Alexandria Real Estate Equities - Q1 2024

Transcript

Operator (participant)

Good day, and welcome to the Alexandria Real Estate Equities Q1 2024 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal 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 touchtone phone, and 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 Ms. Paula Schwartz with Investor Relations. Please go ahead, ma'am.

Paula Schwartz (Investor Relation)

Thank you, and good afternoon, everyone. This Conference Call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. Now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Joel Marcus (Executive Chairman and Founder)

Thank you, Paula, and welcome everybody to Alexandria's Q1 2024 Earnings Call. With me today are Hallie, Peter, and Marc. First of all, a thank you and congratulations to the, to our ARE family team for a very solid Q1 against a continuing tough macro, with stubbornly high interest rates and continuing non-transitory inflation instigated by the federal government's really uncontrolled spending. In fact, our annual debt service now is greater than our defense budget. Crazy. Also, huge congratulations to the entire team, as Alexandria has once again been named one of the most trustworthy companies in America by Newsweek, and nominated as such by our three constituencies, our customers, our investors, and our employees.

Guided by Alexandria's core values of integrity, mutual respect, egoless leadership, humility, transparency, teamwork, and trust, we have established ourselves at the vanguard in the heart of the $5 trillion secularly growing life science industry. We're very honored that Newsweek has again recognized us with this important award, which is a testament to the company's values and to the trust that our tenants, investors, and employees have in our one-of-a-kind brand. As we said before, as Jim Collins has said, Alexandria has achieved the three outputs that define a great company: superior results, distinctive impact, and lasting endurance. We remain unwavering in our efforts to build upon these outputs and to continue to maintain our stellar reputation and the most trusted brand for life science real estate, providing essential infrastructure, enabling the development of new, safe, and effective medicines.

Remember, over 90% of diseases have yet to have addressable therapies or cures. Remember, too, the top causes of death in the United States remain cancer, heart disease, and the third, fentanyl and methamphetamines, and that is a profoundly sad statement of fact. So my quick take on the Q1, Alexandria is a one-of-a-kind company with a great brand, as I said, scale, dominance, and our unique cluster strategy, together with a fortress balance sheet. We've posted 7.6% year-over-year NOI growth, which is, I think, very solid in this environment. 7.3% year-over-year FFO growth, 5% dividend growth, and our collections, 99.9%. We had a strong leasing quarter with solid leasing spreads, and we continue strong occupancy despite recently acquired vacancy.

We also have posted very solid same-store growth and also very solid guidance. We are particularly laser-focused on leasing for the 2025 pipeline, as well as redevelopment space to be delivered in 2025, and of course, the leasing of vacant space in 2025, which is the fastest space to deliver, to our growing tenants. And much like we did during the great financial crisis, we're pushing forward our pipeline because of the need for Alexandria's lab space, coupled with solid indicators of a positive rebound for life sciences in 2024, which Hallie will address. Lease expirations for 2024 and 2025 on a combined basis are down, as well as unresolved expirations for both 2024 and 2025 on a combined basis, being down as well.

Peter will talk about capital recycling, but for the quarter so far, we've had approximately $275 million of non-core assets sold or pending, and we're about 20% through our targeted $1.4 billion of recycling of capital for our business for 2024, and we feel very comfortable where we are today. And then finally, before I turn it over to Hallie, I mentioned in our last Earnings Call, our decision to sell 219 East 42nd Street, New York City, the former Pfizer headquarters building, ultimately for residential use.

A very good decision, reinforced by the continuing, my own view, incompetence of the State of New York and the City of New York in continuing to incentivize and foster empty one-off buildings for so-called life science use while turning their backs on fundraising of startup companies, which is the heart and soul of the New York City life science ecosystem, and which is so badly needed. There has been, of all the regions, no lab leasing in New York City in the Q1 whatsoever, and yet the state and the city are proposing fostering and encouraging more people to deliver space.

We sit in a very good position with our campus, but nonetheless, when you have local and state governments who are not mindful of using funding better spent on funding startups and also the health, welfare, and safety of the citizens, it's very disconcerting. So with that, I'm going to turn it over to Hallie for a number of important comments. Hallie?

Hallie Kuhn (SVP of Life Science and Capital Markets)

Thank you, Joel, and good afternoon, everyone. This is Hallie Kuhn, SVP of Life Science and Capital Markets. Today, I'm going to review the fundamentals of the $5 trillion secularly growing life science industry, what these fundamentals mean for the health of our diverse life science base, and how our tenant science dictates the need for Alexandria's lab space infrastructure. In 2008, on the heels of the great financial crisis, the size of the public biopharma industry was around $2.5 trillion, and approximately $11 billion in venture capital was invested in private life science companies. There was no cure for hepatitis C, obesity was considered too complex to ever treat with an effective therapy, and gene and cell therapies were a hope, not a reality. Today, the industry is valued at over $5 trillion.

Venture capital is on pace to reach 4 times the levels deployed in 2008. 600 additional novel therapies have been approved by the FDA, and countless lives have been improved, extended, and saved. Coming out of this bear cycle, albeit with stops and starts along the way, the life science industry is in a profoundly different place compared to previous cycles, with a fundamentally strong framework to accelerate long-term growth of the industry and demand for Alexandria lab space. With the long-term perspective as a backdrop, let's step through Q1 trends in the life science industry. First, with respect to life science venture investment, nearly $11 billion of deployed capital was announced in the Q1, and $100 million+ mega rounds accounted for 34 deals, the highest number in the last 8 quarters and any quarter prior to 2021.

These trends bode well for demand from new and existing private biotechnology tenants, which account for 10% of our ARR. Moving on to our pre-commercial and commercial public biotech tenants, which represent 9% and 16% of our ARR, respectively. Follow-on and pipe financings achieved one of the highest quarters on record, totaling $15.5 billion, of which one in every four dollars was raised by an Alexandria tenant. This past week, longtime Alexandria tenant, Intra-Cellular Therapies, announced clinical data for their first-in-class therapy, lumateperone, for treatment of depression and went on to raise $500 million. The story here is that demand is milestone-based, and for companies that achieve their target milestones, typically clinical data, they have access to meaningful capital to accelerate their exciting science and expand. Third are our multinational pharmaceutical companies, which represent 20% ARR.

