Good day, and welcome to the Alexandria Real Estate Equities Fourth Quarter and Year-End 2019 Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Paula Schwartz of Investor Relations. Please go ahead, ma'am.

Thank you, and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company periodic reports filed with the Securities and Exchange Commission. And now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Thank you, Paula, and welcome, everybody, to the fourth quarter and year-end 2019 conference call. And with me today are Dean Shigenaga, Steve Richardson and Peter Moglia. We'd like to thank, first of all, most importantly, to each and every single member of the Alexandria family from the bottom of our hearts for a stellar execution of our 2019 business plan, a real granular day-by-day execution with the highest level of operational excellence. We're very, very proud. As we celebrated our 25th anniversary in 2019 from our founding, we also achieved and passed the $25 billion total market cap level for which we're also very proud. And we're proud to announce, as you see today, the highest leasing activity in the history of the company with so many companies actually seeking Alexandria campuses, not just space anywhere. The highest rental rate increases in 10 years in the best -- are really driven by the best in locations and our assets, which have really driven that success. And our operating margins have really been outstanding, and they're really driven by judicious management of our unique business plan. So thank you, everybody, for that. When we look at the industry, there's continued bipartisan support for NIH funding, which has remained strong. Congress has provided an additional $2.6 billion for Fiscal Year '20 budget, totaling almost $42 billion. And this marks the fifth consecutive year, congress has provided the NIH with a multibillion-dollar increase. In 2019, there were 48 new therapies approved by the FDA, another historically strong year for bringing new novel therapies to patients, importantly -- most importantly. Several new therapies approved in 2019 included innovative modalities against novel targets and for diseases which have long-needed treatments, such as sickle cell disease and postpartum depression. And we're proud to say that…

Thank you, Joel. Alexandria is continuing clear leadership as a partner to the broad life science industry and a premier developer of world-class science and technology campuses, is driving exceptional performance as evidenced by the highest annual leasing volume in its history of 5.1 million square feet and the highest leasing spreads during the past 10 years of 32.2% on a GAAP basis. It's important to take a step back as we start a new decade and assess what is driving this outperformance. One, our talented people across the entire company and a strong culture of meritocracy; and two, the strategy that we emphasized at a recent Investor Day. The ongoing creation and curation of unique mega campuses in the country's strongest innovation clusters. We are very well positioned for robust future growth with compelling mega campuses in each of our clusters. Peter will cover in detail the recent acquisitions that have added to these campuses, and the following high-level summary provides a clear framework for this high-quality growth opportunity. In Greater Boston, Arsenal on the Charles; in New York City, we are advancing the third tower negotiations with the city. In Maryland, the Shady Grove build-to-suits in a new large land parcel; in Research Triangle Park, the Research Drive and Davis Drive campuses. In Seattle, the Mercer Mega Block anchoring our dominant position along the Eastern portion of South Lake Union; and in San Diego, the San Diego Tech Center in Sorrento Mesa. And to present a particular highlight today the very creative and compelling joint venture with Boston Properties in South San Francisco. The campus totals 29.3 acres. Alexandria has contributed 313,000 square feet of operating properties comprised of a Class A lab facility, an office building and a state-of-the-art net 0 mass timber amenity building with conferencing…

