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Published: 2021-07-26 00:00:00 ET

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-12993

ALEXANDRIA REAL ESTATE EQUITIES, INC.

(Exact name of registrant as specified in its charter)


Maryland						95-4502084
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

26 North Euclid Avenue, Pasadena, California 91101

(Address of principal executive offices) (Zip code)

(626) 578-0777

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	ARE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Smaller reporting company

Accelerated filer

Emerging growth company

Non-accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 15, 2021, 152,362,999 shares of common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS (UNAUDITED)

	Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020	1

	Consolidated Financial Statements for the Three and Six Months Ended June 30, 2021 and 2020:

	Consolidated Statements of Operations	2

	Consolidated Statements of Comprehensive Income	3

	Consolidated Statements of Changes in Stockholders’ Equity and Noncontrolling Interests	4


	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	8

	Notes to Consolidated Financial Statements	10

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	44

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	115

Item 4.	CONTROLS AND PROCEDURES	116

PART II – OTHER INFORMATION

Item 1A.	RISK FACTORS	117

Item 6.	EXHIBITS	123

SIGNATURES		124

GLOSSARY

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:


ASU			Accounting Standards Update
ATM			At the Market
CIP			Construction in Progress
EPS			Earnings per Share
ESG			Environmental, Social & Governance
FASB			Financial Accounting Standards Board
FFO			Funds From Operations
GAAP			U.S. Generally Accepted Accounting Principles
JV			Joint Venture
LEED®			Leadership in Energy and Environmental Design
LIBOR			London Interbank Offered Rate
Nareit			National Association of Real Estate Investment Trusts
NAV			Net Asset Value
REIT			Real Estate Investment Trust
RSF			Rentable Square Feet/Foot
SEC			Securities and Exchange Commission
SF			Square Feet/Foot
SoDo			South of Downtown submarket of Seattle
SOFR			Secured Overnight Financing Rate
SoMa			South of Market submarket of the San Francisco Bay Area
U.S.			United States
VIE			Variable Interest Entity

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Alexandria Real Estate Equities, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)


	June 30, 2021		December 31, 2020
Assets
Investments in real estate	$	21,692,385	$	18,092,372
Investments in unconsolidated real estate joint ventures	323,622		332,349
Cash and cash equivalents	323,876		568,532
Restricted cash	33,697		29,173
Tenant receivables	6,710		7,333
Deferred rent	781,600		722,751
Deferred leasing costs	321,005		272,673
Investments	1,999,283		1,611,114
Other assets	1,536,672		1,191,581
Total assets	$	27,018,850	$	22,827,878

Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	227,984	$	230,925
Unsecured senior notes payable	8,313,025		7,232,370
Unsecured senior line of credit and commercial paper	299,990		99,991
Accounts payable, accrued expenses, and other liabilities	1,825,387		1,669,832
Dividends payable	170,647		150,982
Total liabilities	10,837,033		9,384,100

Commitments and contingencies

Redeemable noncontrolling interests	11,567		11,342

Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
Common stock	1,507		1,367
Additional paid-in capital	14,194,023		11,730,970
Accumulated other comprehensive loss	(4,508)		(6,625)
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	14,191,022		11,725,712
Noncontrolling interests	1,979,228		1,706,724
Total equity	16,170,250		13,432,436
Total liabilities, noncontrolling interests, and equity	$	27,018,850	$	22,827,878

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Income from rentals	$	508,371	$	435,856	$	987,066	$	873,461
Other income	1,248		1,100		2,402		3,414
Total revenues	509,619		436,956		989,468		876,875

Expenses:
Rental operations	143,955		123,911		281,843		253,014
General and administrative	37,880		31,775		71,876		63,738
Interest	35,158		45,014		71,625		90,753
Depreciation and amortization	190,052		168,027		370,965		343,523
Impairment of real estate	4,926		13,218		10,055		15,221
Loss on early extinguishment of debt	—		—		67,253		—
Total expenses	411,971		381,945		873,617		766,249

Equity in earnings of unconsolidated real estate joint ventures	2,609		3,893		6,146		777
Investment income	304,263		184,657		305,277		162,836
Gain on sales of real estate	—		—		2,779		—
Net income	404,520		243,561		430,053		274,239
Net income attributable to noncontrolling interests	(19,436)		(13,907)		(36,848)		(25,820)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	385,084		229,654		393,205		248,419
Net income attributable to unvested restricted stock awards	(4,521)		(3,054)		(4,663)		(3,574)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	380,563	$	226,600	$	388,542	$	244,845

Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	2.61	$	1.82	$	2.74	$	1.99
Diluted	$	2.61	$	1.82	$	2.74	$	1.99

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	404,520	$	243,561	$	430,053	$	274,239
Other comprehensive income (loss)
Unrealized gains (losses) on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period	1,291		2,526		2,117		(3,331)
Unrealized gains (losses) on foreign currency translation, net	1,291		2,526		2,117		(3,331)

Total other comprehensive income (loss)	1,291		2,526		2,117		(3,331)
Comprehensive income	405,811		246,087		432,170		270,908
Less: comprehensive income attributable to noncontrolling interests	(19,436)		(13,907)		(36,848)		(25,820)
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	$	386,375	$	232,180	$	395,322	$	245,088

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of March 31, 2021	145,655,556	$	1,457	$	12,994,748	$	—	$	(5,799)	$	1,780,102	$	14,770,508	$	11,454
Net income	—	—		—		385,084		—		19,216		404,300		220
Total other comprehensive income	—	—		—		—		1,291		—		1,291		—
Contributions from and sales of noncontrolling interests	—	—		103,868		—		—		207,642		311,510		94
Distributions to and redemption of noncontrolling interests	—	—		—		—		—		(27,732)		(27,732)		(201)
Issuance of common stock	4,928,000	50		868,765		—		—		—		868,815		—
Issuance pursuant to stock plan	190,856	2		24,308		—		—		—		24,310		—
Taxes related to net settlement of equity awards	(66,534)	(2)		(12,104)		—		—		—		(12,106)		—
Dividends declared on common stock ($1.12 per share)	—	—		—		(170,646)		—		—		(170,646)		—
Reclassification of earnings in excess of distributions	—	—		214,438		(214,438)		—		—		—		—
Balance as of June 30, 2021	150,707,878	$	1,507	$	14,194,023	$	—	$	(4,508)	$	1,979,228	$	16,170,250	$	11,567

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of March 31, 2020	124,325,684	$	1,243	$	9,336,949	$	—	$	(15,606)	$	1,579,666	$	10,902,252	$	12,013
Net income	—	—		—		229,654		—		13,690		243,344		217
Total other comprehensive income	—	—		—		—		2,526		—		2,526		—
Contributions from and sales of noncontrolling interests	—	—		155		—		—		53,353		53,508		93
Distributions to noncontrolling interests	—	—		—		—		—		(21,295)		(21,295)		(201)

Issuance pursuant to stock plan	289,361	3		19,351		—		—		—		19,354		—
Taxes related to net settlement of equity awards	(56,426)	—		(9,154)		—		—		—		(9,154)		—
Dividends declared on common stock ($1.06 per share)	—	—		—		(133,681)		—		—		(133,681)		—

Reclassification of earnings in excess of distributions	—	—		95,973		(95,973)		—		—		—		—
Balance as of June 30, 2020	124,558,619	$	1,246	$	9,443,274	$	—	$	(13,080)	$	1,625,414	$	11,056,854	$	12,122

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of December 31, 2020	136,690,329	$	1,367	$	11,730,970	$	—	$	(6,625)	$	1,706,724	$	13,432,436	$	11,342
Net income	—	—		—		393,205		—		36,411		429,616		437
Total other comprehensive income	—	—		—		—		2,117		—		2,117		—
Contributions from and sales of noncontrolling interests	—	—		103,915		—		—		289,505		393,420		188
Distributions to and redemption of noncontrolling interests	—	—		—		—		—		(53,412)		(53,412)		(400)
Issuance of common stock	13,762,703	138		2,266,326		—		—		—		2,266,464		—
Issuance pursuant to stock plan	370,928	4		51,243		—		—		—		51,247		—
Taxes related to net settlement of equity awards	(116,082)	(2)		(20,211)		—		—		—		(20,213)		—
Dividends declared on common stock ($2.21 per share)	—	—		—		(331,425)		—		—		(331,425)		—
Reclassification of earnings in excess of distributions	—	—		61,780		(61,780)		—		—		—		—
Balance as of June 30, 2021	150,707,878	$	1,507	$	14,194,023	$	—	$	(4,508)	$	1,979,228	$	16,170,250	$	11,567

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of December 31, 2019	120,800,315	$	1,208	$	8,874,367	$	—	$	(9,749)	$	1,288,352	$	10,154,178	$	12,300
Net income	—	—		—		248,419		—		25,385		273,804		435
Total other comprehensive loss	—	—		—		—		(3,331)		—		(3,331)		—
Contributions from noncontrolling interests	—	—		56,011		—		—		349,453		405,464		93
Redemption of noncontrolling interests	—	—		—		—		—		—		—		(300)
Distributions to noncontrolling interests	—	—		—		—		—		(37,776)		(37,776)		(406)
Issuance of common stock	3,392,622	34		504,304		—		—		—		504,338		—
Issuance pursuant to stock plan	471,289	5		42,337		—		—		—		42,342		—
Taxes related to net settlement of equity awards	(105,607)	(1)		(16,018)		—		—		—		(16,019)		—
Dividends declared on common stock ($2.09 per share)	—	—		—		(263,662)		—		—		(263,662)		—
Cumulative effect of adjustment upon adoption of lease ASUs on January 1, 2020	—	—		—		(2,484)		—		—		(2,484)		—
Reclassification of distributions in excess of earnings	—	—		(17,727)		17,727		—		—		—		—
Balance as of June 30, 2020	124,558,619	$	1,246	$	9,443,274	$	—	$	(13,080)	$	1,625,414	$	11,056,854	$	12,122

The accompanying notes are an integral part of these consolidated financial statements.


Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2021		2020
Operating Activities:
Net income	$	430,053	$	274,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	370,965		343,523
Impairment of real estate	10,055		15,221
Gain on sales of real estate	(2,779)		—
Loss on early extinguishment of debt	67,253		—
Equity in earnings of unconsolidated real estate joint ventures	(6,146)		(777)
Distributions of earnings from unconsolidated real estate joint ventures	10,585		3,438
Amortization of loan fees	5,676		4,984
Amortization of debt premiums	(1,041)		(1,776)
Amortization of acquired above- and below-market leases	(25,379)		(29,751)
Deferred rent	(55,285)		(43,964)
Stock compensation expense	24,688		19,114
Investment income	(305,277)		(162,836)
Changes in operating assets and liabilities:
Tenant receivables	627		2,900
Deferred leasing costs	(54,714)		(22,621)
Other assets	(8,749)		(1,187)
Accounts payable, accrued expenses, and other liabilities	(8,718)		(6,850)
Net cash provided by operating activities	451,814		393,657

Investing Activities:
Proceeds from sale of real estate	25,695		—
Additions to real estate	(1,001,983)		(725,742)
Purchases of real estate	(2,947,469)		(699,901)
Change in escrow deposits	(131,974)		18,719
Acquisition of interest in unconsolidated real estate joint venture	(9,048)		—
Investments in unconsolidated real estate joint ventures	(720)		(2,861)
Return of capital from unconsolidated real estate joint ventures	—		20,225
Additions to non-real estate investments	(233,508)		(75,968)
Sales of non-real estate investments	162,550		68,468
Net cash used in investing activities	$	(4,136,457)	$	(1,397,060)


Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2021		2020
Financing Activities:
Repayments of borrowings from secured notes payable	$	(16,250)	$	(3,088)
Proceeds from issuance of unsecured senior notes payable	1,743,716		699,532
Repayments of unsecured senior notes payable	(650,000)		—
Premium paid for early extinguishment of debt	(66,829)		—
Borrowings from unsecured senior line of credit	2,101,000		1,470,000
Repayments of borrowings from unsecured senior line of credit	(2,101,000)		(1,414,000)
Proceeds from issuances under commercial paper program	12,290,000		8,179,900
Repayments of borrowings under commercial paper program	(12,090,000)		(8,179,900)
Payments of loan fees	(16,870)		(7,957)
Taxes paid related to net settlement of equity awards	(8,174)		(6,890)
Proceeds from issuance of common stock	2,266,464		504,338
Dividends on common stock	(311,760)		(256,259)
Contributions from and sales of noncontrolling interests	357,597		55,775
Distributions to and purchases of noncontrolling interests	(53,812)		(38,482)
Net cash provided by financing activities	3,444,082		1,002,969

Effect of foreign exchange rate changes on cash and cash equivalents	429		(715)

Net decrease in cash, cash equivalents, and restricted cash	(240,132)		(1,149)
Cash, cash equivalents, and restricted cash as of the beginning of period	597,705		242,689
Cash, cash equivalents, and restricted cash as of the end of period	$	357,573	$	241,540

Supplemental Disclosures and Non-Cash Investing and Financing Activities:
Cash paid during the period for interest, net of interest capitalized	$	73,697	$	90,717
Accrued construction for current-period additions to real estate	$	302,985	$	148,431
Right-of-use asset	$	27,802	$	32,700
Lease liability	$	(27,802)	$	(32,700)
Consolidation of real estate assets in connection with our acquisition of partner’s interest in unconsolidated real estate joint venture	$	19,613	$	—
Assumption of secured note payable in connection with acquisition of partner’s interest in unconsolidated real estate joint venture	$	(14,558)	$	—
Contribution of assets from real estate joint venture partner	$	33,000	$	350,000
Issuance of noncontrolling interest to joint venture partner	$	(33,000)	$	(292,930)

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® urban office REIT, is the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations. As used in this quarterly report on Form 10-Q, references to the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements include the accounts of Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

We have prepared the accompanying interim consolidated financial statements in accordance with GAAP and in conformity with the rules and regulations of the SEC. In our opinion, these interim consolidated financial statements presented herein reflect all adjustments, of a normal recurring nature, that are necessary to fairly present the interim consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020. Any references to our market capitalization, number or quality of buildings or tenants, quality of location, square footage, number of leases, or occupancy percentage, and any amounts derived from these values, in these notes to consolidated financial statements are outside the scope of our independent registered public accounting firm’s review.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

On an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly owned by us in accordance with the consolidation guidance. Our evaluation considers all of our variable interests, including equity ownership, as well as fees paid to us for our involvement in the management of each partially owned entity. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:

•The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and

•We have a variable interest in the legal entity – i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets.

If an entity does not meet both criteria above, we apply other accounting literature, such as the cost or equity method of accounting. If an entity does meet both criteria above, we evaluate such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.

A legal entity is determined to be a VIE if it has any of the following three characteristics:

1)The entity does not have sufficient equity to finance its activities without additional subordinated financial support;

2)The entity is established with non-substantive voting rights (i.e., the entity deprives the majority economic interest holder(s) of voting rights); or

3)The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:

•The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:

•Substantive participating rights in day-to-day management of the entity’s activities; or

•Substantive kick-out rights over the party responsible for significant decisions;

•The obligation to absorb the entity’s expected losses; or

•The right to receive the entity’s expected residual returns.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Our real estate joint ventures consist of limited partnerships or limited liability companies. For an entity structured as a limited partnership or a limited liability company, our evaluation of whether the equity holders (equity partners other than the general partner or the managing member of a joint venture) lack the characteristics of a controlling financial interest includes the evaluation of whether the limited partners or non-managing members (the noncontrolling equity holders) lack both substantive participating rights and substantive kick-out rights, defined as follows:

•Participating rights provide the noncontrolling equity holders the ability to direct significant financial and operating decisions made in the ordinary course of business that most significantly influence the entity’s economic performance.

•Kick-out rights allow the noncontrolling equity holders to remove the general partner or managing member without cause.

If we conclude that any of the three characteristics of a VIE are met, including that the equity holders lack the characteristics of a controlling financial interest because they lack both substantive participating rights and substantive kick-out rights, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.

Variable interest model

If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits — that is, (i) we have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) we have the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE (benefits). We consolidate VIEs whenever we determine that we are the primary beneficiary. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for information on specific joint ventures that qualify as VIEs. If we have a variable interest in a VIE but are not the primary beneficiary, we account for our investment using the equity method of accounting.

Voting model

If a legal entity fails to meet any of the three characteristics of a VIE (i.e., insufficiency of equity, existence of non-substantive voting rights, or lack of a controlling financial interest), we then evaluate such entity under the voting model. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares and that other equity holders do not have substantive participating rights. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for further information on our unconsolidated real estate joint ventures that qualify for evaluation under the voting model.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and equity; the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements; and the amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Investments in real estate

Evaluation of business combination or asset acquisition

We evaluate each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine whether the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination. An acquisition of an integrated set of assets and activities that does not meet the definition of a business is accounted for as an asset acquisition. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

•Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or

•The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction).

An acquired process is considered substantive if:

•The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce) that is skilled, knowledgeable, and experienced in performing the process;

•The process cannot be replaced without significant cost, effort, or delay; or

•The process is considered unique or scarce.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Generally, our acquisitions of real estate or in-substance real estate do not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort, or delay. When evaluating acquired service or management contracts, we consider the nature of the services performed, the terms of the contract relative to similar arm’s-length contracts, and the availability of comparable vendors in evaluating whether the acquired contract constitutes a substantive process.

Recognition of real estate acquired

For acquisitions of real estate or in-substance real estate that are accounted for as business combinations, we allocate the acquisition consideration (excluding acquisition costs) to the assets acquired, liabilities assumed, noncontrolling interests, and previously existing ownership interests at fair value as of the acquisition date. Assets include intangible assets such as tenant relationships, acquired in-place leases, and favorable intangibles associated with in-place leases in which we are the lessor. Liabilities include unfavorable intangibles associated with in-place leases in which we are the lessor. In addition, for acquired in-place finance or operating leases in which we are the lessee, acquisition consideration is allocated to lease liabilities and related right-of-use assets, adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. Any excess (deficit) of the consideration transferred relative to the fair value of the net assets acquired is accounted for as goodwill (bargain purchase gain). Acquisition costs related to business combinations are expensed as incurred.

Generally, we expect that acquisitions of real estate or in-substance real estate will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets). The accounting model for asset acquisitions is similar to the accounting model for business combinations, except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. Any excess (deficit) of the consideration transferred relative to the sum of the fair value of the assets acquired and liabilities assumed is allocated to the individual assets and liabilities based on their relative fair values. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. Incremental and external direct acquisition costs (such as legal and other third-party services) are capitalized.

We exercise judgment to determine the key assumptions used to allocate the purchase price of real estate acquired among its components. The allocation of the consideration to the various components of properties acquired during the year can have an effect on our net income due to the useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense in our consolidated statements of operations. We apply judgment in utilizing available comparable market information to assess relative fair value. We assess the relative fair values of tangible and intangible assets and liabilities based on available comparable market information, including estimated replacement costs, rental rates, and recent market transactions. In addition, we may use estimated cash flow projections that utilize appropriate discount and capitalization rates. Estimates of future cash flows are based on a number of factors, including the historical operating results, known and anticipated trends, and market/economic conditions that may affect the property.

The value of tangible assets acquired is based upon our estimation of fair value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. If there is a bargain fixed-rate renewal option for the period beyond the noncancelable lease term of an in-place lease, we evaluate intangible factors such as the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, in order to determine the likelihood that the lessee will renew. When we determine there is reasonable assurance that such bargain purchase option will be exercised, we consider the option in determining the intangible value of such lease and its related amortization period. We also recognize the relative fair values of assets acquired, the liabilities assumed, and any noncontrolling interest in acquisitions of less than a 100% interest when the acquisition constitutes a change in control of the acquired entity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The values allocated to buildings and building improvements, land improvements, tenant improvements, and equipment are depreciated on a straight-line basis using the shorter of the respective ground lease term, estimated useful life, or up to 40 years, for buildings and building improvements; estimated life, or up to 20 years, for land improvements; the respective lease term or estimated useful life for tenant improvements; and the shorter of the lease term or estimated useful life for equipment. The values of the right-of-use assets are amortized on a straight-line basis during the remaining lease term. The values of acquired in-place leases and associated favorable intangibles (i.e., acquired above-market leases) are classified in other assets in our consolidated balance sheets and are amortized over the remaining terms of the related leases as a reduction of income from rentals in our consolidated statements of operations. The values of unfavorable intangibles (i.e., acquired below-market leases) associated with acquired in-place leases are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets and are amortized over the remaining terms of the related leases as an increase in income from rentals in our statements of operations.

Capitalized project costs

We capitalize project costs, including pre-construction costs, interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project. Capitalization of development, redevelopment, pre-construction, and construction costs is required while activities are ongoing to prepare an asset for its intended use. Fluctuations in our development, redevelopment, pre-construction, and construction activities could result in significant changes to total expenses and net income. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment, pre-construction, or construction activity cease, interest, property taxes, insurance, and certain other costs would no longer be eligible for capitalization and would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Real estate sales

A property is classified as held for sale when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Depreciation of assets ceases upon designation of a property as held for sale.

If the disposal of a property represents a strategic shift that has (or will have) a major effect on our operations or financial results, such as (i) a major line of business, (ii) a major geographic area, (iii) a major equity method investment, or (iv) other major parts of an entity, then the operations of the property, including any interest expense directly attributable to it, are classified as discontinued operations in our consolidated statements of operations, and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. The disposal of an individual property generally will not represent a strategic shift and therefore will typically not meet the criteria for classification as a discontinued operation.

We recognize gains or losses on real estate sales in accordance with the accounting standard on the derecognition of nonfinancial assets arising from contracts with noncustomers. Our ordinary output activities consist of the leasing of space to our tenants in our operating properties, not the sales of real estate. Therefore, sales of real estate (in which we are the seller) qualify as contracts with noncustomers. In our transactions with noncustomers, we apply certain recognition and measurement principles consistent with our method of recognizing revenue arising from contracts with customers. Derecognition of the asset is based on the transfer of control. If a real estate sales contract includes our ongoing involvement with the property, then we evaluate each promised good or service under the contract to determine whether it represents a separate performance obligation, constitutes a guarantee, or prevents the transfer of control. If a good or service is considered a separate performance obligation, an allocated portion of the transaction price is recognized as revenue as we transfer the related good or service to the buyer.

The recognition of gain or loss on the sale of a partial interest also depends on whether we retain a controlling or noncontrolling interest in the property. If we retain a controlling interest in the property upon completion of the sale, we continue to reflect the asset at its book value, record a noncontrolling interest for the book value of the partial interest sold, and recognize additional paid-in capital for the difference between the consideration received and the partial interest at book value. Conversely, if we retain a noncontrolling interest upon completion of the sale of a partial interest of real estate, we would recognize a gain or loss as if 100% of the real estate were sold.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of long-lived assets

Prior to and subsequent to the end of each quarter, we review current activities and changes in the business conditions of all of our long-lived assets to determine the existence of any triggering events or impairment indicators requiring an impairment analysis. If triggering events or impairment indicators are identified, we review an estimate of the future undiscounted cash flows, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.

Long-lived assets to be held and used, including our rental properties, CIP, land held for development, right-of-use assets related to operating leases in which we are the lessee, and intangibles, are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Triggering events or impairment indicators for long-lived assets to be held and used are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the asset, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.

Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. If an impairment charge is not required to be recognized, the recognition of depreciation or amortization is adjusted prospectively, as necessary, to reduce the carrying amount of the real estate to its estimated disposition value over the remaining period that the asset is expected to be held and used. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives.

We use the held for sale impairment model for our properties classified as held for sale, which is different from the held and used impairment model. Under the held for sale impairment model, an impairment charge is recognized if the carrying amount of the long-lived asset classified as held for sale exceeds its fair value less cost to sell. Because of these two different models, it is possible for a long-lived asset previously classified as held and used to require the recognition of an impairment charge upon classification as held for sale.

International operations

In addition to operating properties in the U.S., we have three operating properties in Canada and one operating property in China. The functional currency for our subsidiaries operating in the U.S. is the U.S. dollar. The functional currencies for our foreign subsidiaries are the local currencies in each respective country. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect as of the financial statement date. Revenue and expense accounts of our foreign subsidiaries are translated using the weighted-average exchange rate for the periods presented. Gains or losses resulting from the translation are classified in accumulated other comprehensive income as a separate component of total equity and are excluded from net income.

Whenever a foreign investment meets the criteria for classification as held for sale, we evaluate the recoverability of the investment under the held for sale impairment model. We may recognize an impairment charge if the carrying amount of the investment exceeds its fair value less cost to sell. In determining an investment’s carrying amount, we consider its net book value and any cumulative unrealized foreign currency translation adjustment related to the investment.

The appropriate amounts of foreign exchange rate gains or losses classified in accumulated other comprehensive income are reclassified to net income when realized upon the sale of our investment or upon the complete or substantially complete liquidation of our investment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investments

We hold investments in publicly traded companies and privately held entities primarily involved in the life science, agtech, and technology industries. As a REIT, we generally limit our ownership of each individual entity’s voting stock to less than 10%.

Our equity investments (except those accounted for under the equity method and those that result in consolidation of the investee) are measured at adjusted cost or fair value as follows:

•Investments in publicly traded companies are classified as investments with readily determinable fair values and are presented at fair value in our consolidated balance sheets, with changes in fair value recognized in net income. The fair values for our investments in publicly traded companies are determined based on sales prices or quotes available on securities exchanges.

•Investments in privately held entities without readily determinable fair values fall into two categories:

•Investments in privately held entities that report NAV per share, such as our privately held investments in limited partnerships, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV per share reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. We disclose the timing of liquidation of an investee’s assets and the date when redemption restrictions will lapse (or indicate if this timing is unknown) if the investee has communicated this information to us or has announced it publicly.

•Investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative, defined as “adjusted carrying value,” under which these investments are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

For investments in privately held entities that do not report NAV per share, an observable price arises from an orderly transaction for an identical or similar investment of the same issuer, which is observed by an investor without expending undue cost and effort. Observable price changes result from, among other things, equity transactions of the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. To determine whether these transactions are indicative of an observable price change, we evaluate, among other factors, whether these transactions have similar rights and obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

We monitor investments in privately held entities that do not report NAV per share throughout the year for new developments, including operating results, prospects and results of clinical trials, new product initiatives, new collaborative agreements, capital-raising events, and merger and acquisition activities. These investments are evaluated on the basis of a qualitative assessment for indicators of impairment by monitoring the presence of the following triggering events or impairment indicators: (i) a significant deterioration in the earnings performance, asset quality, or business prospects of the investee; (ii) a significant adverse change in the regulatory, economic, or technological environment of the investee, (iii) a significant adverse change in the general market condition, including the research and development of technology and products that the investee is bringing or attempting to bring to the market, or (iv) significant concerns about the investee’s ability to continue as a going concern. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

We account for investments in privately held entities under the equity method whenever we are deemed to have significant influence over the investee’s operating and financial policies. To evaluate whether we exert significant influence over an entity, we consider the following criteria, among others: the extent of our ownership and voting rights, whether we have a board seat, and whether we participate in the policy-making process. Under the equity method of accounting, we initially recognize our investment at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment and for distributions received. For more information about our investments accounted for under the equity method, refer to Note 7 – “Investments” to our consolidated financial statements.

We recognize both realized and unrealized gains and losses in our consolidated statements of operations, classified within investment income. Unrealized gains and losses represent changes in fair value for investments in publicly traded companies, changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV per share, and observable price changes on our investments in privately held entities that do not report NAV per share. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV per share to their estimated fair value. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues

The table below provides details of our consolidated total revenues for the three and six months ended June 30, 2021 and 2020 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$	502,718	$	430,339	$	976,516	$	859,083
Direct financing and sales-type leases	836		616		1,461		1,228
Revenues subject to the lease accounting standard	503,554		430,955		977,977		860,311
Revenues subject to the revenue recognition accounting standard	4,817		4,901		9,089		13,150
Income from rentals	508,371		435,856		987,066		873,461
Other income	1,248		1,100		2,402		3,414
Total revenues	$	509,619	$	436,956	$	989,468	$	876,875

During the three and six months ended June 30, 2021, revenues that were subject to the lease accounting standard aggregated $503.6 million and $978.0 million, respectively, and represented 98.8% of our total revenues, respectively. During the three and six months ended June 30, 2021, our total revenues also included $6.1 million and $11.5 million, or 1.2%, respectively, subject to other accounting guidance. Our other income consisted primarily of construction management fees and interest income earned during the three and six months ended June 30, 2021. For a detailed discussion related to our revenue streams, refer to the “Lease accounting” and “Recognition of revenue arising from contracts with customers” sections within this Note 2 to our unaudited consolidated financial statements.

Lease accounting

Definition and classification of a lease

When we enter into a contract or amend an existing contract, we evaluate whether the contract meets the definition of a lease. To meet the definition of a lease, the contract must meet all three criteria:

(i)One party (lessor) must hold an identified asset;

(ii)The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract; and

(iii)The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract.

We classify our leases as either finance leases or operating leases if we are the lessee, or sales-type, direct financing, or operating leases if we are the lessor. We use the following criteria to determine if a lease is a finance lease (as a lessee) or sales-type or direct financing lease (as a lessor):

(i)Ownership is transferred from lessor to lessee by the end of the lease term;

(ii)An option to purchase is reasonably certain to be exercised;

(iii)The lease term is for the major part of the underlying asset’s remaining economic life;

(iv)The present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset; or

(v)The underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

If we meet any of the above criteria, we account for the lease as a finance, a sales-type, or a direct financing lease. If we do not meet any of the criteria, we account for the lease as an operating lease.

A lease is accounted for as a sales-type lease if it is considered to transfer control of the underlying asset to the lessee. A lease is accounted for as a direct-financing lease if risks and rewards are conveyed without the transfer of control, which is normally indicated by the existence of a residual value guarantee from an unrelated third party other than the lessee.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

This classification will determine the method of recognition of the lease:

•For an operating lease, we recognize income from rentals if we are the lessor, or rental operations expense if we are the lessee, over the term of the lease on a straight-line basis.

•For a sales-type or direct financing lease, we recognize the income from rentals, or for a finance lease, we recognize rental operations expense, over the term of the lease on an effective interest method.

•For a sales-type lease, if we determine the fair value of the leased property differs from its carrying amount, a gain or loss may be recognized at inception of the lease.

Lessor accounting

Costs to execute leases

We capitalize initial direct costs, which represent only incremental costs of a lease that would not have been incurred if the lease had not been obtained. Costs that we incur to negotiate or arrange a lease, regardless of its outcome, such as for fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Operating leases

We account for the revenue from our lease contracts by utilizing the single component accounting policy. This policy requires us to account for, by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single component if two criteria are met:

(i)The timing and pattern of transfer of the lease component and the nonlease component(s) are the same; and

(ii)The lease component would be classified as an operating lease if it were accounted for separately.

Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases, and contingent rental payments. Nonlease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses under our triple net lease structure, including recoveries for utilities, repairs and maintenance, and common area expenses.

If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the lease accounting standard. Conversely, if the nonlease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our leases is predominant. Therefore, we account for all revenues from our operating leases under the lease accounting standard and classify these revenues as income from rentals in our consolidated statements of operations.

We commence recognition of income from rentals related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset. Income from rentals related to fixed rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms. We classify amounts expected to be received in later periods as deferred rent in our consolidated balance sheets. Amounts received currently but recognized as revenue in future periods are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

Income from rentals related to variable payments includes tenant recoveries and contingent rental payments. Tenant recoveries, including reimbursements of utilities, repairs and maintenance, common area expenses, real estate taxes and insurance, and other operating expenses, are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises. Income from rentals related to other variable payments is recognized when associated contingencies are removed.

