Good day ladies and gentlemen, welcome to the Alexandria Real Estate Equities’ Third Quarter 2016 Earnings Conference Call. My name is Katherine 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 that today’s conference is being recorded.

I would now turn the call over to Paula Schwartz. Please go ahead, ma’am..

Thank you and good afternoon everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. I now would like to turn the call over to Joel Marcus. Please go ahead Joel..

Thank you, Paula and welcome everybody to our third quarter call. And with me today is Dean Shigenaga, Tom Andrews, Steve Richardson, Peter Moglia, Dan Ryan and Monica. Thank you, and congratulations to the entire Alexandria family for a truly strong operating and financial performance in the third quarter.

A couple of key the things that we like to stress, one would be our continuing strong core, Dean, will speak to that.

Secondly, our continuing strong leasing, bolstered by strong demand and a constrain supply in our urban cluster markets, and solid rent growth and we’re pleased to say that in the third quarter our rent growth was heavily driven by our Greater Boston region; maintaining strong occupancy; strong tenant credit, also a strong pipeline with deliveries with increase in yields as you saw; and number five, superb execution of our capital plan.

Let me give a couple of macro thoughts as I like to do each quarter. Alexandria’s business is on two of the most important global issues facing humanity, disease and hunger. Life science fundamentals remain strong and as I stated in the last quarter, 10,000 diseases were identified to date and only about 500 of those have been medically addressed.

We’re seeing more patients to date, especially with the implementation of the Affordable Care Act, about 36 million more here and we’re likely to see quite a lot large growth worldwide over the coming couple of decades and the emerging markets growth have been double digits over the couple of years.

We see more drugs, 19 approvals to date in 2016, 68% are Alexandria tenants, more revenue opportunities, multiple disease areas with large market potentials including immune-oncology, the hepatitis world, liver disease and eye diseases and clearly more innovation including cures and therapies that really address a better quality of life.

Demand is driven really by three key factors, in our world we focus on the RND, which is research, 154 billion by biomedical RND worldwide which is very substantial, 34 billion NIH funding basic research and surprisingly $30 billion of medical philanthropy funding basic research as well.

There’s a lot of rhetoric these days regarding drug pricing and drug spending and it’s pretty clear the rhetoric is much verse than the realty. Retail drug spending is not meaningfully exceeded 10% of total healthcare cost of the last 50 years.

Real drug prices increases other than some abusive cases are much smaller than perception if you look at the rebates. Brand drugs that go off patent, they can get genericized typically see their sales drop 95%.

Nine out of ten prescriptions filled in the United States are generic and the hysteria over un-stainability of drug spending is not new, there was uproar in HIV treatment cost back in 1989.

President Obama has been quoted in his State Union Address last year, healthcare inflation has had its lowest rates in 50 years and the Center for Medicare and Medicaid Services, better known CMS state in the Wall Street Journal recently that U.S. expenditures for most RX drugs grew by an average of 2.7% from 2007 to 2013.

The three poster children for a bad behavior, valium, touring and mylan [ph] really none of those are driven biopharma companies. So what what’s the reality and how does that play into the election.

Well, two big reforms at the federal levels as we’re talking about, one would be both supported by Trump and Clinton allowing Medicare to negotiate drug prices directly.

Basically it won’t work because Medicare is legally prohibited from negotiating drug pricing and it would be wildly unpopular not to give the beneficiaries access to certain drugs due to price.

On constraining price increases there is in the Clinton plan a request to try to justify price hikes for long available drugs, why that’s possible but unlikely, it really applies to older drugs, but still would be a difficult pathway.

Reforms at the state level, some of you have seen both in California and Ohio, there’s an attempt for state drugs or drugs in states to be subject to caps and unfortunately it doesn’t distinguish between and older impactful or marginally impactful drugs and it’s not likely to work because they’re tied at the prices that the Veterans Administration charges and those are public and VA has more leverage than Medicare or other state payers and even if states mandate more transparency it would be hard for them to regulate and implement the initiatives.

And then secondly under state law, there’s a move to get transparency which is kind of the naming and shaming and that certainly could happen and is happening. I think if you look beyond the rhetoric, I think there’s some great near-term news for this sector, the 21st Century Cures Act.

On September 28, bipartisan leadership from both the house and senate played support to move the 21st Century Cures Act to a bill during the lame duck session of congress and it would be the first long-term and sweeping biomedical research funding before the end of this year.

