Good day, and thank you for standing by. Welcome to BXP's Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today to Helen Han.

Good morning, and welcome to BXP's Second Quarter 2022 Earnings Conference Call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In the supplemental package, BXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investors section of our website at investors.bxp.com. A webcast of this call will be available for 12 months. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although BXP believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday's press release and from time to time in BXP's filings with the SEC. BXP does not undertake a duty to update any forward-looking statements. I'd like to welcome Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions. [Operator Instructions] I would now like to turn the call over to Owen Thomas for his formal remarks.

Thank you, Helen, and good morning, everyone. Today, I will cover BXP's continued strong performance as demonstrated in our second quarter results, high-level trends in the economy and in-person work affecting BXP, current private equity capital market conditions for office real estate and BXP's capital allocation activities. BXP's financial results for the second quarter reflect the continued positive impact of the post-pandemic reopening of the major cities where we operate and the increasing needs for our clients for securing high-quality office space. Our FFO per share this quarter was well above both market consensus and the midpoint of our guidance, and we increased our forecast for full year 2022. We completed 1.9 million square feet of leasing, more than 160% of our leasing volumes in the first quarter and 140% of longer-term average leasing activity for the second quarter. This success can again be attributed to not only our execution but also the enhanced velocity achieved in the current marketplace for premium quality workspaces, which are the hallmark of BXP's strategy and portfolio. It's clear over the last quarter that economic conditions in the U.S. and globally have deteriorated. The key culprit is inflation, which as it continues to reach new highs, set off a chain reaction of events, starting with: the Federal Reserve taking and signaling severe tightening measures; interest rates rising across the yield curve; volatility and losses in the public equity and debt markets; and now increasing concerns that the U.S. economy may experience a recession. This evolving operating environment is having several impacts to BXP's operating activities. Though our leasing activity has been very strong for the last few quarters, we anticipate headwinds at least in the short term. Business leaders are generally more reticent to make large capital allocation decisions, such as a lease, in…

Thanks, Owen. Good morning, everybody. So our last conference call was on May 3. And over the last 86 days, the conversations on the demand side of our business have really shifted from, as Owen described, return to work and space utilization to the pace of job growth and job reductions as the impacts of the Fed's actions moved their way through the economy. While leasing activity has slowed some across every market, new lease transactions that have been in documentation during the first half of the year across all of our markets and not just with our tenants continue to move towards completion. In our portfolio, none of our active lease negotiations have been scrapped. And I think that's important relative to how we have seen other dramatic slowdowns occur, where people and companies have become much more cautious about what they're doing. There is, however, less urgency with clients to make new commitments. As we consider our expectations for leasing completions in the back half of '22 and '23, we are obviously factoring in the impact of the slowdown in the macroeconomic activity, business performance and reduced overall demand for space. The availability rate defined by third-party brokers that look at the entirety of the markets continues to appear to be very elevated across virtually every office market in the country, and our markets are no exception. Last quarter, we described the work that CBRE Econometric did on the availability in the premier assets in the urban markets. Availability of space is at lower levels among premier buildings. These assets continue to get more than their proportionate share of market demand. And there are still premier building micro markets like the Back Bay in Boston or View Space in Class A buildings in San Francisco that are still…

Great. Thank you, Doug. Good morning. So as Doug said, this morning, I plan to cover the details of our second quarter performance and our full year earnings guidance. And while I don't plan to provide specific guidance for 2023 until next quarter, I do want to discuss the potential impact of rising interest rates as well as the leasing commentary that Doug described and our development deliveries. Overall, we had another strong quarter. Our share of revenues and FFO this quarter are up over 10% and 13%, respectively, over the second quarter of 2021. And we reported second quarter funds from operation of $1.94 per share that exceeded the midpoint of our guidance by $0.09 per share. The improvement mostly came from a combination of higher rental revenues, stronger performance at our hotel and lower operating expenses. Lower expenses drove $0.05 per share of the outperformance and is primarily from the repair and maintenance category. We anticipate that many of these jobs will be completed in the back half of 2022, so the majority of this expense is only a deferral and will be incurred later this year. Our 1 hotel, which is located in Kendall Square in Cambridge, experienced stronger occupancy and RevPAR growth that exceeded our expectations by $0.02 per share. The return of business and educational activity to Kendall Square, along with the college graduation season, drove the improvement in hotel NOI back to the level that we saw in the second quarter of 2019. In the rest of the portfolio, we experienced better-than-projected rental revenues of $0.03 per share from timing of our leasing leading to improved occupancy and higher parking revenue. Our share of parking revenue continues to grow as activity levels increase in our cities and buildings. This quarter, our share of parking…

[Operator Instructions] I show our first question comes from the line of John Kim from BMO Capital Markets.

