Alexandria Real Estate Equities Inc (ARE) 2012 Q4 法說會逐字稿

Hello, and welcome to the Alexandria Real Estate Equities, Inc. fourth quarter and full-year 2012 earnings conference call. My name is my Myesha and I'll be your operator for today's call.

At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded.

I will now turn the call over to Rhonda Chiger. Please go ahead.

Thank you and good afternoon.

This conference call contains forward looking statements within the meaning of the Federal Securities Laws. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's form 10-K annual report and other periodic reports filed with the Securities and Exchange Commission.

Now I would like to turn the call over to Mr. Joel Marcus. Please go ahead.

Thanks, Rhonda, and welcome everybody to the fourth quarter and year-end earnings call, and happy new year to everybody. Sorry for the late notice. We were going to release next week, but I have got to fly to Basel to meet with Roche's CEO, and so we needed to accelerate our earnings release. So I apologize for the inconvenience.

ARE's solid progress in both the fourth quarter and in 2012, I think, positions us well for 2013. It reminds me of Lou Holtz's quote of football fame -- ability is what you're capable of doing, motivation determines what you do, but attitude determines how well you do it. I think it is fair to say in each and every one of our key CBD cluster markets, we are the landlord of choice and most admired life science real estate company because of our unparalleled knowledge, expertise, and experience; and really a can-do attitude for our clients and world-class network. And really it's a great credit to this first-in-class team and I want to thank them for all they do during this past year. We are also very proud of our accounting and financial groups; best-in-class disclosure supplement introduced about a year ago, and continually enhanced and we hope that you appreciate the work that has gone into that.

What I want to do is really look forward to 2013. I think 2013 will be a break-out year for Alexandria. We certainly intend to increase per-share value demonstrably and, as later in life science, both on a branding and quality leadership standpoint, we expect to continue to get wider access to lower cost capital, growing that per-share earnings, solid recycling of assets, a positive internal growth, and increase in dividend. We expect that solid revenue growth from development, redevelopment, will continue; same thing for NOI. Dean will talk in-depth about same-store, but we expect that growth to be driven increasingly or by increasing occupancy and strong leasing; and believe for 2013 we are already nicely outpacing our internal model for leasing projections.

We expect to achieve our debt-to-adjusted EBITDA target of about 6.5 by fourth quarter. We expect to continue to successfully recycle assets to reinvest in high-quality CBD best-in-class assets, as well as achieve our targeted 15% to 17% non-income-producing real estate as a percentage of gross asset value. In January 2013 we began the monetization of our 75/125 Binney Street, Cambridge, parcel, the second out of four key parcels in that development. The first one to Biogen Idec, which will be delivered in the fourth quarter, and they have had a sterling year. And at, by the way, a very solid yield.

ARIAD Pharmaceutical is signed to take almost 250,000 square feet. We think it is about 63% of the project, and we think there is a very high and strong likelihood they will take the balance. It is a first-in-class oncology company, which received early FDA approval for their first-in-class rationally designed small molecule unique cancer drug, Ponatinib. I had the privilege of serving on ARIAD's Board for many years and it is truly a first-in-class second cohort commercial stage biotech company. As was noted in the Boston Properties call, Boston-Cambridge is undergoing really an astounding boom in lab space development and we're a significant beneficiary thereof, with two out of the seven projects.

Moving on to our project in New York, beyond Roche, we are in LOI negotiations for seven additional floors, about 30,000 square feet each, or approximately 210,000 square feet with eight different entities, we feel all lab space users. We feel that the pace of lease-up will beat our internal projections and most of these are ten-year-plus leases with strong rental rates with escalators. I will come back in a moment and talk about yields and costs.

Moving onto the recycling -- really our sales and asset recycling program -- really headed by Peter Moglia. In January, you'll note from the supplement, we did close the 1124 Columbia Street project, the project we actually bought pre-public together with two land parcels, for about $42.6 million; carried back some paper. This is being converted to medical offices and almost all the tenants are rolling out. The strategy was to exit the First Hill sub-market. It is no longer a lab market, it really is a hospital and medical office market; to rid vacancy coming in a non-lab market and also to recycle to core CBD assets. That met all of our goals of there.

This month, in February, we closed on 25/35 and 45 West Watkins. This was again a pre-IPO asset, together with 1201 Clopper, which was a build-to-suit we did a number of years ago for Digene, which has been acquired by Kiagen. That lease rolls in a couple of years, and that property will have to be multi-tenanted; and there's quite a bit of office of vacancy in the West Watkins property, together with the land parcel that is adjacent there too -- 41.4 million. So again, the strategy was to lighten our exposure to the Gaithersburg sub-market, as we've spoken about on a number of occasions, rid coming vacancy in a suburban market, and a recycle to core CBD; and we are very proud of Peter's team for executing in a really excellent fashion.

I want to address -- and Steve will speak a little bit about this, when it comes to San Francisco -- the important issue of yields. I think it is, investors should really take great comfort that Alexandria is really besting most others on the yield front. And let me walk you through examples. I think if you look at others build-to-suit yields, assuming you can find them, and acquisition cap rates in this low cap rate market, it's pretty clear that tech, either development or acquisitions, are not beating our yields, and neither are New York City or Cambridge-Boston CBD office development or acquisitions. We feel very comfortable about what we have been doing. In fact, our patented lab space niche, which we invented, is in fact a mainstream product now, and should be viewed as such.

If you go to page 3 of the supplement, at the front end of the press release, I should say, and you look at the development and redevelopment of the 75/125 Binney Street project -- north of 8% yield. We feel very comfortable with those yields, and I think we are proud to say that those probably beat most other yields in the Boston or Cambridge market that we are aware of. We know of some assets that may be coming to market at either 6% or sub-6% cap rates; so we feel we are doing much better than that. I will come back to New York in a moment.

On the Longwood asset -- again, a north of 8% yield. We know that there's another commercial building in that market that was over $1,000 a foot with probably a 5% or 6% yield on it. And other developments in the greater Boston area that certainly do not come close to a plus-8% yield. Then if you look at our San Diego, Seattle, and a number of the other development and re-developments we've delivered, outside of one or two that have struggled along, like East Jamie Court, again, we feel like we have a very strong yield production. So we feel good about that. And I think few, if any, others are going to beat us, either on an acquisition or a development with these yields.

