Good afternoon, and welcome to the Alexandria Real Estate Equities Second Quarter 2022 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 your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paula Schwartz of Investor Relations. Please go ahead.
Thank you and good afternoon, everyone. This 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, and welcome everybody. Thank you for joining Alexandria's Second Quarter 2022 Earnings Call. With me today are Hallie Kuhn, Steve Richardson, Peter Moglia, and Dean Shigenaga. In a very challenging macroeconomic environment, for sure, we are very blessed and thankful to have a truly one of a kind public company, which has a uniquely visionary mission to create and grow life science ecosystems and clusters that ignite and accelerate leading innovators to advance human health by curing disease, saving lives, and vastly improving nutrition. Our mission for sure. We at Alexandria have worked tirelessly to earn the trust and have carefully and meticulously constructed our client tenant base within our best-in-class asset base. In 1994, we uniquely set out to be the trusted lab space real estate partner for life science companies.
Today, 28 years later, we have earned the trust of over 1,000 diversified, high-quality companies who have chosen our brand and rely on us to deliver on our reputation. Daily, they entrust us with their most precious assets, their talent, thousands of hardworking science, technology, and business professionals reliant on our lab space and on the life science ecosystems we cultivate to attract and retain the best talent to advance their science. We provide them with a truly inspirational and healthy place to work. Daily, they entrust us with billions and billions of dollars of research and development platforms to be safe, secure, and operational. Daily, they entrust us to be aligned with their mission to partner together at the highest level of operational excellence to improve human health.
In this market, our results really stand out in the macroeconomic environment we're all experiencing, a slowing economy, the weakened consumer, higher interest rates, and raging structural inflation. Huge congratulations to our Alexandria family on a great 2Q 2022 report. As Dean will talk about in a while, we've updated guidance for the second quarter to $8.41 FFO per share, representing an almost 8.5% growth for this year. Combined with a 3%+ dividend, we think that's an excellent combination of 11.5% in this macroeconomic environment. We've experienced very powerful continuing rental rate increases in leasing activity. It's important to remember, 87% of our leasing comes from our existing tenants.
We have uniquely crafted our own demand driver in our more than 1,000 tenants, and 92% of the first half of 2022 leasing comes from this tenant base. 2.3 million sq ft were signed in the second quarter, a third all-time high, with cash all-time high of 34% rental rate increase, highest ever, and a 45% gap rental rate. Truly epic and historic. Keep in mind, 50% of our annual rental revenue is from investment grade or big cap companies, public companies, and 80% of our tenants are not private or development stage biotech companies. Peter will discuss in detail our outstanding progress in capital recycling to the tune of about $500 million in the second quarter as we harvest great value, which we have created over the last decade.
He will also talk about strong external growth engine, which we fine-tuned in the new economic environment. Dean will discuss our fortress balance sheet and strong liquidity, more important now than ever with turbulent capital markets. Fortunately, with our great team, we have no debt maturities until 2025, so no FFO dilution due to refinancings. Steve will discuss very strong internal growth and make sure to look at page 33 of the supplement. Dean will mention the burn-off of free rent, providing strong visibility for future growth. Our margin continued to be strong at 70%, and we're very proud of our tenant collections at 99.9%. No real credit issues whatsoever. Hallie will speak to our awesome and non-replicable tenant base of over a thousand tenants and the continuing health of the broader life science industry.
The life science industry is not synonymous with simply early-stage biotech. Alexandria and its best in class tenant base is very well positioned and prepared for this shifting environment. With our best in class assets, decades-long relationship, we in fact beat the so-called competitive product and much future theorized product which will never be built. Last but not least, I want to make a couple of comments about Steve Richardson, our retiring co-CEO. I want to express on behalf of all the extended family here at Alexandria, our profound thank you for the last 22 years, the best ever. Your humble service leadership has set the bar for all of us. Queen Elizabeth II recently talked about leadership at her birthday celebration in which you exemplify these words precisely.
Finding ways of encouraging people to combine their efforts, their talents, their insights, their enthusiasm, and their inspiration to work together. If I may just finally make a quote from the famous movie Band of Brothers, of course could be all genders, of course, and the requiem for a soldier. We're all one great band of brothers, and one day you'll see we can live together. When all the world is free, have you lived to see all you gave to me? You in fact have. Your shining dream of hope and love, we're all one great band of brothers. With that, I want to turn it over to Hallie Kuhn.
Thank you, Joel, and good afternoon, everyone. I'm Hallie Kuhn, SVP of Science and Technology and Capital Markets. Today, I'm going to start by covering the bedrock of Alexandria's business. Specifically, as Joel mentioned, Alexandria's world-class and leading stable of over 1,000 tenants. As part of this review, I will cover the health of the life science industry and then pivot to a number of recent FDA approvals that reflect the industry's collective drive to develop life-saving therapies. The life science industry is large, diverse, and complex. Alexandria's tenant base reflects this diversity, with over 1,000 tenants that span multinational pharma, public and private biotechnology companies, life science products such as enabling research tools and manufacturers of complex medicines, and top-tier investment grade companies and institutions. Let's break this down segment by segment, starting with multinational pharma.
Alexandria is proud to call 17 of the top 20 biopharma companies our tenants, including BMS, Eli Lilly, Sanofi, Takeda, Merck, and Pfizer, just to name a few. Looking at large cap focus indices such as the Dow Jones U.S. Select Pharmaceuticals Index, you'll see that these companies continue to outperform broader indices, including the Dow Jones Industrial Average, S&P 500, and Nasdaq. Biopharma deployed over $200 billion into R&D in 2021, and the top 20 biopharma have an estimated $300 billion cash on hand to put towards M&A and partnerships as they look to bolster their pipelines with innovative new medicines. Next, public biotech companies with small and mid-cap companies have gotten outsized focus over the past several months as indices such as the XBI have tumbled.
This segment contains many of the most innovative and well-funded large cap companies in the industry, with names such as Alexandria tenants Alnylam and Vertex. Indeed, the majority of our ARR across public biotechnology companies is from those with marketed or approved products. Across pre-commercial companies, we have a deeply technical and experienced science and technology team that employs a rigorous underwriting and monitoring process to select the fastest-growing and most promising companies. Our over decade-long relationship with Moderna is a great example. Just three years ago, Moderna was in this pre-commercial category and is now a leading global commercial stage biotech. On to private biotechnology. While funding has slowed across all industries compared to 2021 due to macro market conditions, venture funds continue to raise historic levels of capital and deploy it at a sustained pace.
$30 billion was deployed into private biotechnology companies in the first half of 2022, compared to a record-breaking $39 billion in the first half of 2021, and still up over 50% compared to the first half of 2019 and 2020. Indeed, companies like incoming New York and Bay Area tenant Eikon Therapeutics, with a stellar management team and highly differentiated platform, recently raised over $500 million . This is not to say that investment VCs haven't shifted with downward pressure on valuations and a refocusing towards the most innovative companies with experienced management teams. Market resets are ultimately healthy for a sector in the long run, as companies are forced to double down on their core strengths and talent is diverted to the most promising applications. Now for life science products, services, and devices.
