Leases
Jun. 30, 2025
statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and
disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).
Leases in which we are the lessor
As of June 30, 2025, we had 384 properties aggregating 39.7 million operating RSF in key cluster locations, including Greater
Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus on
developing Class A/A+ properties in AAA life science innovation cluster locations that offer the scale and strategic design integral to our
Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities
and services, and convenient access to transit, our Megacampus ecosystems are designed to support our tenants in attracting and
retaining top talent, which we believe is a key driver of tenant demand for our properties.
As of June 30, 2025, all leases in which we are the lessor were classified as operating leases, with the exception of one direct
financing and one sales-type lease. Our leases are described below.
Operating leases
As of June 30, 2025, our 384 properties were subject to operating lease agreements. Seven of these properties are subject to
operating lease agreements that each contain a purchase option as described below:
(i)Two of these properties, representing two land parcels in our San Francisco Bay Area market, are subject to lease
agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during
each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 67.4 years.
(ii)Two operating properties in our Seattle market, held by a consolidated real estate joint venture, are subject to purchase
options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our
partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option,
the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our
partner’s remaining lease terms for these operating leases are 5.7 years and 19.3 years, respectively.
(iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on
property RSF) exercise date in October 2027.
Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration.
In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early
termination fee by the tenant.
At the commencement of each lease, we establish the lease term comprising the noncancelable period for each lease together
with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our
assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to
the assessment, including property-based, market-based, and tenant-based factors. We do not reassess the lease term or a lessee
option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract.
Future lease payments to be received under the terms of our operating lease agreements, excluding expense
reimbursements, in effect as of June 30, 2025 are outlined in the table below (in thousands):
Year | Amount | |
2025 | $917,038 | |
2026 | 1,768,314 | |
2027 | 1,691,484 | |
2028 | 1,584,647 | |
2029 | 1,482,012 | |
Thereafter | 9,809,227 | |
Total | $17,252,722 |
Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information
about our owned real estate assets, which are the underlying assets under our operating leases.
Direct financing and sales-type leases
As of June 30, 2025, we have one direct financing lease agreement, with a net investment balance of $41.9 million, for a
parking structure with a remaining lease term of 67.4 years. The lessee has an option to purchase the underlying asset at fair market
value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017.
As of June 30, 2025, we also have one sales-type lease for a property located in the Seattle market with the lease term
through August 2025, after which the ownership of the property transfers to the tenant. As of June 30, 2025, the net investment in this
lease is $18.4 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain
on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of
operations for the six months ended June 30, 2025.
The components of our aggregate net investment in our direct financing lease and our sales-type lease as of June 30, 2025
and December 31, 2024 are summarized in the table below (in thousands):
June 30, 2025 | December 31, 2024 | ||
Gross investment in direct financing and sales-type leases | $268,879 | $251,405 | |
Less: unearned income on direct financing lease | (206,391) | (207,734) | |
Less: provision for expected credit losses | (2,217) | (2,168) | |
Net investment in leases | $60,271 | $41,503 |
As of June 30, 2025, our estimated provision for expected credit loss related to our direct financing lease aggregated
$2.2 million, unchanged from December 31, 2024. We estimate the provision for expected credit loss related to our direct financing
lease using a probability of default methodology, which incorporates the borrower’s investment-grade credit rating from S&P Global
Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the
investments to estimate potential recoveries in the event of default, among other inputs.
During the three months ended March 31, 2025, we recognized an estimated provision for expected credit loss aggregating
$49 thousand related to the sales-type lease discussed above. This estimate was determined using historical industry losses and
transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-
term nature of this lease, and other available information. As of June 30, 2025, this estimate remained unchanged.
