Good day, and welcome to the Alexandria Real Estate Equities Second Quarter 2021 Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Paula Schwartz with Investor Relations. Please go ahead.

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 may 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’s periodic reports filed with the Securities and Exchange Commission. And now, I would like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Thank you, Paula, and welcome, everybody to our second quarter call. With me here today are, Jenna Foger, Peter Moglia, Steve Richardson and Dean Shigenaga. We want to welcome all to this second quarter call and also as I always try to do to recognize and thank the entire Alexandria family team for one of the best quarters in the entire history of the company with an operational tempo really like none other, while working virtually for many of us for most of the past, now we into our second year of COVID. Michael Jordan once said some people want it to happen, some people wish it to happen, others make it happen. Alexandria makes it happen. We are deeply mission-driven and thankful for all that we do and urge you to read about many of our important programs and activities in the corporate social responsibility area in our press release. For a moment keys to the second quarter, historic high demand for Alexandria's lab space and our critical lab operations, which go along with that. Alexandra is at the vanguard of meeting the historic and high unprecedented demand from many of our more than 750 tenants for growth needs now, and a critical path for future growth very importantly. Fundamental drivers of demand are the strongest we've ever seen. Rental rate growth continues unabated and no excess supply on the horizon at this time. We're very proud that we've got almost 7% quarter-to-quarter per share FFO growth, more than 40% rental rate growth, almost 18% NOI growth, almost 8% same store NOI growth and a $1.3 billion plus annual NOI run rate, not to mention about $545 million in incremental revenue in our development and redevelopment pipeline. Alexandria truly has a demonstrable pricing power advantage in each of our cluster markets. And when the Life Science tenants choose, they almost always prefer Alexandria's lab space and our operational excellence based on our critical lab operations. Nature, a biotechnology magazine back in April wrote the following; 2020 was a year that smashed many records, biotech savior role in the pandemic, attractive a stampede of private and public investors alike. The pandemic apparently reinforced the requirement for long term value based investors of any kind to have exposure to life sciences. And life science demand has in fact, at an all-time high as the world has recognized the importance of next generation therapies to solve current and future really difficult healthcare challenges, and Jen will talk a bit more about it.

Thank you so much, Joel, and good afternoon, everyone. As Joel highlighted last quarter, we continue to be reaffirmed by the fundamental future's shares is a tremendous paradox of this pandemic moment for the life sciences industry. Despite the challenges of these past many months, COVID has illuminated the power of science and the industry's ability to transform the future of human health. Not only as so many of our tenants in the industry, as Joel mentioned, risen to the challenge of combating this global pandemic, but R&D and bio innovation broadly have persisted with amazing productivity, resilience and expediency throughout this time and we cannot stress enough how critical it is for us as a whole to preserve and prioritize, and continue to catalyze this groundbreaking innovation has and will continue to save so many lives. Now turning to COVID specific update for a few moments. According to the World Health Organization, as of this morning on a global scale, over 194 million confirmed cases of COVID-19 including over 4.1 million death. A total of 3.7 billion vaccine doses have been administered worldwide with nearly 10% of these doses in the US alone. Roughly 57.5% of the vaccine eligible population in our country that's over have been fully vaccinated by either tenant Pfizer or Moderna 2-shot mRNA-based vaccine or tenant Johnson & Johnson single-shot. This is just over 49% of the total US population and we hope this number of fully vaccinated individuals will continue to steadily rise. These numbers are astounding. And before we get into the where are we now, I want to emphasize that despite the COVID fatigue, we all continue to feel even despite some relief from the easing of restrictions over the past few months, albeit with the likely return of some new ones, none of where we are in the recovery process can be taken for granted. The fact that the biopharma industry spearheaded by many of our tenants was equipped with the know-how, resources and technology to create safe and effective vaccines to combat a novel viral pathogen would have been unimaginable just a few decades ago. The fact that our tenants Pfizer, Moderna and Johnson & Johnson were able to develop, run robust clinical trials, manufacture and distribute billions of vaccines at scale in less than 12 months is absolutely unprecedented. These vaccines achieve such astounding safety and efficacy in the 90-plus percent range when the FDA has set the original bar at 50% with an amazingly low incidence of side effects reported from the millions of people who have now received that is truly astounding.