This diverse set of companies enables breakthrough research from the bench to bedside. It is the companies like Illumina developing cheaper, faster, and more efficient research tools to understand the genetic underpinnings of disease. It's companies identifying diseases at the earliest stages when treatments can be more effective. It's the contract manufacturers producing complex medicines for next gen therapies.
As the picks and shovels, so to speak, of the industry, these companies' business models are not the same as those developing novel medicines, with a quicker path to market and revenue. While there is no simple index or measure that is a perfect proxy for the strength of our top tier tenant base, from the beginning of the year to the second quarter, the Dow Jones U.S. Select Pharmaceuticals Index, which captures many of our top 20 tenants, outperformed the Dow Jones Industrial Average by 11 points, the Nasdaq by 25 points, and the XBI by 29 points. Moreover, the life science industry is less cyclical than other industries as products are developed over a longer period, with novel medicines taking an average 10 years from early development to commercialization.
Developing new medicines is not easy, and market dynamics aside, companies will experience challenges and even failures along the way.
with 1,000 tenants and over 87% of leasing stemming from pre-existing relationships, our unique model and deeply experienced team positions us to proactively manage potential risks and bumps in the road. To end, I'd like to take a step back and acknowledge the mission critical nature of the life science industry to our society. Each approval from the FDA marks the potential for a healthier, longer life for each of us listening on the call today and our loved ones. New therapies improve and extend quality of life, prevent costly hospitalizations, and ultimately reduce long term healthcare costs. We are proud and humbled that of novel therapies approved by the FDA in 2022, half are by Alexandria tenants, a stat that holds true for the past decade.
Approvals from tenants this quarter include an RNA- based treatment of hereditary transthyretin-mediated amyloidosis, a small molecule treating obstructive hypertrophic cardiomyopathy, and a first in class immunotherapy targeting metastatic melanoma. To paraphrase Roger Perlmutter, former CSO of Merck and the CEO of the previously mentioned Eikon Therapeutics, "Novel medicines can change the world, and most have yet to be discovered." With that, I'll pass it over to Steve.
Thank you, Hallie. The second quarter of 2022 was an absolute blowout quarter in nearly every regard. The demand and really the intensity of the strong commitment to Alexandria's brand of highly differentiated mega campuses and operational excellence continued to provide for superior financial outperformance. I'd like a big shout out to the entirety of the Alexandria team as the following results are among the best in nearly every category. As Joel noted, Alexandria is truly a one-of-a-kind company and has definitively proven its ability to deliver excellent results throughout a wide variety of macroeconomic conditions. As we've discussed, and Hallie referred to as well a number of times over many years, the companies in the life science industry have a long-term horizon for their pursuit of commercialized lifesaving and life-changing novel medicines and therapies.
Research and discovery in the laboratory, multi-stage clinical trials, commercial rollouts can and do take a decade or more. Alexandria's unique capabilities and team have successfully identified the most promising life science companies and most recently attracted the world's leading investment grade pharmaceutical and big biotech companies to its mega campuses and triple A locations adjacent to the country's leading research institutions. The second quarter exemplifies this powerful combination of trusted relationships with high quality companies in their long term horizons and so consider the following. 87% of the leasing activity overall was from Alexandria's existing relationship, and absolutely essential and unique to Alexandria only enabling success during turbulent macroeconomic waters. During Q2, 88% of the leasing activity in the development and redevelopment pipeline was from Alexandria's existing relationships.
Consider how powerful that statement is for successfully growing the company's high-quality on-balance-sheet opportunities, not only for a few quarters, but for many years ahead. The stability and trusted nature of Alexandria has become a bedrock and highly valued consideration for our tenants. As the company has grown to more than 1,000 tenants in [inaudible], this presents an exceptionally powerful competitive advantage for the company's future growth and a substantial barrier for others who might be dabbling in the highly sophisticated and technical nature of mission-critical life science real estate. The on-the-ground reality for Alexandria this quarter has been a vigorous and highly productive effort from across the entire company. The leasing activity of approximately 2.3 million sq ft is the third highest quarterly leasing volume in company history.
Record rate increases with renewal leasing spreads of 45% GAAP, 44% cash, represent the second highest and the highest rental rate growth in the company's history, respectively. The portfolio mark to market remains strong at approximately 7%. As we noted on the last two quarterly calls, this is significantly greater than the mark to market of 17% at the end of 2020 and in line with the end of 2021's 30.4%. Accounts receivable for the entire Q2 was 100%, including 100% from our publicly traded biotech tenants, and that continues as we've achieved 99.9% so far during July. Early renewals for this quarter were similar to Q1 at a rate of 50% of leasing.
A strong validation again of the health of Alexandria's tenants in their long-term planning horizon that we noted at the start of my comments. We have exceptional health in our value creation pipeline with a total of more than 900,000 sq ft of leasing, which contributes to a highly de-risked nature of the pipeline as 78% of the 7.8 million sq ft, which is projected to generate $665 million of incremental revenue, is leased or negotiating. Peter will provide additional detail and color on the pipeline during his comments as well. Let's move on to supply and demand. Demand is consistent with the past two, three years, with no significant drop in our core clusters.
We do see the demand in the more highly scrutinizing supply life science projects in the market, the actual HVAC capacity, actual electrical capacity, actual operational expansion experience an operator might have are all hallmarks of Alexandria. We continue to monitor supply at a very particular level, including the actual asset, because the differences between purpose-built Class A facilities and Class B quasi-purpose built. We also look at the operators, such as any new companies one-off buildings. We also look at capital sources. They who will actually be making decisions to potentially go forward on the basis for this new term as a service. Let's build up the specific reality in the field on supply. Current vacancy rates continue to be very tight with a vacancy of 1%-3% in our core clusters.
Submarkets range from less than 1%- 2%, which is generally consistent with market conditions during the past several years. There is no significant number of leases hitting the market, which is a contrast to the general office market, and if they are of high quality, they are leased very quickly. As we look to 2022, the unleased new supply is adding very incrementally 1%-2% in our key markets. Important to remember my earlier comment on healthy demand, so we would expect the supply would be substantially leased by year-end. If we look ahead to 2023, again, we drill down on each and every project in our core markets and determine which projects are actually vertical and well underway. The unleased 2023 deliveries will be adding just 3%-5% availability to the total market size.
Again, we expect these deliveries will be further reduced during the next six quarters. Beyond that, 2024 and beyond, we do closely monitor handouts and flyers in the market that indicate creative tech space or life science space alternatives. As of today, we do not see a large disruptive set of Class A lab projects well underway in our core markets that are preparing to go vertical on a purely speculative basis. Ultimately, Alexandria has significant differentiation in the market. As I mentioned at the outset of my comments, this scrutiny of projects is only becoming more intensive and accelerating as companies need a trusted and eminently capable operator for their mission-critical operations. We actually see the difference between Alexandria's Class A facilities as part of our fully amenitized mega campuses and one-off buildings and commodity locations becoming more highly valued.
