Alexandria Real Estate Equities, Inc.: Form 10-Q for the period ended Jun 30, 2024

(2) Excluding the expiration described in footnote 5, the largest remaining contractual lease expiration in 2024 is 97,702 RSF in our Mission Bay submarket, where we are

working to retain the current tenant.

(3) Excludes month-to-month leases aggregating 129,549 RSF as of June 30, 2024.

(4) Represents amounts in effect as of June 30, 2024.

(5) Includes 349,947 RSF at 219 East 42nd Street that was classified as held for sale as of June 30, 2024 and was sold in July 2024.

(6) Key remaining expiring leases in 2025 include 600,477 RSF in three submarkets with a weighted-average expiration date of February 1, 2025 and annual rental revenue

as of June 30, 2024 aggregating approximately $37 million comprised of the following: (i) 248,700 RSF at our Alexandria Technology Square® mega campus in our

Cambridge submarket, of which 171,945 RSF is expected to be repositioned from single-tenancy to multi-tenancy, and we are evaluating options to reposition the

remaining 76,755 RSF; (ii) 247,246 RSF of industrial and R&D space in our Austin submarket for which we are evaluating options to market for re-lease or reposition the

space; and (iii) 104,531 RSF in our Research Triangle market that is currently being marketed for re-lease. We expect downtime on these spaces to range from 12 to 24

months on a weighted average basis.

(7) Includes 816,048 RSF of contractual lease expirations in our Cambridge/Inner Suburbs submarket. Refer to footnote 6 for additional details.

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Top 20 tenants

92% of Top 20 Tenant Annual Rental Revenue Is From Investment-Grade

or Publicly Traded Large Cap Tenants(1)

Our properties are leased to a high-quality and diverse group of tenants, with no individual tenant accounting for more than 5.7%

of our annual rental revenue in effect as of June 30, 2024. The following table sets forth information regarding leases with our 20 largest

tenants in North America based upon annual rental revenue in effect as of June 30, 2024 (dollars in thousands, except average market

cap amounts):

Annual rental revenue and RSF include 100% of each property managed by us in North America. Refer to “Annual rental revenue” and “Investment-grade or publicly traded large

cap tenants” under “Definitions and reconciliations” in Item 2 for additional details, including our methodologies of calculating annual rental revenue from unconsolidated real

estate joint ventures and average market capitalization, respectively.

(1) Based on annual rental revenue in effect as of June 30, 2024.

(2) As of March 31, 2024, 2seventy bio, Inc. held $181.4 million of cash, cash equivalents, and marketable securities. In March 2024, Regeneron Pharmaceuticals, Inc., a

publicly traded biotechnology company with investment-grade credit ratings of Baa1 and BBB+ assigned by Moody’s and S&P, respectively, entered into a sublease for

approximately 195,000 RSF, or 69.6% of our annual rental revenue generated from 2seventy bio as of June 30, 2024. Additionally, 90.2% of the annual rental revenue

generated by 2seventy bio is guaranteed by another related public biotechnology company.

(3) Consists of one lease at a property acquired in 2022 with future development and redevelopment opportunities. This lease with Cloud Software Group, Inc. (formerly known

as TIBCO Software, Inc.) was in place when we acquired the property.

(4) Includes (i) ground leases for land at 1455 and 1515 Third Street (two buildings aggregating 422,980 RSF) and (ii) leases at 1655 and 1725 Third Street (two buildings

aggregating 586,208 RSF) in our Mission Bay submarket owned by our unconsolidated real estate joint venture in which we have an ownership interest of 10%. Annual

rental revenue is presented using 100% of the annual rental revenue from our consolidated properties and our share of annual rental revenue from our unconsolidated real

estate joint ventures. Refer to footnote 1 for additional details. Excluding these ground leases, the weighted-average remaining lease term for our top 20 tenants was 8.0

years as of June 30, 2024.

(5) Primarily relates to one office building in our New York City submarket aggregating 349,947 RSF with a contractual lease expiration in July 2024, which was classified as

held for sale as of June 30, 2024 and sold in July 2024.

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Locations of properties

The locations of our properties are diversified among a number of Class A/A+ assets strategically clustered in life science

mega campuses in AAA innovation cluster markets. The following table sets forth the total RSF, number of properties, and annual rental

revenue in effect as of June 30, 2024 in each of our markets in North America (dollars in thousands, except per RSF amounts):

(1) Primarily includes our active redevelopment projects aggregating 716,604 RSF at 40, 50, and 60 Sylvan Road and 840 Winter Street located on the Alexandria Center®

for Life Science – Waltham mega campus, which are 43% leased/negotiating on a combined basis. This mega campus project is expected to capture demand in our

Route 128 submarket.

