Good afternoon, and welcome to the Alexandria Real Estate Equities 2022 Fourth Quarter and Yearend Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I’d 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 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. I’d now like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Thank you, Paula, and welcome everybody. With me today, are Hallie Kuhn, Peter Moglia and Dean Shigenaga. Want to thank you for joining Alexandria's fourth quarter and yearend 2022 earnings call and wishing you a safe and healthy new year. And thank you to our Alexandria family team members for their continued operational excellence across all facets of our unique business platform. A truly mission-driven, one-of-a-kind company. We have truly exceptional fourth quarter and 2022 yearend results and by any and all metrics, we're very proud, thankful, and humbled, while many public recording companies ever really struggled mightily during this past year. I'd like to take a moment to tick off what I consider to be some of the most notable news for Alexandria. Truly amazing that Alexandria has delivered approximately 8.5% FFO per share earnings growth while continuing to strengthen our fortress balance sheet, the strongest in our history and Dean will give you more details on that. Against the backdrop of a very deleterious macro-market in this 2022 year and really again, nothing short of operational excellence to the team. With our highly leased development pipeline and continued strong leasing and Peter will comment on that, Alexandria is well positioned to deliver strong earnings growth again in 2023. We have continued to create long-term shareholder value with a total shareholder return from IPO through the end of this -- end of the year, December 31, 2022 of 1673% compared to the MSCI read index of 684%, S&P 500 of 628% and NASDAQ 838%. So a wide margin upbeat. Alexandria continues to produce stable, increasing, long duration cash flows and an increasing dividend. We're very proud of our approximately 1,000 client tenant base, a one of a kind treasurer that continues to generate remarkable demand for our Alexandria lab…

Thank you, Joel and good afternoon, everyone. This is Hallie Kuhn, SVP of science and technology and capital markets. Today, I'm going to provide a recap of the life science industry coming out of 2022 and now into 2023 and how our highly unique approximately a 1,000 tenants remain resilient through the volatility of the current macroeconomic environment. As Joel mentioned, and as we often talk about, the 90% of 10,000 diseases remains an incredible opportunity and unmet need. And the fact is, many of these that do have treatments are far from solved. Take type 1 diabetes. While it was a death sentence before the discovery of insulin over 100 years ago, it still carries an immense burden. A person with type 1 diabetes makes on average 180 health-related decisions a day, some of which have life or death consequences. Now looking back at 2022, the stats truly speak for themselves regarding the enduring strength of the life science industry, of which I'll highlight 3. First, despite widespread commentary that VC funding hit the pause button in 2022, life science venture deals totaled nearly $58 billion. Other than 2021's record year, it was the second highest amount of capital ever deployed. Of note, over 70% of VC dollars deployed went into an Alexandria cluster, and with VC funds across tech and life science raising nearly $160 billion in 2022, a record eclipsing 2021 is $150 billion, significant dry powder is on hand to deploy over a multiyear time horizon. Second, large pharma continues to be 1 of the best performing sectors in the market. In a year where total returns for market indices such as the NASDAQ and Dow ended the year down 10%, the top 20 biopharma ended the year up an average 12%, with 8 of the…

Thank you, Hallie. 2022 was quite a volatile year in the macro markets, a reminder that all businesses are subject to cycles, some more than others. The pruning we see in the tech industry today is not a surprise to anyone who's been around since the turn of the century. However, much like a broken bone, it will come back stronger after it heals. Unlike tech, developing products and services to address disease is hard and takes a lot of time, much harder and more time consuming than creating the next app to book a reservation or share recipes. Because of that, there is more discipline in life science investment, a discipline Alexandria has mirrored in our real estate strategy, which is why through the dot-com bust to the financial crisis, to whatever you want to label today's conditions, our business remains sound, as you can see in our results this quarter and during those historic down cycles. Despite the macro headlines, we remain optimistic and excited for our business as we are in the early innings of the Golden Age of Biology. We have only had the blueprint of the human genome for 20 years. And in that time, we've developed more new modalities to attack disease than in the previous 100. It's going to be hard, and it's going to take time, but the industry is going to have options for people with Alzheimer's. It's going to perfect technology to detect pancreatic cancer in time to save lives and much, much more. So let's all remember, it's hard, it takes time and patience, and then you will understand why life science research and development continues through the proverbial thick and thin of economic cycles, making our business resilient and essential. With that said, I'll briefly touch on our…

