ARE
#Yes, that's a good question.
I'll ask <UNK> to reflect upon that.
Certainly one of the things we've done ---+ this is <UNK> again ---+ it's certainly one of the things we've tried to do in this part of the business cycle is really extend term and gain, try to gain longer rents ---+ higher rents for longer durations.
And also certainly reduce the TI allowances and really try to make sure we're spending as little of our own capital as possible in the spaces and get tenants to extend terms as much as possible.
Yes, on the lab side it is certainly our standard that we try to achieve, given where we are in macro economics.
I mean, if inflation ever came roaring back.
At one point in the Company's history we went to a min 3, max 6 on annual increases.
But we think that this represents a stable market and acceptable market annual rental escalation.
There are sometimes some changes to that, especially on the development side where you might get a 0.25 point lower or something like that, but by in large we try to maintain that across the portfolio in each of the markets.
Yes, so I'll ask <UNK> to comment on that.
Thanks, <UNK>.
Yes.
The going-in yields, <UNK>, are reflected in our disclosures in the supplemental.
Yes, you're right.
You're right.
It is from a purchase accounting perspective, <UNK>.
You're correct, we did allocate a portion of the investment to the development site ---+ 170,000 some odd square feet at roughly high $200s, approaching $300 a foot.
$300 a foot, which we believe is market.
We will generate a very nice return on that investment and so the initial stabilized yield is reflective of the operating asset today, with a small allocation of the purchase price over to the land site.
Well, I think it's fair to say that the, well, our cost of debt capital certainly has been very favorable in this environment.
And our cost of equity capital, with the stock doing pretty well, was certainly an important factor.
I don't think we'd want to go out and do a large offering, whether it be forward or not, with the stock price that would be in the 70s, which it was in February.
So that certainly weighed heavily on our mind, and our goal has always been, how do we balance a couple of things.
One is maintain our goal on earnings, continue to increase our net asset value, and at the same time achieve our lever score ratings increase.
So that's ---+ those are the three things we're clearly focused on as we looked at One Kendall.
But, as I said, we looked at this a couple of years ago and Mr.
<UNK>, sitting here to my right, vetoed my desire to buy that a couple of years ago for a variety of good reasons.
But I have always felt that, that asset was unique.
It ---+ the address alone speaks to it: One Kendall.
The ---+ it is rare to be able to find an urban campus in the best life science cluster in the universe ---+ or galaxy maybe.
And also, the factors that were attendant to that ---+ if brokerage estimates are right, and we can get $80 to $85 triple net in 2018 ---+ that gives us even more upside than our base-case projections would hold.
We think we can do well on the development, and we also think there's a huge opportunity to convert office to lab there.
So that was kind of the constellation of considerations broadly that we thought about.
Yes.
I don't think so.
We ---+ if you asked us at the beginning of the year, did we plan on buying One Kendall, I would tell you that we didn't even know it was coming to market.
There was another asset ---+ one lab and one building, that ---+ 245 First, I think ---+ that went out to bid.
They're assets that somewhat older but they're adjacent to our Alexandria Center at Kendall Square.
Would have loved to have probably owned those.
But for a variety of reasons coupled with the One Kendall Square acquisition, we didn't see the upside in the roles.
We didn't bid on that, but we clearly underwrote it and tried to follow all the assets.
So I would say that we're not, in general, aggressively pursuing things.
But where we see, I guess, the one opportunity ---+ or the one characteristic of an opportunity we'd look at is where we see a great asset in a great location that we'd like to own for the long term, and we see short-to-medium termability to add significant value.
We wouldn't buy just a fully stabilized asset for the next 10 or 12 years, just probably no interest in that.
So our main focus is on our development pipeline, though.
That's where our key focus is.
Hey, <UNK>, it's <UNK> here.
So, at some point, we'll re-file the program only because we think it's a great tool to have on balance sheet.
It's a very efficient tool as we all know.
As far as usage goes going forward, the only thing that is contemplated at the moment would be, to the extent we retire any amounts of our Series D convertible preferred, we'd like to time that and match fund it with some common equity.
And I think, again, we've been pretty clear on that strategy.
As far as your question on the ATM usage in the second quarter and pre-funding One Kendall, One Kendall was funded through the forward equity offering and we just saw opportunities to utilize the program in connection with the changes in the overall capital plan outside of One Kendall Square.
The mix of dispositions, as an example, the ability to get ahead on our leverage goals, as well, was interplaying into that thought process.
So hopefully that gives you a little color, <UNK>.
Yes, I guess I would say, to the extent we think about using it in the future ---+ in addition to what <UNK> said ---+ we'd always try to think about it in a leverage-neutral fashion in the sense that we want to try to maintain our earnings trajectory, obviously, grow our NAV, and, at the same time, use it in whatever way that we might, but in an accretive fashion.
So that's how we're trying to thinking about it.
We've tried to be, over the past quite a number of years, as disciplined as possible in the utilization of equity.
Well, thank you, everybody.
We're one hour into the conference, so right on time.
Thank you for your questions and we look forward to talking to you for third-quarter results.
Take care.