Thank you, Jenna. I'd like to take a step back at the start of my comments and provide some historical context for the accelerating demand, which really translates into leasing at warp speed for Alexandria's mega campuses. At Alexandria's Annual Investor Day during December 2017, we presented a bold framework to nearly double the company's annual rental revenues from a little more than $800 million to $1.5 billion by the end of 2022. We are pleased to share those annualized revenues for Q2 2021 are in fact in excess of $1.5 billion, and so the Alexandria team has accomplished this lofty goal in an accelerated time frame more than one year sooner than anticipated. The company has also grown from a mission critical operating asset base and development pipeline of 29 million square feet at the end of 2017 to a total of 62 million square feet at the end of Q2 2021. Truly exceptional growth, more than doubling the footprint of the company, and importantly, concentrated in our core clusters with disciplined execution, enabling the continuation of high quality cash flows. And as we fielded questions during the 2020 as to whether the healthy leasing activity for Alexandria's mega campus platform was perhaps a short term blip driven by COVID-19, the second quarter of this year's leasing volume of more than 1.9 million square feet, the highest quarterly leasing volume in the history of the company is again evidence of the company's unique position as a trusted partner to the growing life science industry, providing a durable and sustainable competitive advantage in the market. I'll go ahead and review a few of the exceptional highlights, including the following, leasing outperformance. As we just stated, the 1.9 million square feet lease represents the highest quarterly leasing activity during the 27…

Thanks, Steve. I'm going to update you all on our development pipeline and construction cost trends, comment on our recent asset sales and report on a couple of comps that reflect that the private market appetite for life science assets is still very healthy. As Steve and Joel both noted, we're experiencing historic demand and have responded by executing our differentiated life science strategy at an accelerated pace through expanding our collaborative campuses and asset base in each of our cluster markets. A significant sign of the health of the underlying life science industry is that we're expanding significantly in almost all of our markets. In many of our submarkets, the supply and demand imbalance has been exacerbated by lack of near term opportunities to expand, leading Alexandria to push the boundaries of those markets. Examples of this are successful forays into Watertown and Seaport in Greater Boston, new mega campuses in Sorrento Mesa and expansion of San Diego Science sector to the north and east, and a highly successful mega campus underway in San Carlos. This high demand paired with our highly experienced development teams resulted in another very productive quarter for Alexandria. In the second quarter, we delivered 755,565 square feet, spread over five assets located in South San Francisco, San Carlos, Long Island City, San Diego and the Research Triangle. This is double what we delivered in the first quarter and these deliveries will provide more than $31 million in annual rental revenue over the next year. In addition, this historic demand has led to improved quarter-over-quarter leasing and leases under negotiation numbers despite adding two new assets that have had little marketing time. Assets contributing notably to this outcome include; 840 Winter Street and Waltham Mass, which is a testament to our ability to capture demand…

Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. We reported exceptional operating and financial results for the first half of '21 and provided a very strong outlook for the remainder of the year. Revenue and net operating income for the second quarter was up 16.6% and 16.8% over the second quarter of 2020, respectively. And NOI for the second quarter was up 6.9% over the first quarter of '21. Now venture investment gains included in FFO per share were $25.5 million for the second quarter and was consistent with the first quarter of '21. Now looking back over the last two quarters, we raised our outlook for FFO per share $0.03 when we reported first quarter results. And during the second quarter, we raised our outlook for FFO per share again by another $0.02. Now this $0.02 increase was announced in connection with our Form 8-K filing date at June 14th when we were substantially through the second quarter and had solid visibility into the strength of core results for the quarter. Same property NOI growth for the first half of '21 continue to benefit from our high quality tenant roster with 53% of our annual rental revenue from investment grade rated or large cap publicly traded companies. Same property NOI growth for the first half of '21 was very strong at 4.4% and 7.4% on a cash basis. High rental rate growth on lease renewals and re-leasing the space was the key driver for the improvement in our outlook for 2021 same property net operating growth to 2% to 4% and 4.7% to 6.7%, an increase of 30 basis points and 40 basis points, respectively. Now while the primary focus of our acquisitions for 2021 has been driven by strong demand from our tenant relationships for both current and…

Thanks very much, Dean. Operator, we can go to questions, please.

