Alexandria Real Estate Equities, Inc.

Welcome to Alexandria Real Estate Equity's first quarter 2020 conference call. Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then one on your touchstone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Paula Shorts from 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. And now we would like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.

Thank you, Paula, and welcome to everybody. And with me today virtually, I think our first virtual quarterly call in order of presentation is Jenna Foger, Steve Richardson, Peter Moglia, and Dean Shigenaga. And we're pleased to present the first quarter earnings call. This will forever be known as the COVID-19 quarter for all public reporting companies. And as I always do, I want to thank our entire team for a truly stellar, operationally excellent first quarter 2020 under extraordinarily difficult COVID-19 circumstances. Our current and go-forward operating and financial status is excellent. On the fourth quarter and 2019 year-end earnings call on February 4th, I commented on the novel coronavirus global health emergency and what Alexandria and our client tenants were already working on. Astoundingly, it was not until March 11th, 2020, that the World Health Organization declared COVID-19 a pandemic. The COVID-19 virus is a tiny 120 nanometer particle, roughly the wavelength of ultraviolet light that has rippled and replicated across the globe with virulent ultraviolence and more than 3 million cases worldwide to date. Tiny things have immense impact, especially when everything and everyone is so interconnected and vulnerable. And some have kind of dubbed this China's Chernobyl. In a few minutes, I'll ask Jenna to update you on the COVID-19 fight regarding testing, therapeutics, and vaccines, which is moving forward in a rapid pace literally every day. We at Alexander are laser-focused and enormously proud of our collective accomplishments during this very challenging first quarter, which none of us will ever forget. Our team's tireless and truly outstanding performance really by all metrics, and we are staying lean, mean, and laser-focused on our mission with no ego. Our teams acquired and delivered over 35,000 individual pieces of PPE, mostly N95 masks, and delivered those to hospitals in six cities. New York City, Boston, Seattle were our top priorities. We also delivered them to Dayton, San Diego, and LA hospitals. and we consider this to be a truly great execution of our corporate responsibility. Alexandria is among the industry leaders in total shareholder return. Alexandria has best-in-class tenants. Alexandria has best-in-class assets, and a powerful and inspiring cluster market presence, design, and placemaking, really second to none other. We have world-class trusted relationships, and importantly, Our Fortress Balance Sheet gives us great flexibility and optionality going forward. We in the life science industry are at the forefront of this multifaceted fight against COVID-19 while still innovating each and every day novel technologies and new products to also treat cancer, cardiovascular, metabolic, neurological, and other serious, serious diseases. While most REITs compare their business today to COVID-19, in the COVID-19 pandemic to the great financial crisis of 2008 and 2009. I think for us, we like to look at four years after that time, really in 2013, this industry and its innovation really catapulted its capabilities and impact starting in 2013, which really was the start of the great bull run of this industry. And as we sit here today, the life science industry is really the true solution to winning the battle against the COVID-19 pandemic, a return to the days when Merck and its then-CEO, Ray Vagelos, were the most admired company and the most admired CEO in America. The first quarter of 2020 set an all-time record quarterly high of $8.1 billion invested in venture-backed life science companies. A very high level and accelerated pace, over 80 of biopharma R&D collaborations took place, in the first quarter, including the blockbuster $483 million Moderna and BARDA government funding, and Moderna being one of our important tenants, to fund to advance and scale clinical testing in the manufacture for a novel COVID-19 vaccine, really the key to the solution here. Biopharma continues to outperform the broad market in the first quarter amidst the COVID-19 reality. While most industries are adversely affected by acute changes in consumer demand, this is not the case for biopharma, as the need for new medicines is fundamental to our human condition. This discrepancy is one of the reasons why biopharma outperformed other sectors during the great financial crisis and the tech bubble crash of 2001. NIH funding support remains very strong, with a 7% budget increase for fiscal 2020 up to $41.7 billion. A very favorable regulatory environment continues with the FDA, especially in light of COVID-19, and 11 new product approvals were achieved in the first quarter. Medical research philanthropy has also hit an all-time high as well. I think it's fair to say that much like flying was before and after 9-11, things will never again be quite the same as they were pre-COVID-19 and the international pandemic. How quickly we return to what will be a new normal depends on how we solve the public health situation, restore public confidence, and safety. Jim Collins, the famous business author and writer, research clearly evidences to be built to last, you have to be built to change. And more importantly, in Jim's introduction to his book, Built to Last, he states the real focus is, quote, it is really about building something that is worthy of lasting. It's about building a company of such intrinsic excellence that the world would lose something important if that organization ceased to exist. Jim Collins further stated, quote, We are more convinced than ever that building an enduring great company, one that is truly worthy of lasting, is a noble cause. And our mission at Alexandria is now more important than ever, and we are in the fight each and every day making a tangible and positive impact. And we were really graced by Jim Collins' quote on the cover of our 2016 annual report where he indicated, quote, Alexandria, has achieved the three outputs that define a great company, superior results, distinctive impact, and lasting endurance. And with that, let me turn it over to Jenna Foger.