Doug, you mentioned on your commentary Class A San Francisco is holding up really well. You had a lot of strength in the market among smaller tenants. Can you just provide some more commentary on the makeup of those tenants renting for space, and also the impact of sublease space in the market, including Salesforce across the street from your building?

Sure. So again, as I described, the high-end premier space is really where the market has held up very, very well. And those tenants are, I would describe as, smaller to midsize professional services, asset management, legal, financial services companies, so hedge funds, money managers, private equity firms, law firms, consultants, et cetera. And none of those tenants are looking at a sublet of a floor at 50 Fremont, which is the building you're describing that Salesforce is -- actually put. It's actually not a sublet space because they own that building. That's actually direct space in the market.

I show our next question comes from the line of Jamie Feldman from Bank of America.

I guess just thinking big picture, your comments about some markets seem like they might be coming back faster. You just -- you're growing in Seattle. Just as you think about the future, are there certain markets where you're much more cautious about putting incremental capital to work and some that you are more aggressive putting capital to work here as you just think about how return to the office will work out and space usage will work out and kind of all the changes we're seeing in the market today?

Yes. Jamie, it's Owen. Look, I think our perimeter is established in the 6 markets where we operate. And as we look at opportunities, they're very much driven from the bottom up. So what deals are available, where do we think there's an attractive return versus risk trade-offs. And sometimes that's in acquisitions that we've been recently doing with partners, and sometimes that's in launching a new development. So I think as -- so you have seen us reallocate capital this year from the downtown of Washington, D.C. to Seattle. That certainly occurred in '22. In terms of the future, again, it's going to be more bottoms up based on the opportunities that we see. It's harder to predict. As Doug described in his remarks, we are seeing stronger leasing activity in Boston, in New York and in the suburban Reston, Virginia markets than we're seeing on the West Coast.

I show our next question comes from the line of Alexander Goldfarb from Piper Sandler.

So question just putting everything that you've said together. I think if I heard the comments correctly, generally, the office leasing is slowing, but premium buildings like the ones you guys have are continuing to win more than their fair share of leasing. And it didn't sound like you expect any slowdown in the robust 4 quarters of successive leasing that you have. It sounded like that leasing is good. Mike, you outlined $40 million more of interest expense for next year, but in outlining that $1 billion 8%-plus yielding pipeline that's going to be on track to be in service next year, that's an $80 million on the positive. So just putting it all together, is the takeaway that generally, the office market is getting tougher but BXP is winning more than their fair share? And because of the developments, you're way more offsetting rise in interest expense, so net, BXP should be better positioned? Or is that not the right takeaway and that we should think about more headwinds for 2023 and from what's going on?

So let me talk about the in-service portfolio, and then I'll let Mike and Owen describe sort of the other components. So on the in-service portfolio, Alex, I think it would be fair to say that we have a constructive but a moderating view on the leasing that we will do between now and the beginning of 2023. And we're assuming the economy is going to continue to be less strong than it is today. That doesn't mean that we will see any meaningful change in our portfolio outcome. We have some leases that are rolling over that are higher, and we have some leases that are rolling over there are lower. And then we'll -- the real question will be, as we always talk about, whether there are incremental pieces of downtime on spaces that we have leased where we haven't started revenue. So net-net, we feel -- I would say that next year and this year relative to our same-store portfolio, are going to be pretty consistent. Mike, you may want to talk about expense development.

Yes. I mean, I think the 1 thing that you got to remember about development, Alex, is all of it is not going to be stabilized day 1, right? So 880 Winter Street is delivering this year, and it will be stabilized day 1 because it's 97% leased. And I think all the tenants are going to be in by the first quarter next year. But 2100 Penn is 61% leased currently. As Doug mentioned, we've got a number of leases in the works, which will take that into the mid-80s percent lease perspective. But most of those leases aren't going to start until mid to late '23. So that building is not going to be stabilized probably until '24, I would say. And I think -- and the other thing I think that's important is View Boston, we believe, is going to have a ramp-up period. So it's a little bit harder to estimate how long the ramp-up will be, and we're highly confident that it's going to have a very strong return when it stabilizes. But the operator that we have that we've been working through believes that there will be kind of a few year ramp-up period. So again, its stabilized return is going to be a year or 2 out.