M&A is a key headline for this segment. 2023 was a record for acquisitions, and Q1 continued at a strong pace, eclipsing $40 billion in announced deals. This activity reflects large pharma, strong balance sheets, and pressure to expand their pipelines with innovative therapies to counter the over $200 billion in revenue at risk from patent expirations through 2030. M&A is a robust sign of the health of the industry, and as capital is recycled back to investors and entrepreneurs, it will be redeployed into the next generation of life science companies. Last are our life science products, service, and device tenants, which represent 21% ARR. A trend we are watching closely is pressure from Congress to limit utilization of Chinese CDMOs under the proposed BioSecure Act.

Whether or not the legislation passes, this is positive for our U.S.-based CDMO tenants, which analysts expect to see a substantial increase in demand and will help ensure we maintain our national competitive edge in such a critical industry. Switching gears, let's put on our lab coats and examine how our tenants' research dictates their lab requirements. Illustrating with a real-world example, consider a private biotech company developing precision oncology medicines that is expanding into 20,000 sq ft. Working directly with Alexandria's in-house lab operations team, they placed 328 pieces of equipment in the lab, ranging from benchtop centrifuges to freezers, cryotanks, DNA sequencers, and advanced microscopes. 10 pieces of equipment, including -80-degree freezers, require emergency power, as it is critical this equipment operates 24/7 to ensure $hundreds of thousands of experimental samples are safeguarded.

Now, where this equipment is placed is not based simply on the square footage required, but the process flow of their experiments. A single cell biologist utilizes equipment spanning multiple benches, chemical fume hoods, tissue culture suites, and microscopy rooms. Beyond that, she moves back and forth through the lab and adjacent non-technical space, conference rooms, and communal kitchen throughout the day. Lab space cannot be equated to traditional office desks dictated solely by the number of workers, but is more akin to a data center where the space needs are driven by the physical equipment. While highly trained scientific talent is required to oversee the science... It's the scientific workflow and instrumentation used that dictates the lab footprint. On a related topic, given the immense volume and complexity of data required to inform AI algorithms, many AI-centric tenants have heavy equipment needs that require significant laboratory footprints.

A great example is South San Francisco-based tenant Insitro, with whom we announced a significant early extension this quarter. AI is an amazing tool, but the laboratory is still the workbench. So circling back to where we began, in the past 15 years, the life science industry has doubled in size, along the way, improving countless lives. Projecting 15 years into the future, the growth trajectory of this industry is massive, as companies work to cure diseases such as Alzheimer's, autoimmune disease, and the nearly 7,000 rare diseases that affect one in ten Americans. As a trusted partner to the world's leading life science companies, our job is to safeguard our tenants' mission-critical research and support and catalyze discoveries that will shape the future of medicine. With that, I will pass it to Peter.

Peter M. Moglia (CEO and Chief Investment Officer)

Thanks, Hallie. I know myself, family, and friends have benefited from the innovation that has occurred since 2008, so appreciate the context you just gave us. I'm going to go ahead and discuss our development pipeline, leasing, supply, and asset sales, and then I'll hand it over to Marc. In the Q1, we delivered 343,445 sq ft into our high barrier to entry submarkets, covering 5 projects. The annual incremental NOI delivered during the quarter aggregated to $26 million. Development and redevelopment leasing during the quarter was approximately 100,000 sq ft. In addition to the executed leases, we signed 162,000 sq ft of LOIs during the quarter, which will seed future development and redevelopment pipeline leasing.

Base leased or under negotiation in our current and near-term projects under construction increased by 3% over last quarter to 63%, and projects delivering in 2024 and 2025 are 80% leased. From the second quarter of 2024 through the end of 2027, we expect to deliver approximately $480 million of stabilized NOI from the current pipeline. Transitioning to leasing and supply. As we noted last quarter, the bottom of demand was reached during the first half of 2023, and it continues to incrementally recover in our core markets. We expect that the lack of funding activity in early 2023 will continue to be an overhang to full recovery for a quarter or two, but we have strong conviction that a recovery will be achieved in the near term, given the key fundamentals Hallie outlined.

Alexandria is well positioned to weather these storms, given the moat and enduring competitive advantages we continue to widen and build. We leased 1,142,857 sq ft during the Q1, consistent with our pre-pandemic velocity. GAAP and cash rental rate increases were extraordinarily strong at 33% and 19%, respectively, and the related tenant improvements and leasing commissions trended down 16% compared to our 2023 leasing costs. Our teams continue to closely track competitive supply, building by building in our proprietary databases. As noted in last quarter's call, we expect 2024 to be the peak year for new deliveries and then begin to dissipate in 2025.

In Greater Boston, unleashed competitive supply, estimated to be delivered in 2024, decreased significantly from 7% of market inventory in the Q4 to 1.6%, due to 3.3 million sq ft of competitive projects delivering in the Q1. Approximately 1.17 million sq ft of those projects were moved from an estimated 2023 delivery to a 2024 delivery last quarter. The unleased delivered space is reflected in the direct vacancy numbers I'm going to present in a moment. In 2025, the unleased competitive supply in Greater Boston will increase market inventory by another 2%, which is an expected slowdown from the 2024 levels.

In San Francisco Bay, unleased competitive supply, estimated to be delivered in 2024, is 9.6% of Marcet inventory, which is a 1.1% decrease, driven mostly by reclassifying a 500,000 sq ft project from a 2024 to 2025 delivery due to a temporary delay in construction. In 2025, the unleased competitive supply in San Francisco will increase Marcet inventory by 3.7%, a 1.5% increase over last quarter due to that reclassification. In San Diego, unleased competitive supply, estimated to be delivered in 2024, is 5.1% of Marcet inventory, a 1.6% decrease from last quarter due to moving two projects from an estimated 2024 delivery to 2025.

In 2025, the unleased competitive supply will increase Marcet inventory by another 3.8%, a 1.1% increase due to that reclassification, but offset somewhat due to Q1 leasing at those projects. To update you on direct and sublease vacancy. Direct vacancy in Greater Boston is up 593 basis points to 12.98%, due to the previously mentioned 1Q 2024 deliveries. It has climbed more moderately in San Francisco, up 175 basis points to 14.11%, propelled by a 147,000 sq ft spec delivery in San Carlos. In San Diego, direct vacancy increased by 244 basis points to 10.41%, driven primarily by the inclusion of space not vacant today, but now known will be vacant soon.

