Good afternoon, and welcome to the Alexandria Real Estate Equities Second Quarter 2022 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Paula Schwartz of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. This 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's 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. Thank you for joining Alexandria's second quarter 2022 earnings call. With me today are Hallie Kuhn; Steve Richardson, Peter Moglia and Dean Shigenaga. In a very challenging macroeconomic environment, for sure, we are very blessed and thankful to have a truly one-of-a-kind public company, which has a uniquely visionary mission to create and grow life science ecosystems and clusters that ignite and accelerate leading innovators to advance human health by curing disease, saving lives and vastly improving nutrition, our mission for sure. We at Alexandria have worked tirelessly to earn the trust and have carefully and meticulously constructed our client tenant base within our best-in-class asset base. In 1994, we uniquely set out to be the trusted lab space real estate partner for life science companies. Today, 28 years later, we have earned the trust of over 1,000 diversified high-quality companies who have chosen our brand and rely on us to deliver on our reputation. Daily, they entrust us with their most precious assets, their talent, thousands of hard-working science, technology and business professionals reliant on our lab space and on the life science ecosystems we cultivate to attract and retain the best talent to advance their science. We provide them with a truly inspirational and healthy place to work. Daily, they entrust us with billions and billions of dollars of research and development platforms to be safe, secure and operational. Daily, they entrust us to be aligned with their mission to partner together at the highest level of operational excellence to improve human health. In this market, our results really stand out in the macroeconomic environment we're all experiencing, a slowing economy, the weaken consumer, higher interest rates and ranging structural inflation. Huge congratulations to our Alexandria family on a great 2Q '22…

Thank you, Joel, and good afternoon, everyone. I'm Hallie Kuhn, SVP of Science & Technology and Capital Markets. Today, I'm going to start by covering the bedrock of Alexandria's business. Specifically, as Joel mentioned, Alexandria's world-class and leading stable of over 1,000 tenants. As part of this review, I will cover the health of the life science industry and then pivot to a number of recent FDA approval that reflect the industry's collective drive to develop life-saving therapies. The life science industry is large, diverse and complex. Alexandria's tenant base reflects the diversity with over 1,000 tenants that span multinational pharma, public and private biotechnology companies, life science products such as enabling research tools and manufacturers of complex medicines and top-tier investment-grade companies and institutions. So let's break this down segment by segment, starting with multinational pharma. Alexandria is proud to call 17 of the top 20 biopharma companies our tenants, including BMS, Eli Lilly, Sanofi, Takeda, Merck and Pfizer, just to name a few. Looking at large cap focused indices such as the Dow Jones U.S. Select Pharmaceutical Index, you'll see that these companies continue to outperform broader indices, including the Dow, S&P 500 and NASDAQ. Biopharma deployed over $200 billion into R&D in 2021 and the top 20 biopharma have an estimated $300 billion cash on hand to put towards M&A and partnerships as they look to bolster their pipelines with innovative new medicines. Next, public biotech companies. With small and mid-cap companies have gotten outsized focus over the past several months as indices such as the XBI have tumbled, this segment contains many of the most innovated and well-funded large-cap companies in the industry with names such as Alexandria tenants Alnylam and Vertex. Indeed, the majority of our ARR across public biotechnology companies is from those with…

Thank you, Hallie. The second quarter of 2022 was an absolute blowout quarter in nearly every regard, the demand and really the intensity of the strong commitment to Alexandria's brand of highly differentiated mega campuses and operational excellence continue to provide for superior financial outperformance. I'd like to give a big shout out to the entirety of the Alexandria team as following the results are amongst the best in nearly every category. As Joel noted, Alexandria is truly a one of a kind company and hence definitively proven its ability to deliver excellent results throughout a wide array of macroeconomic condition. As we've discussed and Hallie referred to as well a number of times over many years, the companies in the life science industry have a long-term horizon for their pursuit and commercial life-saving and life changing novel medicines and therapies. Research and discovery in the laboratory, multi-stage clinical trials, commercial rollouts can and do take a decade or more. Alexandria's unique capabilities and team have successfully identified the most promising life science companies and ultimately attracted the world's leading investment-grade pharmaceutical and big biotech companies to it's mega-campuses in AAA locations adjacent to the country's leading research institutions. The second quarter exemplifies this powerful combination of trusted relationships with high-quality companies and their long-term horizons and some consider the following. 87% of the leasing activity overall was from Alexandria's existing relationship and absolutely essential and unique to Alexandria-only enabling success during turbulent macroeconomic quarters. And during Q2, 88% of the leasing activity in the development and redevelopment pipeline was from Alexandria's existing relationships. Consider how powerful that statement is for successfully growing the company's high-quality on-balance opportunities not only for a few quarters, but for many years. The stability and trusted nature with Alexandria has become a bedrock in…

