BioMed Realty Trust, Inc. Q3 2008 Earnings Call Transcript

BioMed Realty Trust, Inc. (BMR)

Q3 2008 Earnings Call Transcript

October 30, 2008, 1:00 pm ET

Executives

Jon Klassen – VP, Legal and Assistant Secretary

Alan Gold – Chairman, President and CEO

Matt McDevitt – EVP, Acquisitions and Leasing

Kent Griffin – CFO

Analysts

Paul Puryear – Raymond James & Associates

Jordan Sadler – Keybanc Capital Markets

John Guinee – Stifel Nicolaus

Wilkes Graham – FBR

Chris Haley – Wachovia

George Arabech – Merrill Lynch

Dave AuBuchon – Robert W. Baird

Dave Rodgers – RBC Capital Markets

Omotayo Okusanya – UBS

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2008 BioMed Realty Trust earnings conference call. My name is Heather and I will be your coordinator for today. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's conference. (Operator instructions) As a reminder this conference is being recorded for replay purposes.

I would now turn the presentation over to your host for today's conference Mr. Jon Klassen, Vice President, Legal. Please proceed, sir.

Jon Klassen

Thank you, Heather, and welcome everyone. On the call today are Alan Gold, Chief Executive Officer; Kent Griffin, Chief Financial Officer; and Matt McDevitt, Executive Vice President, Acquisitions and Leasing. Before we begin, I would like to remind everyone of the Safe Harbor statement included in yesterday's press release. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements, including statements made during the course of today's conference call.

These forward-looking statements are based on the company's current expectations and beliefs and involves significant risks and uncertainties, some of which are beyond the control of the company and are subject to change based upon various factors. Actual results may differ materially from those expressed or implied by the forward-looking statements.

For a detailed discussion of some of the ongoing risks and uncertainties of the company's business, I refer you to the press release issued yesterday and filed with the SEC on Form 8-K as well as the company’s other SEC filings, including its most recent annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

With that said, I would now like to turn the call over to Alan Gold. Alan?

Alan Gold

Thanks Jon. As always, thank you all for joining us here on the call today. I am going to provide a general overview, after which I will have Matt McDevitt discuss our recent leasing activity. I am going to ask Kent Griffin to review the third quarter financial results, our FFO guidance, and our strong capital position.

Now, because of the enormity the recent economic events, we’ll try to be concise but still thorough in order to address what we believe are the primary areas of focus for investors in the current environment and providing time to take any questions that our listeners might have.

In consideration of the rapidly changing capital market conditions, I would like to start today by looking at what’s changed over the last quarter, particularly over the last 30 days and what that means for our business. The primary overriding change of course is that capital has become increasingly scarce across industries, companies, geographies, across absolutely all fronts. And while all capital has become more difficult to come by, access to debt capital has generally been the primary focus for most commercial real estate companies, given their capital-intensive nature and normal course of business refinancing obligation.

Now, as we said in our last call, we believe that the cost of credit is increasing and it’s increasing significantly. While we all can hope that this a short-lived event, whether it might return to at least some more happy meaning, we don’t think that’s a prudent operating assumption.

Fortunately, because of our long standing practice of pro-actively managing our balance sheet, our capital commitments and our funding capacity, we don’t think the current environment impedes our ability to execute on our core business plan.

In fact, we believe we are well positioned to capitalize on opportunities, opportunity we see in the environment where others find themselves in difficult positions. Now, for the Life Science industry, as we’ve already tried to communicate, access to equity capital is the primary driver for the industry. And while the public bio-techs and pharmaceutical firms held up reasonably well for the first three quarters of the year, over the past few weeks, we are now seeing signs that equity capital is not flowing as freely.

Even despite some anecdotally positive data points and some Q3 funding statistics that appear relatively healthy, the events of the last few weeks certainly raised concerns.

Finally, as fear, volatility sweep across all businesses which in turn brings about a significant slowing of all kinds of transactional activity, including but not limited to equity and debt financing, the slowing activity also affects acquisitions and leasing. And while the pace of leasing will slow and potentially some usual requirements will be pulled, we are still seeing and we expect to see continued leasing progress as companies push their projects through the clinical trial process and ultimately increase their need for space.

Now, before we go through our third quarter results, I’d like to talk about what hasn’t changed for us in our business. The fact is, the positive long term trends and demographic factors strongly support the demand for further investment in the Life Science industry. We all still want better health care treatment and a higher quality of life. Although the last 30 days may have indeed shortened some of our lives, ultimately, our society is living longer.

Life Science tenants have historical been and continue to be underserved by the traditional commercial real estate community creating opportunities for Biomed. And the core Life Science markets remain the primary location for the life-saving research and are focused. Importantly, our overall strategy has remained consistent. It is in fact our disciplined strategy that has positioned us well for today.

We’ve been absolutely focused on the core Life Science markets, four markets on both coasts with continuing variation in new supply, perhaps now even more than before. We have assembled a world class portfolio including state-of-the-art research facilities, like our 530 Fairview property in the Core Life Science market of Seattle that appealed to the top Life Science organizations in the world like Novo Nordisk.

Our premier management team possesses the depth of experience, key relationships and expertise to operate our business, which is absolutely vital to the success in this environment. And we’ve maintained our commitment to a conservative capital structure. Not just now when perhaps it seems obvious to have a conservative capital structure, but really since our inception, we proactively managed our balance sheet recognizing and responding to changes in financial marketing conditions putting us in the enviable position we are now in.

And as for BioMed, the highlights for the quarter really stem from our resilience in the face of what many view as a macroeconomic melting. I'm particularly pleased with our team's ability to focus on the task at hand, namely leasing, leasing, leasing and completing our development projects to help us accomplish our goal.

With another 200,000 square feet of leasing in the quarter, we continue to see positive absorption and we continue to proactively address our near term explorations to early renewals and extensions. We have delivered our development projects which in turn allows us to provide world-class research base for our tenants like Illumina and Beth Israel Deaconess Medical Center.

And finally, just after the quarter end, we raised roughly $212 million in net proceeds from our common stock offering. Again, our disciplined approach to managing the balance sheet has enabled our team to remain focused on operating our business which we believe is especially important during this challenging times.

Now, I'd like to turn the call over Matt McDevitt to touch on our third quarter leasing activity. Matt?