Thank you so much, Joel, and good afternoon, everyone. Against that backdrop and the backdrop of the unprecedented economic, public health, and social impact of this global coronavirus pandemic, as Joel eloquently described, life science fundamentals remain strong. as the biopharma industry represents the beacon of hope in the fight against COVID-19. Effective diagnostics, therapies, and vaccines are absolutely mission critical to solving this crisis, and we truly owe a debt of gratitude to the heroic work being spearheaded by so many of our tenants to help test for, treat, and prevent COVID-19. The countless efforts we are tracking, not to mention the many philanthropic initiatives across our clustered campus communities providing medical supplies and protective equipment to neighboring hospitals is profound and inspiring. We are currently tracking over 60 tenants across our cluster markets with publicly disclosed COVID-19 programs, with dozens of intercompany and public-private collaborations transpiring across our portfolio. Our tenants' position at the forefront of fighting COVID-19 reflects the strength, quality, and fortitude of our tenant base. As you all know, we take tremendous pride in the tenants we attract, each of which is strategically underwritten by our finance and technology teams, which I have the profound honor of being a part of, alongside 20 of our colleagues with deep backgrounds in science and business. So I would like to briefly highlight the mission critical work of our tenant companies across three major categories. One, improving testing quality and capacity. Two, advancing new and repurposed treatments. And three, developing preventative vaccines. So in the area of improving testing quality and capacity, tenant companies including Abbott Labs, LabCorp, Roche, Quest Diagnostics, Thermo Fisher, UCSF, Color Genomics, and several others are working to enhance the quality and capacity for rapid and accessible testing to determine who actively has the virus, who has been exposed, and who has developed immunity against it. The availability of widespread screening and serological testing of this nature will be instrumental for track and trace initiatives and, of course, the safe and healthy reopening of society and return to work. In terms of therapies and vaccines, Over 180 potential drug treatments and vaccines are being studied in more than 250 clinical trials around the world, with well over 100 preclinical stage programs in development. As you can imagine, a substantial number of these programs are sponsored by our tenants. Headlining efforts among them include Gilead Sciences Remdesivir, which is in late-stage studies for the treatment of moderate and severe COVID-19 patients, which, if positive, will likely form the basis for the first FDA-approved treatment for COVID-19. Tenant Company Adaptive Biotechnologies has partnered with Amgen to identify and develop therapies from the blood of sick or recently recovered COVID-19 patients. Other tenant, Veer Biotechnology, has announced partnerships with fellow tenants Alnylam, Biogen, GSK, and others to develop new and existing antibodies that could be used as therapeutic or preventative options to combat COVID-19 and other coronaviruses. Several other tenants, including AbbVie, Eli Lilly, Fiverr, and Novartis, are similarly endeavoring to develop novel therapies and repurpose existing drugs to provide near-term treatments for moderate and severe COVID-19 patients and those at highest risk. And lastly, vaccines. So clearly, a prophylactic vaccine represents the effective end of this global COVID-19 pandemic. Our tenants, Moderna and the National Institute of Allergy and Infectious Diseases, NIAID, partnered to fast-track Moderna's mRNA-based vaccine into the clinic last month. Subsequently, as Joel mentioned, BARDA committed up to $483 million to support the clinical development and manufacturing scale-up of Moderna's vaccine candidate to help expedite FDA approval over the next nine to 12 months, an unprecedented pace for this sort of activity, and facilitate the supply of tens of millions of doses of that vaccine per month thereafter. Other tenants, including Johnson & Johnson, Medicago, Novavax, Pfizer, GSK, and Sanofi, are leveraging their vaccine development expertise and technology platforms with the goal of expediting the delivery of a safe and effective vaccine to the public in 2021. These noble and expedient efforts across our tenant base owe in large part to the fact that as the new coronavirus made itself known to the world, these companies were already well equipped with the R&D infrastructure, resources, and talent in place, such that they were able to mobilize at nearly a moment's notice to combat this unprecedented global health emergency. And with that, I'll turn it over to Steve.

Thank you, Jenna. Good afternoon, everyone. Steve here. We've discussed the mission-critical nature of our laboratory office facilities since our inception 26 years ago. It is clearer now more than ever that Alexandria is the proven leader in providing mission-critical and indispensable strategic national health infrastructure in these unique facilities. As Joel and Jenna outlined earlier, we have 60 companies directly engaged in the fight against COVID-19. Our unique platform is leading to healthy activity at Alexandria's Class A laboratory facilities. During Q1, we leased 700,000 rentable square feet at very strong rental rate increases, actually the highest during the past 10 years with 22.3% on a cash basis and 46.3% on a gap basis, led by a large lease on our flagship Tech Square campus in Cambridge. Our mark to market continues to be strong at 15.8% gap and 14.3% cash. Lab supply constraints continue with nearly zero lab subleases coming to market since the inception of the pandemic and continued strong occupancy at 97.5% in our campuses. When excluding the vacancy of the recently acquired campuses in San Diego and South San Francisco, that will provide future growth opportunities. Executed leases now for the month of April are on pace with Q1 leasing velocity, and important to note that we do have ongoing demand in the form of serious interest in negotiations with tenants on renewals, expansions, and our new ground-up developments and redevelopment projects. It's also important to highlight that Alexandria has long been a pioneer and early adopter in the discipline of designing and constructing state-of-the-art healthy facilities. We currently have 39 total FitWell and WellHealth certification initiatives, with 12 projects completed and another 27 projects underway. One of these facilities in Cambridge, in fact, received the highest score FitWell ever awarded. Our mission-critical facilities already feature many state-of-the-art mechanical and filtration attributes and are easily adaptable as may be needed going forward, guided by our skilled operational teams who are well-versed in the types of measures needed to deliver enhanced environments. Finally, Alexandria is fully prepared and well positioned at all strategic and operational levels to protect the inherent value of our unique Class A facilities and continue to grow as a trusted partner to the life science industry to beat this pandemic. With that, I'll hand it off to Peter.

