Item 1. FINANCIAL STATEMENTS (UNAUDITED)

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Item 1. FINANCIAL STATEMENTS (UNAUDITED)

Alexandria Real Estate Equities, Inc.

Consolidated Balance Sheets

(In thousands)


	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Investments in real estate	$	31,178,054	$	29,945,440
Investments in unconsolidated real estate joint ventures	37,801		38,435
Cash and cash equivalents	924,370		825,193
Restricted cash	35,920		32,782
Tenant receivables	6,951		7,614
Deferred rent	984,366		942,646
Deferred leasing costs	520,610		516,275
Investments	1,495,994		1,615,074
Other assets	1,475,191		1,599,940
Total assets	$	36,659,257	$	35,523,399

Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	91,939	$	59,045
Unsecured senior notes payable	11,091,424		10,100,717
Unsecured senior line of credit and commercial paper	—		—
Accounts payable, accrued expenses, and other liabilities	2,494,087		2,471,259
Dividends payable	214,555		209,131
Total liabilities	13,892,005		12,840,152

Commitments and contingencies

Redeemable noncontrolling interests	52,628		9,612

Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
Common stock	1,709		1,707
Additional paid-in capital	18,812,318		18,991,492
Accumulated other comprehensive loss	(16,589)		(20,812)
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	18,797,438		18,972,387
Noncontrolling interests	3,917,186		3,701,248
Total equity	22,714,624		22,673,635
Total liabilities, noncontrolling interests, and equity	$	36,659,257	$	35,523,399

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,
	2023		2022		2023		2022
Revenues:
Income from rentals	$	704,339	$	640,959	$	1,392,288	$	1,253,513
Other income	9,561		2,805		22,407		5,316
Total revenues	713,900		643,764		1,414,695		1,258,829

Expenses:
Rental operations	211,834		196,284		418,767		377,612
General and administrative	45,882		43,397		94,078		84,328
Interest	17,072		24,257		30,826		53,697
Depreciation and amortization	273,555		242,078		538,857		482,737
Impairment of real estate	168,575		—		168,575		—
Loss on early extinguishment of debt	—		3,317		—		3,317
Total expenses	716,918		509,333		1,251,103		1,001,691

Equity in earnings of unconsolidated real estate joint ventures	181		213		375		433
Investment loss	(78,268)		(39,481)		(123,379)		(279,800)
Gain on sales of real estate	214,810		214,219		214,810		214,219
Net income	133,705		309,382		255,398		191,990
Net income attributable to noncontrolling interests	(43,768)		(37,168)		(87,599)		(69,345)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	89,937		272,214		167,799		122,645
Net income attributable to unvested restricted stock awards	(2,677)		(2,934)		(5,283)		(4,134)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	87,260	$	269,280	$	162,516	$	118,511

Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	0.51	$	1.67	$	0.95	$	0.74
Diluted	$	0.51	$	1.67	$	0.95	$	0.74

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,
	2023		2022		2023		2022
Net income	$	133,705	$	309,382	$	255,398	$	191,990
Other comprehensive income (loss)
Unrealized gains (losses) on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period	3,947		(6,124)		4,223		(4,557)
Unrealized gains (losses) on foreign currency translation, net	3,947		(6,124)		4,223		(4,557)

Total other comprehensive income (loss)	3,947		(6,124)		4,223		(4,557)
Comprehensive income	137,652		303,258		259,621		187,433
Less: comprehensive income attributable to noncontrolling interests	(43,768)		(37,168)		(87,599)		(69,345)
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	$	93,884	$	266,090	$	172,022	$	118,088

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, 2023	170,859,704	$	1,709	$	18,902,821	$	—	$	(20,536)	$	3,757,911	$	22,641,905	$	44,862
Net income	—	—		—		89,937		—		43,567		133,504		201
Total other comprehensive income	—	—		—		—		3,947		—		3,947		—
Contributions from and sales of noncontrolling interests	—	—		4,946		—		—		194,704		199,650		—
Distributions to and redemption of noncontrolling interests	—	—		—		—		—		(71,230)		(71,230)		(201)
Transfer of noncontrolling interests	—	—		—		—		—		(7,766)		(7,766)		7,766

Issuance pursuant to stock plan	14,343	—		29,670		—		—		—		29,670		—
Taxes related to net settlement of equity awards	(4,269)	—		(501)		—		—		—		(501)		—
Dividends declared on common stock ($1.24 per share)	—	—		—		(214,555)		—		—		(214,555)		—
Reclassification of distributions in excess of earnings	—	—		(124,618)		124,618		—		—		—		—
Balance as of June 30, 2023	170,869,778	$	1,709	$	18,812,318	$	—	$	(16,589)	$	3,917,186	$	22,714,624	$	52,628

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, 2022	161,408,296	$	1,614	$	16,934,094	$	—	$	(5,727)	$	3,241,023	$	20,171,004	$	9,612
Net income	—	—		—		272,214		—		36,967		309,181		201
Total other comprehensive loss	—	—		—		—		(6,124)		—		(6,124)		—
Contributions from and sales of noncontrolling interests	—	—		113,020		—		—		96,721		209,741		—
Distributions to and redemption of noncontrolling interests	—	—		(111)		—		—		(61,522)		(61,633)		(201)
Issuance pursuant to stock plan	73,282	1		26,740		—		—		—		26,741		—
Taxes related to net settlement of equity awards	(25,532)	—		(3,816)		—		—		—		(3,816)		—
Dividends declared on common stock ($1.18 per share)	—	—		—		(192,570)		—		—		(192,570)		—
Reclassification of earnings in excess of distributions	—	—		79,644		(79,644)		—		—		—		—
Balance as of June 30, 2022	161,456,046	$	1,615	$	17,149,571	$	—	$	(11,851)	$	3,313,189	$	20,452,524	$	9,612