Thanks, Peter. Dean Shigenaga here. Good afternoon, everyone. We'll jump right in here. Our team is very pleased to have the strongest balance sheet in the company's history as of December 31. And this really is a result of disciplined execution of liability management year-to-year over the past decade. Our key highlights include, we really have earned our corporate credit ratings that rank in the top 10% of the REIT industry today. We ended the year with tremendous liquidity of $5.3 billion that provides us important flexibility in this macro environment. No debt maturities until 2025, a statement only a small handful of REITs can make today, and a weighted average remaining term of debt at 13.2 years. Net debt to adjusted EBITDA was 5.1 times on a quarter annualized basis, 5.2x on a trailing 12-month basis. The fixed charge coverage ratio was very strong at 5.0x, and 99.4% of outstanding debt is subject to fixed interest rates. Our team had outstanding execution in 2022 on our strategic capital plan. Key highlights include $1.8 billion of 12-year and 30-year bonds, with a weighted average rate of 3.28%, the term of 22 years completed in February of 2022. Outstanding execution by our team, as Peter had highlighted, on outright dispositions, partial interest sales, aggregating $2.2 billion, with an amazing $1.2 billion in gains or consideration in excess of booked value, a 4.4% cap rate on cash NOI, all exceptional statistics and significant value creation tap for reinvestment. We had disciplined issuance of common equity with proceeds aggregating $2.5 billion at an average price of $189 per share, including 105 million sold under forward equity sales agreements in December of 2022. On a blended basis for the year, we felt comfortable executing on the modest $105 million under the equity under forward…

Thank you. Operator, you can open it up for questions, please.

[Operator Instructions] And our first question will come from Steve Sakwa of Evercore ISI. Please go ahead.

I guess I wanted to just circle back to some comments, Dean, you made about some of the pending sales and joint venture interest. I'm just wondering if either you or Peter could provide a little bit more color on what the institutional market is sort of looking for? Maybe how pricing has changed over the past six months? And can you give us any sort of flavor on the timing of when some of these transactions make it over the finish line?

Yes. This is Joel. I think we'll try to be general in that given that we have -- we're at the letter of intent stage on a number of transactions. But maybe, Peter, you could give kind of a topside view.

Sure. Obviously, there's only a few product types out there that people are comfortable in investing in right now. And obviously, life science real estate is 1 of them. So we are -- I mean, been receiving calls on a fairly regular basis from some existing partners that are excited to see what we have going this year. As I mentioned during my comments, cap rates are expected to rise from the peak. But as I've also said in the past, we don't anticipate, on a relative basis, to be very high. And I'm not going to speculate right now on where they'll be. We'll start reporting once we have more data, but they will be sticky given the scarcity of opportunities for life science real estate.

Okay. And then just a second question, Joel. I know acquisitions are not a huge part of the plan right now, it's mostly development. But maybe could you just comment on the 2 deals that you did announce in the quarter and kind of the strategic rationale for both of those projects, and how you think about pricing on those versus your development opportunities?

Yes. So each one of those was unique in and of itself. I don't want to get too granular, but I think the one in the Route 128 corridor really enables us to piece together three different projects into a more than 1-million-square-foot mega campus, and we have some great activity from our 1,000 tenants to help fill that. So we're very optimistic on that and feel like that was very strategic. It's also under lease back for a number of years, so it will be continuing to cash flow. The other acquisition was a unique acquisition in downtown Austin. We felt that it was a superb location. It's also under a lease back for a period of time. So we'll continue to generate good revenue, and I won't comment on what our future business plan is for that, but we think there's a really great opportunity to do something unique in that spot, if that's helpful.

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

So I was wondering what are your thoughts on the sublet market in the sector? And have you seen an uptick with more companies subleasing space across the board and specifically in your markets? And could you please remind us what percentage, if any, of your portfolio is currently subleased?

So, Peter, do you want to maybe comment generally on that?

Yes. I've got some sublease statistics so I will -- for our larger markets. I will say that the amount of sublease space overall has come down in the -- over the last couple of quarters. One of the reasons for that is built out lab space is very attractive, especially for companies today that want to try to limit their out-of-pocket investment in the space. So Boston is at about 4.7% right now sublease. And again, anything of quality and that's built out is moving fairly quickly. San Francisco has been reduced to 2.3% and San Diego only has 2.1%. So these are all very normalized numbers for any cycle.