And Mitch McConnell has been quoted as saying, it’s the most significant piece of legislation that we passed in the whole congress in the last year. It provides for substantial increase in funding to the National Institute of Health and to the FDA and also a number of key initiatives, including Vice President Cancer Moonshot.

The key to success in biopharma will be true cures and unique treatments which greatly increase the quality of life and even more recent to date to be in key urban innovation cluster markets to access the talent pool and the innovative technology and products.

So moving beyond that to the number of concerns that are raised about the health of life science tenants, we’re very pleased to say, you can see from the press release and the supplemental, 54% of our annual base rent are from investment grade tenants, 78% of our annual base rent from our top 20 tenants, which is a very high about almost half of our annual base rent and also coupled with an almost nine year lease duration which gives the company great long-term high quality secured cash flows and 77% of our annual base rent these days is from Class A properties and our AAA urban cluster locations.

There’ve been strong recent inflows in the life science insured capital firms, a number of firms, several - maybe up to about five or six are in the process of rising between $0.5 billion and $1 billion in funds. There’s been a decent IPO window.

It’s been more selective this year and I think a good climate for M&A and if you notice that 65% of new drugs from 2011 to 2016 were really developed by the biotech industry, clear that Big Pharma will continue to be on a shopping spree.

Before I turn it over to Dean, just a comment on external growth, we have three Cambridge deliveries substantially pre-leased in the third quarter including 50 Binney, 60 Binney and 11 Hurley were strong yields and we were able to save substantially on project costs which increase the yields.

We have a number of fourth quarter deliveries including University Town Center in San Diego to a great company focused on the year and our 290 Campus Point lease redevelopment to Eli Lilly.

Longwood, we’ve got two floors left to lease or 27.5% interest and our progress for the 2017 and 2018 pipeline 100 Binney, we’re negotiating a number of floors and we hope to conclude those negotiations in the not too distant future and as well on additional floors on Dexter. So with that let me turn it over to Dean for more color..

Thanks, Joel. Dean Shigenaga here. Good afternoon, everyone. Alexandria is in a very solid operating and growth position with our unique business strategy and strength across three important areas.

First, we have solid market fundamentals in our key urban centers of innovation including Greater Boston, San Francisco, New York City, San Diego and Seattle. Second, we have solid internal growth including same property net operating income growth and rental rate growth on lease renewals and releasing the space.

Third, we have solid external growth as we build new Class A that meet the demand from some of the most innovative entities producing new and transformative therapies and solutions to improve quality of life.

We’re unique in the REIT sector today, with positive attributes in these key areas that allows our best in class team to deliver growth in earnings, cash flows, common stock dividends.

Market fundamentals in our dynamic urban centers of innovation today generally consist of very limited suppliers available Class A space and limited capacity for developers to build new properties adjacent to key drivers of innovation.

Solid internal growth, also known as our same property net operating income growth is on track to hit the upper half of our guidance range for 2016.

90% of our third quarter ‘16, net operating income is generated from a consistent pool of quality properties operating for the entirety of comparative periods, otherwise known as our pool of same properties.

We pioneered our favorable lease structure that consists of, one, annual contractual rent escalations that average about 3% today and drive solid contractual growth in net cash, net operating income.

Two, triple net leases that has allowed Alexandria to recover operating and expenses from our tenants and three, a unique ability to recover from our tenants major CapEx like roof replacements and major heating and cooling system upgrades.

Solid market fundamentals consisting of limited supply of available Class A space and solid demand has driven continued improvement in our outlook for rental rate growth on leasing activity projected up 21% to 24% on a GAAP basis and up 8% to 11% on a cash basis and same property net operating income growth projected up 3% to 5% on a GAAP basis and up 4.5% to 6.5% on a cash basis.

We continue to execute on our strategy to deliver new high quality Class A properties to ground up development and redevelopment.

As landlord of choice, our team is working diligently to build inspiring real estate solutions to drive collaboration and innovation for the some of the top biopharma entities focused on making life better for people throughout the world.

We’ve made excellent progress on completion of our current pipeline consisting of new Class A buildings aggregating 3.5 million square feet, 81% highly leased and we are on track to generate approximately $200 million of incremental annual net operating income, representing a significant 35% increase in net operating income over 2015.