Sublease vacancy decreased in Greater Boston by about 0.75% to 5.17%, increased in San Francisco Bay by 0.5% to 6.28%, and increased by 0.33% in San Diego to 5.7%. Again, 2024 is the peak year of disruption from supply. Alexandria's steady 94.6% occupancy is another data point supporting the effectiveness of our wide moat and enduring competitive advantages. I'll conclude with an update on our value harvesting asset recycling program.

After a busy 4Q 2023 schedule, where we closed on $439 million in asset sales, Marceted and negotiated throughout the year, we spent the Q1 priming our disposition and partial interest sales pipeline for what will likely be a closing schedule, heavily weighted towards the third and Q4s. Early progress is reflected in pending transactions, subject to letters of intent or purchase and sale agreement negotiations of $258.1 million, and there are a number of other ongoing active sales efforts. Buyers of non-core assets are generally private equity, family office, local operators, and institutionally backed real estate partnerships, looking to diversify their asset mix with life science real estate.

During the quarter, we closed on assets totaling $17.2 million, inclusive of 99 A Street in the Seaport, which executive management deemed to no longer be strategic due to its one-off profile and our pivot to 285, 299, 307, and 347 Dorchester Avenue acquired during the quarter, which is nearby with similar Red Line access, but has the scale to be a future mega campus. We remain committed to our self-funding strategy, and our offering, and our offerings remain attractive to investors looking for exposure to life science real estate, given the promising outlook for the industry, highly presented despite near-term supply challenges. With that, I'll pass it over to Marc.

Marc Binda (CFO)

Thank you, Peter. This is Marc Binda, CFO. Hello, and good afternoon, everyone. We reported very strong operating and financial results for the Q1, and our team's off to a great start to 2024. Total revenues and NOI for 1Q 2024 was up 9.7% and 11.5% respectively over 1Q 2023, primarily driven by solid same property performance and continued execution of our development and redevelopment strategy. FFO per share diluted as adjusted for the quarter was $2.35, up 7.3% over 1Q 2023, and was ahead of consensus. We also reiterated the midpoint of our full year 2024 guidance for FFO per share, diluted, as adjusted, of $9.47, which is up 5.6% over 2023.

Our solid operating results for the quarter were driven by our disciplined execution of our mega campus strategy, tremendous scale, and our differentiated business. Our tenants continue to appreciate our brand, collaborative mega campuses, and operational excellence by our team. 74% of our annual rental revenue comes from our collaborative mega campuses. We have high-quality cash flows from 52% of our annual rental revenue from investment grade, or publicly traded large cap tenants. Collections remain very high at 99.9%, and adjusted EBITDA margins were very strong at 72%. Leasing volume in the Q1 was strong at 1.1 million sq ft for the quarter, which is up 30% over the average of the last two quarters, and consistent with our historical quarterly average for the period from 2013 to 2020.

We continue to benefit from our tremendous scale, high quality tenant roster, and brand loyalty, with 77% of our leasing activity over the last 12 months coming from existing deep tenant relationships. Rental rate growth for lease renewals and releasing space in 1Q 2024 were strong at 33% and 19% on a cash basis. Our outlook for rental rate growth for the full year 2024 remains solid at 11%-19% and 5%-13% on a cash basis, and reflects our view that given the relatively small amount included in the renewals or re-leasings in any particular quarter compared to the full year, and the mix of lease expirations in any particular quarter, we do expect some variation in rental rate growth from quarter to quarter.

The overall Mark to Market for cash rental rates for our entire portfolio remains very solid at 14%, which is unchanged from the prior quarter, which is impressive given the strong realized rental rate growth experienced in the Q1. Our non-revenue enhancing expenditures, including TIs on second generation space, have averaged 15% of net operating income over the last five years, and are expected to be below that in the 12%-13% range in 2024, which really highlights the durable nature of our laboratory infrastructure. Same property NOI growth for 1Q 2024 was solid at 1% and 4.2% on a cash basis, driven by strong rental rate growth and leasing volume.

Our outlook for full year same property growth was unchanged since our last update, at 1.5%-4% on a cash basis at the midpoint. Occupancy for the quarter was solid at 94.6%, which is consistent with the prior quarter. During the quarter, we continued to execute on our development and redevelopment strategy by delivering 343,445 sq ft from the pipeline, which will generate $26 million of incremental annual net operating income. We also expect to see significant future growth in incremental annual net operating income on a cash basis of $101 million from executed leases, as the initial free rent from recent deliveries burns off over the next seven months on a weighted average basis.

As a reminder, this contractual increase in cash flows will have a significant positive impact on NAV, as these projects were previously delivered and no longer sit in CIP at the end of Q1 2024. As Peter highlighted, we have 5.5 million rentable sq ft of development and redevelopment projects that are projected to generate $480 million of incremental annual net operating income over the next four years, including 2.1 million sq ft delivering through 2025, that are 81% leased negotiating and are expected to generate $229 million of additional net operating income.

With projects committed and/or under construction and expected to generate significant NOI over the next few years, coupled with our future pipeline projects in pre-construction, we have the ability to grow our already large operating base of 42 million sq ft by 78% over time. With significant construction activities as well as important pre-construction activities, adding value and focused on reducing the time from lease execution to delivery, we're required to capitalize a significant portion of our gross interest costs. Last year, we saw a peak in capitalized interest in the quarter preceding our record deliveries in the Q4 of 2023, which generated $265 million of incremental annual net operating income.

These record deliveries have driven a decline in the average real estate basis, subject to capitalization of $1.3 billion, or 14% from all of 2023 on average to 1Q 2024. Capitalized interest as a percentage of gross interest has similarly declined from 83% for the entire year of 2023 to 67% for 1Q 2024. In addition, capitalized interest has had an overall decline for two consecutive quarters coming off the peak of 3Q 2023. Our outlook for capitalized interest for 2024 is consistent with our previous guidance and continues to assume a double-digit decline in average basis subject to capitalization for the full year ended 2024, compared to 2023. Transitioning to the balance sheet, we continue to have one of the strongest balance sheets amongst all publicly traded U.S. REITs.