Yes. So Alex, kind of pulling all this together, what you're hearing from us is that we are in a less certain economic environment today than we certainly were last quarter. 2023 is a long time from now, and given the uncertainty, it's very hard to predict. So what we're trying to provide is what are all the trade-offs here, what could be up, what could be down. And we don't know the magnitudes of those yet. It's dependent on market forces. So Doug described the leasing. Clearly, the slowdown in economic activity is a headwind to leasing. Absolutely, we believe that our premium assets will get more than their fair share, so that trend continues. Capital costs will be higher. How much? I don't know. It depends on what your assumption is for interest rate. And clearly, the developments will add to our results.

And I show our next question comes from the line of Derek Johnston from Deutsche Bank.

So the newly formed JV, can we get some more details on the 39-story new development tower in NoVA? And specifically on the JV structure, so really hoping for a private market read-through. So I guess the question would be, are you seeing deep interest from potential JV partners like sovereigns, pensions, other institutional capital? Does it seem ready and willing here to partner up on Class A office? And how deep is this pool versus previous cycles and maybe markets as well as assets?

Okay. So let me break that question down into some component parts. So let's start with the interest by institutional investors and commercial real estate, then we'll get into the JV in Reston Next. The answer to your question, there absolutely is interest by institutional investors in office and, in this case, by the way, residential real estate. I think the interest is probably higher for the residential, but we continue to look at new investments and developments with the partners that we have done deals with over the last 1.5 years. And we continue to look at new things. So there's clear interest in office real estate. Moving specifically to this joint venture, this is about capital allocation. The yields from the resident -- from a residential development are generally materially lower than an office development. And we are being discriminating with the use of our capital and trying to put it in the highest-yielding opportunities. So, in this case, we decided to bring in a partner for 80%. We own 20%. The office component of the development is higher yielding, so it brings the whole yield from the project to us up. And there is some compensation that we receive as the manager of this development, which augments our returns. So we're putting out less capital. We require less capital to make the investment. We're doing the development and the returns for the capital that we have invested are higher, and that's why we're doing it. And I think you should expect that BXP will continue to work with capital partners certainly on office acquisitions and possibly on developments sparingly.

And I show our next question comes from the line of Steve Sakwa from Evercore ISI.

Just to kind of circle back on the leasing. I guess we've seen big tech kind of hit the brakes pretty hard on leasing. And certainly, they've kind of frozen their hiring. It's unclear, I guess, when that comes back. And Doug, we've seen certainly the biotech industry kind of hit the brakes on leasing. I guess, given the macro uncertainty, I guess at what point do you need to see those things pick up from a timing perspective to be able to move the occupancy needle forward in 2023? I realize there's still time, but I know these things take a while to get the leases in place get signed. So I guess I'm just trying to think through the renewals for next year, the new leasing activity that's slowing, and what kind of pressure that maybe puts on the occupancy build into '23.

Yes. So Steve, you ask an interesting question because if I actually parse down where our availability is, other than Northern Virginia, where we actually have operating assets with vacant floors that would likely be what I would refer to as sort of techy because it's either cybersecurity companies or web services companies or defense contracting companies which have a technology bend to them, the vast majority of our portfolio is really, in terms of our availability, is in our CBD assets, which are not primarily geared towards technology tenants aka Embarcadero Center is a very different asset than, as an example, Salesforce Tower or 680 Folsom Street. So we are not really, I would say, from a portfolio perspective, very focused on what's going on from a technology perspective relative to what we think we can achieve in 2023. But what I'm not saying is that we're not immune to the fact that the technology sector has been a meaningful contributor to the growth in office absorption in every one of our markets. And so it's hard to see the markets improving in any peculiar way without there being a meaningful change in technology companies' desire to take additional office space. So I think that we can surf above the fray relative to occupancy, but we're going to be impacted by the overall market dynamics that are going to be intrinsic to lack of additional absorption because those tenants are just simply not aggressively looking for space today.

I show our next question comes from the line of Michael Griffin from Citi.