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, 2022	170,748,395	$	1,707	$	18,991,492	$	—	$	(20,812)	$	3,701,248	$	22,673,635	$	9,612
Net income	—	—		—		167,799		—		87,197		254,996		402
Total other comprehensive income	—	—		—		—		4,223		—		4,223		—
Contributions from and sales of noncontrolling interests	—	—		23,945		—		—		270,722		294,667		35,250
Distributions to and redemption of noncontrolling interests	—	—		—		—		—		(134,215)		(134,215)		(402)
Transfer of noncontrolling interests	—	—		—		—		—		(7,766)		(7,766)		7,766

Issuance pursuant to stock plan	208,929	2		65,452		—		—		—		65,454		—
Taxes related to net settlement of equity awards	(87,546)	—		(12,469)		—		—		—		(12,469)		—
Dividends declared on common stock ($2.45 per share)	—	—		—		(423,901)		—		—		(423,901)		—
Reclassification of distributions in excess of earnings	—	—		(256,102)		256,102		—		—		—		—
Balance as of June 30, 2023	170,869,778	$	1,709	$	18,812,318	$	—	$	(16,589)	$	3,917,186	$	22,714,624	$	52,628

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, 2021	158,043,880	$	1,580	$	16,195,256	$	—	$	(7,294)	$	2,834,096	$	19,023,638	$	9,612
Net income	—	—		—		122,645		—		68,943		191,588		402
Total other comprehensive loss	—	—		—		—		(4,557)		—		(4,557)		—
Contributions from and sales of noncontrolling interests	—	—		526,635		—		—		501,972		1,028,607		—
Distributions to and redemption of noncontrolling interests	—	—		(111)		—		—		(91,822)		(91,933)		(402)
Issuance of common stock	3,220,000	32		646,284		—		—		—		646,316		—
Issuance pursuant to stock plan	293,187	3		57,597		—		—		—		57,600		—
Taxes related to net settlement of equity awards	(101,021)	—		(18,464)		—		—		—		(18,464)		—
Dividends declared on common stock ($2.33 per share)	—	—		—		(380,271)		—		—		(380,271)		—
Reclassification of distributions in excess of earnings	—	—		(257,626)		257,626		—		—		—		—
Balance as of June 30, 2022	161,456,046	$	1,615	$	17,149,571	$	—	$	(11,851)	$	3,313,189	$	20,452,524	$	9,612

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,
	2023		2022
Operating Activities:
Net income	$	255,398	$	191,990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	538,857		482,737
Impairment of real estate	168,575		—
Gain on sales of real estate	(214,810)		(214,219)
Loss on early extinguishment of debt	—		3,317
Equity in earnings of unconsolidated real estate joint ventures	(375)		(433)
Distributions of earnings from unconsolidated real estate joint ventures	1,649		2,289
Amortization of loan fees	7,368		6,339
Amortization of debt discounts (premiums)	592		(157)
Amortization of acquired above- and below-market leases	(46,425)		(30,675)
Deferred rent	(62,526)		(69,387)
Stock compensation expense	31,978		28,368
Investment loss	123,379		279,800
Changes in operating assets and liabilities:
Tenant receivables	1,152		306
Deferred leasing costs	(56,367)		(115,601)
Other assets	4,735		(6,893)
Accounts payable, accrued expenses, and other liabilities	30,863		(27,661)
Net cash provided by operating activities	784,043		530,120

Investing Activities:
Proceeds from sales of real estate	592,630		375,379
Additions to real estate	(1,812,241)		(1,377,589)
Purchases of real estate	(233,317)		(2,182,699)
Change in escrow deposits	13,663		138,440
Investments in unconsolidated real estate joint ventures	(332)		(336)
Return of capital from unconsolidated real estate joint ventures	—		471
Additions to non-real estate investments	(103,839)		(140,093)
Sales of and distributions from non-real estate investments	109,335		90,228
Net cash used in investing activities	$	(1,434,101)	$	(3,096,199)


Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2023		2022
Financing Activities:
Borrowings from secured notes payable	$	32,550	$	15,973
Repayments of borrowings from secured notes payable	—		(906)
Payment for the defeasance of secured note payable	—		(198,304)
Proceeds from issuance of unsecured senior notes payable	996,205		1,793,318
Borrowings from unsecured senior line of credit	375,000		1,180,000
Repayments of borrowings from unsecured senior line of credit	(375,000)		(1,180,000)
Proceeds from issuances under commercial paper program	1,705,000		7,410,000
Repayments of borrowings under commercial paper program	(1,705,000)		(7,530,000)
Payments of loan fees	(10,113)		(17,596)
Taxes paid related to net settlement of equity awards	(12,521)		(15,264)
Proceeds from issuance of common stock	—		646,316
Dividends on common stock	(418,477)		(371,547)
Contributions from and sales of noncontrolling interests	299,531		1,029,134
Distributions to and purchases of noncontrolling interests	(134,617)		(92,224)
Net cash provided by financing activities	752,558		2,668,900