When you look at New York, there is some thinking about while, why can't Alexandria build to a 7% or 8% in New York? Well, given the cost of building in New York, certainly the carry cost during the Lehman downturn, we feel very good about a north-6.5% yield, high quality tenants, long-term leases, good escalators. And I think it is fair to say that those who are acquiring first-in-class CBD assets in New York do not come close to that kind of a yield. We know buildings like the GM and other buildings, which have very little lease roll-ups, were acquired at substantially less than those rates, even though they are a little bit different product type.

When it comes to costs in New York, it is pretty clear New York is just an expensive place to do business. But if you compared it, say, to Boston, Longwood areas, and others, I think it is not unusually high when you look at the carry through the Lehman downturn, which was longer than we expected. That certainly adds to basis, quality of finishes. And obviously, building a podium platform infrastructure is very expensive in New York. But we had no systems damage during the storm, so I think our design and our enhancements made a big difference.

Moving on to the Life Science industry, many real estate analysts and investors still fundamentally, I think, do not understand this industry; and I think it is fair to say that, by all accounts, 2012 was, in fact, a very positive year for both the Bio and Pharma sectors of the industry. According to Battelle and R&D Magazine, US Life Science real estate -- and that is just in the US -- is expected to increase this year by 1.5% to a very healthy $82.7 billion of R&D spend. Bio and Pharma had excellent 2012 capital markets performances. Pharma is continuing to be very profitable; stock prices are doing, by and large, reasonably well. And they're sitting on $197 billion in cash to fund R&D, M&A, and partnering to fill the pipeline.

Clearly open innovation and external research is the key to today's focus in key CBD Life Science clusters. And this is really where ARE's sweet spot is; so the Venn diagram has substantially overlapping with where we have Class A assets in Cambridge, New York City, San Francisco and San Diego. We have the locations they want, we have the knowledge and expertise they want, and we have the innovative and collaborative environments they desperately seek.

Robust set of second corporate commercial-stage biotech companies are driving demand and space needs in a number of these markets, including ones like ARIAD and Onyx that we have landed. Demand for clinical development and later-stage space is not a negative; it's also a big positive. And we've captured key requirements from Roche in New York City and Biogen Idec in Cambridge for this type of space. This is a plus, as I said, not a negative, as some have opined.

Headlines from December 10, 2012 -- Barrons, their feature article on the drug industry, Looking Beyond the Patent Cliff, really the key by-line was, after a decade of running a large patent cliff, big Pharma is reaching the other side with rich dividend yields and opportunities for growth. In 2013, 6 of the top 20 selling drugs will be Biologics, or are Biologics, and that is going to boost exclusive marketing windows for drug makers because Biologics can not be easily copied. Biosimilars or generic Biologics, in other words, clearly will not see meaningful sales growth until 2018 to 2020, and I think that gives us great comfort.

Finally, on the heels of an approximately 12% dividend increase in 2012, the Board will be likely to seek to continue to support an increasing dividend in 2013, to share our increasing cash flows with shareholders.

So with that said, let me turn it over to Steve for some detail on the leasing rolls.

Thank you, Joel.

I will go ahead and focus my comments on two key areas. The first being the Q4 in 2012 leasing results. And then we will look forward a little bit at the status of the 2013 rolls for each region.

The company delivered strong operating results during 2012, leasing a total of 3.281 million square feet and 187 leases; and finished with a solid Q4 of 2012, leasing a total of 678,000 square feet and 47 leases. I will provide more color on this consistent performance in each region. We'll note that these statistics really highlight the Company's ability to engage its client-tenants in a way that is unique and differentiated in the real estate industry.

We're bringing to bear our entire operating platform, including our proprietary Life Sciences underwriting teams, to fully engage with these clients not only on an operational level to provide Class A service for mission-critical facilities and enhanced amenities to support an intrinsically collaborative culture; but also on a business development level, to partner and leverage a best-in-class network of industry leaders. So as we look at Cambridge, we leased a total of 924,000 square feet during 2012, including 92,000 square feet of that executed during Q4. We had a nice occupancy increase this past year of 70 basis points from 93.9% to 94.6%, and rents for Class A product had solid support in mid- to high-$50 triple-net range, and significantly higher for new build-to-suit product.

The last quarter featured a 47,000 square foot lease renewal with Novartis in Tech Square. No downtime, no tenant improvements, with a nice 3% increase. The balance of the suites leased last quarter ranged from 2,500 to 9,200 feet, and so we're encouraged with the early-stage segment as well, as an important complement to the second cohort of homegrown companies that Joel mentioned, that are commercializing critical life-saving products, continuing with the announcement in early 2013 of the long-term lease of 244,000 square feet to ARIAD.

The overall Cambridge market is healthy, as the vacancy rate decreased a full 670 basis points from 17% to 10.3% during this past year as a result of the highest absorption rate since 2000. It is also important to note the expansion of, really, some of the key pillars of the Life Science industry, with significant construction activity underway. Biogen is building 0.5 million square feet, Novartis another 570,000 square feet, the Broad Institute's 250,000 square feet, Pfizer's 230,000 square feet, and Mass General's Reagan Institute's 75,000 square feet, are a clear indicator of the dynamic market in and around Alexandria's core Kendall Square and Binney Street holdings.

Moving down to Maryland -- given our significant attention to this cluster with the regional team during 2012, we are very pleased to see the market stabilize and believe the hard work is paying off with pretty significant performance during that year. We leased of 547,000 square feet throughout the year and including 171,000 square feet during Q4. We did experience a bottoming-out of our occupancy rate of 89.4% at the end of the third quarter; and we've seen an improvement of 150 basis points to 90.9% at the end of the fourth quarter. The key leases completed during Q4 included an important mission-critical facility for a local government agency, Montgomery County, leasing 73,000 square feet for nine years at a slight increase on a cash basis, no downtime, and a modest refresh improvement allowance averaging $15 per square foot. This cluster is trending in a vacancy rate of 7%, and if we experience reasonable demand again during 2013, we believe we can continue to incrementally improve our occupancy and rental metrics.

Also, it's important to note the details of the 70,000 square foot lease in this market that negatively impacted our cash results overall this quarter. This facility is ultimately a core holding, and we now have a long-term lease through the end of 2021; and although it did have a cash around roll-down it only required a very modest investment of $5 per square foot in tenant improvements. All things considered, a worthwhile trade-off, as this helps stabilize the portfolio going forward.