We assess collectibility from our tenants of future lease payments for each of our operating leases. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. If we determine that collectibility is not probable, we recognize an adjustment to lower our income from rentals. Furthermore, we may recognize a general allowance at a portfolio level (not the individual level) if we do not expect to collect future lease payments in full. As of June 30, 2021, we had a general allowance of $3.8 million for a pool of deferred rent balances, which at the portfolio level (not the individual level) is not expected to be collected in full through the lease term.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Direct financing and sales-type leases

Income from rentals related to our direct financing and sales-type leases is recognized over the lease term using the effective interest rate method. At lease commencement, we record an asset within other assets in our consolidated balance sheets, which represents our net investment in the lease. This initial net investment is determined by aggregating the present values of the total future lease payments attributable to the lease and the estimated residual value of the property, less any unearned income related to our direct financing lease. Over the lease term, the investment in the lease accretes in value, producing a constant periodic rate of return on the net investment in the lease. Income from these leases is classified in income from rentals in our consolidated statements of operations. Our net investment is reduced over time as lease payments are received.

We evaluate our net investment in the direct financing and sales-type leases for impairment under the current expected credit loss standard that we adopted on January 1, 2020. For more information, refer to the “Allowance for credit losses” section within this Note 2 to our unaudited consolidated financial statements.

Lessee accounting

We have operating lease agreements in which we are the lessee consisting of ground and office leases. At the lease commencement date (or at the acquisition date if the lease is acquired as part of a real estate acquisition), we are required to recognize a liability to account for our future obligations under these operating leases, and a corresponding right-of-use asset.

The lease liability is measured based on the present value of the future lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The present value of the future lease payments is calculated for each operating lease using each respective remaining lease term and a corresponding estimated incremental borrowing rate, 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. Subsequently, the lease liability is accreted by applying a discount rate established at the lease commencement date to the lease liability balance as of the beginning of the period and is reduced by the payments made during the period. We classify the operating lease liability in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

The right-of-use asset is measured based on the corresponding lease liability, adjusted for initial direct leasing costs and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. We classify the right-of-use asset in other assets in our consolidated balance sheets.

Recognition of revenue arising from contracts with customers

We recognize revenues associated with transactions arising from contracts with customers, excluding revenues subject to the lease accounting standard discussed in the “Lease accounting” section above, in accordance with the revenue recognition accounting standard. A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities.

We generally recognize revenue representing the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in the exchange. In order to determine the recognition of revenue from customer contracts, we use a five-step model to (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

We identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. We consider whether we control the goods or services prior to the transfer to the customer in order to determine whether we should account for the arrangement as a principal or agent. If we determine that we control the goods or services provided to the customer, then we are the principal to the transaction, and we recognize the gross amount of consideration expected in the exchange. If we simply arrange but do not control the goods or services being transferred to the customer, then we are considered to be an agent to the transaction, and we recognize the net amount of consideration we are entitled to retain in the exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Total revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of operations for the three and six months ended June 30, 2021, included $4.8 million and $9.1 million, respectively, primarily related to short-term parking revenues associated with long-term lease agreements. During the three and six months ended June 30, 2020, revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of operations were $4.9 million and $13.2 million, respectively, primarily related to short-term parking revenues associated with long-term lease agreements. Short-term parking revenues do not qualify for the single component accounting policy, discussed in the “Lessor accounting” subsection of the “Lease accounting” section within this Note 2, due to the difference in the timing and pattern of transfer of our parking service obligations and associated lease components within the same lease agreement. We recognize short-term parking revenues in accordance with the revenue recognition accounting standard when the service is provided and the performance obligation is satisfied, which normally occurs at a point in time.

Monitoring of tenant credit quality

During the term of each lease, we monitor the credit quality and any related material changes of our tenants by (i) monitoring the credit rating of tenants that are rated by a nationally recognized credit rating agency, (ii) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (iii) monitoring news reports regarding our tenants and their respective businesses, and (iv) monitoring the timeliness of lease payments.

Allowance for credit losses

On January 1, 2020, we adopted an accounting standard (further clarified in subsequently issued updates) that requires companies to estimate and recognize lifetime expected losses, rather than incurred losses, which results in the earlier recognition of credit losses even if the expected risk of credit loss is remote. The accounting standard applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases arising from sales-type and direct financing leases, and off-balance-sheet credit exposures (e.g., loan commitments). The standard does not apply to the receivables arising from operating leases. An assessment of the collectibility of operating lease payments and the recognition of an adjustment to lease income based on this assessment is governed by the lease accounting standard discussed in the “Lease accounting” section earlier within this Note 2 to our unaudited consolidated financial statements.

Additionally, when we acquire a financial asset that qualifies as either a direct financing lease or a sales type lease, we consider whether the purchased financial asset is subject to credit deterioration that would require establishing a credit allowance as part of the purchase price allocation.

At each reporting date, we reassess our credit loss allowances on the aggregate net investment of our direct financing and sales-type leases, and recognize a credit loss adjustment if necessary, for our current estimate of expected credit losses, which is classified within rental operations in our consolidated statements of operations. For further details, refer to Note 5 – “Leases” to our unaudited consolidated financial statements.

Upon adoption of the accounting standard, we had one lease subject to this standard classified as a direct financing lease. In this direct financing lease, the payment obligation of the lessee is collateralized by real estate property. Historically, we have had no collection issues related to this direct financing lease; therefore, we assessed the probability of default on this lease based on the lessee’s financial condition, credit rating, business prospects, remaining lease term, and expected value of the underlying collateral upon its repossession. Based on the aforementioned considerations, we estimated a credit loss adjustment related to this direct financing lease aggregating $2.2 million, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the investment in the direct financing lease balance in our consolidated balance sheets on January 1, 2020.

In addition to our direct financing and sales-type leases, the accounting standard on credit losses applies to our receivables that result from revenue transactions within the scope of the revenue recognition accounting standard discussed in the “Recognition of revenue arising from contracts with customers” section earlier within this Note 2. Upon adoption of the standard on January 1, 2020, our receivables resulting from revenue transactions within the scope of revenue recognition accounting standard aggregated $16.1 million. Among other factors, we considered the short-term nature of these receivables, our positive assessment of the financial condition and business prospects of the payors, and minimal historical collectibility issues. Based on the aforementioned considerations, we estimated the credit loss related to our trade receivables to approximate $259 thousand, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the trade receivables balance in our consolidated balance sheets on January 1, 2020.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

We are organized and operate as a REIT pursuant to the Internal Revenue Code (the “Code”). Under the Code, a REIT that distributes at least 90% of its REIT taxable income to its stockholders annually (excluding net capital gains) and meets certain other conditions is not subject to federal income tax on its distributed taxable income, but could be subject to certain federal, foreign, state, and local taxes. We distribute 100% of our taxable income annually; therefore, a provision for federal income taxes is not required. In addition to our REIT returns, we file federal, foreign, state, and local tax returns for our subsidiaries. We file with jurisdictions located in the U.S., Canada, China, and other international locations. Our tax returns are subject to routine examination in various jurisdictions for the 2015 through 2020 calendar years.

Employee and non-employee share-based payments

We have implemented an entity-wide accounting policy to account for forfeitures of share-based awards granted to employees and non-employees when they occur. As a result of this policy, we recognize expense on share-based awards with time-based vesting conditions without reductions for an estimate of forfeitures. This accounting policy only applies to service condition awards. For performance condition awards, we continue to assess the probability that such conditions will be achieved. Expenses related to forfeited awards are reversed as forfeitures occur. In addition, all nonforfeitable dividends paid on share-based payment awards are initially classified in retained earnings and reclassified to compensation cost only if forfeitures of the underlying awards occur. Our employee and non-employee share-based awards are measured at their fair value on the grant date and recognized over the recipient’s required service period.

Forward equity sales agreements

We account for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of June 30, 2021, none of our forward equity sales agreements were deemed to be liabilities as they did not embody obligations to repurchase our shares, nor did they embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varied with something other than the fair value of our shares, or varied inversely in relation to our shares. We also evaluated whether the agreements met the derivatives and hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements can be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

Issuer and guarantor subsidiaries of guaranteed securities

In March 2020, the SEC issued an amendment to existing guidance to reduce and simplify financial disclosure requirements for issuers and guarantors of registered debt offerings. The guidance became effective for filings on or after January 4, 2021, with early adoption permitted. Upon evaluation of the guidance, we elected to early adopt the amendment during the three months ended March 31, 2020.

Generally, a parent entity must provide separate subsidiary issuer or guarantor financial statements, unless it qualifies for disclosure exceptions provided in the amendment. Under the previous guidance, a parent entity was required to fully own the subsidiary issuer or guarantor and guarantee its registered security fully and unconditionally to qualify for disclosure exceptions. Pursuant to the amendment, a parent entity may be eligible for disclosure exceptions if it meets the following criteria:

•The subsidiary issuer or guarantor is a consolidated subsidiary of the parent company, and

•The subsidiary issues a registered security that is:

•Issued jointly and severally with the parent company, or

•Fully and unconditionally guaranteed by the parent company.

A parent entity that meets the above criteria may instead present summarized financial information (“alternative disclosures”). We evaluated the criteria and determined that we are eligible for the disclosure exceptions, which allow us to provide alternative disclosures.

The amendment also allows for further simplification of disclosure requirements for entities that qualify for the alternative disclosures. A parent entity was previously required to provide disclosures within the footnotes to the consolidated financial statements. However, the amendment allows for such disclosures to be provided outside of the consolidated financial statements, including within the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2. As such, since our adoption of the amendment during the three months ended March 31, 2020, our disclosures are no longer presented in our consolidated financial statements and have been relocated to the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Joint venture distributions

We use the “nature of the distribution” approach to determine the classification within our consolidated statement of cash flows of cash distributions received from equity method investments, including our unconsolidated joint ventures. Under this approach, distributions are classified based on the nature of the underlying activity that generated the cash distributions. If we lack the information necessary to apply this approach in the future, we will be required to apply the “cumulative earnings” approach as an accounting change on a retrospective basis. Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities.

Restricted cash

We present cash and cash equivalents separately from restricted cash within our consolidated balance sheets. We include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the consolidated statements of cash flows. We provide a reconciliation between the balance sheets and statements of cash flows, as required when the balance includes more than one line item for cash, cash equivalents, and restricted cash. We also provide a disclosure of the nature of the restrictions related to material restricted cash balances.

3. INVESTMENTS IN REAL ESTATE

Our consolidated investments in real estate, including real estate assets held for sale as described in Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements, consisted of the following as of June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021		December 31, 2020
Rental properties:
Land (related to rental properties)	$	3,532,924	$	2,550,571
Buildings and building improvements	15,262,973		13,364,561
Other improvements	1,779,818		1,508,776
Rental properties	20,575,715		17,423,908
Development and redevelopment of new Class A properties:
Development and redevelopment projects	3,661,867		3,075,453
Future development projects	879,729		738,994
Gross investments in real estate	25,117,311		21,238,355
Less: accumulated depreciation	(3,457,337)		(3,178,024)
Net investments in real estate – North America	21,659,974		18,060,331
Net investments in real estate – Asia	32,411		32,041
Investments in real estate	$	21,692,385	$	18,092,372

3. INVESTMENTS IN REAL ESTATE (continued)

Acquisitions

Our real estate asset acquisitions during the six months ended June 30, 2021, consisted of the following (dollars in thousands):


		Square Footage
Market	Number of Properties	Future Development	Active Development/Redevelopment	Operating With Future Development/Redevelopment	Operating	Purchase Price
Greater Boston	3	305,000	640,116	311,066	692,088	$	1,541,326




Other	22	69,426	209,295	120,000	741,191	332,424
Three months ended March 31, 2021	25	374,426	849,411	431,066	1,433,279	1,873,750

Greater Boston	2	1,125,000	—	260,867	240,000	235,000
San Francisco Bay Area	7	—	—	187,043	—	217,000
San Diego	5	887,000	—	487,023	—	298,476
Maryland	5	258,000	94,256	—	595,381	80,382
Other	5	1,863,280	37,267	205,983	49,839	247,597
Three months ended June 30, 2021	24	4,133,280	131,523	1,140,916	885,220	1,078,455








Six months ended June 30, 2021	49	4,507,706	980,934	1,571,982	2,318,499	$	2,952,205	(1)

(1)Represents the aggregate contractual purchase price of our acquisitions, which differ from purchases of real estate in our consolidated statements of cash flows due to closing costs and other acquisition adjustments such as prorations of rents and expenses.

Based upon our evaluation of each acquisition, we determined that substantially all of the fair value related to each acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets, or is associated with a land parcel with no operations. Accordingly, each transaction did not meet the definition of a business and therefore was accounted for as an asset acquisition. In each of these transactions, we allocated the total consideration for each acquisition to the individual assets and liabilities acquired on a relative fair value basis.

During the six months ended June 30, 2021, we acquired 49 properties for an aggregate purchase price of $3.0 billion. In connection with our acquisitions, we recorded in-place leases aggregating $196.5 million and below-market leases in which we are the lessor aggregating $83.5 million. As of June 30, 2021, the weighted-average amortization period remaining on our in-place and below-market leases acquired during the six months ended June 30, 2021, was 8.4 years and 9.2 years, respectively, and 8.7 years in total.

Purchase of partner’s interest in an unconsolidated real estate joint venture in March 2021

As of December 31, 2020, we had a 56.8% interest in an unconsolidated real estate joint venture that owned an operating property aggregating 80,032 RSF located at 704 Quince Orchard Road in our Gaithersburg submarket of Maryland. We accounted for this joint venture under the equity method of accounting. On March 25, 2021, we acquired the remaining 43.2% interest in this real estate joint venture for $9.4 million and fully repaid the outstanding secured loan with principal and accrued interest aggregating $14.6 million as of March 25, 2021.

As a result of this acquisition, we now own 100% of this property and consolidate its results in our consolidated financial statements. The acquired property did not meet the definition of a business and the transaction was accounted for as an asset acquisition. Refer to Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for more information about our evaluation of applicability of asset acquisition or business combination accounting guidance.

Real estate assets acquired in July 2021

In July 2021, we completed acquisitions for an aggregate purchase price of $387.9 million, comprising 496,070 RSF of operating properties with future development and redevelopment opportunities and 335,825 RSF of operating properties strategically located across multiple markets.

3. INVESTMENTS IN REAL ESTATE (continued)

Sales of real estate assets and impairment charges

Sales of real estate

During the six months ended June 30, 2021, we recognized $2.8 million of gains related to the completion of two real estate dispositions. These gains were classified in gain on sales of real estate within our consolidated statements of operations for the six months ended June 30, 2021.

For the discussion of our sale of a partial interest in 213 East Grand Avenue in our South San Francisco submarket during the six months ended June 30, 2021, and sale of a partial interest in 400 Dexter Avenue North in our Lake Union submarket in July 2021, refer to the “Formation of consolidated real estate joint ventures and sales of partial interests” section within Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements.

Impairment charges

We currently have five properties held for sale, including one within our San Francisco Bay Area market and two within our Seattle market. During the three months ended December 31, 2020, we recognized impairment charges aggregating $25.2 million upon classification as held for sale of these three office properties to lower the carrying amounts of these properties to their estimated fair values less costs to sell.

During the six months ended June 30, 2021, we recognized impairment charges aggregating $10.1 million, primarily related to additional impairment charges for the aforementioned three properties, based on the sales price negotiated for each property in 2021. The sales of these properties have not yet been completed as of June 30, 2021.

Refer to “Impairment of long-lived assets” within Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

4. CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES

From time to time, we enter into joint venture agreements through which we own a partial interest in real estate entities that own, develop, and operate real estate properties. As of June 30, 2021, our real estate joint ventures held the following properties:

Property

Market

Submarket

Our Ownership Interest(1)

Consolidated joint ventures(2):

75/125 Binney Street

Greater Boston

Cambridge/Inner Suburbs

40.0

225 Binney Street

Greater Boston

Cambridge/Inner Suburbs

30.0

57 Coolidge Avenue

Greater Boston

Cambridge/Inner Suburbs

75.0

409 and 499 Illinois Street

San Francisco Bay Area

Mission Bay

60.0

1500 Owens Street

San Francisco Bay Area

Mission Bay

50.1

Alexandria Technology Center® – Gateway(3)

San Francisco Bay Area

South San Francisco

46.8

213 East Grand Avenue

San Francisco Bay Area

South San Francisco

30.0

500 Forbes Boulevard

San Francisco Bay Area

South San Francisco

10.0

Alexandria Center® for Life Science – Millbrae Station

San Francisco Bay Area

South San Francisco

37.0

Alexandria Point(4)

San Diego

University Town Center

55.0

5200 Illumina Way

San Diego

University Town Center

51.0

9625 Towne Centre Drive

San Diego

University Town Center

50.1

SD Tech by Alexandria(5)

San Diego

Sorrento Mesa

50.0

The Eastlake Life Science Campus by Alexandria(6)

Seattle

Lake Union

30.0

Unconsolidated joint ventures(2):

1655 and 1725 Third Street

San Francisco Bay Area

Mission Bay

10.0

Menlo Gateway

San Francisco Bay Area

Greater Stanford

49.0

1401/1413 Research Boulevard

Maryland

Rockville

65.0

(7)

(1)Refer to the table on the next page that shows the categorization of our joint ventures under the consolidation framework.

(2)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in five other consolidated joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

(3)Includes 601, 611, 651, 681, 685, and 701 Gateway Boulevard in our South San Francisco submarket.

(4)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4161, 4224, and 4242 Campus Point Court in our University Town Center submarket.

(5)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton Road 10055 and 10065 Barnes Canyon Road in our Sorrento Mesa submarket.

(6)Includes 1201 and 1208 Eastlake Avenue East and 199 East Blaine Street in our Lake Union submarket.

(7)Represents our ownership interest; our voting interest is limited to 50%.

Our consolidation policy is described under the “Consolidation” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. Consolidation accounting is highly technical, but its framework is primarily based on the controlling financial interests and benefits of the joint ventures.

We generally consolidate a joint venture that is a legal entity that we control (i.e., we have the power to direct the activities of the joint venture that most significantly affect its economic performance) through contractual rights, regardless of our ownership interest, and where we determine that we have benefits through the allocation of earnings or losses and fees paid to us that could be significant to the joint venture (the “VIE model”).

We also generally consolidate joint ventures when we have a controlling financial interest through voting rights and where our voting interest is greater than 50% (the “voting model”). Voting interest differs from ownership interest for some joint ventures.

We account for joint ventures that do not meet the consolidation criteria under the equity method of accounting by recognizing our share of income and losses.

4. CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES (continued)

The table below shows the categorization of our joint ventures under the consolidation framework:

Property(1)

Consolidation Model

Voting Interest

Consolidation Analysis

Conclusion

75/125 Binney Street

VIE model

Not applicable under VIE model

We have:

Consolidated

225 Binney Street

(i)

The power to direct the activities of the joint venture that most significantly affect its economic performance; and

57 Coolidge Avenue

409 and 499 Illinois Street

1500 Owens Street

Alexandria Technology Center® – Gateway

213 East Grand Avenue

(ii)

Benefits that can be significant to the joint venture.

500 Forbes Boulevard

Alexandria Center® for Life Science – Millbrae Station

Alexandria Point

5200 Illumina Way

Therefore, we are the primary beneficiary of each VIE

9625 Towne Centre Drive

SD Tech by Alexandria

The Eastlake Life Science Campus by Alexandria

Menlo Gateway

We do not control the joint venture and are therefore not the primary beneficiary

Equity method of accounting

1401/1413 Research Boulevard

1655 and 1725 Third Street

Voting model

Does not exceed 50%

Our voting interest is 50% or less

(1)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in five other consolidated joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

Formation of consolidated real estate joint ventures and sales of partial interests

213 East Grand Avenue

In April 2021, we sold a 70% interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF. We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. Accordingly, we accounted for the $103.7 million difference between the consideration received and the book value of the 70% interest sold as an equity transaction, with no gain or loss recognized in earnings.

400 Dexter Avenue North

In July 2021, we sold a 70% interest in our 400 Dexter Avenue North property located in our Lake Union submarket for a sales price of $254.8 million, or $1,255 per RSF. We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. Accordingly, we accounted for the $95.5 million difference between the consideration received and the book value of the 70% interest sold as an equity transaction, with no gain or loss recognized in earnings.

Refer to the “Consolidation” section in Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements for additional information.

4. CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES (continued)

Consolidated VIEs’ balance sheet information

The table below aggregates the balance sheet information of our consolidated VIEs as of June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021		December 31, 2020
Investments in real estate	$	3,932,144	$	3,196,215
Cash and cash equivalents	115,281		95,565
Other assets	416,401		341,524
Total assets	$	4,463,826	$	3,633,304

Secured notes payable	$	—	$	—
Other liabilities	227,315		183,237
Total liabilities	227,315		183,237
Redeemable noncontrolling interests	1,955		1,731
Alexandria Real Estate Equities, Inc.’s share of equity	2,255,576		1,742,039
Noncontrolling interests’ share of equity	1,978,980		1,706,297
Total liabilities and equity	$	4,463,826	$	3,633,304

In determining whether to aggregate the balance sheet information of consolidated VIEs, we considered the similarity of each VIE, including the primary purpose of these entities to own, manage, operate, and lease real estate properties owned by the VIEs, and the similar nature of our involvement in each VIE as a managing member. Due to the similarity of the characteristics, we present the balance sheet information of these entities on an aggregated basis. None of our consolidated VIEs’ assets have restrictions that limit their use to settle specific obligations of the VIE. There are no creditors or other partners of our consolidated VIEs that have recourse to our general credit. Our maximum exposure to our consolidated VIEs is limited to our variable interests in each VIE.

Unconsolidated real estate joint ventures

Our maximum exposure to our unconsolidated VIEs is limited to our investment in each VIE. Our investments in unconsolidated real estate joint ventures, accounted for under the equity method of accounting presented in our consolidated balance sheets as of June 30, 2021, and December 31, 2020, consisted of the following (in thousands):


Property	June 30, 2021		December 31, 2020
Menlo Gateway	$	297,830	$	300,622
1655 and 1725 Third Street	14,143		14,939
Other	11,649		16,788
	$	323,622	$	332,349

704 Quince Orchard Road

During the six months ended June 30, 2021, we acquired our partner’s ownership interest in our unconsolidated real estate joint venture that holds our property located at 704 Quince Orchard Road. For additional information, refer to the “Purchase of partner’s interest in an unconsolidated real estate joint venture in March 2021” section in Note 3 – “Investments in real estate” to our unaudited consolidated financial statements.

1401/1413 Research Boulevard

In January 2015, we formed a joint venture with a local retail developer and operator by contributing a land parcel located in our Rockville submarket of Maryland. The joint venture developed a retail shopping center aggregating approximately 90,000 RSF, which was primarily funded by a construction loan that is non-recourse to us. Since its formation, we accounted for this investment under the equity method of accounting as we do not have a controlling interest.

In March 2020, as a result of the impact of the COVID-19 pandemic, we evaluated the recoverability of our investment and recognized a $7.6 million impairment charge to lower the carrying amount of our investment balance to zero and eliminated this investment from our consolidated balance sheet. We continued to hold our economic interest in this joint venture. However, as the investment balance was carried at zero dollars, we discontinued applying the equity method recognition of losses in excess of our capital commitments to the joint venture.

4. CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES (continued)

The equity method continues to remain suspended until a point where either (i) the joint venture accumulates operating profits in excess of losses accumulated or (ii) additional financial support is contributed by us to the joint venture.

In June 2021, as a result of improving economic conditions for this retail center, we contributed capital aggregating $578 thousand to the joint venture to become current with required capital contributions and maintain our 65.0% equity interest in this joint venture. This contribution increased our investment in the joint venture, but this was offset by the recognition of our share of operating losses of the joint venture that occurred while our equity method accounting was suspended. During the six months ended June 30, 2021, we recognized equity in losses of unconsolidated real estate joint ventures equal to the $578 thousand of additional financial support contributed to the joint venture, resulting in a carrying amount of our investment in the joint venture of zero dollars as of June 30, 2021.

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of June 30, 2021 (dollars in thousands):


Unconsolidated Joint Venture	Our Share	Maturity Date		Stated Rate	Interest Rate(1)				Debt Balance at 100%(2)

1401/1413 Research Boulevard	65.0%		5/17/22	L+2.50%		3.50	%	(3)	$	26,921
1655 and 1725 Third Street	10.0%		3/10/25	4.50%		4.57	%		598,444
Menlo Gateway, Phase II	49.0%		5/1/35	4.53%		4.59	%		155,579
Menlo Gateway, Phase I	49.0%		8/10/35	4.15%		4.18	%		138,245
									$	919,189

(1)Includes interest expense and amortization of loan fees.

(2)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2021.

(3)This loan is subject to a fixed floor rate of 3.5%.

5. LEASES

We are subject to the lease accounting standard that sets principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

As a lessor, we are required to disclose, among other things, the following:

•A description of the nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the underlying asset;

•Tabular presentation of undiscounted cash flows to be received over the next five years and thereafter separately for operating leases and direct financing leases;

•The amount of lease income and its location on the statements of operations;

•Income classified separately for operating leases and direct financing leases; and

•Our risk management strategy to mitigate declines in residual value of the leased assets.

As a lessee, we are required to disclose, among other things, the following:

•A description of the nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the underlying asset;

•The amounts of lease liabilities and corresponding right-of-use assets and their respective locations in the balance sheet;

•The weighted-average remaining lease term and weighted-average discount rate of leases;

•Tabular presentation of undiscounted cash flows of our remaining lease payment obligations over the next five years and thereafter; and

•Total lease costs, including cash paid, amounts expensed, and amounts capitalized.

Refer to the “Lease accounting” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

Leases in which we are the lessor

As of June 30, 2021, we had 381 properties aggregating 36.7 million operating RSF located in key locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. We focus on developing Class A properties in AAA innovation cluster locations, which we consider to be highly desirable for tenancy by life science, agtech, and technology entities. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space. As of June 30, 2021, all leases in which we are the lessor were classified as operating leases with the exception of one direct financing lease and two sales-type leases. Our operating, direct financing, and sales-type leases are described below.

Operating leases

As of June 30, 2021, our 381 properties were subject to operating lease agreements. Two of these properties, representing two land parcels, 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 71.4 years. Our leases generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain operating leases contain early termination options that require advance notification and payment of a penalty, which in most cases is substantial enough to be deemed economically disadvantageous by a tenant to exercise. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of June 30, 2021, are outlined in the table below (in thousands):


Year	Amount
2021	$	696,143
2022	1,446,685
2023	1,445,297
2024	1,343,032
2025	1,248,147
Thereafter	7,584,727
Total	$	13,764,031

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.

5. LEASES (continued)

Direct financing and sales-type leases

As of June 30, 2021, we had one direct financing lease agreement, with a net investment balance of $38.2 million, for a parking structure with a remaining lease term of 71.4 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.

During the three months ended June 30, 2021, we acquired two sales-type ground lease agreements. As of June 30, 2021, these leases had a net investment balance of $31.9 million and a weighted-average remaining lease term of 88.4 years. Upon recognition of the two sales-type ground leases during the three months ended June 30, 2021, the present value of future lease payments approximated our carrying value of the leased assets; therefore, no profit or loss was recognized in connection with these leases.

The components of our aggregate net investment in our direct financing and sales-type leases as of June 30, 2021, and December 31, 2020, are summarized in the table below (in thousands):


	June 30, 2021		December 31, 2020
Gross investment in direct financing and sales-type leases	$	404,872	$	258,751
Add: estimated unguaranteed residual value of the underlying assets	31,839		—
Less: unearned income on direct financing lease	(216,820)		(218,072)
Less: effect of discounting on sales-type leases	(146,939)		—
Less: allowance for credit losses	(2,839)		(2,839)
Net investment in direct financing and sales-type leases	$	70,113	$	37,840

As of June 30, 2021, our estimated credit loss related to our direct financing lease was $2.8 million. No adjustment to the estimated credit loss balance was required during the three months ended June 30, 2021.

We determined our two sales-type leases were not financial assets purchased with credit deterioration, and as such did not recognize an initial credit loss reserve, based on our experience with leases that included similar collateral and tenant credit worthiness. At June 30, 2021, we re-assessed the collectability of these leases, and determined that no credit loss adjustment was necessary. For further details, refer to the “Allowance for credit losses” section 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 and sales-type leases as of June 30, 2021, are outlined in the table below, in aggregate (in thousands):


Year	Total
2021	$	1,484
2022	3,066
2023	3,120
2024	3,176
2025	3,371
Thereafter	390,655
Total	$	404,872

5. LEASES (continued)

Income from rentals

Our total 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,
	2021		2020		2021		2020
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$	502,718	$	430,339	$	976,516	$	859,083
Direct financing and sales-type leases	836		616		1,461		1,228
Revenues subject to the lease accounting standard	503,554		430,955		977,977		860,311
Revenues subject to the revenue recognition accounting standard	4,817		4,901		9,089		13,150
Income from rentals	$	508,371	$	435,856	$	987,066	$	873,461

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 the “Revenues” and “Recognition of revenue arising from contracts with customers” sections 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 with limited supply of available space, (ii) directly managing our leased properties, conducting frequent property inspections, proactively addressing potential maintenance issues before they arise, and timely resolving any occurring issues, (iii) carefully selecting our tenants and monitoring their credit quality throughout their respective lease terms, and (iv) focusing on making continuous improvements to our sustainability efforts and achievement of our sustainability goals for ground-up development of new buildings, which are targeting Gold or Platinum LEED® certification. Our environmentally focused design decisions, careful selection of construction materials, and continuous monitoring of our properties throughout their lives are expected to promote the durability of building infrastructure and enhance residual value of our properties.

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 the “Lessee accounting” subsection of the “Lease accounting” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

As of June 30, 2021, the present value of the remaining contractual payments aggregating $877.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $371.9 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 $397.0 million. As of June 30, 2021, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 44 years, and the weighted-average discount rate was 4.8%. 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, 2021, included leases for 38 of our properties, which accounted for approximately 10% 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 $6.9 million as of June 30, 2021, our ground lease obligations have remaining lease terms ranging from approximately 32 years to 93 years, including extension options which we are reasonably certain to exercise.

5. LEASES (continued)

The reconciliation of future lease payments, under noncancelable operating ground and office leases in which we are the lessee, to the operating lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2021, is presented in the table below (in thousands):


Year	Total
2021	$	10,474
2022	21,115
2023	21,288
2024	21,533
2025	21,564
Thereafter	781,783
Total future payments under our operating leases in which we are the lessee	877,757
Effect of discounting	(505,852)
Operating lease liability	$	371,905

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. Our operating lease obligations related to our office leases have remaining terms of up to 14 years, exclusive of extension options. For the three and six months ended June 30, 2021 and 2020, our costs for operating leases in which we are the lessee were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Gross operating lease costs	$	6,975	$	5,816	$	13,525	$	11,437
Capitalized lease costs	(762)		(880)		(1,446)		(1,720)
Expenses for operating leases in which we are the lessee	$	6,213	$	4,936	$	12,079	$	9,717

For the six months ended June 30, 2021 and 2020, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee were $11.7 million and $10.5 million, respectively.

6. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash consisted of the following as of June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	323,876	$	568,532
Restricted cash:
Funds held in trust under the terms of certain secured notes payable	16,935		17,256
Funds held in escrow related to construction projects and investing activities	10,830		4,580
Other	5,932		7,337
	33,697		29,173
Total	$	357,573	$	597,705

7. INVESTMENTS

We hold equity investments in publicly traded companies and privately held entities. These investments are predominantly held at adjusted carrying value or fair value, unless we have significant influence over the entity’s operating and financial policies. Investments in which we have significant influence over are accounted for using the equity method. Refer to the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

Investments held at adjusted carrying value or fair value

Investments in publicly traded companies

Our investments in publicly traded companies are classified as investments with readily determinable fair values and are presented at fair value in our consolidated balance sheets, with changes in fair value classified in investment income in our consolidated statements of operations.