Returns on our investment are solid and average approximately 7% on this 3.5 million square foot pipeline. We are very pleased to report strong improvement in cash returns on our investments by 40 basis points to 7.7% at 50 and 60 Binney Street in Cambridge due to 5% savings in total project cost.

We also improved our cash returns by 90 basis points to 8.8% at 11 Hurley, also located in Cambridge and due to cost savings of approximately $4 million. We are aligning solid market fundamentals, solid internal growth and solid external growth with our balance sheet management goals.

Our non-income producing real estate consist of current projects under construction and a great pipeline of well-located land for future ground up development of Class A properties was approximately 12% of gross real estate as of September 30, 2016 and expected to be in the 10% range by December 31, 2016.

Our development sites have and will continue to serve the future innovation requirements of high quality biopharma entities focused on discovery of important and transformative new therapies.

Our leverage goal; net debt to adjusted EBITDA remains firm and on track for the fourth quarter of ‘16 and also on track to be sub six times by the fourth quarter of ‘17. Additionally our debt plus preferred stock to adjusted EBITDA is also on track for significant improvement as we continue to repurchase our 7% Series D convertible preferred stock.

In October 2016, we match funded open market repurchases of 1.5 million shares of 7% Series D convertible preferred stock with 53 million of proceeds from the issuances of common stock under our at the market common stock offering program.

As of October 31, we had 125 million par value Series D preferred stock outstanding and hope to repurchase additional shares in the fourth quarter. In the 10 months to date, we’re pleased to report that we have raised approximately $324 million from real estate dispositions that have closed or that are under contract today.

This includes good progress on our disposition of real estate investments located in India including the sale of a portfolio of operating properties in October of 2016. We expect to complete the exit of the remaining investments in India consisting of two land parcels over the next couple of quarters.

In connection with the progress on dispositions of these investments in India in the third quarter, we recognized additional real estate impairments.

Briefly a quick update on our acquisition of One Kendall Square, we expect to obtain approval from the lender for the assumption of the $203 million secured loan and expect to close the acquisition and the forward sale equity offering agreements in the next few weeks.

Even though we do not currently own One Kendall Square, our team has already advanced the efforts to significantly increase revenue and cash flows with early renewals and expansion negotiations.

We’ve also quickly advanced the design insight work for a fully entitled land part [ph] on this campus in order to capture demand for a new Class A 173,000 square foot property.

I should point out that the weighted average shares outstanding for the third quarter included 751,000 additional shares to the obligation of the treasury method of accounting for the outstanding forward equity sale agreements.

Lastly on our guidance update, we provided updated guidance for 2016 as detailed on page 7 of our supplemental package, our updated guidance for 2016 net loss per diluted share attributable to Alexandria common stock holders at a range of loss of a $1.13 to $1.19.

This net loss reflects real estate impairments, a loss on early extinguishment of debt and preferred stock redemption charge. We narrowed our range of guidance for funds from operations as adjusted on a diluted per share basis for 2016 to a range of $0.03 from $5.50 to $5.52 with no change in the midpoint of the range of $5.51.

As mentioned earlier we increased our 2016 outlook for same property NOI growth and rental rate growth from leasing activity as a result of continued solid fundamentals in our key sub markets. Key credit metrics remains solid in our forecasted as follows for the fourth quarter of 2016.

Net debt to adjusted EBITDA very solid in the range of 5.9 times to 6.3 times, our fixed rate coverage ratio also very solid at 3.5 times to 4 times.

Our value creation pipeline consisting of new Class A properties currently under construction through our development and redevelopment programs and LAN providing a future pipeline of new Class A properties aggregating 10% to 12% of gross real estate and we expect to be closer to the 10% range by year end.

Few key remaining items for sources and uses for November and December of 2016 include the following, $142 million of real estate dispositions as highlighted on page 4 of our supplemental package, $140 million of acquisitions also as highlighted on page 5 of our supplemental package and this amount is related to purchase of 88 Bluxome located in south of market in San Francisco.

We anticipate the selling differing closing of this acquisition into 2017 and $168 million of capital from our aftermarket common stock offering program or from additional asset sale.

In closing we look forward to meeting many of you at our Annual Investor Day on November 30, when we will cover our business strategy, our outlook and provide detailed guidance assumptions for 2017. With that, let me turn it back over to Joel Marcus..

Operator, we'll open it up for Q&A please..