Great. And could you comment on your specific portfolio?

It's less than that.

Okay. And just my second question on Sanofi. We noticed that the square footage day rent dropped by about 30,000 square feet quarter-over-quarter. I was wondering if you could provide some more color on that.

SP1 I don't know, Dean, if you know that, what asset that was or you want to...

No, it's such a small number. I'm sorry, guys. We don't -- I don't have that at my fingertips.

I don't either.

It's 30,000 square feet on our 40 million square foot portfolio is artwork.

The next question comes from Michael Griffin of Citigroup Global Markets. Please go ahead.

Maybe going back to the Route 128 acquisition. Peter, you touched on some pretty favorable pricing it seemed like with transaction comps. I feel like that's probably 1 submarket that maybe there's been more worries around supply with. So maybe you can expand on sort of what you're seeing out there, has sentiment changed for that suburban market? I mean, obviously, when we think Boston, we think Cambridge being the highest quality market there, but maybe has a sentiment shifted in more of those suburban product?

Yes, this is Joel. Let me make a topside comment, and then I'll turn it over to Peter. I think you have to -- if you're asking about general sentiment, Peter will comment if you're asking about our sentiment it's different because we generally have a certain targeted demand from our existing client base, and therefore, by making, say, the acquisition we did or doing things that we do to create an environment where companies want to go, it really is focused on our kind of game plan. But if you're looking at a topside view, I don't know, Peter, you could share topside view on Waltham generally.

Well, Waltham, the other surrounding areas, I think the sentiment is still positive. The group, that last comp, I talked about the campus that sold for a five cap, it was reported -- I think it was [indiscernible] that had the article that the group that sold it made $200 million on it. They only owned it for two years. So pretty good outcome. And obviously, if somebody is paying $200 million more than somewhat bought it for two years ago, maybe it was three years ago now, that -- they're a believer in the rent growth in the market. So the other reason that the comps are weighted towards the suburbs is very likely because there's just not a lot of available product to buy in Cambridge or the Seaport or Watertown. So the opportunities were just there. And I don't know if it says anything about the sentiment and probably just more about the availability.

And keep in mind, there will always be demand among more R&D-light companies for Route 128 in Waltham than in the heart of Cambridge. That's just how it's been for decades now.

Great. That's helpful. And then on the $1.4 billion of commitment costs from joint venture partners, I'm curious, are there any kind of restrictions around how that can be drawn down, how much these partners can fund? I think you've got some portion of that in your capital plan for this year. But anything you can expand on that would be helpful as well.

Yes. I'll ask Dean to do that, but obviously, each and every situation is different, but Dean, upside view?

Yes. I think the high-level concept on the $1.4 billion of commitments for funding from our JV partners, generally speaking, these are funding requirements related to our value creation pipeline, so construction funding commitments. And these commitments do extend out over multiple years out, two to three years depending on the joint venture. But given the recent increase in projects with joint ventures over the last, call it, four to six quarters, we just wanted to be sure that the investment community understood the significance of the commitments coming from our partners on just a handful of construction projects. So we'll continue that disclosure going forward.

Next question comes from Josh Dennerlein of Bank of America Merrill Lynch. Please go ahead.

I saw in your top 20 tenants page in the sub. It looks like there's a footnote on 270 Bio saying the in-place cash rents are 20% to 25% below current market. Looks like that last quarter was 5 just 10% below current market. Just curious on what's driving that update?

Dean, do you have any information on that?

Yes. So it's Dean here, guys. So what we did was we looked more carefully at the actual space. I believe the prior quarter was slightly lower or showing a modest mark-to-market opportunity and it was reflective of looking at that specific property overall, but we realized we had to dive into the details a little bit further because it didn't make sense as we were looking at it for the current quarter. And as we looked at the space specifically, so a portion of the building and the specific space that they're occupying, there's a bigger mark-to-market opportunity. So we wanted to be sure we updated that number in the current quarter. So nothing changed from a real mark-to-market, but previously, it was the overall building. And today, it's just specifically, or this quarter it's specific to that space that they occupy.

Okay. And then just -- since I'm newer to the story, just kind of curious why the disclosure on that type company. It looks like it has a small market cap.