In conclusion, the first quarter of 2022 was a very strong quarter, and now the historic strength of the second quarter continues to definitively highlight Alexandria's position for the near term and the long term. Life science companies intrinsically have a long-term horizon, and their mission-critical laboratory facilities are essential for their success. Alexandria's combination of a tenant roster that has both a long-term horizon and high-quality investment grade credit portends a very bright future for the company. As this is my last earnings call with the announcement of my retirement, I want to say it has been the honor of my life to work shoulder to shoulder with the entire Alexandria family at this one-of-a-kind company. I have the highest regard and deep affection for this incredible team.
Our unique culture of respect for one another, high expectations for one another, and a passion for the company's mission is a rare blend that has enabled us to thrive and work as a trusted partner with one of the country's most strategic and cherished industries. I also want to thank the broader investment community for your deep engagement and support for the company over these many years we've worked with one another. Finally, it has been an exceptional privilege, in particular, to work so closely during the past 22+ years with Dean, an extraordinarily insightful and eminently capable leader, Peter, who was the ultimate co-CEO, providing the heart and soul of the company and perfectly complementing my shortcomings with his formidable talents. Joel, an inspirational leader. A genuine lion of the industry and a once in a generation founder in American business. I have been truly blessed.
With that, I will hand it off with energy and enthusiasm to my brother, Peter.
Thank you, Steve. I'd like to start by thanking you for teaching me so much about teamwork, managing people, operational excellence, the necessity of taking a deep breath every now and again, expanding my vocabulary, and being a sounding board and confidant throughout our partnership. I started this co-CEO relationship with alacrity. The use of that word is an example of your influence, and I was not disappointed. I will greatly miss our regular chats, but I'm glad you will be around when a good talk is needed. With that said, I'm gonna update the audience on the progress being made on our value creation pipeline and related construction costs and supply chain trends, then conclude with remarks on the dispositions completed this quarter.
As Hallie referenced in her overview, our 1,000+ tenant base is of the highest quality as it includes 17 of the 20 biopharma companies, the most innovative and well-funded large cap public biotech companies in the world, and a stable full of the most promising and fastest-growing private companies in the industry, which have been rigorously underwritten by a deeply technical and experienced team. This highly curated tenant base provides opportunities that have been consistently fueling our external growth for over a decade. If you connect the dots, it's no coincidence that 87% of our leasing activity comes from it. The best companies are those that grow, and we have grown along with them.
The past quarter, we completed over 915,000 sq ft of leasing in our development and redevelopment pipeline, which aggregates to in excess of 2.3 million sq ft for only half a year. At a time when people are worried about the product type we invented because others pretending to be equals are struggling with their tenant base. Our results in the wake of others struggling should tell you something. Life science real estate is not for everyone. Success takes years of experience in designing and building the right product in the right location, deep relationships with the highest quality life science companies and company creators, operational excellence, and most important during times like these, a very deep understanding of the industry.
We delivered 375,394 sq ft in the second quarter spread among six projects, including the full deliveries of eight and 10 Davis, part of our Alexandria Center for Advanced Technologies in the Research Triangle, and 5505 Morehouse Drive in Sorrento Mesa. The weighted average yield of these delivered projects was a healthy 7.8%, and they will contribute over $20.6 million in net operating income moving forward. The remainder of the pipeline that is either under construction or expected to commence construction in the next six quarters has decreased by approximately 200,000 sq ft from last quarter but is still projected to add more than $665 million in annual rental revenue over the same number of quarters, reflecting higher revenue per square foot developed.
As of quarter end, 78% of this remarkable pipeline was either leased or under negotiation, meaning we have an executed LOI, with 95% of the activity year to date coming from existing relationships, reinforcing the quality of our tenant base, given that this category of leasing is typically driven by consolidation necessitated by growth. It also highlights the extraordinary loyalty of our tenants and the trust we have earned through many years of high-quality service. I'm also pleased to report that despite continued volatility in construction costs and supply chain disruptions, our pro forma yields are neutral to slightly improving relative to last quarter, and there have been no adjustments to our delivery timing. That is a good transition to our construction cost and supply chain update. The bad news first.
There are still upward pressures on construction and material prices stemming from high energy costs, and now labor costs are becoming a bigger issue than in the past. As the U.S. exports more natural gas to Europe, it becomes more expensive here, and one direct impact has been an increase in glazing costs of 20%-40%. In addition to a 35% increase in aluminum over the past 12 months, glazing is impacted by the cost of natural gas as it's heavily used in its production. As mentioned last quarter, elevated diesel prices have a significant impact on construction costs as earthwork machinery runs on it, and our contractors have been seeing fuel surcharges in the billings from these subs.
Crude oil was up 71% from February 2021 through February 2022, and although pricing has slightly improved since then, it's not providing any significant relief. Other costs that continue to be overly elevated over the past quarter include construction machinery, which has doubled, gypsum, which is up over 1,500%. One of our contractors blames this on elevated housing construction, which uses about 50% of the supply. Semiconductors are up 276% due to heavy demand by the automotive industry, and switchgear and other industrial electrical equipment is up 73%, due partially to demand and partially to elevated cost of components that go into that equipment. Labor, which accounts for approximately 60%-70% of construction costs, has been relatively stable over the past couple of years due to prearranged wage increases negotiated into labor agreements.
Many of those are now up for renewal, and negotiations are reported to be intense. Due to career changes for many in the industry after layoffs caused by COVID-19 work stoppages, there is a smaller pool of labor, and combined with the higher cost of living, wages are expected to be much higher in the future. Supply chain issues remain despite improvements in transportation, mainly due to the war in Ukraine and a ripple effect from shortages in components. One of our surveyed contractors closely tracks supply chain related impacts to their jobs nationally and found that from September of 2020 through February 23rd of this year, supply chain impacts averaged 5.89 per day. From the beginning of the war on February 24th through June 8th of this year, there have been 38.12 impacts per day.
As a result, extraordinary lead times remain for equipment used in our product type, including generators, building controls, transformers, switchgear, electrical panels, air handlers, and chillers, all of which have lead times that are double what they normally are, many exceeding a year. Much of the delay is due to a ripple effect of missing components. A generator can be 90% complete but can take an additional six months to finish because of a missing component or two from a vendor with a huge backlog. The good news is that despite the shortage in skilled labor, productivity is improving. Contractors are starting to see cancellations or projects being put on hold, lightening their backlogs, which will eventually reduce demand and ease both pricing and supply chain problems.
This can be seen in expected escalations from one of our major GCs, who projects them to be 6%-8% this year, with a bias towards the longer end, but a reduction to 4%-5% in 2023. We continue to closely manage these conditions, and approximately 80% of our costs for development and redevelopment projects under construction are subject to guaranteed maximum or other contracts that enable us to mitigate the risk of inflation. We have contingencies behind those contracts to account for scope creep and unknowns. The other 20% is from projects that are currently pending guaranteed maximum contracts that are in process, and those projects include larger cost contingency allowances in their pro formas. Moving to our asset sales.