Thank you, Steve. I'd like to start by thanking you for teaching me so much about teamwork, managing people, operational excellence, the necessity of taking a deep breath every now and again, expanding my vocabulary and being a sounding board and confidante throughout our partnership. I started this Co-CEO relationship with alacrity. The use of that word is an example of your influence, and I was not disappointed. I will greatly miss our regular chats, but I'm glad you will be around when a good talk is needed. With that said, I'm going to update the audience on the progress being made on our value creation pipeline and related construction costs and supply chain trends then conclude with remarks on the dispositions completed this quarter. As Hallie referenced in her overview, our 1,000 plus tenant base is of the highest quality as it includes 17 of the 20 biopharma companies, the most innovative and well-funded large cap public biotech companies in the world and a stable full of the most promising and fastest growing private companies in the industry, which have been rigorously underwritten by a deeply technical and experienced team. This highly curated tenant base provides opportunities that have been consistently fueling our external growth for over a decade. And if you connect the dots, it's no coincidence that 87% of our leasing activity comes from it. The best companies are those that grow and we have grown along with them. The past quarter, we completed over 915,000 square feet of leasing in our development and redevelopment pipeline which aggregates to an excess of 2.3 million square feet for only half a year at a time when people are worried about the product type we invented, because others pretending to be equals are struggling with their tenant base. Our…

All right, thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. Our team is very pleased for their 7th year of recognition as winner of the Large Cap NAREIT Communication and Reporting Excellence Award, 6-time Gold Winner plus one Silver Award, which is truly awesome. So congratulations team. At the end of June, our team published our Annual ESG report highlighting key areas of our leadership in ESG and our focus on making a positive and lasting impact on the world. Key topics included in our ESG report include among many others, first, managing and mitigating climate-related risks, including continued development of our science-based targets to reduce emissions. Two, highlights of the design of what is expected to become the most sustainable lab building in Cambridge and to future all electric buildings in our San Francisco Bay Area market. And then three, our eight unique and important social responsibility pillars. Now turning to the quarter and the first half of the year. Our first quarter and first half results were very strong and significantly beat consensus. We also raised our strong outlook since our initial guidance for 2022 by $0.05 including $0.03 with the second quarter results here. Our projected growth in FFO per share is very strong at 8% over 2021. Total revenues for the first quarter and the first half of the year were strong and up 26.3% and 27.2% respectively over the same periods for 2021. FFO per share for the second quarter was strong at $2.10, up 8.8% over the second quarter of '21. Now huge thanks to our entire team for truly exceptional execution in 2022. We have generated one of the most consistent and strong operating and financial results quarter-to-quarter and year-to-year within the REIT industry. Now, as you've heard from us today over 1,000…

Thank you very much. And I want to apologize, Steve was on cell phone and his line cut in and cut out, we'll work with the transcript providers and make sure the blanks are filled in. With that, we'd like to go to questions.

[Operator Instructions] And our first question will come from Anthony Paolone of JPMorgan. Please go ahead.

Thanks. And first best wishes to Steve and thanks for all the help over the years. So I appreciate that. My first question is, as it relates to just the demand you guys continue to see in the portfolio, do you think the $3 billion in development spending and effectively roughly about the same amount of deliveries is sustainable and how we should think about what things look like going forward or is the second half of the year drop in spending likely to persist into next year and kind of indicate just slowing the pipeline?

Yes. So Dean, do you want to take that?