Moving over to San Diego, the regional team leased a total of 354,933 square feet during 2012, including the lease of a little more than 76,000 square feet during Q4. When you step back and realize the operating asset base has grown significantly year-over-year from a little over 2 million square feet to 2.7 million square feet, this represents a remarkable 34% increase, nearly all of which is represented by new Class A facilities with credit-worthy tenants. Occupancy is a solid 95.1%, and this past quarter we were pleased to partner with Genomatica, one of the rising stars in industrial biotechnology industry, on a long-term lease of 10 years for 68,000 square feet during Q4.

The majority of the tenant prospect activity continues to be in the Torrey Pines and UTC sub-markets, as the flight to quality continues in this strong market. The overall market vacancy has increased slightly by 80 basis points from 9.3% to 10.1% compared with the prior year, largely as a result of one project that has been placed on the market by a non-Life Science developer, so it remains to be seen if it will represent significant competition.

Moving north to the Bay Area, we leased a total of 592,000 square feet during 2012, and 78,000 square feet of this total during Q4. Occupancy increased 110 basis points from 96.7% to 97.8% during the year. The Q4 leases were highlighted by a broad set of renewals in each of the three key sub-markets. The Stanford cluster remains very healthy, with a vacancy rate of sub-5% and lease rates in the $30 to $36 triple-net range. Alexandria also congratulates one of its key Stanford cluster anchor tenants, MAP pharmaceuticals, on its recent acquisition by Allergan, a $32 billion New York Stock Exchange-traded company. MAP will continue to operate in our facility in the Stanford cluster, and Allergan's presence will surely bolster the overall strength of the cluster as well.

The South San Francisco cluster is a tale of two cities, ultimately. The overall vacancy rate is certainly high at 11.9%, but if you drill down and segment the market, the vacancy rate for the moderate- to small-size suites is just 2.4%, and this is exactly where we focused our efforts and have been successful. Lease rates in the South San Francisco for these suites range from the low- to mid-$30s triple-net.

The Mission Bay cluster has no laboratory suite vacancy and has ongoing activity from the three market areas we anticipated over time -- Life Science companies and institutions, translational and clinical operations, and information technology companies. UCSF has an RFQ/RFP on the street for a 300,000 square foot consolidation of its Laurel Heights campus; and Meraki's recent establishment of a 110,000 square-foot headquarters in Mission Bay and subsequent acquisition by Cisco, clearly validates this location as desirable for the tech sector, which continues its boom as we're tracking 2 to 3 million square feet of demand. Rental rates have risen to the mid- to high-$50s industrial gross in the SoMa markets corridor, and higher for new build-to-suit projects.

The 499 Illinois project is directly benefiting from these positive market dynamics, and we are pleased that discussions are progressing in a serious manner, with potential anchor tenants ranging from 80,000 square feet to 120,000 square feet in each of these market segments. Specifically, we have had a number of tours and meetings with senior teams of a few key tenant prospects, and are now progressing to test bits of interior improvements with engineering and facility teams. The response to both the testimonials from key leaders in the Mission Bay cluster in these meetings, and the detailed set of cutting-edge amenities we have designed and plan to build, featuring enhanced collaboration spaces, has been very positive as well.

As a Joel mentioned, let me go ahead and touch on yields in this market and others for a moment., as investors really should take comfort in the solid yields we've delivered recently in Cambridge and San Diego and the South San Francisco market as well, notably the East Grand facility in the 8.5% range and the anticipation of delivering within our yield range of mid-6% at the 499 facility. This is a contrast for a number of the tech sector projects in SoMa reported to be in the 6% range, as indicated by other leading REITs. It is important to note, these projects are being delivered at attractive yields in today's market, and often times with longer leases and higher credit quality than the tech sector.

At North Carolina and Seattle we leased 237,000 square feet during 2012 in North Carolina, including 19,000 feet in Q4, and 124,000 square feet during 2012 in Seattle. North Carolina's occupancy increased 120 basis points from 94.3% to 95.5% this past year, and we anticipate fresh demand in early 2013 will continue to improve those metrics. Seattle's occupancy dipped from 96.7% to 93.9% year-over-year, substantially impacted by new vacancy in one facility where we have had encouraging momentum and anticipate a positive outcome over the next couple of quarters.

So let me look forward for a bit in the status of the 2013 rolls. We have approximately 1.1 million square feet, or 7.9% of our operating properties, slated for rollover during 2013, and consider it very manageable. 8% of that or 89,000 square feet are leased; 21% or 235,000 square feet are in active negotiations; 16% or 176,000 square feet is targeted for redevelopment, and that is comprised entirely of a non-lab acquisition that we closed during 2012 in our San Diego market located at a AAA Torrey Pines location. Finally, we have 55% or 620,000 square feet, in early discussions in marketing.

Let's go ahead and review that 620,000 square feet in greater detail by each region. 105,000 square feet in the greater Boston market has 60% of the space located in Cambridge and the adjacent urban markets. Nearly half of this square footage is rolling in November or December of 2013; the lab suites are in a very nice size range of 4,000 to 12,000 square feet, which are very desirable in today's market. So we are encouraged with our prospects there for the year.

205,000 square feet is located in the San Francisco Bay Area market. We have got a set of two buildings comprising 21,000 square feet in the Stanford Research Park. It's well-positioned for a variety of Life Science or clean tech tenants; and another 14,000 square foot suite in the Stanford cluster is in the marketing phase. We're also in early discussions with existing tenants for nearly 85% of the 100,000 square feet distributed across a set of small- to moderate-size suites located in the greater South San Francisco market. And finally about 60,000 square feet located in the Mission Bay cluster in a number of high-quality moderate-size lab suites in early discussions are going well with existing tenants.

Moving south, we have 135,000 square feet in the San Diego market, primarily in the Sorrento Valley and Sorrento Mesa markets. The two largest blocks, comprising a little less than half, or about a 50,000 square foot chunk, should provide a favorable outcome with an existing tenant discussion. And the remainder we're evaluating the potential for placing about 62,000 square feet on the market for sale as leases roll during 2013.

We have 101,000 square feet in the Maryland market, distributed across each of their sub-markets. We've ultimately sold and exited the properties that we discussed earlier that contain 47,000 square feet of these rolls as part of our asset recycling plan; and we are working with an existing tenant in the early stages for 38,000 feet and actively are marketing the remainder of those suites.

Finally, 52,000 square feet in the Southeast market; we are in early discussions with tenants to resolve all 30,000 square feet we have a North Carolina, and we're actively marketing the remaining 20,000 square feet to new prospects. Just 7000 square feet in Seattle, with the largest suite rolling in December, so we are in very good shape there.