Summary of occupancy percentages in North America

The following table sets forth the occupancy percentages for our operating properties and our operating and redevelopment

properties in each of our North America markets, excluding properties held for sale, as of the following dates:

(1) The Alexandria Center® for Life Science – New York City mega campus is 95.5% occupied as of June 30, 2024. Occupancy percentage in our New York City market

reflects vacancy at the Alexandria Center® for Life Science – Long Island City property, which was 41.7% occupied as of June 30, 2024.

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Investments in real estate

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new

Class A/A+ properties, and property enhancements identified during the underwriting of certain acquired properties, located in

collaborative life science mega campuses in AAA innovation clusters. These projects are focused on providing high-quality, generic, and

reusable spaces that meet the real estate requirements of a wide range of tenants. Upon completion, each value-creation project is

expected to generate increases in rental income, net operating income, and cash flows. Our development and redevelopment projects

are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer

lease terms, higher rental income, higher returns, and greater long-term asset value. Our pre-construction activities are undertaken in

order to prepare the property for its intended use and include entitlements, permitting, design, site work, and other activities preceding

commencement of construction of aboveground building improvements.

Our investments in real estate consisted of the following as of June 30, 2024 (dollars in thousands):

(1) Represents one committed near-term project expected to commence construction during the next two years after June 30, 2024.

(2) Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional details, including value-creation square feet currently included in rental

properties.

(3) Balances exclude accumulated depreciation and our share of the cost basis associated with our properties held by our unconsolidated real estate joint ventures, which is

classified as investments in unconsolidated real estate joint ventures in our consolidated balance sheets.

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Our real estate asset acquisitions during the six months ended June 30, 2024 and pending as of the date of this report consisted of the following (dollars in thousands):

(1) We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction.

(2) Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for additional details.

(3) Includes a payment of $35.3 million to redeem our partner’s partial ownership interest in a consolidated real estate joint venture in our Greater Boston market, pursuant to our partner’s notification of their intent to exercise their put option

received in December 2023 and settled in January 2024.

Acquisitions

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Our completed dispositions of and sales of partial interests in real estate assets during the six months ended June 30, 2024 and pending as of the date of this report consisted of the

following (dollars in thousands):

(1) We completed the sale during the three months ended March 31, 2024 and recognized no gain or loss. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements in Item 1 for additional information.

(2) The disposition completed in July 2024 was leased to a single tenant with a July 2024 lease expiration and had annual net operating income of $18.6 million based upon three months ended June 30, 2024 annualized. This asset was

previously considered to be a potential development project upon expiration of an in-place non-laboratory space lease in July 2024.

Dispositions and sales of partial interests

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Refer to “Net operating income” under “Definitions and reconciliations” in Item 2 for additional details, including its reconciliation from the most directly comparable financial measures presented in accordance with GAAP.

(1) Our share of incremental annual net operating income from development and redevelopment projects expected to be placed into service primarily commencing from 3Q24 through 1Q28 is projected to be $380 million.

(2) Represents expected incremental annual net operating income to be placed into service from deliveries of projects undergoing construction and one committed near-term project expected to commence construction in the next two

years.

(3) Includes 1.5 million RSF that is expected to stabilize through 2025 and is 87% leased, and partial deliveries through 4Q25 from projects expected to stabilize in 2026 and beyond. In addition to the projects represented, we are evaluating

one priority anticipated development project that could commence active construction in the second half of 2024 and may have initial delivery in 2025. Refer to the initial and stabilized occupancy years under “New Class A/A+ development

and redevelopment properties: current projects” in Item 2 for additional details.

New Class A/A+ development and redevelopment properties

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The following table presents value-creation development and redevelopment of new Class A/A+ properties placed into service during the six months ended June 30, 2024 (dollars in

thousands):

Incremental Annual Net Operating Income Generated From 1H24 Deliveries

Aggregated $42 Million, Including $16 Million in 2Q24

(1) Image represents 500 North Beacon Street on the Arsenal on the Charles mega campus.

(2) Represents the average delivery date for deliveries that occurred during the three months ended June 30, 2024, weighted by annual rental revenue.

(3) Occupancy relates to total operating RSF placed in service as of the most recent delivery.

New Class A/A+ development and redevelopment properties: recent deliveries

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(1) Image represents 500 North Beacon Street on the Arsenal on the Charles mega campus.