We classify adjustments to estimated provision for expected credit loss related to our direct financing and sales-type leases
within other income in our consolidated statement of operations. For further details, refer to “Provision for expected credit losses” in
Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of June 30,
2025 are outlined in the table below (in thousands):
Year | Total | |
2025 | $19,450 | |
2026 | 2,036 | |
2027 | 2,097 | |
2028 | 2,160 | |
2029 | 2,224 | |
Thereafter | 240,912 | |
Total | $268,879 |
Income from rentals
Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes
revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Income from rentals: | ||||||||
Revenues subject to the lease accounting standard: | ||||||||
Operating leases | $722,935 | $745,626 | $1,454,356 | $1,491,687 | ||||
Direct financing and sales-type leases | 1,089 | 662 | 1,899 | 1,321 | ||||
Revenues subject to the lease accounting standard | 724,024 | 746,288 | 1,456,255 | 1,493,008 | ||||
Revenues subject to the revenue recognition accounting standard | 13,255 | 8,874 | 24,199 | 17,705 | ||||
Income from rentals | $737,279 | $755,162 | $1,480,454 | $1,510,713 | ||||
Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist
primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to
“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”
to our unaudited consolidated financial statements for additional information.
Residual value risk management strategy
Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual
value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business
objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property
inspections, proactively addressing potential maintenance issues, and/or timely resolving any occurring issues, and (iii) carefully
selecting our tenants and monitoring their credit quality throughout their respective lease terms.
Leases in which we are the lessee
Operating lease agreements
We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these
leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or
covenants imposed by the leases, nor guarantees of residual value.
We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related
liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to
account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”
in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
As of June 30, 2025, the present value of the remaining contractual payments aggregating $784.2 million under our operating
lease agreements, including our extension options that we are reasonably certain to exercise, was $363.4 million. Our corresponding
operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to
the commencement of the lease, aggregated $717.1 million. As of June 30, 2025, the weighted-average remaining lease term of
operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to
exercise, and the weighted-average discount rate was 4.7%. The weighted-average discount rate is based on the incremental
borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized
basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of June 30, 2025 included leases for 31 of our properties, which accounted for approximately 8%
of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book
value of $5.3 million as of June 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81
years, including extension options that we are reasonably certain to exercise.
The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating
lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2025 is in the table below (in thousands):
Year | Total | |
2025 | $10,777 | |
2026 | 22,768 | |
2027 | 21,849 | |
2028 | 21,517 | |
2029 | 21,025 | |
Thereafter | 686,242 | |
Total future payments under our operating leases in which we are the lessee | 784,178 | |
Effect of discounting | (420,759) | |
Operating lease liability | $363,419 |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed
annual rent payments and may also include escalation clauses and renewal options. For the six months ended June 30, 2025 and
2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we
are the lessee aggregated $156.1 million and $16.4 million, respectively. The increase is primarily due to the second installment of a
ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year lease term extension to our existing ground
lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket.
Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension
options. For the three and six months ended June 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as
follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Gross operating lease costs | $12,859 | $9,930 | $25,218 | $19,141 | ||||
Capitalized lease costs | (720) | (518) | (1,413) | (1,046) | ||||
Expenses for operating leases in which we are the lessee | $12,139 | $9,412 | $23,805 | $18,095 | ||||
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in
2021 for a future development site in the San Francisco Bay Area market. Based on our current financial outlook for this project, we
made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our
remaining right-of-use asset balance. As of June 30, 2025 and December 31, 2024, we had no operating lease liability associated with
this ground lease, as the related lease obligation had been fully prepaid.
statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and
disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).
Leases in which we are the lessor
As of June 30, 2025, we had 384 properties aggregating 39.7 million operating RSF in key cluster locations, including Greater
Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus on
developing Class A/A+ properties in AAA life science innovation cluster locations that offer the scale and strategic design integral to our
Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities
and services, and convenient access to transit, our Megacampus ecosystems are designed to support our tenants in attracting and
retaining top talent, which we believe is a key driver of tenant demand for our properties.
As of June 30, 2025, all leases in which we are the lessor were classified as operating leases, with the exception of one direct
financing and one sales-type lease. Our leases are described below.
Operating leases
As of June 30, 2025, our 384 properties were subject to operating lease agreements. Seven of these properties are subject to
operating lease agreements that each contain a purchase option as described below:
(i)Two of these properties, representing two land parcels in our San Francisco Bay Area market, are subject to lease
agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during
each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 67.4 years.