So in conclusion, the Company really delivered on solid leasing results during 2012. And although the second half of the year did not have the same volume as leasing as the first half, the overall trend is certainly positive, as the operating portfolio occupancy has improved this past quarter by 40 basis points from 94.2% to 94.6%; and improved 160 basis points, from 90% to 91.6%, when you include the redevelopment assets. We have a manageable set of roll-overs during 2013 and are poised for meaningful progress and lease-up of properties in the redevelopment and development pipeline. Finally we have continued momentum on the build-to-suit front in our key markets, as we are engaged in ongoing discussions with existing tenant clients and a new tenant product prospect for establishing new Class A facilities in our AAA locations.

I will hand it off to Dean for further commentary.

Okay, thanks, Steve.

We reported FFO of $1.16 per share, diluted as adjusted for the fourth quarter. Our FFO per share results are in line with our range for guidance provided on Investor Day in December of 2011. Moving on to our core operating metrics, we had significant success with the execution of a significant growth in NOI from development and redevelopment deliveries. Fourth quarter NOI from continuing operations of $107.5 million was up 6.6% over the third quarter and up 10.1% over the fourth quarter of 2011.

In 2012, we completed approximately 1.1 million rentable square feet of value-added development and redevelopment projects, aggregating almost $700 million at an average GAAP yield around 8%. Approximately 60% of this was completed and delivered at the very beginning of the fourth quarter of 2012. Same-property performance for the fourth quarter -- it really was the third consecutive quarter of an upward trend in cash same-property performance, the fourth quarter of '12 cash same-property NOI growth of 6.3%, up over the solid third quarter '12 cash same-property NOI growth of 4.3%. We project that the strength of our cash same-property performance continues into 2013. Our projection for 2013 cash same-property performance is up from 4% to 7% over 2012.

2012 cash same-property performance of being up 3.5% was driven primarily by the following items -- a significant increase in cash rents from the burn-off of free rent at a couple projects in particular. The East Tower in New York City drove about a $10 million increase in cash rents, and our build-to-suit for Onyx at 259 East Grand in South San Francisco drove about $1 million increase. There were some off-setting increases resulting in a decrease in some cash rents, primarily in greater Boston. We took some temporary downtime to transition space at 300 Technology Square and 790 Memorial Drive during 2012. These spaces were delivered a few months after rollover in the year and will contribute to increases in cash same-property performance in 2013. Suburban Washington DC -- we had about 100,000 square foot amount of space that rolled in the second quarter at Virginia Manor, with a drop in occupancy to about 42% as of June 30. We have leased a portion of this space in the second half of the year and increased occupancy to approximately 56%.

Same-property operating expenses for the fourth quarter were up 8% over the fourth quarter of '11, primarily related to an aggregate increase of approximately $2.6 million in recoverable taxes and repairs and maintenance expenses. The increases in property taxes were related to recently completed construction projects. The same-property operating expenses for the year were up about 3.9% over 2011. The increases in same-property operating expenses were primarily related to an increase in recoverable repairs and maintenance by approximately $2.6 million. Excluding this $2.6 million increase in repairs and maintenance, same property operating expenses would have been up about 1.7% when compared to 2011.

Before we move on to our balance sheet milestones and strategy, let me briefly comment on certain important pre-construction activities. During the quarter we commenced pre-construction activities for certain land parcels in order to reduce the time to deliver product to prospective tenants. For example, we are advancing entitlement efforts at Campus Point for expansion capacity on the site. Additionally, at Illumina Way, we are advancing efforts to increase entitlements, and adjusting the designs for both Building Six and Building Seven for the additional entitlements.

Moving on to balance sheet matters -- during the year, we executed our capital strategy and proved that we have accessed the diverse sources of capital that we believe is strategically import to our long-term capital structure. These sources of capital included real estate asset sales, secured construction project financing, an unsecured line of credit, unsecured notes payable, joint venture capital, preferred stock, and common stock issued through our at-the-market common stock offering program. It is also important to note that we completed approximately $577 million of construction in 2012, limited our issuance of equity capital to $98 million, and ended the year relatively leverage-neutral at 7.3 times on a debt-to-EBITDA basis.

In 2013 our balance sheet goals include execution of our capital recycling program for investment into high-value Class A urban assets, continue to minimize the use of common equity capital, and lower our debt-to-EBITDA to approximately 6.5 times. At a very high level, let me provide an overview of our strategy for key components of our sources and uses of capital. Keep in mind that this is high level and capital is fungible between the two buckets I am going to describe, but this should provide a better understanding of our capital strategy for 2013.

Let's split the capital needs for '13 into two buckets. One bucket will fund construction and the other bucket will focus on our goal to reduce leverage. Certain amounts I'm going to describe may represent mid-point amounts from our 2013 guidance.

The first bucket represents funding for construction spending of $570 million for 2013. Sources of capital, aggregating about $667 million, or $97 million in excess of our construction forecast, is projected to come from the following -- $140 million from cash flows from operating activities after dividends; $377 million from asset sales, and this includes the $84 million of sales that we completed to date in 2013; and lastly, $150 million of common equity proceeds under our ATM program.

The other key bucket will focus on our goal to reduce leverage from approximately 7.3 times as of December 31, 2012 to about 6.5 times by the end of '13. The key sources that will allow us to achieve our leverage goal includes a combination of EBITDA growth, and a portion of the excess capital from the first bucket I just mentioned. The key value-added project deliveries scheduled for 2013, as shown on page 28 of our supplemental package, include the following -- the ground-up development at 225 Binney Street in Cambridge, which is 100% leased to Biogen Idec; a portion of the space at 430 East 29th Street in New York City, which is the West Tower, related to our lease with Roche. And keep in mind that this delivery in particular is very close to the end of the year. Then, lastly, almost all of our redevelopment projects -- and again these projects have significant pre-leasing.

Moving on to asset sales, a very big picture here -- I think we hit our target for 2012. I think the challenge here from time to time is a making an estimate of the timing of closing transactions is always a bit tricky to predict, but we completed $84 million of the sales in 2013, bringing our total sales since January 1 of 2012 to $159 million. Our original 2013 asset sales target was $300 million; and we had about $77 million roll over from December of 2012 and deferred into 2013, for an aggregate of $377 million now targeted for 2013. We have made progress since Investor Day in December as follows -- $84 million in sales completed to date in 2013; we have about $55 million under contract; we have about another $140 million at various stages, including letters of intent, early negotiations, and lastly, preparation of marketing packages. Included in this $140 million is our targeted parcel sale of an interest in a land parcel related to the 50/50 joint venture for 75/125 Binney. Lastly, $98 million that remains, which we'll identify in the next quarter or two.