Thank you, Steve. I'm going to quickly update you all on our development pipeline acquisitions closed in 1Q and touch on some capital markets activity. Coming into 2010, we have 11 development and redevelopment projects in our pipeline that are 61% leased with another 7% under negotiation. One of the many things that we like about our pipeline is that it is spread among six markets and nine submarkets, which really shows that the ecosystems we've built and all of our clusters are contributing to our growth and our story is not just about any particular region. Despite the shelter-in-place orders reducing our ability to tour potential tenants, there is good activity on partially leased assets that are progressing at various levels from initial online presentations, to paper being traded. As Steve mentioned, we are still seeing healthy activity in our markets and these leasing percentages should accelerate given the pent up demand and the new COVID-19 related requirements. As you may have noted by looking on page 38 of the supplemental, seven projects have had a temporary pause in construction, but three of them have restarted as they've been deemed essential. Delays related to shelter in place orders, or I'll refer to as SIP, are not day for day. They are likely between day for day and two days per day of delay, depending on how long it takes to remobilize the subcontractors back on site and where we were in the staging of the work. We do not anticipate any material supply chain issues. The amount of delay is really going to depend upon the subcontractor labor and what other work they are performing elsewhere. In general, we anticipate about one quarter delay on average for those projects that are in temporary work stoppages due to SIPP orders and assuming construction recommences upon lifting of the current orders and they are not further extended. We do anticipate or we do not anticipate any material movement in yields at this time due to these delays. Touching on acquisitions, in the first quarter, we closed on two projects we discussed on last quarter's call, 275 Grove in the Route 128 corridor and the JV with Boston Properties in South San Francisco. In addition to those, we closed on 9808 and 9868 Scranton Road in Serrano Mesa and 3330 and 3412 Hillview in the Stanford Research Park. The Scranton Road assets total 220,000 square feet and are located directly across the street from and will be incorporated into our SD Tech campus. They are currently 88% leased with the predominant tenants being investment grade companies. The assets present us the opportunity to achieve a strong 6.8% stabilized cash yield by leasing the vacant space and future value creation opportunities as they are convertible to lab. A 50% interest in these assets was subsequently sold into a joint venture, and we received $51.1 million from that asset sale. As mentioned, in addition, we closed on 3330 and 3412 Hillview in the Stanford Research Park for $105 million. These two high-quality Class A office properties total approximately 106,000 square feet and are fully leased to credit tenants. The rents are considerably under market and offer near-term value creation in an irreplaceable location. The buildings are also convertible to lab, offering us long-term optionality and further value creation opportunities down the road. Subsequent to the end of the quarter, we closed on 975 to 1075 Commercial Street and 915 to 1063 Old County Road, a 12.7-acre site that is the fourth and final piece of our 25-acre assemblage branded as the Alexandria District in San Carlos. This campus is in close proximity to the Caltrain Station and will reach 2 million square feet upon full development. The first phase of a little over 500,000 square feet is currently under construction and has been well received as the only purpose-built Class A lab campus in the greater Stanford cluster, illustrated by it being 56% pre-leased with another 9% under negotiation. I'll wrap up by mentioning that conversations with a number of brokers indicate that there is still strong interest in lab office assets, from a diverse set of investors. To that end, The Post, a 426,000 square foot campus in Waltham, Massachusetts, closed on April 2nd at a 5.1% cap rate, the lowest suburban cap rate we know of. And a reliable source has told us another life science transaction in the Boston area has gone under contract while in the shutdown. With a positive light shining on the industry, it is not surprising that demand for our product type remains robust. And with that, I'll pass it over to Dean.

Thanks, Peter. Dean Shigenaga here. Good afternoon, everybody. I'm just going to quickly rattle through my commentary. Kicking off with really outstanding results for the first quarter, revenues were up 22.6% over the first quarter of 2019. NOI was up 22.9% as well over the first quarter. Adjusted EBITDA margin was very strong at 68%. Contractual annual rent escalations average almost 3% today. Our value creation pipeline is 61% leased and will generate significant revenue and cash flows, and I'll come back to this topic in a moment. We also have about $37 million of annual cash net operating income that will commence as free rent burns off primarily over the next four quarters related to recently announced placed into service development and redevelopment projects. Same property NOI growth was very solid at 2.4% and 6.1% on a cash basis. Rental rate growth, as you heard from Steve earlier, on lease renewals and releasing the space was very strong, up 46% and 22% on a cash basis. And our properties are open and operating today and through this environment. Our business is not absolutely immune from this unusual and unprecedented environment, but is doing very well on a relative basis. The NASDAQ Biotech Index, as some of you may have noted, was up 5.8% year-to-date as of yesterday, and our stock has outperformed on a relative basis, roughly down about 7% year-to-date again as of yesterday. Our team is working diligently on our annual corporate responsibility report, which we expect to issue around mid-year. Now, as Joel had highlighted, our balance sheet really remains in the best shape in the history of the company. We have about $4 billion of liquidity. We have an excellent maturity profile with no debt maturities until 2023. We rank roughly in the top 10% on a relative ranking with our credit profile when compared to all publicly traded REITs. We have a real high-quality tenant roster, et cetera, et cetera. I mean, these are just some of the best statistics in the REIT industry today. And we remain committed to our strong and improving credit profile. Our dividend is well covered with an FFO payout ratio just under 60% today. This strategically allows us to use a portion of our cash flows from operating activities after dividends, which is just above $200 million today, for investment into our value creation ground-up development projects. Now, briefly on rent deferrals and an update on rent collections, we've only received a handful of requests for rent deferrals, which is primarily on the retail side of our tenancy. We've really taken these requests one by one, and we'll review these each one month at a time. The total rent deferrals were in the low $600,000 range for the month of April. Now, we're very proud of our research and property management teams for really building an outstanding and high-quality tenant roster and for really taking care of these long-term relationships. We've collected 98.4% of our April rent and expense recoveries, which is just outstanding. Our AR balance as of Friday, April 24th, was $7.3 million, representing the lowest balance since 2012. And our team has successfully decreased our AR balance, both when we look back to the depth of the great financial crisis. So our goal was clear from the beginning of April that we would continue to make this a priority each month. We're feeling really good now that we're at the end of April. We've collected almost all of our account receivable balances. Our business is doing really well, again, relative to other REITs. However, this is an unprecedented environment. and we have forecasted a relatively minor impact to our outlook for the last three quarters of 2020. We're forecasting about an $0.08 or 1% reduction in FFO per share as adjusted at the midpoint of the range of our guidance. And this is really related to a very limited retail tenancy that we have, as well as transient and short-term parking. Of the $0.08, 60% of this is related to retail, and the remainder is primarily related to transient and short-term parking. To put this into perspective, this $0.08 is roughly 60 to 70 basis points of our annual rental revenue, and we believe this will only be about a 50 basis point decline to our year-end occupancy. As of March 31st, our annual rental revenue from retail was about $10.4 million. We recognize an allowance of about $3.8 million related to NOI for the second, third, and fourth quarter of 2020. And most of the impact to retail revenue will really occur in the second quarter since GAAP requires cash basis revenue recognition related to these leases that now have specific allowances or reserves. And our retail-related occupancy declines, which we expect to be very minor, may not occur right away since these leases are still in effect today. And keep in mind, retail is a very minor part of our operating results, but we hope these details are useful. Parking income for ARE is primarily from urban or CBD markets, and these markets have very limited parking to service tenants and daily parking needs. For example, Juno Therapeutics in Seattle has about 600 employees, but they only have parking for about 50% of that employee base. So these really dense urban CBD submarkets generally have lower risk of a major decline in parking income due to the very limited supply of spaces in the markets. Our outlook for same property performance for 2020 remains very strong, down only about 50 basis points. The eight cents of FFO per share related to retail and parking revenue translates to about 60 to 70 basis points of same property results. And this was offset by our same property results in our forecast running at the upper end of the range prior to this guidance adjustment. Now turning to real estate impairments we spent Quite a bit of time analyzing options for one of our unconsolidated retail joint ventures. To put this into perspective, this deal came together back in 2015 as we were looking for opportunities to monetize certain assets, including this land parcel. Now, in this case, we found an opportunity to contribute our land into a joint venture with a local retail developer in Maryland. And this project was really doing well on its way to solid, stabilized NOI. until COVID-19 arrived and almost every tenant was required to comply with executive orders and close their business. Now, we concluded that we're not going to recover our basis and wrote off our investment of approximately $7.6 million. Turning to our venture investment portfolio, the portfolio has done really well to date. For example, our venture investments aggregate about $1.1 billion, but this includes unrealized gains of $384 million. During the first quarter, we did recognize impairments aggregating about $19.8 million, primarily related to three privately held investments. One is focused on Parkinson's and ALS, another in the dermatology area, and the third is a smart glass technology-related company. Now, each of these companies really have great innovation and technology. However, we do not expect to recover our entire investment. On the positive note, realized gains for the first quarter were $15.1 million in Recent quarterly gains were put on for 2020, really are on track to exceed the 50.3 million in realized gains recognized in 2019. Turning to our value creation pipeline, we're uniquely positioned with flexibility to be prudent during this unprecedented time, while we're also very well positioned to address future demand. Now, construction has been impacted in urban markets, with more of our suburban markets having limited to no impact. COVID-19 and other projects continue while following appropriate guidelines. Now, we felt it was prudent to significantly reduce our 2020 capital plan with a reduction of $640 million in construction spend and $300 million of acquisitions, both at the midpoint of our guidance. Now, our remaining construction spend for 2020 is now primarily focused on construction that is committed to tenants Importantly, though, we remain uniquely positioned for opportunities on a project-by-project basis to meet the demand for our well-located pipeline of future ground-up development projects. Now, we updated our 2020 guidance to arrange for EPS dilutive from $1.69 to $1.79 and for FFO per share diluted as adjusted from $7.25 to $7.35 to As usual, please refer to the detailed underlying assumptions included in our 2020 guidance beginning on page 9 of our supplemental package. Let me pause there and turn it back to Joel.