Investments in privately held companies

Our investments in privately held entities consist of (i) investments in entities that report NAV and (ii) investments in privately held entities that do not report NAV. These investments are accounted for as follows:

Investments in privately held entities that report NAV

Investments in entities that report NAV, such as our privately held investments in limited partnerships, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date.

Investments in privately held entities that do not report NAV

Investments in privately held entities that do not report NAV are carried at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments continue to be evaluated on the basis of a qualitative assessment for indicators of impairment by utilizing the same monitoring criteria described in the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements, and by monitoring the presence of the following impairment indicators:

(i)a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee;

(ii)a significant adverse change in the regulatory, economic, or technological environment of the investee;

(iii)a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; and/or

(iv)significant concerns about the investee’s ability to continue as a going concern.

If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

Refer to “Investments” within Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information on the criteria used to determine whether an investment is accounted for under the equity method.

Investment income/loss recognition and classification

We classify unrealized and realized gains and losses on our investments within investment income in our consolidated statements of operations. Unrealized gains and losses represent:

(i)changes in fair value for investments in publicly traded companies;

(ii)changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV; and/or

(iii)observable price changes of our investments in privately held entities that do not report NAV.

An observable price arises from an orderly transaction for an identical or similar investment of the same issuer. Observable price changes result from, among other things, equity transactions of the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. To determine whether these transactions are indicative of an observable price change, we evaluate, among other factors, whether these transactions have similar rights and obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

7. INVESTMENTS (continued)

Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV to their estimated fair value.

Investments accounted for under the equity method

We account for investments in privately held entities under the equity method whenever we are deemed to have significant influence over the investee’s operating and financial policies. Under the equity method of accounting, we initially recognize our investment at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment and for distributions received. As of June 30, 2021, we had four investments in privately held entities, aggregating $48.0 million, accounted for under the equity method. Our ownership interest in each of our investments accounted for under the equity method of accounting was less then 20%.

Our equity in earnings related to equity method investments are recognized as earned each period and are included within investment income in our consolidated income statements. Upon receipt of distributions from our equity method investments, we use the “nature of the distribution” approach to determine the classification as realized gains or losses and the classification in our statement of cash flows. Refer to the “Joint venture distributions” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

The following tables summarize our investments as of June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021
	Cost		Unrealized Gains (Losses)		Carrying Amount
Publicly traded companies	$	226,831	$	401,095	$	627,926
Entities that report NAV	362,020		466,065		828,085
Entities that do not report NAV:
Entities with observable price changes	57,237		94,341		151,578
Entities without observable price changes	343,646		—		343,646
Total investments held at adjusted carrying value or fair value	$	989,734	$	961,501	1,951,235
Investments accounted for under the equity method					48,048
Total investments					$	1,999,283


	December 31, 2020
	Cost		Unrealized Gains (Losses)		Carrying Amount
Publicly traded companies	$	208,754	$	351,076	$	559,830
Entities that report NAV	334,341		327,741		662,082
Entities that do not report NAV:
Entities with observable price changes	47,545		96,859		144,404
Entities without observable price changes	244,798		—		244,798
Total investments	$	835,438	$	775,676	$	1,611,114

Cumulative gains and losses (realized and unrealized) on investments in privately held entities that do not report NAV still held as of June 30, 2021, aggregated to a gain of $56.2 million, which consisted of upward adjustments of $95.2 million, downward adjustments of $0.9 million, and impairments of $38.1 million.

7. INVESTMENTS (continued)

Our investment income for the three and six months ended June 30, 2021 and 2020, consisted of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Realized gains	$	60,232	$	13,005	$	107,497	$	8,328
Unrealized gains	244,031		171,652		197,780		154,508
Investment income	$	304,263	$	184,657	$	305,277	$	162,836

During the six months ended June 30, 2021, gains and losses on investments in privately held entities that do not report NAV still held at June 30, 2021, aggregated to a loss of $8.1 million, which consisted of upward adjustments of $28.3 million and downward adjustments primarily related to observable prices changes aggregating $36.4 million.

During the six months ended June 30, 2020, gains and losses on investments in privately held entities that do not report NAV still held at June 30, 2020, aggregated to a loss of $18.3 million, which consisted of downward adjustments and impairments of $25.8 million and upward adjustments of $7.5 million.

Unrealized gains and losses related to investments still held at June 30, 2021 and 2020, aggregated to gains of $242.5 million and gains of $163.1 million during the six months ended June 30, 2021 and 2020, respectively.

Refer to the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

Commitments on investments in privately held entities that report NAV

We are committed to funding approximately $339.3 million for all investments in privately held entities related to our investments in limited partnerships. Our funding commitments expire at various dates over the next 12 years, with a weighted-average expiration of 9.0 years as of June 30, 2021. These investments are not redeemable by us, but we may receive distributions from these investments throughout their term. Our investments in privately held entities that report NAV generally have expected initial terms in excess of 10 years. The weighted-average remaining term during which these investments are expected to be liquidated was 5.1 years as of June 30, 2021.

8. OTHER ASSETS

The following table summarizes the components of other assets (in thousands):


	June 30, 2021		December 31, 2020
Acquired in-place leases	$	595,454	$	462,324
Deferred compensation plan	37,284		31,057
Deferred financing costs – unsecured senior line of credit	21,705		24,124
Deposits	146,043		13,861
Furniture, fixtures, and equipment	29,872		31,130
Net investment in direct financing and sales-type leases	70,113		37,840
Notes receivable	7,190		3,424
Operating lease right-of-use asset	396,996		335,920
Other assets	54,928		30,620
Prepaid expenses	24,560		67,667
Property, plant, and equipment	152,527		153,614
Total	$	1,536,672	$	1,191,581

9. FAIR VALUE MEASUREMENTS

We provide fair value information about all financial instruments for which it is practicable to estimate fair value. We measure and disclose the estimated fair value of financial assets and liabilities by utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels, as follows: (i) quoted prices in active markets for identical assets or liabilities (Level 1), (ii) significant other observable inputs (Level 2), and (iii) significant unobservable inputs (Level 3). Significant other observable inputs can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield curves. Significant unobservable inputs are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Assets and liabilities measured at fair value on a recurring basis

The following table sets forth the assets that we measure at fair value on a recurring basis by level in the fair value hierarchy (in thousands). There were no liabilities measured at fair value on a recurring basis as of June 30, 2021, and December 31, 2020. In addition, there were no transfers of assets measured at fair value on a recurring basis to or from Level 3 in the fair value hierarchy during the six months ended June 30, 2021.


			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in publicly traded companies:
As of June 30, 2021	$	627,926	$	627,926	$	—	$	—
As of December 31, 2020	$	559,830	$	559,830	$	—	$	—

Our investments in publicly traded companies represent investments with readily determinable fair values, and are carried at fair value, with changes in fair value classified in net income. We also hold investments in privately held entities, which consist of (i) investments that report NAV, and (ii) investments that do not report NAV, as further described below.

Our investments in privately held entities that report NAV, such as our privately held investments in limited partnerships, are carried at fair value using NAV as a practical expedient, with changes in fair value classified in net income. As of June 30, 2021, and December 31, 2020, the carrying values of investments in privately held entities that report NAV aggregated $828.1 million and $662.1 million, respectively. These investments are excluded from the fair value hierarchy above as required by the fair value accounting standards. We estimate the fair value of each of our investments in limited partnerships based on the most recent NAV reported by each limited partnership. As a result, the determination of fair values of our investments in privately held entities that report NAV generally does not involve significant estimates, assumptions, or judgments.

9. FAIR VALUE MEASUREMENTS (continued)

Assets and liabilities measured at fair value on a nonrecurring basis

The following table sets forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of June 30, 2021 (in thousands). These investments were measured at various times during the period from January 1, 2018, to June 30, 2021.


			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Investments in privately held entities that do not report NAV
As of June 30, 2021	$	159,828	$	—	$	151,578	(1)	$	8,250	(2)
As of December 31, 2020	$	157,871	$	—	$	144,404		$	13,467

(1)This balance represents the total carrying amount of our equity investments in privately held entities with observable price changes, included in our total investments balance of $2.0 billion in our consolidated balance sheets as of June 30, 2021. For more information, refer to Note 7 – “Investments” to our unaudited consolidated financial statements.

(2)This amount is included in the $343.6 million balance of investments in privately held entities without observable price changes disclosed in Note 7 – “Investments” to our unaudited consolidated financial statements and represents the carrying amount of investments in privately held entities that do not report NAV for which impairments have been recognized in accordance with the measurement alternative guidance described within the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

Our investments in privately held entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of our investments in privately held entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments.

We also subject our investments in privately held entities that do not report NAV to a qualitative assessment for indicators of impairment. If indicators of impairment are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

In addition, our real estate assets classified as held for sale are measured at fair value less cost to sell, with changes recognized in net income. We evaluated these assets utilizing available comparable market information or an agreed-upon contractual sales price to assess relative fair value. Therefore, the determination of fair values of our assets classified as held for sale does not involve significant estimates and assumptions or complex judgments.

The estimates of fair value typically incorporate valuation techniques that include an income approach reflecting a discounted cash flow analysis, and a market approach that includes a comparative analysis of acquisition multiples and pricing multiples generated by market participants. In certain instances, we may use multiple valuation techniques for a particular investment and estimate its fair value based on an average of multiple valuation results.

Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures,” Note 7 – “Investments,” and Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements for further discussion on assets and liabilities measured at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, tenant receivables, deposits, notes receivable, accounts payable, accrued expenses, and other short-term liabilities approximate their fair value.

The fair values of our secured notes payable, unsecured senior notes payable, and the amounts outstanding on our unsecured senior line of credit and commercial paper program were estimated using widely accepted valuation techniques, including discounted cash flow analyses using significant other observable inputs such as available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Because the valuations of our financial instruments are based on these types of estimates, the actual fair value of our financial instruments may differ materially if our estimates do not prove to be accurate. Additionally, the use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

9. FAIR VALUE MEASUREMENTS (continued)

As of June 30, 2021, and December 31, 2020, the book and estimated fair values of our secured notes payable, unsecured senior notes payable, and amounts outstanding under our unsecured senior line of credit and commercial paper program, including the level within the fair value hierarchy for which the estimates were derived, were as follows (in thousands):


	June 30, 2021
	Book Value		Fair Value Hierarchy						Estimated Fair Value
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Secured notes payable	$	227,984	$	—	$	242,685	$	—	$	242,685
Unsecured senior notes payable	$	8,313,025	$	—	$	9,105,118	$	—	$	9,105,118
Unsecured senior line of credit	$	—	$	—	$	—	$	—	$	—
Commercial paper program	$	299,990	$	—	$	299,995	$	—	$	299,995


	December 31, 2020
	Book Value		Fair Value Hierarchy						Estimated Fair Value
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Secured notes payable	$	230,925	$	—	$	249,782	$	—	$	249,782
Unsecured senior notes payable	$	7,232,370	$	—	$	8,447,845	$	—	$	8,447,845
Unsecured senior line of credit	$	—	$	—	$	—	$	—	$	—
Commercial paper program	$	99,991	$	—	$	99,998	$	—	$	99,998

10. SECURED AND UNSECURED SENIOR DEBT

The following table summarizes our outstanding indebtedness and respective principal payments as of June 30, 2021 (dollars in thousands):


	Stated Rate			Interest Rate(1)			Maturity Date(2)	Principal Payments Remaining for the Periods Ending December 31,														Unamortized (Deferred Financing Cost), (Discount)/ Premium
Debt								2021		2022		2023		2024		2025		Thereafter		Principal				Total
Secured notes payable
Greater Boston	4.82	%		3.40	%		2/6/24	$	1,705	$	3,564	$	3,742	$	183,527	$	—	$	—	$	192,538	$	7,059	$	199,597
San Francisco Bay Area	4.14	%		4.42			7/1/26	—		—		—		—		—		28,200		28,200		(517)		27,683
San Francisco Bay Area	6.50	%		6.50			7/1/36	26		28		30		32		34		554		704		—		704
Secured debt weighted-average interest rate/subtotal	4.74	%		3.54				1,731		3,592		3,772		183,559		34		28,754		221,442		6,542		227,984

Commercial paper program(3)	0.23	%	(3)	0.23		(3)	(3)	—		—		—		—		—		300,000		300,000		(10)		299,990
Unsecured senior line of credit	L+0.815	%	(4)	N/A			1/6/26	—		—		—		—		—		—		—		—		—
Unsecured senior notes payable	3.45	%		3.62			4/30/25	—		—		—		—		600,000		—		600,000		(3,369)		596,631
Unsecured senior notes payable	4.30	%		4.50			1/15/26	—		—		—		—		—		300,000		300,000		(2,225)		297,775
Unsecured senior notes payable – green bond	3.80	%		3.96			4/15/26	—		—		—		—		—		350,000		350,000		(2,358)		347,642
Unsecured senior notes payable	3.95	%		4.13			1/15/27	—		—		—		—		—		350,000		350,000		(2,815)		347,185
Unsecured senior notes payable	3.95	%		4.07			1/15/28	—		—		—		—		—		425,000		425,000		(2,777)		422,223
Unsecured senior notes payable	4.50	%		4.60			7/30/29	—		—		—		—		—		300,000		300,000		(1,799)		298,201
Unsecured senior notes payable	2.75	%		2.87			12/15/29	—		—		—		—		—		400,000		400,000		(3,486)		396,514
Unsecured senior notes payable	4.70	%		4.81			7/1/30	—		—		—		—		—		450,000		450,000		(3,351)		446,649
Unsecured senior notes payable	4.90	%		5.05			12/15/30	—		—		—		—		—		700,000		700,000		(7,455)		692,545
Unsecured senior notes payable	3.375	%		3.48			8/15/31	—		—		—		—		—		750,000		750,000		(6,581)		743,419
Unsecured senior notes payable – green bond	2.00	%		2.12			5/18/32	—		—		—		—		—		900,000		900,000		(10,165)		889,835
Unsecured senior notes payable	1.875	%		1.97			2/1/33	—		—		—		—		—		1,000,000		1,000,000		(10,131)		989,869
Unsecured senior notes payable	4.85	%		4.93			4/15/49	—		—		—		—		—		300,000		300,000		(3,274)		296,726
Unsecured senior notes payable	4.00	%		3.91			2/1/50	—		—		—		—		—		700,000		700,000		10,364		710,364
Unsecured senior notes payable	3.00	%		3.08			5/18/51	—		—		—		—		—		850,000		850,000		(12,553)		837,447
Unsecured debt weighted-average interest rate/subtotal				3.42				—		—		—		—		600,000		8,075,000		8,675,000		(61,985)		8,613,015
Weighted-average interest rate/total				3.43	%			$	1,731	$	3,592	$	3,772	$	183,559	$	600,034	$	8,103,754	$	8,896,442	$	(55,443)	$	8,840,999

(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

(2)Reflects any extension options that we control.

(3)Refer to footnote 2 on the next page.

(4)During the year ended December 31, 2020, we achieved certain sustainability measures, as described in our unsecured senior line of credit agreement, which reduced the borrowing rate by one basis point for one year ending December 31, 2021.

10. SECURED AND UNSECURED SENIOR DEBT (continued)

The following table summarizes our secured and unsecured senior debt and amounts outstanding under our commercial paper program as of June 30, 2021 (dollars in thousands):


	Fixed-Rate Debt			Variable-Rate Debt								Weighted-Average
												Interest		Remaining Term (in years)
							Total			Percentage		Rate(1)
Secured notes payable	$	227,984		$	—		$	227,984		2.6	%	3.54	%	2.9
Unsecured senior notes payable	8,313,025			—			8,313,025			94.0		3.54		13.1
Unsecured senior line of credit	—			—			—			—		N/A		4.5
Commercial paper program	—			299,990			299,990			3.4		0.23		(2)
Total/weighted average	$	8,541,009		$	299,990		$	8,840,999		100.0	%	3.43	%	12.5	(2)
Percentage of total debt	97		%	3		%	100		%

(1)Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to the amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

(2)The commercial paper notes bear interest at short-term fixed rates and can generally be issued with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Borrowings under the program are used to fund short-term capital needs and are backed by our unsecured senior line of credit. The commercial paper outstanding as of June 30, 2021, matured on July 7, 2021. In the event we are unable to issue commercial paper notes or refinance outstanding borrowings under terms equal to or more favorable than those under our unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit at L+0.815%. As such, we calculate the weighted-average remaining term of our commercial paper by using the maturity date of our unsecured senior line of credit. Using the maturity date of our outstanding commercial paper, the consolidated weighted-average maturity of our debt is 12.4 years as of June 30, 2021. The commercial paper notes sold during the three months ended June 30, 2021, were issued at a weighted-average yield to maturity of 0.20% and had a weighted-average maturity term of 8 days.

Unsecured senior notes payable

In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes consisted of $900.0 million of 2.00% unsecured senior notes due 2032 (“2.00% Unsecured Senior Notes”) and $850.0 million of 3.00% unsecured senior notes due 2051 (“3.00% Unsecured Senior Notes”). The proceeds from our 2.00% Unsecured Senior Notes are expected to be allocated to eligible green projects and were initially used to refinance $650.0 million of our 4.00% unsecured senior notes payable due in 2024 pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts that settled on March 12, 2021. As a result of this refinancing, we recognized a loss on early extinguishment of debt of $67.2 million, including the write-off of unamortized loan fees and premiums.

$1.5 billion commercial paper program

Our commercial paper program, which received credit ratings of A-2 from S&P Global Ratings and Prime-2 from Moody’s Investors Service, provides us with the ability to issue up to $1.5 billion of commercial paper with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our unsecured senior line of credit equal to any outstanding notes issued under our commercial paper program. We use the net proceeds from the issuances of the notes for general working capital and other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of other debt and selective development, redevelopment, or acquisition of properties. As of June 30, 2021, we had $300.0 million of notes outstanding under our commercial paper program.

Interest expense

The following table summarizes interest expense for the three and six months ended June 30, 2021 and 2020 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Gross interest	$	78,650	$	75,807	$	155,003	$	146,226
Capitalized interest	(43,492)		(30,793)		(83,378)		(55,473)
Interest expense	$	35,158	$	45,014	$	71,625	$	90,753

11. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES

The following table summarizes the components of accounts payable, accrued expenses, and other liabilities as of June 30, 2021, and December 31, 2020 (in thousands):


	June 30, 2021		December 31, 2020
Accounts payable and accrued expenses	$	305,575	$	285,021
Accrued construction	358,982		333,271
Acquired below-market leases	345,392		288,075
Conditional asset retirement obligations	58,164		47,070
Deferred rent liabilities	11,895		4,495
Operating lease liability	371,905		345,750
Unearned rent and tenant security deposits	290,784		276,751
Other liabilities	82,690		89,399
Total	$	1,825,387	$	1,669,832

As of June 30, 2021, and December 31, 2020, our conditional asset retirement obligations liability primarily consisted of the soil and groundwater remediation liabilities associated with certain of our properties. Some of our properties may contain asbestos or may be subjected to other hazardous or toxic substances, which, under certain conditions, requires remediation. We engage independent environmental consultants to conduct Phase I or similar environmental assessments at our properties. This type of assessment generally includes a site inspection, interviews, and a public records review; asbestos, lead-based paint, and mold surveys; subsurface sampling; and other testing. We recognize a liability for the fair value of a conditional asset retirement obligation (including asbestos) when the fair value of the liability can be reasonably estimated. In addition, environmental laws and regulations subject our tenants, and potentially us, to liability that may result from our tenants’ routine handling of hazardous substances and wastes as part of their operations at our properties. These assessments and investigations of our properties have not to date revealed any additional environmental liability we believe would have a material adverse effect on our business and financial statements or that would require additional disclosures or recognition in our financial statements.

12. EARNINGS PER SHARE

From time to time, we enter into forward equity sales agreements, which are discussed in Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements. We considered the potential dilution resulting from the forward equity sales agreements on the EPS calculations. At inception, the agreements do not have an effect on the computation of basic EPS as no shares are delivered until settlement. The common shares issued upon the settlement of the forward equity sales agreements, weighted for the period these common shares were outstanding, are included in the denominator of basic EPS. To determine the dilution resulting from the forward equity sales agreements during the period of time prior to settlement, we calculate the number of weighted-average shares outstanding – diluted using the treasury stock method.

We account for unvested restricted stock awards that contain nonforfeitable rights to dividends as participating securities and include these securities in the computation of EPS using the two-class method. Our forward equity sales agreements are not participating securities and are therefore not included in the computation of EPS using the two-class method. Under the two-class method, we allocate net income (after amounts attributable to noncontrolling interests) to common stockholders and unvested restricted stock awards by using the weighted-average shares of each class outstanding for quarter-to-date and year-to-date periods independently, based on their respective participation rights to dividends declared (or accumulated) and undistributed earnings.

The table below reconciles the numerators and denominators of the basic and diluted EPS computations for the three and six months ended June 30, 2021 and 2020 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	404,520	$	243,561	$	430,053	$	274,239
Net income attributable to noncontrolling interests	(19,436)		(13,907)		(36,848)		(25,820)
Net income attributable to unvested restricted stock awards	(4,521)		(3,054)		(4,663)		(3,574)
Numerator for basic and diluted EPS – net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	380,563	$	226,600	$	388,542	$	244,845

Denominator for basic EPS – weighted-average shares of common stock outstanding	145,825		124,333		141,596		122,883
Dilutive effect of forward equity sales agreements	233		115		300		234
Denominator for diluted EPS – weighted-average shares of common stock outstanding	146,058		124,448		141,896		123,117
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	2.61	$	1.82	$	2.74	$	1.99
Diluted	$	2.61	$	1.82	$	2.74	$	1.99

13. STOCKHOLDERS’ EQUITY

Common equity transactions

During the six months ended June 30, 2021, our common equity transactions included the following:

•In January 2021, we entered into forward equity sales agreements to sell 6.9 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.1 billion at a public offering price of $164.00 per share, before underwriting discounts and commissions.

•During the three months ended March 31, 2021, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received proceeds of $850.5 million.

•As of June 30, 2021, 1.5 million shares representing net proceeds of approximately $230.5 million remain outstanding under our forward equity sales agreements.

•In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.

•During the three months ended March 31, 2021, we issued 3.1 million shares under our ATM program at a price of $163.26 per share (before underwriting discounts) and received net proceeds of $492.3 million.

•As of June 30, 2021, and as of the date of this report, the remaining aggregate amount available under our ATM program for future sales of common stock aggregated $500.0 million.

•In March 2021, we issued the remaining 362 thousand shares of common stock to settle our forward equity sales agreements that were outstanding as of December 31, 2020, and received net proceeds of $56.2 million.

•In June 2021, we entered into forward equity sales agreements to sell 8.1 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.5 billion at a public offering price of $184.00 per share, before underwriting discounts and commissions.

•During the three months ended June 30, 2021, we settled a portion of our forward equity sales agreements by issuing 4.9 million shares and received net proceeds of $870.3 million.

•As of June 30, 2021, 3.1 million shares representing net proceeds of approximately $547.8 million remain outstanding under our forward equity sales agreements.

Dividends

During the three months ended March 31, 2021, we declared cash dividends on our common stock aggregating $160.8 million, or $1.09 per share. In April 2021, we paid the cash dividends on our common stock declared for the three months ended March 31, 2021.

During the three months ended June 30, 2021, we declared cash dividends on our common stock aggregating $170.6 million, or $1.12 per share. In July 2021, we paid the cash dividends on our common stock declared for the three months ended June 30, 2021.

Accumulated other comprehensive loss

The following table presents the changes in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the six months ended June 30, 2021, which was entirely due to net unrealized gains on foreign currency translation related to our operations in Canada and China (in thousands):


	Total
Balance as of December 31, 2020	$	(6,625)

Other comprehensive income before reclassifications	2,117
Net other comprehensive income	2,117

Balance as of June 30, 2021	$	(4,508)

Common stock, preferred stock, and excess stock authorizations

Our charter authorizes the issuance of 200.0 million shares of common stock, of which 150.7 million shares were issued and outstanding as of June 30, 2021. Our charter also authorizes the issuance of up to 100.0 million shares of preferred stock, none of which were issued and outstanding as of June 30, 2021. In addition, 200.0 million shares of “excess stock” (as defined in our charter) are authorized, none of which were issued and outstanding as of June 30, 2021.

14. NONCONTROLLING INTERESTS

Noncontrolling interests represent the third-party interests in certain entities in which we have a controlling interest. These entities owned 42 properties as of June 30, 2021, and are included in our consolidated financial statements. Noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. Distributions, profits, and losses related to these entities are allocated in accordance with the respective operating agreements. During the six months ended June 30, 2021 and 2020, we distributed $53.8 million and $38.2 million, respectively, to our consolidated real estate joint venture partners.

Certain of our noncontrolling interests have the right to require us to redeem their ownership interests in the respective entities. We classify these ownership interests in the entities as redeemable noncontrolling interests outside of total equity in our consolidated balance sheets. Redeemable noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. If the amount of a redeemable noncontrolling interest is less than the maximum redemption value at the balance sheet date, such amount is adjusted to the maximum redemption value. Subsequent declines in the redemption value are recognized only to the extent that previous increases have been recognized.

Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for additional information.

15. ASSETS CLASSIFIED AS HELD FOR SALE

As of June 30, 2021, five properties aggregating 559,993 RSF were classified as held for sale in our unaudited consolidated financial statements, none of which met the criteria for classification as discontinued operations. Accordingly, we ceased depreciation of these properties upon their classification as held for sale.

We evaluate on a quarterly basis any indicators of impairment for our properties, and upon determination that there is an impairment charge to be recognized, we reassess the fair value of the property at such time. Therefore, the net assets presented below as of June 30, 2021, and December 31, 2020, were based on estimated fair values determined during the quarter in which the asset became classified as held for sale or an incremental impairment charge was recognized. Refer to the “Sales of real estate assets and impairment charges” section within Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for information about impairment charges aggregating $10.1 million recognized during the six months ended June 30, 2021.

The following is a summary of net assets as of June 30, 2021, and December 31, 2020, for our real estate investments that were classified as held for sale as of each respective date (in thousands):


	June 30, 2021		December 31, 2020
Total assets	$	112,701	$	117,879
Total liabilities	(32,947)		(33,081)
Total accumulated other comprehensive loss	(1,222)		(841)
Net assets classified as held for sale	$	78,532	$	83,957

16. SUBSEQUENT EVENTS

Real estate assets acquired in July 2021

In July 2021, we completed acquisitions for an aggregate purchase price of $387.9 million. Refer to the “Acquisitions” section within Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information.

Sale of partial interest in July 2021

In July 2021, we sold a 70% interest in 400 Dexter Avenue North located in our Lake Union submarket for a sales price of $254.8 million, or $1,255 per RSF. Refer to the “Formation of consolidated real estate joint ventures and sales of partial interests” section within Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for additional information.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

Certain information and statements included in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “targets,” “will,” or the negative of those words or similar words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, results of operations, and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the following:

•Operating factors such as a failure to operate our business successfully in comparison to market expectations or in comparison to our competitors, our inability to obtain capital when desired or refinance debt maturities when desired, and/or a failure to maintain our status as a REIT for federal tax purposes.

•Market and industry factors such as adverse developments concerning the life science, agtech, and technology industries and/or our tenants.

•Government factors such as any unfavorable effects resulting from federal, state, local, and/or foreign government policies, laws, and/or funding levels.

•Global factors such as negative economic, political, financial, credit market, and/or banking conditions.

•Uncertain global, national, and local impacts of the ongoing COVID-19 pandemic.

•Other factors such as climate change, cyber intrusions, and/or changes in laws, regulations, and financial accounting standards.

This list of risks and uncertainties is not exhaustive. Additional information regarding risk factors that may affect us is included under “Item 1A. Risk factors” and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020, and respective sections within this quarterly report on Form 10-Q. Readers of this quarterly report on Form 10-Q should also read our other documents filed publicly with the SEC for further discussion regarding such factors.

The COVID-19 pandemic

In December 2019, a novel coronavirus, which causes respiratory illness and spreads from person to person (COVID-19), was identified for the first time. The first case of COVID-19 in the U.S. was reported on January 20, 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

COVID-19 prevention, treatment, and other measures to combat the pandemic

Since scientists shared the virus’s genetic makeup in January 2020, intense research has been underway around the world to develop treatments and vaccines for COVID-19. This has led to the U.S. Food and Drug Administration (“FDA”) issuing Emergency Use Authorizations (“EUAs”) for therapeutics to treat patients with COVID-19 and, most recently, issuing EUAs for three vaccines for use in the prevention of coronavirus disease caused by COVID-19.

The three vaccines issued EUAs were created by Pfizer Inc. (in partnership with BioNTech), Moderna, Inc. (in partnership with the National Institutes of Health (“NIH”)), and Johnson & Johnson, each a tenant of ours. The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. As of July 23, 2021, according to the U.S. Centers for Disease Control and Prevention, approximately 162.4 million individuals in the U.S. have been fully vaccinated for COVID-19, and the U.S. will continue to roll out vaccines across the nation. The U.S. has sufficient vaccine supply to inoculate 100% of the population for which the vaccines are authorized and continues to facilitate access and encourage the remaining unvaccinated population to get vaccinated so the country may achieve herd immunity.

Access to vaccines outside the U.S. remains limited, and as a result, new strains of COVID-19 continue to emerge. The level of resistance these new strains may have to the existing vaccines remains unknown and is being closely tracked by governments in partnership with industry. The effectiveness and durability of current vaccines to emerging variants will help determine the need for boosters in the future.

Impact to the global and U.S. economy

As a result of the unprecedented measures taken in the U.S. and around the world, the disruption and impact to the U.S. and global economies and financial markets by the COVID-19 pandemic have been significant.

Based on the data provided by the U.S. Bureau of Labor Statistics on July 2, 2021, the unemployment rate in the U.S. is up by 2.4% since February 2020 to 5.9%. While still higher compared to pre-pandemic levels, there has been a slight decrease since December 2020. The July 2021 data reported an increase of approximately 850,000 jobs in June 2021, reflecting the gradual reopening of the economy as a result of vaccine distribution.

Since March 2020, the U.S. government has passed approximately $5.3 trillion in government funding to combat the pandemic and stimulate the economy. The various relief packages provided unemployment benefits, direct payments to all eligible Americans, small business loans, funding toward highly impacted industries and funding toward the U.S. health system to fund research, construction, and acquisition of equipment for vaccine and infectious disease research facilities, as well as the distribution of vaccines.

It is too early to determine the full, long-term economic impact of the COVID-19 pandemic and corresponding government stimulus measures. Potential ineffectiveness of relief measures could lead to the deterioration of economic conditions, significant inflation, long-term high unemployment rates, and/or a recession, which in turn could materially affect our (or our tenants’ or venture investment portfolio companies’) performance, financial condition, results of operations, and cash flows.

See “Item 1A. Risk factors” in our most recent annual report on Form 10-K for additional discussion of the risks posed by the COVID-19 pandemic and uncertainties we, our tenants, and the national and global economies may face as a result.