Effect of foreign exchange rate changes on cash and cash equivalents	(185)		(386)

Net increase in cash, cash equivalents, and restricted cash	102,315		102,435
Cash, cash equivalents, and restricted cash as of the beginning of period	857,975		415,227
Cash, cash equivalents, and restricted cash as of the end of period	$	960,290	$	517,662

Supplemental Disclosure and Non-Cash Investing and Financing Activities:
Cash paid during the period for interest, net of interest capitalized	$	4,030	$	25,915
Accrued construction for current-period additions to real estate	$	495,807	$	517,909
Contribution of assets from real estate joint venture partner	$	33,250	$	—
Issuance of noncontrolling interest to joint venture partner	$	(33,250)	$	—
Right-of-use asset	$	—	$	17,978
Lease liability	$	—	$	(17,978)

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® life science REIT, is the pioneer of the life science real estate niche since its founding in 1994. Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and advanced technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. With approximately 825 tenants, Alexandria has a total market capitalization of $30.6 billion and an asset base in North America of 74.9 million SF as of June 30, 2023. 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, 2023. 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, 2022. Any references to our total 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 accounting 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 information on specific 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 related to acquisitions of real estate or in-substance real estate (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 that 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.

Depreciation and amortization

The values allocated to buildings and building improvements, land improvements, tenant improvements, and equipment are depreciated on a straight-line basis. For buildings and building improvements, we depreciate using the shorter of the respective ground lease terms or their estimated useful lives, not to exceed 40 years. Land improvements are depreciated over their estimated useful lives, not to exceed 20 years. Tenant improvements are depreciated over their respective lease terms or estimated useful lives, and equipment is depreciated over the shorter of the lease term or its estimated useful life. The values of the right-of-use assets are amortized on a straight-line basis over the remaining terms of each related lease. The values of acquired in-place leases and

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 consolidated 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. For additional details, refer to Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements.

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 recognize a gain or loss as if 100% of the asset 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 of the asset 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 asset 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 11 properties in Canada. The functional currency for our subsidiaries operating in the U.S. is the U.S. dollar. The local currency of a foreign subsidiary serves as its functional currency. 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 (loss) as a separate component of total equity and are excluded from net income (loss).

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 (loss) are reclassified to net income (loss) when realized upon the sale of our investment or upon the complete or substantially complete liquidation of our investment.

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%. We evaluate each investment to determine whether we have the ability to exercise significant influence, but not control, over an investee. We evaluate investments in which our ownership is equal to or greater than 20%, but less than or equal to 50%, of an investee’s voting stock with a presumption that we have this ability. For our investments in limited partnerships that maintain specific ownership accounts, we presume that such ability exists when our ownership interest exceeds 3% to 5%. In addition to our ownership interest, we consider whether we have a board seat or whether we participate in the policy-making process, among other criteria, to determine if we have the ability to exert significant influence, but not control, over an investee. If we determine that we have such ability, we account for the investment under the equity method of accounting, as described below.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investments accounted for under the equity method

Under the equity method of accounting, we initially recognize our investment at cost and subsequently adjust the carrying amount of the investment for our share of earnings or losses reported by the investee, distributions received, and other-than-temporary impairments. For more information about our investments accounted for under the equity method, refer to Note 7 – “Investments” to our unaudited consolidated financial statements.

Investments that do not qualify for the equity method of accounting

For investees over which we determine that we do not have the ability to exercise significant influence or control, we account for each investment depending on whether it is an investment in a (i) publicly traded company, (ii) privately held entity that reports NAV per share, or (iii) privately held entity that does not report NAV per share, as described below.

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 (loss) in our consolidated statements of operations. 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 companies

Our investments in privately held entities without readily determinable fair values consist of (i) investments in privately held entities that report NAV per share and (ii) investments in privately held entities that do not report NAV per share. These investments are accounted for as follows:

Investments in privately held entities that report NAV per share

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 classified in investment income (loss) in our consolidated statements of operations. 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.

Investments in privately held entities that do not report NAV per share

Investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative, under which these investments are measured at cost, adjusted for observable price changes and impairments, with changes classified in investment income (loss) in our consolidated statements of operations.

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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment evaluation of equity method investments and investments in privately held entities that do not report NAV per share

We monitor equity method investments and investments in privately held entities that do not report NAV per share 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, 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, including the research and development of technology and products that the investee is bringing or attempting to bring to the market;

(iv)significant concerns about the investee’s ability to continue as a going concern; and/or

(v)a decision by investors to cease providing support or reduce their financial commitment to the investee.

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.

Investment income/loss recognition and classification

We recognize both realized and unrealized gains and losses in our consolidated statements of operations, classified in investment income (loss) 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 for investments in privately held entities that report NAV per share;

(iii)observable price changes for investments in privately held entities that do not report NAV per share; and

(iv)our share of unrealized gains or losses reported by our equity method investees.

Realized gains and losses on our investments represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost basis. For our equity method investments, realized gains and losses represent our share of realized gains or losses reported by the investee. Impairments are realized losses, which result in an adjusted cost basis, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV per share and equity method investments, if impairments are deemed other than temporary, to their estimated fair value.