Thank you, Steve. I'm going to spend the next few minutes updating you on our fourth quarter deliveries, 88 Bluxome, the Mercer Mega Block and 15 Necco progress, give an update on construction costs and then given recent activity, highlight a couple of major acquisitions that occurred in the fourth quarter and one that closed in January. So as for developments, 2019 was a very busy year in many respects, but especially on the development and redevelopment front as we delivered over 2 million square feet at average initial yields of 7.4% on a GAAP and 6.9% on a cash basis. The fourth quarter deliveries were light relative to the first 3 quarters at 131,000 square feet, but we closed out 5 projects during the quarter and ended the year with all 11 projects spanning 9 submarkets at 95% occupancy or higher, illustrating the strong demand present in all of our markets. Given the significant interest in 88 Bluxome in the SoMa submarket of San Francisco, the Mercer Mega Block in Seattle and 15 Necco in the Seaport area of Boston, we wanted to provide a brief update on those 3. As many of you know, the Bay Area's team -- the Bay Area team's significant community and municipal engagement resulted in our 88 Bluxome project receiving Prop M allocation on the entire project, as opposed to approval in phases as other developers received. We are pleased to report that we are now fully entitled as all challenge periods have expired and the Central SoMa plan litigation has been resolved. We expect to receive a permit for demolition and our site work in May, and we expect to commence those activities in the summer once certain required off-site work is completed. As you likely know, the [indiscernible] or the 1,070,000…

Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. As a mission-driven real estate company, we're very proud of our team's awesome execution of operating and financial results. Our team remains very focused on leadership in ESG, making a positive impact on society by executing in a thoughtful manner to minimize the impact that our business has on the environment and advancing human health, well-being and nutrition. During 2019, our team earned a 5-star rating and an A disclosure score from GRESB. We issued $550 million in green bonds with proceeds allocated to green eligible projects consisting of gold or platinum LEED-certified projects in addition to other bond issuances; continued the execution of our 2025 goals focused on how we manage carbon emissions, energy consumption, waste diversion and water usage; and then continued leadership in health and wellness. November was a really exciting time period for our employees as 59 of them finished the 26.2 mile New York City Marathon in support of raising important funds for mission-critical research at the Mountain (sic) [Memorial] Sloan Kettering Cancer Center. Now this is pretty amazing since this was the first marathon for most of our runners. Our solid results highlight continued growth in high-quality cash flows, operational efficiency and several key REIT industry-leading statistics. Total revenues were $1.5 billion up 15.4% over 2018. Cash NOI was $1 billion for the fourth quarter annualized, and FFO per share as adjusted was right on track with our expectations at $177 million and $6.96 for the fourth quarter in 2019, respectively. High-quality cash flow growth was generated from one of the best tenant rosters in the REIT industry with 50% of our annual rental revenue from investment-grade or large-cap tenants. Same-property NOI growth was strong for 2019 at 3.1% and 7.1% on a cash basis. And…

Operator, you can open it up for question-and-answer, please.

[Operator Instructions] Our first question will come from Jamie Feldman of Bank of America Merrill Lynch.

I guess, I just wanted to start on -- just thinking about the potential risk of excess supply in both South San Francisco and Boston Seaport. It seems like we've got several projects in the pipeline there. Can you just give us your latest thoughts on both those markets?

Jamie, it's Steve. Thank you for the question. We've talked about this for quite a while in South San Francisco, and I think we've been very pleased to see that the supply that's come on has been substantially absorbed. Kilroy with 650,000 square feet of Phase 1 is entirely leased, so that does not present a near-term opportunity. Blackstone now has resolved half of their 400,000 square foot building. So they just have 200,000 square feet available there. And then finally, HCP just has 65,000 square feet available in their project, a little further North in South San Francisco. So on an overall basis, that's very limited supply of available inventory. And we, in turn, feel like we're extremely well positioned with 201 Haskins. We've got 100,000 feet leased there and ongoing discussions for another big block of space. So as it may have been a concern and something we were watching closely a year ago, we're in very good shape. The future pipeline, I think, we'll take a look at that and continue to monitor that. But I think that will be metered over a number of years and that really present a big supply shock. Moving out to Seaport. There are probably 3 other projects that could compete with our Necco site, if you're looking for large blocks of space. Couple of them at about 200,000 square feet and another one at about 500,000 square feet. So again, you may have a future supply that's a number of years down the road, but nothing in the near or intermediate term that we're overly concerned about. But we're always monitoring this extremely closely.

Okay. Can you talk about the demand pipeline for the Seaport? It does seem like there's several projects in the pipeline there beyond farther out as well.