It's really due to that. Some -- occasionally, there's a tenant in the top 20 list of tenants that we did not curate ourselves or has a modest market cap, and we just want to provide some incremental color to some investors who don't need to research the details on their own.

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

You may be on mute, Rich.

I totally was, sorry about, Joel. So Peter, you talked about cap rates in your opening comments, and I think, Dean, you mentioned some partial interests that are far along and may be announced shortly. How would you characterize the quality spectrum of what you're looking at for partial interest? Are we talking very high-quality assets like the Binney Street transaction a while back or more middle of the road is a mechanism to minimize the cap rate, but also keep hold of your best assets and not relinquish too much of that opportunity going forward?

I'll start, Rich. The profile of what going on is good quality. We don't have much of anything outside, I think, of high quality. I mean, certainly some workhorse assets that we still hold, we've sold a lot of those. So the partial interest sales just because of the profile of our portfolio are typically going to be higher quality assets, and that's what we're working on now.

Are we sub-five, you're not talking about pricing just yet? Or can you give any...

I mean I don't think it does any good really to talk about pricing because we're still negotiating with people. And so better strategy to keep that to ourselves at this point.

Fair enough. And then second question for me is for Dean. You have an average debt exploration, I think, of 13 years, you said, I think your average lease term expires in 7 or 8 years. I'm wondering if that provides you any opportunity in the future in the interest of matching liabilities with assets, your way conservative in that comparison as it stands today. Do you ever see that, that gap shrinking whereas maybe the opportunity to raise shorter-term debt or lengthen lease term would make sense for the company? I'm just curious if that spread that you have in place now is something that could wiggle around a little bit in the future?

Rich, I guess the way to answer the question is I think we find significant value in the longer maturity profile given the size of our company and -- we have a meaningful maturity profile for a big company, right, or that matches a big company is maybe a better way of describing it. So the longer average debt term gives us a lot more flexibility to manage the overall maturity profile, right? Because if that was more like five years, with that much debt outstanding, it will be a lot to manage year-to-year on top of any growth capital. So I think strategically, the longer term of remaining maturity is a real positive for us.

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

Appreciated Hallie's comments at the outset about tenant health and funding and commentary around Pfizer M&A really jumped out. Maybe, Peter or Joel, during prior M&A cycles in the biopharma industry, what was the read-through for real estate usage? Did acquirers tend to consolidate the footprint of their portfolio companies or were there further expansions?

Yes. I can give you my thoughts, and Peter can share his. I think it's hard to compare past cycles because the level of technological development in biotech was so different. Today, it's much more sophisticated new modalities. So when you have M&A today, it used to be oftentimes you're buying a company for maybe a pipeline and you like to hold on to the people, but maybe space is less valuable going back maybe a decade or two. Today, that space is pretty critical, especially if it's located in a top-tier cluster market like Cambridge. Not only do you want the people for recruitment, retention and just working on the projects, but you've also got probably built into the space some pretty sophisticated new modality technologies, both at the lab side and in the R&D manufacturing, which is kind of integrated so closely. So I think it's harder to tell. I think, again, there's going to be a whole series of different types of uses of capital. A lot of it will be partnering, which has historically been probably the favorite approach of pharma. There will be some acquisitions. You've got a Federal Trade Commission that's pretty hostile to any acquisition in any industry these days. So you'll probably see bolt-on acquisitions where people will want to keep that group and that technology in tow. But I don't think it's is easy to look at, say, big mega mergers in the past and think that, that has any relevance to today. And I think the key buy line for life science in 2023, in addition to what Hallie kind of framed out is what will be the velocity, the depth and the focus of this large cash hoard $300 billion. And if you leverage it, you could be as much as $500 billion to $600 billion. But Peter, you could comment just historically and what you've seen.