Operator, let's open it up for Q&A, please.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Sheila McGrath from Evercore ISI. Go ahead.

Yes, good afternoon. Joel, I was wondering if you could talk big picture your thoughts on research funding for life science tenants in the race for the cure, do you think the laser focus will have some positive outcome for R&D funding for your tenants? And you also mentioned 60 tenants working on COVID responses. Are they dominated in any one or two single markets or across the portfolio?

Hi, Shayla. Welcome to the call. So I talked about NIH being up 7% this year. who knows where Congress may decide to additionally focus. There was $25 billion in the recent CARE bill, I think the second edition, focused on testing. In fact, I was on a call the other day where there's going to be some rollout of some pretty amazing novel testing, so a lot of money is going into that sector. In fact, it may be that the nasal swab will actually be old technology at some point and people will be using there's some research out of practical research out of Rutgers and Yale indicating that you can actually find virus in spit and if you could imagine you could do that simply on a daily basis and be alerted on your smartphone that you are aren't able to go to work that would be a pretty unique solution so we see a fair amount of money both from pharma from bio From the venture side, obviously, from philanthropy and from the government, I think the BARDA deal that I mentioned and Jenna mentioned, almost a half a billion dollars to try to ramp up testing and the vaccine with Moderna is one example of, I think, extraordinary focus in this area. So I think it's broad-based and really across multiple regions.

Okay, great. And then on leasing spreads for the quarter, I think Steve mentioned they're the strongest in 10 years. I was wondering if you could give us more detail on the mix of the increases geographically and if there was any one lease that was well below market that might have impacted the numbers.

Yeah, I'll have Steve comment. It was somewhat broad-based. One of the important leases was a renewal in TechSquare, don't want to get into the details of that, but that was certainly an important part of driving. But Steve, any further comments?

Hi, Sheila. It's Steve. No, that's exactly right. We do have, as we said, mark-to-market strong across most of the regions, and it is typically broad-based. For this particular quarter, we did have that one lease at TechSquare that was a particular driver. But in general, we do have nice mark-to-market opportunities.

Okay, last question. On the North Tower, your 10Q mentioned that that project would be postponed. I'm just wondering if that in New York, is that indefinitely postponed, or what's the status of that future development?

Right. As you maybe even have seen on television when some of the news – Media reports go to that site, which is right next to our two towers. The pad that was the location of OCME, the Office of County Medical Examiner, was occupied for many, many years with the white tent with the unidentified remains of the World Trade Center victims. They vacated that site, and then we began a diligence there. They reclaimed that site for a temporary period. Just a number of weeks ago, they have mobile morgues there because of the number of people dying in the New York City area. We would expect them to probably vacate that by the summer or the fall, and then we would look to see where we are with the economy and so forth. But I don't think it's going to be an indefinite postponement in the sense of how long they'll be there. We just don't know at this point.

Okay, thank you.

Sure, thank you.

Our next question is from Anthony Paolone from J.P. Morgan. Go ahead.

Yeah, thank you. You talked about just the continued demand for space from your life science companies and reading these headlines about Google maybe changing some of their space plans. And so I was wondering if you could talk about When you net all of this, maybe what's happening on tech and what's happening in life science together, what do you think is happening with your rents and what do you think will happen with occupancy on the ground in some of your markets?

Well, I'll ask Steve to come in in a minute, but I think in general we're a dominantly life science-focused business, as you know, Tony, for a long, long time. We do have a number of important single-tenant buildings where we have companies like Google. They have the original campus they started in, Facebook, et cetera. We don't typically have multi-tenant office buildings that have lots of different tenants and lots of different in the office vein. And so we don't think that's going to have any particular impact on us. It may more broadly. But Steve, you could comment what you're seeing on the ground.

Tony, hi, it's Steve. Yeah, broadly, when you look at just the overall vacancy in these markets, they're typically mid single digits and even low single digits. Look at Cambridge, 1.8% vacancy. San Francisco, 2.2% availability. and on with other regions as well. And then my comment as well, there has not been really any significant sublease space that's come to market since the pandemic. So you do have, again, a constrained supply situation. We think pricing power will be maintained. The level of demand continues to be strong. Again, April's activity was consistent with what we saw during Q1. of this year, so the markets are, in fact, healthy at this point, and we're very, very close to them as well with our installed tenant base.