Overview

We are a Maryland corporation formed in October 1994 that has elected to be taxed as a REIT for federal income tax purposes. We are an S&P 500® urban office REIT and the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, with a total market capitalization of $36.3 billion and an asset base in North America of 58.1 million SF as of June 30, 2021. The asset base in North America includes 36.7 million RSF of operating properties and 3.4 million RSF of Class A properties undergoing construction, 7.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 10.3 million SF of future development projects. Founded in 1994, we pioneered this niche and have since established a significant market presence in key locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. We have a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agtech, and technology companies through our venture capital platform. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

As of June 30, 2021:

•Investment-grade or publicly traded large cap tenants represented 53% of our total annual rental revenue;

•Approximately 95% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from approximately 3.0% to 3.5%) or indexed based on a consumer price index or other index;

•Approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent; and

•Approximately 94% of our leases (on an RSF basis) provided for the recapture of capital expenditures (such as heating, ventilation, and air conditioning systems maintenance and/or replacement, roof replacement, and parking lot resurfacing) that we believe would typically be borne by the landlord in traditional office leases.

Our primary business objective is to maximize stockholder value by providing our stockholders with the greatest possible total return and long-term asset value based on a multifaceted platform of internal and external growth. A key element of our strategy is our unique focus on Class A properties clustered in urban campuses. These key urban campus locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space. They generally represent highly desirable locations for tenancy by life science, agtech, and technology entities because of their close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Our strategy also includes drawing upon our deep and broad real estate, life science, agtech, and technology relationships in order to identify and attract new and leading tenants and to source additional value-creation real estate.

Executive summary

Operating results


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income attributable to Alexandria’s common stockholders – diluted:
In millions	$	380.6	$	226.6	$	388.5	$	244.8
Per share	$	2.61	$	1.82	$	2.74	$	1.99
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions	$	282.3	$	225.0	$	545.2	$	446.4
Per share	$	1.93	$	1.81	$	3.84	$	3.63

The operating results shown above include certain items related to corporate-level investing and financing decisions. Refer to the tabular presentation of these items at the beginning of the “Results of operations” section within this Item 2 for additional information.

Six-time Nareit Investor CARE Gold Award winner

2021 recipient of the Nareit Investor CARE (Communications and Reporting Excellence) Gold Award in the Large Cap Equity REIT category as the best-in-class REIT delivering transparency, quality, and efficient communications and reporting to the investment community. This represents our fourth consecutive Nareit Investor CARE Gold Award, and our sixth Gold Award over the last seven years.

Historic leasing activity and rental rate growth; continued strong net operating income and internal growth

•During the three months ended June 30, 2021, historic demand for our high-quality office/laboratory space translated into 1.9 million RSF of leasing activity, representing the highest leasing activity in a single quarter and the second highest rental rate growth in Company history.

•Continued strong leasing activity and rental rate growth during the three and six months ended June 30, 2021, over expiring rates on renewed and re-leased space:


	June 30, 2021
	Three Months Ended	Six Months Ended
Total leasing activity – RSF	1,933,838	3,611,497
Leasing of development and redevelopment space – RSF	256,328	1,045,301
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)	1,472,713	1,994,538
Rental rate increases	42.4%	40.7%
Rental rate increases (cash basis)	25.4%	23.3%

•Total revenues:

•$509.6 million, up 16.6%, for the three months ended June 30, 2021, compared to $437.0 million for the three months ended June 30, 2020.

•$989.5 million, up 12.8%, for the six months ended June 30, 2021, compared to $876.9 million for the six months ended June 30, 2020.

•Net operating income (cash basis) of $1.3 billion for the three months ended June 30, 2021, annualized, increased by $194.4 million, or 17.6%, compared to the three months ended June 30, 2020, annualized.

•95% of our leases contain contractual annual rent escalations approximating 3%.

•Same property net operating income growth:

•3.7% and 7.8% (cash basis) for the three months ended June 30, 2021, over the three months ended June 30, 2020.

•4.4% and 7.4% (cash basis) for the six months ended June 30, 2021, over the six months ended June 30, 2020.

A REIT industry-leading high-quality tenant roster with high-quality revenues and cash flows, strong margins, and operational excellence


Percentage of annual rental revenue in effect from investment-grade or publicly traded large cap tenants	53	%

Occupancy of operating properties in North America	94.3	%	(1)
Operating margin	72	%
Adjusted EBITDA margin	69	%
Weighted-average remaining lease term:
All tenants	7.5		years
Top 20 tenants	11.1		years

(1)Includes 1.4 million RSF, or 3.8%, of vacancy at recently acquired properties in our North America markets, representing lease-up opportunities that are expected to provide incremental annual rental revenues in excess of $55 million. Approximately 35% of the vacant 1.4 million RSF is currently under leased/negotiating, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.1% as of June 30, 2021. Refer to the “Summary of occupancy percentages in North America” section within this Item 2 for additional information regarding vacancy at recently acquired properties.

Strong and flexible balance sheet with significant liquidity

•Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of June 30, 2021.

•Net debt and preferred stock to Adjusted EBITDA of 5.8x and fixed-charge coverage ratio of 4.9x for the three months ended June 30, 2021, annualized.

•$4.5 billion of liquidity as of June 30, 2021.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for the three months ended June 30, 2021, of $1.12 per common share, aggregating $4.36 per common share for the twelve months ended June 30, 2021, up 24 cents, or 6%, over the twelve months ended June 30, 2020. Our FFO payout ratio of 60% for the three months ended June 30, 2021, allows us to continue to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Sustained strength in tenant collections

•Tenant collections remain consistently high, with 99.4% of July 2021 billings collected as of the date of this report.

•As of June 30, 2021, our tenant receivables balance was $6.7 million, representing our lowest balance since 2012.

Leasing activity of development and redevelopment projects

We continue to execute our unique and differentiated life science strategy at an accelerated pace and expand our collaborative campuses and asset base in each of our key life science cluster submarkets, and we remain strategically positioned to take maximum advantage of historic tenant demand. Demand for our value-creation development and redevelopment projects of high-quality office/laboratory space, as well as continued operational excellence at our world-class, sophisticated laboratory facilities and strong execution by our team, has translated into record leasing activity. The following table provides leasing activity of our development and redevelopment projects:

Leased RSF

In-Process RSF(1)

2020

Six months ended June 30, 2021

As of July 26, 2021

1.0 million

3.0 million

(1) Represents in-process leasing activity on near-term value-creation development and redevelopment projects that are expected to commence vertical construction in 2021/2022. Includes 2.2 million RSF related to leases under negotiation/executed letters of intent and 0.8 million RSF related to letters of intent under negotiation.

Value-creation development and redevelopment projects are expected to generate significant growth in rental revenues and cash flows

Under Construction

Projects Expected to Commence
Construction in 2021/2022

Incremental Projected
Annual Rental Revenues

3.4 million RSF

3.6 million RSF

>$545 million

33 Properties

19 Properties

80% Leased/Negotiating

89% Leased/Negotiating

Delivery of fully leased value-creation projects

•During the three months ended June 30, 2021, we placed into service development and redevelopment projects aggregating 755,565 RSF that are 100% leased across five submarkets.

•Annual net operating income (cash basis) is expected to increase by $49 million upon the burn-off of initial free rent from recently delivered projects.

Alexandria at the vanguard of innovation for over 750 tenants and looking to accommodate current needs plus a path for future growth

•In June 2021, we entered into a definitive agreement to expand our Alexandria Center® at Kendall Square campus through our acquisition of a 100% interest in One Rogers Street and One Charles Park for a purchase price of $815.0 million. This acquisition provides a key expansion to our mega campus strategy in our Cambridge submarket, the premier life science real estate market in the world, and consists of the following:

•Upon closing of the acquisition, we expect to redevelop the two existing buildings, along with the services of The Davis Companies, into a Class A life science project aggregating 400,000 RSF of technical office/laboratory space. We will retain our wholly owned interest in the project upon completion of the redevelopments.

•These two buildings are 100% under lease negotiation with several cutting-edge life science companies.

•The redevelopment project is targeting initial occupancy in 2023.

•Parking garage with approximately 650 spaces.

•We expect to pursue additional entitlement opportunities for future development of additional office/laboratory space at this site.

•We expect to complete this acquisition in December 2021.

•During the three months ended June 30, 2021, we completed acquisitions in our key life science cluster submarkets aggregating 5.5 million SF (includes Sequence Drive described in the next bullet); 4.7 million RSF of value-creation opportunities; and 0.9 million RSF of operating space, for an aggregate purchase price of $1.1 billion.

•In June 2021, we acquired five operating buildings at 6260, 6290, 6310, 6340, and 6350 Sequence Drive aggregating 487,023 RSF, located in our Sorrento Mesa submarket, for a purchase price of $298.5 million, with opportunity to increase the campus by approximately 400,000 SF through ground-up development.

•The five operating buildings are currently 100% occupied with a weighted-average remaining lease term of 2.7 years. We expect to develop or redevelop these spaces upon expiration of the existing in-place leases.

•The aggregate 887,000 RSF from this acquisition provides a significant future development opportunity to expand our existing Sequence District by Alexandria campus into a flagship mega campus aggregating 1.9 million SF.

Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and acquisitions with development and redevelopment opportunities

•In April 2021, we sold a 70% partial interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis).

•In July 2021, we sold a 70% partial interest in our 400 Dexter Avenue North property located in our Lake Union submarket for a sales price of $254.8 million, or $1,255 per RSF, representing capitalization rates of 4.1% and 4.2% (cash basis).

Balance sheet management

Key metrics as of June 30, 2021

•$36.3 billion of total market capitalization.

•$27.4 billion of total equity capitalization.

•No debt maturing prior to 2024.

•12.5 years weighted-average remaining term of debt as of June 30, 2021.

•Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of June 30, 2021.

June 30, 2021

Goal for Fourth Quarter of 2021, Annualized

Quarter Annualized

Trailing 12 Months

Net debt and preferred stock to Adjusted EBITDA

5.8x

6.2x

Less than or equal to 5.2x

Fixed-charge coverage ratio

4.9x

4.6x

Greater than or equal to 5.0x

Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross investments in real estate

June 30, 2021

Current and key near-term projects and key pending acquisition 84% leased/negotiating

10%

Income-producing/potential cash flows/covered land play(1)

Land

(1)Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses.

Key capital events

•In June 2021, we entered into forward equity sales agreements aggregating $1.5 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters’ option) at a public offering price of $184.00 per share, before underwriting discounts and commissions.

•During the three months ended June 30, 2021, we settled a portion of these forward equity sales agreements by issuing 4.9 million shares and received net proceeds of $870.3 million.

•We expect to issue 3.1 million shares in the second half of 2021 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $547.8 million.

•We also expect to issue 1.5 million shares in the second half of 2021 to settle our remaining outstanding January 2021 forward equity sales agreements and receive net proceeds of approximately $230.5 million.

•During the three months ended June 30, 2021, there was no sale activity under our ATM common stock offering program. As of June 30, 2021 and as of the date of this report, the remaining aggregate amount available under our current program for future sales of common stock is $500.0 million.

Investments

•As of June 30, 2021, our investments aggregated $2.0 billion, including an adjusted cost basis of $1.0 billion, unrealized gains of $1.0 billion, and $48.0 million of investments accounted for under the equity method of accounting.

•Investment income of $304.3 million for the three months ended June 30, 2021, consisted of $60.2 million of realized gains and $244.0 million of unrealized gains.

Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society

Industry leadership

•We were ranked in the top 10 of the world’s largest and most impactful real estate firms on the Forbes 2021 Global 2000 list determined based on sales, profits, assets, and market value.

•In June 2021, we released our 2020 Environmental, Social & Governance Report, which showcases our longstanding ESG commitment and leadership. Key highlights in the report include the company’s critical efforts to tackle climate change by pioneering low-carbon and climate-resilient design solutions, mitigating climate-related risk in our asset base, and investing in and providing essential infrastructure for sustainable agrifoodtech companies; continuing strong progress toward our 2025 environmental impact goals, including further reducing carbon emissions; and catalyzing the health, wellness, safety, and productivity of our employees and tenants, local communities, and the world at large through the built environment and our social responsibility initiatives.

Operating summary

Same Property Net Operating
Income Growth

Favorable Lease Structure(1)

Strategic Lease Structure by Owner and Operator of Collaborative Life Science, Agtech, and Technology Campuses

Increasing cash flows

Percentage of leases containing annual rent escalations

95%

Stable cash flows

Percentage of triple

net leases

94%

Lower capex burden

Percentage of leases providing for the recapture of capital expenditures

94%

Rental Rate Growth:
Renewed/Re-Leased Space

Margins(2)

Operating

Adjusted EBITDA

72%

69%

(1)Percentages calculated based on RSF as of June 30, 2021.

(2)Represents percentages for the three months ended June 30, 2021.

Long-Duration Cash Flows From High-Quality, Diverse, and
Innovative Tenants

Investment-Grade or
Publicly Traded Large Cap Tenants

Long-Duration Lease Terms

53%

7.5 Years

of ARE’s

Weighted-Average

Annual Rental Revenue(1)

Remaining Term(2)

Tenant Mix

Percentage of ARE’s Annual Rental Revenue(1)

(1)Represents annual rental revenue in effect as of June 30, 2021. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(2)Based on aggregate annual rental revenue in effect as of June 30, 2021. Refer to definition of “Annual rental revenue” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information on our methodology on annual rental revenue for unconsolidated real estate joint ventures.

(3)Represents annual rental revenue currently generated from office space that is targeted for a future change in use. The weighted-average remaining term of these leases is 2.9 years.

(4)Represents annual rental revenue from publicly traded technology tenants with an average daily market capitalization greater than $200 billion for the twelve months ended June 30, 2021.

(5)Our other tenants, aggregating 5.0% of our annual rental revenue, comprise 3.9% of annual rental revenue from technology, professional services, finance, telecommunications, and construction/real estate companies and only 1.1% from retail-related tenants.


High-Quality Cash Flows From High-Quality Tenants and Class A Properties in AAA Locations

Industry-Leading Tenant Roster		AAA Locations

85%
of ARE’s Top 20 Tenants’ Annual Rental Revenue(1) Is From Investment-Grade or Publicly Traded Large Cap Tenants
		Percentage of ARE’s Annual Rental Revenue(1)



Solid Historical Occupancy(2)	Occupancy Across Key Locations(3)

96%
Over 10 Years

(1)Represents annual rental revenue in effect as of June 30, 2021. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(2)Represents average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of June 30, 2021.

(3)As of June 30, 2021.

(4)Refer to the “Summary of occupancy percentages in North America” section within this Item 2 for additional information.

Leasing

The following table summarizes our leasing activity at our properties:


	Three Months Ended			Six Months Ended			Year Ended
	June 30, 2021			June 30, 2021			December 31, 2020
	Including Straight-Line Rent		Cash Basis	Including Straight-Line Rent		Cash Basis	Including Straight-Line Rent	Cash Basis
(Dollars per RSF)
Leasing activity:
Renewed/re-leased space(1)
Rental rate changes	42.4%		25.4%	40.7%		23.3%	37.6%	18.3%
New rates	$58.70		$56.16	$58.41		$55.82	$49.51	$46.53
Expiring rates	$41.22		$44.77	$41.51		$45.29	$35.99	$39.32
RSF	1,472,713			1,994,538			2,556,833
Tenant improvements/leasing commissions	$32.06			$31.82			$35.08
Weighted-average lease term	5.8 years			6.1 years			6.0 years

Developed/redeveloped previously vacant space leased(2)
New rates	$57.61		$53.52	$51.56		$47.91	$56.67	$53.61
RSF	461,125			1,616,959			1,802,013
Weighted-average lease term	7.5 years			9.8 years			9.0 years

Leasing activity summary (totals):
New rates	$58.44		$55.53	$55.34		$52.28	$52.47	$49.46
RSF	1,933,838	(3)		3,611,497	(4)		4,358,846
Weighted-average lease term	6.2 years			7.7 years			7.3 years

Lease expirations(1)
Expiring rates	$40.06		$43.13	$40.25		$43.35	$36.03	$39.01
RSF	1,712,307			2,459,582			3,560,188

Leasing activity includes 100% of results for each property in which we have an investment in North America.

(1)Excludes month-to-month leases aggregating 88,305 RSF and 96,383 RSF as of June 30, 2021, and December 31, 2020, respectively.

(2)Refer to “New Class A development and redevelopment properties: summary of pipeline” section within this Item 2 for additional information on total project costs.

(3)Represents the highest leasing activity in a single quarter in Company history.

(4)During the six months ended June 30, 2021, we granted tenant concessions/free rent averaging 2.6 months with respect to the 3,611,497 RSF leased. Approximately 47% of the leases executed during the six months ended June 30, 2021, did not include concessions for free rent.

Summary of contractual lease expirations

The following table summarizes information with respect to the contractual lease expirations at our properties as of June 30, 2021:


Year			RSF		Percentage of Occupied RSF			Annual Rental Revenue (per RSF)(1)			Percentage of Total Annual Rental Revenue

	2021	(2)		913,052		2.7	%		$	46.74		2.6	%
	2022			2,503,192		7.3	%		$	45.14		6.8	%
	2023			3,472,768		10.1	%		$	40.58		8.5	%
	2024			2,912,682		8.5	%		$	43.28		7.6	%
	2025			2,778,313		8.1	%		$	51.54		8.7	%
	2026			2,077,113		6.0	%		$	48.24		6.1	%
	2027			2,109,753		6.1	%		$	50.48		6.4	%
	2028			2,951,361		8.6	%		$	50.79		9.1	%
	2029			2,132,286		6.2	%		$	53.42		6.9	%
	2030			2,299,958		6.7	%		$	53.53		7.5	%
Thereafter				10,225,279		29.7	%		$	48.19		29.8	%

(1)Represents amounts in effect as of June 30, 2021.

(2)Excludes month-to-month leases aggregating 88,305 RSF as of June 30, 2021.

The following tables present information by market with respect to our lease expirations in North America as of June 30, 2021, for the remainder of 2021, and all of 2022:


	2021 Contractual Lease Expirations (in RSF)											Annual Rental Revenue (per RSF)(3)
Market	Leased		Negotiating/ Anticipating		Targeted for Development/ Redevelopment(1)		Remaining Expiring Leases			Total2)

Greater Boston	57,247		62,312		202,428		35,120			357,107		$	46.37
San Francisco Bay Area	122,534		4,570		—		73,301			200,405		57.99
New York City	30,408		—		—		4,973			35,381		N/A
San Diego	46,586		—		84,359		35,085			166,030		37.40
Seattle	24,990		6,053		—		33,341			64,384		18.62
Maryland	7,268		—		—		76			7,344		35.23
Research Triangle	23,435		—		—		43,911			67,346		30.78
Canada	—		—		—		—			—		—
Non-cluster/other markets	—		—		—		15,055			15,055		86.16
Total	312,468		72,935		286,787		240,862			913,052		$	46.74
Percentage of expiring leases	34	%	8	%	31	%	27	%		100	%

	2022 Contractual Lease Expirations (in RSF)											Annual Rental Revenue (per RSF)(3)
Market	Leased		Negotiating/ Anticipating		Targeted for Development/ Redevelopment(1)		Remaining Expiring Leases(4)			Total

Greater Boston	118,555		149,849		—		275,190		(5)	543,594		$	58.71
San Francisco Bay Area	—		33,498		490,127		233,583			757,208		52.08
New York City	—		14,891		—		3,264			18,155		N/A
San Diego	103,730		—		250,028		211,117			564,875		36.31
Seattle	—		—		51,255		151,092			202,347		34.39
Maryland	7,638		18,090		—		50,865			76,593		29.11
Research Triangle	—		30,039		—		207,409			237,448		22.48
Canada	—		—		—		28,623			28,623		22.57
Non-cluster/other markets	—		—		—		74,349			74,349		44.25
Total	229,923		246,367		791,410		1,235,492			2,503,192		$	45.14
Percentage of expiring leases	9	%	10	%	32	%	49	%		100	%

(1)Represents RSF targeted for development or redevelopment upon expiration of existing in-place leases, primarily related to recently acquired properties. Refer to “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details on value-creation square feet currently included in rental properties.

(2)Excludes month-to-month leases aggregating 88,305 RSF as of June 30, 2021.

(3)Represents amounts in effect as of June 30, 2021.

(4)The largest remaining contractual lease expiration includes one lease for 62,490 RSF in our Research Triangle submarket.

(5)57% of the remaining expiring leases in Greater Boston are located in our Cambridge/Inner Suburbs submarket.

Top 20 tenants

85% of Top 20 Annual Rental Revenue 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 3.3% of our annual rental revenue in effect as of June 30, 2021. 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, 2021 (dollars in thousands, except average market cap):


		Remaining Lease Term(1) (in Years)			Aggregate RSF	Annual Rental Revenue(1)		Percentage of Aggregate Annual Rental Revenue (1)		Investment-Grade Credit Ratings		Average Market Cap(1) (in billions)

	Tenant									Moody’s	S&P
1	Bristol-Myers Squibb Company		7.2		916,234	$	53,100	3.3	%	A2	A+	$	140.0
2	Takeda Pharmaceutical Company Ltd.		8.1		606,249		39,342	2.4		Baa2	BBB+	$	55.8
3	Moderna, Inc.		11.2		855,458		39,341	2.4		—	—	$	48.9
4	Facebook, Inc.		10.5		903,786		38,595	2.4		—	—	$	797.7
5	Eli Lilly and Company		7.5		580,693		37,047	2.3		A2	A+	$	167.4
6	Illumina, Inc.		9.1		891,495		36,118	2.2		Baa3	BBB	$	55.3
7	Sanofi		8.1		494,693		35,040	2.1		A1	AA	$	126.5
8	Novartis AG		7.1		423,914		30,216	1.9		A1	AA-	$	217.7
9	Uber Technologies, Inc.		61.4	(2)	1,009,188		27,379	1.7		—	—	$	84.7
10	Roche		2.8	(3)	546,893		26,040	1.6		Aa3	AA	$	299.6
11	bluebird bio, Inc.		5.9		312,805		23,142	1.4		—	—	$	3.0
12	Maxar Technologies		4.2	(4)	478,000		21,803	1.3		—	—	$	2.1
13	Massachusetts Institute of Technology		7.5		257,626		21,145	1.3		Aaa	AAA	$	—
14	United States Government		13.8		918,516		20,236	1.2		Aaa	AA+	$	—
15	The Children’s Hospital Corporation		17.3		269,816		20,066	1.2		Aa2	AA	$	—
16	Jazz Pharmaceuticals, Inc.		9.2		198,041		20,003	1.2		—	—	$	8.6
17	New York University		10.2		204,691		19,531	1.2		Aa2	AA-	$	—
18	Merck & Co., Inc.		12.9		311,015		19,392	1.2		A1	AA-	$	200.2
19	Pfizer Inc.		3.7		416,979		17,762	1.1		A2	A+	$	207.3
20	FibroGen, Inc.		7.4		234,249		16,896	1.0		—	—	$	3.4
	Total/weighted-average		11.1	(2)	10,830,341	$	562,194	34.4	%

Annual rental revenue and RSF include 100% of each property managed by us in North America.

(1)Based on aggregate annual rental revenue in effect as of June 30, 2021. Refer to the definitions of “Annual rental revenue” and “Investment-grade or publicly traded large cap tenants” in the “Non-GAAP measures and definitions” section within this Item 2 for our methodologies on annual rental revenue from unconsolidated real estate joint ventures and average market capitalization.

(2)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) 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 of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Refer to footnote 1 for additional details. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 8.5 years as of June 30, 2021.

(3)Includes 197,787 RSF expiring in 2022 at our recently acquired property at 651 Gateway Boulevard in our South San Francisco submarket. Upon expiration of the lease, 651 Gateway Boulevard will be redeveloped into a Class A office/laboratory building. Excluding this 197,787 RSF, the weighted-average remaining term of space leased to Roche is 3.4 years.

(4)Represents remaining lease term at two properties with future redevelopment and development opportunities. The leases with this tenant were in place when we acquired the property during the three months ended December 31, 2019.

Locations of properties

The locations of our properties are diversified among a number of life science, agtech, and technology cluster markets. The following table sets forth the total RSF, number of properties, and annual rental revenue in effect as of June 30, 2021, in each of our markets in North America (dollars in thousands, except per RSF amounts):


	RSF						Number of Properties	Annual Rental Revenue
Market	Operating	Development	Redevelopment	Total	% of Total			Total		% of Total		Per RSF
Greater Boston	9,893,984	510,116	490,545	10,894,645	27	%	77	$	579,594	36	%	$	61.32
San Francisco Bay Area	8,046,553	368,149	92,147	8,506,849	21		66	408,038		25		61.46
New York City	1,160,472	—	120,027	1,280,499	3		5	83,961		5		72.80
San Diego	7,102,797	341,891	117,212	7,561,900	19		88	263,165		16		39.49
Seattle	2,628,577	—	213,976	2,842,553	7		40	108,354		7		42.26
Maryland	3,593,787	84,264	344,226	4,022,277	10		50	95,592		6		26.88
Research Triangle	3,137,115	410,000	325,936	3,873,051	10		35	71,093		4		24.42
Canada	268,551	—	—	268,551	1		3	5,164		—		24.98
Non-cluster/other markets	600,709	—	—	600,709	1		13	11,174		1		40.41
Properties held for sale	225,849	—	—	225,849	1		4	6,168		—		N/A
North America	36,658,394	1,714,420	1,704,069	40,076,883	100	%	381	$	1,632,303	100	%	$	48.65
		3,418,489

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:


	Operating Properties							Operating and Redevelopment Properties
Market	6/30/21			3/31/21		6/30/20		6/30/21		3/31/21		6/30/20
Greater Boston	95.5	%	(1)	96.2	%	98.2	%	91.0	%	91.5	%	95.6	%
San Francisco Bay Area	94.0		(1)(2)	95.4		94.7		92.9		94.3		90.6
New York City	99.4			99.4		97.1		90.1		89.8		86.2
San Diego	93.8		(1)	93.3		91.8		92.3		90.3		90.8
Seattle	97.6			96.8		95.1		90.2		89.6		95.1
Maryland	98.9			97.9		93.9		90.3		90.4		93.2
Research Triangle	92.8		(1)	90.8		96.8		84.1		73.7		96.8
Subtotal	95.2			95.3		95.1		90.9		89.9		92.6
Canada	77.0			81.6		90.0		77.0		81.6		90.0
Non-cluster/other markets	46.0			52.6		70.8		46.0		52.6		70.8
North America	94.3	%	(1)	94.5	%	94.8	%	90.1	%	89.2	%	92.3	%

(1)Excludes 1.4 million RSF, or 3.8%, of vacancy at recently acquired properties in our North America markets, representing lease-up opportunities that are expected to provide incremental annual rental revenues in excess of $55 million. Approximately 35% of the vacant 1.4 million RSF is currently under leased/negotiating, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.1% as of June 30, 2021. The following table provides vacancy detail for our recent acquisitions:


		As of June 30, 2021					Percentage of Vacancy Leased/Negotiating		Incremental Projected Annual Rental Revenue Upon Full Lease-Up
		Vacant	Occupancy Impact
Property	Market/Submarket	RSF	Region		Consolidated
Alexandria Center® for Life Science – Durham	Research Triangle/Research Triangle	204,034	6.5	%	0.6	%	70	%	>$55 million
601, 611, and 651 Gateway Boulevard	San Francisco Bay Area/South San Francisco	310,863	3.9	%	0.9		20
Alexandria Center® for Life Science – Fenway	Greater Boston/Fenway	96,992	1.0	%	0.3		39
SD Tech by Alexandria	San Diego/Sorrento Mesa	82,566	1.2	%	0.2		9
Other acquisitions	Various	693,501	N/A		1.8		34
		1,387,956			3.8	%	35	%

(2)Decline from March 31, 2021, is due to the expiration of two leases aggregating 131,069 RSF in our South San Francisco submarket, of which 96% has been re-leased and is expected to be occupied by the new tenants over the next few quarters.

Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

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 properties located in collaborative life science, agtech, and technology campuses in AAA innovation clusters. These projects are focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase 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 get the property ready for its intended use and include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements.

As of the date of this report, construction activities were in process at all of our active construction projects. Construction workers continue to observe social distancing and follow rules that restrict gatherings of large groups of people in close proximity, as

well as adhere to other appropriate measures that may slow the pace of construction.

Our investments in real estate consisted of the following as of June 30, 2021 (dollars in thousands):


			Development and Redevelopment
	Operating		Under Construction		Near Term			Intermediate Term		Future		Subtotal		Total
Investments in real estate
Book value as of June 30, 2021(1)	$	20,575,715	$	1,858,986	$	1,224,340		$	578,541	$	879,729	$	4,541,596	$	25,117,311

Square footage
Operating	36,658,394		—		—			—		—		—		36,658,394
New Class A development and redevelopment properties	—		3,418,489		5,740,386		(2)	3,189,951		13,073,721		25,422,547		25,422,547
Value-creation square feet currently included in rental properties(3)	—		—		(818,052)			(369,173)		(2,785,326)		(3,972,551)		(3,972,551)
Total square footage	36,658,394		3,418,489		4,922,334			2,820,778		10,288,395		21,449,996		58,108,390

(1)Balances exclude 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.

(2)Includes 3,554,058 RSF, currently 89% leased/negotiating, expected to commence vertical construction or redevelopment during 2021/2022. Refer to “New Class A development and redevelopment properties: current projects” within this Item 2 for additional details.

(3)Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details on value-creation square feet currently included in rental properties.

Acquisitions

Our real estate asset acquisitions for the six months ended June 30, 2021, consisted of the following (dollars in thousands):


Property	Submarket/Market	Date of Purchase	Number of Properties	Operating Occupancy			Square Footage									Purchase Price
							Acquisitions With Development and Redevelopment Opportunities(1)
							Future Development	Active Redevelopment	Operating With Future Development/ Redevelopment	Operating(2)		Operating		Total

Six months ended June 30, 2021:
550 Arsenal Street	Cambridge/Inner Suburbs/Greater Boston	4/21/21	1	98	%		775,000	—	260,867	—		—		775,000	(3)		$	130,000
Alexandria Center® for Life Science – Fenway	Fenway/Greater Boston	1/29/21	2	90		(4)	305,000	510,116	311,066	662,079		—		1,788,261				1,483,200	(4)
One Investors Way	Route 128/Greater Boston	4/6/21	1	100			350,000	—	—	240,000	(5)	—		590,000				105,000
840 Winter Street	Route 128/Greater Boston	1/20/21	1	100			—	130,000	—	30,009		—		160,009				58,126
1501-1599 Industrial Road	Greater Stanford/ San Francisco Bay Area	6/22/21	6	88			—	—	103,063	—		—		103,063				112,000
2475 Hanover Street	Greater Stanford/San Francisco Bay Area	4/28/21	1	100			—	—	83,980	—		—		83,980				105,000
6260, 6290, 6310, 6340, and 6350 Sequence Drive	Sorrento Mesa/San Diego	6/10/21	5	100			887,000	—	487,023	—		—		887,000	(3)			298,476
9601, 9605, 9609, 9613, and 9615 Medical Center Drive(6)	Rockville/Maryland	5/12/21	5	100			258,000	94,256	—	595,381		—		947,637				80,382
Other	Various	Various	27	97			1,932,706	246,562	325,983	710,998		80,032	(7)	3,296,281				580,021
			49	95	%		4,507,706	980,934	1,571,982	2,238,467		80,032		8,631,231			$	2,952,205

(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. Refer to “New Class A development and redevelopment properties: current projects” within this Item 2 for additional information on active development and redevelopment projects.

(2)Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.

(3)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operations with future development or redevelopment opportunities. We intend to demolish and develop or redevelop the existing properties upon expiration of the existing in-place leases. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(4)The campus includes an operating property with future redevelopment opportunities at 401 Park Drive, a development project at 201 Brookline Avenue, and a future development opportunity. 401 Park Drive, aggregating 973,145 RSF, is 90% occupied, with an additional 3% of leased space that is under renovation, and has initial stabilized yields of 5.7% and 4.5% (cash basis). We expect to provide total estimated costs and related yields for the development projects at 201 Brookline Avenue and the future development/redevelopment opportunities in the future, subsequent to the commencement of construction. Refer to “New Class A development and redevelopment properties: current projects” within this Item 2 for additional information.