It's Michael Bilerman here with Michael Griffin. Owen, Doug, I don't know who wanted to take this one. I'm just thinking about sort of strategic direction of the company just from a property type perspective. And as I think about the company is obviously over-indexed to office as what you are, as your primary property type, in the most high-quality buildings, in the most core urban coastal markets. The company has had great success over the years of developing and selling and sometimes retaining, whether it's residential or hotel or retail and obviously, all the life science stuff that's been core to the company for decades. How are you thinking about, given this economic environment that we're in today, and if you look at the residential reports or the retail reports or even the hotel reports that are coming out, there's not as much of a negative drag or uncertainty to which you're talking a little bit about from an office perspective? So is there any thought to perhaps going deeper from a mixed-use or alternate property type relative to office, whether that be through development, which you're already starting to do, or maybe through acquisitions? And just how are you and the Board sort of thinking about the next chapter of BXP and could that be different than from where we are today?

Michael, it's Owen. So to answer your question, our focus on office will obviously continue to be very important going forward. But let me make a couple of related comments. First of all, we have increased our development of residential assets over the last few years, and I think that will continue. I talked about some of the yield challenges that we have experienced with that, but we also have capital partners that we can work with. So I would anticipate that our residential contributions will grow. We have, as you know, also emphasized more our abilities and assets that are geared towards the life science market. And that segment is about 6% of the company, and we've said we think we can double that over a 5-year period of time. And we continue to develop new assets and grow that segment of our business. So I think that will continue to grow as a percentage. And then I think the other thing that we keep talking about, I think, is critically important is that I think you have to bifurcate the office business between the premium assets and the balance of the market. And the premium assets are something like 15% to 20% of the total assets. If you look at our portfolio, a vast majority of the assets are in the premium segment of the market. And we continue to have dialogue with major corporations about moving into new office developments that we're doing. And these buildings are new. They have the strongest sustainability characteristics, and they're what the clients that we want to serve want. So I do think that the premium segment of the office business will continue to be rewarding to our shareholders over time.

And Michael, I would just add a couple of things. So the first is that we continue to and have moved away from what I would refer to as greenfield ownership of assets, meaning we've looked at our Boston suburban portfolio and said, which of these buildings can we convert to life science because there's a lot more life science demand, we believe, going forward, than there will be office demand in suburban locations. You just saw us sell our VA 95 assets. And I would say that we will likely have a larger overall sales portfolio in 2022 and 2023 than we had in 2018, 2019 and 2020. And that will, to some degree, continue to sort of position the portfolio to be even more select about what it owns and where it owns it and what we believe the characteristics of those buildings are. So we may get slightly smaller relative to the kinds of assets that we own today versus what we will own as we move into the next number of years. And I would say that, that's a conversation that the Board has every single time we get together.

I show our next question comes from the line of Ronald Kamdem from Morgan Stanley.

I just wanted to zoom in on the spreads this quarter, given sort of there was a big bifurcation by markets, Boston, L.A., Seattle, San Francisco doing 20%-plus versus New York and D.C. sort of in the 17% and 16%. Can you provide sort of any color of what's going on there? What's happening in the market? And how should we think about that going forward in terms of the lease roll, call it, over the next 6 to 12 months?

Yes. So I just -- I want to sort of step back and just provide you with just a commentary that I've made a number of times over the years, which is the data that we provide in our supplemental are leases that are becoming revenue-contributing with the new lease this quarter. And many, if not all of those leases, were done historically at much longer time frames than what's going on today. So as an example, we did a lease in Washington, D.C. in 2019 with a tenant where the rent went down by 15%. It was a 5-year lease and there were no TIs. But it's the new rents commencing this quarter and so we're showing that rent downturn this quarter. When I provide you with the market commentary each quarter for the leases that were signed and executed this quarter, I'm giving you sort of the real mark-to-market that is occurring at the time. So it's impossible to look historically at the data that is in our supplemental and say, well, that's showing you what's going on in the market at that time. And those are historical numbers that are based upon what were our revenue contributions are. So again, so that's -- I gave you the reason for the stuff that's going on in Washington, D.C. And similarly, we did a large lease with a tenant at 601 Lexington Avenue in early 2020, where they took space from Citibank that Citibank was expiring out of and the rent was down. And so that was the logic on that transaction. And again, as I've said time and time again, our New York City portfolio is very sort of chunky on the ups and the downs. And this quarter, again, I sort of aggregated all together and said, of all the leasing that we did this quarter, we were basically flat. It was 0.3% positive. So -- and that's because there were some ups and there were some downs.

And I show our next question comes from the line of Blaine Heck from Wells Fargo.