I think the bigger question, Tony, that you may be asking, too, is will these companies somehow decide to put people in more remote locations or even at home, and that's something we just don't know yet. There are obviously a number of office tenants who've indicated that You know, they will have a new way of working, maybe in shifts, or in fact, maybe will wait and do telecommuting until there's either an effective therapeutic or, you know, hopefully an effective vaccine as well. So we haven't seen that roll out. But again, in the office world, most of our leases are really full building leases with the major tech companies. We don't have lots of spaces rolling and smaller spaces to deal with, so that's a good thing on the office side.

Okay. And then in terms of the acquisition you walked away from in the quarter, can you give us a sense as to the size of it and what changed or what your view of value was and maybe is now to prompt, you know, leaving the $10 million on the table? Sure.

Yeah, so maybe I'll have Dean comment, and then maybe Steve as well.

Hey, Tony. Dean here. So the size of the deal is roughly $150 to $160, $160 million in that range. And it really came down to economics at the end of the day during the diligence period, Tony. We constantly revisit... The cash flow analysis and our views on the performance of the holding in the near term was meaningfully different. When we took it in totality with our business today and where we wanted to deploy capital, it was a pretty simple decision even though we don't take these decisions lightly because you're talking about $10 million. It's the only transaction I can think of in the history of the company where we've had to do that. It was well thought through, and I think the prudent decision for us as well as our investors to pause and terminate the deal.

Keep in mind, it was an office asset in the city of San Francisco. Steve, anything else you'd want to add?

No, Dean really covered it there. Thank you.

But just to make sure I understand, was it more you just saw your capital better situated somewhere else, you know, given what's unfolded? Or was there some, okay, it wasn't a matter of the tenant crapped out or something?

Well, I think in this, remember what I said, this was a office asset, a multi-tenant office asset. So you can imagine your first question really went to the heart of that. As we saw things unfolding in the office sector, our underwriting, you know, changed. And so that kind of alerts you to, is this where you would want to deploy your capital in this particular kind of environment? And the answer was no.

Okay. I understand. Thank you all.

Yep. Thanks, Tony.

Our next question is from Tom Catherwood from BTIG. Go ahead.

Thank you. And good afternoon, everyone. Peter, It was helpful, your comments on the seven active construction projects that had been delayed and the three that had been restarted. But you also have another 2.1 million square feet of near-term development opportunities. Have your capital spending plans impacted these projects? And are there some that you're prioritizing over others at this point?

Yeah, so maybe let me ask Dean to kind of take first shot at that.

So, Tom, the way we thought about our capital, and this is true for many years now, a large portion of our capital spend is in the category that we always have the flexibility to moderate like we did just now with our earnings release. These are future projects in the pipeline that have not yet commenced vertical construction. not committed to tenants yet, we move them along to shrink the time to deliver, which means everything from entitlement to site work. We could be doing anything below grade, which could include obviously infrastructure, but a parking garage if necessary, just the shrink the time to deliver. Now, there's still important costs continuing, but the bulk of the spend has been temporarily paused because we think that's the most prudent thing to do in this environment. And I think as we get clarity to COVID clearing out and things getting closer to normal, I'm pretty confident we're going to see opportunities that will present themselves, i.e., tenants looking for expansion capacity within this portfolio of land holdings that we have. And we could do these deals one deal at a time, Tom. I think that's the beauty of the position we're in. We can moderate the spend like we have, but we also can be opportunistic when appropriate. And I think that's what we really want to convey. The projects, by and large, remain in the priority the way they've been disclosed from near-term, medium, and future. And that's how we rank them generally. But the specific ones that will pull the trigger on will be more demand-driven.

And keep in mind, as we said in our guidance, Tom, one of our overriding goals, having lived through the great financial crisis, was to give ourselves maximum optionality so that we adjusted our spend and our go-forward business plan almost on a dime, pivoting very quickly so that we don't need to raise any further capital this year to accomplish what we presented here on the call.

Got it. That makes total sense. I guess the kind of follow-on to that then would be, so I assume then you get those projects that are near-term to a level where there aren't significant startup costs. Again, I guess thinking longer-term for yield impacts, and obviously it's very early to be able to tell on that. But I would imagine if it was shut down midstream without full entitlements, or without full approval, that there would be kind of restart-up costs or delays. So all that is part of the calculation.

And I mean, to some extent, something similar was different, but yet there is kind of a similarity during the great financial crisis when we continued to build the East Tower in New York and we shut down the West Tower having finished the foundation. but we didn't go vertical and it turned out to be, you know, a really great call.

Understood. And over to acquisitions, obviously acquisitions came in higher than expected over the past two years. The lower guidance for 2020 makes sense as you talk through your capital allocation plans, but I want to get more color on the transaction market in general and Is part of the lower guidance that you're seeing sellers pull their properties because they're not getting the pricing they want? And on the flip side of that, sorry, go ahead, Joe.

I was going to say, let me just respond quickly. No, I think that's part and parcel of giving ourselves the maximum optionality where we don't have an assumption of as many acquisitions as we had earlier so that we don't have to tap either the debt or the equity markets at all or even raise money through partial interest sales or whatever. So part of that was had nothing to do with the outside, you know, state of the market. It had to do with giving ourselves, you know, total and maximum optionality here. That was the driving force.

Got it. Got it. I was just wondering as far as if there were opportunities out there that you think you might like that we missed out on because of the lower guidance, but it doesn't sound like that is the driving force.

No, although given where we are today and our balance sheet as Dean articulated, we have optionality to do a lot of things that maybe we wouldn't have had to do in a different environment. So it really puts us in a unique and, I think, excellent position, which is where you want to be if you can be.

Got it. Thanks, guys.

Thank you.

Our next question is from Manny Coachman from Citi. Go ahead.

Hey, good afternoon, everyone. In your press release, you talked about the fact that a lot of the new ground-up development in your pipeline is supportive of COVID-19 research. That would obviously imply that that's a shift as to the work that's happening in those facilities. So, one, Is that simply an overlap with the tenants that were already signed up and now they're going to be doing that type of work in those facilities? And two, does that mean that there should be more shadow demand for all of the other stuff that they thought they would be doing in those spaces pre-COVID?