We will now begin the question-and-answer session . Our first question will come from Manny Korchman with Citi.

So Dean, in your last comment, you talked about going forward being more selective on acquisitions. I was wondering if you can, or maybe Peter, sort of talk about what's going to change in your approach or your underwriting, or the yields you're targeting relative to the feracious appetite that you've had in putting capital out, how will deals going forward be scrutinized versus the deals that you've done?

Maybe it's best to amend that word, selective, and think about it as being a bit more patient. We've had -- if you just look at the quality of deals we've done, we don't change our underwriting. We don't change our focus. It hasn't changed for a very long time. We look at -- if you look at the two big deals we did this year, both were aimed at, one, creating a new submarket in Boston and the other was extending the Alexandria Center for Life Science at Kendall Square. Both of those to meet kind of historic high demand. But we're mindful of the overall capital markets. So I think we're being just a bit of a slower pace, but I wouldn't say the selectivity or the change in the underwriting or how we do things, or what we do is any way shape or form changed.

And from the capital markets, you've shown a lot of discipline in prefunding a lot of these deals through forward, through deb, or through straight equity offerings. Is it more of a concern about where the markets are going, Joel, in your mind about funding future deals?

Well, I think one has to just be mindful that if you look at -- we’re probably at a historic high with GDP right now. We're probably peaking. And it's just hard to know where the market might go. So we're just going to be careful about, stepwise about how we do things. We also have no anticipation of when -- I think Dean said this pretty clearly. We don't know when an owner is going to bring an asset to market. And so that oftentimes drives decisions as to the 750 tenants, many of whom have active current requirements and many of whom want a path to future growth. So we just have to be -- maybe the best word to use is judicious rather than selective and that's not necessarily parsing words. So I think we're just going to be judicious about how we go forward. There's only so many big acquisitions one can continue to do and that actually exists. So I think the market will determine that.

I think judicious, it definitely sounds like more of the word rather than selective in the comments. And then secondly, just on supply, Joel, in your opening comments, you basically said that it's not a concern of yours. Now you're obviously, as an entity, building a ton, others are building a lot. Is it just the level of preleasing and tenant demand that causes you not to worry about the levels of development going on in life sciences and just the overall excitement that there is on behalf of a lot of corporate landlords to do it?

So I'm going to ask Steve to comment. But I would say we're always worried about everything. I think when you look at -- and we're fans of Jim Collins. We always have productive paranoia. And so we're always -- every day we wake up, we assume nothing and we have to prove everything. And so I don't think it has to do with our not or our not worrying or so forth. But I think if you look in each of the key markets, you look in the Bay Area, you look at the Greater Boston area, the supply chart really is focused out several years. It's not focused on '21, '22 or even '23. You start to see bigger blips, for example, Kilroy's capability to do large scale projects in the Oyster Point area in South San Francisco. Pretty large numbers but those are out quite a number of years. They're also at a disadvantage because they have a substandard location to kind of the gateway location. But Steve, do you want to comment on kind of on the supply overall issue? I think you have a good perspective on that.

Look, we have been in these markets for more than two decades. We track this on a building-by-building parcel-by-parcel basis. So we have absolute granular information and insight on these projects. And just to add to what Joel said, when you look at Greater Boston in that pipeline, projects that actually have gone vertical that are under construction, more than half of that is already leased, and those will extend into 2022 and 2023. So when you look at that, you really don't see very significant pieces being added to the overall inventory from that basis. Other people may be talking about supply but again, four or five years out, inevitably, the markets will change. Office will always be an alternative for all of these new entrants as well. And then in the Bay Area, as Joel said, there's two or three projects we're monitoring. There is leasing activity there. So there is additional supply but we don't see large, disruptive, very large projects that are well under construction that have no leasing activity. So again, we do monitor it on a very granular basis and that's what we're seeing over the next year or two or even two and half years.

