Dean Shigenaga: Yes. I think the high-level concept on the $1.4 billion of commitments for funding from our JV partners, generally speaking, these are funding requirements related to our value creation pipeline, so construction funding commitments. And these commitments do extend out over multiple years out, two to three years depending on the joint venture. But given the recent increase in projects with joint ventures over the last, call it, four to six quarters, we just wanted to be sure that the investment community understood the significance of the commitments coming from our partners on just a handful of construction projects. So we’ll continue that disclosure going forward.
Operator: Next question comes from Josh Dennerlein of Bank of America Merrill Lynch. Please go ahead.
Josh Dennerlein: I saw in your top 20 tenants page in the sub. It looks like there’s a footnote on 270 Bio saying the in-place cash rents are 20% to 25% below current market. Looks like that last quarter was 5 just 10% below current market. Just curious on what’s driving that update?
Joel Marcus: Dean, do you have any information on that?
Dean Shigenaga: Yes. So it’s Dean here, guys. So what we did was we looked more carefully at the actual space. I believe the prior quarter was slightly lower or showing a modest mark-to-market opportunity and it was reflective of looking at that specific property overall, but we realized we had to dive into the details a little bit further because it didn’t make sense as we were looking at it for the current quarter. And as we looked at the space specifically, so a portion of the building and the specific space that they’re occupying, there’s a bigger mark-to-market opportunity. So we wanted to be sure we updated that number in the current quarter. So nothing changed from a real mark-to-market, but previously, it was the overall building. And today, it’s just specifically, or this quarter it’s specific to that space that they occupy.
Josh Dennerlein: Okay. And then just — since I’m newer to the story, just kind of curious why the disclosure on that type company. It looks like it has a small market cap.
Dean Shigenaga: It’s really due to that. Some — occasionally, there’s a tenant in the top 20 list of tenants that we did not curate ourselves or has a modest market cap, and we just want to provide some incremental color to some investors who don’t need to research the details on their own.
Operator: The next question comes from Richard Anderson of SMBC Nikko Securities. Please go ahead.
Joel Marcus: You may be on mute, Rich.
Richard Anderson: I totally was, sorry about, Joel. So Peter, you talked about cap rates in your opening comments, and I think, Dean, you mentioned some partial interests that are far along and may be announced shortly. How would you characterize the quality spectrum of what you’re looking at for partial interest? Are we talking very high-quality assets like the Binney Street transaction a while back or more middle of the road is a mechanism to minimize the cap rate, but also keep hold of your best assets and not relinquish too much of that opportunity going forward?
PeterMoglia: I’ll start, Rich. The profile of what going on is good quality. We don’t have much of anything outside, I think, of high quality. I mean, certainly some workhorse assets that we still hold, we’ve sold a lot of those. So the partial interest sales just because of the profile of our portfolio are typically going to be higher quality assets, and that’s what we’re working on now.
Richard Anderson: Are we sub-five, you’re not talking about pricing just yet? Or can you give any…
Peter Moglia: I mean I don’t think it does any good really to talk about pricing because we’re still negotiating with people. And so better strategy to keep that to ourselves at this point.
Richard Anderson: Fair enough. And then second question for me is for Dean. You have an average debt exploration, I think, of 13 years, you said, I think your average lease term expires in 7 or 8 years. I’m wondering if that provides you any opportunity in the future in the interest of matching liabilities with assets, your way conservative in that comparison as it stands today. Do you ever see that, that gap shrinking whereas maybe the opportunity to raise shorter-term debt or lengthen lease term would make sense for the company? I’m just curious if that spread that you have in place now is something that could wiggle around a little bit in the future?
Dean Shigenaga: Rich, I guess the way to answer the question is I think we find significant value in the longer maturity profile given the size of our company and — we have a meaningful maturity profile for a big company, right, or that matches a big company is maybe a better way of describing it. So the longer average debt term gives us a lot more flexibility to manage the overall maturity profile, right? Because if that was more like five years, with that much debt outstanding, it will be a lot to manage year-to-year on top of any growth capital. So I think strategically, the longer term of remaining maturity is a real positive for us.
Operator: Our next question comes from Tom Catherwood of BTIG. Please go ahead.
Tom Catherwood: Appreciated Hallie’s comments at the outset about tenant health and funding and commentary around Pfizer M&A really jumped out. Maybe, Peter or Joel, during prior M&A cycles in the biopharma industry, what was the read-through for real estate usage? Did acquirers tend to consolidate the footprint of their portfolio companies or were there further expansions?
Joel Marcus: Yes. I can give you my thoughts, and Peter can share his. I think it’s hard to compare past cycles because the level of technological development in biotech was so different. Today, it’s much more sophisticated new modalities. So when you have M&A today, it used to be oftentimes you’re buying a company for maybe a pipeline and you like to hold on to the people, but maybe space is less valuable going back maybe a decade or two. Today, that space is pretty critical, especially if it’s located in a top-tier cluster market like Cambridge. Not only do you want the people for recruitment, retention and just working on the projects, but you’ve also got probably built into the space some pretty sophisticated new modality technologies, both at the lab side and in the R&D manufacturing, which is kind of integrated so closely.
So I think it’s harder to tell. I think, again, there’s going to be a whole series of different types of uses of capital. A lot of it will be partnering, which has historically been probably the favorite approach of pharma. There will be some acquisitions. You’ve got a Federal Trade Commission that’s pretty hostile to any acquisition in any industry these days. So you’ll probably see bolt-on acquisitions where people will want to keep that group and that technology in tow. But I don’t think it’s is easy to look at, say, big mega mergers in the past and think that, that has any relevance to today. And I think the key buy line for life science in 2023, in addition to what Hallie kind of framed out is what will be the velocity, the depth and the focus of this large cash hoard $300 billion.
And if you leverage it, you could be as much as $500 billion to $600 billion. But Peter, you could comment just historically and what you’ve seen.