(5)Upon acquisition of this property, we entered into a 12-year lease with Moderna, Inc.

(6)We acquired land subject to two ground leases, aggregating 595,381 RSF, at 9609, 9613, and 9615 Medical Center Drive. We also acquired the land at 9605 Medical Center Drive, where we had previously acquired the building subject to a ground lease during the three months ended March 31, 2020.

(7)Represents the acquisition of our partner’s 43.2% ownership interest in our previously unconsolidated real estate joint venture at 704 Quince Orchard Road for $9.4 million. We completed the redevelopment of this stabilized property during the three months ended June 30, 2019.

Dispositions and sales of partial interest

Our completed dispositions of and sales of partial interest in real estate assets during the six months ended June 30, 2021, consisted of the following (dollars in thousands, except for sales price per RSF):


Property	Submarket/Market	Date of Sale	Interest Sold	RSF	Capitalization Rate(1)		Capitalization Rate (Cash Basis)(1)		Sales Price		Sales Price per RSF		Gain
Six months ended June 30, 2021:
213 East Grand Avenue	South San Francisco/ San Francisco Bay Area	4/22/21	70%	300,930	4.5	%	4.0	%	$	301,000	$	1,429	(2)
Land	Other/San Diego	3/12/21	100%	185,000	N/A		N/A		22,900		N/A		$	19
				485,930					$	323,900			$	19

(1)Capitalization rates are calculated based upon net operating income and net operating income (cash basis) annualized for the quarter preceding the date on which the property is sold.

(2)We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. We accounted for the $103.7 million difference between the consideration received and the book value of the 70% interest sold as an equity transaction, with no gain or loss recognized in earnings.

Sustainability

(1)15 projects have been certified and another 32 projects are in process targeting WELL or Fitwel certification.

(2)Source: Barron’s, “The 10 Most Sustainable REITs, According to Calvert,” February 19, 2021.

(3)Relative to a 2015 baseline for buildings in operation that Alexandria directly manages.

(4)For buildings in operation that Alexandria indirectly and directly manages.

(5)Reflects sum of annual like-for-like progress from 2015 to 2020.

(6)Reflects progress for all buildings in operation in 2020 that Alexandria indirectly and directly manages.

New Class A development and redevelopment properties

Demand for our value-creation development and redevelopment projects of high-quality office/laboratory space, as well as continued operational excellence at our world-class, sophisticated laboratory facilities and strong execution by our team, has translated into record leasing activity.

Under Construction

Projects Expected to Commence Construction in 2021/2022(1)

Incremental Projected Annual Rental Revenues

3.4 Million RSF

3.6 Million RSF

>$545 million

33 Properties

19 Properties

80% Leased/Negotiating

89% Leased/Negotiating

(1)We also expect other projects to commence construction in 2021.

New Class A development and redevelopment properties: recent deliveries

Alexandria Center® for Life Science –

South San Francisco(1)

Alexandria Center® for Life Science –

San Carlos

Alexandria Center® for Life Science –

Long Island City

San Francisco Bay Area/South San Francisco

San Francisco Bay Area/Greater Stanford

New York City/New York City

171,042 RSF

310,177 RSF

32,892 RSF

100% Leased

9877 Waples Street

1165 Eastlake Avenue East

9804 Medical Center Drive

Alexandria Center® for Life Science – Durham(2)

San Diego/Sorrento Mesa

Seattle/Lake Union

Maryland/Rockville

Research Triangle/Research Triangle

63,774 RSF

100,086 RSF

176,832 RSF

326,445 RSF

100% Leased

(1)Image represents 201 Haskins Way in our Alexandria Center® for Life Science – South San Francisco.

(2)Image represents 2400 Ellis Road in our Alexandria Center® for Life Science – Durham campus.

New Class A development and redevelopment properties: recent deliveries (continued)

The following table presents value-creation development and redevelopment of new Class A properties placed into service during the three months ended June 30, 2021 (dollars in thousands):


Property/Market/Submarket	Delivery Date	Our Ownership Interest	RSF Placed in Service				Occupancy Percentage(1)		Total Project			Unlevered Yields
			4Q20	1Q21	2Q21	Total						Initial Stabilized				Initial Stabilized (Cash Basis)
									RSF	Investment
Development projects
Alexandria Center® for Life Science – South San Francisco/San Francisco Bay Area/ South San Francisco	Various	100%	—	—	171,042	171,042		100%	323,190	$	370,000		6.4	%			6.2	%
Alexandria Center® for Life Science – San Carlos/San Francisco Bay Area/Greater Stanford	Various	100%	96,463	99,557	114,157	310,177		100%	526,178	630,000			6.4				6.1
1165 Eastlake Avenue East/Seattle/Lake Union	March 2021	100%	—	100,086	—	100,086		100%	100,086	138,000			6.3		(2)		6.4		(2)
9804 Medical Center Drive/Maryland/Rockville	January 2021	100%	—	176,832	—	176,832		100%	176,832	89,300			8.3				8.0

Redevelopment projects
Alexandria Center® for Life Science – Long Island City/New York City/New York City	Various	100%	17,716	—	15,176	32,892		100%	189,580	184,300			5.5				5.6
9877 Waples Street/San Diego/Sorrento Mesa	December 2020	100%	63,774	—	—	63,774		100%	63,744	31,000			8.8				8.1
Other/San Diego	June 2021	100%	—	—	128,745	128,745		100%	128,745	47,000			8.0		(3)		8.0		(3)
Alexandria Center® for Life Science – Durham/Research Triangle/Research Triangle	June 2021	100%	—	—	326,445	326,445		100%	652,381	245,000			7.5				6.7
Total			177,953	376,475	755,565	1,309,993				$	1,734,600		6.6	%			6.4	%

(1)Relates to total operating RSF placed in service as of the most recent delivery.

(2)Unlevered yields represent aggregate returns for 1165 Eastlake Avenue East, an amenity-rich research headquarters for Adaptive Biotechnologies Corporation, and 1208 Eastlake Avenue East, an adjacent multi-tenant office/laboratory building.

(3)We expect to achieve yields greater than 8.0%.

New Class A development and redevelopment properties: current projects

The Arsenal on the Charles

201 Brookline Avenue

840 Winter Street

Alexandria Center® for Life Science –

South San Francisco(1)

Greater Boston/
Cambridge/Inner Suburbs

Greater Boston/Fenway

Greater Boston/Route 128

San Francisco Bay Area/South San Francisco

360,545 RSF

510,116 RSF

130,000 RSF

152,148 RSF

92% Leased/Negotiating

84% Leased/Negotiating

73% Leased/Negotiating

100% Leased/Negotiating

Alexandria Center® for Life Science –

San Carlos

3160 Porter Drive

Alexandria Center® for Life Science –

Long Island City

3115 Merryfield Row

San Francisco Bay Area/Greater Stanford

New York City/New York City

San Diego/Torrey Pines

216,001 RSF

92,147 RSF

120,027 RSF

146,456 RSF

100% Leased/Negotiating

88% Leased/Negotiating

41% Leased/Negotiating

100% Leased/Negotiating

(1)Image represents 201 Haskins Way in our Alexandria Center® for Life Science – South San Francisco.

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

SD Tech by Alexandria(1)

5505 Morehouse Drive

10277 Scripps Ranch Boulevard

9601 and 9603 Medical Center Drive

9950 Medical Center Drive

San Diego/Sorrento Mesa

San Diego/Other

Maryland/Rockville

195,435 RSF

79,945 RSF

37,267 RSF

94,256 RSF

84,264 RSF

100% Leased/Negotiating

47% Leased/Negotiating

—% Leased/Negotiating

100% Leased/Negotiating

700 Quince Orchard Road

20400 Century Boulevard

Alexandria Center® for Life Science – Durham(2)

Alexandria Center® for AgTech

Alexandria Center® for

Advanced Technologies(3)

Maryland/Gaithersburg

Research Triangle/Research Triangle

169,420 RSF

80,550 RSF

325,936 RSF

160,000 RSF

250,000 RSF

100% Leased/Negotiating

27% Leased/Negotiating

77% Leased/Negotiating

59% Leased/Negotiating

75% Leased/Negotiating

(1)Image represents 10055 Barnes Canyon Road in our SD Tech by Alexandria campus.

(2)Image represents 14 TW Alexander Drive in our Alexandria Center® for Life Science – Durham campus.

(3)Image represents 10 Davis Drive in our Alexandria Center® for Advanced Technologies campus.

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

The following tables set forth a summary of our new Class A development and redevelopment properties under construction, pre-leased/negotiating near-term projects, and key pending acquisition as of June 30, 2021 (dollars in thousands):


Market Property/Submarket		Square Footage				Percentage
	Dev/Redev	In Service	CIP	Total		Leased			Leased/Negotiating			Initial Occupancy(1)
Under construction
Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs	Redev	475,743	360,545	836,288		85	%		92	%			2021
201 Brookline Avenue/Fenway	Dev	—	510,116	510,116		18			84				2022
840 Winter Street/Route 128	Redev	30,009	130,000	160,009		19			73				2022
San Francisco Bay Area
Alexandria Center® for Life Science – South San Francisco/South San Francisco	Dev	171,042	152,148	323,190		100			100			2Q21
Alexandria Center® for Life Science – San Carlos/Greater Stanford	Dev	310,177	216,001	526,178		100			100			4Q20
3160 Porter Drive/Greater Stanford	Redev	—	92,147	92,147		21			88				3Q21
New York City
Alexandria Center® for Life Science – Long Island City/New York City	Redev	69,553	120,027	189,580		41			41			4Q20
San Diego
3115 Merryfield Row/Torrey Pines	Dev	—	146,456	146,456		100			100				2022
SD Tech by Alexandria/Sorrento Mesa	Dev	—	195,435	195,435		100			100				2022
5505 Morehouse Drive/Sorrento Mesa	Redev	—	79,945	79,945		100			100				2021
10277 Scripps Ranch Boulevard/Other	Redev	32,774	37,267	70,041		47			47				2022
Seattle
Other	Redev	246,647	213,976	460,623		51			53				2022
Maryland
9601 and 9603 Medical Center Drive/Rockville	Redev	—	94,256	94,256		—			—				2022
9950 Medical Center Drive/Rockville	Dev	—	84,264	84,264		100			100				1H22
700 Quince Orchard Road/Gaithersburg	Redev	—	169,420	169,420		100			100				2021
20400 Century Boulevard/Gaithersburg	Redev	—	80,550	80,550		27			27				2022
Research Triangle
Alexandria Center® for Life Science – Durham/Research Triangle(2)	Redev	326,445	325,936	652,381		77			77			2Q21/2022
Alexandria Center® for AgTech/Research Triangle(3)	Redev/Dev	180,400	160,000	340,400		55			59				2021
Alexandria Center® for Advanced Technologies/Research Triangle	Dev	—	250,000	250,000	(4)	73		(4)	75		(4)	2H21/2022
		1,842,790	3,418,489	5,261,279		69			80
Pre-leased/negotiating near-term projects and key pending acquisition
Charles Park/Greater Boston/Cambridge(5)	Redev	—	400,000	400,000		—			100
4150 Campus Point Court/San Diego/University Town Center	Dev	—	171,102	171,102		100			100
Other near-term projects expected to commence vertical construction in 2021/2022 (16 properties)(6)	Dev	—	2,982,956	2,982,956		—			87
		—	3,554,058	3,554,058		5			89
		1,842,790	6,972,547	8,815,337		43	%		84	%

(1)Initial occupancy dates are subject to leasing and/or market conditions. Construction disruptions resulting from COVID-19 and observance of social distancing measures may impact construction and occupancy forecasts and will continue to be monitored closely. Multi-tenant projects may have occupancy by tenants over a period of time. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.

(2)The recently acquired Alexandria Center® for Life Science – Durham redevelopment project includes three properties at 40 Moore Drive, 2400 Ellis Road, and 14 TW Alexander Drive. 2400 Ellis Road is 100% leased and was delivered during the three months ended June 30, 2021. We expect stabilized occupancy for the remaining buildings in 2022.

(3)The strategic collaborative agtech campus consists of Phase I at 5 Laboratory Drive, including campus amenities, which was previously delivered, and Phase II at 9 Laboratory Drive.

(4)Represents 150,000 RSF that is 58% leased/negotiating at 8 Davis Drive and 100,000 RSF that is 100% leased at 10 Davis Drive.

(5)We expect to complete this acquisition in December 2021.

(6)Includes 1.8 million RSF related to leases under negotiation/executed letters of intent and 0.8 million RSF related to letters of intent under negotiation.

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


	Our Ownership Interest												Unlevered Yields
Market Property/Submarket			In Service		CIP		Cost to Complete			Total at Completion			Initial Stabilized			Initial Stabilized (Cash Basis)

Under construction
Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs	100	%	$	359,079	$	293,274	$	119,647		$	772,000			6.2	%		5.5	%
201 Brookline Avenue/Fenway	98.0	%	—		398,491		335,509			734,000				6.8	%		6.0	%
840 Winter Street/Route 128	100	%	12,973		52,176		TBD
San Francisco Bay Area
Alexandria Center® for Life Science – South San Francisco/South San Francisco	100	%	177,921		149,407		42,672			370,000				6.4	%		6.2	%
Alexandria Center® for Life Science – San Carlos/Greater Stanford	100	%	388,369		170,932		70,699			630,000				6.4	%		6.1	%
3160 Porter Drive/Greater Stanford	100	%	—		86,951		20,049			107,000				5.2	%		5.0	%
New York City
Alexandria Center® for Life Science – Long Island City/New York City	100	%	52,421		117,509		14,370			184,300				5.5	%		5.6	%
San Diego
3115 Merryfield Row/Torrey Pines	100	%	—		87,222		64,778			152,000				6.2	%		6.2	%
SD Tech by Alexandria/Sorrento Mesa	50.0	%	—		45,291		135,709			181,000				7.2	%		6.6	%
5505 Morehouse Drive/Sorrento Mesa	100	%	—		28,001		38,999			67,000				6.9	%		7.0	%
10277 Scripps Ranch Boulevard/Other	100	%	11,786		13,433		TBD
Seattle
Other	100	%	54,321		66,492		TBD
Maryland
9601 and 9603 Medical Center Drive/Rockville	100	%	—		28,121		TBD
9950 Medical Center Drive/Rockville	100	%	—		41,297		18,303			59,600				8.6	%		7.7	%
700 Quince Orchard Road/Gaithersburg	100	%	—		50,977		28,523			79,500				8.6	%		7.3	%
20400 Century Boulevard/Gaithersburg	100	%	—		9,824		TBD
Research Triangle
Alexandria Center® for Life Science – Durham/Research Triangle	100	%	88,265		73,127		83,608			245,000				7.5	%		6.7	%
Alexandria Center® for AgTech/Research Triangle	100	%	91,175		83,057		18,768			193,000				7.1	%		7.0	%
Alexandria Center® for Advanced Technologies/Research Triangle	100	%	—		63,404		87,596			151,000				7.5	%		7.3	%
			$	1,236,310	$	1,858,986	$	1,290,000	(1)	$	4,390,000	(1)

(1)Amounts rounded to the nearest $10 million.

New Class A development and redevelopment properties: summary of pipeline

The following table summarizes the key information for all our development and redevelopment projects in North America as of June 30, 2021 (dollars in thousands):


Market Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Development and Redevelopment						Total
					Under Construction	Near Term		Intermediate Term	Future

Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs	100	%	$	320,937	360,545	200,000		—	12,502		573,047
Alexandria Center® for Life Science – Fenway/Fenway	(1)		522,662		510,116	—		305,000	—		815,116
840 Winter Street/Route 128	100	%	52,176		130,000	—		—	—		130,000
325 Binney Street/Cambridge	100	%	181,094		—	450,000		—	—		450,000
57 Coolidge Avenue/Cambridge/Inner Suburbs	75.0	%	50,620		—	275,000		—	—		275,000
15 Necco Street/Seaport Innovation District	93.7	%	196,456		—	350,000		—	—		350,000
Reservoir Woods/Route 128	100	%	45,592		—	202,428		—	752,845		955,273	(2)
10 Necco Street/Seaport Innovation District	100	%	92,731		—	—		175,000	—		175,000
215 Presidential Way/Route 128	100	%	6,808		—	—		112,000	—		112,000
550 Arsenal Street/Cambridge/Inner Suburbs	100	%	54,285		—	—		—	775,000		775,000	(2)
Alexandria Technology Square®/Cambridge	100	%	7,881		—	—		—	100,000		100,000
380 and 420 E Street/Seaport Innovation District	100	%	118,560		—	—		—	1,000,000		1,000,000	(2)
99 A Street/Seaport Innovation District	95.0	%	45,940		—	—		—	235,000		235,000
One Upland Road, 100 Tech Drive, and One Investors Way/Route 128	100	%	13,769		—	—		—	1,100,000		1,100,000
231 Second Avenue/Route 128	100	%	1,093		—	—		—	32,000		32,000
Other value-creation projects	100	%	9,988		—	—		—	16,955		16,955
			1,720,592		1,000,661	1,477,428		592,000	4,024,302		7,094,391
San Francisco Bay Area
Alexandria Center® for Life Science – South San Francisco/ South San Francisco	100	%	149,407		152,148	—		—	—		152,148
Alexandria Center® for Life Science – San Carlos/Greater Stanford	100	%	439,612		216,001	—		700,000	587,000	(2)	1,503,001
3160 Porter Drive/Greater Stanford	100	%	86,951		92,147	—		—	—		92,147
Alexandria Technology Center® – Gateway/South San Francisco	46.8	%	70,219		—	517,010	(2)	—	291,000		808,010
901 California Avenue/Greater Stanford	100	%	1,680		—	56,924		—	—		56,924
88 Bluxome Street/SoMa	100	%	313,432		—	1,070,925		—	—		1,070,925
1450 Owens Street/Mission Bay	100	%	60,904		—	—		191,000	—		191,000
3825 and 3875 Fabian Way/Greater Stanford	100	%	—		—	—		250,000	228,000		478,000	(2)
3450 and 3460 Hillview Avenue/Greater Stanford	100	%	—		—	—		76,951	—		76,951	(2)
East Grand Avenue/South San Francisco	30.0	%	6,103		—	—		—	90,000		90,000
2475 Hanover Street/Greater Stanford	100	%	—		—	—		—	83,980		83,980	(2)
Other value-creation projects	100	%	—		—	—		—	25,000		25,000
			$	1,128,308	460,296	1,644,859		1,217,951	1,304,980		4,628,086
(1)We have a 98.0% ownership interest in 201 Brookline Avenue, which is currently under construction. We have a 100% ownership interest in the intermediate-term development project. (2)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property and commence future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

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


Market Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Development and Redevelopment							Total
					Under Construction	Near Term		Intermediate Term		Future

New York City
Alexandria Center® for Life Science – Long Island City/New York City	100	%	$	117,509	120,027	—		—		—		120,027
47-50 30th Street/New York City	100	%	30,094		—	135,938		—		—		135,938
Alexandria Center® for Life Science – New York City/New York City	100	%	66,556		—	—		550,000	(1)	—		550,000
219 East 42nd Street/New York City	100	%	—		—	—		—		579,947		579,947	(2)
			214,159		120,027	135,938		550,000		579,947		1,385,912
San Diego
3115 Merryfield Row/Torrey Pines	100	%	87,222		146,456	—		—		—		146,456
SD Tech by Alexandria/Sorrento Mesa	50.0	%	131,727		195,435	190,074		160,000		333,845		879,354
5505 Morehouse Drive/Sorrento Mesa	100	%	28,001		79,945	—		—		—		79,945
10277 Scripps Ranch Boulevard/Other	100	%	13,433		37,267	32,774	(2)	—		—		70,041
11255 and 11355 North Torrey Pines Road/Torrey Pines	100	%	109,564		—	288,956		—		—		288,956	(2)
10931 and 10933 North Torrey Pines Road/Torrey Pines	100	%	—		—	242,000		—		—		242,000	(2)
Alexandria Point/University Town Center	55.0	%	108,620		—	596,102		—		324,445	(2)	920,547
University District/University Town Center	100	%	61,401		—	—		600,000	(3)	—		600,000	(2)
10975 and 10995 Torreyana Road/Torrey Pines	100	%	48,250		—	—		—		125,280		125,280	(2)
5200 Illumina Way/University Town Center	51.0	%	12,632		—	—		—		451,832		451,832
Sequence District by Alexandria/Sorrento Mesa	100	%	37,383		—	—		—		1,798,915		1,798,915	(2)
9444 Waples Street/Sorrento Mesa	100	%	—		—	—		—		149,000		149,000	(2)
4045 and 4075 Sorrento Valley Boulevard/Sorrento Valley	100	%	7,667		—	—		—		149,000		149,000	(2)
Other value-creation projects	100	%	6,876		—	54,000		—		50,000		104,000
			652,776		459,103	1,403,906		760,000		3,382,317		6,005,326
Seattle
1150 Eastlake Avenue East/Lake Union	100	%	78,423		—	310,000		—		—		310,000
701 Dexter Avenue North/Lake Union	100	%	61,971		—	217,000		—		—		217,000
601 Dexter Avenue North/Lake Union	100	%	36,510		—	—		—		188,400		188,400	(2)
1010 4th Avenue South/SoDo	100	%	50,315		—	—		—		544,825		544,825
830 4th Avenue South/SoDo	100	%	—		—	—		—		52,488		52,488	(2)
Other value-creation projects	100	%	72,483		213,976	51,255	(2)	—		35,000		300,231
			$	299,702	213,976	578,255		—		820,713		1,612,944
(1)We are currently negotiating a long-term ground lease with the City of New York for the future site of a new building approximating 550,000 RSF. (2)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property and commence future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information. (3)Includes our recently acquired properties at 4555 Executive Drive and 9363, 9373, and 9393 Towne Centre Drive in our University Town Center submarket, which are currently under evaluation for development, subject to future market conditions.

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


Market Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Development and Redevelopment				Total
					Under Construction	Near Term	Intermediate Term	Future

Maryland
9601 and 9603 Medical Center Drive and Excess Land/Rockville	100	%	$	42,465	94,256	—	—	258,000	352,256
9950 Medical Center Drive/Rockville	100	%	41,297		84,264	—	—	—	84,264
700 Quince Orchard Road/Gaithersburg	100	%	50,977		169,420	—	—	—	169,420
20400 Century Boulevard/Gaithersburg	100	%	9,824		80,550	—	—	—	80,550
Alexandria Center® at Traville Gateway/Rockville	100	%	30,681		—	410,000	—	70,000	480,000
9808 Medical Center Drive/Rockville	100	%	5,701		—	90,000	—	—	90,000
			180,945		428,490	500,000	—	328,000	1,256,490
Research Triangle
Alexandria Center® for Life Science – Durham/Research Triangle	100	%	115,791		325,936	—	—	885,000	1,210,936
Alexandria Center® for Advanced Technologies/Research Triangle	100	%	81,525		250,000	—	70,000	700,000	1,020,000
Alexandria Center® for AgTech, Phase II/Research Triangle	100	%	83,057		160,000	—	—	—	160,000
Other value-creation projects	100	%	4,185		—	—	—	76,262	76,262
			284,558		735,936	—	70,000	1,661,262	2,467,198
Other value-creation projects	100	%	60,556		—	—	—	972,200	972,200
Total pipeline as of June 30, 2021			$	4,541,596	3,418,489	5,740,386	3,189,951	13,073,721	25,422,547	(1)

Key pending acquisitions
Charles Park/Cambridge(2)					—	400,000	—	—	400,000
Mercer Mega Block/Lake Union					—	800,000	—	—	800,000
					3,418,489	6,940,386	3,189,951	13,073,721	26,622,547

(1)Total square footage includes 3,972,551 RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(2)We expect to complete this acquisition in December 2021.

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, 2020, and our subsequent quarterly reports on Form 10-Q. We believe 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 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 held for sale assets 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 significant termination fees are not related to the operating performance of our real estate assets as they result from strategic, corporate-level 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 decline 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 within this Item 2. Key items included in net income attributable to Alexandria’s common stockholders for the three and six months ended June 30, 2021 and 2020, were as follows (in millions, except per share amounts):


	Three Months Ended June 30,									Six Months Ended June 30,
	2021			2020		2021		2020		2021		2020		2021		2020
	Amount					Per Share – Diluted				Amount				Per Share – Diluted
Unrealized gains on non-real estate investments	$	244.0		$	171.7	$	1.67	$	1.38	$	197.8	$	154.5	$	1.39	$	1.25
Realized gains on non-real estate investments	34.8		(1)	—		0.24		—		57.7		—		0.41		—
Gain on sales of real estate	—			—		—		—		2.8		—		0.02		—
Impairment of real estate	(4.9)			(13.2)		(0.03)		(0.11)		(10.1)		(22.9)		(0.07)		(0.18)
Impairment of non-real estate investments	—			(4.7)		—		(0.04)		—		(24.5)		—		(0.20)
Loss on early extinguishment of debt	—			—		—		—		(67.3)		—		(0.47)		—
Total	$	273.9		$	153.8	$	1.88	$	1.23	$	180.9	$	107.1	$	1.28	$	0.87

(1)Refer to “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders“ in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

Same properties

We supplement an evaluation of our results of operations with an evaluation of operating performance of certain of our properties, referred to as Same Properties. For additional information on the determination of our Same Properties portfolio, refer to the definition of “Same property comparisons” in the “Non-GAAP measures and definitions” section within this Item 2. The following table presents information regarding our Same Properties for the three and six months ended June 30, 2021:


	June 30, 2021
	Three Months Ended	Six Months Ended
Percentage change in net operating income over comparable period from prior year	3.7%	4.4%
Percentage change in net operating income (cash basis) over comparable period from prior year	7.8%	7.4%
Operating margin	73%	73%
Number of Same Properties	260	250
RSF	25,523,121	23,730,512
Occupancy – current-period average	95.0%	96.5%
Occupancy – same-period prior-year average	95.1%	96.2%

The following table reconciles the number of Same Properties to total properties for the six months ended June 30, 2021:


Development – under construction						Properties
9950 Medical Center Drive						1
The Alexandria Center® for Life Science – San Carlos						2
3115 Merryfield Row						1
Alexandria Center® for Life Science – South San Francisco						1
Alexandria Center® for AgTech						2
Alexandria Center® for Advanced Technologies						2
201 Brookline Avenue						1
SD Tech by Alexandria						1
						11
Development – placed into service after January 1, 2020						Properties
9804 Medical Center Drive						1
1165 Eastlake Avenue East						1
						2
Redevelopment – under construction						Properties
5505 Morehouse Drive						1
Alexandria Center® for Life Science – Long Island City						1
3160 Porter Drive						1
The Arsenal on the Charles						11
700 Quince Orchard Road						1
Alexandria Center® for Life Science – Durham						3
840 Winter Street						1
20400 Century Boulevard						1
10277 Scripps Ranch Boulevard						1
9601 and 9603 Medical Center Drive						2
Other						6
						29
Redevelopment – placed into service after January 1, 2020						Properties
9877 Waples Street						1
Other						1
						2


Acquisitions after January 1, 2020						Properties
3181 Porter Drive						1
275 Grove Street						1
601, 611, and 651 Gateway Boulevard						3
3330, 3412, 3450, and 3460 Hillview Avenue						4
9605, 9609, 9613, and 9615 Medical Center Drive						4
9808 and 9868 Scranton Road						2
Alexandria Center® for Life Science – Durham						13
Reservoir Woods						3
One Upland Road						1
830 4th Avenue South						1
11255 and 11355 North Torrey Pines Road						2
Sequence District by Alexandria						7
380 and 420 E Street						2
Alexandria Center® for Life Science – Fenway						1
550 Arsenal Street						1
1501-1599 Industrial Road						6
One Investors Way						1
2475 Hanover Street						1
10975 and 10995 Torreyana Road						1
9444 Waples Street						1
Other						22
						78
Unconsolidated real estate JVs						5
Properties held for sale						4
Total properties excluded from Same Properties						131
Same Properties						250
Total properties in North America as of June 30, 2021						381

Comparison of results for the three months ended June 30, 2021, to the three months ended June 30, 2020

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the three months ended June 30, 2021, compared to the three months ended June 30, 2020. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for definitions of “Tenant recoveries” and “Net operating income” and their reconciliations from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income (loss), respectively.

For additional discussion related to the COVID-19 pandemic and its impact to us, refer to “The COVID-19 pandemic” section within this Item 2. In addition, refer to “Item 1A. Risk factors” in our annual report on Form 10-K for the year ended December 31, 2020, for a discussion about risks that COVID-19 directly or indirectly may pose to our business.


	Three Months Ended June 30,
(Dollars in thousands)	2021		2020		$ Change		% Change
Income from rentals:
Same Properties	$	321,450	$	311,627	$	9,823	3.2	%
Non-Same Properties	75,354		29,928		45,426		151.8
Rental revenues	396,804		341,555		55,249		16.2

Same Properties	97,669		88,682		8,987		10.1
Non-Same Properties	13,898		5,619		8,279		147.3
Tenant recoveries	111,567		94,301		17,266		18.3

Income from rentals	508,371		435,856		72,515		16.6

Same Properties	104		14		90		642.9
Non-Same Properties	1,144		1,086		58		5.3
Other income	1,248		1,100		148		13.5

Same Properties	419,223		400,323		18,900		4.7
Non-Same Properties	90,396		36,633		53,763		146.8
Total revenues	509,619		436,956		72,663		16.6

Same Properties	113,673		105,693		7,980		7.6
Non-Same Properties	30,282		18,218		12,064		66.2
Rental operations	143,955		123,911		20,044		16.2

Same Properties	305,550		294,630		10,920		3.7
Non-Same Properties	60,114		18,415		41,699		226.4
Net operating income	$	365,664	$	313,045	$	52,619	16.8	%

Net operating income – Same Properties	$	305,550	$	294,630	$	10,920	3.7	%
Straight-line rent revenue	(15,394)		(23,829)		8,435		(35.4)
Amortization of acquired below-market leases	(4,527)		(5,940)		1,413		(23.8)
Net operating income – Same Properties (cash basis)	$	285,629	$	264,861	$	20,768	7.8	%

Income from rentals

Total income from rentals for the three months ended June 30, 2021, increased by $72.5 million, or 16.6%, to $508.4 million, compared to $435.9 million for the three months ended June 30, 2020, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Rental revenues

Total rental revenues for the three months ended June 30, 2021, increased by $55.2 million, or 16.2%, to $396.8 million, compared to $341.6 million for the three months ended June 30, 2020. The increase was primarily due to an increase in rental revenues from our Non-Same Properties aggregating $45.4 million primarily related to 1.3 million RSF of development and redevelopment projects placed into service subsequent to April 1, 2020, and 68 operating properties aggregating 7.2 million RSF acquired subsequent to April 1, 2020.

Rental revenues from our Same Properties for the three months ended June 30, 2021, increased by $9.8 million, or 3.2%, to $321.5 million, compared to $311.6 million for the three months ended June 30, 2020. The increase was primarily due to a $10.5 million increase in rental revenues from rental rate increases on lease renewals and re-leasing of space since April 1, 2020.

Tenant recoveries

Tenant recoveries for the three months ended June 30, 2021, increased by $17.3 million, or 18.3%, to $111.6 million, compared to $94.3 million for the three months ended June 30, 2020. The increase was primarily from our Non-Same Properties related to our development and redevelopment projects placed into service and properties acquired subsequent to April 1, 2020, as discussed above under “Rental revenues.”