Yes, I think as we look at the demand in the Cambridge market, it continues to stay healthy with 2.7 million square feet of lab demand. And when you start looking at a 2% vacancy in that market, we have discussed all along Seaport being a very strong natural outlet for that. So we are in early discussions with a very large tenant base that we have in our 3 mega campuses there in Cambridge. So we're very encouraged at a very early stage with the tenant interest in that site.

And this is Peter, Jamie. I can just give you some color that, obviously, the Seaport is a major tech destination. There's a number of big tenants going in there. Amazon is making a huge move and will likely gobble up a lot more space when you talked about the concern over supply. But also, it's starting to gain a lot of traction with life science companies. Vertex, which is already there, is looking to expand in a fairly big way, and there's a couple -- Foundation Medicine has moved over there. And there's a couple of other tenants that we'll keep to ourselves that are interested in as well as Cambridge has very limited availability and people see Seaport as a great place to go in lieu of that.

Okay. And then last for me. I mean if you think about your acquisitions done to date and the pending, I think -- it looks like you're pretty close to your full year target. So how do we think about -- how should we think about the potential that you go well above that target? And if so, how do you finance it?

Well, Jamie, it's Dean here. I think what we found really interesting about the market today versus looking back several years ago is there is obviously a volume in the market, many deals of which we pass on. The other thing that's really interesting about the dynamics today, I would say that we're required to do diligence before we're even aware of being awarded as the winning bidder on a transaction. So I think what I'm trying to highlight is there is deal flow in the marketplace. We're very disciplined in what we choose to pursue. And there is a short fuse when it does come up as a winning opportunity. So we'll keep the market informed as we go through the year. As far as funding goes, whether it's construction, value-creation projects or future acquisitions, I think we'll remain as disciplined as we have been historically, Jamie. Today, we've got a bucket of equity to solve for. We solved a big chunk of it, and we have an amount to resolve for the rest of the year. But I think you'll find us disciplined and preserving our optionality as we look forward to solving the rest of our capital [ means ] for this year.

Okay. How large is your noncore pipeline or noncore portfolio right now that you'd sell?

I think the way to simply describe it, Jamie, is we always prune the bottom of the portfolio. There's always a couple of assets we're selling every year that don't even resonate to any meaningful capital. We did most of our heavy lifting back in 2012 and 2013 on the noncore side.

And our next question will come from Tom Catherwood of BTIG.

Steve, at the opening, you mentioned kind of the role of Alexandria as a partner to life science industry. And then later, you mentioned the sense of urgency for your tenants across your markets, hence, the high leasing spreads and the early renewals. How do you balance this kind of almost dual mandate of the ability to push rents because vacancies are so low and tenant demand is so high with the fact that you have these long-term relationships with tenants? What's the kind of equation that goes into that? How do you make sure you're giving them the space that they need, while also pushing rents as far as you can?

Tom, it's Steve. Thank you for the question. I think it's been and it has been for the time since the company was started. It's a balance of respect for the clients that we're working with and the work that they're doing. These are multi-market relationships. They're multi-company relationships. So they are critically important. And I think we balance that respect with the reality of the marketplace and share that in an open and pretty transparent way so that ultimately, the companies and the decision-makers feel like they are gaining tremendous value in the facilities, tremendous value in the operations of the facilities and really are working with somebody who's a partner for the long term. So I think it's a balance between those 2.

Got it. That makes sense. And I assume that there is kind of also helping them find space in other areas, which leads to my next question. Peter, it was really helpful when you provided more insight to the Riverside Center purchase in the Boston suburbs. Obviously, the Boston suburbs has been an area where you've been more active with acquisitions and redevelopments over the past few quarters. What are you seeing as far as demand dynamics beyond just executives living in the area? What are you seeing as far as tenant demand there? And how does this differ from previous cycles when the suburbs experienced much more volatility than your urban markets?

