Leasing Pipeline and Occupancy
Q: How much of occupancy uplift is from signed leases?
A: We have 300,000 square feet of leases already signed but not commenced, which will begin next year, giving us a good head start into 2024. After accounting for space going into redevelopment, we have about 1.8 million square feet of lease rolls not resolved, which feels manageable relative to our historical leasing run rate.

Trends in Rents and Concessions
Q: When will net effective rents bottom out?
A: It's hard to predict, but net effective rents have been impacted by the 2023 supply. Tenant improvements (TIs) have increased remarkably but aren't expected to rise further as they're already high. Outside of large tenant requirements, things have been holding relatively well.

Dispositions of Noncore Assets
Q: Are you focusing on noncore asset sales?
A: Yes, we are focused on selling noncore, noncampus assets and feel good about that strategy.

Impairment Charges
Q: Expect more impairments with asset sales in 2024?
A: As we commit to certain sales, it's possible to have additional impairments under accounting rules, but it's hard to say as we're refining our approach and which assets to sell.

Investment Gains Guidance
Q: Can you achieve $95–$125 million gains despite impairments?
A: Yes, despite recent impairments, we've averaged $96 million in investment gains over the last three years. We have over $300 million of unrealized gains we could tap , and we're comfortable with our guidance heading into next year.

Free Rent Trends
Q: How does free rent burn compare to the past?
A: We have $114 million of free rent burning off , which is modest given our $265 million annual NOI. Free rent has ticked up from 0.3 months per year to 0.6 months but remains relatively modest. During the financial crisis, it was around 1 month, so we're still healthy.

Impact of M&A on Space Demand
Q: Does M&A lead to more space demand?
A: It varies. Strategic acquisitions, especially for technology platforms with multiple products, often lead to expansions. Smaller bolt-ons may not impact space demand.

Tenant Office vs. Lab Space
Q: How are tenants viewing office space needs?
A: Nontechnical space adjacent to labs is essential and not being rationalized. Biogen is rationalizing pure office space, not lab space. We generally cater to lab-based infrastructure which is not going away.

Leasing Activity and Tenant Decisions
Q: Is tenant leasing activity picking up?
A: It depends on the sector. Big pharma depends on needs, while clinical-stage biotech may delay until hitting milestones. Boards are cautious not to get ahead of their skis.

Increase in Tenant Improvements Costs
Q: Are higher TI costs the new normal?
A: Yes, driven by market competition and increased construction costs. TIs have risen from around $200 to $300 per square foot and are expected to stay at this level. Structural inflation contributes to this trend.

CARGO Therapeutics Lease
Q: What drove the decline in rents with CARGO?
A: It was a unique situation matching vacant space from Atreca with CARGO, leading to a deal with very little downtime and no TIs. It was about finding the perfect tenant for the space.

Concessions in Leasing
Q: How are concessions trending in leases?
A: Increase in tenant improvement concessions is mainly in new development space, rising from around $200 to $300 per square foot. In existing properties, concessions aren't needed as the space is already built out.

Same-Store NOI Guidance
Q: What’s needed to achieve 3% same-store NOI growth?
A: We have about half of the 64% vacancy leased and the other half under negotiation. Progress on leasing and contractual free rent will benefit the second half of the year.

2024 Expirations and Redevelopment
Q: Why did expirations moving into redevelopment decline?
A: We decided to sell the 219 East 42nd Street asset instead of redeveloping it, accounting for the decline. It's possible more assets could be sold as we evaluate noncore assets.

Asset Sales and Yields
Q: What's the yield on recent asset sales?
A: Stabilized assets in Boston have traded in the low to mid-5% cap rates. Well-located assets with good credit and lease terms are expected in the low 5% cap rates; sub-5% cap rates are no longer due to rates.

Tenant Leasing Behavior
Q: Are tenants still favoring just-in-time leasing?
A: Decision-making has been slow; tenants prefer available built space to avoid investing in new space. Larger companies need to plan ahead due to less availability in larger sizes.

Leasing Prospects for 2025 Projects
Q: How are leasing prospects for 2025 projects?
A: We'll address this specifically on our first-quarter call.

Dispositions Buyer Profiles
Q: Who are the buyers for noncore assets?
A: We'd rather not discuss that on an earnings call.