Moving briefly on to unsecured bonds -- I just want to point out that we are unable to comment on the timing of our bond offering, since it will be subject to market conditions, but let me provide some color. Given the continuing positive financing environment and low interest rate outlook, we expect to issue unsecured notes in 2013. Our strategy remains focused on 10-year bonds, given attractive pricing for longer 10-year paper; and our desire to both expand and ladder our maturities. 10-year Treasuries are hovering around 2% and spreads have tightened, so 10-year bonds today for Alexandria should be inside of 4%. Again, specific pricing for Alexandria will be at market when we execute our transaction.

Lastly on guidance -- our guidance for 2013 was increased by a $0.02 for both EPS and FFO per share diluted. Our updated guidance is as follows -- EPS diluted in a range from $1.41 to $1.61. FFO per share diluted in a range from $4.44 to $4.64. Our guidance for '13 was increased to reflect an improvement in our occupancy forecast for the year, as well as an increased pace of leasing. Additionally, the increase reflects important pre-construction activities related to entitlement or designed for expansion opportunities related to a few campus locations. As a reminder, our goal with these pre-construction efforts is to reduce the time to deliver ground-up development projects to prospective tenants.

Our guidance for 2013 also includes our current assumptions related to the funding for our ground-up development at 75/125 Binney as follows -- construction financing, somewhere in the 60% loan to cost range; the transfer of the 50% interest to a JV partner; and our capital investment in the range of $40 million to $50 million -- all of which we expect to be funded in 2013. Lastly, disclosure of detail assumptions included in our overall guidance was disclosed beginning on page 7 of our press release.

With that, I will turn it back to Joel.

Operator, we will take questions now, please.

(Operator Instructions)

Jamie Feldman, Bank of America.

I know you guys spent a good deal of time talking about yields and comparing yields to office on the call. I guess what investors might be trying to get their head around is, the portion of your total investment that goes to the lab space build-out, How do you guys think about underwriting that and the return on that versus your core and shell office building? Maybe if you give us a sense of how you guys, when you look at acquisitions or even developments, how you think about the relative investment in those two pieces of your cost structure.

Jamie, is the question presumed that somehow the above-standard improvement from office somehow is not valuable for the long term? Could you expand upon your question? Obviously the return is the overall return of the project, it's not segmented core and shell versus improvement, but if we have a build-to-suit, generally they tend to be 10-year, 15-year, 20-year leases. I think it is important to note, these are initial stabilized yields, so these don't include all the increases over time, which I think investors and analysts often overlook as well. These are yields on the full package.

I guess one way I could answer it, Jamie, it's Peter Moglia, is that when we do look at pricing build-to-suits, we do have a lower expectation for return on the core and shell and the TIs that are infrastructure 40-year type of duration. And then we price the TIs that we think may not recycle as well or for as long at a higher rate, to blend into a total that we believe is above what exit cap rates would be at the time.

So the price of the piece that doesn't recycle, how do you think about the duration or how long those last? Or do you assume that those only last as long as the lease?

I would say that we amortize the majority of that into the term of the lease, so if it is a 10-year lease we're getting that back in 10 years.

Right, and Jamie, think it is instructive, I made a couple of anecdotes. We mentioned Novartis renewing the lease, they're in Tech Square, there were no TI dollars. The one down in Maryland were $5 a foot. We had a large one in South San Francisco, a year or so ago, it that had been leased for 10 years, we had a 10-year renewal, think we had a $15 to $20 foot tenant improvement allowance there. In the overall cost per square foot of these facilities, it is fairly nominal.

Could you just give us a sense of where market rents are across your major markets and whether we're seeing any material growth at this point?

I think in a Cambridge market we have got very solid support as we talked about in the mid-$50s, triple net for existing product, so I think were doing well there.

Non-build-to-suit.

Right, non-build-to-suit, absolutely, that is existing product and again, as we talked about build-to-suit, significantly higher. So there certainly is a step function as these companies, we've talked about this a lot, and we have seen it prove out now with Onyx, with Arihant, as they're looking to aggregate around a campus to build a company for the next 10 or 15 years, they're really driven to this build-to-suit type of product and they are absolutely willing to pay for that step up in rent from the existing product that is out there. Moving across the market, we think Torrey Pines has certainly stabilized in that mid-$30s triple net range. South San Francisco, again, segmenting the large blocks of space from the small space, similarly low- to mid-$30s triple net.

I can just comment on Seattle. Seattle has remained a very high rental environment, even though the activity hasn't been as strong as it was maybe two or three years ago but their rents are between $45 and $52 for the class A space. Maryland has experienced a drop over the last couple of years, but we are encouraged by the fact that we are now quoting things in the mid- to high-$20s and getting a lot of traction with that. Then in Research Triangle Park, things for the first-class space is also similar to Maryland in the $25 to $30 range. In New York, which obviously Joel commented on, is very high cost environment, we are able to translate that to very high rents and, without giving too much away, I would say that we are in the mid- to high-$70s to low-$80s for our projections for the West Tower.

Finally, any thoughts on sequestration and what you think it might mean to your leasing, any expected slowdown?

My own personal view is that it is likely to happen, it may not last for a prolonged period of time. We know, just through my work at the NIH and others, that there is no one on either side of the aisle as well as the executive branch, that want the NIH budget cut, so we think a deal will be made post-sequestration as part of another budget package. I think the only area that we see it impacting, is really the institutional side. Because the institutions are the ones that get direct grants from the NIH, the Pharma and biocide, zero impact, those guys by and large. I think projects like Longwood or projects where you'd be looking primarily at an institutional base, a 501(c)(3) university or research, those are the ones that would be on the pause until that sequestration is resolved. My guess is it will be resolved by June 30 if not sooner, in a positive fashion.

When you think about your expiration schedule, is there anything there that might be slow to renew?

We have one roll of about 60,000 with a GSA lease in one of our markets. We expect to renew that because it is mission critical. We have been told that. As far as bigger leases, I think we have said before, the only lease we have that really is heavily dependent on NIH is a lease rolling in 2016 with the Scripps Research Institute, which is a largest nonprofit in the US, but there is no near term lease exposure to that, and that is 2016. Other than that we have nothing coming up in 2013.