Yes. So Tom, this is Joel. Let me start off before Peter jumps in. I think one of the things you have to think about is there are a host of companies broadly in the life science area that actually don't want to be in the Cambridge location for a variety of reasons beyond where executives may live. And so we've seen certainly being the #1 life science market in the United States, there are a continual flow of companies that either started in Cambridge and choose to move out or have never moved there and are expanding. And I think those are ones we see pretty regularly, a number of which are pretty great credit and a number of which are not. But I think there is a pretty good core of tenants. And then those tenants are pretty mindful of what Peter says is transit has become king. And I think working with a owner operator that both understands their needs and is pretty sophisticated about what they do and how they do things. But Peter can give you any further.

Yes. I mean -- I think Joel answered it well. I guess, one thing I would remind everyone about is we've had over 1 million square feet in the suburbs for a number of years with high 90s occupancy. Never really run into any problems there. As Joel said, there's a number of companies that just would prefer to be there. But we feel confident in acquisitions like Arsenal on the Charles and the Riverside Center because they do connect well to transportation. They have very close proximity to Cambridge and Boston. And given just what is going on in Boston, in general, such as the tech cadre going to downtown, connecting to all the different teams, such as the green line as well as red line is important. And so the demand is really coming from a lot of folks that want to be in the suburbs, as Joel said, but there's also a tremendous amount of company growth in Cambridge that can't find growth space. So we're figuring out where to go next. And I think we've made some pretty good decisions.

Got you. So it sounds like it is a little bit different in the suburbs than it used to be. So one last one for me.

And not all suburbs are created equal. So remember that.

Very fair. Last one for me, probably for either Dean or maybe Steve, a lot of redevelopments as part of the acquisitions that you guys did in 2019, whether it's stuff in Campus Point or SD tech or the Arsenal. Is it possible that earnings could kind of take some chunky hits as leases expire? And you go in to re-do some of these either out buildings or [ parts ] of these buildings. Or are you planning to pull the projects out of service, so you end up capitalizing interest and FFO remains stable? How should we think about how those kind of roll on over the next 12 to 18 months?

Tom, it's Dean here. I'm trying to think about the redevelopment projects that we have on the horizon. At least if you look at our 2020 lease expirations as an example, in fact, '21 as well, we highlight that there's some redevelopment opportunities, as an example. So I think over the next 2 years, what we do have going into redevelopment is very, very modest. There is 75,000, 76,000 targeted for '20 and then another 79,000 targeted for '21, and that is related to the Arsenal and the Charles. So I think that gives you some visibility over the next 24 months, that it's not really going to have any impact.

And this is Peter. I think I'll chime in to remind everybody that some of these redevelopments are considered covered land plays. If you look at the camp at 1260 Campus Point Drive, 4161 Campus Point Court, we have Leidos occupying those properties as we do a build-to-suit for them just next door. So we're able to kind of get the earnings while we build. And then once we deliver, one of those buildings will be converted to lab, the other will be demolished in favor of a new building, part of the overall 1.9 million square foot Campus Point, maybe campus development. 10 Necco Street in Seaport is very similar. It's a parking garage with good income coming off of it as we position it for redevelopment. So we have a number of things like that, and we're very aware when we buy something that could be redeveloped that -- to the extent it has cash flow makes it more attractive.

And our next question will come from Rich Anderson of SMBC.

On the Boston Properties joint venture, I'm curious if you can speak about that in dollar terms a little bit in terms of -- do buildings get mark-to-market when they get contributed into the JV? What's the leverage on the JV? What's your equity investment? And what kind of capital are you kind of taking out-of-pocket and putting into this JV? I guess, mainly, I want to know what 1.7 million square feet means in dollar terms.