(ii)Two operating properties in our Seattle market, held by a consolidated real estate joint venture, are subject to purchase
options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our
partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option,
the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our
partner’s remaining lease terms for these operating leases are 5.7 years and 19.3 years, respectively.
(iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on
property RSF) exercise date in October 2027.
Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration.
In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early
termination fee by the tenant.
At the commencement of each lease, we establish the lease term comprising the noncancelable period for each lease together
with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our
assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to
the assessment, including property-based, market-based, and tenant-based factors. We do not reassess the lease term or a lessee
option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract.
Future lease payments to be received under the terms of our operating lease agreements, excluding expense
reimbursements, in effect as of June 30, 2025 are outlined in the table below (in thousands):
Year | Amount | |
2025 | $917,038 | |
2026 | 1,768,314 | |
2027 | 1,691,484 | |
2028 | 1,584,647 | |
2029 | 1,482,012 | |
Thereafter | 9,809,227 | |
Total | $17,252,722 |
Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information
about our owned real estate assets, which are the underlying assets under our operating leases.
Direct financing and sales-type leases
As of June 30, 2025, we have one direct financing lease agreement, with a net investment balance of $41.9 million, for a
parking structure with a remaining lease term of 67.4 years. The lessee has an option to purchase the underlying asset at fair market
value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017.
As of June 30, 2025, we also have one sales-type lease for a property located in the Seattle market with the lease term
through August 2025, after which the ownership of the property transfers to the tenant. As of June 30, 2025, the net investment in this
lease is $18.4 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain
on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of
operations for the six months ended June 30, 2025.
The components of our aggregate net investment in our direct financing lease and our sales-type lease as of June 30, 2025
and December 31, 2024 are summarized in the table below (in thousands):
June 30, 2025 | December 31, 2024 | ||
Gross investment in direct financing and sales-type leases | $268,879 | $251,405 | |
Less: unearned income on direct financing lease | (206,391) | (207,734) | |
Less: provision for expected credit losses | (2,217) | (2,168) | |
Net investment in leases | $60,271 | $41,503 |
As of June 30, 2025, our estimated provision for expected credit loss related to our direct financing lease aggregated
$2.2 million, unchanged from December 31, 2024. We estimate the provision for expected credit loss related to our direct financing
lease using a probability of default methodology, which incorporates the borrower’s investment-grade credit rating from S&P Global
Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the
investments to estimate potential recoveries in the event of default, among other inputs.
During the three months ended March 31, 2025, we recognized an estimated provision for expected credit loss aggregating
$49 thousand related to the sales-type lease discussed above. This estimate was determined using historical industry losses and
transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-
term nature of this lease, and other available information. As of June 30, 2025, this estimate remained unchanged.
We classify adjustments to estimated provision for expected credit loss related to our direct financing and sales-type leases
within other income in our consolidated statement of operations. For further details, refer to “Provision for expected credit losses” in
Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of June 30,
2025 are outlined in the table below (in thousands):
Year | Total | |
2025 | $19,450 | |
2026 | 2,036 | |
2027 | 2,097 | |
2028 | 2,160 | |
2029 | 2,224 | |
Thereafter | 240,912 | |
Total | $268,879 |
Income from rentals
Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes
revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Income from rentals: | ||||||||
Revenues subject to the lease accounting standard: | ||||||||
Operating leases | $722,935 | $745,626 | $1,454,356 | $1,491,687 | ||||
Direct financing and sales-type leases | 1,089 | 662 | 1,899 | 1,321 | ||||
Revenues subject to the lease accounting standard | 724,024 | 746,288 | 1,456,255 | 1,493,008 | ||||
Revenues subject to the revenue recognition accounting standard | 13,255 | 8,874 | 24,199 | 17,705 | ||||
Income from rentals | $737,279 | $755,162 | $1,480,454 | $1,510,713 | ||||
Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist
primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to
“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”
to our unaudited consolidated financial statements for additional information.
Residual value risk management strategy
Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual
value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business
objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property
inspections, proactively addressing potential maintenance issues, and/or timely resolving any occurring issues, and (iii) carefully
selecting our tenants and monitoring their credit quality throughout their respective lease terms.