Matt McDevitt

Thanks, John. We continue to make solid progress in the leasing front. During the third quarter, our gross leasing volume was roughly 200,000 square feet. We executed 52,000 square feet of new leases highlighted by a 28,000 square feet to Nteryx at our Ardenwood Boulevard property. This property is in the Fremont/Newark submarket of the San Francisco Bay Area which is also home to the Pacific Research Center, yet another validation of the demand for Life Science tenants in this submarket.

During the quarter, we also executed 147,000 square feet of early renewals and extensions, highlighted by Regeneron's 91,000 square feet extension for space they had previously intended to vacate at our Landmark campus in New York, expanding their long-term commitment to the campus to just over 348,000 square feet. This transaction particularly addresses our single largest lease maturity in 2009. As a consequence, by 2009 lease explorations now represent just under 2% of annualized day turns for the entire portfolio.

Now, our tenant mix remained strong, 86% of our rents coming from research institutes, public companies or government agencies. And our average remaining lease term remains consistent at nine years. As many of you saw just this month, we signed a 36,900 square feet lease with Novo Nordisk at our 530 Fairview Avenue property in Seattle. You may recall that we just completed the core and shell just last quarter. This was our first spec project for BioMed and we're pleased to have produced such a world-class facility that attracts tenants of this caliber.

Now, over the last four quarters, we executed over 1.3 million square feet of gross leasing volume. Now, roughly half of this gross leasing volume was associated with early renewals and extensions.

Taking a look forward, we do believe that the deterioration of financial markets will continue to make leasing environment a challenge, lengthening the leasing cycle even further. We expect this to be more so for new leases than extensions. We're actively engaged with tenant prospects across the entire portfolio and we are expecting piles of net absorption again through the end of 2009.

But the pace and terms of this leasing are more difficult to forecast given the unusual magnitude and uncertainty of this economic slowdown. Now, taking a look ahead, we currently anticipate approximately 1 million square feet of gross leasing volume by the end of 2009 with significant portion of the total again related to renewals and extensions.

Now, most of the eyes remain focus on TRC and the Center for Life Science Boston. In both these cases, we continue to be engaged in very active dialogs with tenants that could result in additional leasing before the year end 2008. But, the rapid deterioration of the economy this month makes it even more difficult for us to forecast the pace of leasing activity throughout the next 12 or so months.

And with that, I'll turn it back over to Alan.

Alan Gold

Thanks, Matt. Touching briefly on our development activity, we delivered the Towne Centre Drive building in San Diego during the quarter. This represents our first start to finish development project since we've been operating as a public company. The building, which includes 84,000 square feet of office and lad space, is 100% lease to Illumina and we delivered early and under budget. We're of course very proud of this project.

Also during the quarter, we neared completion of the move in for Beth Israel Deaconess Medical Center, the last of our four current tenants of the Center for Life Science Boston. And our joint venture with Prudential now has only one project under development, 650 East Kendall, and our consolidated portfolio has only three ongoing developments, each of which is over 50% pre-leased and all three of which will be placed in service in the first half of 2009. We do not currently anticipate any new construction starts for the foreseeable future.

And that's that. I guess that I'm going to turn it over to Kent to review our third quarter results. Kent?

Kent Griffin

Thanks, Alan. As indicated in our earnings release last night, our financial performance in the third quarter was again very solid. I'm going to review our third quarter results and our expectations for the balance of 2008 and 2009. After which, I will review on liquidity and capital position.

Funds from operations were approximately $0.48 per diluted share compared with $0.45 per share in the third quarter of 2007. Rental revenues were up over 20% year-over-year to $59.4 million for the quarter primarily driven by the delivery of some of our development projects into service along with the strong leasing performance over the past four quarters.

Tenant recoveries increased roughly in line with the increase in property operating expenses resulting in a property operating expense recovery ratio of approximately 88%. G&A was $4.6 million, down partially attributable to reduced compensation for senior management.

Interest expense increased in the third quarter primarily as a function of projects or portions of projects moving out of our development or redevelopment pool into service resulting in a reduction in capitalized interest.

We also experienced some additional interest expense, roughly $700,000, associated with the ineffectiveness of our forward starting swaps. The same property results were again strong with our strongly leasing success driving increased occupancy, which helps contribute to an increase in cash trends of 5.3%, which was the primary driver for increasing same property cash NOI up over 7% year-over-year.

Now, for 2008 guidance, based on the results now for the first three quarters, we are updating our guidance for the full year of 2008 to an FFO range of $1.84 to $1.87 per diluted share. The revised range of FFO estimates reflects the strong results for the first three quarters offset by the dilutive effective our recent stock offering as well as higher anticipated interest expense as we put more of our development projects into service and capitalize less of our interest and operating costs.

On a sequential basis, we anticipate a reduction in Q4 FFO versus Q3 FFO, as a result of the equity offering along with the return to a higher run rate for G&A as well as the dilutive effect of the delivery of 301 Binney prior to stabilization.

For 2009 guidance, we introduced our guidance for 2009 in yesterday's press release with a range of $1.60 to $1.80. The wider range, wider than prior periods, reflects that greater variability associated with the highly fluid macro economic environment. Our guidance reflects continued strength in our operating portfolio, but assumes significantly increased long-term financing cost particularly as it relates to financing for the Center for Life Science.

Some key operating assumptions include the following. As Matt indicated, we are assuming roughly one million square feet of gross leasing volume for the five quarters that include the fourth quarter of 2008 and the full year 2009 and we are also assuming a continuation of the trend of more renewals and extensions as a part of our aggregate gross leasing volume. We also expect G&A to approach a run rate of approximately $6.5 million per quarter beginning in Q4 2008.

On the financing side, we expect the change in accounting for the exchangeable notes to equate to roughly $0.01 per diluted share per quarter taking effect January 1 of next year. Dilution from the recent equity offering is roughly $0.025 per quarter as we utilized the proceeds to pay down our revolving credit facility.

As I'll address in a moment when we review our balance sheet and our liquidity, we intend to seek long-term fixed rate financing for our CFLS property at the beginning of 2009, which could result in additional interest expense approaching $3 million per quarter or more than $0.03 per diluted share again per quarter.

Also using the value of the four starting swaps as of September 30, which is approximately $23.2 million, the amortization of this amount over ten year period would result in just over $0.005 or so of additional interest expense per quarter. So, for many of you that like to track the pennies, we start with the third quarter FFO of $0.48 per quarter. We add back $0.01 for the ineffectiveness of the four starting swaps that we incurred in the third quarter and we reduce FFO for $0.02 for what we would estimate would be a more representative run rate for G&A going forward, you would have a normalized, if you will, run rate of $0.47 per share.

