. If you sit down and break the numbers down and you think, okay, you're getting a big leaseback from Pfizer for six years. If you just value that leaseback and subtracted it from what we paid, you're essentially getting it for the land value. We're paying for the land value, but we're getting a building that we're going to be able to leverage off of. In six to seven years when we start planning for the redevelopment, we're really going to have a great basis from which to price the next generation of Alexandria New York life science real estate.
Okay, great. On acquisitions, I guess, Peter, the stabilized yield and the supplemental on 100 Tech Drive and the Maryland life science portfolio, those yields go up to like 8.7 and 9.1. I'm just wondering, are those yields just rolling in-place leases to market, or are you redeveloping those buildings?
The 100 Tech Drive is actually already delivered, so that's set, and so is the Maryland portfolio. It's a 100% leased portfolio. There is a little bit of rollover coming in the next couple of years, but we fully expect to reach those numbers and potentially do a little better.
Okay. Last question on, you were active on ATM this quarter. It doesn't look like you need that much additional equity capital based on the plan. Just if you could touch on what assets are for sale, is it non-core, or are you looking to do a joint venture of a stabilized asset?
Sheila, it's Dean here. Yeah, we have about $230 million remaining of equity capital to absolve for the rest of this year, excluding the forward that we can settle by the end of the year. The goal is, as I mentioned in my commentary, is to look at dispositions. We do have some, what I'll call non-strategic assets that we're selling. Importantly, I think, we do want to look at something of high value that would be attractive cost to capital in a disposition here.
Yeah, a partial interest disposition.
We're working through the details of that, and we'll provide more color maybe by the next call to give you a little more detail around our plans there.
Okay, great. Thank you.
Thanks, Sheila.
The next question will be from Thomas Catherwood of BTIG. Please go ahead.
Thank you, and good afternoon, everybody. Steve and Dean, just on the forward leasing that you mentioned. I think you mentioned roughly two-thirds of leasing has been forward. Of that one-third is on leases that were 2021, 2022, 2023. What are the mechanics as far as when you recognize that same-store NOI growth? Are those leases blends and extends? Does the kind of growth kick in once the natural lease term expires? How does that kind of flow through to your earnings?
Tom, it's Dean here. It depends on the transaction. An extension of a lease will usually trigger re-straight-lining GAAP revenue. The actual commencement of the cash rents, which in this environment is generally upward, will depend on the negotiation. Probably more frequently that occurs at the initial expiration date, and then it steps, as opposed to bringing that all the way forward. I think the other thing to think about is part of the early renewals were, in one case, in Cambridge, as an example, was connected to an expansion. You had an early renewal and expansion all combined together, and the expansion component would commence upon delivery of the expansion space. Hopefully that gives you a sense for what to expect.
Tom, this is Steve. Maybe just to add to that, just to be very clear, blend and extend implies some type of concession. That's absolutely not what is happening here. These are early renewals. There's a sense of urgency in the market, and people are coming to us to lock down space. When you look at these vacancy rates of one, two, 3%, the tenants are acutely aware of the competition for space.
Just to clarify, if it was just kind of the first scenario, Dean, that you laid out where it's an extension, the GAAP same story NOI change would be recognized now, and then the cash would kick in in the later years whenever that natural expiration was. Correct?
Correct.
Okay. Got it.
Keep in mind, some of this early renewals is also One Kendall Square. I shouldn't say early. Some of it's re-leasing, one of the expirations was, I believe, a 2023 expiration related to re-tenanting with a new tenant, which allows us to capture the cash rents much sooner.
Got it.
Yeah.
Got it. Switching over to developments. Page five, you guys list 493,000 sq ft of development rights that you acquired this quarter. If we go back to your kind of land holdings, it looks like these development rights are spread amongst Greater Stanford, San Diego, RTP, and an undisclosed bucket of other value creation projects. Can you walk through these additional opportunities and kind of how they came to fruition this quarter?
I think we don't want to get into, because there are some assemblage and some other key strategies. I'd say, Tom, kind of hold your question for a couple of quarters, and we'll lay that out.
Very fair. Maybe I'll try one development that hopefully you can talk on. The development rights did seem to jump up for the third phase of the New York City Alexandria Center. Is that something you can talk about?
Right. We have signed a letter of intent on May 31st with the city. John and the team are working on the ground lease negotiations. We expect to have a building that will be enhanced in size from what we believe. I would say stay tuned and an announcement will be forthcoming fairly shortly.
Got it. Thanks, Joel.
Thank you.
The next question will be from Richard Anderson of Mizuho Securities. Please go ahead.
Thanks. Getting back to the ATM comment earlier, is it fair to say you fast-tracked that maybe quicker than at least we were assuming in our model? Was that driven by the Pfizer deal, or was that always kind of assumed to be kind of a chunky issuance this quarter?