Leases in which we are the lessee
Operating lease agreements
We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these
leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or
covenants imposed by the leases, nor guarantees of residual value.
We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related
liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to
account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”
in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
As of June 30, 2025, the present value of the remaining contractual payments aggregating $784.2 million under our operating
lease agreements, including our extension options that we are reasonably certain to exercise, was $363.4 million. Our corresponding
operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to
the commencement of the lease, aggregated $717.1 million. As of June 30, 2025, the weighted-average remaining lease term of
operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to
exercise, and the weighted-average discount rate was 4.7%. The weighted-average discount rate is based on the incremental
borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized
basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of June 30, 2025 included leases for 31 of our properties, which accounted for approximately 8%
of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book
value of $5.3 million as of June 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81
years, including extension options that we are reasonably certain to exercise.
The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating
lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2025 is in the table below (in thousands):
Year | Total | |
2025 | $10,777 | |
2026 | 22,768 | |
2027 | 21,849 | |
2028 | 21,517 | |
2029 | 21,025 | |
Thereafter | 686,242 | |
Total future payments under our operating leases in which we are the lessee | 784,178 | |
Effect of discounting | (420,759) | |
Operating lease liability | $363,419 |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed
annual rent payments and may also include escalation clauses and renewal options. For the six months ended June 30, 2025 and
2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we
are the lessee aggregated $156.1 million and $16.4 million, respectively. The increase is primarily due to the second installment of a
ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year lease term extension to our existing ground
lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket.
Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension
options. For the three and six months ended June 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as
follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Gross operating lease costs | $12,859 | $9,930 | $25,218 | $19,141 | ||||
Capitalized lease costs | (720) | (518) | (1,413) | (1,046) | ||||
Expenses for operating leases in which we are the lessee | $12,139 | $9,412 | $23,805 | $18,095 | ||||
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in
2021 for a future development site in the San Francisco Bay Area market. Based on our current financial outlook for this project, we
made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our
remaining right-of-use asset balance. As of June 30, 2025 and December 31, 2024, we had no operating lease liability associated with
this ground lease, as the related lease obligation had been fully prepaid.
statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and
disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).
Leases in which we are the lessor
As of June 30, 2025, we had 384 properties aggregating 39.7 million operating RSF in key cluster locations, including Greater
Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus on
developing Class A/A+ properties in AAA life science innovation cluster locations that offer the scale and strategic design integral to our
Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities
and services, and convenient access to transit, our Megacampus ecosystems are designed to support our tenants in attracting and
retaining top talent, which we believe is a key driver of tenant demand for our properties.
As of June 30, 2025, all leases in which we are the lessor were classified as operating leases, with the exception of one direct
financing and one sales-type lease. Our leases are described below.
Operating leases
As of June 30, 2025, our 384 properties were subject to operating lease agreements. Seven of these properties are subject to
operating lease agreements that each contain a purchase option as described below:
(i)Two of these properties, representing two land parcels in our San Francisco Bay Area market, are subject to lease
agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during
each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 67.4 years.
(ii)Two operating properties in our Seattle market, held by a consolidated real estate joint venture, are subject to purchase
options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our
partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option,
the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our
partner’s remaining lease terms for these operating leases are 5.7 years and 19.3 years, respectively.
(iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on
property RSF) exercise date in October 2027.
Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration.
In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early
termination fee by the tenant.
At the commencement of each lease, we establish the lease term comprising the noncancelable period for each lease together
with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our
assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to
the assessment, including property-based, market-based, and tenant-based factors. We do not reassess the lease term or a lessee
option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract.
Future lease payments to be received under the terms of our operating lease agreements, excluding expense
reimbursements, in effect as of June 30, 2025 are outlined in the table below (in thousands):
Year | Amount | |
2025 | $917,038 | |
2026 | 1,768,314 | |
2027 | 1,691,484 | |
2028 | 1,584,647 | |
2029 | 1,482,012 | |
Thereafter | 9,809,227 | |
Total | $17,252,722 |
Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information
about our owned real estate assets, which are the underlying assets under our operating leases.