Owen, you spoke a little bit about the transactional market in your prepared remarks and how overall volume is down but there's still good demand for high-quality assets. I'm just trying to reconcile that with your expected sales in D.C., which I'm assuming are not some of the best properties in your portfolio, maybe more similar to VA 95. I guess I'm just wondering what's giving you confidence in completing those sales. And how much flexibility do you guys have with respect to pricing on those assets? Are you committed to selling them or is there a price where maybe it just doesn't make sense?

Well, as I mentioned, there is definitely liquidity for office real estate. Financing buyers being able to arrange financing or buildings that have existing financing on them, I think, are critical for success. And we are at various points along in the execution of the sales of the assets that we are attempting in D.C. And we are encouraged by our progress. Clearly, we're not going to sell for any price. We don't need to sell these assets. We'd like to and reallocate the capital from D.C. to Seattle. But again, I do think there is good demand for higher-quality buildings and financing can be arranged.

And we're needed. And Blaine, I'd say the thematic comment that Owen made during his prepared remarks was, these are all buildings that are selling at what I would say are sort of consistent cap rates. And they're all well-leased with long lease terms. And the assets that we are marketing in the greater D.C. area are generally buildings with long lease terms with very little, if any, exposure to the market over the next 10-plus years. So I think they will -- we expect them to sort of have a similar expectation in terms of the execution because of the nature of the cash flows in those assets.

And I show our next question comes from the line of Nick Yulico from Scotiabank.

I just want to go back to the guidance and leasing assumptions. It feels like the first half of the year played out a little bit better than expected in terms of leasing volume. I mean, you're raising guidance on the same-store because of some of this. Yet the overall occupancy number that you have in guidance hasn't changed for the year. You just tightened up the range this quarter. So just wondering how much of that is due to, again, sort of just being conservative in the back half of the year. Or you did speak of some level of known expirations. And I'm wondering if that maybe shift on you where you -- there were some tenants you thought might renew and eventually, they decided to not and that sort of prevented you from raising your occupancy guidance this year.

I think that your first comment was the accurate one, which is we are, I would say, slightly less exuberant about leasing activity for the remainder of the year. And so if you look at the data that I provided, I basically said, look, we have 1.7-plus million square feet, actually slightly less than 1.7 million square feet of leases expiring. And I gave you visibility on almost that much leasing that's been done. The issue is some of it's in 2022 and some of it's in 2023. And then I said, by the way, that's what we have active. I will tell you that my active portfolio is not going to simply be all that we do between now and the end of the year or what we do at the beginning of 2023. There are things that will happen that I don't know about right now. We're a big company that does millions of square feet of leasing from every year. And there are transactions that will pop up that will also be part of the calculus here. Again, I don't know likely when those rents will commence from an occupancy perspective. So that's why I would say we're being -- I don't think we're being overly conservative. I think we're being realistic relative to sort of not having as much visibility on the rate of increase as we had as we were looking at the volumes when we talked to you 86 days ago, where there was a lot more going on in the markets in general and in our portfolio.

I think the other thing to point to, Nick, is we brought up the bottom of the occupancy by 50 basis points. And that's related to the activity that we're seeing and the leasing that we've seen this quarter. And so that gave us the confidence to increase that. And that's part of the reason we increased our guidance is that we knew that we had some uncovered rollover in the back half of the year. We knew that last quarter. We know it this quarter. But we covered more of it now because of the activity that we had this quarter. So the bottom end was brought up because we don't think we're going to lose as much of that occupancy. But there's still some expiries in suburban Boston. And there's a few floors at 599 Lex and there's a couple of floors at GM, so small amounts of space that are coming back to us that aren't yet covered and we all believe will be covered with leasing we'll do later this year. and that's kind of driving what we believe the short-term increase in vacancy we will see later this year.

And I show our next question comes from the line of Michael Goldsmith from UBS.

It's more of a philosophical question. I think in the last several quarters, you've talked about how the focus is perhaps more centered on leasing rather than rent growth, given how that flows through the financials. My question now is, how are you thinking about the trade-off, given the macro that you described? And then along the lines, like how can you lean into leasing even more, I guess, in sort of this uncertain macro environment?