Same Properties’ tenant recoveries for the three months ended June 30, 2021, increased by $9.0 million, or 10.1%, primarily due to an increase in recoverable contract services, higher property tax expenses resulting from higher assessed values of our properties, and higher property insurance during the three months ended June 30, 2021, as discussed under “Rental operations” below. As of June 30, 2021, 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

Rental operations

Total rental operating expenses for the three months ended June 30, 2021, increased by $20.0 million, or 16.2%, to $144.0 million, compared to $123.9 million for the three months ended June 30, 2020. The increase was primarily due to incremental expenses related to our Non-Same Properties, which consist of development and redevelopment projects placed into service and acquired properties, as discussed above under “Income from rentals.”

Same Properties’ rental operating expenses increased by $8.0 million, or 7.6%, to $113.7 million during the three months ended June 30, 2021, compared to $105.7 million for the three months ended June 30, 2020. The increase was primarily the result of higher utility expenses, higher contract services expenses, higher property insurance, and an increase in recoverable property tax expenses resulting from higher assessed values of our properties.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2021, increased by $6.1 million, or 19.2%, to $37.9 million, compared to $31.8 million for the three months ended June 30, 2020. The increase was primarily due to costs related to the continued growth in the depth and breadth of our operations in multiple markets, including development and redevelopment projects placed into service and properties acquired, as discussed above under “Income from rentals.” As a percentage of net operating income, our general and administrative expenses for the trailing twelve months ended June 30, 2021 and 2020, were 9.8% and 10.3%, respectively.

Interest expense

Interest expense for the three months ended June 30, 2021 and 2020, consisted of the following (dollars in thousands):


	Three Months Ended June 30,
Component	2021			2020			Change
Gross interest	$	78,650		$	75,807		$	2,843
Capitalized interest	(43,492)			(30,793)			(12,699)
Interest expense	$	35,158		$	45,014		$	(9,856)

Average debt balance outstanding(1)	$	8,805,891		$	7,461,439		$	1,344,452
Weighted-average annual interest rate(2)	3.6		%	4.1		%	(0.5)		%

(1)Represents the average debt balance outstanding during the respective periods.

(2)Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.

The net change in interest expense during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, resulted from the following (dollars in thousands):


Component	Interest Rate(1)			Effective Date	Change
Increases in interest incurred due to:
Issuances of debt:
$1.0 billion unsecured senior notes payable due 2033		1.97	%	August 2020	$	4,723
$900 million unsecured senior notes payable due 2032 – green bond		2.12	%	February 2021	4,557
$850 million unsecured senior notes payable due 2051		3.08	%	February 2021	6,394
Other increase in interest					99
Total increases					15,773
Decreases in interest incurred due to:
Repayments of debt:
Secured notes payable		Various		December 2020	(990)
$500 million unsecured senior notes payable due 2023		4.04	%	September 2020	(4,915)
$650 million unsecured senior notes payable due 2024 – green bond		4.03	%	March 2021	(6,292)
Fluctuations in interest rate and average balance:
Unsecured senior line of credit					(332)
$1.5 billion commercial paper program					(401)
Total decreases					(12,930)
Change in gross interest					2,843
Increase in capitalized interest					(12,699)
Total change in interest expense					$	(9,856)

(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2021, increased by $22.0 million, or 13.1%, to $190.1 million, compared to $168.0 million for the three months ended June 30, 2020. The increase was primarily due to additional depreciation from 1.3 million RSF of development and redevelopment projects placed into service subsequent to April 1, 2020, and 68 operating properties aggregating 7.2 million RSF acquired subsequent to April 1, 2020.

Impairment of real estate

During the three months ended June 30, 2021, we recognized an impairment charge of $4.9 million, primarily related to two of our real estate properties located in our Seattle market that was classified as held for sale in 2020, to lower the carrying amount of this property to its estimated fair value based on the sales price negotiated in June 2021 less costs to sell. We expect to complete this sale during the third quarter of 2021.

During the three months ended June 30, 2020, we recognized impairment charges of $13.2 million, which primarily consisted of a $10 million write-off of the preacquisition deposit for a previously pending acquisition of an operating tech office property for which our revised economic projections declined from our initial underwriting. We recognized this impairment charge in April 2020 concurrently with the submission of our notice to terminate the transaction.

Investment income

During the three months ended June 30, 2021, we recognized investment income aggregating $304.3 million, which consisted of $60.2 million of realized gains and $244.0 million of unrealized gains. Realized gains consisted primarily of sales of investments and distributions received. Unrealized gains of $244.0 million primarily consisted of increases in fair values of our investments in publicly traded companies and investments in privately held entities that report NAV during the three months ended June 30, 2021.

During the three months ended June 30, 2020, we recognized investment income aggregating $184.7 million, which consisted of $171.7 million of unrealized gains and $13.0 million of realized gains.

For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report. For our impairments accounting policy, refer to the “Investments” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report.

Comparison of results for the six months ended June 30, 2021, to the six months ended June 30, 2020

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for definitions of “Tenant recoveries” and “Net operating income” and their reconciliations from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income, respectively.


	Six Months Ended June 30,
(Dollars in thousands)	2021		2020		$ Change		% Change
Income from rentals:
Same Properties	$	607,884	$	588,729	$	19,155	3.3	%
Non-Same Properties	159,153		90,768		68,385		75.3
Rental revenues	767,037		679,497		87,540		12.9

Same Properties	192,670		179,546		13,124		7.3
Non-Same Properties	27,359		14,418		12,941		89.8
Tenant recoveries	220,029		193,964		26,065		13.4

Income from rentals	987,066		873,461		113,605		13.0

Same Properties	205		140		65		46.4
Non-Same Properties	2,197		3,274		(1,077)		(32.9)
Other income	2,402		3,414		(1,012)		(29.6)

Same Properties	800,759		768,415		32,344		4.2
Non-Same Properties	188,709		108,460		80,249		74.0
Total revenues	989,468		876,875		112,593		12.8

Same Properties	216,827		208,894		7,933		3.8
Non-Same Properties	65,016		44,120		20,896		47.4
Rental operations	281,843		253,014		28,829		11.4

Same Properties	583,932		559,521		24,411		4.4
Non-Same Properties	123,693		64,340		59,353		92.2
Net operating income	$	707,625	$	623,861	$	83,764	13.4	%

Net operating income – Same Properties	$	583,932	$	559,521	$	24,411	4.4	%
Straight-line rent revenue	(32,272)		(42,645)		10,373		(24.3)
Amortization of acquired below-market leases	(6,717)		(9,368)		2,651		(28.3)
Net operating income – Same Properties (cash basis)	$	544,943	$	507,508	$	37,435	7.4	%

Income from rentals

Total income from rentals for the six months ended June 30, 2021, increased by $113.6 million, or 13.0%, to $987.1 million, compared to $873.5 million for the six months ended June 30, 2020, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Rental revenues

Total rental revenues for the six months ended June 30, 2021, increased by $87.5 million, or 12.9%, to $767.0 million, compared to $679.5 million for the six months ended June 30, 2020. The increase was primarily due to an increase in rental revenues from our Non-Same Properties aggregating $68.4 million primarily related to 1.3 million RSF of development and redevelopment projects placed into service subsequent to January 1, 2020, and 78 operating properties aggregating 9.0 million RSF acquired subsequent to January 1, 2020.

Rental revenues from our Same Properties for the six months ended June 30, 2021, increased by $19.2 million, or 3.3%, to $607.9 million, compared to $588.7 million for the six months ended June 30, 2020. The increase was primarily due to a $23.5 million increase in rental revenues from rental rate increases on lease renewals and re-leasing of space since January 1, 2020. This increase was partially offset by a $3.7 million decrease in retail and retail-related and transient parking revenues, due to the continued impact of COVID-19 during the six months ended June 30, 2021.

Tenant recoveries

Tenant recoveries for the six months ended June 30, 2021, increased by $26.1 million, or 13.4%, to $220.0 million, compared to $194.0 million for the six months ended June 30, 2020. This increase was primarily from our Non-Same Properties related to our development and redevelopment projects placed into service and properties acquired subsequent to January 1, 2020, as discussed above under “Rental revenues.”

Same Properties’ tenant recoveries for the six months ended June 30, 2021, increased by $13.1 million, or 7.3%, primarily due to the increase in recoverable contract services, higher property tax expenses resulting from higher assessed values of our properties, higher property insurance, and higher utilities expenses during the six months ended June 30, 2021, as discussed under “Rental operations” below. As of June 30, 2021, 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

Other income

Other income for the six months ended June 30, 2021 and 2020, was $2.4 million and $3.4 million, respectively, primarily consisting of construction management fees and interest income earned during each respective period.

Rental operations

Total rental operating expenses for the six months ended June 30, 2021, increased by $28.8 million, or 11.4%, to $281.8 million, compared to $253.0 million for the six months ended June 30, 2020. The increase was primarily due to incremental expenses related to our Non-Same Properties, which consist of development and redevelopment projects placed into service and acquired properties, as discussed above under “Income from rentals.”

Same Properties’ rental operating expenses increased by $7.9 million, or 3.8%, to $216.8 million during the six months ended June 30, 2021, compared to $208.9 million for the six months ended June 30, 2020. The aggregate $11.9 million increase was primarily the result of higher contract services expenses, recoverable property tax expenses driven by higher assessed values of our properties, higher utility expenses, and higher property insurance. The increase was partially offset by a $4.0 million decrease in retail and retail-related and transient parking operating expenses, due to the impact of COVID-19 during the six months ended June 30, 2021.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2021, increased by $8.1 million, or 12.8%, to $71.9 million, compared to $63.7 million for the six months ended June 30, 2020. The increase was primarily due to costs related to the continued growth in the depth and breadth of our operations in multiple markets, including development and redevelopment projects placed into service and properties acquired, as discussed above under “Income from rentals.” As a percentage of net operating income, our general and administrative expenses for the trailing twelve months ended June 30, 2021 and 2020, were 9.8% and 10.3%, respectively.

Interest expense

Interest expense for the six months ended June 30, 2021 and 2020, consisted of the following (dollars in thousands):


	Six Months Ended June 30,
Component	2021			2020			Change
Gross interest	$	155,003		$	146,226		$	8,777
Capitalized interest	(83,378)			(55,473)			(27,905)
Interest expense	$	71,625		$	90,753		$	(19,128)

Average debt balance outstanding(1)	$	8,773,651		$	7,358,158		$	1,415,493
Weighted-average annual interest rate(2)	3.5		%	4.0		%	(0.5)		%

(1)Represents the average debt balance outstanding during the respective periods.

(2)Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.

The net change in interest expense during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, resulted from the following (dollars in thousands):


Component	Interest Rate(1)			Effective Date	Change
Increases in interest incurred due to:
Issuances of debt:
$700 million unsecured senior notes payable		5.05	%	March 2020	$	8,109
$1.0 billion unsecured senior notes payable		1.97	%	August 2020	9,446
$900 million unsecured senior notes payable - green bond		2.12	%	February 2021	6,734
$850 million unsecured senior notes payable		3.08	%	February 2021	9,449
Other increase in interest					736
Total increases					34,474
Decreases in interest incurred due to:
Repayments of debt:
Secured notes payable		Various		December 2020	(1,979)
$500 million unsecured senior notes payable		4.04	%	September 2020	(9,830)
$650 million unsecured senior notes payable – green bond		4.03	%	March 2021	(9,640)
Fluctuations in interest rate and average balance:
Unsecured senior line of credit					(1,546)
$1.5 billion commercial paper program					(2,702)
Total decreases					(25,697)
Change in gross interest					8,777
Increase in capitalized interest					(27,905)
Total change in interest expense					$	(19,128)

(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

Depreciation and amortization

Depreciation and amortization expense for the six months ended June 30, 2021, increased by $27.4 million, or 8.0%, to $371.0 million, compared to $343.5 million for the six months ended June 30, 2020. The increase was primarily due to additional depreciation from 1.3 million RSF of development and redevelopment projects placed into service subsequent to January 1, 2020, and 78 operating properties aggregating 9.0 million RSF acquired subsequent to January 1, 2020.

Impairment of real estate

During the three months ended December 31, 2020, we recognized impairment charges aggregating $25.2 million upon classification as held for sale of three of our office properties located in our San Francisco Bay Area and Seattle markets to lower the carrying amounts of these properties to their estimated fair values less costs to sell. During the six months ended June 30, 2021, we recognized impairment charges aggregating $10.1 million, primarily related to additional impairment charges for these three properties, based on the sales price negotiated for each property in June 2021 less costs to sell. We expect to complete these sales during the third quarter of 2021.

During the six months ended June 30, 2020, we recognized impairment charges aggregating $15.2 million, which primarily consisted of a $10 million write-off of the preacquisition deposit for a previously pending acquisition of an operating tech office property for which our revised economic projections declined from our initial underwriting. We recognized this impairment charge in April 2020 concurrently with the submission of our notice to terminate the transaction.

Loss on early extinguishment of debt

During the six months ended June 30, 2021, we recognized a loss on early extinguishment of debt of $67.3 million, including the write-off of unamortized loan fees primarily related to the refinancing of our 4.00% unsecured senior notes payable aggregating $650.0 million due in 2024 pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts completed on March 12, 2021.

Equity in earnings of unconsolidated real estate joint ventures

During the six months ended June 30, 2021, we recognized equity in earnings of unconsolidated real estate joint ventures of $6.1 million.

During the six months ended June 30, 2020, we recognized equity in earnings of unconsolidated real estate joint ventures aggregating $777 thousand. This balance consisted of earnings from our unconsolidated real estate joint ventures of approximately $8.4 million, partially offset by an impairment charge on one of our unconsolidated joint ventures. In March 2020, the impact of COVID-19 pandemic led to the temporary closure of a retail center owned by our 1401/1413 Research Boulevard joint venture. We evaluated the recoverability of our investment in this joint venture and recognized a $7.6 million impairment charge to lower the carrying amount of our investment balance, which primarily consisted of real estate, to zero. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Investment income

During the six months ended June 30, 2021, we recognized investment income aggregating $305.3 million, which consisted of $107.5 million of realized gains and $197.8 million of unrealized gains. Realized gains consisted of $116.4 million related to the sales of investments and distributions received, partially offset by impairments of $8.9 million related to investments in privately held entities that do not report NAV. Unrealized gains of $197.8 million during the six months ended June 30, 2021, primarily consisted of increases in fair values of our investments in publicly traded companies and investments in privately held entities that report NAV.

During the six months ended June 30, 2020, we recognized investment income aggregating $162.8 million, which consisted of $8.3 million of realized gains and $154.5 million of unrealized gains.

Gain on sales of real estate

Summary of capital expenditures

Our construction spending for the six months ended June 30, 2021, consisted of the following (in thousands):


Construction Spending	Six Months Ended June 30, 2021
Additions to real estate – consolidated projects	$	1,001,983
Investments in unconsolidated real estate joint ventures	720
Contributions from noncontrolling interests	(30,138)
Construction spending (cash basis)	972,565
Change in accrued construction	20,451
Construction spending for the six months ended June 30, 2021	993,016
Projected construction spending for the six months ending December 31, 2021	916,984
Guidance midpoint	$	1,910,000

The following table summarizes the total projected construction spending for the year ending December 31, 2021, which includes interest, property taxes, insurance, payroll, and other indirect project costs (in thousands):


Projected Construction Spending	Year Ending December 31, 2021
Development, redevelopment, and pre-construction projects(1)	$	1,790,000
Contributions from noncontrolling interests (consolidated real estate joint ventures)		(100,000)
Revenue-enhancing and repositioning capital expenditures		155,000
Non-revenue-enhancing capital expenditures		65,000
Guidance midpoint	$	1,910,000

(1)Refer to the definition of “Development, redevelopment, and pre-construction” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details.

Projected results

We present updated guidance for EPS attributable to Alexandria’s common stockholders – diluted, funds from operations per share attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, based on our current view of existing market conditions and other assumptions for the year ending December 31, 2021, as set forth, in the tables below. The tables below also provide a reconciliation of EPS attributable to Alexandria’s common stockholders – diluted, the most directly comparable GAAP measure, to funds from operations per share and funds from operations per share, as adjusted, non-GAAP measures, and other key assumptions included in our updated guidance for the year ending December 31, 2021. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of “Forward-looking statements” within this Item 2.

2021 Guidance

Summary of Key Changes in Guidance

As of 7/26/21

As of 6/14/21

EPS, FFO per share, and FFO per share, as adjusted

See updates below

Same property net operating income increase

2.0% to 4.0%

1.7% to 3.7%

Same property net operating income increase (cash basis)

4.7% to 6.7%

4.3% to 6.3%

Fixed-charge coverage ratio – fourth quarter of 2021, annualized

Greater than or equal to 5.0x

Greater than or equal to 4.8x


Projected 2021 Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted	As of 7/26/21		As of 6/14/21
Earnings per share(1)	$3.46 to $3.54		$1.60 to $1.70
Depreciation and amortization of real estate assets		5.50		5.50
Gain on sales of real estate		(0.02)		(0.02)
Impairment of real estate – rental properties		0.05		0.04
Allocation of unvested restricted stock awards		(0.04)		(0.03)
Funds from operations per share(2)	$8.95 to $9.03		$7.09 to $7.19
Unrealized (gains) losses on non-real estate investments		(1.39)		0.34
Realized gains on non-real estate investments(3)		(0.41)		(0.17)

Impairment of real estate		0.02		—
Loss on early extinguishment of debt		0.47		0.49
Allocation to unvested restricted stock awards		0.01		(0.01)
Other		0.06		(0.04)
Funds from operations per share, as adjusted(2)	$7.71 to $7.79		$7.70 to $7.80
Midpoint		$7.75		$7.75

(1)Excludes unrealized gains or losses after June 30, 2021, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(2)Refer to the definition of “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(3)Represents realized gains related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company and the sale of investments in two publicly traded biotechnology companies.


Key Assumptions(1) (Dollars in millions)	2021 Guidance
	Low		High
Occupancy percentage for operating properties in North America as of December 31, 2021	94.3%		94.9%
Lease renewals and re-leasing of space:
Rental rate increases	31.0%		34.0%
Rental rate increases (cash basis)	18.0%		21.0%
Same property performance:
Net operating income increase	2.0%		4.0%
Net operating income increase (cash basis)	4.7%		6.7%
Straight-line rent revenue	$	119	$	129
General and administrative expenses	$	146	$	151
Capitalization of interest	$	172	$	182
Interest expense	$	128	$	138

(1)Our assumptions presented in the table above are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under Part I; “Item 1A. Risk factors”; and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020, as well as in “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q.

Key Credit Metrics

2021 Guidance

Net debt and preferred stock to Adjusted EBITDA – fourth quarter of 2021, annualized

Less than or equal to 5.2x

Fixed-charge coverage ratio – fourth quarter of 2021, annualized

Greater than or equal to 5.0x

Consolidated and unconsolidated real estate joint ventures

We present components of balance sheet and operating results information for the noncontrolling interest share of our consolidated real estate joint ventures and for our share of investments in unconsolidated real estate joint ventures to help investors estimate balance sheet and operating results information related to our partially owned entities. These amounts are estimated by computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint ventures that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint ventures to arrive at our proportionate share of each component presented. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for further discussion.


Consolidated Real Estate Joint Ventures
Property/Market/Submarket	Noncontrolling(1) Interest Share				Operating RSF at 100%
75/125 Binney Street/Greater Boston/Cambridge/Inner Suburbs		60.0	%			388,270
225 Binney Street/Greater Boston/Cambridge/Inner Suburbs		70.0	%			305,212
57 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs		25.0	%			—	(2)
409 and 499 Illinois Street/San Francisco Bay Area/Mission Bay		40.0	%			455,069
1500 Owens Street/San Francisco Bay Area/Mission Bay		49.9	%			158,267
Alexandria Technology Center® – Gateway/San Francisco Bay Area/South San Francisco(3)		53.2	%			1,089,852
213 East Grand Avenue/San Francisco Bay Area/South San Francisco		70.0	%			300,930
500 Forbes Boulevard/San Francisco Bay Area/South San Francisco		90.0	%			155,685
Alexandria Center® for Life Science – Millbrae Station/San Francisco Bay Area/South San Francisco		63.0	%			—
Alexandria Point/San Diego/University Town Center(4)		45.0	%			1,337,916
5200 Illumina Way/San Diego/University Town Center		49.0	%			792,687
9625 Towne Centre Drive/San Diego/University Town Center		49.9	%			163,648
SD Tech by Alexandria/San Diego/Sorrento Mesa(5)		50.0	%			677,597
The Eastlake Life Science Campus by Alexandria/Seattle/Lake Union(6)		70.0	%			321,218

Unconsolidated Real Estate Joint Ventures
Property/Market/Submarket	Our Ownership Share(7)				Operating RSF at 100%
1655 and 1725 Third Street/San Francisco Bay Area/Mission Bay		10.0	%			586,208
Menlo Gateway/San Francisco Bay Area/Greater Stanford		49.0	%			772,983
1401/1413 Research Boulevard/Maryland/Rockville		65.0	%	(8)		(9)

(1)In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in five other real estate joint ventures in North America.

(2)We expect to commence vertical construction of 275,000 RSF during 2021.

(3)Includes 601, 611, 651, 681, 685, and 701 Gateway Boulevard in our South San Francisco submarket. Noncontrolling interest share is anticipated to be 49% as we make further contributions into the joint venture over time.

(4)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4161, 4224, and 4242 Campus Point Court in our University Town Center submarket.

(5)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton Road 10055 and 10065 Barnes Canyon Road in our Sorrento Mesa submarket.

(6)Includes 1201 and 1208 Eastlake Avenue East and 199 East Blaine Street in our Lake Union submarket.

(7)In addition to the unconsolidated real estate joint ventures listed, we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

(8)Represents our ownership interest; our voting interest is limited to 50%.

(9)Joint venture with a distinguished retail real estate developer for an approximate 90,000 RSF retail shopping center.

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of June 30, 2021 (dollars in thousands):


		Maturity Date		Stated Rate	Interest Rate(1)				Debt Balance at 100%(2)
Unconsolidated Joint Venture	Our Share
1401/1413 Research Boulevard	65.0%		5/17/22	L+2.50%		3.50	%	(3)	$	26,921
1655 and 1725 Third Street	10.0%		3/10/25	4.50%		4.57	%		598,444
Menlo Gateway, Phase II	49.0%		5/1/35	4.53%		4.59	%		155,579
Menlo Gateway, Phase I	49.0%		8/10/35	4.15%		4.18	%		138,245
									$	919,189

(1)Includes interest expense and amortization of loan fees.

(2)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2021.

(3)This loan is subject to a fixed floor rate of 3.5%.

The following tables present information related to the operating results and financial positions of our consolidated and unconsolidated real estate joint ventures for the three and six months ended June 30, 2021 (in thousands):



	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures				Our Share of Unconsolidated Real Estate Joint Ventures
	June 30, 2021				June 30, 2021
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Total revenues	$	48,353	$	93,115	$	12,207	$	22,719
Rental operations	(12,613)		(24,628)		(2,279)		(3,825)
	35,740		68,487		9,928		18,894
General and administrative	(223)		(332)		(124)		(154)
Interest	—		—		(3,060)		(5,383)
Depreciation and amortization	(16,301)		(31,744)		(4,135)		(7,211)

Fixed returns allocated to redeemable noncontrolling interests(1)	220		437		—		—
	$	19,436	$	36,848	$	2,609	$	6,146

Straight-line rent and below-market lease revenue	$	1,227	$	2,082	$	1,117	$	2,115
Funds from operations(2)	$	35,737	$	68,592	$	6,744	$	13,357

(1)Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in one property in our South San Francisco submarket. These redeemable noncontrolling interests earn a fixed return on their investment rather than participate in the operating results of the property.


	As of June 30, 2021
	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures		Our Share of Unconsolidated Real Estate Joint Ventures
Investments in real estate	$	1,795,944	$	478,137
Cash, cash equivalents, and restricted cash	61,225		7,237
Other assets	228,471		61,995
Secured notes payable	—		(219,705)
Other liabilities	(94,845)		(4,042)
Redeemable noncontrolling interests	(11,567)		—
	$	1,979,228	$	323,622

During the six months ended June 30, 2021 and 2020, our consolidated real estate joint ventures distributed an aggregate of $53.8 million and $38.2 million, respectively, to our joint venture partners. Refer to our consolidated statements of cash flows and Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Investments

We present our equity investments at fair value whenever fair value or NAV is readily available. Adjustments for our limited partnership investments represent changes in reported NAV as a practical expedient to estimate fair value. For investments without readily available fair values, we adjust the carrying amount whenever such investments have an observable price change, and further adjustments are not made until another price change, if any, is observed. Refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for additional information.


	June 30, 2021
(In thousands)	Three Months Ended			Six Months Ended			Year Ended December 31, 2020
Realized gains	$	60,232	(1)	$	107,497	(2)	$	47,288	(3)
Unrealized gains	244,031			197,780			374,033
Investment income	$	304,263		$	305,277		$	421,321


Investments (In thousands)	Cost		Unrealized Gains			Carrying Amount
Publicly traded companies	$	226,831	$	401,095	(4)	$	627,926
Entities that report NAV	362,020		466,065			828,085
Entities that do not report NAV:
Entities with observable price changes	57,237		94,341			151,578
Entities without observable price changes	343,646		—			343,646
Investments held at adjusted carrying value or fair value	$	989,734	$	961,501		1,951,235

Investments accounted for under the equity method of accounting						48,048
Total investments						$	1,999,283	(5)

(1)Includes realized gains of $34.8 million related to the sales of our investments in two publicly traded biotechnology companies.

(2)Includes realized gains of $57.7 million related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company and the sales of investments in two publicly traded biotechnology companies.

(3)Includes impairments of $24.5 million related to investments in privately held entities that do not report NAV.

(4)Includes gross unrealized gains and losses of $416.0 million and $14.9 million, respectively, as of June 30, 2021.

(5)Represents 3.4% of total gross assets as of June 30, 2021.


			Public/Private Mix (Cost)


			Tenant/Non-Tenant Mix (Cost)

Liquidity

Minimal Outstanding Borrowings and Significant Availability on Unsecured Senior Line of Credit

$4.5B

(in millions)

(In millions)

Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program

2,700

Outstanding forward equity sales agreements(1)

778

Cash, cash equivalents, and restricted cash

358

Investments in publicly traded companies

628

Liquidity as of June 30, 2021

4,464

Net Debt and Preferred Stock to Adjusted EBITDA(2)

Fixed-Charge Coverage Ratio(2)

(1)Represents expected net proceeds from the future settlement of the remaining 4.6 million shares outstanding under our forward equity sales agreements as of June 30, 2021.

(2)Quarter annualized. Refer to the definitions of “Net debt and preferred stock to Adjusted EBITDA” and “Fixed-charge coverage ratio” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details.

We expect to meet certain long-term liquidity requirements, such as requirements for development, redevelopment, other construction projects, capital improvements, tenant improvements, property acquisitions, leasing costs, non-revenue-enhancing capital expenditures, scheduled debt maturities, distributions to noncontrolling interests, and payment of dividends through net cash provided by operating activities, periodic asset sales, strategic real estate joint venture capital, long-term secured and unsecured indebtedness, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, and issuances of additional debt and/or equity securities.

We expect to continue meeting our short-term liquidity and capital requirements, as further detailed in this section, generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make the distributions necessary to continue qualifying as a REIT.

Over the next several years, our balance sheet, capital structure, and liquidity objectives are as follows:

•Retain positive cash flows from operating activities after payment of dividends and distributions to noncontrolling interests for investment in development and redevelopment projects and/or acquisitions;

•Improve credit profile and relative long-term cost of capital;

•Maintain diverse sources of capital, including sources from net cash provided by operating activities, unsecured debt, secured debt, selective real estate asset sales, partial interest sales, non-real estate investment sales, and common stock;

•Maintain commitment to long-term capital to fund growth;

•Maintain prudent laddering of debt maturities;

•Maintain solid credit metrics;

•Maintain significant balance sheet liquidity;

•Mitigate variable-rate debt exposure through the reduction of short-term and medium-term variable-rate debt;

•Maintain a large unencumbered asset pool to provide financial flexibility;

•Fund common stock dividends and distributions to noncontrolling interests from net cash provided by operating activities;

•Manage a disciplined level of value-creation projects as a percentage of our gross investments in real estate; and

•Maintain high levels of pre-leasing and percentage leased in value-creation projects.

The following table presents the availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program; outstanding forward equity sales agreements; cash, cash equivalents, and restricted cash; and investments in publicly traded companies as of June 30, 2021 (dollars in thousands):


Description	Stated Rate		Aggregate Commitments		Outstanding Balance		Remaining Commitments/Liquidity
Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program	L+0.815	%	$	3,000,000	$	300,000	$	2,700,000
Outstanding forward equity sales agreements(1)							778,362
Cash, cash equivalents, and restricted cash							357,573
Investments in publicly traded companies							627,926
Total liquidity as of June 30, 2021							$	4,463,861

(1)Represents expected net proceeds from the future settlement of the remaining 4.6 million shares outstanding under our forward equity sales agreements as of June 30, 2021.

Cash, cash equivalents, and restricted cash

As of June 30, 2021, and December 31, 2020, we had $357.6 million and $597.7 million, respectively, of cash, cash equivalents, and restricted cash. We expect existing cash, cash equivalents, and restricted cash, net cash from operating activities, proceeds from real estate asset sales and partial interest sales, non-real estate investment sales, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, issuances of unsecured notes payable, and issuances of common stock to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, distributions to noncontrolling interests, scheduled debt repayments, acquisitions, and certain capital expenditures, including expenditures related to construction activities.

Cash flows

We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows for the six months ended June 30, 2021 and 2020 (in thousands):


	Six Months Ended June 30,
	2021		2020		Change
Net cash provided by operating activities	$	451,814	$	393,657	$	58,157
Net cash used in investing activities	$	(4,136,457)	$	(1,397,060)	$	(2,739,397)
Net cash provided by financing activities	$	3,444,082	$	1,002,969	$	2,441,113

Operating activities

Cash flows provided by operating activities are primarily dependent upon the occupancy level of our asset base, the rental rates of our leases, the collectibility of rent and recovery of operating expenses from our tenants, the timing of completion of development and redevelopment projects, and the timing of acquisitions and dispositions of operating properties. Net cash provided by operating activities for the six months ended June 30, 2021, increased to $451.8 million, compared to $393.7 million for the six months ended June 30, 2020. This increase was primarily attributable to (i) cash flows generated from our highly leased development and redevelopment projects recently placed into service, (ii) income-producing acquisitions since January 1, 2020, and (iii) increases in rental rates on lease renewals and re-leasing of space since January 1, 2020.