So Rich, it's Dean here. I think you asked a couple of points. First off, I think it's important to recognize, this is a tremendous joint venture opportunity for Alexandria. The mark-to-market is actually fairly modest on the operating assets. So that really doesn't come into play here. As far as dollars going in, I'd say, stay tuned for the first quarter disclosures, we'll get into a little more information that's required to be disclosed. But it was just a very recent transaction. So it was premature for us to get into the details right now.

Okay, fair enough. Now the -- this satisfies your 2 sort of objectives, which is mega campuses and buying vacancy. And so I agree, it seems like a really great setup for 2 really high-quality companies, so -- like all that. Wondering if there's a pipeline here, Boston Properties operates in a lot of your markets. Is there a chance that you -- the 2 companies could work more together in other areas around the country and do something similar? Or is this sort of a one-shot deal do you think?

Rich, it's Steve. This was a very unique opportunity. We were literally adjacent neighbors to one another for a couple of decades. There was actually one parcel in the heart of the campus that Boston Properties owns, and we had a long-term perpetual easement across it. There is additional parking with a parking facility that ends up unlocking another chunk of square footage. So you had presented to both of us a very unusual and unique opportunity. So we're very focused on this and don't necessarily see this being a pipeline, as you mentioned. But again, just a very unique and exceptional opportunity to create something that really will be transformational for nearly 30 acres in South San Francisco. So quite the scale when you think about it.

Okay, great. And then on your buying vacancy initiatives what is -- like the path, the cadence to cap rates, if you're buying at x? And how does that ramp, if you could speak in general terms when you look at these sort of half vacant type of opportunities for the company?

Yes, I wouldn't say that we have a strategy to buy vacancy, Rich. I think it is unique to each transaction. So the San Diego Tech center, as we said, presented itself in a unique way, very undermanaged and really was not meeting up to what we think its aspirational capabilities could be. I don't think we went in there specifically because it had significant vacancy, same thing with Boston properties issues. I mean I think they were motivated by vacancy. I'm not sure we were. But we were motivated for the things that Steve pointed out, is the ability to, over time, create a very unique mega campus right at the gateway entry to South City. So I don't think I would intuit that as a light deliberative strategy.

Okay. I didn't mean to put words in your mouth there. So sorry about that. But nonetheless, good deals. And then finally for me, what is the timing of that $55 million burn off-of free rent on the delivered developments?

Rich, it's Dean here. The majority of that $55 million of free rent that is now related to properties that are in service, generating revenue. So the free rent period will burn off substantially over the next 4 quarters.

And our next question will come from Sheila McGrath of Evercore ISI.

I wanted to first clarify on the Mercer Mega Block. Peter, did you say you don't expect that to close until the end of this year? And if so, when do you expect to have buildings open at that project?

Okay. Well, I will confirm that closing will be at the end of the year. We are concurrently, as I said, processing drawings for our early design guidance and [ MOP ]. So that is a fairly long process. But I'd imagine our entitlements will be perfected sometime in '21. And then decisions will be made then based on market conditions. It's really hard to forecast where we'll go.

Okay. And then just following up on your comments on the mega campus strategy. Obviously, the flexibility for growing tenants is a key part of it. Just wondering if part of the economic benefit is spreading the cost as the amenity building across a larger campus, if that's part of your strategy? And on those dedicated amenity buildings, are you getting reimbursed for the amenity package from tenants?

Yes, Sheila, it's Peter. You're exactly right. The mega campus does allow the spreading of the cost, not only the cost of the amenities, but it actually gives us a lot of economies of scale in the operations of the buildings. So that's how we're able to get to that NOI premium in addition to higher rental rates. We have lower reimbursements, so the tenants feel that they can go ahead and cover those things. The amenities themselves are almost always included in the load factor. So we do get full rent on them as well as some -- the collection of operating expenses. So the larger the campus, the easier it is to do because, obviously, you want to manage your load factor.

Okay, great. And one last question. You mentioned the leasing spreads continue to be significant with 2019 at -- I think, a record in the past 10 years. Just wondering if you have a rough estimate for us where in-place rents for the portfolio might compare to current market rents.