Our next question will come from Sheila McGrath with Evercore ISI.

Acquisition cap rates have compressed for life science as we can see at 400 Dexter. How should we think about the development yields for your current pipeline? Should we expect some of the newer projects to have a little bit or some compression in the development yields versus historic yields?

So Peter…

I think it's fair to say that there's been a tremendous amount of growth in rents. So that will help keep the returns buoyant, but with that has come a growth in the cost of land. There's been some, obviously, some cost increases that I just went over in my comments. But I think it's fair to say that our goal of development, redevelopment, having a minimum spread of 150 bps over exit cap rates will continue. And so that's a very important number for us. We often exceed that well over 200 bps in many cases. But yes, just the cost of capital is advantageous. So you can develop something to a six and it'd be very accretive, especially if you can sell it for a four.

And then I was wondering if you could provide a little more detail on the Sorrento Mesa acquisition of existing buildings. Will you redevelop those buildings and add density or knock some down, what are the plans there?

I think we've got a number of scenarios that Dean and team have explored. But you're right, I mean the advantage or one of the great things about that acquisition is the ability to combine it with an existing property and create a 2 million square foot mega campus. Will that certainly contain new buildings? Whether they're all new and some are redeveloped is still to be undertaken or to be decided. But we're very comfortable with our basis there and we've got a lot of optionality with the existing buildings, but also our basis is good enough that if we take a couple down, we can build bigger ones at good yields.

Okay. And last question. Leasing spreads were almost a record quarter. Was that driven by any one particular transaction or market? And where do you think in-place rents for your portfolio compared to market right now?

Yes. So, pretty broad, Sheila, and not based on any single one. But Steve, you could -- or Peter, you can give some view on that, on the uptick.

Yes. The mark-to-market, Sheila, it's Steve here, has actually increased over the past several quarters. We're roughly 23.5% on a mark-to-market basis across the entire portfolio. So, I think, that's clear evidence of the continued healthy demand and rent growth.

We were in the mid-teens not that long ago. So, that's a pretty significant increase.

Our next question will come from Anthony Paolone with JP Morgan. Please go ahead.

Joel, you mentioned some of the record capital formation in the form of venture capital IPOs, and I think the NIH as well. In the past, that -- those numbers have ebbed and flowed. I'm just wondering what you think happens to space demand, if there's any sort of pullback in that capital formation this time.

Yes. So, that's a really good question, and welcome to the call, Tony. This is a kind of a historic biotech bull market. It's really been going into its seventh year, which is pretty historic. I think, which gives us good comfort is on the private side, a number of the venture firms -- quite a number of the venture firms have raised record amounts of money, and those funds usually take multiple years to invest two, three, sometimes four. And so, that's going to give a runway to private companies, let's say there was a black swan event or something forbid happens that just causes the market to sell off pretty drastically. I think we're very fortunate. As Dean said, we have a historically high credit profile in our asset base. So, that's good. I think the companies that would be most at risk would be newly public companies now that are outside of the private venture or private equity financing. They're public now. And if the markets shut down, they have capital, they'll have to adjust their burn rate and be careful because they won't be able to go back to the capital market. So, I think that -- we saw that in '08 and '09. It was the newly public companies, companies that were preclinical particularly or in the clinic and needed a number of years of runway. So, that would be a downside scenario. But as I said, I think for -- at least for the coming couple of coming quarters, we see a pretty steady flow of capital. We don't see any interruption. But, you never know. If China decides to make Taiwan like Hong Kong or something like that and decide to reunify, that could cause the markets to certainly freeze up. I mean, they're already attacking a lot of the tech companies and so forth. So, I think, China remains a huge question as to the impact on the market and what their intention is.