Revenues

The table below provides details of our consolidated total revenues for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$	695,019	$	629,359	$	1,372,441	$	1,232,872
Direct financing and sales-type leases(1)	650		787		1,298		1,807
Revenues subject to the lease accounting standard	695,669		630,146		1,373,739		1,234,679
Revenues subject to the revenue recognition accounting standard	8,670		10,813		18,549		18,834
Income from rentals	704,339		640,959		1,392,288		1,253,513
Other income	9,561		2,805		22,407		5,316
Total revenues	$	713,900	$	643,764	$	1,414,695	$	1,258,829

(1)We completed the sale of our real estate assets subject to sales-type leases in May 2022 and have had no sales-type leases since then.

During the three and six months ended June 30, 2023, revenues that were subject to the lease accounting standard aggregated $695.7 million and $1.4 billion, respectively, and represented 97.4% and 97.1%, respectively, of our total revenues. During the three and six months ended June 30, 2023, our total revenues also included $18.2 million, or 2.6%, and $41.0 million, or 2.9%, respectively, subject to other accounting guidance. Our other income consisted primarily of management fees and interest income earned during the three and six months ended June 30, 2023. For a detailed discussion related to our revenue streams, refer to the “Lease accounting” subsection and the “Recognition of revenue arising from contracts with customers” section within this Note 2 to our unaudited consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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 lease or a 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 using the effective interest method.
At inception of a sales-type lease or a direct financing lease, if we determine the fair value of the leased property is lower than its carrying amount, we recognize a selling loss immediately at lease commencement. If fair value exceeds the carrying amount of a lease, a gain is recognized at lease commencement on a sales-type lease. For a direct financing lease, a gain is deferred at lease commencement and amortized over the lease term.

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 property taxes, insurance, utilities, repairs and maintenance, and common area expenses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

For each lease for which we determine that collectibility of future lease payments is not probable, we cease the recognition of income from rentals on a straight-line basis and limit the recognition of income to the payments collected from the lessee. We do not resume straight-line recognition of income from rentals for these leases until we determine that the collectibility of future payments related to these leases is probable.

We also record a general allowance related to the deferred rent balances that at the portfolio level (not the individual level) are not expected to be collected in full through the lease term. During the six months ended June 30, 2023, we recorded adjustments aggregating $1.0 million to the general allowance balance. As of June 30, 2023, our general allowance balance aggregated $21.4 million.

Direct financing and sales-type leases

Income from rentals related to 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 direct financing and sales-type leases for impairment under the current expected credit loss standard. For more information, refer to the “Allowance for credit losses” section within this Note 2 to our unaudited consolidated financial statements.

As a lessor, we classify a lease with variable lease payments that do not depend on an index or a rate as an operating lease on the commencement date of the lease if both of the following criteria are met:

(i)The lease would have been classified as a sales-type lease or direct financing lease under the current lease standard; and

(ii)The sales-type lease or direct financing lease classification would have resulted in a selling loss at lease commencement.

We do not derecognize the underlying asset and do not recognize a loss upon lease commencement but continue to depreciate the underlying asset over its useful life.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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, 2023 included $8.7 million and $18.5 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, as 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for credit losses

We are required to estimate and recognize lifetime expected losses, rather than incurred losses, for most of our financial assets measured at amortized cost and certain other instruments, including trade and other receivables (excluding receivables arising from operating leases), 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 recognition of such expected losses, even if the expected risk of credit loss is remote, typically results in earlier recognition of credit losses. 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.

At each reporting date, we reassess our credit loss allowances on the aggregate net investment of our direct financing and sales-type leases and our trade receivables. If necessary, we recognize a credit loss adjustment 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.

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 2017 through 2022 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. 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 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, 2023, 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

Generally, a parent entity must provide separate subsidiary issuer or guarantor financial statements, unless it qualifies for disclosure exceptions. A parent entity may be eligible for disclosure exceptions if it meets the following criteria:

(i)The subsidiary issuer or guarantor is a consolidated subsidiary of the parent company, and

(ii)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”) either within the consolidated financial statements or within the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2. We evaluated the criteria and determined that we are eligible for the disclosure exceptions, which allow us to provide alternative disclosures; as such, we present alternative disclosures within the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Distributions from equity method investments

We use the “nature of the distribution” approach to determine the classification within our consolidated statements of cash flows of cash distributions received from equity method investments, including our unconsolidated real estate joint ventures and equity method non-real estate investments. 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. However, 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 consolidated balance sheets and the consolidated 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.

Recent accounting pronouncement

On June 30, 2022, the FASB issued an ASU to clarify the guidance on fair value measurement of an equity security that is subject to a contractual sale restriction. Currently, some entities apply a discount to the price of their equity security investments subject to a contractual sale restriction, whereas others do not. This update eliminates the diversity in practice by clarifying that a recognition of a discount related to a contractual sale restriction is not permitted. We hold certain equity investments in publicly held entities that are subject to contractual sale restrictions. We do not recognize such discounts; therefore, the adoption of this standard will have no impact on our consolidated financial statements. This update does not change the application of existing measurement guidance on share-based compensation. Pursuant to the disclosure requirements of this new standard, the footnotes to our consolidated financial statements will contain incremental disclosures related to equity securities that are subject to contractual sale restrictions, including (i) the fair value of such equity securities reflected in the balance sheet, (ii) the nature and remaining duration of the corresponding restrictions, and (iii) any circumstances that could cause a lapse in the restrictions. The accounting standard will become effective for us on January 1, 2024, with early adoption permitted.