From here from this starting point, deducting $0.01 for the change in accounting for the convertible notes, $0.025 for the dilution from the common stock offering, $0.03 for the higher financing cost at CFLS, and $0.005 for the swap amortization, you come to $0.40 per quarter which annualized represents a $1.50 or the bottom end of our range.

Form a sequential perspective, we would expect declining FFO perhaps to the third quarter of 2009 as the delivery projects into our operating portfolio prior to being fully leased is likely to largely offset the income received from new lease commitments.

Now, I'll talk about our balance sheet and liquidity. During the third quarter, we repaid our only remaining debt maturity for 2008, a $17 million mortgage which we repaid by drawing on our revolving credit facility.

As the quarter end, we had approximately $1.5 billion of consolidated debt plus another $100 million of debt representing our proportionate share of the unconsolidated debt associated with our joint ventures, with a total debt to capitalization ratio of approximately 41% as of September 30.

Immediately subsequent to the quarter end, we issued just over $8.6 million shares of common stock including the full exercise of the underwriters over-allotment option. The offering which is underwritten by UBS resulted in approximately $212 million of net process which we utilized to pay down our $600 million revolving credit facility.

So, on a pro forma basis, we would have had $54 million outstanding on the line. This leaves almost $546 million of credit facility capacity. Proactively managing our balance sheet and liquidity position has really been a hallmark of our business strategy. And while it probably doesn't come as a surprise to those of you who followed us for a while, we are very pleased to have further solidified our capital position in light of the current economic environment.

While we of course consider and recognize the dilutive effect of the common stock offering, we believe that prudence in this environment is appropriate.

Also subsequent to the quarter end, we completed the previously announced sale of a portion of the garage at the Center for Life Science Boston for approximately $29 million. This was as expected and pursuant to a contract, we assumed when we acquired the Center for Life Science Boston.

So, next quarter, these proceeds will be reflected as a reduction in the investment to date amount in our supplemental and our estimated total investment in the supplemental will remain at $730 million. Looking forward, we expect to invest approximately $100 million to complete our three development projects in 2009.

We expect to invest roughly $200 million to complete our redevelopment projects, of which we expect to spend roughly half, $100 million, by the end of 2009 and the balance generally over the course of 2010 and 2011. Now, almost half of our projected future investment in the redevelopment projects is subject to the execution of leases of these properties.

We have an additional potential capital requirement related to our four starting swaps that have initial value of $450 million. The estimated settlement amount of these swaps as of quarter-end was approximately $23 million. However, these amounts have varied and they continue to vary significantly based on changes in interest rates. At the time of settlement, we will either fund the costs or receive the benefit of their then current value, which will then be amortized over the subsequent tenure period as an increase to or reduction of interest expense, which what I was referring to earlier when we discussed the '09 guidance.

As for our refinancing obligations, we have no other maturities in 2008. We have one maturity in 2009, one consolidated debt maturity, which is our construction mode at Center for Life Science. Here we do have an extension option that would extend the maturity to November 2010, which is more than two years from today subject to certain conditions.

And although we have this extension option, we are evaluating financing alternatives with the goal of obtaining long-term fixed rate financing for this asset in the beginning of 2009. Although this financing is likely to be at a higher cost than our current financing, we believe that obtaining long term fixed rate financing will be prudent despite potential impact on our 2009 financial results. We have one 2009 maturity for our unconsolidated joint ventures, which occurs in the second quarter, our portion of which is approximately $72 million.

We expect to complete the term's free financing prior to maturity, but again at a higher spread versus the maturing obligation. We've never taken our capital position for granted and we're very fortunate to be so well positioned and we appreciate the continued support of our lenders and investors.

And with that I'll turn it back over to Alan.

Alan Gold

Well thanks, Kent. And while these are difficult times for all us, I want to again thank our employees across the organization and across the country for their hard and smart work.

With that operator, can you now open the line up for questions?

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Paul Puryear with Raymond James. Please Proceed.

Paul Puryear − Raymond James & Associates

Hey, good morning guys.

Alan Gold

Good morning Paul.

Paul Puryear − Raymond James & Associates

Alan, could you compare and contrast the current environment for life science funding to what you went through in 2001 or any previous slowdown for that matter?

Alan Gold

I'll give you my best. The one good thing about the life science industry is they've lived through these capital freezes many at times and indeed the 2001 capital freeze which was considered a nuclear freeze, it was a long-term inability for the companies to raise capital to use it through the IPO windows in public markets, even private markets.

We haven't seen the complete shut-off of capital or we hadn't seen the complete shut-off until the last 30 days when we really started to see some significant halt in the flowing capital to the life science companies.

I think what happened in 2001 and what happened before is that the weaker companies, the companies that didn't take advantage of the opportunity to raise capital, those are the first ones to fall out and we are starting to see some of those weaker Tier 4 start-up venture backed companies that didn't raise sufficient capitals and haven't moved their product through the pipeline to – they've started to crack and have problems.

What we do see and what we have seen in the past is we have seen these companies to be more willing to merge because of necessity, and typically what happens is that their evaluations are significantly reduced and that gives the pharma companies the desire to take advantage of those opportunities. We still are in an environment where the pharma companies do have a very thin pipeline of new drugs and their best hope for an improvement their pipeline comes from the biotech company.

We think that the companies who have sufficient capacity to last out a long time will survive. These management teams have been − they're very experienced and they know how to, during these tough times, extend their runway for a very long time.

Paul Puryear − Raymond James & Associates

I guess in light of that and what's happened in the last 30 days, who's on your tenant watch list and how has that changed?

Alan Gold

Our tenant watch list really hasn't changed too much. We still have Ardus Medical and MDRNA. Ardus Medical is a company in San Diego that provides − their main product is ArteFill [ph] which is a product for the aesthetics (inaudible) market. They reported positive revenues so they actually have revenues and they reported positive revenue increase in the third quarter, but we haven't seen their fourth quarter numbers yet to date.

The other one is MDRNA up in Seattle, in the Bothell area, which has gone through a major restructuring, and we're watching them very closely. But they do have sufficient cash and they are watching their cash very carefully and they're looking to sub lease space and we're working with them on that.

We also have three smaller tenants that really don't make a watch list because they're less than 10,000 square feet, but they are smaller tenants that may or not may not survive. We'll see.

