Joel Marcus: Yeah. I think that’s a really good question and that’ll be a cornerstone of the Investor Day presentation. But I think it’s fair to say Rich that the way to think about it is we continue to have, the company owns and operates 40 million square feet and has the capability to double our size and what we own beyond that. So there’s a pretty deep pool for partial interest and sales of outright non-core assets, but we do have an approach to self-funding for next year in addition to that, which I think will be pretty, pretty exciting. So let us wait to announce that that at Investor Day.
Rich Anderson: You got it. Thanks very much, everyone.
Joel Marcus: Yep. Thank you guys.
Operator: And our next question today will come from Tom Catherwood of BTIG. Please go ahead.
Tom Catherwood: Thanks and good afternoon, everyone. Maybe Joel or Peter, we always think of your team doing such a great job partnering with tenants understanding their business, helping them solve real estate problems, Peter I think the examples you talked about in San Diego with the developments really speak to that this quarter. When we think of that partnership, how have you seen the needs and maybe the pain points of your tenants changed over the past six to 12 months?
Joel Marcus: Well, I think that the obvious one is one that a number of people mentioned throughout the commentary. And that is certainly in the small and medium size companies that are emerging that are dependent upon whether it be private financing or public market financing or cash on hand. The fact that we’re in this de facto recession, inflation and high interest rate environment just makes the management of cash, the management of burn, the management of decisions, just more methodical. And yeah, maybe just more methodical. So our job is to understand those needs and work intimately with the clients to make sure that we’re doing the best job that we can to meet their needs. And I think we’ve done a great job of that. And we have very, very close relationships. These are not ones they sign a lease and that’s it. These are ongoing very deep relationships. So we’re generally pretty intimately involved in a lot of the decision making.
Peter Moglia : And, remember, I mean, this isn’t the first time we’ve hit hard times as a company. We’ve been around for, close to 30 years. And we’ve worked with our tenant base during all of these times. And the goodwill that accumulates and how we’re able to help them is why 80% of our leasing comes from these existing tenants. I mean, we have the ability – we have the size, the ability to work with folks that need assistance and it provides great goodwill for future endeavors for those of the – those management teams that are in the buildings that we’re helping them out with.
Tom Catherwood: Got it. Thank you. Thank you for those answers. And then, kind of following up on that, maybe if I switchover to Hallie, Hallie I appreciate – Hallie I apologize. Appreciate the detailed market update. I was kind of really interested in the comment you made around AI adoption potentially leading to the need for incremental lab space. And that you were potentially seeing the early signs of that. Can you provide more kind of color on that comment? And maybe what you’re seeing in the market in that regard?
Hallie Kuhn : Sure. Happy to. A great example and we had a quote from the CEO, Roger Perlmutter the former CSO of Merck in our press release is icons, which we have a signed lease with a property under development in San Francisco. With AI you have to have data to train the models. And so, when folks kind of – there has been commentary thrown out that oh! AI is going to and, make it so that you don’t have to run experiments as extensively in labs. What we see is actually the opposite, because you need such vast datasets to train the AI ML models in order to optimize and drive towards results that we see really large footprints whether it’s robotic, high throughput, both chemical, and biological data these companies are generating in order to be able to actually apply AI and ML.
It would be like applying generative AI to the internet in 1995, right? You have to have a really vast starting dataset in order to get something that’s meaningful on the back end. So we’re continuing to see that evolve I think across all of our clusters. There’s some really interesting ways that companies are integrating this tool into their toolkit for developing new medicines and that the end results 10, 20 years from now it’s hopefully a lot more medicines for patients and additional lab space demand.
Tom Catherwood: Appreciate the color. Thanks everyone.
Joel Marcus: Yep. Thanks, Tom.
Operator: Our next question will come from Connor Siversky of Wells Fargo. Please go ahead.
Connor Siversky: Good afternoon. Thanks for having me on the call. I got a question on 2025 deliveries. So correct me if I’m wrong here, but the pre-leasing rate of the 2025 delivery should have a significant impact on how we’re looking at capitalized interests in this context. So, assuming the pre-lease rate remains stable as it was reported in the supplemental release last night, can you give us an idea of how this would impact the interest expense on the P&L?
Joel Marcus: So Marc you might want to comment on that, but that’s kind of used in isolation because that’s just one piece of the business. But Marc, go ahead and comment.
Marc Binda: Yeah. Hi Connor. So, yeah, so capitalized interest is really determined based upon the size and magnitude of the assets under construction activities or under broadly all types of activities to get that asset ready for its intended use. So, to the extent that deliveries outpace construction spending and assets that are going through, either redevelopment or development, then capitalized interest would go down and the opposite is true if construction costs exceed the pace of deliveries. What I’d say on 2025, if you’re looking at the leasing percentages is, we’ve got some time on some of those and we’ve seen that that pre-leasing percentage pick up. Definitely, if those assets, we get to ‘25 and those assets seize activities and yeah, then capitalized interest would turn off.
But we’re, we got a long headway there. We got a long time and we’ve done – we’ve definitely done studies to look at the timing of pre-leasing and we’re not quite in that sweet spot for some of these assets that are out in ‘25 and beyond in terms of when tenants are ready to make decisions. So, I guess, stay tuned.
Connor Siversky: I appreciate the color. Is there any way, I mean, let’s just say we took the most simplistic form of the deliveries in that context, what a kind of breakeven pre-leased rate would look like as those projects come online?
Marc Binda: I’m not sure I understand your question, Connor.