Direct financing and sales-type leases
As of June 30, 2025, we have one direct financing lease agreement, with a net investment balance of $41.9 million, for a
parking structure with a remaining lease term of 67.4 years. The lessee has an option to purchase the underlying asset at fair market
value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017.
As of June 30, 2025, we also have one sales-type lease for a property located in the Seattle market with the lease term
through August 2025, after which the ownership of the property transfers to the tenant. As of June 30, 2025, the net investment in this
lease is $18.4 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain
on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of
operations for the six months ended June 30, 2025.
The components of our aggregate net investment in our direct financing lease and our sales-type lease as of June 30, 2025
and December 31, 2024 are summarized in the table below (in thousands):
June 30, 2025 | December 31, 2024 | ||
Gross investment in direct financing and sales-type leases | $268,879 | $251,405 | |
Less: unearned income on direct financing lease | (206,391) | (207,734) | |
Less: provision for expected credit losses | (2,217) | (2,168) | |
Net investment in leases | $60,271 | $41,503 |
As of June 30, 2025, our estimated provision for expected credit loss related to our direct financing lease aggregated
$2.2 million, unchanged from December 31, 2024. We estimate the provision for expected credit loss related to our direct financing
lease using a probability of default methodology, which incorporates the borrower’s investment-grade credit rating from S&P Global
Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the
investments to estimate potential recoveries in the event of default, among other inputs.
During the three months ended March 31, 2025, we recognized an estimated provision for expected credit loss aggregating
$49 thousand related to the sales-type lease discussed above. This estimate was determined using historical industry losses and
transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-
term nature of this lease, and other available information. As of June 30, 2025, this estimate remained unchanged.
We classify adjustments to estimated provision for expected credit loss related to our direct financing and sales-type leases
within other income in our consolidated statement of operations. For further details, refer to “Provision for expected credit losses” in
Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of June 30,
2025 are outlined in the table below (in thousands):
Year | Total | |
2025 | $19,450 | |
2026 | 2,036 | |
2027 | 2,097 | |
2028 | 2,160 | |
2029 | 2,224 | |
Thereafter | 240,912 | |
Total | $268,879 |
Income from rentals
Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes
revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Income from rentals: | ||||||||
Revenues subject to the lease accounting standard: | ||||||||
Operating leases | $722,935 | $745,626 | $1,454,356 | $1,491,687 | ||||
Direct financing and sales-type leases | 1,089 | 662 | 1,899 | 1,321 | ||||
Revenues subject to the lease accounting standard | 724,024 | 746,288 | 1,456,255 | 1,493,008 | ||||
Revenues subject to the revenue recognition accounting standard | 13,255 | 8,874 | 24,199 | 17,705 | ||||
Income from rentals | $737,279 | $755,162 | $1,480,454 | $1,510,713 | ||||
Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist
primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to
“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”
to our unaudited consolidated financial statements for additional information.
Residual value risk management strategy
Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual
value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business
objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property
inspections, proactively addressing potential maintenance issues, and/or timely resolving any occurring issues, and (iii) carefully
selecting our tenants and monitoring their credit quality throughout their respective lease terms.
Leases in which we are the lessee
Operating lease agreements
We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these
leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or
covenants imposed by the leases, nor guarantees of residual value.
We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related
liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to
account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”
in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
As of June 30, 2025, the present value of the remaining contractual payments aggregating $784.2 million under our operating
lease agreements, including our extension options that we are reasonably certain to exercise, was $363.4 million. Our corresponding
operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to
the commencement of the lease, aggregated $717.1 million. As of June 30, 2025, the weighted-average remaining lease term of
operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to
exercise, and the weighted-average discount rate was 4.7%. The weighted-average discount rate is based on the incremental
borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized
basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of June 30, 2025 included leases for 31 of our properties, which accounted for approximately 8%
of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book
value of $5.3 million as of June 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81
years, including extension options that we are reasonably certain to exercise.