Interest rates are certainly influencing real estate pricing broadly, and we've been told by our investment brokers that they are seeing a 25-basis point widening in other hot product types such as industrial, so we may see it with lab office assets as well. It is certainly reasonable to expect that may happen, but we do believe that the scarcity of well-located Class A lab office assets will help mitigate that. You can certainly find industrial product almost anywhere, but for sale, Class A lab product is still very hard to find. Despite the increasing interest rate environment, there continues to be strong demand for life science assets demonstrated by our partial interest sales in Cambridge and Mission Bay and our outright sale of 12 assets in the Route 128 and 495 suburbs of Boston.
The partial interest sale of 300 Third Street in Cambridge closed at the end of the quarter, and was sold to an existing partner relationship for a 4.3% cash cap rate at a price per sq ft of $1,802, a $113 million gain over book value. As of the sale date, we have achieved an 11.6% unlevered IRR on this asset. The partial interest sale at 1450 Owens in Mission Bay was also purchased by an existing relationship and is a development asset that included reimbursement for infrastructure and pre-development costs. Parsing those reimbursements out yields a land value of $324 per buildable sq ft, indicative of the high value of our land bank.
Lastly, our 12-asset suburban portfolio sale in Greater Boston sold at a strong cash cap rate of 5.1% and a sales price per sq ft of $542. Although these assets served our tenant base well for a number of years, we believe we can create more value long term with the capital from this sale by reinvesting it into our development and redevelopment pipeline focused on the creation and expansion of our mega campus platform. The great progress made on the construction and leasing of our high-quality value creation pipeline, paired with our ability to realize strong exit cap rates during the quarter, once again demonstrates our ability to create significant long-term enduring value for our shareholders. Thanks for listening. With that, I'm gonna go ahead and pass it over to Dean.
Thanks, Peter Moglia. Dean Shigenaga here. Good afternoon, everyone. Our team is very pleased for their seventh year of recognition as winner of the large cap Nareit Communication and Reporting Excellence Award. Six-time gold winner, plus one silver award, which is truly awesome. Congratulations team. At the end of June, our team published our annual ESG report highlighting key areas of our leadership in ESG and our focus on making a positive and lasting impact on the world. Key topics included in our ESG report include, among many others, first, managing and mitigating climate-related risk, including continued development of our science-based targets to reduce emissions. Two, highlights of the design of what is expected to become the most sustainable lab building in Cambridge, and two, future all-electric buildings in our San Francisco Bay Area market.
Three, our eight unique and important social responsibility pillars. Now turning to the quarter in the first half of the year. Our first quarter and first half results were very strong and significantly beat consensus. We also raised our strong outlook since our initial guidance for 2022 by $0.05, including $0.03 with the second quarter results here. Our projected growth in FFO per share is very strong at 8.4% over 2021. Total revenues for the first quarter and the first half of the year were strong and up 26.3% and 27.2% respectively over the same periods for 2021. FFO per share for the second quarter was strong at $2.10, up 8.8% over the second quarter of 2021.
Now huge thanks to our entire team for truly exceptional execution in 2022. We have generated one of the most consistent and strong operating and financial results quarter to quarter and year to year within the REIT industry. Now, as you've heard from us today, over 1,000+ tenants and other life science industry relationships is really driving strong demand for ARE's brand. ARE is the go-to brand and the trusted partner to the life science industry. We have the best team, the highest quality facilities, the best locations, and tremendous scale for space optionality to address demand. Our EBITDA margin was 70% and is one of the best in the REIT industry. This strong EBITDA margin also highlights the efficient execution of operational excellence by our team.
We had strong occupancy at 94.6%, up 60 basis points since 12/31/2021, and our occupancy guidance range for 2022 from 95.2%- 95.8% highlights continued strength in occupancy growth. Record leasing volume and rental rate growth for the second quarter of 45.4% and 33.9% on a cash basis, and really strong rental rate growth outlook for the entire year at 32.5% and 20.5% on a cash basis, highlighting the strength again of our brand and execution. We had very high collections of July rent at 99.9% as of July 22nd, which was about three weeks into July, and consistently low AR at $7.1 million as of June 30th.
These are pretty amazing statistics for one of the largest REITs in the industry, and not surprising given the high credit and diverse tenant roster our team has curated over the years. Our strong same property NOI growth for the second quarter was 7.5%, 10.2% on a cash basis. This strong performance highlights the strength of our brand and trusted partnerships that continue to drive strong demand for lease renewals and re-leasing into space and expansion of space with ARE. Now same property occupancy was very exceptional for an asset base with consistently high occupancy, but it was up 140 basis points in the second quarter compared to the second quarter of 2021. Now turning to our strong and flexible balance sheet.
We have one of the top overall credit ratings in the REIT industry, ranking in the top 10%. We've got no debt maturities until 2025. Over 98% of our outstanding debt is subject to fixed interest rates with $5.5 billion of liquidity. The weighted average remaining term of outstanding debt was 13.6 years and one of the highest in the REIT industry. Our net debt to adjusted EBITDA is on track to hit 5.1x by year-end, really highlighting our focus on continuous improvement in our balance sheet and credit profile. Forecasted cash at the end of the year of about $250 million is expected to reduce our incremental debt capital needs for 2023, and this is really important in this higher interest rate environment.
We really have achieved really strategic execution in 2022 on our capital plan, with only slightly above 10% of our overall gross sources of capital remaining for the rest of 2022. Now at the midpoint of guidance for this year on dispositions, we have $740 million remaining, and we have the potential to exceed the midpoint of that guidance. Our updated capital plan reflects a significant reduction in uses of capital for the second half of the year, aggregating about $635 million across both acquisitions and construction spend as we prioritize our allocation of capital.
On acquisitions, it's important to recognize that activity has been and was expected to decline as a result of having a very attractive pipeline of land for future development in each of our key submarkets, combined with the considerations for the overall challenging macro environment and capital markets. Now briefly on our dividend policy. Our board has been very consistent with their policy and really has focused on sharing our high-quality growth and cash flows from operating activities with shareholders while also retaining a significant portion for reinvestment into our highly leased pipeline of development and redevelopment projects. We are on track to reinvest about $2 billion of cash flows from operating activities after dividends over a 10-year period ending on December 31, 2022.
Now this includes about $300 million in cash flows from operating activities after dividends at the midpoint of guidance for 2022. Turning to our venture investments. This program and component of our business has really been consistently generating realized gains. Realized gains for the second quarter were $28.6 million and $51.8 million for the first half of the year. We're on track with projected realized gains for 2022 that should be consistent with the $105 million in realized gains in 2021, or almost $26 million per quarter. Now, the mix of realized gains has varied period to period. However, on average, over the last 5.5 years, gains from our investments in publicly traded securities represented only 30% of our total annual realized gains.