I'd say broadly, the ATM usage this quarter, in the second quarter, was driven by acquisitions broadly, Rich. When we see the deal flow that was under contract, we did pull forward into the ATM program. The timing may not be matched perfectly in all circumstances, but I think at the price point that we did raise the capital at, it was fairly attractive to do so at the time we did.
Okay. Joel mentioned Illumina having a good day today. Pfizer indicating more R&D spend. Biogen, I suppose, we're reading that as good news with their Alzheimer's activity. I'm looking at your top 20 list. Are there any that you could peg that are having similar but maybe quieter, good moments where they are expressing to you that they need more space? I don't know if you could be company specific, but are you getting that with a regular kind of flow of information from your top 20 tenants because of certain things that are going on within their organizations?
Yeah, I don't want to broadcast a pipeline of leasing-
Right
I would say that Lilly had certainly a positive quarter. Celgene's kind of on the turnaround, doing better. Its stock had lagged for a while. bluebird bio is still in a very strong position. Moderna, same thing. I would say in general, almost all of these have I think strengths of businesses that, they ebb and flow. I mean, it's hard to say on any given quarter, but I think in general, there's positive absorption from some of these, not necessarily all at this point, but some of these tenants for sure.
When you look at them as also competitors like MIT, is there any. I shouldn't say at them, but MIT is a competitor. Do others kind of fit that mold too at all, or are they generally lessees?
I think because MIT has a gigantic endowment and they have a pretty huge real estate strategy, they're pretty unique in that regard.
Lastly, on the Pfizer deal, $580 a sq ft going in. I hear you on getting a lot of NOI back over the next couple of years, and maybe sitting at land value as a basis. When you think about redevelopment, is it too soon to talk about what that could be in terms of a per pound type of investment? Or should we just be thinking about this as an acquisition in and of itself, and we'll worry about that seven years from now?
Tom, it's Peter Moglia. I'd say it's the latter. We're going to collect rent for six years. We'll see where it goes from there. I think of it this way, one of the most efficient ways for us to provide space to the market is through redevelopment of an existing building that we can get at below replacement cost, and we are very below replacement cost. We'll be in a price per pound that should be very competitive, if not extremely competitive versus new product when that comes to the market.
Okay. No chance, could it exist as just this asset, or it absolutely would need to be a redevelopment? I don't know the building, so.
Yeah, it would absolutely. It's tired.
Well, yeah. I would think it'd be a missed opportunity if we just decided to take some lease and keep it running the way it is now. Yeah, I think we're gonna add a lot of value.
Okay. Sounds good. Thanks.
Thank you.
The next question will be from Michael Carroll of RBC Capital Markets. Please go ahead.
Yeah, thanks. A little bit off of Rich's question. Do you guys go out there and acquire some of these acquisitions, I guess particularly the land sites? I'm looking at 701 Dexter specifically. How long do you kind of underwrite before you'll start breaking ground on those projects? Do you think you'd start breaking ground on Dexter sometime soon?
Well, hey, Michael, it's Peter Moglia. That sub-market is very hot right now, and as Steve laid out in his comments, and I in mine, the momentum of the life science market there is gaining steam. There's no doubt that the tech market there has been on fire for quite a bit. There is still a great need for product there. We're going to focus ours towards the life science side. We're pretty confident, given what we're doing at 1818 Fairview right now, that we're going to be able to follow up with other projects soon after that. We bought that with the intent of designing and entitling it fairly quickly.
Okay, great. How long does that entitlement process take? Is this something like a 2019 start?
We're constrained by the city's MUP, Master Use Permit, process. I think the quickest MUP we ever got was about nine months. We probably wouldn't be in a position to even pull a permit for another, call it, 12. Yeah. That would be sometime in the end of 2019 would be at the earliest we could even address that.
Okay, great. Steve, can you give us a quick update on the San Francisco market? What's your expectations of receiving any Proposition M allocation with the Tennis Court site?
Yeah. Hi, good afternoon, Michael. The market, as we've talked about, is extremely healthy. There's no availability of life science space in Mission Bay. You have a very small vacancy rate, 2%, 3%, 4% in kind of Mission Bay and SoMa on the tech side. The city is moving forward. They've passed one stage of the political process there for the Central SoMa adoption. They do have a recess in August. They've received a number of comments. They do have a few filings against the plan. Our understanding is that those are being actively worked on and resolved, when they come back in September, they are going to move expeditiously.
I think as we've maintained now for several quarters, the thought is that each of the projects will be receiving an allocation so that they can move forward on a phased basis, thereby providing the city with all of the community benefits front-loaded. We expect that that'll be the outcome by the end of the year.
Okay, great. Thank you.
Ladies and gentlemen, that will conclude our question and answer session. I would like to hand the conference back over to Joel Marcus for his closing remarks.
Thank you, everybody, for listening. Look forward to talking to you on the third quarter call. Thank you, everybody.
Thank you, sir. Ladies and gentlemen, the conference has concluded