[Operator Instructions] Our first question will come from Sheila McGrath with Evercore..

Yes, good afternoon.

Joel I was wondering if you could talk about the San Diego acquisition, how that opportunity came about if there’s lot of competition on the acquisition?.

Yeah, let me turn it over to Dan and he might give you a little bit of highlight..

Yeah, good afternoon Sheila.

Yes, this was a three buildings that Pfizer had vacated approximately 4.5 years ago, it had been acquired by a private equity group that had substantially repositioned the asset with new leasing kind of I'd say, sort of got to sort of 75% completion level and as these things go the time ran out and they went to market to sell it, as you can imagine, Campus is a three [indiscernible] Torrey Pines highly desirable asset.

All the expected players were heavily participating in the process.

I think ultimately we prevailed probably, most notably because of our ability to close, I think there is great confidence, certainly if you look at the universe of other life science REITs and other private equity, Alexandria certainly has a reputation for being able to close and there is some disruption with these other REITS give us the opportunity if there been..

Sheila, this is Peter Moglia. I just wanted to add a couple of things, currently the availability in Torrey Pines is only 3.5%. And rents have grown since 2011 by 32%, so with the low availability and the opportunity to get inventory with the trend that we saw it in rent it look like a really good opportunity and we are really excited about it..

Yeah, I’m coupled with the fact that there is leasing yet to do, there is mark-to-market on rents, they roll and conversion opportunities from offers for Lab, all those things were factored into our decision to go after this asset..

Okay, great, one last question on the South San Francisco market. Was just wondering if we could get a update, we see HCP is starting another project there, just want to get your view on demand there at this point..

Sheila, hi, it is Steve Richardson. Yeah, I think as we reported for the past couple of quarters, we do see demand, very strong in south San Francisco, vacancy rates have dropped below 5%. The increases in rental rates have been very substantial, second generation space is probably increased 25% over the past 12 to 18 months.

So we consider that a very health y market. We recently completed the big campus with [indiscernible] the Google subsidy area, so we are very bullish on South San Francisco..

Okay. Great thank you..

We will go to Manny Korchman with Citi..

Hey good afternoon, John appreciate the comments on drug pricing but it seems like headlines are becoming more prevalent just in general, is there any impact in just a way that both maybe all type of drug companies and even newer companies are thinking about their growth plans or how they approach the space given all the scrutiny and given all the negative price..

Yeah, so we haven’t really seen that on the ground.

In actual practice, at this point I think yeah, as I said in my prepared remarks I think increasingly if older drugs are going to command less pricing power, there is going to be a much stronger need to bring new molecular entries where they be chemical and these are biological and these to the market, that really have cured facts of really positively impact , therapy or treatment and it seems to me that's going to even dry people more strongly in to the urban cores to access the talent and the innovation.

So I think you are going to see continually more of that and people - if companies growth rates, if you look at Illumina, Illumina’s growth rate is moving probably from a 30% growth rate to a 10% growth rate.

I think you will see companies reach out and look at greater opportunities to bring, to widen their product portfolio and their technology platform and where can you do that, you can't do that and isolated campus and suburban locations, you really got to do it in the heart of innovation.

So we are still pretty good about that but haven’t seen any actual changes on the ground and in the markets. I mean you just look at our staff and the demand we haven’t seen it roll back at all..

May be that’s a good segue.

If we look at that demand and the limited amount of supply, are you at all changing the way that negotiations are growing and trying to get tenants to put in maybe only the people that are best facilitative of the cluster market and telling tenants don’t take as much space as you want, take smaller space, don’t put in the people there.

The need to be in the cluster market or is that no something we are interested in doing..

Well I think it is very company specific and I think it is very hard to generalize and I don’t think we would be telling management teams or board of directors do this or don’t do that.

They can determine that factor based on their own analysis of their own G&A, their own requirements, their needs access innovated platforms or technologies but I think we just haven’t seen on the ground yet.

Some people want large groups of employees on the ground who might have opus uses or development side and other people are putting kind of key research facilities on these cluster but I think as a percentage of overall spend remember that rent is not a significant part of the spend in our world and our sectors compose as compared to say financial services, law firms, accounting firms and so forth.