Okay. Got it. Thank you. And then, just the other question I have is you mentioned your pricing power advantage and tenants wanting to be in your portfolio. Are you being asked to go to either new markets, new submarkets to satisfy some of the demands of your tenants? And just updated thoughts on potentially going to those places, if so?

Well, I think what is true of this industry for a long time, and I've said this for a long time, the life science clusters generally take a generation to grow, 25 years or more. And we see, for instance, New York’s now just into the 12th year of that gestation period. And because of the density of players, the ecosystem being collaborative and cooperative as opposed to tech, which is more a little bit those guys like to be more isolated, there's an employee base there. Most companies looking to expand are opting to stay in the existing markets. I do not see and have not seen, and Steve or Peter can certainly comment, any big move toward new markets or other locations. Obviously, if somebody wants to go somewhere, I mean, we'll look at it and we'll think about it, but it's got to be a pretty convincing and persuasive situation.

Our next question will come from Jamie Feldman with Bank of America. Please go ahead.

Thanks. If I could just add on to Tony's question. I mean, what about on the international? I mean, clearly, your platform has absolutely proven itself. Do you have any thoughts about trying to do it again in other markets around the world?

Well, I think if you look at this quarter's results, you would ask the question why would you ever want to or need to. We spent time in India and exited India, realized that the Indian Supreme Court invalidated the Gleevec patent and so novel research just isn't going on there. We have one remaining project in China, which is partially leased up. We compete against government properties that get free rent for three years for Chinese tenants. So, that's not a really great market to grow in. I mean, Europe is fine, but it still is, by and large, their socialized medicine system. So, not a place you would think about booming R&D. So, we're very happy with the markets we're in and with our current operational view of things, Jamie.

Okay. And then -- that's helpful. And then, thinking about New York, can you give us an update on when you think you might start the new project there? And with Long Island City, it looks like 100% leased in the supplemental. Just how are you thinking about other opportunities there away from the center?

Yes. I'll have Peter comment on Long Island City. We're not 100% leased there. That's been a slower lease-up than we would have wanted, partially in due to what happened with Amazon and so forth kind of put a chill on that submarket overall. We're working with the city right now going through a process. And I would just say, stay tuned there. I think, New York is the one market that brokers tout like this big demand, but the reality is the demand is much less. And the demand is primarily organic companies that are starting up, being formed, spinning out. You don't see any big companies moving to New York for obvious reasons, high taxes, governance issues to some extent. And just it's an expensive place to be. So, we're doing great at our center. But, it's a tough market. It's a heavy lift market. You really have to create the entities that stay there, and we've helped do that over the last decade. But it's different than Boston, which is experiencing record high boom. So, just fundamentally different.

Okay. So, you said the Long Island is not 100% leased, the supplemental…

Yes. So Peter, do you want to talk about Long Island?

Yes. Long Island, according to supplemental is 41% leased and -- 41% leased and under negotiation on page 38. So, that's actually -- the leased percentage went up 10%. So, we have started to make some progress. We meet weekly about demand there and the different companies we're talking to. Essentially, there's a lot of slow decision-making going on there. I don't know if it has to do with just the state of New York City and if people are wondering when COVID is going to not be as impactful to life there, could be one reason. But as Joel mentioned, it's definitely a market where we've had to almost create demand. It's very organic. The tenant prospects we're talking to are almost exclusively New York-created companies. And we're not getting a lot of help from in-migration. But, we are seeing everything and capitalizing on some. And admittedly, it's been a slow process, but we do think we'll get that stabilized in the near term.

Okay. Thanks. By the way, I was looking at Page 34, which I think showed that it is, but I see what you're talking about. Thank you.

34, Jamie, is what we delivered to date.

Yes. Parts of the building already delivered not the full building.

Our next question will come from Rich Anderson with SMBC. Please go ahead.