Investing activities

Cash used in investing activities for the six months ended June 30, 2021 and 2020, consisted of the following (in thousands):


	Six Months Ended June 30,				Increase (Decrease)
	2021		2020
Sources of cash from investing activities:
Sales of non-real estate investments	$	162,550	$	68,468	$	94,082
Proceeds from sales of real estate	25,695		—		25,695
Return of capital from unconsolidated real estate joint ventures	—		20,225		(20,225)
Change in escrow deposits	—		18,719		(18,719)
	188,245		107,412		80,833
Uses of cash for investing activities:
Purchases of real estate	2,947,469		699,901		2,247,568
Additions to real estate	1,001,983		725,742		276,241
Acquisition of interest in unconsolidated real estate joint ventures	9,048		—		9,048
Investments in unconsolidated real estate joint ventures	720		2,861		(2,141)
Change in escrow deposits	131,974		—		131,974
Additions to non-real estate investments	233,508		75,968		157,540
	4,324,702		1,504,472		2,820,230

Net cash used in investing activities	$	4,136,457	$	1,397,060	$	2,739,397

The increase in net cash used in investing activities for the six months ended June 30, 2021, was primarily due to an increased use of cash for property acquisitions and additions to real estate, partially offset by increased proceeds from sales of non-real estate investments and sales of real estate. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Financing activities

Cash flows provided by financing activities for the six months ended June 30, 2021 and 2020, consisted of the following (in thousands):


	Six Months Ended June 30,
	2021		2020		Change
Repayments of borrowings from secured notes payable	$	(16,250)	$	(3,088)	$	(13,162)
Proceeds from issuance of unsecured senior notes payable	1,743,716		699,532		1,044,184
Repayments of unsecured senior notes payable	(650,000)		—		(650,000)
Premium paid for early extinguishment of debt	(66,829)		—		(66,829)
Borrowings from unsecured senior line of credit	2,101,000		1,470,000		631,000
Repayments of borrowings from unsecured senior line of credit	(2,101,000)		(1,414,000)		(687,000)
Proceeds from issuance under commercial paper program	12,290,000		8,179,900		4,110,100
Repayments of borrowings from commercial paper program	(12,090,000)		(8,179,900)		(3,910,100)
Payments of loan fees	(16,870)		(7,957)		(8,913)
Changes related to debt	1,193,767		744,487		449,280

Contributions from and sales of noncontrolling interests	357,597		55,775		301,822
Distributions to and purchases of noncontrolling interests	(53,812)		(38,482)		(15,330)
Proceeds from the issuance of common stock	2,266,464		504,338		1,762,126
Dividend payments	(311,760)		(256,259)		(55,501)
Taxes paid related to net settlement of equity awards	(8,174)		(6,890)		(1,284)
Net cash provided by financing activities	$	3,444,082	$	1,002,969	$	2,441,113

Capital resources

We expect that our principal liquidity needs for the year ending December 31, 2021, will be satisfied by the following multiple sources of capital, as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.


Key Sources and Uses of Capital (In millions)	As of 7/26/21
	Range				Midpoint		Certain Completed Items
Sources of capital:
Net cash provided by operating activities after dividends	$	210	$	250	$	230
Incremental debt	1,215		875		1,045		see below
2020 debt capital proceeds held in cash at the beginning of 2021	150		250		200
Real estate dispositions and partial interest sales (refer to the “Dispositions and sales of partial interest” section within Item 2 for additional information)	1,670		2,170		1,920		$	579
Common equity	2,975		3,975		3,475		$	3,048	(1)
Total sources of capital	$	6,220	$	7,520	$	6,870

Uses of capital:
Construction (refer to the “Summary of capital expenditures” section within Item 2 for additional information)	$	1,760	$	2,060	$	1,910
Acquisitions (refer to the “Acquisitions” section within Item 2 for additional information)	4,460		5,460		4,960		$	3,340

Total uses of capital	$	6,220	$	7,520	$	6,870

Incremental debt (included above):
Issuance of unsecured senior notes payable	$	1,750	$	1,750	$	1,750	$	1,750
Principal repayments of unsecured senior notes payable	(650)		(650)		(650)		$	(650)
Unsecured senior line of credit, commercial paper, and other	115		(225)		(55)
Incremental debt	$	1,215	$	875	$	1,045

(1)Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional details on our June 2021 public offering of common stock. During the six months ended June 30, 2021, we issued 13.8 million shares of common stock and received net proceeds of $2.3 billion. We expect to issue 4.6 million shares in the second half of 2021 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $778.4 million.

The key assumptions behind the sources and uses of capital in the table above include a favorable capital market environment, performance of our core operating properties, lease-up and delivery of current and future development and redevelopment projects, and leasing activity. Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under Part I; “Item 1A. Risk factors”; and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020; as well as “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q. We expect to update our forecast of sources and uses of capital on a quarterly basis.

Sources of capital

Net cash provided by operating activities after dividends

We expect to retain $210.0 million to $250.0 million of net cash flows from operating activities after payment of common stock dividends, and distributions to noncontrolling interests for the year ending December 31, 2021. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences. We also exclude significant contract termination fees that represent an ancillary source of cash that is not associated with any ongoing activity at any of our operating properties. For the year ending December 31, 2021, we expect our recently delivered projects, our highly pre-leased value-creation projects expected to be completed and along with contributions from Same Properties and recently acquired properties, to contribute significant increases in income from rentals, net operating income, and cash flows. We anticipate significant contractual near-term growth in annual cash rents of $49 million related to the commencement of contractual rents on the projects recently placed into service that are near the end of their initial free rent period. Refer to the “Cash flows” subsection of the “Liquidity” section within this Item 2 for a discussion of cash flows provided by operating activities for the six months ended June 30, 2021.

Debt

We expect to fund a portion of our capital needs for the remainder of 2021 from the settlement of our outstanding forward equity sales agreements, sales of our common stock under our ATM program, issuances under our commercial paper program discussed below, borrowings under our unsecured senior line of credit, and real estate dispositions and partial interest sales.

As of June 30, 2021, we have no outstanding balance on our unsecured senior line of credit. Our unsecured senior line of credit bears an interest rate of LIBOR plus 0.825% with a 0% LIBOR floor and is subject to certain annual sustainability measures entitling us to a temporary reduction in the interest rate margin of one basis point, but not below zero percent per year. During the year ended December 31, 2020, we achieved certain sustainability measures, as described in our unsecured senior line of credit agreement, which reduced our borrowing rate to LIBOR plus 0.815% for a one-year period. In addition to the cost of borrowing, the unsecured senior line of credit is subject to an annual facility fee of 0.15% based on the aggregate commitments outstanding.

We use our unsecured senior line of credit to fund working capital, construction activities, and, from time to time, acquisition of properties. Borrowings under the unsecured senior line of credit bear interest at a “Eurocurrency Rate,” a “LIBOR Floating Rate,” or a “Base Rate” specified in the unsecured senior line of credit agreement plus, in any case, the Applicable Margin. The Eurocurrency Rate specified in the unsecured senior line of credit agreement is, as applicable, the rate per annum equal to either (i) the LIBOR or a successor rate thereto as agreed to by the administrative agent and the Company for loans denominated in a LIBOR quoted currency (i.e., U.S. dollars, euro, sterling, or yen), (ii) the average annual yield rates applicable to Canadian dollar bankers’ acceptances for loans denominated in Canadian dollars, (iii) the Bank Bill Swap Reference Bid rate for loans denominated in Australian dollars, or (iv) the rate designated with respect to the applicable alternative currency for loans denominated in a non-LIBOR quoted currency (other than Canadian or Australian dollars). The LIBOR Floating Rate means, for any day, one-month LIBOR, or a successor rate thereto as agreed to by the administrative agent and the Company for loans denominated in U.S. dollars. The Base Rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the federal funds rate plus 1/2 of 1.00%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate,” and (iii) the Eurocurrency Rate plus 1.00%. Our unsecured senior line of credit contains a feature that allows lenders to competitively bid on the interest rate for borrowings under the facility. This may result in an interest rate that is below the stated rate.

We established a commercial paper program that provides us with the ability to issue up to $1.5 billion of commercial paper notes with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our unsecured senior line of credit equal to any outstanding balance on our commercial paper program. We use borrowings under the program to fund short-term capital needs. The notes issued under our commercial paper program are sold under customary terms in the commercial paper market. They are typically issued at a discount to par, representing a yield to maturity dictated by market conditions at the time of issuance. In the event we are unable to issue commercial paper notes or refinance outstanding commercial paper notes under terms equal to or more favorable than those under the unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit at LIBOR plus 0.815%. The commercial paper notes sold during the three months ended June 30, 2021, were issued at a weighted-average yield to maturity of 0.20%. As of June 30, 2021, we had an aggregate of $300.0 million of notes outstanding under our commercial paper program.

In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes consisted of $900.0 million of 2.00% unsecured senior notes due 2032 (“2.00% Unsecured Senior Notes”) and $850.0 million of 3.00% unsecured senior notes due 2051. The proceeds from our 2.00% Unsecured Senior Notes are expected to be allocated to eligible green projects and were initially used to refinance $650.0 million of our 4.00% unsecured senior notes payable due in 2024, pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts that settled on March 12, 2021.

Proactive management of transition away from LIBOR

LIBOR has been used extensively in the U.S. and globally as a reference rate for various commercial and financial contracts, including variable-rate debt and interest rate swap contracts. However, based on an announcement made by the Financial Conduct Authority (“FCA”) on March 5, 2021, all LIBOR settings will effectively cease after June 30, 2023, and it is expected that LIBOR will no longer be used after this date. To address the impending discontinuation of LIBOR, in the U.S. the Alternative Reference Rates Committee (“ARRC”) was established to help ensure the successful transition from LIBOR. In June 2017, the ARRC selected SOFR, a new index calculated by reference to short-term repurchase agreements backed by U.S. Treasury securities, as its preferred replacement for U.S. dollar LIBOR. We have been closely monitoring developments related to the transition away from LIBOR and have implemented numerous proactive measures to minimize the potential impact of the transition to the Company, specifically:

•We have proactively eliminated outstanding LIBOR-based borrowings under our unsecured senior bank term loans and secured construction loans through repayments. From January 2017 through June 2021, we retired approximately $1.5 billion of all such debt.

•During 2020, we increased the aggregate amount of our commercial paper program to $1.5 billion from $750.0 million. This program provides us with ability to issue commercial paper notes bearing interest at short-term fixed rates, with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is not subject to LIBOR and is used for funding short-term working capital needs. As of June 30, 2021, we had an aggregate of $300.0 million of notes outstanding under our commercial paper program.

•We continue to prudently manage outstanding borrowings under our unsecured senior line of credit. As of June 30, 2021, we had no borrowings outstanding under our unsecured senior line of credit. Our unconsolidated joint venture at 1401/1413 Research Boulevard holds a LIBOR-based construction loan with an outstanding balance of $26.9 million that matures in May 2022. We hold a 65.0% interest in this unconsolidated joint venture.

•Our unsecured senior line of credit contains fallback language generally consistent with the ARRC’s Amendment Approach, which provides a streamlined amendment approach for negotiating a benchmark replacement.

•We continue to monitor developments by the FCA, the ARRC, and other governing bodies involved in LIBOR transition.

Refer to Note 10 – “Secured and unsecured senior debt” and Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this quarterly report on Form 10-Q and “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2020, for additional information about our management of risks related to the transition away from LIBOR.

Real estate dispositions and partial interest sales

We expect to continue the disciplined execution of select sales of operating assets. Future sales will provide an important source of capital to fund a portion of pending and recently completed opportunistic acquisitions and our highly leased value-creation development and redevelopment projects, and also provide significant capital for growth. We may also consider additional sales of partial interests in core Class A properties and/or development projects. For 2021, we expect real estate dispositions and partial interest sales ranging from $1.7 billion to $2.2 billion. The amount of asset sales necessary to meet our forecasted sources of capital will vary depending upon the amount of EBITDA associated with the assets sold.

As a REIT, we are generally subject to a 100% tax on the net income from real estate asset sales that the IRS characterizes as “prohibited transactions.” We do not expect our sales will be categorized as prohibited transactions. However, unless we meet certain “safe harbor” requirements, whether a real estate asset sale is a “prohibited transaction” will be based on the facts and circumstances of the sale. Our real estate asset sales may not always meet such “safe harbor” requirements. Refer to “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2020, for additional information about the “prohibited transaction” tax.

Common equity transactions

During the six months ended June 30, 2021, our common equity transactions included the following:

•During the three months ended March 31, 2021, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received proceeds of $850.5 million.

•We expect to issue 1.5 million shares in 2021 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $230.5 million.

•In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.

•As of June 30, 2021, and as of the date of this report, the remaining aggregate amount available under our ATM program for future sales of common stock aggregated $500.0 million.

•During the three months ended June 30, 2021, we settled a portion of our forward equity sales agreements by issuing 4.9 million shares and received net proceeds of $870.3 million.

•We expect to issue 3.1 million shares in 2021 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $547.8 million.

Other sources

Under our current shelf registration statement filed with the SEC, we may offer common stock, preferred stock, debt, and other securities. These securities may be issued, from time to time, at our discretion based on our needs and market conditions, including, as necessary, to balance our use of incremental debt capital.

Additionally, we hold interests, together with joint venture partners, in real estate joint ventures that we consolidate in our financial statements. These joint venture partners may contribute equity into these entities primarily related to their share of funds for construction and financing-related activities. During the six months ended June 30, 2021, we received $357.6 million of contributions from and sales of noncontrolling interests.

Uses of capital

Summary of capital expenditures

One of our primary uses of capital relates to the development, redevelopment, pre-construction, and construction of properties. We currently have projects in our growth pipeline aggregating 3.4 million RSF of Class A office/laboratory and tech office space undergoing construction, 7.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 10.3 million SF of future development projects in North America. We incur capitalized construction costs related to development, redevelopment, pre-construction, and other construction activities. We also incur additional capitalized project costs, including interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project, during periods when activities necessary to prepare an asset for its intended use are in progress. Refer to the “New Class A development and redevelopment properties: current projects” and “Summary of capital expenditures” subsections of the “Investments in real estate” section within this Item 2 for more information on our capital expenditures.

We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the six months ended June 30, 2021 and 2020, of $83.4 million and $55.5 million, respectively, was classified in investments in real estate. Indirect project costs, including construction administration, legal fees, and office costs that clearly relate to projects under development or construction, are capitalized as incurred during the period an asset is undergoing activities to prepare it for its intended use. We capitalized payroll and other indirect project costs related to development, redevelopment, pre-construction, and construction projects, which aggregated $34.0 million and $32.3 million for the six months ended June 30, 2021 and 2020, respectively. The increase in capitalized payroll and other indirect project costs for the six months ended June 30, 2021, compared to the same period in 2020 was primarily due to an increase in our value-creation pipeline projects undergoing construction and pre-construction activities in 2021 over 2020. Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Should we cease activities necessary to prepare an asset for its intended use, the interest, taxes, insurance, and certain other direct project costs related to this asset would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Fluctuations in our development, redevelopment, and construction activities could result in significant changes to total expenses and net income. For example, had we experienced a 10% reduction in development, redevelopment, and construction activities without a corresponding decrease in indirect project costs, including interest and payroll, total expenses would have increased by approximately $11.7 million for the six months ended June 30, 2021.

We use third-party brokers to assist in our leasing activity, who are paid on a contingent basis upon successful leasing. We are required to capitalize initial direct costs related to successful leasing transactions that result directly from and are essential to the lease transaction and would not have been incurred had that lease transaction not been successfully executed. During the six months ended June 30, 2021, we capitalized total initial direct leasing costs of $72.5 million. Costs that we incur to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Acquisitions

Refer to the “Acquisitions” section of Note 3 – “Investments in real estate” and to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report, and the “Acquisitions” subsection of the “Investments in real estate” section within this Item 2 for information on our acquisitions.

Dividends

During the six months ended June 30, 2021 and 2020, we paid common stock dividends of $311.8 million and $256.3 million, respectively. The increase of $55.5 million in dividends paid on our common stock during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, was primarily due to an increase in number of common shares outstanding subsequent to January 1, 2020, as a result of issuances of common stock under our ATM program and settlement of forward equity sales agreements, and partially due to the increase in the related dividends to $2.18 per common share paid during the six months ended June 30, 2021, from $2.06 per common share paid during the six months ended June 30, 2020.

Contractual obligations and commitments

Contractual obligations as of June 30, 2021, consisted of the following (in thousands):


			Payments by Period
	Total		2021		2022–2023		2024–2025		Thereafter
Secured and unsecured debt(1)(2)	$	8,896,442	$	1,731	$	7,364	$	783,593	$	8,103,754
Estimated interest payments on fixed-rate debt(3)	3,823,243		148,567		593,689		566,553		2,514,434
Ground lease obligations – operating leases	851,055		9,209		37,150		37,514		767,182
Operating office leases	26,702		1,265		5,253		5,583		14,601
Total	$	13,597,442	$	160,772	$	643,456	$	1,393,243	$	11,399,971

(1)Amounts represent principal amounts due and exclude unamortized premiums (discounts) and deferred financing costs reflected in the consolidated balance sheets under Item 1 of this report.

(2)Payment dates reflect any extension options that we control.

(3)Amounts are based upon contractual interest rates, including interest payment dates and scheduled maturity dates.

Secured notes payable

Secured notes payable as of June 30, 2021, consisted of four notes secured by nine properties. Our secured notes payable typically require monthly payments of principal and interest and had a weighted-average interest rate of approximately 3.54%. As of June 30, 2021, the total book value of our investments in real estate securing debt was approximately $887.1 million. Additionally, as of June 30, 2021, our entire secured notes payable balance of $228.0 million, including unamortized discounts and deferred financing costs, was fixed-rate debt.

Unsecured senior notes payable and unsecured senior line of credit

The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior notes payable as of June 30, 2021, were as follows:

Covenant Ratios(1)

Requirement

June 30, 2021

Total Debt to Total Assets

Less than or equal to 60%

31%

Secured Debt to Total Assets

Less than or equal to 40%

Consolidated EBITDA(2) to Interest Expense

Greater than or equal to 1.5x

10.4x

Unencumbered Total Asset Value to Unsecured Debt

Greater than or equal to 150%

301%

(1)All covenant ratio titles utilize terms as defined in the respective debt agreements.

(2)The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as described in Exchange Act Release No. 47226.

In addition, the terms of the indentures, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s subsidiaries to (i) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (ii) incur certain secured or unsecured indebtedness.

The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior line of credit as of June 30, 2021, were as follows:

Covenant Ratios(1)

Requirement

June 30, 2021

Leverage Ratio

Less than or equal to 60.0%

28.1%

Secured Debt Ratio

Less than or equal to 45.0%

0.7%

Fixed-Charge Coverage Ratio

Greater than or equal to 1.50x

4.15x

Unsecured Interest Coverage Ratio

Greater than or equal to 1.75x

8.21x

(1)All covenant ratio titles utilize terms as defined in the credit agreement.

Estimated interest payments

Estimated interest payments on our fixed-rate debt were calculated based upon contractual interest rates, including interest payment dates and scheduled maturity dates. As of June 30, 2021, 97% of our debt was fixed-rate debt. For additional information regarding our debt, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report.

Ground lease obligations

Operating lease agreements

Ground lease obligations as of June 30, 2021, included leases for 38 of our properties, which accounted for approximately 10% 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 $6.9 million as of June 30, 2021, our ground lease obligations have remaining lease terms ranging from approximately 32 to 93 years, including available extension options that we are reasonably certain to exercise.

As of June 30, 2021, the remaining contractual payments under ground and office lease agreements in which we are the lessee aggregated $851.1 million and $26.7 million, respectively. We are required to recognize a right-of-use asset and a related liability to account for our future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is measured based on the present value of the remaining lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The right-of-use asset is equal to the corresponding operating lease liability, adjusted for the initial direct leasing cost and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. As of June 30, 2021, the present value of the remaining contractual payments, aggregating $877.8 million, under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $371.9 million, which was classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets. As of June 30, 2021, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 44 years, and the weighted-average discount rate was 4.8%. 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 $397.0 million. We classify the right-of-use asset in other assets in our consolidated balance sheets. Refer to the “Lease accounting” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Commitments

As of June 30, 2021, remaining aggregate costs under contract for the construction of properties undergoing development, redevelopment, and improvements under the terms of leases approximated $1.7 billion. We expect payments for these obligations to occur over one to three years, subject to capital planning adjustments from time to time. We may have the ability to cease the construction of certain properties, which would result in the reduction of our commitments. In addition, we have letters of credit and performance obligations aggregating $88.3 million primarily related to construction projects, including one $77.5 million letter of credit we issued during the three months ended June 30, 2021. The $77.5 million letter of credit serves to secure our performance under the purchase and sale agreement of our acquisition of Charles Park in our Cambridge submarket for a purchase price of $815.0 million. We expect to complete this acquisition in December 2021, and the letter of credit will expire in January 2022.

We are committed to funding approximately $339.3 million for non-real estate investments in privately held entities that report NAV. Our funding commitments expire at various dates over the next 12 years, with a weighted-average expiration of 9.0 years as of June 30, 2021.

Exposure to environmental liabilities

In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at substantially all of our properties.

Foreign currency translation gains and losses

The following table presents the change in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the six months ended June 30, 2021, due to the changes in the foreign exchange rates for our real estate investments in Canada and Asia. We reclassify unrealized foreign currency translation gains and losses into net income (loss) as we dispose of these holdings.


(In thousands)	Total
Balance as of December 31, 2020	$	(6,625)

Other comprehensive income before reclassifications	2,117
Net other comprehensive income	2,117

Balance as of June 30, 2021	$	(4,508)

Inflation

As of June 30, 2021, approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Approximately 95% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from 3.0% to 3.5%) or indexed based on a consumer price index or other indices. Accordingly, we do not believe that our cash flows or earnings from real estate operations are subject to significant risks from inflation. A period of inflation, however, could cause an increase in the cost of our variable-rate borrowings, including borrowings related to our unsecured senior line of credit, commercial paper program, unsecured senior bank term loans, and secured loans held by our unconsolidated joint ventures.

In addition, refer to “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q for a discussion about risks that inflation directly or indirectly may pose to our business.

100

Issuer and guarantor subsidiary summarized financial information

Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under the Securities Act of 1933, as amended, that are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or the “Guarantor Subsidiary”), an indirectly 100% owned subsidiary of the Issuer. The Issuer’s other subsidiaries, including, but not limited to, the subsidiaries that own substantially all of its real estate (collectively, the “Combined Non-Guarantor Subsidiaries”), will not provide a guarantee of such securities, including the subsidiaries that are partially or 100% owned by the LP. The following summarized financial information presents on a combined basis for the Issuer and the Guarantor Subsidiary balance sheet financial information as of June 30, 2021, and December 31, 2020, and results of operations and comprehensive income for the six months ended June 30, 2021, and year ended December 31, 2020. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to (i) the Issuer’s interests in the Guarantor Subsidiary, (ii) the Guarantor Subsidiary’s interests in the Combined Non-Guarantor Subsidiaries, and (iii) the Combined Non-Guarantor Subsidiaries’ interests in the Guarantor Subsidiary, where applicable, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All assets and liabilities have been allocated to the Issuer and the Guarantor Subsidiary generally based on legal entity ownership.

The following tables present combined summarized financial information as of June 30, 2021, and December 31, 2020, and for the six months ended June 30, 2021, and the year ended December 31, 2020, for the Issuer and Guarantor Subsidiary. Amounts provided do not represent our total consolidated amounts (in thousands):


	June 30, 2021		December 31, 2020
Assets:
Cash, cash equivalents, and restricted cash	$	168,351	$	404,802
Other assets	106,055		100,689
Total assets	$	274,406	$	505,491

Liabilities:
Unsecured senior notes payable	$	8,313,025	$	7,232,370
Unsecured senior line of credit and commercial paper	299,990		99,991
Other liabilities	371,575		341,621
Total liabilities	$	8,984,590	$	7,673,982


	Six Months Ended June 30, 2021		Year Ended December 31, 2020
Total revenues	$	12,106	$	22,946
Total expenses	(211,375)		(355,370)
Net loss	(199,269)		(332,424)
Net income (loss) attributable to unvested restricted stock awards	—		(10,168)
Net loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	(199,269)	$	(342,592)

Critical accounting policies

Refer to our annual report on Form 10-K for the year ended December 31, 2020, for a discussion of our critical accounting policies related to REIT compliance, investments in real estate, impairment of long-lived assets, equity investments, liability and right-of-use assets related to operating leases in which we are the lessee, monitoring of tenant credit quality, and allowance for credit losses.

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Non-GAAP measures and definitions

This section contains additional information of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors, as well as the definitions of other terms used in this report.

Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders

GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate acquisition and disposition decisions, financing decisions, capital structure, capital market transactions, variances resulting from the volatility of market conditions outside of our control, or other corporate activities that may not be representative of the operating performance of our properties.

The 2018 White Paper published by the Nareit Board of Governors (the “Nareit White Paper”) defines funds from operations as net income (computed in accordance with GAAP), excluding gains or losses on sales of real estate, and impairments of real estate, plus depreciation and amortization of operating real estate assets, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper, excluding significant gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on non-real estate investments, gains or losses on early extinguishment of debt, significant termination fees, acceleration of stock compensation expense due to the resignation of an executive officer, deal costs, the income tax effect related to such items, and the amount of such items that is allocable to our unvested restricted stock awards. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.

The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures for the three and six months ended June 30, 2021 (in thousands):



	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures				Our Share of Unconsolidated Real Estate Joint Ventures
	June 30, 2021				June 30, 2021
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Net income	$	19,436	$	36,848	$	2,609	$	6,146
Depreciation and amortization	16,301		31,744		4,135		7,211

Funds from operations	$	35,737	$	68,592	$	6,744	$	13,357

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The following tables present a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, and funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted, and the related per share amounts for the three and six months ended June 30, 2021 and 2020. Per share amounts may not add due to rounding.


	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2021			2020		2021			2020
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted	$	380,563		$	226,600	$	388,542		$	244,845
Depreciation and amortization of real estate assets	186,498			165,040		364,218			337,668
Noncontrolling share of depreciation and amortization from consolidated real estate JVs	(16,301)			(15,775)		(31,744)			(31,645)
Our share of depreciation and amortization from unconsolidated real estate JVs	4,135			2,858		7,211			5,501
Gain on sales of real estate	—			—		(2,779)			—
Impairment of real estate – rental properties	1,754			—		6,883			7,644
Allocation to unvested restricted stock awards	(2,191)			(2,228)		(4,427)			(4,531)
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted(1)	554,458			376,495		727,904			559,482
Unrealized gains on non-real estate investments	(244,031)			(171,652)		(197,780)			(154,508)
Realized gains on non-real estate investments	(34,773)		(2)	—		(57,692)		(3)	—
Impairment of real estate	3,172			13,218		3,172			15,221
Impairment of non-real estate investments	—			4,702		—			24,482
Loss on early extinguishment of debt	—			—		67,253			—
Allocation to unvested restricted stock awards	3,428			2,251		2,382			1,711
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	282,254		$	225,014	$	545,239		$	446,388

(1)Calculated in accordance with standards established by the Nareit Board of Governors.

(2)Represents realized gains related to the sales of our investments in two publicly traded biotechnology companies.

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	Three Months Ended June 30,				Six Months Ended June 30,
(Per share)	2021		2020		2021		2020
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted	$	2.61	$	1.82	$	2.74	$	1.99
Depreciation and amortization of real estate assets	1.19		1.22		2.39		2.53
Gain on sales of real estate	—		—		(0.02)		—
Impairment of real estate – rental properties	0.01		—		0.05		0.06
Allocation to unvested restricted stock awards	(0.01)		(0.01)		(0.03)		(0.04)
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted	3.80		3.03		5.13		4.54
Unrealized gains on non-real estate investments	(1.67)		(1.38)		(1.39)		(1.25)
Realized gains on non-real estate investments	(0.24)		—		(0.41)		—
Impairment of real estate	0.02		0.11		0.02		0.12
Impairment of non-real estate investments	—		0.04		—		0.20
Loss on early extinguishment of debt	—		—		0.47		—
Allocation to unvested restricted stock awards	0.02		0.01		0.02		0.02
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	1.93	$	1.81	$	3.84	$	3.63

Weighted-average shares of common stock outstanding – diluted(1)	146,058		124,448		141,896		123,117

(1)Refer to the definition of “Weighted-average shares of common stock outstanding – diluted” within this section of this Item 2 for additional information.

Adjusted EBITDA and Adjusted EBITDA margin

We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, impairments of real estate, and significant termination fees. Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains and impairments that result from our non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of operations outside of total revenues.

We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the operating performance of our business activities without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments, our capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, significant impairments and gains on the sale of non-real estate investments, and significant termination fees allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments or other corporate activities that may not be representative of the operating performance of our properties.

In addition, we believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income (loss) or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

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In order to calculate Adjusted EBITDA margin, we also make comparable adjustments to our revenues. We adjust our total revenues by realized gains, losses, and impairments related to our non-real estate investments and significant termination fees to arrive at revenues, as adjusted. Our calculation of Adjusted EBITDA margin divides Adjusted EBITDA by our revenues, as adjusted. We believe that consistent application of these comparable adjustments to both components of Adjusted EBITDA margin provides a more useful calculation for the comparison across periods.

The following table reconciles net income (loss) and revenues, the most directly comparable financial measures calculated and presented in accordance with GAAP, to Adjusted EBITDA and revenues, as adjusted, respectively, for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	404,520	$	243,561	$	430,053	$	274,239
Interest expense	35,158		45,014		71,625		90,753
Income taxes	2,800		1,406		4,226		2,747
Depreciation and amortization	190,052		168,027		370,965		343,523
Stock compensation expense	12,242		9,185		24,688		19,114
Loss on early extinguishment of debt	—		—		67,253		—
Gain on sales of real estate	—		—		(2,779)		—
Realized gains on non-real estate investments	(34,773)		—		(57,692)		—
Unrealized gains on non-real estate investments	(244,031)		(171,652)		(197,780)		(154,508)
Impairment of real estate	4,926		13,218		10,055		22,865
Impairment of non-real estate investments	—		4,702		—		24,482
Adjusted EBITDA	$	370,894	$	313,461	$	720,614	$	623,215

Revenues	$	509,619	$	436,956	$	989,468	$	876,875
Non-real estate investments – realized gains	60,232		13,005		107,497		8,328
Realized gains on non-real estate investments	(34,773)		—		(57,692)		—
Impairment of non-real estate investments	—		4,702		—		24,482
Revenues, as adjusted	$	535,078	$	454,663	$	1,039,273	$	909,685

Adjusted EBITDA margin	69%		69%		69%		69%

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental obligations, calculated in accordance with GAAP, for leases in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of June 30, 2021, approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses, along with base rent, are classified in income from rentals in our consolidated statements of operations.

Cash interest

Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts). Refer to the definition of “Fixed-charge coverage ratio” within this section of this Item 2 for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.

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Class A properties and AAA locations

Class A properties are properties clustered in AAA locations that provide innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Class A properties generally command higher annual rental rates than other classes of similar properties.

AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.

Development, redevelopment, and pre-construction

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties, and property enhancements identified during the underwriting of certain acquired properties, located in collaborative life science, agtech, and technology campuses in AAA innovation clusters. These projects are generally focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase 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.

Development projects generally consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory, agtech, or tech office space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory, agtech, and tech office space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.

Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.

Development, redevelopment, and pre-construction spending also includes the following costs: (i) certain tenant improvements and renovations that will be reimbursed, (ii) amounts to bring certain acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of acquisition), and (iii) permanent conversion of space for highly flexible, move-in-ready office/laboratory space to foster the growth of promising early- and growth-stage life science companies.

Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of a property, including through improvement in the asset quality from Class B to Class A.

Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized property, including the associated costs for renewed and re-leased space.

Fixed-charge coverage ratio

Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts).

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The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Adjusted EBITDA	$	370,894	$	313,461	$	720,614	$	623,215

Interest expense	$	35,158	$	45,014	$	71,625	$	90,753
Capitalized interest	43,492		30,793		83,378		55,473
Amortization of loan fees	(2,859)		(2,737)		(5,676)		(4,984)
Amortization of debt premiums	465		888		1,041		1,776
Cash interest and fixed charges	$	76,256	$	73,958	$	150,368	$	143,018

Fixed-charge coverage ratio:
– period annualized	4.9x		4.2x		4.8x		4.4x
– trailing 12 months	4.6x		4.2x		4.6x		4.2x

Initial stabilized yield (unlevered)

Initial stabilized yield is calculated as the estimated amounts of net operating income at stabilization divided by our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are generally expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.

•Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.

•Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.

Investment-grade or publicly traded large cap tenants

Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended June 30, 2021, as reported by Bloomberg Professional Services. Credit ratings from Moody’s Investors Service and S&P Global Ratings reflect credit ratings of the tenant’s parent entity, and there can be no assurance that a tenant’s parent entity will satisfy the tenant’s lease obligation upon such tenant’s default. We monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s market capitalization to decline below $10 billion, which are not immediately reflected in the twelve-month average, may result in their exclusion from this measure.

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Investments in real estate – value-creation square footage currently in rental properties

The square footage presented in the table below includes RSF of buildings in operation as of June 30, 2021, primarily representing lease expirations at recently acquired properties that also have inherent future development or redevelopment opportunities, for which we have the intent to demolish or redevelop the existing property upon expiration of the existing in-place leases and commencement of future construction:


	Dev/Redev	RSF of Lease Expirations Targeted for Development and Redevelopment
Property/Submarket		2021	2022	Thereafter		Total
Near-term projects:
50 and 60 Sylvan Road/Route 128	Redev	202,428	—	—		202,428
651 Gateway Boulevard/South San Francisco	Redev	—	198,089	101,921	(1)	300,010
11255 and 11355 North Torrey Pines Road/Torrey Pines	Dev	—	139,135	—		139,135
10931 and 10933 North Torrey Pines Road/Torrey Pines	Dev	—	92,450	—		92,450
10277 Scripps Ranch Boulevard/Other	Redev	32,774	—	—		32,774
Other/Seattle	Redev	—	51,255	—		51,255
		235,202	480,929	101,921		818,052
Intermediate-term projects:
3825 Fabian Way/Greater Stanford	Redev	—	250,000	—		250,000
3450 and 3460 Hillview Avenue/Greater Stanford	Redev	—	42,340	34,611		76,951
9393 Towne Centre Drive/University Town Center	Dev	42,222	—	—		42,222
		42,222	292,340	34,611		369,173
Future projects:
550 Arsenal Street/Cambridge/Inner Suburbs	Dev	—	—	260,867		260,867
380 and 420 E Street/Seaport Innovation District	Dev	—	—	195,506		195,506
40 Sylvan Road/Route 128	Redev	—	—	312,845		312,845
3875 Fabian Way/Greater Stanford	Redev	—	—	228,000		228,000
960 Industrial Road/Greater Stanford	Dev	—	—	110,000		110,000
2475 Hanover Street/Greater Stanford	Redev	—	—	83,980		83,980
219 East 42nd Street/New York City	Dev	—	—	349,947		349,947
10975 and 10995 Torreyana Road/Torrey Pines	Dev	—	—	84,829		84,829
4161 Campus Point Court/University Town Center	Dev	—	—	159,884		159,884
10260 Campus Point Drive/University Town Center	Dev	—	—	109,164		109,164
Sequence District by Alexandria/Sorrento Mesa	Dev/Redev	—	—	689,938		689,938
9444 Waples Street/Sorrento Mesa	Dev	—	—	88,380		88,380
4045 and 4075 Sorrento Valley Boulevard/Sorrento Valley	Dev	—	—	50,926		50,926
601 Dexter Avenue North/Lake Union	Dev	—	—	18,680		18,680
830 4th Avenue South/SoDo	Dev	—	—	42,380		42,380
		—	—	2,785,326		2,785,326
		277,424	773,269	2,921,858		3,972,551

(1)Represents vacant square footage as of June 30, 2021.

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Joint venture financial information

We present components of balance sheet and operating results information related to our real estate joint ventures, which are not presented, or intended to be presented, in accordance with GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, which are controlled by us through contractual rights or majority voting rights, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control and do not consolidate, and are instead controlled jointly or by our joint venture partners through contractual rights or majority voting rights, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.

The components of balance sheet and operating results information related to our real estate joint ventures do not represent our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.

We believe this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in our consolidated results.

The components of balance sheet and operating results information related to our real estate joint ventures are limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of operations and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are presented and prepared in accordance with GAAP.

Net cash provided by operating activities after dividends

Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.

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Net debt and preferred stock to Adjusted EBITDA

Net debt and preferred stock to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure of evaluating our balance sheet leverage. Net debt and preferred stock is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash, plus preferred stock outstanding as of the end of the period. Refer to the definition of “Adjusted EBITDA and Adjusted EBITDA margin” within this section of this Item 2 for further information on the calculation of Adjusted EBITDA.

The following table reconciles debt to net debt and preferred stock and computes the ratio to Adjusted EBITDA as of June 30, 2021, and December 31, 2020 (dollars in thousands):


	June 30, 2021			December 31, 2020
Secured notes payable	$	227,984		$	230,925
Unsecured senior notes payable	8,313,025			7,232,370
Unsecured senior line of credit and commercial paper	299,990			99,991
Unamortized deferred financing costs	66,913			56,312
Cash and cash equivalents	(323,876)			(568,532)
Restricted cash	(33,697)			(29,173)
Preferred stock	—			—
Net debt and preferred stock	$	8,550,339		$	7,021,893

Adjusted EBITDA:
– quarter annualized	$	1,483,576		$	1,331,608
– trailing 12 months	$	1,371,586		$	1,274,187

Net debt and preferred stock to Adjusted EBITDA:
– quarter annualized	5.8		x	5.3		x
– trailing 12 months	6.2		x	5.5		x

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Net operating income, net operating income (cash basis), and operating margin

The following table reconciles net income to net operating income and to net operating income (cash basis) for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	404,520	$	243,561	$	430,053	$	274,239

Equity in earnings of unconsolidated real estate joint ventures	(2,609)		(3,893)		(6,146)		(777)
General and administrative expenses	37,880		31,775		71,876		63,738
Interest expense	35,158		45,014		71,625		90,753
Depreciation and amortization	190,052		168,027		370,965		343,523
Impairment of real estate	4,926		13,218		10,055		15,221
Loss on early extinguishment of debt	—		—		67,253		—
Gain on sales of real estate	—		—		(2,779)		—
Investment income	(304,263)		(184,657)		(305,277)		(162,836)
Net operating income	365,664		313,045		707,625		623,861
Straight-line rent revenue	(27,903)		(23,367)		(55,285)		(43,964)
Amortization of acquired below-market leases	(13,267)		(13,787)		(25,379)		(29,751)
Net operating income (cash basis)	$	324,494	$	275,891	$	626,961	$	550,146

Net operating income (cash basis) – annualized	$	1,297,976	$	1,103,564	$	1,253,922	$	1,100,292

Net operating income (from above)	$	365,664	$	313,045	$	707,625	$	623,861
Total revenues	$	509,619	$	436,956	$	989,468	$	876,875
Operating margin	72%		72%		72%		71%

Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairments of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.

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Furthermore, we believe net operating income is useful to investors as a performance measure of our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income or loss. Net operating income can be used to measure the initial stabilized yields of our properties by calculating net operating income generated by a property divided by our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions or a deterioration in market conditions. We also exclude realized and unrealized investment gain or loss, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses included in determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management. We calculate operating margin as net operating income divided by total revenues.

We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income or loss as presented in our consolidated statements of operations. Net operating income should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows as a measure of our liquidity or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental revenue, refer to the definition of “Annual rental revenue” within this section of this Item 2.

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total income from rentals, as well as rental operating expenses in our operating results, can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, termination fees, if any, are excluded from the results of same properties. Refer to the “Same properties” subsection in the “Results of operations” section within this Item 2 for additional information.

Stabilized occupancy date

The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.

Tenant recoveries

Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.

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We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenue in income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues and tenant recoveries in the “Comparison of results for the three months ended June 30, 2021, to the three months ended June 30, 2020” subsection of the “Results of operations” section within this Item 2 because we believe it promotes investors’ understanding of our operating results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes, common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant variability to components of our operating expenses.

The following table reconciles income from rentals to tenant recoveries for the three and six months ended June 30, 2021 and 2020 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Income from rentals	$	508,371	$	435,856	$	987,066	$	873,461
Rental revenues	(396,804)		(341,555)		(767,037)		(679,497)
Tenant recoveries	$	111,567	$	94,301	$	220,029	$	193,964

Total market capitalization

Total market capitalization is equal to the outstanding shares of common stock at the end of the period multiplied by the closing price on the last trading day of the period (i.e., total equity capitalization), plus total debt outstanding at period-end.

Unencumbered net operating income as a percentage of total net operating income

Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.

The following table summarizes unencumbered net operating income as a percentage of total net operating income for the three and six months ended June 30, 2021 and 2020 (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Unencumbered net operating income	$	353,104	$	296,358	$	683,264	$	591,359
Encumbered net operating income	12,560		16,687		24,361		32,502
Total net operating income	$	365,664	$	313,045	$	707,625	$	623,861
Unencumbered net operating income as a percentage of total net operating income	97%		95%		97%		95%

Weighted-average shares of common stock outstanding – diluted

From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward Agreements”), to fund acquisitions, to fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. We are required to consider the potential dilutive effect of our forward equity sales agreements under the treasury stock method while the forward equity sales agreements are outstanding. As of June 30, 2021, we had Forward Agreements outstanding to sell an aggregate of 4.6 million shares of common stock. Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

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The weighted-average shares of common stock outstanding used in calculating EPS – diluted, funds from operations per share – diluted, and funds from operations per share – diluted, as adjusted, for the three and six months ended June 30, 2021 and 2020, are calculated as follows (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Weighted-average shares of common stock outstanding – basic	145,825	124,333	141,596	122,883
Outstanding forward equity sales agreements	233	115	300	234
Weighted-average shares of common stock outstanding – diluted	146,058	124,448	141,896	123,117

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, 2021, 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 an interest rate floor of 0%, on our fixed- and variable-rate debt as of June 30, 2021 (in thousands):


Annualized effect on future earnings due to variable-rate debt:
Rate increase of 1%	$	(1,211)
Rate decrease of 1%	$	194

Effect on fair value of total consolidated debt:
Rate increase of 1%	$	(845,958)
Rate decrease of 1%	$	982,453

These amounts are determined by considering the effect of the hypothetical interest rates on our borrowings as of June 30, 2021. 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.

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Equity price risk

We have exposure to equity price market risk because of our equity investments in publicly traded companies and privately held entities. All of our investments in actively traded public companies are reflected in the 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, 2021 (in thousands):


Equity price risk:
Fair value increase of 10%	$	199,928
Fair value decrease of 10%	$	(199,928)

Foreign currency exchange rate risk

We have exposure to foreign currency exchange rate risk related to our subsidiaries operating in Canada and Asia. 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, 2021 (in thousands):


Effect on potential future earnings due to foreign currency exchange rate:
Rate increase of 10%	$	60
Rate decrease of 10%	$	(60)

Effect on the fair value of net investment in foreign subsidiaries due to foreign currency exchange rate:
Rate increase of 10%	$	9,825
Rate decrease of 10%	$	(9,825)

This sensitivity analysis assumes 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, 2021, was consistent with the risk elements presented above, including the effects of changes in interest rates, equity prices, and foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of June 30, 2021, 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, 2021.

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, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

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 our 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, 2020. 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” to our

annual report on Form 10-K for the year ended December 31, 2020, except for the following updates:

We may not be able to operate properties successfully and profitably.

Our success depends in large part upon our ability to operate our properties successfully. If we are unable to do so, our business could be adversely affected. The ownership and operation of real estate is subject to many risks that may adversely affect our business and our ability to make payments to our stockholders, including, but not limited to, the following risks:

•Our properties may not perform as we expect;

•We may have to lease space at rates below our expectations;

•We may not be able to obtain financing on acceptable terms;

•We may underestimate the cost of improvements required to maintain or improve space to meet standards established for the market position intended for that property; and

•We may be unable to complete the improvements required to maintain or improve space, due to unanticipated delays or cancellation of construction resulting from shortages in the supply of necessary construction materials.

The realization of any of the above risks could significantly and adversely affect our ability to meet our financial expectations, our financial condition, results of operations, and cash flows, our ability to make distributions to our stockholders, the market price of our common stock, and our ability to satisfy our debt service obligations.

Failure to meet market expectations for our financial performance would likely adversely affect the market price and volatility of our stock.

Our expected financial results may not be achieved, and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited to, the following:

•The status of the economy;

•The status of capital markets, including availability and cost of capital;

•Changes in financing terms available to us;

•Negative developments in the operating results or financial condition of tenants, including, but not limited to, their ability to pay rent;

•Our ability to re-lease space at similar rates as leases expire;

•Our ability to reinvest sale proceeds in a timely manner at rates similar to the rate at which assets are sold;

•Our ability to successfully complete developments or redevelopments of properties for lease on time and/or within budget;

•Regulatory approval and market acceptance of the products and technologies of tenants;

•Liability or contract claims by or against tenants;

•Unanticipated difficulties and/or expenditures relating to future acquisitions;

•Environmental laws affecting our properties;

•Changes in rules or practices governing our financial reporting; and

•Other legal and operational matters, including REIT qualification and key management personnel recruitment and retention.

Failure to meet market expectations, particularly with respect to earnings estimates, funds from operations per share, operating cash flows, and revenues, would likely result in a decline and/or increased volatility in the market price of our common stock or other outstanding securities.

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We may face increased risks and costs associated with volatility in commodity and labor prices, which may adversely affect the status of our construction projects.

The price of commodities and skilled labor for our construction projects may increase unpredictably due to external factors, including, but not limited to, performance of third-party suppliers and contractors; overall market supply and demand; government regulation; international trade; and changes in general business, economic, or political conditions. As a result, the costs of raw construction materials and skilled labor required for the completion of our development and redevelopment projects may fluctuate significantly from time to time.

We rely on a number of third-party suppliers and contractors to supply raw materials and skilled labor for our construction projects. We have favorable relationships with our suppliers and contractors, and we generally have not encountered difficulty obtaining materials and skilled labor, nor experienced significant delays or increases in overall project costs. While we do not rely on any single supplier or vendor for the majority of our materials and skilled labor, we may experience difficulties obtaining necessary materials from suppliers or vendors whose supply chains might become impacted by economic or political changes, or difficulties obtaining adequate skilled labor from third-party contractors in a tightening labor market. It is uncertain whether we would be able to source the essential commodities, supplies, materials, and skilled labor timely or at all without incurring significant costs or delays. In addition, we may be unable to compete with entities that may have more favorable relationships with their suppliers and contractors or greater access to the required construction materials and skilled labor.

During 2021, industry prices for certain construction materials, including steel, copper, lumber, plywood, electrical materials, and heating, ventilation, and air conditioning (“HVAC”) materials, experienced significant increases as a result of low inventories; surging demand fueled by the U.S. economy rebounding from the effects of COVID-19; tariffs imposed on imports of foreign steel, including on products from key competitors in the European Union (“EU”) and China; and significant changes in the U.S. steel production landscape stemming from the consolidation of certain steel-producing companies. Price surges on construction materials may result in corresponding increases in our overall construction costs as our projects undergo construction. Increases in the costs of construction materials, however, can often be managed in our development and redevelopment projects through either (i) general budget contingencies built into our overall construction costs estimates for each of our projects or (ii) inflation risk borne by our construction general contractors in the form of Guaranteed Maximum Price construction contracts which stipulate a maximum price for certain construction costs in many of our projects.

The Biden administration and the EU have started discussions to revisit restrictions on steel imports from the EU. However, it is not known whether these discussions will lead to the elimination or easing of tariffs, especially in light of the U.S. steel companies’ demands to keep the tariffs in effect.

Separately, new energy-related initiatives entered into in collaboration with partner countries through global climate agreements may impose stricter requirements for building materials, such as lumber, steel, and concrete, which could significantly increase our construction costs if the manufacturers and suppliers of our materials are burdened with expensive cap and trade or similar energy-related regulations or requirements, and the costs of which are passed onto customers like us. As a result of the factors discussed above, we may be unable to complete our development or redevelopment projects timely and/or within our budget, which may affect our ability to lease space to potential tenants and adversely affect our business, financial condition, and results of operations.

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We face substantial competition in our target markets.

The significant competition for business in our target markets could have an adverse effect on our operations. We compete for investment opportunities with:

•Other REITs;

•Insurance companies;

•Pension and investment funds;

•Private equity entities;

•Partnerships;

•Developers;

•Investment companies;

•Owners/occupants; and

•Foreign investors, including sovereign wealth funds.

Many of these entities have substantially greater financial resources than we do and may be able to pay more than we can or accept more risk than we are willing to accept. These entities may be less sensitive to risks with respect to the creditworthiness of a tenant or the geographic concentration of their investments. These entities may also have more favorable relationships and pricing with suppliers and contractors and may complete construction projects sooner and at lower costs than we are able. Competition may also reduce the number of suitable investment opportunities available to us or may increase the bargaining power of property owners seeking to sell. If there is no matching growth in demand, the intensified competition may lead to oversupply of available space comparable to ours and result in the pressure on rental rates and greater incentives awarded to tenants. To maintain our ability to retain current and attract new tenants, we may be forced to reduce the rental rates that our tenants are currently willing to pay or offer greater tenant concessions. Should we encounter intensified competition or oversupply, we cannot be certain that we will be able to compete successfully, maintain our occupancy and rental rates, and continue to expand our business. As a result, our financial condition, results of operations, and cash flows, our ability to pay dividends, and our stock price may be adversely affected.

Improvements to our properties are significantly more costly than improvements to traditional office space.

Many of our properties generally contain infrastructure improvements that are significantly more costly than improvements to other property types. Although we have historically been able to recover the additional investment in infrastructure improvements through higher rental rates, there is the risk that we will not be able to continue to do so in the future. Typical improvements include:

•Reinforced concrete floors;

•Upgraded roof loading capacity;

•Increased floor-to-ceiling heights;

•Heavy-duty HVAC systems;

•Enhanced environmental control technology;

•Significantly upgraded electrical, gas, and plumbing infrastructure; and

•Laboratory benches.

Because many of our infrastructure improvements are specialized and costlier than those of other property types, we may be more significantly impacted by any unanticipated delays or increased costs due to price volatility or supply shortages of construction materials or labor. As a result, we may be unable to complete our improvements as scheduled or within budgeted amounts, which may adversely affect our ability to lease available space to potential tenants.

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Most of our costs, such as operating and general and administrative expenses, interest expense, and real estate acquisition and construction costs, are subject to inflation.

A significant portion of our operating expenses is sensitive to inflation. These include expenses for property-related contracted services such as janitorial and engineering services, utilities, repairs and maintenance, and insurance. Property taxes are also impacted by inflationary changes as taxes are regularly reassessed based on changes in the fair value of our properties located outside of California. In California, property taxes are not reassessed based on changes in the fair value of the underlying real estate asset but are instead limited to a maximum 2% annual increase by law. We also have ground lease expenses in certain of our properties. Ground lease costs are contractual, but in some cases, lease payments reset every few years based on changes on consumer price indexes.

Our operating expenses, with the exception of ground lease rental expenses, are typically recoverable through our lease arrangements, which allow us to pass through substantially all expenses associated with property taxes, insurance, utilities, repairs and maintenance, and other operating expenses (including increases thereto) to our tenants. As of June 30, 2021, 94% of our existing leases (on an RSF basis) were triple net leases, which allow us to recover operating expenses, and 94% of our existing leases (on an RSF basis) also provided for the recapture of capital expenditures. Our remaining leases are generally gross leases, which provide for recoveries of operating expenses above the operating expenses from the initial year within each lease. During inflationary periods, we expect to recover increases in operating expenses from our triple net leases and our gross leases. As a result, we do not believe that inflation would result in a significant adverse effect on our net operating income, results of operations, and operating cash flows at the property level.

Our general and administrative expenses consist primarily of compensation costs, technology services, and professional service fees. Annually, our employee compensation is adjusted to reflect merit increases; however, to maintain our ability to successfully compete for the best talent, rising inflation rates may require us to provide compensation increases beyond historical annual merit increases, which may significantly increase our compensation costs. Similarly, technology services and professional service fees are also subject to the impact of inflation and expected to increase proportionately with increasing market prices for such services. Consequently, inflation is expected to increase our general and administrative expenses over time and may adversely impact our results of operations and operating cash flows.

Also, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings. Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings, which consist of borrowings under our unsecured senior line of credit and commercial paper program. As of June 30, 2021, our commitments under our unsecured senior line of credit and commercial paper program aggregated $3.0 billion, of which only $300.0 million was outstanding, and our borrowings from our commitments available under our unhedged variable-rate debt as a percentage of our total debt was 3%. Therefore, we do not expect that the effect of inflation on our interest expense would have a material adverse impact on our financing costs in the short term, but it could increase our financing costs over time as we refinance our existing long-term borrowings.

As of June 30, 2021, approximately 95% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from 3.0% to 3.5%) or indexed based on a consumer price index or other index. We have long term lease agreements with our tenants, 5% to 10% of which expire each year. We believe these annual lease expirations allow us to reset these leases to market rents upon renewal or re-leasing and that annual rent escalations within our long-term leases are generally sufficient to offset the effect of inflation on non-recoverable costs, such as general and administrative expenses and interest expense. However, it is possible that during higher inflationary periods the impact of inflation will not be adequately offset by the resetting of rents from our renewal and re-leasing activities or our annual rent escalations. As a result, during inflationary periods in which the inflation rate exceeds the annual rent escalation percentages within our lease contracts, we may not adequately mitigate the impact of inflation, which may adversely affect to our business, financial condition, results of operations, and cash flows.

Additionally, inflationary pricing may have a negative effect on the real estate acquisitions and construction costs necessary to complete our development and redevelopment projects, including, but not limited to, costs of construction materials, labor, and services from third-party contractors and suppliers. Higher acquisition and construction costs could adversely impact our net investments in real estate and expected yields in our development and redevelopment projects, which may make otherwise lucrative investment opportunities less profitable to us. As a result, our financial condition, results of operations, and cash flows, we well as our ability to pay dividends, could be adversely affected over time.

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Security incidents through cyber attacks, cyber intrusions, or other methods could disrupt our information technology networks and related systems, cause a loss of assets or loss of data, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could result in substantial reputational damage and materially and adversely affect our business, financial condition, results of operations, and cash flows, and the market price of our common stock.

Information technology, communication networks, and related systems are essential to the operation of our business. We use these systems to manage our tenant and vendor relationships, internal communications, accounting and record-keeping systems, and many other key aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks, which also depend on the strength of our procedures and the effectiveness of our internal controls.

A security incident may occur through physical break-ins, disruptions due to power outages or catastrophic events, such as fires, floods, hurricanes and earthquakes, breaches of our secure network by an unauthorized party, software vulnerabilities, malware, computer viruses, attachments to emails, employee theft or misuse, social engineering, or inadequate use of security controls. Outside parties may attempt to fraudulently induce our employees to disclose sensitive information or transfer funds via illegal electronic spamming, phishing, spoofing, or other tactics. Additionally, cyber attackers can develop and deploy malware, credential theft or guessing tools, and other malicious software programs to gain access to sensitive data or fraudulently obtain assets we hold.

We have implemented security measures to safeguard our systems and data and to manage cybersecurity risk. We monitor and develop our information technology networks and infrastructure, and invest in the development and enhancement of our controls designed to prevent, detect, respond, and mitigate the risk of unauthorized access, misuse, computer viruses, and other events that could have a security impact. We conduct periodic security awareness trainings of our employees to educate them on how to identify and alert management to phishing emails, spoofed or manipulated electronic communications, and other critical security threats. We have implemented periodic phishing tests using a variety of scenarios, including those obtained from phishing samples and intelligence sources. Additionally, we have an internal team and external partners with well-defined processes devoted to responding to threats, including reports of phishing, in real time. We have implemented internal controls around our treasury function, including enhanced payment authorization procedures, verification requirements for new vendor setup and vendor information changes, and bolstered outgoing payment notification process and account reconciliation procedures. Finally, we have policies and procedures in place in order to identify cybersecurity incidents and elevate such incidents to senior management in order to appropriately address and remediate any cyber attack.

There can be no assurance that our actions, security measures, and controls designed to prevent, detect, or respond to intrusion; to limit access to data; to prevent loss, destruction, alteration, or exfiltration of business information; or to limit the negative impact from such attacks can provide absolute security against a security incident. A significant security incident involving our information systems or those of our tenants, vendors, software creators, cloud providers, cybersecurity service providers, or other third parties with whom we do business could lead to, among other things, the following:

•Theft of our cash, cash equivalents, or other liquid assets, including publicly traded securities;

•Interruption in the operation of our systems, which may result in operational inefficiencies and a loss of profits;

•Unauthorized access to, and destruction, loss, theft, misappropriation, or release of, proprietary, confidential, sensitive, or otherwise valuable information of ours or our tenants, and other business partners, which could be used to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;

•Inability to produce financial and operational data necessary to comply with rules and regulations from the SEC, the IRS, or other state and federal regulatory agencies;

•Our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

•Significant management attention and resources required to remedy any damages that result;

•Significant exposure to litigation and regulatory fines, penalties, or other sanctions;

•Violation of our lease agreements or other agreements;

•Damage to our reputation among our tenants, business partners, and investors;

•Loss of business opportunities;

•Difficulties in employee retention and recruitment;

•Unauthorized access to, and destruction, loss, or denial of service to, the computing systems that manage our buildings;

•Increase in the cost of proactive defensive measures to prevent future cyber incidents, including hiring personnel and consultants or investing in additional technologies;

•Increase in our cybersecurity insurance premiums; and

•The wide breadth of software required to run our business, and the increase in supply chain attacks by advanced persistent threats.

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A principal reason that we cannot provide absolute protection from security incidents is that it may not always be possible to anticipate, detect, or recognize threats to our systems, or to implement effective preventive measures against all security incidents. We may not be able to immediately address the consequences of a security incident. A successful breach of our computer systems, software, networks, or other technology assets could occur and persist for an extended period of time before being detected due to, among other things:

•The breadth of our operations and the high volume of transactions that our systems process;

•The large number of our business partners;

•The frequency and wide variety of sources from which a cyber attack can originate;

•The severity of cyber attacks; and

•The proliferation and increasing sophistication and types of cyber attacks.

The extent of a particular cyber attack and the steps that we may need to take to investigate the attack may not be immediately clear. Therefore, in the event of an attack, it may take a significant amount of time before such an investigation can be completed. During an investigation, we may not necessarily know the extent of the damage incurred or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, which could further increase the costs and consequences of a cyber attack.

Even if we are not targeted directly, cyber attacks on the U.S. government, financial markets, financial institutions, or other businesses, including our tenants, vendors, software creators, cloud providers, cybersecurity service providers, and other third parties with whom we do business, may occur and such events could disrupt our normal business operations and networks in the future. In December 2020, hackers reportedly linked to the Russian government engaged in a massive cyber attack on the U.S. government and major U.S.-based private companies through malware planted in third-party software. The full extent of the hack to these entities remains unknown, and there is no evidence that we have been impacted by this hack, though a significant number of governmental agencies and companies in the private sector, most of which are U.S.-based, have confirmed breaches.

We have not experienced any material breach of cybersecurity. However, our computer systems will likely be subject to cyber attacks, unauthorized access, computer viruses, or other computer-related penetrations. Our administrative and technical controls as well as other preventive actions we take to reduce the risk of cyber incidents and protect our information technology may be insufficient to prevent physical and electronic break-ins, cyber attacks or other security breaches to our computer systems.

In response to recent cyber attacks, the Biden administration issued an executive order, “Improving the nation’s cybersecurity” in May 2021, which established a reporting requirement for government contractors and encouraged coordination between the public and private sectors to better protect against cybersecurity incidents. In addition, in June 2021, the Securities and Exchange Commission (“SEC”) increased its focus on the failure of some public companies to disclose that they had been affected by the aforementioned December 2020 cyber attack, by sending investigative letters seeking voluntary information regarding the attack and questions around companies’ disclosures and internal controls. The SEC also communicated that cyber risks would be included on the SEC rulemaking agenda. We expect the federal government and regulatory agencies to continue to focus on ways to increase protection against and oversight and disclosure of cyber attack incidents.

We maintain insurance to protect ourselves against certain losses incurred in the event of a security incident or disruption of our information systems. However, we cannot be certain that the coverage is adequate to compensate for all damages that may arise. In addition, we cannot be certain that such insurance options will remain available to us in the future on commercially reasonable terms, or at all.

Any or all of the foregoing could have a material adverse effect on our financial condition, results of operations, and cash flows, or the market price of our common stock. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, may also have potential to materially adversely affect our business, financial condition, and results of operations.

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ITEM 6. EXHIBITS

Exhibit
Number

Exhibit Title

Incorporated by Reference to:

Date Filed

3.1*

Articles of Amendment and Restatement of the Company, dated May 21, 1997

Form 10-Q

August 14, 1997

3.2*

Certificate of Correction of the Company, dated June 20, 1997

Form 10-Q

August 14, 1997

3.3*

Articles of Amendment of the Company, effective as of May 10, 2017

Form 8-K

May 12, 2017

3.4*

Articles Supplementary, dated June 9, 1999, relating to the 9.50% Series A Cumulative Redeemable Preferred Stock

Form 10-Q

August 13, 1999

3.5*

Articles Supplementary, dated February 10, 2000, relating to the election to be subject to Subtitle 8 of Title 3 of the Maryland General Corporation Law

Form 8-K

February 10, 2000

3.6*

Articles Supplementary, dated February 10, 2000, relating to the Series A Junior Participating Preferred Stock

Form 8-K

February 10, 2000

3.7*

Articles Supplementary, dated January 18, 2002, relating to the 9.10% Series B Cumulative Redeemable Preferred Stock

Form 8-A

January 18, 2002

3.8*

Articles Supplementary, dated June 22, 2004, relating to the 8.375% Series C Cumulative Redeemable Preferred Stock

Form 8-A

June 28, 2004

3.9*

Articles Supplementary, dated March 25, 2008, relating to the 7.00% Series D Cumulative Convertible Preferred Stock

Form 8-K

March 25, 2008

3.10*

Articles Supplementary, dated March 12, 2012, relating to the 6.45% Series E Cumulative Redeemable Preferred Stock

Form 8-K

March 14, 2012

3.11*

Articles Supplementary, effective as of May 10, 2017, relating to Reclassified Preferred Stock

Form 8-K

May 12, 2017

3.12*

Amended and Restated Bylaws of the Company (Amended July 27, 2018)

Form 8-K

August 2, 2018

22.0

List of Guarantor Subsidiaries of Alexandria Real Estate Equities, Inc.

N/A

Filed herewith

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.2

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.3

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.4

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

32.0

Certification of Principal Executive Officers and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

101.1

The following materials from the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020 (unaudited), (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited), (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (unaudited), (iv) Consolidated Statements of Changes in Stockholders’ Equity and Noncontrolling Interests for the three and six months ended June 30, 2021 and 2020 (unaudited), (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited)

N/A

Filed herewith

104

Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, is formatted in Inline XBRL and contained in Exhibit 101.1

N/A

Filed herewith

(*) Incorporated by reference.

123

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on July 26, 2021.


			ALEXANDRIA REAL ESTATE EQUITIES, INC.


			/s/ Joel S. Marcus
			Joel S. Marcus Executive Chairman (Principal Executive Officer)


			/s/ Stephen A. Richardson
			Stephen A. Richardson Co-Chief Executive Officer (Principal Executive Officer)


			/s/ Peter M. Moglia
			Peter M. Moglia Co-Chief Executive Officer and Co-Chief Investment Officer (Principal Executive Officer)


			/s/ Dean A. Shigenaga
			Dean A. Shigenaga President and Chief Financial Officer (Principal Financial Officer)

124