Now, historical gains over the years were most often triggered by traditional liquidity events, including M&A activity and IPOs. From a balance sheet perspective, we've got strong gross unrealized gains of about $565.5 million relative to our cost basis of $1.1 billion. Now our team has delivered very strong operating and financial results in the first half of 2022, and our improved outlook for the year remains very strong, with EPS diluted ranging from $2.14- $2.20. FFO per share is adjusted, diluted from a range of $8.38- $8.44. FFO per share is up $0.05 From our initial guidance provided at Investor Day on December 1, 2021, including the $0.03 Increase with second quarter earnings here.
We expect strong FFO per share growth of 8.4% now for 2022 over 2021. Now we refined our capital plan for the back half of the year, including the following items. We're really just focused on real estate sales for the rest of the year. We have no equity required for the remainder of the year, and we significantly reduced our forecasted uses of capital by $635 million, really on the back half of this year, which is a reduction of forecasted acquisitions and construction spending. Please refer to page six of our supplemental package for detailed underlying assumptions included in our outlook for the full year of 2022. With that, I'll turn it back to Joel.
Thank you very much. I want to apologize. Steve was on cell phone, and his line cut in and cut out. We'll work with the transcript providers and make sure the blanks are filled in. With that, I'd like to go to questions.
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 key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Anthony Paolone of JP Morgan. Please go ahead.
Thanks. First, best wishes to Steve, and thanks for all the help over the years. Appreciate that. My first question is, as it relates to just the demand you guys continue to see in the portfolio, do you think that $3 billion in development spending and effectively roughly about the same amount of deliveries is sustainable? And how we should think about what things look like going forward. Or is the second half of the year drop in spending likely to persist into next year and kind of indicate just slowing the pipeline?
Yep. Dean, do you want to take that?
Yeah, Anthony, it's Dean Shigenaga here. When we did look over the last couple months here at our capital plan on around construction spend, you know, we did announce a significant reduction in spend here for the back half of this year. As you would expect, we look very carefully at spend for 2023. There were significant reductions there, but I don't want to get into the details of the capital plan specifically for next year. We'll get into that at Investor Day. What we are focused on, though, Anthony, as you can tell from our disclosures, you know, the $665 million in incremental annual rental revenue is what I'll call, you know, our priority focus. That's a fairly significant pipeline, both in revenue, but also, you know, 7.8 million sq ft.
Most of that, as you guys know, is leased or negotiating at roughly 78%. I'd call it we've refocused where we're paying attention to on allocating capital, and this pipeline is super important to us. You know, there is dollars that we will incur as we look into 2023 related to that, but we're being mindful and disciplined and scaling back where we can.
Okay, got it. Just in terms of in the portfolio, can you maybe take us inside some of the spaces and give us a sense as to, you know, how tenants are utilizing their space and whether or not just their own funding environment being more challenging is slowing up their hiring or growth plans or just anything you see on that side.
When you ask about how they're using their space, do you mean. I'm not quite sure what you're asking. Laboratories are operating, you know, full time. You know, we've said, as you know, many times you can't do lab work from home. Most of the life science tenants have a flexible work from home schedule. They're you know, white collar folks are in several days a week and kinda move that around. I think that's kind of the norm and you know, I was at one of our mega campuses not too long ago, and the parking lot was jammed.
People are back in a pretty important way, but I think the office part of the component still is, of kind of a hybrid work schedule, if that's what you're asking.
I'm trying to think through if capital is less plentiful when they have growth plans, do they slow up the need to take down as much space as maybe they would have otherwise right now and just
You have to go back. Yeah, Anthony, you have to go back to what Hallie said. The industry is not a cyclical industry. The industry is event-driven, and if one is working on a particular blockbuster drug or whatever, they're gonna allocate capital obviously, as prudently and as a disciplined fashion as possible. They're gonna have to move forward because that's where the value of the, you know, the pipeline is part of the key value. I think it's different than, you know, other sectors, whether you're in a law firm or a, you know, financial sector where you can move a whole bunch of things around because of just macroeconomics. This is a very different industry, so I don't think you can kinda compare the two. Now, tech tenants are well known.
Obviously, those guys clearly have slowed the pace of hiring. Some of them have done, you know, some layoff work and so forth. We see that. You know, we've got, what, 8% or so, less than 10% of our portfolio is tech-related. That is, I think, well characterized out there.
Okay. Sorry. Thanks.
Yep. Thank you.
The next question comes from Jamie Feldman of Bank of America. Please go ahead.
Oh, you may be on mute.
Oh, thank you. To start off, just congratulations also to Steve. It's been a pleasure to work with you all these years, and we wish you the best going forward. I guess, you know, we appreciate all the color on the additional disclosure on tenant segmentation, and can you talk maybe, you know, let's fast forward six months, nine months here, and we look back, and I'm sure there's gonna be some distress or something of some sort in your portfolio. Like, what do you think that actually looks like in terms of, you know, what the cycle does actually bring?
Well, I think, you know, it's pretty clear, if you go back to the 2008, 2009 timeframe, that there will be tenants, and oftentimes they tend to be, you know, small, publicly held companies, either preclinical or into the clinic, who have a certain amount of cash. They're trying to kind of, you know, manage their resources to get to value inflection milestones, so they can either finance further or potentially reach a milestone that they could partner or sell either the company or the product to, you know, a bigger company. I mean, that goes on all the time, and I'm sure we'll see that, you know, evolve from time to time. I mean, the great example that I like to use is a company that, you know, had that problem back in 2008, 2009.
Actually, they had the entire building at 500 Forbes. They moved out on one day. The next day, you know, Genentech, Roche took that entire space. I think that's what you see. We've described, I think, last time Steve described, on the last call, a tenant in San Diego, or maybe we've done that on some of the analyst calls, that wanted to leave, I forgot, you know, 20,000 sq ft or so. We brought in another tenant who wanted that space, and the mark to market on the new lease was 50%. We expect to, you know, be able to manage those kinds of issues.
I think we're gonna be much better well-set than almost anybody else because of the discipline we've used in leasing space in the first place. Now, if we buy an asset where we have an existing tenant, and that actually happened at 500 Forbes, then we have to just manage that, you know, in a way that is as best we can because we hadn't underwritten the tenant in a sense of choosing to bring them in or not, obviously, as part of the acquisition. So far, if you look at collections, receivables, and just the general situation across the portfolio, we don't have any credit issues at the moment.
Yeah. Joel and Jamie, if I could add, it's Dean here. Just to put things into perspective, just from one simple statistic. If you look at occupancy from the end of 2008 to the end of 2009, occupancy only declined 70 basis points. If you broaden that time period just a tad, and you look at the end of 2007 to the end of 2009, occupancy actually grew by 30 basis points. I think the one fundamental difference between that period and today, the life science industry, in particular the biotech industry, has really gone through this, you know, period where I think you can almost call it the golden age of the biotech industry today, with tremendous innovation going on relative to 2008.