Our corporate credit ratings rank in the top 10% of all publicly traded U.S. REITs. Our leverage continues to remain low at 5.2x for net debt to adjusted EBITDA on a quarterly annualized basis. We have tremendous liquidity of $6 billion, fixed rate debt comprising 98.9% of our total debt, and a weighted average remaining debt term of 13.4 years. In addition, nearly a third of our total debt has at least 25 years remaining to maturity, with a very, advantageous blended rate of 3.86%. We remain disciplined with our strategy for long-term funding of our business, with a focus on maximizing bottom line growth, maintaining our fortress balance sheet, and recycling capital from dispositions and partial interest sales to minimize the issuance of common stock.

We're very pleased with the execution of our bond deal, which we completed during the quarter, aggregating $1 billion with a weighted average interest rate of 5.48% and a weighted average maturity of 23.1 years. Similar to the self-funding strategy that we executed in 2023, we expect to recycle capital into our highly leased development and redevelopment pipeline through outright dispositions and partial interest sales, primarily focused on assets not integral to our mega campus strategy, allowing us to enhance the quality of our asset base. As Peter mentioned, we completed $17 million of dispositions during the quarter. We have $258 million of pending transactions at various levels of negotiation, and we have a significant amount of additional targeted dispositions and partial interest sales that we're working on beyond that.

Based on our current outlook, we expect our asset recycling program to be more heavily weighted towards outright dispositions of non-core assets rather than partial interest sales. I'll turn to the dividends. We also expect to continue to fund a meaningful amount of our equity needs with retained cash flows from operating activities after dividends of $450 million at the midpoint for 2024, or an estimated $2.1 billion for the five-year period through 2024. And our high-quality cash flows continue to support the growth in our annual common stock dividends, with an average annual increase in dividends per share of 5%... 5% since 2020, and we continue to have a very conservative FFO payout ratio of 54% in the Q1.

Realized gains from the venture investments, including the FFO per share, is adjusted for the quarter, were $28.8 million, relatively consistent with our historical average of $24 million per quarter going back to 2021. Gross unrealized gains in our venture, our venture investment portfolio as of 1Q 2024 were $320 million on a cost basis of just under $1.2 billion. We have updated our guidance, as I mentioned, for 2024, for EPS of $3.60-$3.72, and we tightened the range for FFO per share, diluted as adjusted to $9.41-$9.53, with no change to the midpoint of $9.47, which represents a solid 5.6% growth in FFO per share for 2024. With that, let me turn it back to Joel.

Joel Marcus (Executive Chairman and Founder)

Operator, let's go to Q&A, kindly.

Operator (participant)

Yes, sir. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Joshua Dennerlein with Bank of America Merrill Lynch. Please go ahead.

Joshua Dennerlein (Senior Equity Research Analyst)

Yeah. Hey, everyone. Thanks for the time. Peter, just wanted to follow up on your question or your comments on asset recycling. Could you just kind of provide more color on... It sounds like you're pausing or relooking at what you're selling, so maybe there's a little bit, slowing activity near term. I guess, just what's driving that, and how is the potential pool changing?

Joel Marcus (Executive Chairman and Founder)

Yeah, I think you misinterpreted my comments. There's no pause. I was just trying to point out that, we tend to close a lot of our sales in the latter half of the year, like we did last year, and because we spend a lot of time in the Q1 teeing up, things after a busy Q4. So, yeah, no pause. Activity remains brisk.

Joshua Dennerlein (Senior Equity Research Analyst)

Okay. Because I think if I'm not mistaken, it looks like, like, what you had pending versus 4Q or under, like, letter of intent versus, like, today, it looks like it fell a bit. Is that just—did anything fall out?

Marc Binda (CFO)

It's about 20% of our goal, which, again, given how we're heavily weighted towards 3Q and 4Q, I think is on target.

Joshua Dennerlein (Senior Equity Research Analyst)

Okay. Okay, thanks for that. Then, Marc, just wanted to follow up on your comment on leasing spreads in 1Q and just, like, the guide. It's the guide, it sounds like, looks like there's a slowing for the rest of the year on, on, rental rate increases. Just kind of curious how we should think about the cadence through the rest of the year.

Marc Binda (CFO)

Yeah, I mean, it really depends Marcet by Marcet, lease by lease, that we, you know, that we renew in each particular quarter. So there can definitely be some variation to quarter to quarter. Q1 was very strong. We're really pleased with that. And I think the year is strong. You know, we still feel good about the guidance we gave for both GAAP and cash rental rate increases for the year.

Joshua Dennerlein (Senior Equity Research Analyst)

Thanks for that, guys. We'll jump back in the queue.

Operator (participant)

The next question will come from Michael Griffin with Citi. Please go ahead.

Michael Griffin (Senior Equity Research Analyst)

Great, thanks. Peter, I want to go back to your comments, just around the competitive supply set. You've noted that a number of properties, I think, have been pushed out a couple of years in the development pipeline. I guess, what gives you confidence that, you know, we're nearing the peak of this supply picture and, you know, we're not sitting here a year from now and seeing a lot of those projects get the can kicked down the road, and the supply picture is still pretty, you know, pretty challenging?

Joel Marcus (Executive Chairman and Founder)

Yeah. So this is Joel. I'll let Peter answer that, but you—I think the words you used are pretty inaccurate. One project in San Diego was moved to the following year, not kicked down several years or the can, because there's a very substantial credit tenant lease they're working on that makes it more complex to deliver the space as we originally intended. So I think your thinking is not like the federal government, not getting a budget and just kicking it down. That's not what's going on here. But Peter.

Yeah, I, you know, I think Michael was also referring just to the general Marcet data that I was talking about. There were probably, I think, three to four projects within the three Marcets that I comment on that got moved, and that is something fairly normal because, of course, what Joel mentioned was one of our own projects that got moved, but we're tracking all projects that we believe are competitive. And, you know, as the data comes in from the brokerage community and from our own observations, at times, something that was supposed to, or we thought would deliver in one year, gets kicked a quarter or two and puts it into the next year. So, that's just the nature of data.

... But yes, we do. We are fairly confident that we're not gonna see too much more, after 2025, frankly, because we're not seeing anything else start right now. Or, you know, limited, I think maybe one project started in San Diego in the third quarter of 2023, but nothing, of material, that's material that we've noticed has started since then. So that would put us in a pretty good position, after 2025 to get to a very normalized, delivery run.