Yes. Tony, it's Dean here. When we did look over the last couple of months here at our capital plan on around construction spend, we did announced a significant reduction in spend here for the back half of this year. But as you would expect, we look very carefully at spend for 2023. There were significant reductions there, but I don't want to get into the details of the capital plan specifically for next year, we'll get into that at Investor Day. What we are focused on though Tony as you can tell from our disclosures, the $665 million in incremental annual rental revenue as well call our priority focus, that's a fairly significant pipeline, both in revenue, but also 7.8 million square feet most of that, as you guys know is leased or negotiating at roughly 78%. So I'd call it we've refocused where we're paying attention to on allocating capital this pipeline is super important to us. So there is dollars that we will incur as we look into '23 related to that, but we're being mindful and disciplined and scaling back where we can.

Okay, got it. And then just in terms of in the portfolio, can you maybe take us inside some of the spaces and give us a sense as to how tenants are utilizing their space and whether or not just their own funding environment being more challenging is slowing up their hiring or growth plans, or just anything you see on that side?

So when you ask about how they're using their space, do you mean, I'm not quite sure what you're asking. The laboratories are operating full time, we've said, as you know, many times, you can't do lab work from home. Most of the life science tenants have a flexible work from home schedule. So they are, yes white color folks are in several days a week and kind of move that around. I think that's kind of the norm. But there have been, I was at one of our mega campuses, not too long ago and the parking lot was jam, so people are back in a pretty important way. But I think the office part of the component still is kind of a hybrid work schedule, if that's what you're asking.

I'm trying to think through if capital was last point to fall and they have growth plans, do they slow up the need to take down as much space as maybe they would have otherwise right now?

Yes. Tony, you have to go back to what Hallie said, the industry is not a cyclical industry, the industry is event-driven and if one is working on a particular blockbuster drug or whatever, they're going to allocate capital obviously as prudently and as disciplined fashion as possible, but they're going to have to move forward, because that's where the value of the pipeline is part of the key value. So I think it's different than other sectors, whether you're in a law firm or a financial sector where you can move a whole bunch of things around, because of just macroeconomics. But this is a very different industry. So I don't think you can kind of compare the two. Now tech tenants are well known, obviously, those guys clearly have slowed the pace of hiring, some of them have done some layoff work and so forth and so we see that, we've got what 8% or so, less than 10% of our portfolio is tech related. So that is, I think, well-characterized out there.

Okay. That's all I had. Thanks.

Yes. Thank you.

The next question comes from Jamie Feldman of Bank of America. Please go ahead.

You may be on mute.

Thank you. To start off, just congratulations also to Steve. It's been a pleasure to work with you all these years and we wish you the best going forward. I guess, we appreciate all the color, the additional disclosure on tenant segmentation, but can you talk maybe let's fast forward six months, nine months here and we look back and I'm sure there's going to be some distressed or something of some sort in your portfolio, like what do you think that actually looks like in terms of what the cycle does actually bring?

Well, I think it's pretty clear if you go back to the '08, '09 timeframe that there will be tenants and oftentimes they tend to be small publicly-held companies, either preclinical or into the clinic, who have a certain amount of cash that are trying to kind of manage their resources to get to value inflection milestone so they can either finance further or potentially reach a milestone that they could partner or sell either the company or the product to a bigger company. And so, I mean that goes on all the time, and I'm sure we'll see that evolve from time to time. I mean, the great example that I like to use as a company that had that problem back in '08, '09, they moved out of a big -- actually, they had the entire building of 500 Forbes, they moved out on one day, the next day, Genentech-Roche took that entire space and I think that's what you see we've described, I think last time, Steve described on the last call a tenant in San Diego, or maybe we've done that on some of the analyst calls, that wanted to leave, I forgot 20,000 square feet or so. We brought in another tenant who wanted that space and the mark-to-market on the new lease was 50%. So we expect to be able to manage those kinds of issues. But I think we're going to be much better well set than almost anybody else because of the discipline we've used in leasing space in the first place. Now if we buy an asset where we have an existing tenant, and that actually happened at 500 Forbes, then we have to just manage that in a way that is as best we can, because we haven't underwritten a tenant in a sense of choosing them, bring them in or not, obviously, as part of the acquisition. But so far, if you look at collections, receivables and just the general situation across the portfolio, we don't have any credit issues at the moment.