3. INVESTMENTS IN REAL ESTATE

Our consolidated investments in real estate, including real estate assets classified as 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, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Rental properties:
Land (related to rental properties)	$	4,568,668	$	4,284,731
Buildings and building improvements	19,056,860		18,605,627
Other improvements	2,974,944		2,677,763
Rental properties	26,600,472		25,568,121
Development and redevelopment projects	9,220,247		8,715,335
Gross investments in real estate – North America	35,820,719		34,283,456
Less: accumulated depreciation – North America	(4,642,665)		(4,349,780)
Net investments in real estate – North America	31,178,054		29,933,676
Net investments in real estate – Asia	—		11,764
Investments in real estate	$	31,178,054	$	29,945,440

Acquisitions

Our real estate asset acquisitions during the six months ended June 30, 2023 consisted of the following (dollars in thousands):


		Square Footage
Market	Number of Properties	Future Development	Active Development/Redevelopment	Operating With Future Development/Redevelopment	Purchase Price(1)






Canada	1	—	—	247,743	$	100,837
Other	2	715,000	110,717	10,000	71,103
Three months ended March 31, 2023	3	715,000	110,717	257,743	171,940

Other	—	374,349	—	—	54,000
Three months ended June 30, 2023	—	374,349	—	—	54,000






Six months ended June 30, 2023	3	1,089,349	110,717	257,743	$	225,940	(1)

(1)Represents the aggregate contractual purchase price of our acquisitions, which differs from purchases of real estate in our unaudited consolidated statements of cash flows due to the timing of payment, 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 was concentrated in a single identifiable asset or a group of similar identifiable assets or was 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, 2023, we acquired three properties for an aggregate purchase price of $225.9 million. In connection with our acquisitions, we recorded in-place lease assets aggregating $11.3 million and below-market lease liabilities in which we are the lessor aggregating $5.9 million. As of June 30, 2023, the total and weighted-average amortization period remaining on our in-place leases and below-market leases acquired during the six months ended June 30, 2023 was 2.5 years.

3. INVESTMENTS IN REAL ESTATE (continued)

Sales of real estate assets and impairment charges

Our completed dispositions of and sales of partial interests in real estate assets during the six months ended June 30, 2023 consisted of the following (dollars in thousands):


									Gain on Sale of Real Estate		Consideration Above/(Below) Book Value(1)
Property	Submarket/Market	Date of Sale	Interest Sold		RSF	Sales Price
225, 231, 266, and 275 Second Avenue and 780 and 790 Memorial Drive	Route 128 and Cambridge/Inner Suburbs/Greater Boston	6/13/23	100	%	428,663	$	365,226		$	187,225	N/A
11119 North Torrey Pines Road	Torrey Pines/San Diego	5/4/23	100	%	72,506	86,000			27,585		N/A
						451,226			214,810		N/A

275 Grove Street	Route 128/Greater Boston	6/27/23	100	%	509,702	109,349			(2)		N/A
Other						42,092			—		N/A

Partial interest sales(3):
9625 Towne Centre Drive	University Town Center/ San Diego	6/21/23	20.1	%	163,648	32,261			N/A		$	15,553
15 Necco Street	Seaport Innovation District/Greater Boston	4/11/23	18	%	345,995	66,108			N/A		(7,761)
						$	701,036	(4)	$	214,810	$	7,792

(1)Relates to sales of partial interests in real estate assets over which we retained control and therefore continue to consolidate. We recognized the difference between the consideration received and the book value of partial interests sold in additional paid-in capital, with no gain or loss recognized in earnings.

(2)Refer to the “Impairment charges” section below for information related to impairment charges recognized in connection with this transaction.

(3)Refer to the “Sales of partial interests” section in Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for additional information.

(4)Represents the aggregate contractual sales price of our sales, which differs from proceeds from sales of real estate and contributions from and sales of noncontrolling interests in our consolidated statements of cash flows under “Investing activities” and “Financing activities,” respectively, primarily due to the timing of payment, closing costs, and other sales adjustments such as prorations of rents and expenses.

Impairment charges

During the six months ended June 30, 2023, we recognized impairment charges aggregating $168.6 million primarily consisting of the following:

In January 2020, we acquired a three-building office campus aggregating 509,702 RSF at 275 Grove Street in our Route 128 submarket. At the time of our acquisition, the campus was fully occupied with a weighted-average remaining lease term of 6.1 years. We had intended to convert the campus into laboratory space through redevelopment upon the expiration of the acquired in-place leases.

Since our acquisition, the macroeconomic environment and demand for office space have deteriorated considerably. In April 2023, upon meeting the criteria for classification as held for sale, we recognized a real estate impairment charge aggregating $138.9 million to reduce our investment in this campus to its estimated fair value less costs to sell. In June 2023, we recognized an additional impairment adjustment of $6.5 million to reduce the carrying amount of this asset to its updated fair value less costs to sell. These impairment charges aggregating $145.4 million were classified in impairment of real estate in our consolidated statements of operations. We completed the sale in June 2023 with no gain or loss recognized in earnings.