Quentin Velleley, Citigroup

Just in terms of the income producing assets that you saw recently, where you're GAAP yields are above 15%, and I assume the cash yields are actually higher than that as well. My question is, how many these properties are there in the portfolio that are in the suburban park markets, lab space might not be a viable long-term and the rent is very high. Can you give us a sense of how many more of these assets there are?

First of all, let me maybe correct your view. When you sell an asset, and Peter is the one that has handled that and can give you chapter and verse, it is really a mis-characterization and a misnomer to characterize this as being sold at some GAAP yield. Those were rents that were produced in the past and in the 1124 Columbia, we had already removed one of the key anchors, and move them down to South Lake Union. Another tenet we didn't choose to underwrite, moved to another landlord. And then another tenant chose to elect an early termination.

If you talk about a GAAP yield on that project of 15% or 17%, it makes no sense. It is really on a per square foot basis, and it really is on a buyer looking at what he can pay for re-purposing thing that. That's how you have to look at it. Peter will talk more about, we don't have too many of those in the portfolio on a value basis, but it is pretty different. Same thing on West Watkins, we had an almost 50,000 square feet that is rolling this year. We have another building that the tenant is likely to exit, which is the main anchor there, in a couple of years. So again, you can't look at it as, we are investing on a yield or you're selling on a yield basis. Peter?

Yes, thanks, Joel. Quentin, to give you an example, that 1124 Columbia building may show as a 15% GAAP yield or something like that right now, but after these tenants exit I think that would go down to a 3%. And you'd be holding an asset in a market that is just not in favor with lab tenants anymore. It's highest and best use is really medical office. I think it was really good marriage between us and the buyer, where we were able to cash out of an asset that did really well for us for a long period of time but no longer was needed. We could take that cash and put it into higher earning investments.

Let me just say this about that asset. We bought that in 1996 with zero down. The yield on the original sale-leaseback to the Fred Hutch was something in the range of 10% to 11% and that asset has cash flowed and been very, very accretive to this portfolio. Now we are in a position where that market, as Peter said, has gone totally MOB in hospitals. Again, look at it for what it is not for maybe some theoretical cash flow. But you want to talk to Quentin about exposure?

A little more color on the 1201 Clopper asset as Joel alluded to, we have a tenant in a couple of years that has told us that they are moving out. They have their own the campus already in another part of the I-270 corridor there. Their plan was to move. That building is quite a big. I think it is somewhere in the neighborhood of about 140,000 square feet and it is also a mix of office, warehouse and lab. We took a look at that strategically and said, this is Gaithersburg, it's not Rockville, which is really the place where people want to be these days. Do we really want to sink a large amount of capital into re-tenanting that building and the answer was no, it didn't make sense. So, we found a buyer who was really willing to put in the work, and the capital to reposition it. And again, I think that was a good marriage between us and them, and we got a fair price for the income that is left on it.

To talk about what is remaining, and we do have a few assets across the portfolio, some in San Diego, that we have identified that have very similar attributes there. They were great performers for a while but the market has really moved in a more high quality area. I don't know if I want to disclose too much more than that, but suburban Pennsylvania is another area where maybe some of the assets have longer-term leases that may be rolling in the next two years, but down the road, we don't really want to own those assets anymore. It is just not a market that we want to be invested in so we're looking at potentially disposing of those as well.

Yes, but as a percentage of GAV, it is pretty minor.

For the non-income producing assets, sorry, for the income reducing assets that you're looking at selling this year, should we expect to see similar yields to what you have done or a little bit lower?

I guess it depends on what yield you are looking at. We have disclosed, held for sale in Wooster, the portfolio we have there.

Yes, there is only the two assets we sold in 2013, one was actually the asset that was held for sale as of year end. One of the assets did not meet the qualifications for health for sale as of year end, so it was actually not in the discontinued operations numbers. The asset that Peter is referring to, there is a third asset that is in the queue to be sold in the first quarter. That asset is also a component of the fourth quarter discontinued operation information so whether it is the revenue or the NOI that you see in the supplemental package, you kind of could get a sense for the income estimates off of that project.

Then, in terms of the proposed joint venture on Binney Street, if I'm reading it correctly, it's like you are selling it in effectively, where your partner would get an 8% development yield. Obviously they're going to take some leasing risk with that, given you're not fully leased. Can you talk about the fees, I'm not sure if there is some kind of promote or something in there?

Quentin, this is Peter Moglia, we're still in early discussions with a number of parties. It's just not smart for us to disclose any specific details of those negotiations at this time.

Sheila McGrath, Evercore.

Joel, I was wondering on the joint venture, is that something we can extrapolate the pricing there to land value in Cambridge? Was it negotiated based on a certain land value?

Again, we haven't had a handshake or concluded any joint venture. We're actually aggressively pursuing the construction financing first, because that provides a valuable piece of the puzzle. So I think it wouldn't be useful for us to comment on any of the broad terms, we've had broad discussions with. We just haven't been that, we are not that far along, we're really focused on, we've had discussions with a number of partners and structures and things like that, but we are really waiting to get the construction financing in place ASAP. But still bear with us, a quarter or so.

Sure. Then on East Jamie Court and East Grand Avenue, the yields moved higher. I was wondering if you could walk through what were the drivers of the revisions there?

I think, Sheila, on East Grand ultimately the team on the ground did a great job of buying out the project. And that the combined with Onyx really wanting to occupy as soon as they possibly could, so we accelerated the delivery, so that helped. And then at East Jamie Court, we were just more successful than we had been projecting. Again, we talked about that smaller segment having lower vacancy rate in the market, so we were fortunate to capture a few tenants and really beat what were conservative projections.

Joel, you did mention in your remarks earlier that there are some assets coming for sale. I'm just wondering if there is something of interest to you or how you are viewing acquisition opportunities at this point?

We have modeled none, but there are in one market or another, assets we know that are being positioned for sale. We are certainly looking at a few as we speak. We don't have any huge motivation one way or another, but obviously if something was superbly fascinating to us, and one where we thought we could create value and deliver a product that fit into that sub-market in a smart way, we would potentially pursue it. I would say we are looking more than we are aggressively pursuing.

On New York Tower LOIs, do you consider them highly probable? The ones that get you to 54%?