Paul Puryear − Raymond James & Associates

Yes, Bill's got a question here.

William Crow − Raymond James & Associates

Hey guys. Can you just talk about the leasing activity and specifically with the change you may have seen over the last 30 days, are you just seeing paralysis right now or are you still seeing tours of your vacant properties?

Alan Gold

We're still seeing tours. There were tours yesterday at PRC and they've been tours consistently at our availabilities in San Diego and in Boston. We are very excited about the level of continued activity and the number of transactions we are discussing and negotiating. But if I were a Board member of a tenant, I would step back and pause to rethink for a minute for two before you commit yourself to any sort of long term investment or commitments.

William Crow − Raymond James & Associates

All right. Thanks. Thanks Alan.

Alan Gold

Thanks Paul.

Operator

You're next question comes from the line of Jordan Sadler with KeyBanc Capital Markets. Please proceed.

Jordan Sadler − Keybanc Capital Markets

Hey, thanks. Good morning guys. I just wanted to follow up on one of those questions there which is – that was a good answer. You said if you were a Board member in one of these companies, you would pause and re-assess. But I think one of the questions I have is I think that makes a lot of intuitive sense to us I think, but at the end of the day, aren't your tenants investing in order to do research, it was cash – and in many cases, it was cash that's been raised already?

Alan Gold

And I think that's absolutely correct and that's why we remain optimistic that we are continuing to see leasing activity and at these times will continue to sign leases to grow there business. You've identified the reason why we're so excited about our business is because these companies need our facilities in order to do their research. And their research is not dependent upon what happens to the consumers. If consumers don't spend, they still need to do the research to get their product through the clinical trial and finally to approval. But, we've seen in the past economic downturns that the life science research industry has continued to move along albeit at somewhat slower pace but continues to grow.

Jordan Sadler − Keybanc Capital Markets

It's okay. And there is no real change – I mean, is that change reflects what going on in Boston as well – in Cambridge as well as Boston with those institutions?

Alan Gold

I don't think that. We still have – there's been tremendous demand and people running around looking at properties. I do think that it has slowed some of the leasing transactions that we have been monitoring. Just because it makes sense to be prudent to step back and see – figure out where things are going and make sure that you have all your ducks in the line before you make that long term commitment. And it's only been very recently and we are talking 30 days, 40 days at the most where we've seen any sort of hesitation.

Jordan Sandler − Keybanc Capital Markets

And I might have missed this, what's reflected in the guidance for next year in terms of new leases as supposed to renewals.

Alan Gold

That's a good question. We are assuming an aggregate gross leasing volume of 1 million square feet. And we've been tracking over the past four quarters or so roughly an even split between the two. And so we're still projecting, if you had to put your finger on a point today, you'd say an even mix between the two. Clearly, if we did 1 million square feet and more of it as a result of renewals versus new leasing that would push us towards the lower end of our expected range. And if we do 1 million square feet and a higher portion of that is new leases versus renewals that would put us towards the higher end of our range.

Jordan Sadler − Keybanc Capital Markets

And is that million square feet from September 30 through the end of 2009?

Alan Gold

That's exactly right. That's a very good point. So, if you look backwards, we've done just over close to 1.3 million over the last four quarters. Currently, we are projecting a million square feet over the next five quarters, the five quarters being this fourth quarter of 2008 and the four quarters of 2009.

Jordan Sandler − Keybanc Capital Markets

Over the preceding period, so from September 30 of last year until the end of this year, you were expecting I think previously to do 1.2 million in new leases?

Alan Gold

We were originally projecting to do roughly 1.2 million in two leases, that's right.

Jordan Sandler − Keybanc Capital Markets

And so now, by my count, I think we're at 700,000 year-to-date?

Alan Gold

That sounds roughly right.

Jordan Sandler − Keybanc Capital Markets

We're 500,000 short on the new lease schedule, so those 500,000 are now really being extended, if we are going to take an extra year to get to that same 500,000 is kind of what you're saying here?

Alan Gold

Well, it's very much space specific, so we had some leases that we projected happen in '08 that may happen in '09 and vise versa. So, I wouldn't necessarily characterize it as a specific bucket of leases that gets pushed out. But, what we've seen is, we've seen higher leasing volumes than we anticipated, but we've just seen a more significant piece of renewal and early amendments.

Jordan Sandler − Keybanc Capital Markets

But, aggregate net new absorption which is how you guys increase FFO most significantly is really not changing from the previous expectation relative to what was expected by the end of this year. So, really going to be no change by the end of next year. That's fine. I just want to clarify.

Alan Gold

If I understand your question, I can think that’s correct and we can talk about it more offline and let me try and understand your question correctly. But if the question you’re asking is have we experienced lower new leasing volumes in 2008, the answer of that is yes.

Jordan Sadler – KeyBanc Capital Markets

Okay. And then maybe just if you can clarify on this financing, what your assumptions are, you’re saying that you expect to have something by the beginning of the year?

Alan Gold

No. Our expectation is actually in the first quarter. So, we don’t expect to do – on our last call, we had on our second quarter call, we had discussed our intent to do something by the end of the year. We don’t expect that now, but we do expect to – we are targeting and intend to do something next quarter.

Jordan Sadler – KeyBanc Capital Markets

So, I assume this is another mortgage financing of some sort of permanent mortgage?

Alan Gold

Correct.

Jordan Sadler – KeyBanc Capital Markets

And just given the marketplace, I assume you guys are already underway with the process just because I know it's taking people long time to get these types of deals done. Can you give us a sense for the types of institutions that's lending and maybe what kind of term you might be seeking?

Alan Gold

I think it’s early and we are intending to prepare ourselves to be in a position to do something in the first quarter. So, I don’t have a lot of color to provide you. We’ve obviously been – had some early stage discussions with a handful of folks, but it’s still very premature to make any assumptions. And so, we are trying to give clarity as to what our intent is and what our expectations are. We are not trying to lead everybody think that we have a production [ph] we are going to close tomorrow. That’s not the case.

Jordan Sadler – KeyBanc Capital Markets

Okay. I guess, based on sort of the dilution you steered us to from this financing of $0.03 per quarter roughly, obviously you’re anticipating some spread above the current cost and I’m – I know you talked about the desire to be well capitalized and prudently capitalized and I understand that. But, maybe you could explain to us sort of the reason to sort of execute today and with a long term financing when you might have – well, I guess you have two years of term left on that existing financing at the current floating rate.