Additionally, during the three months ended June 30, 2023, we recognized a real estate impairment charge aggregating $17.1 million to fully write down the carrying amount of our one remaining property in Asia.

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, 2023, our real estate joint ventures held the following properties:


	Property	Market	Submarket	Our Ownership Interest(1)
Consolidated real estate joint ventures(2):
	50 and 60 Binney Street	Greater Boston	Cambridge/Inner Suburbs		34.0	%
	75/125 Binney Street	Greater Boston	Cambridge/Inner Suburbs		40.0	%
	100 and 225 Binney Street and 300 Third Street	Greater Boston	Cambridge/Inner Suburbs		30.0	%
	99 Coolidge Avenue	Greater Boston	Cambridge/Inner Suburbs		75.0	%
	15 Necco Street	Greater Boston	Seaport Innovation District		67.3	%	(3)
	Other joint venture	Greater Boston	–		60.9	%
	Alexandria Center® for Science and Technology – Mission Bay(4)	San Francisco Bay Area	Mission Bay		25.0	%
	1450 Owens Street	San Francisco Bay Area	Mission Bay		46.4	%	(5)
	601, 611, 651, 681, 685, and 701 Gateway Boulevard	San Francisco Bay Area	South San Francisco		50.0	%
	751 Gateway Boulevard	San Francisco Bay Area	South San Francisco		51.0	%
	211 and 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	San Francisco Bay Area	South San Francisco		46.2	%
	3215 Merryfield Row	San Diego	Torrey Pines		30.0	%
	Campus Point by Alexandria(6)	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		30.0	%
	SD Tech by Alexandria(7)	San Diego	Sorrento Mesa		50.0	%
	Pacific Technology Park	San Diego	Sorrento Mesa		50.0	%
	Summers Ridge Science Park(8)	San Diego	Sorrento Mesa		30.0	%
	1201 and 1208 Eastlake Avenue East and 199 East Blaine Street	Seattle	Lake Union		30.0	%
	400 Dexter Avenue North	Seattle	Lake Union		30.0	%
	800 Mercer Street	Seattle	Lake Union		60.0	%

Unconsolidated real estate joint ventures(2):
	1655 and 1725 Third Street	San Francisco Bay Area	Mission Bay		10.0	%
	1401/1413 Research Boulevard	Maryland	Rockville		65.0	%	(9)
	1450 Research Boulevard	Maryland	Rockville		73.2	%	(9)
	101 West Dickman Street	Maryland	Beltsville		57.9	%	(9)

(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 two other consolidated real estate joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

(3)Our ownership interest is expected to decline to 57% as one of our joint venture partners contributes the remaining costs to complete the project over time.

(4)Includes 409 and 499 Illinois Street, 1500 and 1700 Owens Street, and 455 Mission Bay Boulevard South.

(5)The noncontrolling interest share of our joint venture partner is anticipated to increase to 75% as our partner contributes the remaining cost to complete the project over time.

(6)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4110, 4135, 4155, 4161, 4224, and 4242 Campus Point Court.

(7)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton Road and 10055, 10065, and 10075 Barnes Canyon Road.

(8)Includes 9965, 9975, 9985, and 9995 Summers Ridge Road.

(9)Represents a joint venture with a local real estate operator in which our joint venture partner manages the day-to-day activities that significantly affect the economic performance of the joint venture.

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”).

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

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.

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


Property(1)	Consolidation Model		Voting Interest		Consolidation Analysis	Conclusion

50 and 60 Binney Street	VIE model		Not applicable under VIE model			Consolidated
75/125 Binney Street	We have:
100 and 225 Binney Street and 300 Third Street
99 Coolidge Avenue	(i)	The power to direct the activities of the joint venture that most significantly affect its economic performance; and
15 Necco Street
Other joint venture (Greater Boston)
Alexandria Center® for Science and Technology – Mission Bay
1450 Owens Street
601, 611, 651, 681, 685, and 701 Gateway Boulevard
751 Gateway Boulevard
211 and 213 East Grand Avenue	(ii)	Benefits that can be significant to the joint venture.
500 Forbes Boulevard
Alexandria Center® for Life Science – Millbrae
3215 Merryfield Row
Campus Point by Alexandria
5200 Illumina Way	Therefore, we are the primary beneficiary of each VIE
9625 Towne Centre Drive
SD Tech by Alexandria
Pacific Technology Park
Summers Ridge Science Park
1201 and 1208 Eastlake Avenue East and 199 East Blaine Street
400 Dexter Avenue North
800 Mercer Street
1401/1413 Research Boulevard		We do not control the joint venture and are therefore not the primary beneficiary.		Equity method of accounting
1450 Research Boulevard
101 West Dickman Street
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 two other consolidated real estate joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

Sales of partial interests

We evaluated each of our real estate joint ventures described below under the consolidation framework outlined above and further detailed in the “Consolidation” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. Upon completion of each partial interest sale, we continued to consolidate each property. Accordingly, we accounted for these sales of partial interests as equity transactions, with the differences between consideration received and the book value of partial interests sold recognized in additional paid-in capital, and no gain or loss recognized in earnings.

Refer to the “Consolidation” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information. For a summary of our completed dispositions of and sales of partial interests in real estate assets during the six months ended June 30, 2023, refer to the “Sales of real estate assets and impairment charges” section in Note 3 – “Investments in real estate” to our unaudited consolidated financial statements.