Michael Griffin (Senior Equity Research Analyst)

Okay, that makes sense, and appreciate the clarification there, Joel. And then just on the leasing environment, specifically as it pertains to the development pipeline. You know, would you have to give up more in concessions in order for tenants to sign leases? Or, you know, would you rather leave some vacancy in those developments, you know, if they go at or after stabilization, in order to potentially get, you know, better rents if the environment improves?

Joel Marcus (Executive Chairman and Founder)

Yeah, it doesn't quite work that way. That's kind of how it works in the rest of real estate, but as Hallie said, demand in this sector, as you know, you can see over many years, is event-driven. So it's not so much, you know, a rental rate or a concession per se, it's the key location for recruitment of talent, the ability to grow or need space immediately based on a major clinical milestone that's either made financing possible or just scale-up possible. So those are the things that tend to be the most important, which is space for delivery. And, you know, the Marcet will be the Marcet, but that's not the, you know, concessions or things like that are not driving people's decisions. It doesn't work that way.

Michael Griffin (Senior Equity Research Analyst)

All right. That's it for me. Thanks for the time.

Joel Marcus (Executive Chairman and Founder)

Yep.

Operator (participant)

The next question will come from Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra (Managing Director)

Thanks for taking the questions. I guess just, you know, you sort of painted a picture where things are on track, spreads better, et cetera. So I guess, Marc, I'm just wondering why adjust the guide, the FFO guide early on, especially the top end of the guide, given what you just outlined as, you know, likely a good start?

Marc Binda (CFO)

Yeah, I mean, I think we're on track. You know, it's not unusual for us, you know, as we get out, as we kinda get through the year, to shrink the range as we get more and more comfortable. So, you know, we shrunk the top end and the bottom end with no change to the midpoint of our guidance. So I think we still feel good about very solid growth this year of, you know, 5.6% over 2023.

Joel Marcus (Executive Chairman and Founder)

Yeah, and that's been pretty consistent as the, Vikram, how we've done it year by year, year-over-year.

Vikram Malhotra (Managing Director)

Okay, fair enough.

Joel Marcus (Executive Chairman and Founder)

Remember, you know, this is one of those, you know, years where you've got, you know, you've got macro at home, you've got geopolitical issues, and then you've got an election. So, you know, we wanted to be conservative about what we're doing here.

Vikram Malhotra (Managing Director)

Makes sense. I think there were a bunch of shorter-term renewals or I guess, extensions into 2025, because we did see the 2025 overall expirations move up. And I'm just wondering, like, what is the nature of those discussions? Is it kind of tenants are uncertain about space needs, or, you know, what drove those relatively higher volume of short-term renewals?

Joel Marcus (Executive Chairman and Founder)

Well, short-term renewals often happen. Remember what I just said to Michael in this industry, people are waiting for data that Hallie said, and if you've got a clinical trial data or some important catalyst that's gonna drive the business, hopefully positively, but could be negatively, and that's coming up, you want to ensure that you're kind of preserving, you know, your strategic optionality as much as possible, and that's why people wanna kind of keep where they are until they know, you know, what do we need and where are we going. So that's very typical of this industry over many years.

Vikram Malhotra (Managing Director)

Got it. Okay, and if one more, I can just slip in. You, I think there was a comment about 2024 being sort of the bottom or, or at least your trajectory seems to be in a recovery from here on into 2025. And I'm wondering if you can just elaborate on that. Is it demand? Is it? What, what parameters or factors are you seeing that give you confidence in this demand recovery into 2025?

Joel Marcus (Executive Chairman and Founder)

Yeah. So, Hallie, do you want to maybe just comment again?

Hallie Kuhn (SVP of Life Science and Capital Markets)

Sure. Yeah, so, Vikram, as I walked through in the data, you know, across our different segments, just, you know, remember that we have a very diverse set of different tenant demands, ranging from small private biotechs, public biotechs, large pharma institutions, life science tools, product devices. So each of those you have to look at differently. But across each one of those, we're seeing strength, and again, you know, we're coming down off 2021, but still quite strong compared to any year previously. So venture capital continues to, you know, be at a very robust pace. Mega rounds, which are a great indicator of, you know, what will be near-term demand drivers, oftentimes just in time space, have really picked up with 34, just this quarter.

On the public biotech side, follow-on financings, very strong historic quarter, but also IPOs, the window is opening slightly. We'll see how that trend continues over the rest of the year. And then pharma demand, you know, we continue to see a number of very large requirements across our regions, very much driven by the need to be able to recruit the best talent and ensure that they can innovate for years to come. So I think across each of our segments, we're seeing continued strength in the backdrop of, you know, of course, some challenging macro Marcets.

Vikram Malhotra (Managing Director)

... Thank you.

Operator (participant)

The next question will come from Rich Anderson with Wedbush. Please go ahead.

Rich Anderson (Managing Director)

Thanks, good morning out there. No? Good afternoon. So, what's Peter, what's the tail of supply? And by that I mean, okay, let's say we peak in deliveries this year, but there's that doesn't just shut off the light switch and you're off to the races or shut off, turn on the light switch. There's a period of time where there's free rent to burn from your competition, and that impacts your ability to operate, you know, nearby facilities, perhaps. I'm wondering, is it a year lag, where you can really start to see cash flow roll in again for Alexandria, or is it shorter or is it longer?

I'm just, I'm just curious, you know, yes, maybe we're getting to a point where we're peaking on deliveries, but then when do we start peaking or get back up and running on a cash flow basis for the company?

Peter M. Moglia (CEO and Chief Investment Officer)

Yeah, I mean, it's a great question, Rich, and it's a crystal ball question, but, I mean, the way I think about it-

Rich Anderson (Managing Director)

You got a crystal ball.

Peter M. Moglia (CEO and Chief Investment Officer)

The way I think about it is, I look at what Hallie is talking about with demand and, you know, to kind of add on to what her last comments were. You know, we saw a relative decrease in funding during 2023, and, you know, there's a lag effect for that to take place. And I-- you know, that's one of the reasons why we think 2024 is, you know, gonna be the kind of the bottom, to use the crystal ball. And that it's gonna, it's gonna accelerate from here because of all the investment that Hallie pointed out that's going on today, is going to create demand. So the tail of the supply is going to, you know, be a direct correlation to how much demand there is to take it up.