Alan Gold

Sure. I guess there are a couple of parts to that question. Obviously, we are just getting prepared to going out and gearing up to get a transaction done in the first quarter. We certainly have the ability, if the terms are not where we think they should be, we have the ability to defer that decision and we certainly have that option to work with. But, if you sit back and look at what our plan has been for the Center for Life Science, when we acquired the asset, we put in place for example forward starting swaps with the target settlement date of December 30.

So, our plan has always been to put permanent data on the asset once the construction was completed, which is constructions now completed and the tenants are moving in. And so this has been our plan from the get go. So, the real question is, does the current environment tell us should we change that plan and should be stay in the construction loan for a longer period of time to hope for a better financing environment and try to enjoy the low LIBOR environment that we’re in relative to past periods.

And while I’m sure it's tempting to hang out in a lower cost LIBOR construction loans, that's not the intent, that’s not part of the long term plan with having assets for long term leases and trying to match on your cost structure with your revenue streams. And so, this has always has been part of our plan and I think our belief is that hanging out and hoping for a better day in terms of the aggregate cost to financing is potentially exposes you to more risk and could put someone in the position of the credit markets or to seize up again for some other reason by the end of next year or longer having longer terms than you might get today.

Jordan Sadler – KeyBanc Capital Markets

To what extent does the decision to act now reflect your view of the ability to lease the remaining vacancy at the Center for Life Science, or the inability?

Alan Gold

I don’t think our decision to pursue the financing is directly correlated to our leasing assumptions at the Center for Life Science. So, I don’t think they are correlated events.

Jordan Sadler – KeyBanc Capital Markets

Okay. Thank you.

Alan Gold

Thanks.

Operator

Your next question from John Guinee with Stifel. Please proceed.

John Guinee – Stifel Nicolaus

John Guinee here. How are you?

Alan Gold

Hi John.

John Guinee – Stifel Nicolaus

Two quick questions. First, PRC, what do you think the market rank is for just generic office space, let's say, $20 work letter?

Kent Griffin, Jr.

We’ve seen comparables out there at level probably in the $1.50, maybe $1.35.

John Guinee – Stifel Nicolaus

That’s the net number or gross number?

Kent Griffin, Jr.

That’s a net number per square foot per month.

John Guinee – Stifel Nicolaus

Got you, okay. Second, if I’m looking at your capitalized interest line items on your financing and operating statements, at what point do you essentially get to zero on capitalized interest and the vast majority of interest expense being expensed three quarters from now or six quarters from now?

Alan Gold

Well, I think you’ll see – if you look at our supplemental on our development or redevelopment summaries, you can see the estimated in service dates. And we expect the capitalized interest to burn-off in accordance with those estimated in service dates. So, the capitalized interest related to our development pipeline we expect to basically burn-off in the first half of the year of ‘09. Our redevelopment pipeline, there are research centers – the book of that should (inaudible) by mid-year. But, we had a couple of other projects that go out longer. So, it’s not going to burn down to zero by mid-year, but it should burn down significantly to perform the majority of the capitalized interest should be given off by then.

John Guinee – Stifel Nicolaus

And I apologize if you've already mentioned this, but who are your lenders on Center for Life Science and the big Prudential JV in Cambridge?

Alan Gold

We have a pretty broad base of lenders across all of our facilities.

John Guinee – Stifel Nicolaus

(inaudible)

Alan Gold

On both the Center for Life Science, I guess there's three different facilities I think you're talking about, so the construction loan at the Center for Life Science was led by KeyBanc. But I think they are probably close to maybe as many as 20 different institutions, somewhere 15 to 20 different institutions that are participants. So it's a pretty well syndicated transaction that's pretty broadly held.

If you look at our joint venture financings, we have two different joint venture financings, one of which is with Wachovia. But the one that matures in April, which I think is the one you're referring to, is also led by KeyBanc. But when we look across all of our facilities, we have about 37 banks that have participated in each of our five different financing that are currently outstanding.

John Guinee – Stifel Nicolaus

Okay. And then the last question, are you in the market for your exchangeable notes and how are they trading now?

Alan Gold

We are not. I think they're trading at a discount much like all publicly traded securities are. If you look at common and preferred and exchangeable notes, I think everything is trading pretty poorly right now.

John Guinee – Stifel Nicolaus

Most people are trading in the $0.60 to $0.75 on the dollar. Are you in that range?

Alan Gold

I would have to talk to one of them as to get a current quote (inaudible) me if we're on the same ranges as the other REITs.

John Guinee – Stifel Nicolaus

Okay. Thank you very much.

Alan Gold

Thanks.

Operator

The next question comes from the line of Wilkes Graham with FBR. Please proceed. Mr. Graham your line is open. Please proceed.

Wilkes Graham – FBR

Sorry about that. Good morning. As it relates to your plans to refinance Center for Life Science Boston potentially roughly two years ahead of time where you could have the ability to continue your current financing there through November of 2010, do you have similar plans to refinance the $266 million that matures in 2011 that is currently at 3.84%?

Alan Gold

I think if you're referring to our line of credit, which I assume that's what you're referring to, the answer to that is no. The difference with the line that credit is, from our perspective anyway, is part of your ongoing operating capital structure and the facility that we have at the Center for Life Science was a construction loan and construction is completed.

The project is 80% leased and it's appropriate to go ahead with long-term capital in place to match the long-term nature of the asset versus the credit facility which is a revolving credit facility which you use to match them your capital requirements with your availabilities. Did that address your question? That answer your question?

Wilkes Graham – FBR

Yes. I guess I'm just trying to get a sense for how you view – I guess what your view on 2010 is, given – what sounds like your choice to go ahead and knock out the Center for Life Science financing as early as possible.

Alan Gold

Well, I think we are – our crystal ball is and you've heard us say this before, our crystal ball is no better than anybody else's about the overall economy and the credit markets. I guess we don't have an optimistic view that there's going to be some rapid return to '06 financing levels. And so, while we expect there is some – I think that everybody is hoping for a reduction in spreads, I think a lot of people would suspect that if there was a reduction in spreads, if the underlying treasuries – the underlying industries would be increasing. I don't think people are really forecasting all in coupons really coming down that much faster. Depends on who you ask and everybody is entitled to a different opinion on that.

Wilkes Graham – FBR

Sure, okay. And then just separately, the million square feet of leasing between September 30 and end of '09, you may have already said this, but does that include any leasing in the development properties?