Sheila, it's Steve. Yes, we had talked about a mark-to-market of 17.1% on a GAAP basis and nearly that on a cash basis, and that's across all markets. And it is particularly strong, as you might expect in Boston, Cambridge.

Our next question will come from Manny Korchman of Citi.

It's Michael Bilerman here with Manny. So I just wanted to come back to potential other opportunities around the assets that you own, and it definitely sounded like from the BXP call that BXP approached you guys with this unique opportunity. And certainly, there's a lot of unique circumstances from that ownership of assets beside each other. But I'm just wondering, after you've now identified and been able to go through this process for what will be 1 plus 1 greater than 2. Have you sort of done a deep dive into every single one of your other assets and campuses to see whether there's other landlords that may be beside your assets who you could work with to create similar value, either by buying them out or entering into similar types of joint ventures like that?

Yes, Michael, this is Joel. We've actually been doing that for quite a while, thinking about our locations, the assemblages. Campus point is maybe the best example of that where we grew a campus we acquired back in 2010. I can't remember exactly how big it was then, but in the hundreds of thousands of feet today. It's over -- almost 2 million square feet. And that's probably the best example where we have very deliberately gone after adjacent parcels or buildings or things like that, other owners and so forth. And I think that's something we always think about. It's not so much easy to do, oftentimes, especially if they're owner users that are adjacent, but that clearly is part of our long-term strategy.

I guess, is there anything else sort of underway that got uncovered where arguably, this thing with BXP once you got into the negotiation and understanding what was that -- what was there, obviously, on a lot of value to both parties. Is there nothing that sparked something of similar scope within the portfolio today?

Probably enough breaking news today. Stay tuned. But the answer is...

Right, it's a question whether you've gone through a more deep dive into these opportunities.

The answer is yes. Very much so, yes.

Manny had a question too.

Okay. Dean, just thinking about the capital plan, I understand you want to keep your options open but just could you help us dial in how much of that is equity? And maybe as part of that, what the cadence is of taking down the forward that you just did?

Manny, sure, it's Dean here. So 2 questions. Maybe I'll start with the latter as far as the timing on the forward because a big component of the capital raise was related to 2 key acquisitions that not only closed in December, but also were awarded around that timeframe. So we had a short fuse to work with. We do need to bring down a big chunk of the capital in Q1. So you'll see some of the equity settled in the first quarter and then you'll see the rest kind of spread through the remaining 3 quarters. As far as our broad needs, Manny, our guidance, on Page 7, touched on the broad equity component number that we need to solve for 2020, which was $1.95 billion at the midpoint. And the follow-on offering in January solved for little over $1 billion of that. And so we'll work through options to close out the remainder through the next several quarters.

And our next question will come from Dave Rodgers with Baird.

Maybe for Joel or Steve, I wanted to ask about just kind of the mega campuses versus the historical kind of clustering of slightly smaller building. I mean, as you move to these mega campuses, is it your expectation you would kind of move back toward maybe a smaller base of lab tenants? Would you prefer that versus maybe leasing a mega campus to a tech tenant? It just seems like maybe the tech tenants will be less likely to want to rent next door to competitive tenant versus the lab tenants. So just some thoughts maybe around how that -- what direction that takes you.

Dave, it's Steve. Thanks for the question. Yes, again, by and large, 90% or thereabouts of the NOI is from life science companies. And the industry, as it's growing and maturing -- and I think one of the most important slides we put out at Investor Day was the new modalities that the life science companies are pursuing to really get at intractable diseases. So what we see is these companies continuing to grow, the demand to be in these clusters and the footprints that they're looking to occupy and their colleagues are looking to occupy, continue to grow. So we see the mega campuses as a natural response to the way the industry is growing and evolving in a very healthy, productive and sustainable way.

