Camille Bonnel: Good morning. So, despite your FED payout ratio picking up this quarter, I know your FED is on track this year to deliver one of its best years. As we head into year-end using third quarter as a base, are there any factors we should be considering that could impact it after considering the FFO changes you highlighted? And can you help us understand how your FED growth has generally kept pace or outpaced FFO given how office is such a capital-intensive business? Thank you.
Michael LaBelle: Thanks, Camille. I’ll take that one. So, you’re right. I mean, our FFO has held up really well. In fact, I anticipate that it’s going to be somewhere between 5% and 10% higher than it was last year. And the primary reason for that is two things. One, we had a lot of free rent that burned off last year with some large leasing that we had done. And that became cash rent this year. So, that really helped our FFO. And then our leasing expirations in 2023 were lower. So we actually had to do less leasing to maintain the occupancy that we had. So our lease transaction costs are also a little bit lower. I think in the fourth quarter, we will see some incremental CapEx, if you look at the first three quarters of CapEx, it’s not really where we would have a typical run rate for CapEx. So, I think our teams out there are trying to get everything done.
So I do think that our CapEx will be a little bit higher in the fourth quarter. But overall, I mean, if you — the guidance for FFO would be something like $5 and $5.20 is what we’re looking at, which I think is pretty solid. So, the run rate is a little bit lower in the fourth quarter than it has been, basically due to kind of catching up on the CapEx items that we’ve planned, but haven’t quite been completed yet.
Operator: Thank you. And I show our next question, comes from the line of Ronald Kamdem from Morgan Stanley. Please go ahead.
Ronald Kamdem: Hey just wanted to zoom in on the life sciences segment. If you could talk about what activity or the pipeline is looking like? And if you can comment on large tenants versus middle and smaller users would be helpful. Thanks.
Douglas Linde: Sure. So, again, the breadth of our life science activity is our property at 651 Gateway, which we’re in partnership with [indiscernible]. And there, the only significant demand that we’ve been seeing is from small tenants, meaning single-floor type tenants that are looking for turnkey buildouts. And then our other life science opportunity is the two buildings that we have in the Greater Boston marketplace. 180 CityPoint, which is just completed. And when anybody goes there, they are blown away by sort of what it provides, not just from a life science infrastructure, but actually from a human infrastructure in terms of the amenity base that, that building provides to any client and why they would want to be in a building like that.
And that our other building at 1034th Avenue. I would say we’re seeing consistent tour activity, a couple of tours every week or so. These are, I would refer to as shoppers, not buyers, right? They all have a potential use for space, some of them are lease expiration-driven. Some of them are related to potential opportunities for successful drug discovery from a commercialization perspective and therefore, added capital and therefore, the ability to hire more people, but they are being very, very cautious and it’s an elongated process. And for the most part, those tenants are privately funded organizations. There are a few public out there. There’s one or two sort of large organizations that are I would say, traveling around in the Greater Boston market as well as in San Francisco that are, I think they are the same names you would have — you probably would have heard 18 months ago.
Looking for space, and they haven’t yet to make a decision. And they could, at any time, make a decision or they could continue to postpone. So again, it’s a relatively slow process and the demand is like the demand was, call it, back in 2014 or ’15 relative to the demand that we were all experiencing in 2019, ’20 and early ’21 where it was just explosive.
Bryan Koop: Yes, for Boston, Doug’s description is spot on in terms of the underwriting of what we’re seeing. I would add, over the last two weeks, we have seen some encouraging amount of tour uptick. And in size as well, not huge but midsized 30,000 to 60,000 feet, a couple. And then also, we’ve been encouraged by the quality, as Doug mentioned, of these clients.
Operator: Thank you. And I show, our last question, comes from the line of Omotayo Okusanya from Deutsche Bank. Please go ahead.
Omotayo Okusanya: Hi, yes. Good morning, everyone. Just if you could make any quick comments just about your outlook on life sciences. Is this an area you think you might dive into more as we go into 2024, fundamentals still somewhat uncertain, and it’s an area where you may not do as much in. Any commentary would be appreciated. Thank you.
Douglas Linde: Okay. So I’ll just, I’ll assume that you’ll — the comments that I just made are not meant to be repeated. So let me take a different tack, which is we are not planning on starting any new life science activities in any of our marketplaces given current conditions. That being said, we have opportunities to build some fabulous life science buildings on land, which has virtually no basis in it. And therefore, we have a “cost advantage” at some point, if there is demand. When there is that demand, we will sequentially start to think about how we might be attractive to tenants that are looking for buildings where the economics would justify the new construction of the life science relative to where the market economics are.
But in the short term, meaning, 2023, 2024, there’s going to be absolutely no expectation for us to be starting a new life science building. There are a couple of places in our portfolio where we have existing office installations where there’s actually some interested life science demand, were a tenant to show up and say, hey, we want 40,000 square feet in this particular location, would you consider putting the infrastructure in to the building to allow us to do light or heavy lab research? We would consider doing that depending upon the credit of that company. Those organizations could be anywhere in our portfolio. But absent that, what you see is what you get relative to our existing life science platform.
Operator: Thank you. And I show, we have a question from the line of Jamie Feldman from Wells Fargo. Please go ahead.
Jamie Feldman: Great. Thanks for taking my questions. I guess since I’m last, maybe if you guys don’t mind, if you humor me, I can ask two. First is, you mentioned San Francisco back to 45% of its turnstile activity. I mean, how do you think that plays out over time? That’s a meaningful difference from what you said New York, is it 95%? And then secondly, what are partners saying, like capital — potential capital partners saying in terms of wanting to put money to work in office? Is it more conversion activity? Are there certain markets? Just, are they starting to think about writing checks here more aggressively?
Owen Thomas: Yeah. So, Jamie, I’ll take a crack at it. Definitely, the Bay Area, and actually, I’d just say the West Coast, Seattle, it’s true in L.A. as well, the turnstile activity is slower, I think that is primarily driven by the behavior and policies of the technology client base. They have been less forceful and less prescriptive about having workers come back to the office. That all being said, the activity is increasing, and I think it’s going to continue to increase just more slowly. So what was the second part of your question — was private equity. So look, there is — I would say, certainly much more limited interest in the private equity industry today generally for office. That’s why you’re not seeing much transaction activity.