Alan Gold

Yes, it does. A large portion of that we would expect to be in our development and redevelopment assets.

Wilkes Graham – FBR

Okay. I'm just trying to – is it true that up with your statement that you expect to offset new NOI from leases next year, you expect to offset that with bringing on under-leased new stabilized properties?

Alan Gold

Correct. That's right. I guess net we expect that – we are anticipating that the revenue generated from our new leases will actually exceed our increased interest expense and operating cost resulting from placing properties in service, which is why I walked through the math to get to the bottom end of the range, but that's the bottom end of the range.

Wilkes Graham – FBR

Right.

Alan Gold

We obviously have the expectation of net absorption and net increase in NOI that would push us up from there.

Wilkes Graham – FBR

Okay, thanks.

Alan Gold

Thanks Wilkes.

Operator

Your next question comes from the line of Chris Haley with Willys [ph]. Please proceed.

Chris Haley – Wachovia

I wanted to see if I could just take a minute or two and go through the assumptions related to Boston's Center for Life Science project. How are you approaching a slower leasing environment with regard to rate or other inducements, any adjustments you've made in the last two or three months?

Alan Gold

Chris, I'm sorry. Can you speak up? I'm sorry we're just having a hard time hearing you.

Chris Haley – Wachovia

The Boston Center for Life Science, which obviously looking at your potential earnings impact in 2010, have you made any adjustments to what you are asking or what you are offering as inducement over the last two or three months as part of the remaining 10% to 20% of the space?

Alan Gold

The question is, have we made any additional inducements or have we made any – changed anything in terms of trying to get the balance of Center for Life Science leased any recent time. We haven't changed anything, we’re still very excited. We still believe we have the premiere asset in that location. We still believe that the vacancy factor in that market is very low. We still believe that the institutional investors are the primary tenants that – the institutions that are in that market are the primary tenants that we are to be focused on in there. And when we talk about the activity and the people touring the space, it is primarily the institutional tenants that are in the local market. I think all those institutions are waiting to see what happens with the economy and the election that is going to provide greater clarity for them, and we don’t believe that if we were to drop the rent by 50% that we would lease the space up immediately. It’s not that elastic.

Chris Haley – Wachovia

All right. And then on the financing side recognizing that that's a fair proportion of the construction loan, I understand that obviously you do have time to work with this, but the guidance that you are giving for 2009 assumes that you term it him, although you have that option. So, is that a fair assessment that the dilution that they are looking at from a permanent financing basis may not occur, if you decide to let it hang up?

Alan Gold

I think the answer to that is yes, although the counter point to that is that we would – just like anybody, who would be living with a construction loan that you would be exposed to variable rate risk. So, to the extent that LIBOR moves up from where it is today, you would certainly have some exposure to – you may not say that full $0.03.

Chris Haley – Wachovia

And so, from a capitalization perspective though, capitalization versus expensing, you went down from the second quarter to the third quarter by approximately $3 million to $4 million. What specific projects are you currently still capitalizing as part – that you will still capitalize as part of your 2009 FFO guidance?

Alan Gold

So the projects we are still capitalizing on are the three projects on our development summary.

Chris Haley – Wachovia

You will continue to capitalize those through 2009?

Alan Gold

We are continuing to capitalize a portion through the first quarter so the portion that is unleased will continue to capitalize through the first quarter, after which no more capitalization related to The Center for Life Science.

Chris Haley – Wachovia

Okay. That’s the second to fourth quarter impact.

Alan Gold

I’m sorry?

Chris Haley – Wachovia

That’s the second to fourth quarter impact.

Alan Gold

Correct.

Chris Haley – Wachovia

Okay.

Alan Gold

Then the other two projects, Fairview and Landmark, we are expecting those to be placed in service in the second quarter. So, we will expect to continue to capitalize those projects through that and then it will grow up there.

Chris Haley – Wachovia

So, a full expensive load, a GAAP expense load would be felt really looking into the second half of 2009?

Alan Gold

Correct.

Chris Haley – Wachovia

Okay.

Alan Gold

Subject to whatever (inaudible) might offset that of course.

Chris Haley – Wachovia

Correct. And then in the guidance you are offering for the full year 2009, what is the least rate that you are offering on these projects? What should be assume is in your guidance relating to where your leased rate will be mid year '09 or year end '09 relating to these three projects.

Alan Gold

When you say lease rates, I assume you are not talking about rental rates, you are talking about what the lease percentages would be for those projects at those points.

Chris Haley – Wachovia

Correct.

Alan Gold

I think our guidance encompasses a range of assumptions and to put a specific leasing point on any specific quarter for each of those projects is a level of precision that we think would be misleading.

Chris Haley – Wachovia

Okay. So, right now those projects are 70% leased apparently.

Alan Gold

Correct.

Chris Haley – Wachovia

If I assume my rate of return on those construction projects on a GAAP basis, weighted average is approximately what?

Alan Gold

North of 9%.

Chris Haley – Wachovia

North of 9%, so –?

Alan Gold

Excuse me, north of 9% excluding Center for Life Science, that is the one project we have always communicated was sub our traditional target of 9%.

Chris Haley – Wachovia

So, on a weighted average basis, will we say that $920 million worth of development would be generating?

Alan Gold

I haven’t tackled that. Take it with you offline, but it's fairly simple math taking the two projects at north of 9%, approximately 9% to 10%, and the Center for Life Science had 6.5% which is what we always targeted.

Chris Haley – Wachovia

Well, if I just do a simple weighted average and multiply that by 70% and assume you have no more leasing, I compare that to what assumption one can make regarding the permanent financing of the associated construction loans or the associated secured loans on those assets, that would therefore derive whether or not these are additive from a GAAP perspective or dilutive from a GAAP perspective, correct?

Alan Gold

I think that would work. We should probably go through that math to make sure we are talking on the same level. I think you've got that right. Generally speaking, I think it’s a little of – sort of to model them separately to think about the capitalization burning off in accordance with the – what we have, what we have communicated and what we've said about how much we've got invested which is disclosed in the supplement, what our average borrowing cost is and what those service dates are. In your modeling, I would probably reflect that capitalization burning off and increase (inaudible) and then separately model whatever your rental revenue assumptions would be.

Chris Haley – Wachovia

Okay. And just to clarify, so in your guidance for '09, have you assumed the second half of '09 GAAP FFO being higher or lower than the first half of '09?