(2) Image represents 60 Sylvan Road on the Alexandria Center® for Life Science – Waltham mega campus. The project is expected to capture demand in our Route 128 submarket.

(3) Image represents a single- or multi-tenant project expanding our existing Alexandria Center® for Science and Technology – Mission Bay mega campus, where our joint venture partner will fund 100% of the construction cost until it attains an

ownership interest of 75%, after which it will contribute its respective share of additional capital. We are currently marketing the space for lease and have initial interest from publicly traded biotechnology and institutional tenants.

New Class A/A+ development and redevelopment properties: current projects

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(1) Image represents 10955 Alexandria Way on the One Alexandria Square mega campus.

(2) Image represents 3755 Monte Villa Parkway.

New Class A/A+ development and redevelopment properties: current projects (continued)

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The following tables set forth a summary of our new Class A/A+ development and redevelopment properties under construction and pre-leased/negotiating near-term projects as of

June 30, 2024 (dollars in thousands):

New Class A/A+ development and redevelopment properties: current projects (continued)

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New Class A/A+ development and redevelopment properties: current projects (continued)

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69% of Our Total Value-Creation Pipeline RSF Is Within Our Mega Campuses

The following table summarizes the key information for all our development and redevelopment projects in North America as of June 30, 2024 (dollars in thousands):

New Class A/A+ development and redevelopment properties: summary of pipeline

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New Class A/A+ development and redevelopment properties: summary of pipeline (continued)

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New Class A/A+ development and redevelopment properties: summary of pipeline (continued)

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New Class A/A+ development and redevelopment properties: summary of pipeline (continued)

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Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information.

(1) Total square footage includes 3,407,847 RSF of buildings currently in operation that we expect to demolish or redevelop and commence future construction. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item

2 for additional information, including value-creation square feet currently included in rental properties.

(2) Pursuant to an option agreement, we are currently negotiating a long-term ground lease with the City of New York for the future site of a new life science building aggregating approximately 550,000 SF.

(3) Includes $3.9 billion of projects that are currently under construction and are 61% leased/negotiating. We also expect to commence construction of one committed near-term project aggregating $58.8 million, which is 51% leased/

negotiating, in the next two years after June 30, 2024.

New Class A/A+ development and redevelopment properties: summary of pipeline (continued)

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Results of operations

We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results

and provide context for the disclosures included in our annual report on Form 10-K for the year ended December 31, 2023 and our

subsequent quarterly reports on Form 10-Q. We believe that such tabular presentation promotes a better understanding for investors of

the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to

period. We also believe that this tabular presentation will supplement for investors an understanding of our disclosures and real estate

operating results. Gains or losses on sales of real estate and impairments of assets classified as held for sale are related to corporate-

level decisions to dispose of real estate. Gains or losses on early extinguishment of debt are related to corporate-level financing

decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses on non-real estate investments,

impairments of real estate and non-real estate investments, and acceleration of stock compensation expense due to the resignations of

executive officers are not related to the operating performance of our real estate assets as they result from strategic, corporate-level

non-real estate investment decisions and external market conditions. Impairments of non-real estate investments are not related to the

operating performance of our real estate as they represent the write-down of non-real estate investments when their fair values

decrease below their respective carrying values due to changes in general market or other conditions outside of our control. Significant

items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in Item 2. Key items

included in net income attributable to Alexandria’s common stockholders for the three and six months ended June 30, 2024 and 2023

and the related per share amounts were as follows (in millions, except per share amounts):

Refer to Note 3 – “Investments in real estate” and Note 7 – “Investments” to our unaudited consolidated financial statements in

Interest rate risk

The primary market risk to which we believe we may be exposed is interest rate risk, which may result from many factors,

including government monetary and tax policies, domestic and international economic and political considerations, and other factors

that are beyond our control.

In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate

risks on our operations, we may utilize a variety of financial instruments, including interest rate hedge agreements, caps, floors, and

other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest

rates may carry additional risks, such as counterparty credit risk and the legal enforceability of hedge agreements. As of June 30, 2024,

we did not have any outstanding interest rate hedge agreements.

Our future earnings and fair values relating to our outstanding debt are primarily dependent upon prevalent market rates of

interest. The following tables illustrate the effect of a 1% change in interest rates, assuming a zero percent interest rate floor, on our

fixed- and variable-rate debt as of June 30, 2024 (in thousands):

These amounts are determined by considering the effect of the hypothetical interest rates on our borrowings as of June 30,

2024. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an

environment. Furthermore, in the event of a change of such magnitude, we would consider taking actions to further mitigate our

exposure to the change. Because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity

analyses assume no changes in our capital structure.