It used to be if you were like a one-trick pony, it was an acquisition and then you shut it down. I mean, a good example is company called ICOS in the Seattle area was bought by -- they developed Cialis, they were bought by Lilly, and they completely shut down. But with the rise of platform technologies, a lot of the M&A, were super beneficial to the growth of our clusters. Companies realized that these teams that they were buying -- or these companies were much more valuable than just the pipeline, but the teams were extremely important. So there were a number of companies. I mean I remember when I was in Seattle, a company got bought by Gilead It was a -- it was called Corus Pharma. They were a 5000-square-foot tenant. And right after that, the Gilead approached us, and we ended up doing a huge over 100000-square-foot deal with them so that they could expand the capabilities of the team. So as Joel said, it ebbs and flows. But I think if you look at the fact that, I think about 75 -- or in certain years, about 75% of products that have hit the market have started from external innovation that end up on -- in pharma's hands, it's pretty telling that, that is a long-lasting strategy to cone the biotech world, to buy the companies and to keep the teams in place because they generally have platforms and other products behind their initial ones. So I think the general trend in recent years has been to keep them in place and to expand. That would be my...

Yes. Hallie, any final comments on that question?

Just to say that every acquisition is going to be very unique in terms of the types of products being acquired, the talent base that comes along with it, the market that it's in. And so we very much are acutely aware of kind of the one-off nature of every acquisition. And ultimately, for acquisitions where they may tuck it into the company, we see a net positive in the ecosystem. If it's a small company that does get folded in, those executives go on to create 1 more or multiple companies after that. So we've had some great examples in the past of a company gets acquired and then that CEO goes on to build a bigger and even larger company. So altogether, it's a net positive for the ecosystem, I would say no matter what the outcome is. And a great example in Seattle, as Peter mentioned, another great 1 is Celgene's acquisition of Juno and then the acquisition by Bristol-Myers, that's really one of their most critical advanced cell therapy outpost. So again, it's almost case by case, Rich.

Great. I really appreciate the thoughts there. Maybe sticking with Pfizer, we did notice that in New York, 219 East 42nd Street moved from future developments to intermediate developments. If memory serves me, I think there was a 6-year sale leaseback on that asset. What are your current plans, if any, on that building in a potential project?

Yes. So that building, which we acquired had a leaseback to Pfizer. Remember, it's an office building for Pfizer, but it unique in New York, very few buildings have the bones to be converted to lab. They are moving to Hudson Yards, as you know, and their lease is up, I think, out about 2 years or so. But we do have some internally generated demand for that from our current client base, and so we're moving that along.

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

I know demand for fully built-out lab product is pretty high. But have you noticed any difference in the level of demand you're tracking in your development pipeline where tenants do need to invest a significant amount of cash outlays to build out that space? I mean has that dropped off noticeably over the past 6 to 12 months given the disruption in the capital markets?

Yes. Peter, you could comment generally to upside.

Yes. one of the reasons the sublease market has stayed in check even when there's been some disruptions to companies is the fact that -- and as we've talked about for now almost 2 years, the high cost of construction has just created a much more expensive proposition when you have to build out lab space. The news, though, is that there's just not a lot of sublease space to satisfy all the demand. So deals where the tenants have to invest space, such as our development and redevelopment deals do continue to go. But I mean, there -- if you're a Board and your company wants to expand and they can go into 25,000 to 35,000 square feet of existing space, even though it might be in a different building and even the different neighborhood, they're going to consider that today just given the costs. We're still doing fine in our leasing of our development and redevelopment portfolio. But there is a sentiment that if there's an existing available space just try to grab it.

Okay. Dean, do you know if you're like competitors on the development pipeline? I mean, is that where the drop-off in demand is coming from is that first-generation type space?

Well, I think that the reason that others aren't as successful just because they don't have our brand. I mean it's -- we've talked about it for years and years. And there's a lot to be said about the operational excellence we bring, the management of the facilities to the design of the facilities. I think -- to the extent that there's projects out there that are pausing even after they've gone vertical or remain vacant, it's a number of things. One is that the location isn't comparable to ours; two, they've underwritten very high rents because they need to, their basis isn't very good; and three, they don't have a reputation to manage these critical infrastructure building. So I would say that, that's really the reason behind a lot of the competitive buildings not...

And major overruns on budgets, I can think of 1 project in Boston where a client went there because we didn't have exactly the space that they needed, and then they came back to us when the developer had a huge overrun on costs. So that goes on all the time.

Okay. And then just last 1 for me. I was looking at your current tenant roster versus the prior quarter, and it looks like Maxar Technologies dropped off the list. I mean is that a fair read? Am I looking at that correctly? And can you give us a sense of what happens there?

Yes. That is a project that we own where they're rotating out of that, and that will be a future development project -- redevelopment and development.