Well, so maybe the first question, the COVID-19 type requirements or requirements COVID-19 type infrastructure requirements, I should say, in the buildings. These are companies who are already focused in areas of therapeutic need in the antiviral areas, in certain testing areas, certain infectious disease areas. I mean, Vera is a good example. That was their business before. And to be able to move from a particular area focus in infectious disease or in, you know, therapies in the antiviral side to a COVID-19 is not much of a stretch because the basic capabilities and technology and manpower is already there. So there isn't a lot of big pivoting among tenants who we're working at. I mean, the Eastlake development for adaptive, I mean, they are, you know, all over the COVID-19 area, but it was a natural progression from where they were. But the second part of your question, yes, we've been already contacted. I can think of personally about a half a dozen emails I've got from individuals from companies where they are looking for additional capability, additional facilities for their ramp up on COVID-19, whether it be vaccine, therapeutics, or in fact in testing. And so we do think there will be some pent-up demand there.

Great. And then, you know, on your comment about sort of the retail environment within your assets, what does that retail look like on the other side of this? Is it going to be a different mix of retail? Is it going to be not retail at all? help us get it out there, first of all, what those retail spaces will look like.

Yeah, that's really hard to say. My sense is that given that we're not a heavily retail-oriented developer and operator, we think that one by one, we're going to look at the retail operations and see, does this make sense in a new environment? People are going to want you know, clean, repackaged, probably not so quickly, you know, to sit down. So I think there's going to be some shift. Some operators will be, you know, pretty facile at being able to do that, and others probably won't. And I think those will just be done on a one-by-one basis. Luckily, as Dean said, we don't have immense numbers of retail tenants, though for us it will be pretty methodical to try to go through that analysis. But I think it's fair to say until there's a truly effective vaccine, people are not going to be socializing and eating the way they used to. Thanks, Shelton. Thank you.

Our next question is from Jamie Feldman from Bank of America. Go ahead.

Thank you. I was hoping you could talk about your tenant base, the life science tenant base that's not involved in COVID-19. I mean, are those tenants basically still open for business?

They are.

And any pushing for rent relief or any kind of issues on earnings or revenue?

No. I think what's happening is many of the office-type people are working virtually because you've got a component in every company depending upon size. of people who are just office users. And then people in the labs, you know, labs by their very nature are essentially you've got good spacing, you know, between people. In fact, when we've done tours in the past, especially I remember in San Diego people saying, oh, my God, are there anybody working in the labs? You know, so because on a beautiful day a lot of times people work through the night rather than during the day. Right. I think people have adapted pretty well, so they have essential crews going in to do continue experiments and mission-critical work, and they shift around on days and weeks, and then those who don't need to be there aren't there until the stay-in-place orders are lifted. But everything is essentially open and working, but under new rules and new rules of the road, if you will.

Okay, and then as you think about long-term building design, Do you think, you know, there's a lot of talk about what might be different in the office sector, but if you think about the lab sector, do you think this is a catalyst for any changes in space design?

Yeah. So, Peter, you want to maybe comment?

Sure. So, Jamie, one of the things that we used to get asked about was, is the densification trend for office going to affect lab? And the answer was always no, because, for one, it lab spaces as much about equipment as it is about people. So the way that just research is done right now with people kind of at every other bench with equipment filling in, social distancing is really already factored into the design. There may be some things that can be done with circulation within a lab that we'll examine to make things even safer. But by and large, we've already been studying this. Our traditional lab product is probably already safe in this environment. We're looking at some of our proprietary products that might be a little bit more dense, and we've already got plans in place for some practical reconfiguration that will not be costly, but will just create a little bit more safety.

Okay, and there's a lot of talk about air quality just for traditional office. I mean, are there things in your lab development business that you think are, you know, strategic assets or knowledge assets that might actually help you even more in the office business or that, you know, if you think how that design might change going forward?

Well, you bring up a – if you don't mind, Joel, you bring up a really good point. Yeah, you bring up a really good point, and we actually even have – One of our large tech tenants, which I won't name because I'm not sure they would want that publicity, but has come to us. They were put into one of our large lab buildings, and as the only non-lab tenant, they really have fallen in love with the high floor-to-ceiling and the 100% fresh air. This is pre-COVID, by the way, that they – They had such great experience and such great feedback from their employees that when they go out now with RFPs for new space, they're asking for these same floor-to-floors and the same air filtration, air changes that we provide. So, you know, look, everything that we have that is office, with potentially a couple minor exceptions, is built for laboratory, and therefore it does have high ceilings. It may have MEP design that is a bit more efficient for office, but we have thought about and put in infrastructure that would enable it to be lab in the future. So we do have the ability to provide an atmosphere from a mechanical standpoint that mirrors lab. And I think to the extent that office tenants are growing and expanding, we'll see when that happens, but that they will look at buildings like ours like they have been because we have that advantage. And Steve even mentioned the fit well and the well standards, which factor in such things as the amount of natural light that comes into the space, the amount of actual space people have to move around the building, the outdoor space people have to work in. All of those things in this environment are going to be really important as people decide where they want to office. And so our forethought to getting into these well and fit well design standards is going to pay off not only in our lab business, but for anybody who is leasing office from us as well.

Okay, that's helpful. And then finally for me, as you look across the – competitive landscape, are there buildings owned by landlords that have balance sheets that may not be so strong and you could see some distressed opportunities? Or do you think the better quality buildings that would fit with your portfolio are pretty well owned at this point?

I would say it's possible. So stay tuned.

Okay. All right. Thank you. Thank you, Jamie.

Our next question is from Rick. Anderson from SMBC. Go ahead.

Hey, thanks, and good afternoon. So, you know, this question has kind of been asked and kind of answered but not quite, and so I wanted to sort of ask it a different way. You know, 60 tenants in some way, shape, or form involved in the process here and doing, you know, awesome things to try to move things along. But is there a – And no one's suggesting they shouldn't be doing that, of course. But is there a short-term potential impact on their own profitability as some amount of resources are redirected towards COVID-19 and their own core drug research business perhaps gets a little bit of a delay? Is that a reasonable way to think about this, or am I completely off base on it?