So I guess I'll describe it in the following way. So first and foremost, we have a great portfolio of buildings that generally, as I said earlier and Owen sort of reiterated, get more than their fair share of market demand. However, as I also said, we are not immune to what's going on in the market. And so we have to be more competitive, in certain cases, because the market is desiring more in the way of concessions on particular transactions. And so where we have to do that, we're doing that. And we're -- our goal is to utilize our capital as best we can to get occupancy in our buildings with great tenants on a long-term basis, where we think we're going to be in a position where we're going to stabilize the amount of occupancy that we have, hopefully, at that sort of 93% to 94% level as opposed to the 89% to 90% level, which is where we are today. And that's fundamentally where I think we hope to get to with our portfolio. And we're going to do that through active management with our operating teams who are the best in the business in their respective markets and work really, really hard to understand what our customers' and clients' needs are and fulfil them in ways that get traction and allow us to create additional occupancy.

And I show our next question comes from the line of Omotayo Okusanya from Credit Suisse.

Just wanted to go back to some of the thoughts around interest expense in '23 and just the amount of variable rate debt that will be outstanding, especially with the new term loan on Madison. Curious, how much of that do you expect to kind of fix probably over the next 12 months? And does it make a difference whether it is via you guys raising kind of fixed unsecured to take out the term loan or putting swaps, whether that can make a really big difference 1 way or another in regards to the impact on interest expense going forward?

Tayo, this is Mike. So as I mentioned on the refinancings, we have $800 million of floating rate debt -- floating and fixed rate debt. Some of its floating today. About $300 million is floating and about $500 million is fixed, that is refinancing that we're going to fix. The $750 million term loan, we expect to repay and that will be repaid with proceeds from asset sales, and we have some pretty good visibility into that so we feel confident that we'll be repaying that. The development pipeline is -- basically, the funding is something like $150 million a quarter type of run rate over the next, say, 6 quarters. So at this point, we -- our plan is to fund that with our line of credit. It is possible that we could bake the election to do some sort of unsecured financing sometime in 2023 to fix some of that. And so that's possible. So we're looking at those strategies and thinking about those strategies, and we'll continue to. I think that the bond market today, we see credit spreads being wider than they have been historically and reflecting the uncertainty in the economy and the outlook in the economy. And I'm hopeful that those credit spreads will actually become more attractive next year as people have more visibility into what's going on with the economy as we kind of get through the increases in rates and we kind of see where the economy is going. So I think that it's possible that the pricing in those markets actually may be more attractive next year than it is today.

And I show our next question comes from the line of Daniel Ismail from Green Street.

I'm just curious how share repurchases factor into today's strategic plan and just your overall thoughts on the overall resilience of higher-quality office versus what we're seeing in the public share price today.

Danny, it's Owen. We have needs for our capital. We have exciting investment opportunities in development and in some cases, acquisitions and feel that's a better allocation of our capital than repurchasing shares. And we care about the level of leverage of the company, particularly given the economic slowdown that we've described. So that's our priority.

And I show our last question comes from the line of Vikram Malhotra from Mizuho Group.

Just 2 clarifications. One, I think I heard you say something around the stabilized or same-store portfolio into ‘23 being steady. Without giving us a number, could you just – does that mean same-store is likely to be flat on an absolute basis or actually see some sort of growth? And then could you just clarify on life sciences, somewhat contrast to your peers, one of your peers who reported, just specifically around the view on mark-to-market and leasing velocity near term?

I’ll cover the same-property growth comment. What I said was that in 2023, we anticipate that our same-property NOI will grow but likely not at the pace that we saw in 2022, which is 4% at the midpoint, with the reason being that our ancillary income has basically gotten almost to where it was so it’s going to grow but at a slower pace. And we’ve looked at the leasing markets that Doug described, and we’ve throttled back, I guess, a little bit the occupancy growth that we would have expected to have a couple of quarters ago. We still think our occupancy is going to grow from where it is today in 2023 but potentially not as fast as we had thought a couple of quarters ag’.

And I’m a little unsure your question on life science. We have very little in the way of what you refer to as life science rollover in our portfolio because the vast majority of the life science stuff that we’ve done are leases that have either recently or are about to commence. We have 1 building that’s going to – has a lease expiration in November, which is a building that we acquired about a year ago on Second Avenue, and there’s a material mark-to-market on that when we’re able to re-lease that building. But we just don’t – we don’t have much in the way of exposure to expirations in the life science business.

Thank you. I'm showing no further questions in the queue. I would now like to turn the conference back to Owen Thomas for final comments.

Thank you for all of your time and attention this morning, and we hope to see all of you at our investor conference in September. Thank you very much.

Thank you. This concludes today's conference call. Thank you for -- you may now disconnect.