Alan Gold

We expected to be declining until, say, the third or fourth quarter. We expected to decline into the third quarter as you mentioned because a couple of those projects that were compensated in the second quarter and so you get the full hit, if you want to think about it that way, of potentially the interest. We’ll hit in the third quarter, so you would really expect to finally see the upswing starting in the Q4.

Chris Haley

Okay, super, thanks very much.

Alan Gold

Thanks Chris.

Operator

Your next question comes from the line of George Arabech [ph] from Merrill Lynch. Please proceed.

George Arabech – Merrill Lynch

Hi, good afternoon. Kent, with regards to the refinancing on Center for Life Science, what are the total proceeds you’re targeting in the loan?

Kent Griffin

Well obviously, we would like to get proceeds as high as possible at a pretty attractive rate, but the existing facility is $550 million on a $730 million costs, so about 75% loan to cost. It was sized that way, you could’ve obviously gotten higher proceeds at the time but we targeted a level that we thought was consistent with where the permanent take-out might shake out with the expectation that we wouldn’t have sort of refi risk from a capital requirement perspective. We do think that there’s a reasonable likelihood that we would refi at a lower rate than that 75%, whether that’s 65% or what that level is, it’s premature to say but likely it'll be less than the 75%.

George Arabech – Merrill Lynch

And how do you expect to back fill the gap then, through other mortgages or –?

Kent Griffin

We would have certainly have capacity on our line of credit as I mentioned before, we have roughly $550 million of capacity on our line with a projected spend of less than $200 million this year between our development and redevelopment projects.

George Arabech – Merrill Lynch

What is the appetite from the banks to the life companies for about $500 million mortgage?

Kent Griffin

Well, the long-term financing market is challenged to say that it is absolute leased right now and it’s clearly a challenging task and we recognize that, particularly for larger loans like this one. There have been loans that have gotten done, but it is a difficult environment. The good news is, the Center for Life Science being trophy asset, leased to world class institutions adjacent to the Harvard Medical Campus, is if any asset can get long term financing in this environment, we expect this one is that asset.

George Arabech – Merrill Lynch

And finally, assuming the (inaudible) does not approve at Center for Life Science at '09, what would be sort of the pro forma cash flow coverage?

Kent Griffin

Assuming it depends on what leverage level you are describing, but you could do that math, I don’t have that calculation in front of me but we communicated the yield, we expect it to be about 6.5%. We’re fully stabilized, so you could do your own deduct for a lower occupancy if you made that assumption and you can calculate interest on the – whatever interest rate you would assume.

George Arabech – Merrill Lynch

Okay, thank you.

Kent Griffin

Thanks.

Operator

Your next question comes from the line of Dave AuBuchon with Baird, please proceed.

Dave AuBuchon – Robert W. Baird

Hello, I wanted to explore the tenant credit issue a little bit more. I’m sure you may have seen yesterday the journal had a article that stated about 38% of 370 small biotech companies have less than a year cash and 100 have less than six months. Can you just talk about how you plan to attack your portfolio in terms of credit and whether or not you have any downside relative to that in your guidance for ‘09?

Kent Griffin

I’ll touch on that first. You have to recall that we – overwhelming majority of our rents come from the larger biotechs and institutions. And so only about 3% of our rents come from the early stage venture backed biotech community. So, we have not assumed in our guidance and we aren’t currently anticipating any departures or increase to bad debt expense associated with that. As Allan talked you through, our tenants are on the whole and generally reasonably well capitalized to weather through this for the foreseeable future. Obviously the longer capital storm is and the worse it gets if it goes on for years, obviously that situation can change, but today we feel pretty good about our tenant base.

Alan Gold

I agree with that, and I think that the one good thing that we have is even with smaller type tenants or newly public type companies, you have a great deal of insight into the amount of cash that they have, and can see where and when they are going to be having problems. And we can and have worked with tenants in the past to help them sublease space that they may have over-committed to and that’s our primary focus today in helping companies that are in that type of situation, and just to help them with sub lease the space out.

Kent Griffin

And just anecdotally, our largest private tenant, Ironwood, just announced the beginning of October that they have rate another, I think it was $50 million of venture backed capital. So fortunately, our tenants individually seem to be in pretty good positions.

Dave AuBuchon – Robert W. Baird

And should we assume, I think in the past, we talked about these life science companies, as long as they have somewhat of a promising technology that someone would come along and be willing to buy it. Do you think Allan in this environment that still is a good rule of thumb to use?

Alan Gold

Well, I mean I absolutely do and I think that the large pharma companies are licking their chops and wondering which one that they could pick up that they couldn’t pick up in the past because evaluation's got a little bit higher. And now that with valuations on many of the public companies coming down and even the private companies, I think there’s going to be more of that type of acquisition activity going on.

Dave Aubuchon – Robert W. Baird

And so, Kent, you don’t have any reserves for bad credit right now?

Kent Griffin

We have very, very modest bad debt reserves that have been − that are consistent with the levels we’ve had, but our bad debt expense has been pretty de minimus throughout our history.

Dave Aubuchon – Robert W. Baird

And how much subleased space do you have in the portfolio, if you track that?

Alan Gold

How much space are we helping other tenants sublease?

Dave Aubuchon – Robert W. Baird

Yes.

Alan Gold

I think we talked about just one, which would be the MDRNA. We may have one other 20,000 square foot space that we’re also trying to work with, but that’s all I can recall at this point.

Dave Aubuchon – Robert W. Baird

How much square foot is this on the first example, I'm sorry?

Alan Gold

50,000 square feet.

Dave Aubuchon – Robert W. Baird

Okay. Thank you.

Alan Gold

Thanks, Dave.

Operator

Your next question comes from the line of Dave Rodgers with RBC Capital Markets. Please proceed.

Dave Rodgers – RBC Capital Markets

Hi. Kent, back on the loan for Center for Life Science, I think you bought that earlier, you and Alan said that you really didn’t have a desire to reduce the acting rent for the property. I wanted to ask specifically, is there a restriction or has there been a restriction due to pro forma loan covenant that has prevented you from lowering the rate if you had so chosen and would a permanent financing free you up to be more flexible if you choice to do so in the future?

Kent Griffin

The short answer is no. We haven’t − financing has not driven any of our thoughts in terms of the Center of Life Science.

Dave Rodgers – RBC Capital Markets

I think the extension option is something like a 25 basis point for you. Are there any other restrictions on the extension if you so chose to go that route?