And remember two, if whoever wins the president and CEO, over the house and the Senate go, there is one thing that they could do that could absolutely generate growth in the economy and that would be to do a onetime tax on repatriation of overseas cash which I think if you look at corporate America, that something between two and three trillion dollars so if you could imagine, 15% or 20% one-time tax on that and use that tax for infrastructure that would really move this country in a pretty dramatic way and it can't be too controversial but we have seen positive impact on the ground and clusters not anything negative and I think we are giving advice to these teams..

And Dean a quick one for you, it look like you had a non-real estate impairment this quarter, what was that related to?.

Yeah Manny, in the quarter we recorded an impairment of $3.1 million. It really was to recognize reduction in the net book value of an investment of a privately held bio tech company.

The charge was classified in other income in the income statement and in this case Manny it is clearly a valuation matter, we expect this company to continue to execute on their solid business model. This bio tech companies widely recognized as a leader in the chemical industry and providing solutions to produce chemicals from alternative feed stock.

Not a traditional bio pharma tenant. So good company and still but we had to reduce the value of our investments and so that it was recognized in the third quarter..

Thanks guys..

Thank you..

Thank you, our next question comes from Tom Catherwood with BTIG..

Yes, thank you good afternoon guys.

Question for Tom and Steve, can you guys talk a little bit about demand pipeline that you are tracking in Cambridge and San Francisco, are there any changes that you have seen versus last quarter?.

This is Tom Andrews, in Cambridge, we have, we are tracking right now about 3 million square feet of tenants in the market on the lab side and another million and half square feet on the office sides, these are tenants who are looking for space in Cambridge or in the market looking for space in Cambridge, some of them are in the market already but others didn’t have explorations but other are growth requirements and that some, that’s been pretty steady and stable.

We have got new actors coming in who weren’t there a few quarters ago both outside the market companies who are looking to enter into the market and we have got new company formation going on, Joel mentioned the fund raising that is going on in venture.

We announced this week was a $600 million new fund for third rocks ventures which has been one of the most prolific companies forming new almost prolific firms forming new companies and very Cambridge and San Francisco focused so we benefited from new company formation there and again still a relatively reasonable IPO markets which has enabled companies to raise capital, continue their clinical progress, commercialize new therapy.

So we feel very good about the level of demand that we continue using..

Tom, hi, it is Steve Richardson. Similarly there are probably three different dimensions to the demand here.

One is continued very healthy and robust demand, we have been experiencing about 2 million square feet of demand and not for just the past quarter but two or three years now we don’t see any drop off about half of that is credit tenants out in the market looking for additional facilities.

The second piece is that we are also seeing continued sense of urgency so the early renewable discussion continue, we have had good success with that past 12 months and we see that happening in the foreseeable future and finally we have very high profile entities coming into the clusters, most recently the chance [indiscernible] initiative which is pooling together the resources that UCSF, Stanford and UC, Berkley, so actually very continued exciting developments in our clusters in San Francisco..

That’s great and one follow up on that, just given the fact that there is such limited availability and new supply in both of those markets.

Have you seen any trends towards tenants looking beyond the kind of the core East Cambridge area over the core mission based lost my area, in order to find the space that they need or they really just staying in those core market?.

This is Tom, yes.

We have certainly seen some of the companies who are in the ecosystem saying all right if we are really are going to take down space and there is none here and these Cambridge right now and we need the space right now, we are going to have to look in nearby sub markets and there has been a very limited number of companies who at this point committed to that.

I expect that we will see some more because there are just not at the moment and out space in these Cambridge to accommodate all the who want to be there, but as we mentioned earlier but as we mentioned earlier we have got around 170,000 square foot development in the pipeline for One Kendall Square that we hope to start construction on next year and we actually have some real perspective activity on that space right now, we get some RMPS with corresponding to.

So I think we will significant level of pre-leasing there, so that’s a piece of supply that is not yet in the market but is expected to be created..

Hey this is Peter, I just wanted to underscore demand in this Cambridge JLL just came out with the lab space report that said that the ratio of demand to supply right now is 9 to 1. So we have never seen anything quite like that in our history and that explains the very high increases that we are seeing in rents..

Tom, it is Steve again, I would say 10 stores to the latter, these companies really do want to be in these clusters. So we are seeing continued demand which is leading us to be able to push rent, we registered a 9.6% increase in the mark to market for the rental rates that we have in San Francisco..