It's a much more exciting and vibrant environment for the biotech sector.
All right. Great. Thank you for that. Then, I guess, just thinking about the cap rates on the asset sales in the quarter, you know, how are those or how are they not representative of the broader portfolio? You know, we've heard from brokers that maybe life science could still be trading in the threes. I'm just curious if that's just no longer a fact or maybe the, you know, the Binney asset in particular that you sold is not a great comp to talk about kind of the best of the best in the portfolio.
Well, I'll let Peter take that, but let me just say, if you remember the Binney corridor, and I think you've toured that, Jamie, it took us about a decade to assemble in title and build, you know, over 2 million sq ft there. 300 Third was an asset we purchased, you know, before all that. It was actually an older building that had been built for Palm and a converted asset, so it doesn't really represent what we've developed along that corridor. That corridor is, I think, representative of, you know, a big kind of mega class A campus. I think, you know, keep that in mind as you think it's not a one-off. 100 Binney isn't just a one-off class A building. It actually represents all 2 million+ sq ft there.
Peter, you can give some details for sure.
Yeah, sure, Jamie. You know, fair question. You saw the 3.5 print last quarter, and, you know, this is a 4.3. The buildings are next to each other locationally. I would assess the difference, you know, Joel touched on it. You know, maybe starting from where I was in my comments, you know, I think there were a number of factors. It would include interest rate creep since that trade. Certainly, rates have gone up since the sale of 100 Binney, so that, I'm sure, factored into it. The age of the building. 300 Third was built in 2000, and as Joel mentioned, it was a build-to-suit for Palm. 100 Binney was built in 2017.
100 Binney's very new, state-of-the-art, where 300 was not purpose-built for lab. You know, I've talked during other quarters, commenting on non-purpose-built buildings and, you know, this one has similar challenges, to others that, you know, we've seen in the market, namely, because of their low ceilings there, or the low floor-to-floors, there's 8.5-ft ceilings. We typically have 10-ft ceilings in our space. When you shrink the ceiling down like that, it's just not as nice of an environment. You know, it has some other weird things, like there's the parking lot's on the second floor of the building, and that just creates some operational inefficiencies when you're dealing with chemical storage and things. You know, so you have that.
You know, I'd say maybe one other item is it's subject to a ground lease versus 100 Binney, which was a fee simple asset, and there's certainly a little bit of discount for that. I think all of those things kinda aggregated to a 4.3, but I would also say in this environment, a 4.3 is still pretty good. Really good, if you factor in also that 300 Binney is subject to a long-term lease and the buyer's not gonna be able to mark to market for quite a long time. They certainly saw great value in the future appreciation.
Yeah. A great tenant in Alnylam.
Yes.
Yep.
Okay, great. Thank you.
Thanks, Jamie.
The next question comes from Michael Griffin of Citi. Please go ahead.
Thanks. Appreciate you having me on the call this quarter, and Steve, congrats on a well-deserved retirement. Just wanted to touch on the suburban portfolio dispositions. Can you maybe give some color as to why it made sense to sell these assets, and could you see potential sales from other similar properties in the future?
I'll let Peter comment again on some of the specifics, but I would say and welcome to the call. We aggregated those assets. Actually, 60 Westview, if I'm not mistaken, was the first asset we ever bought in the Massachusetts cluster. We aggregated those assets, many of which kind of early on in our attempt to try to build a presence in the greater Boston region. In those days, we didn't have enough money to buy anything in Cambridge. We over, as I say, well over a decade, we aggregated a nice group of suburban assets, well-maintained, well-operated, actually pretty good credit throughout those assets.
It comes a time when you see values there to harvest and to reinvest, and also our move to the really the mega campus strategy in the greater Boston region with our really big mega campuses. That's where we wanted to focus our capital, and we have, you know, obviously a whole host of needs. It was a pretty easy decision, and the timing was, I think, pretty darn good. Peter, you could comment. I don't know if there was anything specific.
Yeah. I'd just say that I think the time was right. There were 12 buildings in that portfolio. They were really good workhorse buildings, but relative to the rest of the assets that we have in that market, they were on the lower spectrum of quality. Given the appetite for life science real estate, I think we were able to get the pricing by selling them today that was, you know, very attractive, and as Joel mentioned. I said in the comments, great opportunity to reinvest that into our value creation pipeline. I don't think there's really. I think it's just really that simple. Just really opportunistic time to sell assets and get maybe more for them than you would in another era.
Yeah. I would say we don't also have a set of suburban assets like that really in, you know, how they kind of originated and stuff really in any other market. You can't really say, "Oh, do you have other suburban portfolios?" Like in the Bay Area, you know, a portfolio we would probably exit would be the East Bay, but we exited those before, so we don't have those kind of assets by and large.
Great. Appreciate the color on that. Just maybe stepping back a bit, you know, obviously, given the continued demand for life science, are you noticing more entrants coming into your markets, particularly, you know, on the conversion side of traditional office to life science product?
Well, I think, as Peter said, the reality is data centers have been hot. Obviously, resi's been hot. Industrial logistics has been hot, and life science has been hot. Life science is a much smaller, you know, overall asset base, you know, countrywide. The scarcity is, you know, an important part of things. As Peter said, I think a number of important high-quality investors have sought to look at these scarcity assets. Obviously, sometimes people make a decision they don't like the asset they have, so they're looking at somebody else and saying, "Gee, could we try to convert and do that?" Sure, in markets there are those kind of people.
By and large, I mean, we've heard pretty big horror stories on some conversions in the Boston region by people who have no idea what they're doing and tenants who are desperate to get out. You know, that's a story that will unfold pretty sadly for those folks.
Gotcha. That's it for me. Thanks for the time.
Yep.
The next question comes from Richard Anderson of SMBC Nikko. Please go ahead.
Thanks. To Steve, good luck. Honor and privilege to work with you. I'll look for you on celebrity row at Warrior Games going forward next season. You know, on the topic of conversion activities, you know, it's interesting a lot of your, you know, office peers have made that the bulk of their development or redevelopment business. Peter, to your comments about development costs going up and all that, and again, despite what you just said, Joel, about some of the horror stories, do we expect the conversion business to start to whittle down or is it whittling down even though you don't consider it a competitive force for you guys? Is that something that could be an outcome from all of this, you know, disruption?
Yeah. Steve and Peter, you guys wanna comment?
Steve, you wanna go first?
Yep. Yeah, sure. Maybe I'll jump in here, Richard, and thank you for the kind words there. Yeah, we're already seeing. That's why I tried to break it down in terms of, you know, the properties themselves. You look at these conversions, and then you look at the operators who are new to this, you know, with a one-off building and then ultimately their capital partners. We have seen now projects that have been put on pause that those will ultimately be put on ice. We just don't see capital that enthusiastic about, you know, committing significant dollars to these types of conversions, you know, given the overall macro environment, you know, the complete lack of any tenant base mixed with, you know, a lack of operational experience.