Yes, about 50% are from existing tenants and I would say those are highly probable. Out of the seven floors, let's say more than 50%, four floors or more from existing tenants, so we think those are highly probable. And the others are new tenants but we have strong relationships and I think it is hard to always characterize and you say something and the Street assumes you have it. I would say, 50/50 but my personal view is it is higher than that.

George Auerbach, ISI group.

Joel, or Dean, have you touched yet on the seller financing or the asset sales of $39 million?

Have we touched on it?

We just briefly mentioned it. Peter can talk to you about it. He negotiated it.

I think $29 million of that was associated with the 1124 Columbia sale. Remember is that the buyer, you may not know but the buyer is repositioning that. In order to maximize the value they were looking for a loan that could bridge them through the entitlement process in the beginning of construction. So that is a short-duration loan I think it is a couple years, where they will be paying us. I think and they have an option to extend it one year after that. And then there was another $9 million loan associated with the $40 million-something West Watkins-Clopper deal, which was part of the negotiation to maximize our proceeds.

Can you touch on the rate on those loans? And stepping back, what is the FFO contribution of those loans? Just trying to figure out, I know guidance picked up by $0.04. Just wondering what impact the seller financing had on FFO this year.

Actually the seller financing had no impact. What really drove the change in our guidance was driven twofold. One, our improved outlook on occupancy and leasing in '13, which was driving improved NOI, and then a little bit of the entitlement efforts which I described to really advance opportunities for prospective tenants and certain campus locations. Going back to your rate question, George, we haven't disclosed that publicly but just keep in mind the low rate environment. It is fairly consistent with what you would expect.

Dean, could you talk about the same store NOI growth in the fourth quarter in 2012? It seems like the New York lease, especially the fourth quarter, had a disproportionate impact. Do you have those numbers excluding New York?

I don't. That was actually same store performance for the entire year. I don't have that breakdown, George, but I can come back to you.

Dave Rodgers, Robert Baird.

Joel, during your comments, and Steve's as well, I think you both talked about the negotiations leasing backlog RFPs, RFQs, that you're seeing out in the market. Have you, I didn't hear you present information, but have you aggregated that total of what the backlog is that you are looking at today? If not, can you? And I guess maybe to componetize that a little bit, how much of that is related to existing assets that you think you'd have a shot at filling versus how much of that would be related to redevelopment or ground-up development where you'd have to spend money on?

Maybe try to restate your question in a more compartmentalized fashion so we can try to take it in bite-size pieces. That is a pretty broad question.

What is the total leasing backlog that you're looking at today?

I'm not sure what you mean by leasing backlog, but let's put it this way, we are seeing stronger leasing, strangely enough, in some of the suburban markets than we've imagined or seen over the past year or two, which has been, I'd say, significantly more than we assumed. I think we've got pretty conservative assumptions on some of our existing space when those things would be speculatively filled. And we're seeing a more rapid conversion of requirements in the leases than we'd planned in our internal model. But I don't know that -- we track by market and sub-market, not overall. We don't really roll it up because it does not mean anything. Rolled up because rents in North Carolina could be $15 a foot and rents in Boston could be $65. It is a little hard to say, but if you want to be market-specific we could be responsive.

No, excuse me. Maybe not now, but again, the thought was just getting to, seems like a lot of your activity has been, in the last couple of quarters, development related. Are you continuing to see that? You kind of commented on that during the comments --

I think it's broader, much broader than development related. I can think of space that we've had, we have what we call, chronic leasing or chronic vacancy. Spaces that we have just seen stay vacant for periods of time. We have one space that has been vacant for quite a while in the greater Boston market, that's now has just been leased, I think this quarter, to an institutional tenant that we have not had activity for three or four years on. It's not part of Cambridge, but we are starting to see that happen in quite a number of locations with spaces that have been hard to lease and we are getting really good results. That has been surprising to us.

The second question is related to the joint venture you talked about with Arihant and I realize it is not done, you are still negotiating it. Maybe just step back and say, why did you elect to go, or what are you electing to do at least pursue that type of funding for that asset versus what you might do with the Biogen development that you have ongoing as well?

Our preference would be to do it all ourselves, but we are mindful of, and we haven't made final determinations, but we're certainly moving down a road here. Our goal is to meet our debt to adjusted EBITDA target of 6.5% this year. So that is part of the overall plan. That has been driving our thinking there.

This is Peter. I would just comment too, versus of the Biogen Idec campus, this is a development is still has some leasing risks associated with it. So it just makes a little bit more sense to do a JV structure where you have some more risk involved than the Biogen Idec deal.

Dave, before you jump into your next question, let me get back to George's question about fourth quarter same property performance on a cash basis as reported was 6.3%. If we were to back out the benefit from cash rent improvements at New York City, cash same property performance for the fourth quarter would have been 3.7%. So it was roughly a $2 million cash improvement in New York for the fourth quarter.

Dave, were we responsive to your questions?

Yes, I'm all set. Thanks, guys.

Jeff Theiler, Green Street Advisors.

Just a quick one regarding 499 Illinois, it sounded from your commentary that, at least it sounded like interest is really turned a corner, you're getting a lot more inquiries. Is that in your opinion just a function of you are getting to UCSF opening or is there something else going on there that is driving traffic?

I think it is really combination of things. I think the overall market dynamics as we've outlined in the second half of 2012 has really pointed in our direction. There is a lessening existing supply of space in SoMa for tech companies. With Meraki and Cisco coming down to Mission Bay, I think that is clearly validated, Mission Bay as a technology sector location so that certainly has been positive. Ultimately, we had a bit of a pause in the life science activity during 2012. And historically it has been relatively consistent, so I think we are seeing that consistent demand reemerge and it is really from both sectors. It is life science companies, it is institutions, it's the translational research and clinical elements as well. That is not only UCSF for sure, but as they continue to advance on that medical center and really the campus is nearly built out there, which is why they've got this RFP on the street. It's just very clear that there is a diminishing supply of product available.

Would you expect, just in regards to UCSF, would you expect the peak demand coming concurrently with the completion of the opening, or is there a timeline that happens after that? Do you get demand coming ahead of that? Where would you put the peak?

I think it will be starting this year and will continue through the time period that the medical center opens. There is a clear effort to consolidate in and around Mission Bay that Chancellor is building has now broken ground, so that is clearly the power center for UCSF, right there at the corner of 16th Street and Third Street.

Quentin Velleley, Citi.