And we think that that demand is gonna be strong, therefore, the tail won't be that long. But we'll see. As I said, we're, you know, we're gonna see some significant additions to the Marcet in 2024, and then roughly half of what we're seeing in 2024, in 2025, and then virtually, hopefully zero to very little in 2026. Probably just things that get delayed in 2025 or bleed into 2026. But we'll be, you know, that'll be coming into a Marcet that is strengthening as more demand appears because of the funding.

Rich Anderson (Managing Director)

Yep, fair enough. And then, as it relates to you guys on using that, you know, those observations that you just made, would we expect you to continue on your, you know, kind of existing pace of development starts funded primarily through dispositions? Or do you feel the need to maybe slow it down a little bit on the view that disposition funding is not a forever strategy? Assuming the stock stays where it is, hopefully not, but, you know, let's say everything will hold everything else constant or starts down next year, up to meet the demand. What do you think from Alexandria's lens?

Joel Marcus (Executive Chairman and Founder)

Yeah. So maybe, Rich, let me just say this. I think you've seen us kind of like we did in the great financial crisis. Once the rocket ship of COVID started to come back to Earth rather rapidly, you know, February of 2021 is when it started. Certainly, over the last couple of years, and certainly into this year, we've been, I think, profoundly disciplined in thinking about... We've certainly stopped a number of projects. We've restarted one or two here or there based on, you know, leasing volume. But we've been very, very disciplined about what we would start. So it, there is not a volume throughput or some kind of a need to do that.

We have right now, as you know, a pretty decent pipeline that's relatively well leased, and our goal is to meet the needs of growing tenants, and that's what really dictates our decision to start projects or, you know, convert space or try to move people into vacant space that's, you know, that's available and, you know, quickly operational. So those are the things that we're really focused on, and it, you know, it's really judged by demand, and then against the backdrop of cost of capital and yield and things like that, which Peter's given pretty, you know, over many quarters, pretty great detail on.

Rich Anderson (Managing Director)

Great. That's all I have. Thanks very much.

Joel Marcus (Executive Chairman and Founder)

Thank you, guys.

Operator (participant)

The next question will come from Wes Golladay with Baird. Please go ahead.

Wes Golladay (Senior Research Analyst)

Hey, everyone. Looks like the Q1 is off to a good start with same-store NOI growth. I believe the expectation was for the growth to be back-half weighted. Is that still the case?

Marc Binda (CFO)

Yeah. Hi, Wes, this is Marc. Yeah, I think last quarter, we did believe that the second half of the year would have some acceleration. I think, you know, I think our view is that the second half will be, you know, strong, too in line with guidance right now. And I think, you know, to be fair, I think the Q1 came in pretty strong. So I think, you know, second half, we expect to be strong.

Wes Golladay (Senior Research Analyst)

Okay. And then you mentioned, potential demand, demand drivers, CDMO, AI. Is this gonna move the needle this year, or is it more of a 25, 26, 27 type driver?

Joel Marcus (Executive Chairman and Founder)

Yeah. So, Hallie, you could kind of comment on that. I think that's ongoing, frankly, but-

Hallie Kuhn (SVP of Life Science and Capital Markets)

... Sure. Yeah, you know, I think these are really popular topics, right? We don't go more than half an hour without getting a question on AI and the BioSecure Act, certainly on the regulatory front, has been front and center. Yeah, I think these are pieces of a kind of large pool of different types of demand that we see across our spectrum of tenants. But certainly, you know, we have a number of tenants in Insitro, we mentioned, and a number of others in our portfolio that do have significant lab requirements, given the large data generation. And then for CDMOs, you know, and how that relates to demand going forward, these things happen in the order of years, not months.

You know, but certainly, I think is a positive trend for the industry overall, with respect to ensuring, you know, that this industry, you know, remains certainly a, what we would consider a, a national, really important for our national security, for, development of drugs. So two things that we're watching closely, but I wouldn't say are going to be the things that are, you know, pushing the industry overall, just two pieces of it.

Wes Golladay (Senior Research Analyst)

Okay, thanks for the time, everyone.

Peter M. Moglia (CEO and Chief Investment Officer)

Yep, thank you.

Operator (participant)

Your next question will come from Tom Catherwood with BTIG. Please go ahead.

Tom Catherwood (Managing Director)

Thank you. Good afternoon, everybody. Peter, maybe moving over to leasing activity this quarter, costs were down pretty materially, you know, yet obviously, the unleased new supply continues to deliver as you detailed. How is this new supply competing with the expiring leases in your operating portfolio?

Peter M. Moglia (CEO and Chief Investment Officer)

I don't think it's competing very well at all. And that's illustrated by our occupancy and, you know, the cash and GAAP rent spreads that we reported today. I mean, we've been saying for a long time that our brand and platform of mega campuses means a lot to our tenants, and I think, you know, it's just proving out. You know, remember, a lot of this supply is one-off in tertiary markets, and it's the type of profile that if things get super tight in areas like Cambridge or Torrey Pines or South Lake Union in Seattle, you know, they might catch a bid, just like tertiary markets and office would when there'd be, you know, spikes in office demand.

But for now, you know, nothing's really moving outside, you know, a handful of leases here and there outside of what we're doing. Because as we say all the time, if Alexandria has space available that fits what the tenants needs are, you know, 90%+ of the time, they're going to come to us because we know what we're doing, we can scale them, we have, you know, we have operational excellence, and no one, and I say this all the time, no one's going to get fired for picking an Alexandria building. They might get fired for picking a building from somebody who has no idea what they're doing.

Tom Catherwood (Managing Director)

Understood. Actually, that kind of feeds into the next question, which is, and this is probably another crystal ball question here, but if we take a step back and think more broadly on the unleased competitive supply in your comments on secondary markets and secondary operators, how do you think distress could play out in the life science real estate market, if at all? And does that present a potential opportunity for Alexandria?

Peter M. Moglia (CEO and Chief Investment Officer)

Yeah, it's a great question we get asked. You know, my first reaction is always: Well, gosh, if we weren't there by now, it wasn't a priority. I believe there'll probably be some opportunities that we will look at in the future. You know, if we put our brand on the building and people know we're operating it, even if it's in a newer market, it can be successful. A great illustration of that is what we did in the Fenway. When we came in there, it was an unproven market. The 201 Brookline asset that we bought was about 17% leased. We come in, put our brand on it, put our know-how into it, and within, I think, three quarters, it was fully stabilized.