Equity price risk

We have exposure to equity price market risk because we hold equity investments in publicly traded companies and privately

held entities. All of our investments in actively traded public companies are reflected in our consolidated balance sheets at fair value.

Our investments in privately held entities that report NAV per share are measured at fair value using NAV as a practical expedient to fair

value. Our equity investments in privately held entities that do not report NAV per share are measured at cost less impairments,

adjusted for observable price changes during the period. Changes in fair value of public investments, changes in NAV per share

reported by privately held entities, and observable price changes of privately held entities that do not report NAV per share are

classified as investment income in our consolidated statements of operations. There is no assurance that future declines in value will

not have a material adverse effect on our future results of operations. The following table illustrates the effect that a 10% change in the

value of our equity investments would have on earnings as of June 30, 2024 (in thousands):

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Foreign currency exchange rate risk

We have exposure to foreign currency exchange rate risk related to our subsidiaries operating in Canada. The functional

currencies of our foreign subsidiaries are the local currencies in each respective country. Gains or losses resulting from the translation

of our foreign subsidiaries’ balance sheets and statements of operations are classified in accumulated other comprehensive income

(loss) as a separate component of total equity and are excluded from net income (loss). Gains or losses will be reflected in our

consolidated statements of operations when there is a sale or partial sale of our investment in these operations or upon a complete or

substantially complete liquidation of the investment. The following tables illustrate the effect that a 10% change in foreign currency rates

relative to the U.S. dollar would have on our potential future earnings and on the fair value of our net investment in foreign subsidiaries

based on our current operating assets outside the U.S. as of June 30, 2024 (in thousands):

The sensitivity analyses assume a parallel shift of all foreign currency exchange rates with respect to the U.S. dollar; however,

foreign currency exchange rates do not typically move in such a manner, and actual results may differ materially.

Our exposure to market risk elements for the six months ended June 30, 2024 was consistent with the risk elements presented

above, including the effects of changes in interest rates, equity prices, and foreign currency exchange rates.

Evaluation of disclosure controls and procedures

As of June 30, 2024, we had performed an evaluation, under the supervision of our principal executive officers and principal

financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and

procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized, and reported

within the requisite time periods. Based on our evaluation, the principal executive officers and principal financial officer concluded that

our disclosure controls and procedures were effective as of June 30, 2024.

Changes in internal control over financial reporting

There has not been any change in our internal control over financial reporting during the three months ended June 30, 2024

that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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In addition to the information set forth in this quarterly report on Form 10-Q, one should also carefully review and consider the

information contained in the other reports and periodic filings that we make with the SEC, including, without limitation, the information

contained under the caption “Item 1A. Risk factors” in our annual report on Form 10-K for the year ended December 31, 2023. Those

risk factors could materially affect our business, financial condition, and results of operations. The risks that we describe in our public

filings are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we presently deem to be

immaterial, also may materially adversely affect our business, financial condition, and results of operations.

There have been no material changes in our risk factors from those disclosed under the caption “Item 1A. Risk factors” in our

annual report on Form 10-K for the year ended December 31, 2023, except for the following updates:

The use of artificial intelligence presents risks and challenges that may adversely impact our business and

operating results or that of our tenants and vendors or may adversely impact the requirements and demand for life

science laboratory space as a whole.

We may adopt and integrate generative artificial intelligence and machine learning (collectively, “AI”) tools into our

operations to enhance efficiencies and streamline existing systems. However, the deployment and maintenance of AI tools

may entail substantial risks. While these tools hold promise in optimizing processes and driving efficiencies, as with many

technological innovations, they also pose inherent risks. These include, but are not limited to, the potential for inaccuracy, bias,

intellectual property infringement, or misappropriation, as well as concerns regarding data privacy and cybersecurity.

Moreover, the use of AI may introduce errors or inadequacies that are not easily detectable. Deficiencies,

inaccuracies, or biases in the data used for AI training, or in the content, analyses, or recommendations generated by AI

applications, may adversely affect our business, financial condition, and results of operations. The legal landscape surrounding

AI is evolving and remains uncertain. It is unknown how the development of laws in this area could impact our business and

our ability to enforce our proprietary rights or protect against infringement of those rights.

Potential risks from the use of AI by our tenants

The integration of AI technologies in the life science industry presents both significant opportunities and inherent

risks. AI predictive models have the potential to enhance the accuracy and usefulness of simulation models and be utilized

broadly across various stages of drug development. However, the adoption of AI also introduces a complex risk landscape

similar to those described above that must be navigated with caution.