Yes, and Joel and Jamie, if I could add, it's Dean here, just to put things into perspective, just from one simple statistic. If you look at occupancy from the end of '08 to the end of 2009, occupancy only declined 70 basis points, if you brought in that time period, just a tad and you look at the end of '07 to the end of 2009, occupancy actually grew by 30 basis points. And I think the one fundamental difference between that period and today that the life science industry in particular, the biotech industry has really gone through this period where I think you can almost call it the Golden Age of the biotech industry today with tremendous innovation going on relative to 2008. So it's a much more exciting and vibrant environment for the biotech sector.

Great, thank you for that. And then I guess just thinking about the cap rates on the asset sales in the quarter. How are those or how are they not representative of the broader portfolio? We've heard from brokers that maybe life science could still be trading in the threes, I'm just curious if that's just no longer a fact or maybe the Binney asset in particular that you sold is not a great comp to talk about kind of the best of the best in the portfolio?

Yes well, I'll let Peter take that, but let me just say if you remember the Binney corridor and I think you've heard that Jamie. It took us about a decade to assemble in title and build over 2 million square feet there. 300 Third was an asset we purchased before all that it was actually an older building that had been built for Palm. And a converted asset so it doesn't really represent what we developed along that corridor, but that corridor is I think representative of a big kind of mega Class A campus. So I think keep that in mind as you think it's not an one-off one, 100 Binney isn't just one-off Class A building. It actually represents all 2 plus million square feet there. But Peter you can give some details for sure.

Yes sure Jamie fair question, you saw the 3.5 print last quarter and this is 4.3 the buildings are next to each other locationally. I would assess the difference Joel touched on it may be starting from where I was in my comments I think they were a number of factors it would include interest rate creep since that trade certainly rates have gone up since the sale of 100 Binney so that I'm sure factored into it. The age of building - 300 Third was built in 2000. And as Joel mentioned, it was a build-to-suit for Palm, 100 Binney was built in 2017. So 100 Binney is very new state-of-the-art HMH where 300 was not purpose-built for lab. I've talked and - during other quarters, commenting on non-purpose-built buildings, and this one has similar challenges to others that we've seen in the market, namely because of their low ceilings there or the low floor-to-floors, there's 8.5 foot ceilings. We typically have 10-foot ceilings in our space. So when you shrink the ceiling down like that, it's just not as nice of an environment. And it has some other weird things. There's, the parking lots on the second floor of the building, and that just creates some operational inefficiencies when you're dealing with chemical storage and things. So you have that and then I'd say, maybe one other item is that it's subject to a ground lease versus 100 Binney, which was a fee simple asset and there's certainly a little bit of discount for that. So I think all of those things kind of aggregated to a 4.3 but I would also say in this environment of 4.3 is still pretty good really good if you factor and also that 300 Binney is subjective a long-term lease and the buyer is not going to be able to market-to-market for quite a long time. So they certainly saw great value in the future appreciation.

And a great tenant in Alnylam.

Yes.

Yes.

Okay great, thank you.

Thanks Jamie.

The next question comes from Michael Griffin of Citi. Please go ahead.

Thanks appreciate you having me on the call this quarter and Steve, congrats on a well-deserved retirement. Just wanted to touch on the suburban portfolio dispositions, can you maybe give some color as to why it made sense to sell these assets? And could you see potential sales from other similar properties in the future?

So I'll let Peter comment again on some of the specifics, but I would say - and welcome to the call. We aggregated those assets actually 60 West View, if I'm not mistaken, was the first asset we ever bought in the Massachusetts cluster. And we aggregated those assets, many of which kind of early on in our attempt to try to build a presence in the Greater Boston region. In those days, we didn't have enough money to buy anything in Cambridge. And we over -- as I say, well over a decade, we aggregated a nice group of suburban assets, well maintained, well operated, actually pretty good credit throughout the - those assets. But it comes a time when you see values there to harvest and to reinvest and also our move to the - really the mega campus strategy in the greater Boston region with our really big mega campuses. That's where we wanted to focus our capital, and we have obviously a whole host of needs. So it was a pretty easy decision and the timing was, I think, pretty darn good. But Peter, you could comment. I don't know if there's anything specific.