That said, that was a submarket that we knew was going to be have a lot of the fundamentals that make a good submarket. Some of these areas that this supply is in today, I don't see the same profile, so probably a tougher decision down the road. But what happens to those buildings? I think a lot of them will become office buildings, frankly. You know, office is certainly not dead. Probably office that was built in the sixties and seventies and even the eighties might, might have to go away because it's functionally obsolete, but if you built a new lab building and you couldn't lease it as lab, it's probably going to be a pretty good office building. But you know, again, crystal ball, that's just my opinion.

Tom Catherwood (Managing Director)

Well, I appreciate all the thoughts. That's it for me. Thanks, everyone.

Operator (participant)

The next question will come from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone (Executive Director)

Thank you. I guess first question is, your, your development yields seem to have been around 7% for, you know, a number of years at this point. And Joel, you mentioned interest rates being stubbornly high, but if this is the, the rate environment on a go-forward basis, is that 7? Is that an appropriate level for you all to continue with the program? Or, maybe you've just been overearning on spread in prior years, or does that number have to go up? Like, how do you think about that?

Peter M. Moglia (CEO and Chief Investment Officer)

Yeah. So, Peter, thoughts?... Yeah, look, Tony, I think you really have to look, you know, Joel laid out what creates opportunities that we may capitalize on, but we are going to be looking, obviously, at cost of capital. We can't make decisions, though, on what we think the-- or what the cost of capital is today. We have to take a longer look. So as an analyst, you would look at the internal rate of return that you would get on a development, because you know that if you believe that fundamentals are going to improve over time, you could do something with a 6 yield today, a 7 yield today.

But it, you know, as cap rates adjust, as rental, as rental growth adjusts, you look out 10 years and you get an IRR that's above your weighted average cost of capital today, and then you have confidence to go forward. So I know it's real easy to just look at initial yield, and we publish that because it's an interesting topic to everybody, and rightly so. But in challenging times like this, you really have to, to take a longer view because you don't want to miss on an opportunity that would be very strategic and excellent for your shareholders over the long run, and that's what we're trying to do.

Anthony Paolone (Executive Director)

Okay. And then just on the funding side of that, then, you talked about just the preference for dispositions versus stake sales. But just, you know, what about your common at this point? I mean, is that completely off the table or is it a similar type discussion where it could make sense depending on what's teed up?

Joel Marcus (Executive Chairman and Founder)

Yeah. So, Tony, as we've said, you know, our guidance assumes no equity. Same was true in 2023, you know, to remind everybody, and our focus is on as sources of capital to fund our business on the non-core assets outside of the mega campus. But obviously, you reevaluate that on an ongoing basis, just, you know, like we have in past practice.

Anthony Paolone (Executive Director)

Okay. Now, if I could just sneak one more in for Peter, since you got your crystal ball out. If you know, if you kind of look forward to, you know, I guess maybe next year when you're past this whole wave of supply that you outlined, you know, what do you think happens to market rents between now and then? And not just base, but just totality of lease economics.

Peter M. Moglia (CEO and Chief Investment Officer)

Yeah, look, we're anticipating, you know, a very flat environment. Opportunities that Alexandria can provide in a mega campus are likely going to perform much better, materially better than some of the supply that's going to be delivered. But certainly supply is going to weigh on rents and... But we don't necessarily see a retrenchment outside of, you know, certainly levels that were hit in 2021 and 2022 are going to be, you know, back-- we're going to back off from that. But the area, the rental areas of 17, 18, 19 that our subMarcets were in, I'm certain will be the bottom, and it'll grow from there.

Anthony Paolone (Executive Director)

Okay, thanks for the time.

Joel Marcus (Executive Chairman and Founder)

Thank you, Tony.

Operator (participant)

The next question will come from James Kammert with Evercore. Please go ahead.

James Kammert (Research Analyst)

Thank you. Good afternoon. Joel, certainly appreciate your comments that, you know, demand can be more event driven for the lab business, which is understandable. But is it possible for the team to provide just a little bit more context or quantification regarding your tenant interest in your development and redevelopment pipeline today, say, versus, you know, 90-180 days ago? And when I say context, I'm thinking, you know, the number of tenants you're holding discussions with, the range of space requirements they might be seeking and, you know, maybe the timetables for making decisions. Just trying to get some more comfort into the visibility of the lease-up. Thank you.

Joel Marcus (Executive Chairman and Founder)

Yeah, I don't, Jim, you know, good question, and, fair, fair to ask. I don't think we would want to be that transparent, given, you know, the competitive nature of of what we're doing these days. It just, you know, I'm not sure that would serve our our interest or even our tenants' interest. In fact, they may not want us to be talking about something like that in advance. So I'd be, you know, I'd be pretty wary of that kind of thing. I think that, you know, what is happening is, you know, and Peter, I think, has talked about this, we, you know, we kind of hit a low in 2023, certainly after, you know, the Silicon Valley Bank episode and, you know, some of the Marcet shudders and so forth.

But I think, you know, as Hallie has presented, the Marcet since October has really solidified and, you know, more money was flowing into, or is flowing into the sector. And I think that's really a better benchmark. And certainly as companies hit milestones, as Hallie mentioned, Intra-Cellular hitting a, you know, a critical, critical, very high quality milestone and was able to do, I think, their last financing, and then they turned profitable. So that's kind of how we look at it. I think anything more of a, you know, NORAD early warning system probably wouldn't be in our best interest. I apologize for that.

James Kammert (Research Analyst)

Yeah, that's fine. Call it long in the tooth. I'll leave it there. Thank you.

Operator (participant)

The next question will come from Dylan Brzezinski with Green Street. Please go ahead.

Dylan Burzinski (Analyst)

Hi, guys. Just going back to sort of the development yields coming down versus historical levels. I guess just given, as you guys think about things from a holistic capital allocation approach... How do you weigh sort of starting a development at a low 6% cap rate versus sort of going out and buying in the open market or buying assets, I guess I should say? Is it simply maybe you guys are willing to sort of accept that lower yield today because a lot of these developments are sort of an extension of the mega campus strategy, or is there something else?

