Dave Rogers: That’s fair. And then maybe to follow up, Peter, in your last question in terms of kind of market rent growth, it sounds like it’s bifurcating even further, probably between kind of the higher-quality and lower-quality assets. What does that spread look like today maybe across the portfolio or maybe pick the top three clusters in terms of kind of where replacement rents might be going versus where maybe a more traditional kind of A- asset might be performing today at a market rent level?
Peter Moglia: I can really only speak to our rents. I just don’t have a lot of visibility to outside of the asking rents that we are hearing from competitive buildings. Our newer product and our — in our older product, there’s not much of a spread between it. Typically, you might see even a 10% to 15% premium for new buildings over older buildings. I think probably the availability of existing space makes the existing space more valuable today. But it also, I think, speaks to just the quality of our overall portfolio. We don’t have a lot of B assets that you would — that you could say that out in the suburbs, the single-story stuff that’s not amenitized. Still, the rents, I can — in the greater Boston, I mean, the rents out there for that type of product or are in the $60 to $70 range.
Compare that to the $100 to $120 in Cambridge and maybe the $85 to $100 in Seaport. It’s still fairly close, but you do the math and that will give you the premium. I think overall, though, I would say that rents for lab space have not regressed at all and are still fairly strong, and the has not been a big movement in concessions like you might be seeing in the office market. I know I read a lot about the office market, and I know that rents for high-quality buildings have held there, but concessions have gotten really, really high. And that’s not the case with us. Our rents have held well and concessions have remained constant.
Operator: The next question comes from Dylan Burzinski at Green Street Advisors. Please go ahead.
Dylan Burzinski: And I appreciate the color on some of the transactions that have happened lately. But just curious, when we look at cap rates for purpose-built lab product versus converted product, have you guys seen any cap rate differential between the 2?
Peter Moglia: I don’t have any specific examples other than maybe what I just talked about and the comp in is a really just terrible conversion. Burlingame is on the Peninsula. It is very close to South San Francisco. So to get a fully leased comp at an almost 6% cap rate, I think, probably illustrates that conversions aren’t that appealing. I would expect good quality, purpose-built lab in Berlingame to be at least 100 to 150 basis points lower than that.
Joel Marcus: And most conversions, not all, but almost all don’t work.
Dylan Burzinski: Okay. That’s helpful. And then, I guess, just looking at the supply picture, are there certain markets or submarkets where you’re starting to see supply pick up and maybe become more of a risk here?
Peter Moglia: From a supply standpoint?
Dylan Burzinski: Yes.
Peter Moglia: The numbers are — the numbers for availability are still kind of where they’ve been over the last few quarters. I mean, the biggest supply overhang in any of our markets is in South San Francisco, and it remains that way. That is — that has not really changed. We — there’s a lot of talk about supply in Greater Boston. Majority of what’s talked about hasn’t broken ground, some assets have. A lot of them are in the Summerville area, which is not competitive to where our product is. So we’re not too concerned about it. But yes, I think that the supply story is always 1 that we have to talk about. People are trying to get involved in the business. But the best locations are very difficult to get. And some people have tried to fan out in other areas such as Summerville with limited to no success, I think, at this point.
Dylan Burzinski: Okay. Thanks. That’s it for me.
Operator: The next question comes from Jamie Feldman of Wells Fargo. Please go ahead.
Jamie Feldman: Thanks for taking my question. So I know you spoke a lot about how differentiated AllexInterest portfolio is and leasing demand is. But if you look at the market that it does kind of show in some of these markets, you’re seeing flattish rents and concessions rising and net effective rents been declining month-over-month or maybe quarter-over-quarter. Are you seeing that at all in your portfolio? I mean, are you still pushing rents? And I know you said the concessions haven’t grown a lot, but can you just provide some more color on how that really looks for your business versus maybe what we’re seeing overall in the market?
Dean Shigenaga: Jamie, it’s Dean here. Net effective rents have been positive over time for our business. So it’s not declining, it’s increasing.
Jamie Feldman: Can you say maybe by how much like quarter-over-quarter? Do that like a same-store basis, how much you’re pushing net effective rents?
Dean Shigenaga: I don’t have it right in front of me, Jamie, but I don’t have the exact statistic, but we recall reviewing it over the last month and it was a very solid positive trend. I mean it’s — look, our rents, cash and GAAP rents are up. Those are significant increases period-over-period. Net effective is just trailing out a little bit, but still directionally very substantial, right? Because their base net effective is based off your GAAP rents, right? Very strong.
Peter Moglia: Yes. I wouldn’t doubt, Jamie, that other developers are offering concessions to try to bridge the gap between the quality and reputation that we have and what they offer. Our numbers are still stable at this point.
Jamie Feldman: Okay. That’s great news. And then I saw — I noticed you did the $105 million forward equity agreement in the fourth quarter. Typically, this time of the year, sometimes you’ll do a much larger one. Can you just decide — can you just discuss the decision to do equity at all this quarter? And just how you think about why you didn’t do something bigger?
Dean Shigenaga: Jamie, it’s Dean. As we looked at our wrapping up the year, there was an opportunity to raise a very modest amount, as you’ve mentioned, $105 million. And as we looked at our overall capital that we raised during the year, which I commented on, it blended in very attractively. While, it was done at $150, I think the overall blended common equity proceeds were about $189 per share. So just keeping things in perspective, there’s a modest amount that we raised. And Jamie, going back to your other question, I just needed a second to pull it, but 1 second, I just lost the page. But on rental rate growth, we were at — so 31% GAAP, ’22 cash for the year. Net effective for the year was something around 37%.
Jamie Feldman: I guess I was thinking more in terms of just in the market today. I mean, you have a nice baked-in mark-to-market that’s going to show up in leasing spreads. But are you able to still, versus last month, keep pushing rents? It sounds like you think you are on a net effective basis, but I was just hoping to get color on that.
Dean Shigenaga: It sounds like you’re asking what the first quarter is going to look like. Look, Jamie, in the fourth quarter and the year for 2022, we are very strong. So I don’t have an outlook going into the first quarter for net effective, but again, 2022 is up 37% on a net effective basis.
Joel Marcus: And directionally, just look at our guidance for GAAP and cash, too so…
Jamie Feldman: Okay. That’s great. And I guess just going back to the equity raise. So it sounds like you kind of think about it on a 12-month view, like that kind of cleaned things up for ’22 and then ’23 kind of is a fresh start in your — how you would raise equity?
Peter Moglia: Well, maybe I think probably what’s more important, Jamie, on the broad bucket of solving for equity-type capital, as I mentioned, we remain focused on dispositions and partial inter sales JV capital for a significant component of our capital plan for 2023. And we’ve got a couple of transactions that are fairly advanced right now executed LOI and moving through. So it’s only January 31, and we feel like we’re in a good spot moving on our capital plan there. And so we got to keep in mind that, that’s an important component as well, Jamie, as it has been for many years now.
Operator: The next question comes from Omotayo Okusanya of Credit Suisse. Please go ahead.
Omotayo Okusanya: Just a quick question on capitalized interest. I think there was a comment made earlier on that CIP would peak in first quarter and then slowly start to decline as you have deliveries. But I believe the CIP guidance is meaningfully above last year. Can you just help us kind of reconcile the difference? Just higher cost of capital being used to capitalize the CIP? Or how do we think about that?
Peter Moglia: Is your question just the growth year-over-year?
Omotayo Okusanya: Yes.