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

15 Necco Street

As of March 31, 2023, our investment in 15 Necco Street, an active development project aggregating 345,995 RSF located in our Seaport Innovation District submarket, was held in a consolidated real estate joint venture in which 90% was owned by us and 10% owned by our existing joint venture partner.

In April 2023, an investor acquired a 20% interest in our 15 Necco Street property, which consisted of an 18% interest sold by us and a 2% interest sold by our existing partner. The sales price of the 18% interest sold by us was $66.1 million, and the $7.8 million difference between the consideration received and the book value of our partial interest sold was recognized as an adjustment to additional paid-in capital. Upon completion of the sale, our ownership interest in the consolidated real estate joint venture was 72% and our existing and new partners’ noncontrolling interests were 8% and 20%, respectively. We expect our new joint venture partner to contribute capital to fund construction of the project over time and to accrete its ownership interest in the joint venture from 20% to 37%.

9625 Towne Centre Drive

As of March 31, 2023, our investment in 9625 Towne Centre Drive, aggregating 163,648 RSF located in our University Town Center submarket, was held in a consolidated real estate joint venture in which 50.1% was owned by us and 49.9% was owned by a joint venture partner.

In June 2023, an investor acquired a 70% interest in our 9625 Towne Centre Drive property, which consisted of a 20.1% partial interest sold by us and a 49.9% interest sold by our previous joint venture partner, which it had entirely and solely held. The consideration paid was based on an agreed-upon value of $160.5 million for the entire property. Our portion of the sales price for the 20.1% partial interest sold by us was $32.3 million, and the $15.6 million of consideration received in excess of the book value of our partial interest sold was recognized as an adjustment to additional paid-in capital. Upon completion of the sale, our ownership in the joint venture is 30%.

Other joint venture

During the three months ended March 31, 2023, we acquired two properties and entitlements aggregating 515,000 RSF with development opportunities in our Greater Boston market for a purchase price aggregating $58.9 million. Upon completion of these acquisitions, we formed a real estate joint venture with a local real estate operator that acquired a 39.1% interest in this joint venture in exchange for the contribution of additional entitlements and other pre-construction assets for a total contribution of $37.6 million, including a non-cash contribution aggregating $33.3 million. The entitlements contributed by our partner increased the joint venture’s aggregate development opportunities to 715,000 RSF. Our partner has the option to require us to redeem $35.3 million of its ownership interest at its contributed value beginning in January 2024. As a result, this portion of our partner’s ownership interest is classified in redeemable noncontrolling interests in our unaudited consolidated balance sheet as of June 30, 2023. Refer to Note 14 – “Noncontrolling interests” to our unaudited consolidated financial statements for additional information.

Consolidated VIEs’ balance sheet information

We, together with joint venture partners, hold interests in real estate joint ventures that we consolidate in our financial statements. These existing joint ventures provide significant equity capital to fund a portion of our future construction spend, and our joint venture partners may also contribute equity into these entities for financing-related activities.

The table below aggregates the balance sheet information of our consolidated VIEs as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Investments in real estate	$	7,309,072	$	6,771,842
Cash and cash equivalents	229,598		246,931
Other assets	693,908		684,487
Total assets	$	8,232,578	$	7,703,260

Secured notes payable	$	91,290	$	58,396
Other liabilities	492,603		430,615
Total liabilities	583,893		489,011
Redeemable noncontrolling interests	43,016		—
Alexandria Real Estate Equities, Inc.’s share of equity	3,688,483		3,513,001
Noncontrolling interests’ share of equity	3,917,186		3,701,248
Total liabilities and equity	$	8,232,578	$	7,703,260

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

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, and our maximum exposure to our consolidated VIEs is limited to our variable interests in each VIE, except for our 99 Coolidge Avenue real estate joint venture in which the VIE’s secured construction loan is guaranteed by us. For additional information, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements.

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, 2023 and December 31, 2022, consisted of the following (in thousands):


Property	June 30, 2023		December 31, 2022
1655 and 1725 Third Street	$	12,256	$	12,996
1450 Research Boulevard	5,839		5,625
101 West Dickman Street	8,787		8,678
Other	10,919		11,136
	$	37,801	$	38,435

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of June 30, 2023 (dollars in thousands):


					Interest Rate(1)		At 100%					Our Share
Unconsolidated Joint Venture	Maturity Date		Stated Rate			Aggregate Commitment			Debt Balance(2)
1401/1413 Research Boulevard		12/23/24	2.70%		3.31%		$	28,500		$	28,244	65.0%
1655 and 1725 Third Street		3/10/25	4.50%		4.57%		600,000			599,293		10.0%
101 West Dickman Street		11/10/26	SOFR+1.95%	(3)	7.11%		26,750			13,107		57.9%
1450 Research Boulevard		12/10/26	SOFR+1.95%	(3)	7.17%		13,000			6,383		73.2%
							$	668,250		$	647,027

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

(2)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2023.

(3)This loan is subject to a fixed SOFR floor rate of 0.75%.