The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating
lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2025 is in the table below (in thousands):
Year | Total | |
2025 | $10,777 | |
2026 | 22,768 | |
2027 | 21,849 | |
2028 | 21,517 | |
2029 | 21,025 | |
Thereafter | 686,242 | |
Total future payments under our operating leases in which we are the lessee | 784,178 | |
Effect of discounting | (420,759) | |
Operating lease liability | $363,419 |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed
annual rent payments and may also include escalation clauses and renewal options. For the six months ended June 30, 2025 and
2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we
are the lessee aggregated $156.1 million and $16.4 million, respectively. The increase is primarily due to the second installment of a
ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year lease term extension to our existing ground
lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket.
Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension
options. For the three and six months ended June 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as
follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Gross operating lease costs | $12,859 | $9,930 | $25,218 | $19,141 | ||||
Capitalized lease costs | (720) | (518) | (1,413) | (1,046) | ||||
Expenses for operating leases in which we are the lessee | $12,139 | $9,412 | $23,805 | $18,095 | ||||
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in
2021 for a future development site in the San Francisco Bay Area market. Based on our current financial outlook for this project, we
made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our
remaining right-of-use asset balance. As of June 30, 2025 and December 31, 2024, we had no operating lease liability associated with
this ground lease, as the related lease obligation had been fully prepaid.
statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and
disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).
Leases in which we are the lessor
As of June 30, 2025, we had 384 properties aggregating 39.7 million operating RSF in key cluster locations, including Greater
Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus on
developing Class A/A+ properties in AAA life science innovation cluster locations that offer the scale and strategic design integral to our
Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities
and services, and convenient access to transit, our Megacampus ecosystems are designed to support our tenants in attracting and
retaining top talent, which we believe is a key driver of tenant demand for our properties.
As of June 30, 2025, all leases in which we are the lessor were classified as operating leases, with the exception of one direct
financing and one sales-type lease. Our leases are described below.
Operating leases
As of June 30, 2025, our 384 properties were subject to operating lease agreements. Seven of these properties are subject to
operating lease agreements that each contain a purchase option as described below:
(i)Two of these properties, representing two land parcels in our San Francisco Bay Area market, are subject to lease
agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during
each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 67.4 years.
(ii)Two operating properties in our Seattle market, held by a consolidated real estate joint venture, are subject to purchase
options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our
partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option,
the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our
partner’s remaining lease terms for these operating leases are 5.7 years and 19.3 years, respectively.
(iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on
property RSF) exercise date in October 2027.
Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration.
In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early
termination fee by the tenant.
At the commencement of each lease, we establish the lease term comprising the noncancelable period for each lease together
with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our
assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to
the assessment, including property-based, market-based, and tenant-based factors. We do not reassess the lease term or a lessee
option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract.
Future lease payments to be received under the terms of our operating lease agreements, excluding expense
reimbursements, in effect as of June 30, 2025 are outlined in the table below (in thousands):
Year | Amount | |
2025 | $917,038 | |
2026 | 1,768,314 | |
2027 | 1,691,484 | |
2028 | 1,584,647 | |
2029 | 1,482,012 | |
Thereafter | 9,809,227 | |
Total | $17,252,722 |
Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information
about our owned real estate assets, which are the underlying assets under our operating leases.
Direct financing and sales-type leases
As of June 30, 2025, we have one direct financing lease agreement, with a net investment balance of $41.9 million, for a
parking structure with a remaining lease term of 67.4 years. The lessee has an option to purchase the underlying asset at fair market
value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017.
As of June 30, 2025, we also have one sales-type lease for a property located in the Seattle market with the lease term
through August 2025, after which the ownership of the property transfers to the tenant. As of June 30, 2025, the net investment in this
lease is $18.4 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain
on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of
operations for the six months ended June 30, 2025.
The components of our aggregate net investment in our direct financing lease and our sales-type lease as of June 30, 2025
and December 31, 2024 are summarized in the table below (in thousands):
June 30, 2025 | December 31, 2024 | ||
Gross investment in direct financing and sales-type leases | $268,879 | $251,405 | |
Less: unearned income on direct financing lease | (206,391) | (207,734) | |
Less: provision for expected credit losses | (2,217) | (2,168) | |
Net investment in leases | $60,271 | $41,503 |
As of June 30, 2025, our estimated provision for expected credit loss related to our direct financing lease aggregated
$2.2 million, unchanged from December 31, 2024. We estimate the provision for expected credit loss related to our direct financing
lease using a probability of default methodology, which incorporates the borrower’s investment-grade credit rating from S&P Global
Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the
investments to estimate potential recoveries in the event of default, among other inputs.