I think more to come and more to unfold, but that's certainly the sentiment that we're seeing out in the market now. You know, Peter can add to that too.
Yeah, I would say. You know, we do quite a number of meetings about strategy and market updates and, you know, on a weekly basis. We're never going too long before we're covering what could be coming up, what have we heard with all the different regions. By and large, we don't hear a lot about potential conversions outside of what you might see announced in the press. Most of it is potentially new development. But you know, as Steve mentioned in his comments, we only see you know, a limited amount of that in 2022 and 2023. More has been announced. We'll see if it gets built. But I don't see or we don't see a lot of conversions outside of, you know, going back to the suburbs in Boston.
We certainly know you know one of the office REITs that has a lot of holdings out there have talked about doing conversions, and I'm sure are underway you know with a few. We're not seeing them proliferate throughout our urban core very much, at least at this point.
Okay, great. I'll yield the floor and get along on the call here. Thanks very much, team.
The next question comes from Sheila McGrath of Evercore. Please go ahead.
Yes, good afternoon. Congrats, Steve, and all the best.
Just a quick question on the dynamics of rental rates for new construction. Assuming, as Peter outlined, construction costs continue to go up, and you wanna maintain development yields. Just curious if the new rents on new development to justify construction are like above prevailing market in various submarkets.
Yeah. Peter, do you want to talk about Blackstone's kind of market high they just signed Takeda?
I mean, I think what Joel's referring to is I think they were at $137 a foot. You know, that's by and large one of the things that sets the market, are new developments. You get a rate like that, and then, you know, a renewal comes up of another class A property in the neighborhood, and the landlord will ask for the same rent. I would say that the new development kind of helps set the market and then the existing assets follow. It's, you know, it's a good thing.
Okay, great. On 1450 Owens, I thought that was an interesting structure, I guess, sort of to minimize construction spend. Just wondering if that's something you would replicate on some of the pipeline going forward.
We've actually done it before, but Steve, you could talk about that.
Yeah. I think, Sheila, that was a really great situation for both ourselves and the joint venture partner. You know, we had the very last parcel in Bay, you know, titled to go. We have a combination of, you know, a very attractive intrinsic land value plus, you know, pre-construction work that we've done. As we looked at partnering up on that project, you know, just mentally the additional capital contribution to build the building, you know, will equaling the intrinsic land value and the pre-construction work we had in there. You're right. It's a very, you know, mutually rewarding way to move forward with that project.
Okay, great. Thank you.
The next question comes from Michael Carroll of RBC Capital Markets. Please go ahead.
Yeah, thanks. I just wanted to touch back on the suburban Boston sale. I guess, Peter, you indicated that that portfolio was at the lower quality spectrum. So could you comment how the 5.1% cap rate would compare to the rest of the portfolio? I mean, is there an easy way to understand the cap rate difference between, let's say, newer buildings and the rest of the properties?
Yeah. The assets and the locations aren't even comparable, but Peter, you could answer.
Well, I think what you're trying to get to, Michael, is these were more one-off buildings. If we were to sell something in the suburbs that was more campus-like, like, you know, I mean, San Diego in itself is kind of a suburban market. You look at something like Campus Point, right? Where you have this amenitized campus, it's in a suburban spread out environment, but it's, you know, class A and amenitized. I mean, that's gonna be a low 4 cap rate. If we had something in the suburbs of Boston that was a similar type of development, you know, I would expect a similar type of cap rate. These were lower quality. These were not really campuses.
They were one-off buildings, a significant age and of, you know, the credit tenancy in there was about a quarter, when you looked over the spectrum of the tenant base. It just, as I termed it before, kind of workhorse. They'll be leased over time as, you know, tenants need 30,000-50,000 sq ft, which is about the average size of those buildings. You know, they're never gonna have huge rent growth because they're just not that appealing to have somebody clamoring over it.
Okay, great. Just real quick, I know we're running short on time. I know about 80%, I guess, of your in-process development projects are protected in terms of, I guess, development cost increases. Can you kinda talk about the near term starts and how that's protected and if there's any risk to those budgets going higher or yields potentially going lower?
Look, you can't get a gross maximum price contract until you actually have something to price. Whenever we start a project, we obviously do a pro forma, and then within that pro forma, I believe that we have a very conservative approach with allowances for costs that should be adequate, and then contingencies on top of that. Then we get the entitlements, we get permits, and then we're ready to go out and start buying out the project. It just take, you know, you don't buy it all out at once. You buy out different trades at different times. It's a process, but we do it expeditiously.
Anything that, you know, we have that starts out, again, we have these underwriting contingencies that are in our pro forma, so we have a really good idea what the yield would be. More often than not, that initial yield, you know, we can do better because as we start to buy things out, we can start removing some of those allowances and contingencies and, you know, end up by the time it gets put into the supplemental, you know, we're highly confident in that yield. It may not be completely bought out by then, but it's very close. If it hasn't been bought out, it still contains good contingency to cover any unknowns or unexpected cost increases.
Okay, great. Thanks.
The next question comes from David Rogers of Robert W. Baird. Please go ahead.
Yeah. Hey, Steve. Thanks for the help over the years. Congratulations, and good luck, as well. Peter, just on the investment sales side, maybe you've touched on a lot of different ways about this question, but when you talk to your JV partners that have been the consistent buyers of a lot of your better quality assets, are they specifically asking for or indicating that they'd be interested in a different type of asset or a different price point at this point in time, just with respect to where debt costs are and their ability to kind of finance that spread?
The nice thing that we have in the base of our great partner pool, and it really truly is a great group of partners that we've established significant relationships with, is that, when we do these JVs, they're done on an unlevered basis. You know, they're not necessarily beholden to, you know, what the rates are for secured debt at the time. Now, many of them may indeed finance their portfolios outside of asset-specific financing, but it is at a very low level. In fact, some of our partners though have so much cash to put out that they don't lever really at all.
It's been one of the things that I think has helped us achieve the cap rates that we've achieved and sell things in an expeditious manner because there is a hunger for those types of assets, and they're not those purchases aren't contingent upon financing. You know, we hear stories about, you know, deals falling out because the lender at the last minute decides not to fund. You know, that. Fortunately for us, we haven't had to deal with that.
You know, if we did an outright sale and we've had bidders that have put financing contingencies in their offers, but we've had enough bidders that were willing to not have that contingency that, you know, we just so far, knock on wood, everything that we've put out there, we've performed on and haven't had any disruption because of debt market volatility.
That's helpful. Thanks. Maybe just one unrelated question with regard to the Texas investments you detailed, I think a little bit more of those this quarter versus last. I think last quarter, Joel, you had made the comment that you'd wanna wait. I guess just more curious in terms of your thoughts, if you can comment further, are you bringing existing tenants? Are there tenants in that market that wanna be in those locations? What's driving that decision? What's your kind of vision for the investment there?