Good afternoon, it's Michael Bilerman speaking. I wanted to come back to the asset sales that are planned and, Joel, we completely understand and appreciate that under-leased and under-utilized assets and assets that go through changes and dynamics, can't really look at them on a cap rate basis. I think the other side of it is, that income is being lost from the company, right? You take the two sales that happened at beginning of the year, the $84 million, you are losing $15 million of cap NOI that is coming out of the P&L.

Yes but some of it was coming out anyway, because of either lease rolling out or termination of leases. A chunk of it, I don't have it in front of me --

We know where there is going to come out, but I think you have to appreciate from an investor and analyst perspective, that we have to understand that on your NOI stream, how much of that would the at risk from potential assets that, if someone was capping your NOI and capping this NOI at a cap rate, okay, so they would be putting a cap rate on that $15 million, they would've come out with a much different value than what ultimately you sold on the assets. So maybe I can ask it in a different way. If we look at these sales in income-producing assets that are scheduled for the rest of the year, which is about just under $100 million, what is the current NOI stream for those assets? i.e., how much NOI needs to come out once we sell those assets for $100 million?

Give us one second. Are going to see how much --

Well about, more than 50% of that, Michael, I think Dean had in his remarks about $50 million or $60 million are targeted for three assets in San Diego, all of which go dark in our lease rolls today. That is going away no matter what. But we can try --

I assume that is not in your same store guidance that we need to figure out some way to take that out from an NOI stream to be able to get to the numbers. Arguably, I understand that some of these assets, they serve a different purpose and they are great to do, and it's cleaning up the portfolio and all of the other benefits that we think are good. But at the same time we have to make sure that we are stripping out the right amount of NOI for the sales.

Yes.

Yes, so Michael, I'm sorry, just got the schedule, as you can imagine $377 million projected, I wanted to make sure I looked carefully at the breakdown to answer your question.

But only the income produced.

Yes, so on the income-producing, the only other sale that has been identified is the one we referenced on the call. We completed $84 million, there is roughly something in the $40 million range that is closing here shortly in the quarter, and outside of that, I think there is another $18 million to meet our bogey. So it is a small number, that asset has not been identified, so I can't give you a yield today. In the sense, it is small and I don't expect -- All this information is included in our guidance, included in same store. I don't have that particular yield assumption in front of me at the moment but on $18 million it is not a big assumption.

Maybe the other way to look at it, is there a way to parcel out if you were to look at the NOI stream today, calling it on an annualized basis, the $430 million, what percentage of that income do you view within this bucket of -- is it $10 million, is it $20 million, where we should really be treating that on a price per pound basis rather than a cap rate basis? Understanding that $15 million was, that represented almost 3.5% of NOI, but a much, much lower percentage of NAV.

I hate to ask you to do this, Michael, I missed the first part of your question.

If you're annualized NOI stream is $430 million, how much of that NOI stream is tied up in assets where you see this risk? Is it effectively done, the two assets you sold, again, produced a $15 million of GAAP NOI, it's 3.5% of the NOI stream where the value would have been very different if you put a cap rate of on it versus valuing it on a price per pound basis.

Michael, you're talking about our overall asset base, and we don't have anything specifically identified that falls into this category that we are looking to monetize at the moment. We have one asset in the Wooster market, at the suburbs of Boston that we have identified and those are in our disclosures. I think that was disclosed in the fourth quarter as a component of one of the targeted sales in December. Other than that -- beyond that --

So maybe to put bookends around that, we think that in the broad, if we looked at all the assets that we would want to dispose of today, that we could dispose of today, that we haven't identified, but that we kind of have an idea about, that number would be somewhere in the $5 million to $7 million range of NOI.

Coming back to New York for the construction cost of $1,100 per square foot for the South Tower, can you break that out of how much was, and understanding, I know we went through the great recession, you had to carry the land, not the land because there's the ground lease, but you have to carry the materials for a little while longer. How much of that represented, how much of the $1100 is capitalized cost? And maybe you can break out the components, because it does seem like a high number, especially the fact that there is no land basis.

We can maybe do that off-line. We'd have to look at it. Clearly you have got the superstructure, the infrastructure, which is expensive, you have got all the steel and curtain wall that we bought back in I think '07 when we kicked off that building. You have got obviously the carry issue you described, we have got obviously a budget for finishes, et cetera. I think it is wise not to get too obsessively and compulsively focused on the cost but look at the number on the rent that Peter gave. If you are getting $70 or $80 triple net 10-year, 15-year, 20-year leases with 3% escalations and you are getting a yield we think we'll ultimately north of 6.5% in a AAA, class A asset in New York, I don't know of any deal we could do in New York City today by way of acquisition or development that could equal those yields, Michael. I think to put that into perspective, we will try off-line to get you somewhat of a segmented break down on costs, we don't have it with us.

I'm also just trying to reconcile a little bit. You've been in this project for a long time. I would think that the yields that most people, and that you've talked about on prior calls, we can dig up the transcripts, I'm not trying to say that 6.5%, close to 7% is not good today, it is. But the yields that have been talked about previously about this project, especially about the second phase of the projects, which you're supposed to benefit from a lot of the infrastructure cost being layered, but the first tower, were much higher. I'm just trying to understand what changed, because the rental market has certainly come back and the rents are there, so it has to have been on the cost side and I'm just trying to understand what part of the cost, was it the capitalization piece, because you obviously are capitalizing a lot on other projects, I'm trying to think about whether we need to be mindful of that. And what sort of changed in the dynamics, from when you first thought about this project and it was going to be a high single-digit yield to where it is ending up today.

Well, I think when we started this project in '05,'06 and '07, our view of the market pre-Lehman was quite different. And obviously we had never built in New York. I don't think we ever gave, you could go check the transcripts, I don't remember giving specific yields, because we had no rental rates at that time. I know over the last couple of quarters, I think I personally said both in meetings and publicly, I've said we think it is probably in the mid-$6s, that is the number I have been using publicly for quite a number of quarters and I think the numbers as they finally come out through our finance group, are pretty consistent with that. If you go back five or more years, and our hopes on the project, I'm sure our hopes in '06, '07 in the mid- to high-single-digits but those were only hopes, certainly no details behind that. I think that is how we've thought about it over post-Lehman.

We have no further questions at this time. I would like to turn it back to Joel Marcus for closing remarks.

Again, thank you very much for your time and we will look forward to talking to you on the first quarter call and again happy new year to all.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you all for participating. You may now disconnect.