And then maybe just a second question. You have about a little over 2 million square feet of remaining expirations between '20 and '21. As you talk to those tenants, what are their maybe hesitation to have renewed already? I mean is it -- does it have to do with rent? Are you getting pushed back on rent? It doesn't sound like maybe you're getting a lot of the new modalities. Are they thinking of, "Hey, I have to move to another cluster?" I mean how much of that is kind of weighing into these decisions of these smaller tenants in particular?

Very much case by case, I think. I think it's very hard to make a general observation there. Some are quite small and some are somewhat larger, but I think it's super case by case. So I wouldn't read anything into it, particularly.

And Dave, it's Steve. I would just emphasize Joel's point. We really don't have a number of large blocks rolling. It really is consisting of smaller tenants. And they would typically be looking at a different timeframe than larger tenants.

Our next question is a follow-up from Jamie Feldman of Bank of America Merrill Lynch.

I was just hoping you could talk more about the impairments. I think you had a $10 million impairment in the fourth quarter. And I think it was like $17 million for the year. Just what caused you to take the write-down? And then also just going forward, is that kind of a reasonable run rate based on -- obviously, not every investment is going to play out the way you think it will?

Jamie, so the $10 million impairments on the venture side was really related to 2 privately held investments. The impairment, as you -- well, let me just touch on the accounting rules because it will give you a sense for how the impairments do come up. On the public side, publicly traded securities, they're mark-to-market through earnings now based on the closing stock price for each security. So it's pretty straightforward. There's no impairments on the public portfolio. To the extent a privately held company provides net asset value, the FASB said, use net asset value as really effectively a practical expedient for fair value. And as a result, there's no impairments because you're just going to record those investments at net asset value. So it's the other privately held investments where there's no NAV, and you do have to mark-to-market from time to time for up rounds and down rounds in those companies. But to the extent there is some hiccup in their business plan that impacts the value -- the valuation for the company, the accounting rules will require you to take a look at indicators of impairment and recognize a write-down. I think, Jamie, when you have a portfolio of any assets, real estate or these venture investments, you will have an impairment from time to time. I don't think the historical run rate gives any perspective for the prospective charges that could occur because they're very specific to the companies. And most importantly, Jamie, we've got tremendous value that we've generated from this portfolio. As I mentioned, over $400 million of unrealized gains on the books as of December 31, and that's in addition to roughly $70 million of realized gains that were recognized over the last 2 years. So I'd probably focus on the upside here than the occasional write-down, which is inherent in a portfolio of assets.

Yes, the one -- I'll add a footnote, Jamie. The one similarity between the 2 companies is there was management changes in each of the companies that played into that impairment.

Okay. So both of these are investments you're still holding on to that you think still have upside?

Well, we're -- we wrote down only a portion of it, Jamie, which means we still have a significant amount of our original investment we expect to recover. As far as the future goes, it's too difficult to speculate whether we'll make more money downstream in the future on it than our current budget cost basis. So stay tuned on that.

Okay. And then as I looked at the development pipeline, it looked like there were several projects where your lease percentage declined, but the square footage increased. Was there anything specific that you did this quarter in terms of changing building sizes or adds to some of these projects? I'm just trying to make sure I understand what's new?

There's only one that I could think of, Jamie, that might have been a little more noticeable than anything else. I think in our project, the Alexandria district 56% -- it's 56% leased, 65% leased negotiating. And I think it's pretty close to where it was. It might have moved a little bit. I know there's one lease we had that we're not as confident in completing, but it's still in the works. I think that was the only meaningful change that may have been reflected, Jamie.

Okay. I'll follow up offline. I think there was 1 or 2 that adds like -- they're now larger projects, so it pulled back [ I think 50% ], but I don't have it in front of me. Well, I'll follow up with you guys.

This concludes our question-and-answer session. I would like to turn the conference back over to Joel Marcus for any closing remarks. Please go ahead, sir.

Yes, thank you, everybody, and we look forward to chatting with you on the first quarter call. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.