Yes. Our next question comes from David Rogers of Robert W. Baird. Please go ahead.

Maybe this is for Dean. But I wanted to talk about the leasing spread. When you excluded the 2 leases in the quarter, obviously, very strong performance for the company overall. Curious about the guide for this year, which you gave in December, reaffirmed last night. But at the 11% to 16%, I think you had said that there was some incremental component of that that was non-life science maybe. But can you give us a sense of kind of that 11% to 16%. Is that more a function of kind of market rents may be slowing down? Or is that just a function of kind of more different leases that have been added to that pool?

Dave, its Dean here. Lab rents remain healthy as you can tell from leasing statistics in the fourth quarter. Hard to really look out well as you go out into the future, and lab rents are trending well, as we noted from our results. There is a slight mix at play in '23 with certain expirations coming up and certain leasing activity we expect to accomplish, call it, non-lab product. But that product is a small percentage of the portfolio. Rental rates overall, even when you blend it all together, will remain very strong.

That's fair. And then maybe to follow up, Peter, in your last question in terms of kind of market rent growth, it sounds like it's bifurcating even further, probably between kind of the higher-quality and lower-quality assets. What does that spread look like today maybe across the portfolio or maybe pick the top three clusters in terms of kind of where replacement rents might be going versus where maybe a more traditional kind of A- asset might be performing today at a market rent level?

I can really only speak to our rents. I just don't have a lot of visibility to outside of the asking rents that we are hearing from competitive buildings. Our newer product and our -- in our older product, there's not much of a spread between it. Typically, you might see even a 10% to 15% premium for new buildings over older buildings. I think probably the availability of existing space makes the existing space more valuable today. But it also, I think, speaks to just the quality of our overall portfolio. We don't have a lot of B assets that you would -- that you could say that out in the suburbs, the single-story stuff that's not amenitized. Still, the rents, I can -- in the greater Boston, I mean, the rents out there for that type of product or are in the $60 to $70 range. Compare that to the $100 to $120 in Cambridge and maybe the $85 to $100 in Seaport. It's still fairly close, but you do the math and that will give you the premium. I think overall, though, I would say that rents for lab space have not regressed at all and are still fairly strong, and the has not been a big movement in concessions like you might be seeing in the office market. I know I read a lot about the office market, and I know that rents for high-quality buildings have held there, but concessions have gotten really, really high. And that's not the case with us. Our rents have held well and concessions have remained constant.

The next question comes from Dylan Burzinski at Green Street Advisors. Please go ahead.

And I appreciate the color on some of the transactions that have happened lately. But just curious, when we look at cap rates for purpose-built lab product versus converted product, have you guys seen any cap rate differential between the 2?

I don't have any specific examples other than maybe what I just talked about and the comp in is a really just terrible conversion. Burlingame is on the Peninsula. It is very close to South San Francisco. So to get a fully leased comp at an almost 6% cap rate, I think, probably illustrates that conversions aren't that appealing. I would expect good quality, purpose-built lab in Berlingame to be at least 100 to 150 basis points lower than that.

And most conversions, not all, but almost all don't work.

Okay. That's helpful. And then, I guess, just looking at the supply picture, are there certain markets or submarkets where you're starting to see supply pick up and maybe become more of a risk here?

From a supply standpoint?

Yes.

The numbers are -- the numbers for availability are still kind of where they've been over the last few quarters. I mean, the biggest supply overhang in any of our markets is in South San Francisco, and it remains that way. That is -- that has not really changed. We -- there's a lot of talk about supply in Greater Boston. Majority of what's talked about hasn't broken ground, some assets have. A lot of them are in the Summerville area, which is not competitive to where our product is. So we're not too concerned about it. But yes, I think that the supply story is always 1 that we have to talk about. People are trying to get involved in the business. But the best locations are very difficult to get. And some people have tried to fan out in other areas such as Summerville with limited to no success, I think, at this point.

Okay. Thanks. That's it for me.

The next question comes from Jamie Feldman of Wells Fargo. Please go ahead.

Thanks for taking my question. So I know you spoke a lot about how differentiated AllexInterest portfolio is and leasing demand is. But if you look at the market that it does kind of show in some of these markets, you're seeing flattish rents and concessions rising and net effective rents been declining month-over-month or maybe quarter-over-quarter. Are you seeing that at all in your portfolio? I mean, are you still pushing rents? And I know you said the concessions haven't grown a lot, but can you just provide some more color on how that really looks for your business versus maybe what we're seeing overall in the market?