Yeah. That's a good question. When it comes to Houston, one of our campus acquisitions was in fact made because of a specific tenant. You know that tenant will grow there and will be an anchor to a larger project. When it comes to Austin, we have a cohort of important lab tenants, both credit and non-credit, who wanna be in that market. It is a new market. It is one that is not an existing cluster. Probably will take you know a decade to start to gel, and then probably another 15 years beyond that to get to that 25-year mark.
I think what intrigued us about Texas and Austin in general is, you know, and I've made this statement before, you know, if you look at what Steve Jobs said about the 21st century, it was the century of the intersection of biology and technology. I think Texas is ripe for that intersection, and that's where, you know, this industry is really moving in an industrial fashion. This is really kind of the first toe in the water with that thesis.
Great. Thank you.
Yep. Thank you.
The next question comes from Thomas Catherwood of BTIG. Please go ahead.
Thank you. Steve, thank you for everything, and best of luck. Just one question from me. Hallie and Joel really appreciated the commentary on your different tenant segments at the onset. One thing that's always struck us, though, is the early insights that the company gets through the Alexandria investment platform and incubators like LaunchLabs. On that early-stage side of the business, are you getting any leading indicators suggesting a shift that could drive, you know, future changes in trends? Is that changing your investment strategy at all?
Thank you for that question. Not really. I mean, I think technology and you saw the, you know, the, if you looked at the cover of the press release in support, we've highlighted Eikon Therapeutics based on Nobel Prize-winning technology and headed by Roger Perlmutter, who was CSO at Amgen. He was also chief scientific officer at Merck and head of research at Merck. You know, this is a great example of using to some extent AI in the development of new innovative therapeutics. Clearly that intersection that I just talked about that Steve Jobs described is we're certainly seeing way more of that today than we did, you know, before. I think, you know, our early-stage efforts are really aimed at focusing on the next Alnylams or the next Modernas.
You know, two companies that we became associated with Alnylam in 2003 that started in, you know, 3,500 sq ft in our Science Hotel in Cambridge. Moderna that started, you know, early on in Tech Square a couple years after it had been founded by, you know, the Flagship team. Our hope is to find those kinds of companies that have just totally disruptive technologies and lots of product opportunities and shots on goal, because those are the things that are gonna move the dial and move the needle when it comes to human health. Oh, and by the way, you know, both are, you know, huge tenants of ours in many respects. It all kind of works out, but that's kind of where our focus is.
I don't know, Hallie, if you wanna comment.
Yeah. Thanks, Joel. This is Hallie. You know, I think you covered it well. You know, to kind of parrot some of Joel's comments from earlier earnings calls, we're really in the early innings, so to speak, of these next gen type therapies. When we think about gene therapies, cell therapies, mRNA therapies, we've seen a handful approved. When you look at the stable of clinical and preclinical technologies, it's really mind-blowing how exponential it is and just the repertoire of types of different therapies and types of different science that companies are working on. You know, I would say we're early days in seeing kind of what the next generation of these therapies is gonna look like.
Appreciate the color. Thanks, everyone.
Yep. Thank you.
The next question comes from Georgi Dinkov of Mizuho. Please go ahead.
Hey, thank you. First, congratulations on the strong quarter and Steve, good luck to you. I guess just a couple of quick questions for me. Can you please remind us how you assess credit risk in both the property and the investment portfolio?
I'm sorry, how you?
How you assess credit risk in both the property and the investment portfolio?
Oh, well, that's, you know, we could write a treatise on that. You know, when it comes to the investment portfolio, if you're looking at early stage, we're looking at the things Hallie and I just described. You know, great management teams, strong financial capability to attack some really big problems that have major unmet medical needs. I think when it comes to the tenants, we have a much different kind of focus. Focus on, you know, stability, credit, opportunity. So, they're kind of different in that sense, but both are rigorous. You know, we've had a pretty highly disciplined and highly skilled team in place for a long, long time, which is why I think we've been able to, you know, do a really good job at those underwritings.
Okay, great. That's helpful. Thank you. Just I guess my second question, you mentioned core office utilization is lower, and we see it in core office tenants giving back space. I'm just curious, have you seen any life science companies giving back like pure core office?
I don't think so, but I'd ask Peter or Steve. Have you seen that? I don't think so.
Well, the laboratory, the office that is associated with our laboratories houses the scientists that are working in the labs, and they need.
Yeah.
They need that space, you know, to do their work. They can't. You know, it's not good lab practices to be in the lab writing things up. So it's typically not possible to just give back lab space, or sorry, office space because they need it, if they're working in the lab.
Okay, great. Just like-
They're fully integrated.
Okay. Okay, got it. Thank you so much. That is all for me.
Thank you.
Our last question will come from Daniel Ismail of Green Street Advisors. Please go ahead.
Great. Thank you. Steve, would like to echo the comments on thanking you for your help over the years and best wishes in retirement. Joel, just a quick question on a comment you made about the Texas expansion. We haven't seen the migration of life science tenants to the Sun Belt like we've seen in the traditional office sectors. Do you think this is a trend that will likely either pick up or start? Or do you think this is more of a one-off and the growth of a cluster market will take the time that you stated earlier?
Well, okay. Well, first of all, I think by the way, we didn't have a slightly okay quarter, we had a really great quarter. I would ask you to think about your comments on your review piece. Secondly, it's our intent, like it was in New York. We started in New York. There was one incubator in New York alone. There was no other commercial companies really operating. There were a handful of companies. We've either built or helped move or really helped create that market. Our intent is to do the same in Texas. We're not waiting for tenants just to haphazardly move there somehow, but we have a pretty strategic plan to work with tenants who wanna move there.
Remember, a lot of cities these days you could pick out the names have governance problems, homeless problems, crime problems, high taxes, poor governance. There are a whole lot of folks very interested. We've seen that in financial services, Citadel just announcing a big move from Chicago to Miami. You're gonna see, with 1,000 tenants, I can tell you we have a whole lot of folks that wanna move.
Yeah, that makes sense. Appreciate it. Is cost of living a concern high for these tenants, or is the cost of life science rents in these life science-
Compared to other business, a very small percentage of their overall cost structure.
Makes sense. Peter, just a last question for you. Bidding trends in the last three months, I'm curious, as you're out there acquiring assets or looking to sell assets, have those changed at all? Has it gotten less competitive, more competitive, or what have you seen in terms of bidding trends?
As far as acquiring things, I think, you know, there's been fewer buyers in the last couple months as we've been kinda winding up our program. Pricing is for you know great quality land hasn't really been moving down at all. In the dispositions, we tend to go to we kind of select who we'd like to have purchase our assets or JV with us. It's hard to say, but I would say the interest in those folks that we typically approach with our opportunities has not waned, and they're still very eager to get more exposure.
Yeah. I mean, it's based on a pure scarcity of really high quality, well-located laboratory assets. I mean, that's the equation Peter's laid out.
Got it. Makes sense. Thanks, everyone.
Yep. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Joel Marcus for any closing remarks.
Okay. Thank you, everybody, and we'll look forward to our third quarter call. Be safe. Take care. God bless.
The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.