Connor Siversky: Well, I mean, we can we can take it offline. What I mean to say is if we if we use the schedule of deliveries and when those projects are supposed to roll online is what would be the breakeven rate between say the NOI contribution and the interest expense, that would be absorbed on the P&L as those projects roll online and they are moved from capitalized to the P&L on the interest expense?
Marc Binda: Yeah. I guess the way to look at that, Connor is this, if you’re looking at projects that has say just to make the math easy 7% yield and capitalization is in the high 3% range that that would, that would kind of tell you that, if half the building turned got delivered and half the building got turned off, you’d be neutral, but that’s really, it’s really not typically the case. I mean, that the pre-leasing on all the, all the assets that we have for ‘23 and ‘24 is extremely high. So, we’ll have to wait and see, but like I said before, we’ve seen the pre-leasing on ‘25 pickup as we get closer and closer to delivery, which is, which is pretty typical for tenants that of smaller size that make decisions much closer to the point at which they can see the building coming out of the ground and can visualize it.
Connor Siversky: Got it. Understood. Thank you.
Operator: The next question will come from Steve Sakwa of Evercore ISI. Please go ahead.
Steve Sakwa: Thanks. Lot my questions have been asked. But I guess Joel, I’m just curious given the challenging funding market for maybe many of your private competitors. I’m just wondering to what extent are you gaining any kind of market share to the extent that you can do fit outs and build outs of smaller lab space and to what extent have your peers maybe not been able to do that? And is that maybe delaying some of the new supply coming to market?
Joel Marcus: Well. Yeah, hey Steve. So I think the way to think about that is other landlords who may have laboratory assets. If they’re in – if you’re in Cambridge or you’re in other key markets that are directly competitive of ours, it always depends on their financial capability and also the needs of the tenant. I mean, it’s really hard to say. I think at the moment we feel very good about our positioning because if you’re a tenant and you need especially now just in time space and you need a path for future growth, you hit a valuation milestone, value inflection milestone, which is very typical today. A one-off building, no matter whether it’s fitted out or not fitted out, doesn’t really offer you that opportunity. You need a campus.
You need a campus and generally you want one run by Alexandria because you want the best operator because a one-off building may get you some space, but oftentimes there’s no path to future growth or expansion. And so that that’s how we kind of see things. So we think we have an enormous competitive advantage and moat against one-off buildings by whether they be landlords who know what they’re doing or landlords, who have no idea of what they’re doing.
Peter Moglia : Hey, to dive a little – this is Peter. To dive a little bit deeper into that. You’ll notice the big increase in vacancy in San Francisco of buildings essentially that delivered and they delivered in shell condition. I took a deep dive with the team as like guys, what does this product look like? And a lot of it is just our buildings that are basically waiting to see whether they should be office or lab. They were built with an ability to be lab and so we’re counting them in our supply numbers, but they could very well go office because nobody is super committed. But you’re also right in that those developers are not able to go ahead and just build out TI’s because their financing isn’t there for that. But I wanted to bring attention to that because you reminded me of it, you’re seeing vacancy numbers, you’re seeing supply numbers.
A lot of these projects are agnostic about whether or not they’re going to be office or lab especially in the larger markets. But we are counting on them on our competitive supply because they could be. But they may very well not be and they very well may fail if they don’t have financing to provide TI’s.
Steve Sakwa: Great. Thanks, guys. That’s it for me.
Joel Marcus: Okay. Thanks, Peter.
Operator: The next question will come from Dylan Burzinski of Green Street. Please go ahead.
Dylan Burzinski: Hi guys. Thanks for taking the question this afternoon. Just curious, I know you guys touched a little bit on the development pipeline, but just wondering if there’s any sort of interesting opportunities that are you guys are witnessing or seeing on the acquisitions front? And if not today, do you expect to sort of see any interesting opportunities come refreshing over the next, call it 12 to 18 months?
Joel Marcus: Yeah. So, first of all I think you noted we had a slow quarter. I don’t think any quarter is slow. So you might rethink about that commentary. Second, yes, just remember the quote that I gave regarding Warren Buffett. So we think there may be some opportunities, but we certainly won’t comment on them.
Dylan Burzinski: Thanks. That’s all I had.
Operator: And our final questions today will come from Aditi Balachandran of RBC Capital Markets. Please go ahead.
Aditi Balachandran: Hi all. Just a quick one for me. I know how you mentioned that M&A is an overall positive. So do you have an idea of how much incremental demand it could possibly drive? And I guess, how much of that would be for pure lab space versus the product or drug manufacturing space?
Joel Marcus: Well, most of it. Hallie can comment. We see as a big, big opportunity as, if you look at these schedules of drugs coming off patent for the balance of the decade, it’s pretty large and virtually the only way to fill pipeline in that shorter time is to acquire technologies and pipelines that are available. And so we see it as a big opportunity, number one. And by and large most of that is R&D related. We’re not so focused. Sometimes you have the new modalities that are you’ve got intimate manufacturing with the new modalities as part of the R&D Center, but kind of classic manufacturing. We don’t really deal with that. And we don’t see that as an opportunity for us. But Hallie, I don’t know if you have any other comments.
Hallie Kuhn: Yeah, with M&A as I mentioned, you really have to look at it as a on a case-by-case basis for specific M&A, I think that the better way to look at it is holistically and as Joel mentioned, M&A and licensing is a huge component of large pharma strategy for the next decade and that will likely continue beyond that. They’re looking to recoup something on the order of over $130 billion in revenue, that’ll be lost due to patent expirations. And so when you look at that acquisition activity on a whole, the net positive is certainly going to lead to additional R&D needs and is also a benefit from the perspective of upgrades and credits. Given that when an acquirer comes in and buys a smaller company, we get the upgrade on the credit from the in place lease.
Aditi Balachandran: Great. That’s really Helpful. Thank you.
Joel Marcus: Yeah. Thank you.
Operator: And we did have an additional question coming from Wes Golladay of Baird. Please go ahead.
Wes Golladay: Hey everyone. Thanks for sticking around for the final question. I just had a quick question on the development pipeline, just like the ‘23 and the ‘24 pipeline that’s well leased. Do you have any, I guess plans to change any more of those tenants out like you did this quarter? Or is it pretty much locked in at this point?
Joel Marcus: Yeah, that’s a kind of an unusual circumstance where we felt we had a robust client that needed space even a little more quickly than we anticipated. We had another client. We saw that maybe had taken on too much space. So it was actually an ideal mix and marriage of putting the two together. They come up from time to time. I’m not sure I’d read anything into that, but that’s kind of normal, but that’s how it happened.