Yes, I'd just say that I think the time was right. Those - there were 12 buildings in that portfolio. They were really good workforce buildings but relative to the rest of the assets that we have in our market that were on the lower spectrum of quality and given the appetite for life science real estate I think we were able to get the pricing by selling in today that was very attractive and as Joel mentioned and I said on the comments, great opportunity to reinvest that into our value creation pipeline. So I don't think there's really - I think it's just really that simple, just really opportunistic time to sell assets and get maybe more for on than you would in another era.

Yes and I would say, we don't also have a set of suburban assets like that really in - how they kind of originated and stuff really in any other market. So you can't really say oh, do you have other suburban portfolios. Like in the Bay Area, a portfolio, we would probably exit would be the East Bay, but we exited those before. So we don't have those kind of assets by and large.

Great. I appreciate the color on that. And then just maybe stepping back a bit, obviously given the continued demand for life science, are you noticing more entrants coming into your markets, particularly on the conversion side of traditional office to life science product?

Well, I think as Peter said, the reality is data centers have been hot. Obviously, resi has been hot. Industrial logistics has been hot, and life science has been hot. But life science is a very - it's a much, much smaller overall asset base countrywide. And so, the scarcity is an important part of things. And as Peter said, I think a number of important high-quality investors have sought to look at these scarcity assets. But obviously, sometimes people make a decision. They don't like the asset they have. So they're looking at somebody else and saying, Gee, could we try to convert and do that and sure in markets there are those kind of people. But by and large, I mean, we heard pretty big core stories on some conversions in the Boston region by people who have no idea what they're doing and tenants who are desperate to get out. So that's a story that will unfold pretty sadly for those folks.

Got you, that's it from me, thanks for the time.

Yes.

The next question comes from Rich Anderson of SMBC Nikko. Please go ahead.

Thanks and Steve, good luck honor and privilege to work with you. I'll look for you on Celebrity Row at Warrior Games going forward next season. So on the topic of conversion activities, it's interesting. A lot of your office peers have made that the bulk of their development or redevelopment business. Peter to your comments about development costs going up and all that? And again, despite what you just said, Joel about some of the horror stories, do we expect the conversion business to start to whittle down or is it whittling down even though you don't consider it a competitive force for you guys? Is that something that could be an outtake from all of this disruption?

Yes, so Steve and Peter, you guys want to comment?

Steve, do you want to go first?

Yes, sure. Maybe I'll jump in here, Rich, and thank you for the kind words there. Yes, we're already seeing - that's why I tried to break it down in terms of the properties themselves. So you look at these conversions. And then you look at the operators who are new to this with a one-off building. And then ultimately, the capital partners, and we have seen now projects that have been put on pause that those will ultimately be put on ice. And we just don't see capital that enthusiastic about committing significant dollars to these types of conversions given the overall macro environment, the complete lack of any tenant base mixed with a lack of operational experience. So I think more to come and more to unfold, but that's certainly the sentiment that we're seeing out in the market now and Peter can add to that too.

Yes I would say we do quite a number of meetings about strategy and market updates on a weekly basis. We're covering we never going to long before we covering what could be coming up what have we heard with all the different regions and I had - by and large we don't hear a lot about potential conversions outside of you might see announced in the press. Most of it is potentially new development, but as Steve mentioned in his comments. We only see limited amount of that in 2022 and 2023 more has been announced, we'll see if it gets built. But I don't see or we don't see a lot of conversions outside of going back to the suburbs in Boston. We certainly know one of our - one of the office suites that has a lot of holdings out there I have talked about doing conversions and I'm sure are underway with a few, but we're not seeing - proliferate throughout our urban core very much at least at this point.

Okay, great. I'll yield the floor. Good long in the call here. Thanks very much team.

The next question comes from Sheila McGrath of Evercore. Please go ahead.