Jamie, it's Dean here. Net effective rents have been positive over time for our business. So it's not declining, it's increasing.

Can you say maybe by how much like quarter-over-quarter? Do that like a same-store basis, how much you're pushing net effective rents?

I don't have it right in front of me, Jamie, but I don't have the exact statistic, but we recall reviewing it over the last month and it was a very solid positive trend. I mean it's -- look, our rents, cash and GAAP rents are up. Those are significant increases period-over-period. Net effective is just trailing out a little bit, but still directionally very substantial, right? Because their base net effective is based off your GAAP rents, right? Very strong.

Yes. I wouldn't doubt, Jamie, that other developers are offering concessions to try to bridge the gap between the quality and reputation that we have and what they offer. Our numbers are still stable at this point.

Okay. That's great news. And then I saw -- I noticed you did the $105 million forward equity agreement in the fourth quarter. Typically, this time of the year, sometimes you'll do a much larger one. Can you just decide -- can you just discuss the decision to do equity at all this quarter? And just how you think about why you didn't do something bigger?

Jamie, it's Dean. As we looked at our wrapping up the year, there was an opportunity to raise a very modest amount, as you've mentioned, $105 million. And as we looked at our overall capital that we raised during the year, which I commented on, it blended in very attractively. While, it was done at $150, I think the overall blended common equity proceeds were about $189 per share. So just keeping things in perspective, there's a modest amount that we raised. And Jamie, going back to your other question, I just needed a second to pull it, but 1 second, I just lost the page. But on rental rate growth, we were at -- so 31% GAAP, '22 cash for the year. Net effective for the year was something around 37%.

I guess I was thinking more in terms of just in the market today. I mean, you have a nice baked-in mark-to-market that's going to show up in leasing spreads. But are you able to still, versus last month, keep pushing rents? It sounds like you think you are on a net effective basis, but I was just hoping to get color on that.

It sounds like you're asking what the first quarter is going to look like. Look, Jamie, in the fourth quarter and the year for 2022, we are very strong. So I don't have an outlook going into the first quarter for net effective, but again, 2022 is up 37% on a net effective basis.

And directionally, just look at our guidance for GAAP and cash, too so...

Okay. That's great. And I guess just going back to the equity raise. So it sounds like you kind of think about it on a 12-month view, like that kind of cleaned things up for '22 and then '23 kind of is a fresh start in your -- how you would raise equity?

Well, maybe I think probably what's more important, Jamie, on the broad bucket of solving for equity-type capital, as I mentioned, we remain focused on dispositions and partial inter sales JV capital for a significant component of our capital plan for 2023. And we've got a couple of transactions that are fairly advanced right now executed LOI and moving through. So it's only January 31, and we feel like we're in a good spot moving on our capital plan there. And so we got to keep in mind that, that's an important component as well, Jamie, as it has been for many years now.

The next question comes from Omotayo Okusanya of Credit Suisse. Please go ahead.

Just a quick question on capitalized interest. I think there was a comment made earlier on that CIP would peak in first quarter and then slowly start to decline as you have deliveries. But I believe the CIP guidance is meaningfully above last year. Can you just help us kind of reconcile the difference? Just higher cost of capital being used to capitalize the CIP? Or how do we think about that?

Is your question just the growth year-over-year?

Yes.

The year-over-year growth is more just a function of the size of activities undergoing construction today. As you know from our disclosures we have 7.6 million either under construction or near-term starts on average, 72% leased. If you look at the fourth quarter capped interest, which is reflective of the average basis under construction, it was $79.5 million of cap interest for the quarter. it was $73 million in the third quarter, so I'll call it up about $6 million. It was $68 million in the prior quarter, so up about $5 million quarter-over-quarter. If you were just to continue to project out that $4 million or $5 million increase quarter-to-quarter, you can kind of project out what half of the year would look like. And just double that from that point forward, you're now at the bottom end of the range of our guidance. So directionally, it should make sense if you look at it from a run rate perspective. Again, year-over-year, it's up significantly because the amount of construction activities were actually up year-over-year.

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

Thank you, everybody, and we look forward to talking to you on the first quarter call. Be safe, feel well.

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