Nicholas Yulico: Thanks, Scott.
Operator: Our next question comes from Jon Petersen with Jefferies. Your line is open.
Jon Petersen: Great, thanks. As we do these merger models, we have to deal with some annoying GAAP accounting rules. So, I realize this isn’t cash, but I know we’re going to have to mark-to-market DOC’s debt. If you have any thoughts on what the interest rate there might be, it seems to me like it would be probably very high sixes today. And then, I was just curious on the revenue side, are those rents below market? Do we think there would be any significant revenue mark-to-market that we would have to think about from a GAAP accounting perspective? Again, I realize this is not cash.
Peter Scott: Yes, no problem, Jon. This is Pete. I’ll take that. First of all, we do have to re-straight line, the rents as of when we would anticipate this deal to close. I know DOC has some public disclosures out there that you guys could do your best to come up with some estimates there. But straightlining is almost always positive when you do it in these types of transactions. Second, the lease mark-to-market, where you do compare in place rents to market rents. And more often than not in these deals, there is a positive adjustment. We do think there will be a positive adjustment as part of this as well, although not as significant as perhaps the straightline rent adjustment. And then, the third one you mentioned, which works against you is the debt mark-to-market.
Importantly, though, you mark that to our cost of debt, not to DOC’s cost of debt. And I think we would be sort of in the 6.25 to 6.75 range depending upon the term. And again, that’s as of today. We will do that mark-to-market as of the date of the close. So, that will fluctuate between now and the closing date, but that’s probably the best guidance I can give you. And then, from an assumption perspective, I would say, our hope is to assume all of DOC’s debt, except for the private placement notes, there’s no ability to assume those, but our goal would be to assume all the bonds that are outstanding, absent the private placement notes, and then the term loan as well. And then, we take on the secured debt, a lot of that, which is encumbering the joint venture portfolio.
That’s it.
Jon Petersen: Very thorough, very helpful. Thank you.
Operator: Our next question is a follow-up from Rich Anderson with Wedbush. Your line is open.
Rich Anderson: Thanks. And I was going to say, Scott, I totally got you on the AFFO response to my previous question, but I got knocked off. I want to know if there was, what happens between now and closing? You mentioned just, Scott, you just went through some of these accounting adjustments, transaction costs break fee, what’s to stop a third-party to kind of come in and take a look? Or how would you respond to some of those potential events between now and closing?
John Thomas: Hey Rich, this is J.T. I think we’re going to be focused on again, integrating the team, integrating processes, taking, I don’t know if you heard, if you got knocked off, but we have six markets at overlap where we already have DOC and team on the ground. And we will put those markets all in our internal management going forward and be planning to do that; hopefully, day one or very early on, right after closing. So, besides that, we would be working through the process with the SEC and get our shareholder vote.
Scott Brinker: Yes, I think just on some of the specifics there, Rich, in addition to what J.T. just said, the merger agreement will get filed in a next couple of days. And then, you should expect a proxy to get filed probably late November, early December, you’ll get a lot of information in that our anticipated closing would be in the first-half of next year. We’d all prefer it to be the earlier part of the first-half of next year to help with the integration and to kick that off as quickly as possible. But I think the best guidance we can give right now is first-half of 2024.
Rich Anderson: Okay, sounds good. Thanks.
Scott Brinker: Yes.
Operator: Our final question comes from the line of Steve Sakwa with Evercore ISI. Your line is open.
Steve Sakwa: Yes, thanks. Sorry to beat a dead horse in the synergies. I just want to be 100% clear. The $40 million to $60 million that you’re talking about is that cash savings and then anything on mark to market, FAS 141 and then the debt mark-to-market would be pluses and minuses on top of that.
Peter Scott: So, the GAAP adjustments are on top of the $40 million to $60 million, the vast majority of the $40 million to $60 million is cash. There’s a small non-cash comp component that would not flow into AFFO, but I’d say the $40 million to $60 million, all that would hit effectively FFO. Then you have the GAAP adjustments on top of that, and then the vast majority of those synergies hit AFFO. Does that makes sense, Steve?
Steve Sakwa: Yes, great. Yes, it does. Thanks. I know this is far in the future, just given the challenges we’re seeing in life sciences today, but you did get these approvals for the L-Life land and the upzoning. Is there any comments around that? What it might mean? Do you jumpstart anything with multifamily? Just what are the, I guess forward-look on that project now that you’ve gotten these new entitlements?
Scott Brinker: Yes, the team really did a fantastic job with the entitlement process to really become and establish a partnership with not only the City and the City Councilors, but a lot of the local stakeholders and neighborhood advocates, just really proud of what our team has done in a high barrier market like Cambridge, we think it’s a great outcome for the city in terms of the mixed use and infrastructure that will come into that sub-market and the residential housing in addition to the over time, lab opportunity. So, just a really, really great outcome, but now that the rezoning is done, that was the big discretionary entitlement that we needed. So, we would look sooner than later to recycle some of the multifamily parcels.
That’s obviously not our core business. We have no intention of being a multifamily developer. But there’s a lot of recent apartment development in that sub-market that’s been highly successful. So, we do think that there will be a long list of participants that are eager to participate.
Steve Sakwa: Sorry, and just one quick follow-up on that, Scott. Would you look to actually monetize those, or would you stay in as a joint venture partner, or just sell them outright?
Scott Brinker: The multi-family parcels we would sell outright, Steve.
Steve Sakwa: Okay, great. Thanks. That’s it for me.
Scott Brinker: Okay, thanks.
Operator: The Q&A session has now ended. We’ll now turn the call back over to our presenters for closing remarks.
Scott Brinker: All right. Well, thank you for your interest today. We’re really excited about this and look forward to speaking to you. If not this weekend next, then hopefully in Los Angeles at the conference here in mid-November. Have a great week.
Operator: This concludes today’s conference. We thank you for your participation. You may now disconnect.