Joel Marcus (Executive Chairman and Founder)

Yeah, no, I think that's a really—I'll, you know, ask Peter to comment, but I think that the last point you raised is really the point. You know, the mega campuses provide... I mean, we were first mover. We have, by and large, in almost every Marcet, the best—I can't think of any Marcet where we don't have really best locations. And, you know, if somebody wants to grow and grow on your campus, that's gonna be a lot better for the long-term growth and health of the campus and the company, as opposed to somebody who wants to go into a one-off building somewhere. It's just, you know, even if the yield is potentially higher, I don't think so.

Remember, too, with 3%+ bumps each year, you know, the ending, the ending rental value on certainly development 10-, 15-, 20-year leases is pretty substantial. But Peter?

Peter M. Moglia (CEO and Chief Investment Officer)

Yeah. Hey, Dylan, I just... You know, I'm not just me, but the team is not necessarily seeing anything we'd wanna buy. Again, you know, as I make the commentary about supply, most of what probably will be available to buy is not in the areas that we're interested in today. I'm not saying we're not, never say never, that an area might not become interesting in the future, and as I said, we could put our brand on it and make it work.

But the opportunities that we will be talking about in the future, and I'd say the near future, are going to be on our mega campuses because of all the things that we talked about, with the scale and the vibrancy, our tenants and tenants that are not ours, but wanna be ours, notice and understand the value. And so it, it's gonna make the—it's just gonna make more sense long term, for us to put them on these campuses rather than buy a one-off building and put someone in there and, you know, end up wondering in the future why we did that, because it doesn't really match our model.

Dylan Burzinski (Analyst)

That's helpful. Thanks, guys.

Joel Marcus (Executive Chairman and Founder)

Thank you.

Operator (participant)

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

Michael Carroll (Managing Director)

Yeah, thanks. I wanted to circle back on overall leasing activity. It sounds like trends are improving over the past few quarters, but does the recent push out in interest rate cuts impact, I guess, tenants' ability to raise capital at all, or does that delay their decisions or ability to make these types of decisions?

Joel Marcus (Executive Chairman and Founder)

No, and you can just look at what's happened, as Hallie outlined in the Q1, Michael. Again, event-driven, it's not, you know, a direct correlation to, economic environment or interest rates. That's just how this, you know, sector, and industry, kind of walks the walk. And so, you know, it, it's not totally, you know, shielded by that, because if there was to be some... I mean, imagine if China decided to invade Taiwan, the Marcet seized and, you know, rates spiked in some crazy fashion or something. Obviously, that would have an immediate impact on everybody. But, I think, no, not-- the deferral isn't gonna change. If somebody hits a great milestone, they're gonna be able to finance.

Now, maybe there might be a higher concession, you know, on the underwriting or the overnight or whatever, you know, method they choose, but that's, you know, that's a rather infinitesimal cost to capital issue for companies.

Michael Carroll (Managing Director)

Okay. I mean, do tenants make decisions on expanding into two new areas of research based off of their ability to raise capital? So, like, they're... And I think, correct me if I'm wrong, it's-

Joel Marcus (Executive Chairman and Founder)

Of course, and most of that is done at the venture level. And so, you know, when somebody's pioneering a new area, that's really done venture, not so much the, you know, publicly traded markets. But once you get into the clinic, then if you are fortunate enough to get public, then the public Marcets kind of take hold of that.

Hallie Kuhn (SVP of Life Science and Capital Markets)

Yeah, and just to... This is Hallie. Just to, one addition. Recall that with venture firms, they're sitting on a lot of dry powder, right? That is already committed capital that they can call on, and, you know, there's a number of larger funds that, you know, we're talking to that are raising, closing multibillion-dollar funds. So they're sitting on capital that's ready to deploy. They're not dependent in the same way that a public company is on the interest rate.

Michael Carroll (Managing Director)

Okay, and then just last one from me. I know there has been discussions where, the board, as some of these tenants have been making, like, veto decisions if companies can lease space or not. I mean, is that— are they, are the boards loosening up? Are they willing to make these decisions now?

Joel Marcus (Executive Chairman and Founder)

Well, I think historically, boards have had, you know, very careful oversight. I think unfortunately, when the Marcets become very frothy, boards get a little bit lazy and not as astute or disciplined in what they do. But I think you can be certain today, you know, boards are very disciplined, and it's been that way now for, you know, a handful of years. So I don't think anything's changing in that regard. I mean, the answer is, if somebody needs space to scale and grow because they hit a key milestone or they've, you know, turned profitable or whatever it happens to be, those are high-quality decisions because the cost of space for most of these companies is a fairly nominal amount of their overall cost of doing business.

Michael Carroll (Managing Director)

Okay, great. Thank you.

Joel Marcus (Executive Chairman and Founder)

Yep.

Operator (participant)

The next question will come from Omotayo Okusanya with Deutsche Bank. Please go ahead.

Omotayo Okusanya (Managing Director)

Yes, good afternoon, everyone. Appreciate all the comments around supply, and also development. If you could go back to this, crystal ball-type scenarios, curious if you'd be willing to offer up when you think you might be able to start a new development? And then, what potential Marcet could that be, given the demand-supply dynamics you've seen in each of your key, major Marcets and in, and on the mega campuses?

Joel Marcus (Executive Chairman and Founder)

Yeah, I don't think we would announce such a thing on an Earnings Call willy-nilly. It's based on tenant demand, of course.

Omotayo Okusanya (Managing Director)

But are Marcets getting better? Are you seeing, like, more demand that suggests that could happen sooner rather than later?

Joel Marcus (Executive Chairman and Founder)

Well, I think, you know, based on the questions that have been raised on the call right now, and Hallie's commentary, I think we've said since October, the Marcets certainly have gotten better, yes.

Omotayo Okusanya (Managing Director)

Fair enough. All right. Thank you, Joel.

Joel Marcus (Executive Chairman and Founder)

Yep, thank you.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Mr. Joel Marcus for any closing reMarcs. Please go ahead.

Joel Marcus (Executive Chairman and Founder)

Yep. Thank you, everybody. Just remember, May is Mental Health Month, and we'll be very focused on that with our efforts on a number of corporate social fronts. So be safe, take care, God bless. Thank you.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.