So, on the dispositions, you're looking at $2 billion for this year. And I look back at what you've done in previous years, and this is -- this will be the most by a fair margin in other years. And I'm curious, obviously, you described capital flowing into the business, like I think used the word stampede, and we're all seeing that for all the good reasons. But, are you getting any reverse inquiry where you would have maybe not sold a partial interest or whatnot, but you were just giving an offer that was too good to refuse. Is that happening to you, or is this stuff you would have sold one way or another eventually?

I don't know. So, Peter, you could comment on that.

Yes, Rich. I mean, I'm very confident in saying that if I made a few calls and said, hey, anything you like, want to make an offer? And the other party thought we'd sell anything that they wanted. There'd be a lot of them. So, we have been the ones that have selected what to sell. And obviously, we've done quite well. The typical profile is something that we have already really maxed the value out on at least in the near to medium to long term. So, it's a good time to monetize. But, it's fair to say that our whole portfolio is very attractive to many investors today given the shine on the life science industry.

Okay, great. And then on the development side, Peter, you mentioned you're underwriting cost inflation despite the comments on lumber. Can you say what type of inflation you're assuming when you underwrite a development? And on the other -- on the numerator side, what your assumption is for market rent growth? And, are you taking a discount to what you're seeing? I'm just curious if you could get a little bit more in the weeds of how you're underwriting a deal that so it pencils and it makes sense to go forward with it?

Yes. I'm not getting -- not to give away too much secret sauce, but I -- last quarter I mentioned when I addressed the cost that we look at escalations in the 5% to 6% range right now. And that may not seem like a lot, but labor is fairly stable. So, these large commodity increases and with materials being about 30% of the project, you can get to a weighted average of about 5% to 6%. Now, that's -- that could be double what a normal year of escalations could be. In certain times, things obviously fluctuate. But we, along with our real estate development team, the underwriting team, communicate constantly about these things. So, we make sure we get them right. And the proof is in the pudding. The yields that we publish, we hit like pretty much 100%. So, other than that, we don't underwrite spikes in rents. I've talked about that before. We have a very good idea of what long-term growth looks like. We're probably more conservative than what actuals end up being, but that's great. Surprise the upside is always good. But yes, we're very comfortable with our current pipeline and the way we've underwritten it. And I think -- and I've been here for 23 years, been an underwriter for all that time and feel very comfortable with our process and that we'll continue to meet the numbers that we're publishing.

Our next question will come from Michael Carroll with RBC Capital Markets. Please go ahead.

Yes. Thanks. Joel, in your comments you discussed the need for the U.S. to be the leader in next-gen drug manufacturing. I'm not sure if I heard you correctly or not, but did you say the U.S. only produces 11% to 13% today. I'm not sure if you're referring to semiconductor production or next-gen manufacturing?

Yes, that was semiconductors.

Okay. Where is the next-gen manufacturing being done right now? I think, given the advancement we're seeing in technology, is it safe to assume that's going to be a bigger life science demand driver in general and for your industry?

Yes. The answer is yes. One, it's still, in the early days; number two, because it's more integrated with the research and development side, they will tend to be either at the same location or nearby as opposed to a random manufacturing, if this was just normal synthetic chemistry pills and so forth. You could put it anywhere. You could put it in overseas or in any state. But, I think you'll see these will be much more integrated with the R&D function. And so, my guess is, the clusters as they are today, will be mostly benefited as opposed to other regions.

Okay. And when you're looking at this, I guess, this demand driver, I guess, how close do they need to be to, I guess, the headquarters? I mean, are they going to be in Cambridge, or is it going to be in like suburban Boston, or how close does the manufacturing need to be to get that synergy with the mines within the headquarters?

Yes. Well, I think, it depends on the stage of scale-up. But, in the early clinical, preclinical and clinical, you could see that being a part of the R&D effort. But then, when it goes to full scale, you could see that being in adjacent locations. I mean, Moderna's example is a great example. They did a lot of work inside Tech Square, but then they rebuilt their plant in Norwood, et cetera. So I think that's not -- although that's a vaccine, but that's somewhat emblematic of what you could see happen.

