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. "