Moreover, the adoption of AI by our tenants may lead to infrastructure requirements that our buildings currently do not

accommodate, such as increased power needs due to high-performance computing. Infrastructure upgrades may necessitate

substantial capital expenditures and could potentially impact the environmental footprint of our building operations.

Potential risks from the use of AI by our investors, analysts, and other market participants

The increasing use of AI by investors, analysts, and other market participants for processing, summarizing, and

interpreting financial and other information, including that in our annual reports on Form 10-K, quarterly reports on Form 10-Q,

and other public disclosures, poses potential risks. While AI could improve efficiencies in data analysis, AI could also

inaccurately interpret or summarize information due to algorithmic limitations or misinterpretation of complex financial

concepts. These misinterpretations could be further exacerbated by the potential for AI to overlook additional disclosures in

various report sections, such as the Management's Discussion and Analysis of Financial Condition and Results of Operations

or Risk Factors section within our annual reports on Form 10-K and/or quarterly reports on Form 10-Q.

Our status as a REIT introduces unique financial metrics, such as funds from operations and fund from operations, as

adjusted, which represent widely used non-GAAP financial performance measures of equity REITs. Inadequate AI training on

the aspects unique to our industry could lead to inaccurate interpretations of these financial measures, particularly when

comparing our performance against non-REIT entities. Furthermore, rules and regulations requiring REITs to distribute at least

90% of REIT taxable income to stockholders result in a substantial reliance on debt and equity financing by REITs. Without

adequate training, these unique aspects might not be properly accounted for by AI and could lead to misinterpretations of our

financial metrics, such as net debt and preferred stock to Adjusted EBITDA, resulting in inaccurate conclusions and misleading

investment recommendations.

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Additionally, current inconsistencies in the use, calculation, and presentation of non-GAAP measures among public

companies may lead to AI’s inaccurate interpretations and comparisons of these measures. Without appropriate adjustments

for these divergences, AI may generate erroneous comparisons with peer companies, distorting the view of our operational

performance and profitability, which could lead to misguided investor conclusions about our competitive position among other

companies.

Other challenges associated with AI use may include:

• Inadequate interpretation of real estate market nuances, including geographic and property-type differences, and

property quality.

• Overemphasis on quantitative data, which overlooks qualitative factors like management’s expertise, background,

and tenure; and company strategy, credit rating, track record, and market reputation.

• Reliance on historical data, which may not reliably predict future performance in the dynamic real estate sector.
• Current limited capability of AI in making nuanced judgments, particularly in understanding market trends,

uncertainties, and investor sentiment.

We are committed to the highest levels of transparency, integrity, and accountability in our public disclosures.

However, we have no control over the processing or interpretation of this information by third-party AI tools. Incorrect AI

interpretations could significantly impact investment decisions, which may adversely affect our stock price, investor confidence,

and our reputation. Additionally, the time and resources needed to address and remediate public misconceptions could distract

from our business activities, which may further exacerbate the potential negative impact.

Potential risks of use of AI by vendors

Our vendors may incorporate AI tools into their products or services without our knowledge, and the providers of

these tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data

protection. Consequently, this may inhibit our or our vendors’ ability to uphold an appropriate level of service, data privacy, and

overall experience. Bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in

illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. If we,

our vendors, or other third parties with which we conduct business experience an actual or perceived breach of privacy or

security incident due to the use of AI, we may be adversely impacted, lose valuable intellectual property or confidential

information, and incur harm to our reputation and the public perception of the effectiveness of our security measures.

Potential risk of use of AI by cybercriminals

As AI technologies become more advanced, cybercriminals may develop more sophisticated attack methods. Such

methods may include the use of AI to automate and enhance phishing schemes, advance malware, and carry out more

effective cyberattacks. The AI-driven cyber threats could be harder to detect and counteract, which may pose significant risks

to our data security and the integrity of our systems. If such AI-enhanced cyberattacks are successful, they could lead to

substantial data breaches, loss of sensitive information, and significant financial and reputational damage.

The realization of any of the aforementioned risks could have a material adverse impact on our revenues, net operating

income; our results of operations, funds from operations, operating margins, occupancy, EPS, FFO per share; our overall business; and

the market value of our common stock. Any of the outcomes described above could cause damage to us, our tenants, and vendors and

adversely impact our business or that of our tenants and vendors. Furthermore, these risks, combined with an uncertain regulatory

environment, may result in reputational harm, legal liability, governmental or regulatory scrutiny, or other adverse consequences to our

business operations.