During the three months ended March 31, 2025, we recognized an estimated provision for expected credit loss aggregating
$49 thousand related to the sales-type lease discussed above. This estimate was determined using historical industry losses and
transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-
term nature of this lease, and other available information. As of June 30, 2025, this estimate remained unchanged.
We classify adjustments to estimated provision for expected credit loss related to our direct financing and sales-type leases
within other income in our consolidated statement of operations. For further details, refer to “Provision for expected credit losses” in
Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of June 30,
2025 are outlined in the table below (in thousands):
Year | Total | |
2025 | $19,450 | |
2026 | 2,036 | |
2027 | 2,097 | |
2028 | 2,160 | |
2029 | 2,224 | |
Thereafter | 240,912 | |
Total | $268,879 |
Income from rentals
Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes
revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Income from rentals: | ||||||||
Revenues subject to the lease accounting standard: | ||||||||
Operating leases | $722,935 | $745,626 | $1,454,356 | $1,491,687 | ||||
Direct financing and sales-type leases | 1,089 | 662 | 1,899 | 1,321 | ||||
Revenues subject to the lease accounting standard | 724,024 | 746,288 | 1,456,255 | 1,493,008 | ||||
Revenues subject to the revenue recognition accounting standard | 13,255 | 8,874 | 24,199 | 17,705 | ||||
Income from rentals | $737,279 | $755,162 | $1,480,454 | $1,510,713 | ||||
Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist
primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to
“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”
to our unaudited consolidated financial statements for additional information.
Residual value risk management strategy
Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual
value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business
objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property
inspections, proactively addressing potential maintenance issues, and/or timely resolving any occurring issues, and (iii) carefully
selecting our tenants and monitoring their credit quality throughout their respective lease terms.
Leases in which we are the lessee
Operating lease agreements
We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these
leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or
covenants imposed by the leases, nor guarantees of residual value.
We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related
liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to
account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”
in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.
As of June 30, 2025, the present value of the remaining contractual payments aggregating $784.2 million under our operating
lease agreements, including our extension options that we are reasonably certain to exercise, was $363.4 million. Our corresponding
operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to
the commencement of the lease, aggregated $717.1 million. As of June 30, 2025, the weighted-average remaining lease term of
operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to
exercise, and the weighted-average discount rate was 4.7%. The weighted-average discount rate is based on the incremental
borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized
basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of June 30, 2025 included leases for 31 of our properties, which accounted for approximately 8%
of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book
value of $5.3 million as of June 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81
years, including extension options that we are reasonably certain to exercise.
The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating
lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2025 is in the table below (in thousands):
Year | Total | |
2025 | $10,777 | |
2026 | 22,768 | |
2027 | 21,849 | |
2028 | 21,517 | |
2029 | 21,025 | |
Thereafter | 686,242 | |
Total future payments under our operating leases in which we are the lessee | 784,178 | |
Effect of discounting | (420,759) | |
Operating lease liability | $363,419 |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed
annual rent payments and may also include escalation clauses and renewal options. For the six months ended June 30, 2025 and
2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we
are the lessee aggregated $156.1 million and $16.4 million, respectively. The increase is primarily due to the second installment of a
ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year lease term extension to our existing ground
lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket.
Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension
options. For the three and six months ended June 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as
follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
Gross operating lease costs | $12,859 | $9,930 | $25,218 | $19,141 | ||||
Capitalized lease costs | (720) | (518) | (1,413) | (1,046) | ||||
Expenses for operating leases in which we are the lessee | $12,139 | $9,412 | $23,805 | $18,095 | ||||
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in
2021 for a future development site in the San Francisco Bay Area market. Based on our current financial outlook for this project, we
made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our
remaining right-of-use asset balance. As of June 30, 2025 and December 31, 2024, we had no operating lease liability associated with
this ground lease, as the related lease obligation had been fully prepaid.