Kent Griffin

I think it's 15 basis point. But subject to certain conditions, it's primarily mean we would certainly need to not being default and repped to all the things that we rep to when we did the plans for the first time. But generally, it’s not our option.

Dave Rodgers – RBC Capital Markets

Okay. And Alan, for you or Matt that with respect to the Vertex leasing that we talked about obviously quite in depth the last quarter, I know that’s still maybe a bit up in the air but not with specific respect to Vertex but if they were to make a decision in 2009 as they do with either the renewal or I guess the determination that they would have put back to you, do you sense that that would free up the Cambridge market, companies like Novartis brought [ph] that may be in the market. Do you sense that there’s any backlog right now due to some of the uncertainty created by Vertex’s comments earlier in the year, could that be cleared up and would that stimulate any type of activity in the broader market in Cambridge?

Alan Gold

Well, there’s − I guess that − I’m trying to figure out how to answer the question most succinctly here, but I do think that the Vertex statement did create some uncertainty in the market that there was potentially going to be some available space in the Washington and the East Cambridge area. But to our knowledge, Vertex has not made any public statement themselves. That statement came from a reporter who talked with we don’t know who. And which is why one of the reasons why we don’t comment on any speculative leasing transactions. If they were to occur, they occur on their own time and a deal isn't done until it’s done. So, I don’t really want to focus any more attention on that. I think Vertex is a great company. We’re proud to have them as a tenant, not only in Cambridge but in San Diego, and we’re going to continue to be supportive of them. And I’d be very surprised in this environment that somebody can pull off a new build to suit type transaction in an outlying market.

Dave Rodgers – RBC Capital Markets

And I guess more and more outside of Vertex, I’m just wondering about the market and I appreciate those comments, but do you think it’s created the noise around it, whether it came from Vertex? Also, do you think it’s created any type of backlog with the other tenants in the market? Again, looking for that potential space, maybe now needing to move ahead and commit to other space if that build to suit doesn’t occur?

Alan Gold

I think there’s a great possibility that that is the case.

Dave Rodgers – RBC Capital Markets

Thank you.

Alan Gold

Thanks.

Operator

Your next question comes from the line of Omotayo Okusanya from UBS. Please proceed.

Omotayo Okusanya – UBS

Actually my question was in regards to Vertex and its finances. So thank you.

Alan Gold

Thanks Tayo.

Operator

(Operator instructions) And your next question is a follow up from the line of Jordan Sadler with Keybanc Capital Markets. Please proceed.

Jordan Sadler − Keybanc Capital Markets

Thanks. Not to beat a dead horse but on the CFLS loan, could you extend it today with the current lease rate?

Kent Griffin

I don’t know. We've – certainly there would be no reason to extend it early, but we could. I don't know if there'll be any –

Jordan Sadler − Keybanc Capital Markets

There is no referral warrant to covenant on leasing?

Kent Griffin

There’s no covenant or referral warrant yet. It is probably to a debt service coverage ratio, so we might have to pay it down to whatever that same pay down we might do in permanent financing. But doing permanent financing doesn’t change that.

Jordan Sadler − Keybanc Capital Markets

And so, my question in that case would be, wouldn’t you be able to get better permanent financing with some incremental leasing done on this property?

Kent Griffin

Potentially, yes. But you can sometimes and often are able to work into a long term financing like that feature that basically is a − allows you to expand the facility upon achieving certain leasing threshold. So, that’s something that can be worked around.

Jordan Sadler − Keybanc Capital Markets

Okay. And then, my other question, you guys were talking a little bit about being in a good position to capitalize on opportunities and I guess I’m trying to reconcile that with what is a seemingly very cautious stance on the capital markets. How inclined would you be to make new investment today and maybe what are your return hurdles?

Kent Griffin

I mean, I guess before we answer that, it's a good question about new investment opportunities, but just to be clear on the perception that this is a cautious view of the financing market and the capital structure, this has been our plan since we bought the asset. And so, what it – I view it as more of a bullish stance, a recognition of the fact that the financing world has changed. But, I believe that the world has changed and we're going to continue to operate our business and we want to place long-term financing and continue to explore other opportunities. So, I view it as actually more of a bullish perspective than an overly bearish sentiment. I think we just accepted that the financing world is a different market today as far as new investment opportunities.

Alan Gold

I think that we believe we are well positioned to take advantage of new opportunities. What we are going to do is certainly be very selective and certainly are going to wait to see what occurs over the next 30 days before we make any sort of move towards any acquisitions. And I think that's once again prudent just to make sure that we understand what's going on. It would certainly be a lot easier for us to make acquisitions if we knew that the financing market hadn't had actually opened back-up.

Jordan Sadler – KeyBanc Capital Markets

Would you be inclined to take on additional lease up risk 30 days from now or what have you?

Alan Gold

At this point, I think we would be shot if we did. No, we're focused on leasing our current portfolio. We have enough on our current portfolio to deal with that and that's what we're going to be doing. And I think the opportunities that we've seen and continue to see are fully leased opportunities that we would take advantage of at that point.

Jordan Sadler – KeyBanc Capital Markets

Thanks.

Alan Gold

Thank you.

Operator

And our next question is a follow-up from the line of Omotayo Okusanya with UBS. Please proceed.

Omotayo Okusanya – UBS

Yes, just a quick follow-up question. Kent, in your comment, you mentioned that completion of your development – just want to clarify – completion on your development would be predicated upon you – at least some of your developments will be predicated upon you getting pre-leasing of those assets? I mean, is that to suggest that if things get worse in regards to tenant demand that you may actually shut off those development projects and not complete them?

Kent Griffin

Well, we'll just make sure and try to be clear, for the development projects, we expect to spend the $400 million in 2009. For the redevelopment projects, we're talking about the roughly $200 million of estimated remaining amount to be spent on our redevelopment projects, which is largely related to specific research center. The most significant portion of that dollar amount is related to leasing, meaning primarily larger part of that is TIs. And so, the timing of that means we wouldn't expect to complete those TIs or to perform those TIs until we have a lease in place. So, it's more meant to reflect the fact that the timing of the spend of those dollars is going to be driven by the pace of leasing.

Omotayo Okusanya – UBS

Got it. Thanks very much.

Kent Griffin

Thanks Tayo

Operator

I show no further questions in queue at this time. I would like to turn the call back over to Alan Gold for closing remarks.

Alan Gold

Well, thank you. I'd like to thank you all for joining us again today and we'll sign off. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.