Great, I appreciate. One more for me, just in a kind of market where we were seeing construction costs increasing substantially in some areas how was the development cost came down this quarter in the two Cambridge deliveries and is there any read through therefore your remaining active pipeline..

No, not really I think Tom, Dean Shigenaga here.

I think you just got keep in mind on a very large project for 50 and 60 an example, you have to appropriately budget your cost of completion and ended up with conservative underwriting that realize the 5% cost savings and those opportunities do exist in the portfolio and in this case on a project of that size it has a meaningful impact..

Got it, thank you..

Thank you, Tom..

Thank you. [Operator Instructions], we will go to Michael Carroll with RBC Capital Markets..

Yeah, thanks.

Can you guys discuss how the company is picking about breaking ground on new development and redevelopment project? What you need to see in those projects and what you want to deliver some of your in process, I guess deal before you start one is that coming to play?.

I think we have said Mike on past calls and in our commentary if you go to page 41 that the future project page and we are very pleased it is really high quality locations that I think will attract a lot of interest but I think given the size of our pipeline and we delivering this year, next year in particular and then into early 2018 at the moment, we don’t need to really to match about the future we've got, I think great sides and shovel ready access to respond to really compelling opportunities and will do that as appropriate but at the moment we are not prepared to announce anything..

Okay and then can you discuss your acquisition strategy going forward? What types of deals are you looking for that are more value add opportunities that you are currently pursuing?.

Well as w said in the beginning of the year, we didn’t know that One Kendall Square would come to market; we certainly didn’t know that Torrey Ridge campus would come to market.

So we underwrite, Peter and his team underwrite everything that is out there, but we typically aren’t aggressive acquirers unless we see something we think is just so compelling where we saw One Kendall and we talked about that last time.

I think those are situations that we kind of pull together, our analysis and our view of the market and take a stock of that but those are really kind of at hawk situations got all over and developer rather than acquirer in most cases..

Hi this is Peter and I just wanted to underscore that we are still pursuing value add even when we are doing acquisitions of existing properties I mean the property at One Kendall has 30% of the space rolling over the next few years with similar mark to market.

Same thing with the San Diego property, but the thing that these two acquisitions have in common as that they are very height barrier market.

If you look at Torrey Pines, you look at Cambridge, there are very few owners, so when something comes up, if we don’t get it, somebody else that competes with us will and so it is so we do our best to find a value and we have done it so far..

But if something there was I think it is 245 First that came to market which sits right next to our [indiscernible] project at 215 at first, we looked at that and decided there was really no immediate opportunity that add value to that project and offers power and lab building.

And so we didn’t enter the bidding so we try to be very disciplined and how we think about deploying capital and we think we would rather equate value as peter always says rather than pay somebody else for their value..

And this is Peter, misspoke it is 55% of the at least start rolling [ph] in the next couple of years at One Kendall and 30% mark to market opportunity, thank you..

Great thanks..

Yeah, thank you..

Thank you, we will now hear from David Rodgers with Baird..

Yeah, Dean I don’t if you want to take this or maybe Tom and others can address it, but I guess on 100 Binney and 400 Dexter, you said you are negotiating number of floors just going to the kind of type of tenants that you are talking to, there is not that but they are smaller going to be multi-core users, but as these tech tenants, lab tenants expansions are kind of flags for the portfolio..

Well I think in 400 Dexter we have discussions with the current occupant Juno Therapeutics, they represent probably the best of breed in the cancer immunotherapy area and at 100 Binney we have several companies including big pharma and bio tech.

We don’t have any offers or any tech requirements looking I think either of those buildings that I know at the moment..

Okay great that’s helpful and then maybe I don’t know if this is for Steve or for Dean, it sounds like $140 million acquisition included or was it inside the entirety of the 88 Bluxome site, is that going to be pulled on as land, as a building as redevelopment, I guess how do you categorize that if it is land that go in the land number that you quoted earlier Dean and if not then I guess it doesn’t matter..

It is in our future pipeline of project that we can build on page 41 of supplemental page. Here maybe a short lease back by the club on that sight, maybe up to a year but anyways it really represents important product for the future..

Okay, do you maybe think of maybe [ph] your plan for the secured maturities in 2017 and one those that are up..

Sure that’s scheduled on page 49 of our supplement package; we have about 290 million in total maturities in 2017.