Guys good afternoon, congrats Steve and all the best. Just a quick question on the dynamics of rental rates for new construction. Assuming as Peter outlined construction cost continue to go up and you want to maintain development yields just curious if the new rents on new development to justify construction are like above prevailing market in various submarkets?

Yes so Peter do you want to talk about Blackstone's kind of market high they just are indicative.

Yes I mean, I think what Joel is referring to as I think they were at $137 a foot. And that's, by and large, one of the things that sets the market our new developments. And so, you get a rate like that and then a renewal comes up of another Class A property in the neighborhood and the landlord will ask for the same rent. So I would say that the new development kind of helps set the market and then the existing assets follow. So it's a good thing.

Okay great. And then on 1450 Owens, I thought that was an interesting structure. I guess, sort of to minimize construction spend. Just wondering if that something you would replicate on some of the pipeline going forward?

We've actually done it before. But Steve, you could talk about that.

Yes I think Sheila, that was a really great situation for both ourselves and the joint venture partner. We had the very left of sold, titled to go. So we have combination of a very attractive intrinsic land value plus preconstruction work that we done. And as we looked at partnering on that project just into the additional capital contribution to build to build will equaling the intrinsic value and the preconstruction work we had in there. So you're right. It's a very mutually rewarding way to move forward with that project.

Okay great, thank you.

The next question comes from Michael Carroll of RBC Capital Markets. Please go ahead.

Yes, thanks I just wanted to touch back on suburban Boston sales I guess Peter you indicated that portfolio was at the lower quality spectrum. So could you comment how the 5.1 cap rate would compare to the rest of the portfolio. I mean is there an easy way to understand the cap rate difference between let's say newer buildings and the rest of the properties?

Yes the assets and the locations are even comparable but Peter you could answer.

Well I think what you're trying to get to Michael is I would say that if we had a - so these were more of one-off buildings. But if we were to sell something in the suburbs that was more campus like - I mean San Diego ago and itself is kind of suburban market. So you look at something like Campus Point right where you have this amenitized campus it's in a suburban spread out environment, but it's Class A and amenitized I mean that's going to have, that's going to be a low 4 cap rate. If we had something in the suburbs of Boston, that was a similar type of development I would expect to similar type of cap rate. But these were lower quality these weren't really campuses they were one-off buildings of significant age and of credit tenancy in there was about a quarter when you looked over the spectrum of the tenant base. So it just as I termed it before kind of workforce they'll be leased over time as tenants need 30,000/50,000 square feet which is about the average size of those buildings. But they're never going to have huge rent growths because they are just not that appealing to have somebody clamoring over it.

Okay great. And then just really quick and we ensure in time. I know about 80% I guess of your process development projects are protected in terms of I guess development cost increases. Can you kind of talk about the near term starts and how that's protected and if there is an risk to those budgets going higher or yields potentially going lower?

Yes so, look you can't do a - you get a gross maximum price contract until you actually have something to price. So whenever we start a project we obviously do a pro forma and then within that pro forma I believe that we have a very conservative approach with allowances for cost that should be adequate and then contingencies on top of that. And then we get the entitlements. We get permits and then we're ready to go out and supplying out the project and it just take - you don't but it all out at once you buy out different trades at different times. So it's a process but we do it expeditiously and anything that we have that starts out. Again we have these underwriting contingencies that are in our pro forma so we have a really good idea what the yield would be and more often than not that initial yield can be done. We can do better because as we start to buy things out we can start removing some of those allowances and contingencies and end up by the time it gets put in to the supplemental you know highly confident in that yield. It may not be completely bought out by then but it's very close and if it hasn't been bought out it still contains good contingency to cover any unknowns or unexpected cost increases.

Okay great thanks.

The next question comes from Dave Rodgers of Baird. Please go ahead.

Hi Steve, thanks for the help over the years congratulations and good luck as well. Peter, just on the investment sales side, maybe you've touched on a lot of different ways about this question. But when you talk to your JV partners that have been the consistent buyers of a lot of your better quality assets? Are they specifically asking for or indicating that they'd be interested in a different type of asset or a different price point at this point in time, just with respect to where debt costs are and their ability to kind of finance that spread?