Well, I think for those that, you know, certainly for the bigger pharma and bigger biotech, who actually report quarterly earnings, I think that's a possibility. Saw a little bit of that in Merck's report today where it's pretty clear that when people can't go visit the doctor or can't go into the hospital for normal procedures and you're stuck kind of in your home, your access to medical care and, in fact, pharmaceuticals is a little more problematic. I think for the private biotechs or the biotech companies, that haven't reached profitability. I don't think that's such a big issue because it's the pipeline and the value of the pipeline that really counts. I don't know, Jenna, do you want to make any other comments?

Yeah, I think the other thing that I would add, Hiraj, you know, is really that the, you know, the platforms themselves that they're optimizing. So in the case of Veer or Moderna, the learnings and the, you know, pure, you know, intelligence that they're getting by optimizing the platform in this rapid speed and rapid notion is actually incredibly valuable for the company overall and hopefully they'll be successful, but even if they're not, I think that's a way to think about it. And I think, you know, as Joel mentioned, clearly the large pharma folks, you know, will, you know, will have some trouble of their own as far as clinical trials and progressing. But as far as refocusing efforts to COVID, it's actually not all that, you know, expensive for them to do that. So if they're successful, I think it's great and it'll come back to them. And if they're not, You know, it's really not that much because a lot of it is either in collaboration with other biotech companies that are doing the work or, you know, using or repurposing old drugs. So I think that's just the overview.

Okay, great. Thanks. And then the other reference earlier in the call was sort of different utilization of office space, you know, in the longer-term aftermath of all this. But when I think of your lab buildings, perhaps, you know, maybe the build-out there is 50-50 office and lab space. Do you think for that 50 that's on the office side that your tenants might start thinking about a work-from-home type of strategy, or is it just too soon to sort of make that call, even for the life science component of your business, not the pure office?

Well, I think at the moment and when they reintegrate into whatever will be the new opening, and that's going to be different city by city, state by state, and even company by company, I think you'll find people working maybe shifts to begin with. Those who can work from home over time will probably be brought back into the system because I think it's pretty clear you – it's hard to build a culture when you have people or maintain a culture when you have people working from home consistently. And especially a number of those people are senior management of a lot of these companies. So I don't think that's going to be a big issue, but I think it will be a timeframe issue. but you know there's a light at the end of the tunnel because once there's a if there is and we think there probably will be an effective vaccine hopefully that goes away although the age-old habit of shaking hands hugging being close to people probably will be rethought a lot by people and that may never change except in you know family settings or things like that so there will be some long-term changes but I think you know, as I've described, the reintegration, I think that's likely what would happen on the office side.

Great, great.

And then lastly, good, sure. Peter?

If you don't mind, this is Peter, yeah. The people, a lot of that office space is actually the office space for the people working in the lab. So they do their experiments in the lab and then they go back to their office and write things up and communicate about those things. So you You actually can't work from home. That office has to be next to the lab because you're going in and out of that. And the majority of our space is revenue-producing space. It's research and development. It has nothing to do with back office. I'm sure there's a few companies that we have that may have some back office in there. But, you know, by and large, the majority of that office space are people that are actually working in the labs. That can't be brought home.

All right. Last question for me is on the VC side. Obviously some noise, you know, not to be unexpected this quarter, but has it caused you to rethink or tweak that strategy at all? And the answer could be completely no or perhaps.

Completely no.

Okay.

Yeah, the three items that Dean mentioned are all very unique situations. Yeah. One has to do with just the market. It's more of a consumer kind of product. Another one has to do with actually the other two are really primarily due to management issues and not fundamental underlying, you know, business issues. And so, you know, in any venture portfolio, you're going to expect some, you know, some don't perform and, you know, yeah, no change whatsoever.

You got it. Okay. Thanks very much.

Yep. Thanks, Rachel.

Our next question is from Michael Carroll from RBC Capital Markets. Go ahead.

Yeah, thank you. I wanted to see if we can talk a little bit about the Mercer Mega Block. It seems like that asset was delayed. I'm not sure if it was delayed because of the current COVID environment or if there's something unique that's going on right there. So how's that acquisition going right now, and is there any changes within expectations?

yeah i don't think there's any delays other than covet it's just hard to get we're in diligence um and it's hard to get things done sometimes when you know cities are shut down when uh you know we're shut down to the extent that you know we have to be and when you're working uh virtually and mobily uh so i don't see any we were the anticipation is to close that either toward the end of the year or early 21 And I don't think that's materially changed.

Okay, great. And then can we talk a little bit about the leasing activity? And I know you made several comments throughout this call, and it seems like leasing trends are still very healthy. But has it changed, I guess, in the current environment compared to three months ago? Is it harder for people to see certain assets and Is that potentially delaying transactions but not stopping those transactions? I guess what's a good way to think about that?

Yep. Steve, you can take that. But I don't think there's any huge delays and people are virtually looking at assets.

Yeah. Hi, Michael. It's Steve. No, that's right. I mean, the demand continues. The need for lab space, as Peter has outlined, is qualitatively different than office space. As people's programs and the funding that Joel highlighted in the beginning come to fruition, they want to keep moving forward. They want to lock down lab space. The markets are very tight. Again, no major subleases have come to the market. So people are still acting with a sense of the need to move forward and do that deliberately and diligently. We have been able to, you know, go into the market. These are all essential service buildings. In the orders, they are very clearly and explicitly defined, you know, biotech and pharma buildings as essential services, so they are open. So we continue to see, you know, healthy demand.

And as you saw from the press release and supplement, we announced that we had considerably upzoned our asset at 325 Binney. And that's a good example during this last month or two of COVID shutdown. We've still seen a remarkable amount of interest in, you know, in that development as a good example.

Okay. And then this last one for me, I guess, I know that it seems like there's been a lot of funding coming into this space. I mean, in a post-COVID environment, do you think it's logical to assume that there's going to be more funding coming into biotech that could drive, I guess, incremental demand? Or is The demand that you've seen is already pretty at record levels, and that's a pretty good pace.

I think there's going to be more, and I don't know how things are going to sort out with China, whether they really open up what really happened in Wuhan. I mean, there are a lot of different theories, as you guys know. But whether it was pure research, whether it was maybe a biological weapon, I don't think the web markets were necessarily the exact cause of that, but, you know, I'm not the expert. But I think there's going to be a much more intense federal, state, and local effort to try to stockpile medicines, therapeutics, testing capabilities, vaccines. And remember, there are more than one strain of the coronavirus, and we don't know what other ones are out there and due to come. So I think this is with us. maybe for the history of humanity here.