The bulk of it is in two loans one is $76 million secured loan that is actually scheduled for repayment in December of this year and that’s included in our sources and uses on our guidance disclosures and then we also have another construction loan of $210 million, that we have an opportunity to extend it but we haven’t yet committed to the extension or repayment.

We hope to have more color for you on Investor Day..

Okay, great thank you..

Thank you..

Thank you. Our next question comes from Rich Anderson with Mizuho..

Hey thanks and good afternoon. First question Joel is there any sort of opportunity beyond these sides of Manhattan that you guys are looking into so clustered there, I just wonder if there is anything where we could see more expanded platform someday just in future..

Well I think we look at New York city as a great market, each of these clusters takes about a generation, 25 years to mature, San Francisco, certainly after Genome Tech [ph] was founded and certainly the Cambridge cluster really hastened by some of the early companies and then highlighted by well obviously anchored by MIT and highlighted by Novartis’ move of their R&D headquarters to Cambridge.

Remember we are still kind of at the end of the first decade in New York so we think there is I think great opportunities for expansion.

We view that market is a great market but to some extend it is going to be driven by a lot of early company formation out of the universities, I don’t think you are going to see big companies move 1000 of people into Manhattan but we have been very successful in recruiting unique units, we did a Roche, we have done at Nestle, we recruited the key oncology group at Lilly, Pfizer's Centre of Therapeutic Innovation.

So we think we can bring a number of unique research boutiques to New York city and we think that these type of medical coders at best location but we clearly would look at other, I don’t think we go to the west side because the cross town traffic to the east side, to the medical corridors pretty tough, I don’t know but that’s how we look at it, but overtime I am sure will have a number of sites there..

All right, great and then speaking to Cambridge and understanding this humongous demand opportunity as mentioned 9 to 1 ratio sound s great and likely we will continue to be a fantastic market for you but 40% of your portfolio now at what point does even grey grows like that become a concentration risk for the company longer term..

Yeah that’s the questions that certainly come up in a number of discussion and we pay close attention to that. We think that again Cambridge is the center of the universe on the life science industry and gives us good feeling when you are adjacent within a stone throw of MIT, we feel it is really long term great real estate.

We do think that you will see continued growth in the bay area, Dean has done a fabulous job of expanding San Diego I think overtime we will see more activity in Seattle and in New York City so I think you will see those five clusters continue to grow.

We hope that Maryland will with new injection of funds into the NIG and FDA we hope some of our key campuses are anchored by NIH and Maryland and then overtime we hope that Ag-Tech world will grow dramatically down in North Carolina, so we feel that we will manage that risk and we do pay attention to it for sure..

In case 40% your ceiling or could you go higher? What do you think as a company at this stage?.

Well I don’t know that we have any necessary target but I think as we look at capital allocation each year will pay close attention to that to make sure we don’t have an undue risk in anything or market but we feel good about where we are and what is in the pipeline and I mean if you look at page 41 for example which I just alluded to we have got significant development opportunities in San Francisco obviously New York, San Diego and Seattle to name a few so I think we are pretty well balance in that regard..

Okay, fair enough and then maybe final question for Dean, and more of a modeling thing, you raised same store by 50 basis points but FFO sort of reiterated. Was there an offset there or just not enough too much little bit of rounding or didn’t move the needle at the FFO line..

Two things to consider there Rich, one, as I mentioned the forward equity sale agreements actually brought in some additional shares into third quarter weighted average share count of about 751,000 shares, that’s the equivalent of about $0.01 dilution to the quarter but importantly lot of leasing activity that we have executed on this year is capturing early renewals.

As an example, the top six or so leases executed in the third quarter, none of the explorations related to 2016, most of it was 2017 or later, in fact two of the six went out to ‘21 and ‘22, so most of the upside in that quarter activity will be captures by mid ‘17. So it doesn’t drop to a direct FFO impact for the third and fourth quarter.

But again I think, keep in my mind the fundamentals remains solid, limited supply of Class A space and really strong demand and we’re in a pretty sweet spot as we look forward..

Okay, fair enough. Thank you..

Thank you..

Thank you. And Mr. Marcus with no additional questions, I’d like to turn the floor back over to you for additional or closing remarks. Okay. Well, thank you very much for your time. We appreciate that. We’ll look forward to talking to you in the early February timeframe for fourth quarter and year-end results. Thanks so much..

Thank you, ladies and gentlemen, this does conclude today’s conference, thank you all, again for your participation..