So the nice thing that we have in our - in the base of our great partner pool, and it really truly is a great group of partners that we've established significant relationships with is that when we do these JVs. They're done on an unlevered basis. So they're not necessarily beholden to what the rates are for secured debt at the time. Now many of them may indeed finance their portfolios outside of asset specific financing, but it is at a very low level. In fact, some of our partners though have so much cash to put out that they don't lever really at all. So it's been one of the things that I think has helped us achieve the cap rates that we've achieved and sell things at an expeditious manner because there is a hunger for those types of assets, and they're not those purchases aren't contingent upon financing. So we hear stories about deals falling out because the lender at the last minute decides not to fund. That fortunately for us, we haven't had to deal with that. And if we did an outright sale, and we've had bidders that have put financing contingencies in their offers, but we've had enough bidders that were willing to not have that contingency that we just so far knock on wood. Everything that we've put out there we've performed on and haven't had any disruption because of debt market volatility.

That's helpful thanks. And then maybe just one unrelated question with regard to the Texas investments you detailed, I think, a little bit more this quarter versus last. And I think last quarter, Joel, you had made the comment that you'd want to wait. I guess just more curious in terms of your thoughts, if you can comment further? Are you bringing existing tenants? Are there tenants in that market that want to be in those locations? What's driving that decision and what's your kind of vision for the investment there?

Yes, so that's a good question. So when it comes to Houston, one of our campus acquisitions was, in fact, made because of a specific tenant. And that tenant will grow there and will be an anchor a larger project. When it comes to Austin, we have a cohort of important lab tenants, both credit and noncredit who want to be in that market. It is a new market. It is one that is not an existing cluster probably will take a decade to start to gel and then probably another 15 years beyond that to get to that 25-year mark. But I think what intrigued us about Texas and Austin in general is - and I've made this statement before, if you look at what Steve Jobs said about the 21st century, it was the century the intersection of biology and technology. And so I think Texas is ripe for that intersection, and that's where this industry is really moving in an industrial fashion. So this is really kind of the first toe in the water with that thesis.

Great, thank you.

Yes, thank you.

The next question comes from Tom Catherwood of BTIG. Please go ahead.

Thank you and Steve, thank you for everything and best of luck just one question from me. Hallie and Joel really appreciated the commentary on your different tenant segments at the onset. One thing that's always struck us though is the early insights that the company gets through the Alexandria investment platform and incubators like launch labs. On that early stage side of the business, are you getting any leading indicators suggesting a shift that could drive future changes in trends? And is that changing your investment strategy at all?

So thank you for that question. Not really I mean I think the - I mean technology, and you saw the - if you looked at the cover of the press release and sub, we've highlighted Eikon Therapeutics based on Nobel Prize-winning technology and headed by Roger Perlmutter, who was CSO at Amgen. He was also Chief Scientific Officer at and Head of Research at Merck. And this is a great example of a using to some extent AI in the development of new innovative therapeutics. So clearly that intersection that I just talked about that Steve Jobs described is, we're certainly seeing way more of that today than we did before, but I think our early stage efforts are really aimed at focusing on the next Alnylam's or the next Moderna's, two companies that we became associated with Alnylam in 2003 that started in 3,500 square feet in our Science Hotel and Cambridge and Moderna that started early on in Tech Square a couple of years after it had been founded by the flagship team, and our hope is to find those kinds of companies that have just totally disruptive technologies and lots of product opportunities and shots on goal, because those are the things that are going to move the dial and move the needle when it comes to human health, and by the way, both are huge, huge tenants of ours in many respect. So it all kind of works out, but that's kind of where our focus is, I don't know Hallie if you want to comment.

Yes, thanks, Joel. This is Holly, and I think you covered it well and to kind of parrot some of Joel's comments from earlier earnings calls, we're really in the early innings so to speak of these next-gen type therapies, is that when we think about gene therapies, cell therapies, mRNA therapies, we've seen a handful approved. But when you look at the stable of clinical and preclinical technologies, it's really mind-blowing how exponential it is and just repertoire of types of different therapies and types of different clients that companies are working on. So I would say we're early days and seen kind of what's the next generation of these therapies is going to look like.