Okay, great.

Thank you. Yep, thank you.

Our next question is from Dave Rogers from Bayer. Go ahead.

Yeah, good afternoon, everybody. And maybe following up on Mike's question and some things that both Steve and Peter mentioned earlier, you talked about the activity and the proposals consistent with pre or prior quarters, and that's pretty consistent with what we've talked on the private market as well. But leasing, new leasing activity in the first quarter was just slower. So maybe that, you could just address that specifically. Was it always going to be a little slower just the way the pipeline was materializing? And then maybe take that question to the future and say, you know, second quarter, do we see a spike in COVID leases? Third quarter, maybe the core portfolio. Fourth quarter, we start to see people committing to kind of multi-year developments. Or do you think it happens more quickly than that? Can you give us maybe just a little bit more color on kind of how you're feeling today about some of the timing around that?

Yeah, I'm not sure exactly. anybody really knows given, you know, so many different state, local, and even feds, you know, commentary on what to do in different locations. But, Steve, you could take a crack at that.

Yeah, hi, Dave. Steve here. Yeah, again, you know, the activity remains consistent. It is consistent across all of the regions. So, I think, you know, we're very well positioned to capture that demand. We'll just have to see exactly the intensity of the velocity and the magnitude of it. It is high quality demand, but I think it is still a little bit TBD. But nevertheless, again, you know, April was very encouraging. We're in the full throes of the pandemic, and it was consistent with what we saw during Q1.

in terms of the COVID leasing or the activity that you're seeing there, would that be a notable spike that we'll see coming or just kind of incremental to the demand that you've already been seeing?

I think it's hard to say. I think it's possible that when you say spike, I mean, if there's an additional building or two requirements or half a dozen, I mean, don't know if that's considered a spike or a natural evolution of a pandemic response, but You know, we would expect that there are going to be a range of requirements out there given the amount of money flowing into testing, therapeutics, and vaccines. I think you have to believe that. I don't know if it's a tsunami or, you know, a wave, but it's going to happen.

Last for me, Dean, I think your comment, if I heard it right, was that you thought gains this year, the realized gains from your equity investments would beat last year's $50.3 million. Talk about maybe the confidence and liquidity around those. Are those largely already identified and likely to be public market sales? That gives you kind of the confidence and liquidity for that market. Any thoughts would be helpful. Thank you.

Sure, Dave. So my comment is really just driven by the historical trend of realized gains. So if you look back over the last number of quarters, It's been roughly in that $14 million a quarter range, this quarter about $15 million. And so I think over the last number of quarters I've always mentioned, I think the best way of thinking about it is to watch the historical trend of where we're headed. And at that run rate at $15 million a quarter, just as an example, we're already ahead on an annualized basis to the $50 million that we recognized in 2019. All right, great. Thank you all. There's a tremendous amount of unrealized gains today in the portfolio, $384 million today. So there's good value still to be tapped.

Yeah, sure. That makes sense. All right. Thank you, everyone.

Our next question is from Tayo Okunsaya from Mizuho Securities. Go ahead.

Yes, good afternoon, everyone. Just one quick question. I was curious if there was any interest in other markets you're currently not in right now, whether there was more interest in some of those markets or less. I think at the investor day there had been some conversation about some markets that you could potentially be looking at outside your current core clusters today. Okay.

Well, I think in this environment, that's not something that we're thinking about at this time, but I think over the long term, there will likely be other markets, but probably nothing we'd comment on at this point.

Good. Thank you.

Thank you.

Our next question is from Manny Korchman from Citi. Go ahead.

Hey, it's Michael Bellarmine. I had two questions. One, and you talked a little bit about this deal that you walked away from, the multi-tenant tech office building. Do you have sort of a broader sort of perspective on how you sort of think about your capital investment going forward, whether you view that 100% targeted towards lab and life science, where a lot of the office opportunities you've been involved with have been a byproduct of the market that you've been in and the relationships that you've developed there? Does this whole pandemic change the sort of single-use office, either for a single user or a multi-tenant building going forward, where you could see the company going back to being exclusively focused on life sciences and labs?

Well, I think, Michael, one thing is for sure. We have always allocated capital to our core, which will never change, which is the life science industry. But as you know, the intersection of life science and the whole – you might call it the whole IT world is really booming. And so, I mean, telemedicine went from something that millennials or, you know, Gen Z or Gen Xers would occasionally use because they're pretty healthy to right now it's, I think – I've got a note because we're involved with a company that's kind of at the forefront that it's spiked up 85% of what it was, you know, two months ago. So I think you can't ever forget, I mean, and tenants of ours, Google, Verily, Microsoft, others, they're, you know, are heavily, heavily involved in the healthcare sector. So the two overlap in ways that are pretty fundamental. So that will always be of great interest. I don't think we'll have as much interest in pure tech office buildings, but I think where we see a building, as Peter described, that may be an office tenant today but that's in a great location that we can convert in the future, those would still be of interest. I don't think we've ever really had interest in owning lots of office buildings, multi-tenant office buildings, per se. That's never really been a focus of ours. So I think we continue our focus.

And then you talked a little bit about sort of all the focus on COVID-19 right now from your tenant base and that there may be clearly some effects from other activities that are not occurring for those tenants. How do you sort of think about the academia side with schools potentially not opening up in the fall? Clearly a lot of your buildings are in close proximity to key academic institutions, whether it's MIT, Harvard, UCFS. How do you think about that aspect and what potentially could come out of that if schools don't physically reopen?

Yeah, well, I think, number one, those are mostly for undergraduates. If you look at MIT, a lot of the professors and a lot of the labs are still open. They've gone to COVID-related operations where, you know, people are cycling in, not at all at the same time. But labs and a lot of the graduate students and professors are still working. So in that sense, we're not so tied to the undergraduate populations. We aren't kind of just out there being near university campuses. That's kind of not our business model. But what we are focused on are being close to the fundamental institutions in the United States that have pretty strong computational skills biological, chemical, all the, you know, all the right kind of areas where they're going to continue to work and people will continue to, you know, visit labs and work in labs. I don't think that changes anything we're doing, you know, any iota.

Okay. Thank you.

Yep. Thank you.

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

Okay, this has been a long call, so sorry for that. Thank you, everybody, and look forward to talking to you on the second quarter call. And most importantly, stay safe.

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