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Leases

9 Months Ended

Sep. 30, 2024

Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial

statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and

disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

Leases in which we are the lessor

As of September 30, 2024, we had 406 properties aggregating 41.8 million operating RSF in key cluster locations, including

Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus

on developing Class A/A+ properties in AAA life science innovation cluster locations that offer the scale and strategic design integral to

our mega campus strategy. Strategically located near top academic medical institutions and equipped with curated amenities, services,

and transit access, our mega campuses are designed to support our tenants in attracting and retaining top talent, which we believe is a

key driver of tenant demand for our properties.

As of September 30, 2024, all leases in which we are the lessor were classified as operating leases, with the exception of one

direct financing lease. Our leases are described below.

Operating leases

As of September 30, 2024, our 406 properties were subject to operating lease agreements. Four of these properties are

subject to operating lease agreements that each contain a purchase option as described below:

(i)Two 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 68.2 years.

(ii)Two operating properties aggregating 207,774 RSF owned by our 1201 and 1208 Eastlake Avenue East consolidated real

estate joint venture are subject to purchase options held by our partner in this joint venture, who is also a tenant

occupying 117,479 RSF at these properties. One purchase option allows our partner to purchase our 30% interest in 1208

Eastlake Avenue East for $40.0 million in 2031. Contingent upon the exercise of this option, the second purchase option

allows our partner to purchase our 30% interest in 1201 Eastlake Avenue East for $69.1 million in 2034. Our partner’s

remaining lease terms for its operating leases at 1201 and 1208 Eastlake Avenue East are 20.0 years and 6.4 years,

respectively.

We evaluated the impact of the purchase options on the classification of the existing operating leases and determined that

each lease continues to meet the criteria for classification as an operating lease.

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 September 30, 2024 are outlined in the

table below (in thousands):


Year		Amount
2024		$485,925
2025		1,888,408
2026		1,842,590
2027		1,764,075
2028		1,621,117
Thereafter		11,131,473
Total		$18,733,588

Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information

about our owned real estate assets, which are the underlying assets under our operating leases.

Direct financing lease

As of September 30, 2024, we had one direct financing lease agreement, with a net investment balance of $40.6 million, for a

parking structure with a remaining lease term of 68.2 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.

The components of our aggregate net investment in our direct financing lease as of September 30, 2024 and December 31,

2023 are summarized in the table below (in thousands):


	September 30, 2024	December 31, 2023
Gross investment in direct financing lease	$251,886	$253,324
Less: unearned income on direct financing lease	(208,402)	(210,388)
Less: allowance for credit losses	(2,839)	(2,839)
Net investment in direct financing lease	$40,645	$40,097

As of September 30, 2024, 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 nine months ended September 30, 2024. For further details, refer to “Allowance

for credit losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

Future lease payments to be received under the terms of our direct financing lease as of September 30, 2024 are outlined in

the table below (in thousands):


Year		Total
2024		$481
2025		1,976
2026		2,036
2027		2,097
2028		2,160
Thereafter		243,136
Total		$251,886

Income from rentals

Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes

revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$763,947	$696,601	$2,255,634	$2,069,042
Direct financing leases	665	653	1,986	1,951
Revenues subject to the lease accounting standard	764,612	697,254	2,257,620	2,070,993
Revenues subject to the revenue recognition accounting standard	11,132	10,277	28,837	28,826
Income from rentals	$775,744	$707,531	$2,286,457	$2,099,819

Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist

primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to

“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”

to our unaudited consolidated financial statements for additional information.

Residual value risk management strategy

Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual

value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business

objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property

inspections, proactively addressing potential maintenance issues before they arise, and/or timely resolving any occurring issues, and

(iii) carefully selecting our tenants and monitoring their credit quality throughout their respective lease terms.

Leases in which we are the lessee

Operating lease agreements

We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these

leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or

covenants imposed by the leases, nor guarantees of residual value.

We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related

liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to

account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”

in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

As of September 30, 2024, the present value of the remaining contractual payments aggregating $1.1 billion under our

operating lease agreements, including our extension options that we are reasonably certain to exercise, was $648.3 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 $776.7 million. As of September 30, 2024, the weighted-average

remaining lease term of operating leases in which we are the lessee was approximately 49 years, including extension options that we

are reasonably certain to exercise, and the weighted-average discount rate was 5.1%. 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.

Included in the operating lease liability balance as of September 30, 2024 is the liability related to an amendment to our

existing ground lease agreement at the Alexandria Technology Square® mega campus aggregating 1.2 million RSF in our Cambridge

submarket, which extended the lease term by 24 years from January 1, 2065 to December 31, 2088. The amendment requires that we

prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments during the fourth

quarter of 2024 and the first quarter of 2025. Upon the execution of the amendment in July 2024, we recognized $265.1 million,

representing the present value of our rent obligation related to the amendment, as operating lease liability.

Ground lease obligations as of September 30, 2024 included leases for 36 of our properties, which accounted for

approximately 9% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property

with a net book value of $5.8 million as of September 30, 2024, our ground lease obligations have remaining lease terms ranging from

approximately 30 to 97 years, including extension options that we are reasonably certain to exercise.

The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating

lease liability reflected in our unaudited consolidated balance sheet as of September 30, 2024 is in the table below (in thousands):


Year		Total
2024		$140,553
2025		158,233
2026		23,427
2027		22,508
2028		22,176
Thereafter		757,389
Total future payments under our operating leases in which we are the lessee		1,124,286
Effect of discounting		(475,948)
Operating lease liability		$648,338

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 12 years, exclusive of extension options. For the nine months ended September 30, 2024

and 2023, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which

we are the lessee aggregated $24.7 million and $24.6 million, respectively. For the three and nine months ended September 30, 2024

and 2023, our costs for operating leases in which we are the lessee were as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Gross operating lease costs	$10,701	$9,005	$29,842	$30,277
Capitalized lease costs	(521)	(688)	(1,567)	(4,906)
Expenses for operating leases in which we are the lessee	$10,180	$8,317	$28,275	$25,371

Leases