Appreciate the color. Thanks everyone.

Yes. Thank you.

The next question comes from Georgi Dinkov of Mizuho. Please go ahead.

Hi, thank you. First, congratulations on the strong quarter. And Steve, good luck to you. I guess, just a couple of quick questions for me, can you please remind us how you assess credit risk in both the property and the investment portfolio.

I'm sorry. How you?

How you assess credit risk in both the property and the investment portfolio.

Well that's, we could write a treatise on that, when it comes to the investment portfolio, if you're looking at early-stage, we're looking at the things Hallie and I just described, great management teams, strong financial capability to attack some really big problems that have major unmet medical needs. I think when it comes to the tenants. We have a much different kind of focus, focus on stability, credit, opportunity. So they're kind of different in that sense, but both are rigorous and we've had a pretty highly disciplined and highly skilled team in place for a long, long time, which is why I think we've been able to do a really good job at those underwritings.

Okay, great. That's helpful. Thank you. And just I guess my second question, you mentioned core office utilization is lower, and we see it in core office tenants giving back space. I'm just curious, have you seen any life science companies giving back like fewer core office?

I don't think so. But I'd asked. Peter or Steve, have you seen that, I don't think so.

Well, the laboratory, the office that is associated with our laboratories houses the scientists that are working in the labs and they need that space to do their work, they can't, it's not good lab practices to be in the lab writing things up. So it's typically not possible to just give back lab space -- sorry, office space because they need it, if they're working in the lab.

Okay, great. Thank you.

They are fully integrated.

Okay guys, thank you so much. That is all from me.

Thank you.

Our last question will come from Daniel Ismail of Green Street Advisors. Please go ahead.

Great. Thank you. Steve, I'd like to echo the comments on that. Thanking you for your help over the years and best wishes in retirement. Joel, just a quick question on the comments you made about the Texas expansion. We haven't seen the migration of life science tenant to the Sunbelt like we've seen in the traditional office sectors. Do you think this is a trend that will likely pick up for starts or do you think this is more of a one-off and that the growth of the cluster market will take the time that you stated earlier?

Well, okay. Well, first of all, I think, by the way, we didn't have a slightly okay quarter, we had a really great quarter. So I would ask you to think about your comments on your review piece. Secondly, it's our intent like it was in New York, we started in New York, there was one incubator in New York alone, there was no other commercial companies really operating. There were a handful of companies, and we've either built or helped move or really helped create that market and so our intent is to do the same in Texas. We're not waiting for tenants just to haphazardly move there somehow, but we have a pretty strategic plan to work with tenants who want to move there. Remember, a lot of cities these days, and you could pick out the names have governance problems, homeless problems, crime problems, high taxes, poor governance. So there are a whole lot of folks very interested. We've seen that in financial services and now Citadel just announcing a big move from Chicago to Miami. So you're going to see with the 1,000 tenants I can tell you we have a whole lot of folks that want to move.

That makes sense. I appreciate it. And is cost of living a concern for the tenants or the cost of by science rents in these life sciences customers.

So it's -- very compared to other business, a very small percentage of their overall cost structure.

Thanks. And then Peter, just the last question for you, in bidding terms in the last three months, I'm curious as you're out there acquiring assets or looking to sell assets, have those changed at, has become less competitive or more competitive or what have you seen in terms of bidding terms?

As far as acquiring things I think there has been fewer buyers in the last couple of months as we've been kind of winding up our program, but pricing is for great quality land that hasn't really been moving down at all. And then in the dispositions, we tend to go to -- we kind of select who we'd like to have purchase our assets or JV with us. So it's hard to say, but I would say the interest in those folks that we typically approach with our opportunities has not waned and they are still very eager to get more exposure.

Yes I mean, it's based on a pure scarcity of really high quality, well-located laboratory assets. I mean that's the equation Peters laid out.

Got it. Makes sense. Thanks a lot.

Yes. Thank you.

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

Okay. Thank you everybody. And we'll look forward to our third quarter call. Be safe. Take care. God bless.

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