Okay. And then, I just want to -- I think, I heard you correctly, but this is going to be a driver for every cluster. I mean, is there some clusters that could benefit more than others?

Well, I think, the clusters that would benefit more are the really established clusters, obviously, the Boston market, San Francisco, Seattle, San Diego, Maryland, RTP, I mean, the ones that we're focused in. I think, secondary markets probably wouldn't do as well because you also need skilled workforce and you just don't find them. You're not going to find them in Charleston, South Carolina, per structure. Although that's a great place to be.

Our next question will come from Tom Catherwood with BTIG. Please go ahead.

Peter, maybe turning to the dispositions. Obviously, partial interest sales have been an important part of your capital sources over the past few years. When you're evaluating assets for disposition, past few years. When you're evaluating assets for disposition, how do you decide between an outright sale and a partial interest sale? And are you able to maintain enough control over the joint venture to make decisions kind of holistically across your cluster instead of prioritizing certain assets kind of to the detriment of others?

Yes. So maybe, Peter, let Dean take it first and then maybe you can kind of add the color around that.

Sure.

Yes. So Tom, one part of your question really touches on the complexity of managing good governance around your joint venture relationships. And I think that's what our team has tried to do is to be very respectful of these important relationships that are being established in markets and sometimes across markets. We want to be long-term partners and be mindful as much as we've got joint venture assets and wholly owned assets in a particular market. And so, that's important. From a technical control perspective, I think we're working with partners that understand that we have the expertise to make these successful and we've asked for reasonable leeway in the relationship to be able to execute in that fashion. And so, that's been important, I think, as an attribute from a partner perspective for us. So hopefully, that helps a little bit there, Tom.

Yes. That's really helpful. Thank you. Thank you, Dean. And then, maybe just focusing on a specific market, down in North Carolina. So back in August of 2020, you acquired the Alexandria Center for Life Science in Durham. And expectations at the time or that tenants would both expand within the research triangle ones that were there already, and then some would relocate to RTP from other areas to kind of looking for more talent. In the second quarter, occupancy in that Durham campus picked up I think almost 400 basis points alone. And then, you added another 885,000 square feet of development rights kind of in and around that campus. So, as you're now almost a year out from that large acquisition, how has the market performed there compared to underwriting? And then, what are your expectations for that going forward?

Yes. It's been pretty spectacular. Peter, do you want to maybe give color on that?

Yes. I can tell you that we're certainly above our rental assumptions, probably close to 10%. And then, we have definitely absorbed the vacancy faster than we had underwritten it. Yes, I give Joel a lot of credit. He definitely saw this trend coming towards RT when we made this deal and we've knocked it out of the park. It's really been great.

And is the idea with the expansion adding the additional almost 100,000 square feet. Is that...

Demand. There's great demand there, and that campus itself has built-in amenities. It has existing space that some tenants have gone into. And we know that those tenants will need to expand.

Yes. Tom, I think, what has distinguished Research Triangle for many years, it was kind of a 50-year-old backwater place that few companies went to and had a -- was a nice place to be. And then over the last number of years, it's emerged as a really powerhouse cluster. I mean, Apple is just now taking a gigantic stake down there. And I think what people see is, what they're looking at other places in the United States, people see a great quality of life, a modest cost environment, beautiful place anchored by three world class institutions and a really, really great workforce. So, we're seeing the incoming -- I mean, we kicked off the Beam next-gen manufacturing project. That's a company that's in Cambridge, but they came to us for their next-gen manufacturing gene therapy aimed at cancers and sickle cell, et cetera. And that was the best place because of the workforce. So, I think that, to me, has been the hallmark of that market. Great place to be, live, work, play, and really talented people, which you just can't find everywhere.

No. That’s really helpful. And it does sound like very different than what it was historically. So, that’s it from me. Thanks everyone.

Yes. Thanks.

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

Just to say thank you, everybody. And we look forward to talking to you on the third quarter earnings call. Take care. Be safe. God bless.

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