5. LEASES

Refer to the “Lease accounting” section 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 June 30, 2023, we had 414 properties aggregating 41.1 million operating RSF located in key clusters, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. We focus on developing Class A/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, 2023, 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 June 30, 2023, our 414 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 69.4 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, 2023 are outlined in the table below (in thousands):


Year	Amount
2023	$	868,669
2024	1,868,268
2025	1,875,562
2026	1,829,926
2027	1,740,320
Thereafter	11,955,082
Total	$	20,137,827

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 June 30, 2023, we had one direct financing lease agreement, with a net investment balance of $39.7 million, for a parking structure with a remaining lease term of 69.4 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.

The components of our aggregate net investment in our direct financing lease as of June 30, 2023 and December 31, 2022 are summarized in the table below (in thousands):


	June 30, 2023		December 31, 2022
Gross investment in direct financing lease	$	254,259	$	255,186
Less: unearned income on direct financing lease	(211,697)		(212,995)
Less: allowance for credit losses	(2,839)		(2,839)
Net investment in direct financing lease	$	39,723	$	39,352

As of June 30, 2023, 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 six months ended June 30, 2023. 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.

5. LEASES (continued)

Future lease payments to be received under the terms of our direct financing lease as of June 30, 2023 are outlined in the table below (in thousands):


Year	Total
2023	$	936
2024	1,919
2025	1,976
2026	2,036
2027	2,097
Thereafter	245,295
Total	$	254,259

Income from rentals

Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$	695,019	$	629,359	$	1,372,441	$	1,232,872
Direct financing and sales-type leases(1)	650		787		1,298		1,807
Revenues subject to the lease accounting standard	695,669		630,146		1,373,739		1,234,679
Revenues subject to the revenue recognition accounting standard	8,670		10,813		18,549		18,834
Income from rentals	$	704,339	$	640,959	$	1,392,288	$	1,253,513

(1)We completed the sale of our real estate assets subject to sales-type leases in May 2022 and have had no sales-type leases since then.

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

5. LEASES (continued)

As of June 30, 2023, the present value of the remaining contractual payments aggregating $859.1 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $386.5 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 $535.3 million. As of June 30, 2023, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 42 years, and the weighted-average discount rate was 4.6%. 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, 2023, included leases for 38 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 $6.1 million as of June 30, 2023, our ground lease obligations have remaining lease terms ranging from approximately 30 to 99 years, including extension options that we are reasonably certain to exercise.

The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2023 is presented in the table below (in thousands):


Year	Total
2023	$	10,721
2024	22,664
2025	23,800
2026	21,843
2027	21,999
Thereafter	758,083
Total future payments under our operating leases in which we are the lessee	859,110
Effect of discounting	(472,565)
Operating lease liability	$	386,545

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 three and six months ended June 30, 2023 and 2022, 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,
	2023		2022		2023		2022
Gross operating lease costs	$	11,815	$	8,846	$	21,272	$	17,494
Capitalized lease costs	(3,297)		(922)		(4,218)		(1,852)
Expenses for operating leases in which we are the lessee	$	8,518	$	7,924	$	17,054	$	15,642

For the six months ended June 30, 2023 and 2022, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee were $18.0 million and $39.7 million, respectively. The decrease primarily relates to a $26.3 million payment made during the three months ended March 31, 2022 in connection with the execution of ground lease extensions at two properties in our Greater Stanford submarket.

6. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	924,370	$	825,193
Restricted cash:
Funds held in escrow for real estate acquisitions	30,002		30,112
Other	5,918		2,670
	35,920		32,782
Total	$	960,290	$	857,975

7. INVESTMENTS

Investments accounted for under the equity method

As of June 30, 2023, we had nine investments in limited partnerships aggregating $73.8 million that maintain specific ownership accounts for each investor, which were accounted for under the equity method. Our ownership interest in each of these nine investments was greater than 5%.

Investments that do not qualify for the equity method of accounting

Investments in publicly traded companies

Investments in privately held companies

Investments in privately held entities that report NAV per share

7. INVESTMENTS (continued)

Investments in privately held entities that do not report NAV per share

Impairment evaluation of equity method investments and investments in privately held entities that do not report NAV per share

(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;

(iv)significant concerns about the investee’s ability to continue as a going concern; and/or

(v)a decision by investors to cease providing support or reduce their financial commitment to the investee.

Investment income/loss recognition and classification

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

(ii)changes in NAV for investments in privately held entities that report NAV per share;

(iii)observable price changes for investments in privately held entities that do not report NAV per share; and

(iv)our share of unrealized gains or losses reported by our equity method investees.

Funding commitments to investments in privately held entities that report NAV

We are committed to funding approximately $376.8 million for our 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 8.4 years as of June 30, 2023. These investments are not redeemable by us, but we may receive distributions from these investments throughout their terms. 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 5.6 years as of June 30, 2023.

7. INVESTMENTS (continued)

The following tables summarize our investments as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Cost		Unrealized Gains		Unrealized Losses		Carrying Amount
Publicly traded companies	$	201,526	$	58,748	$	(109,382)	$	150,892
Entities that report NAV	470,731		218,001		(11,361)		677,371
Entities that do not report NAV:
Entities with observable price changes	105,605		96,529		(1,224)		200,910
Entities without observable price changes	393,065		—		—		393,065
Investments accounted for under the equity method	N/A		N/A		N/A		73,756
Total investments	$	1,170,927	$	373,278	$	(121,967)	$	1,495,994


	December 31, 2022
	Cost		Unrealized Gains		Unrealized Losses		Carrying Amount
Publicly traded companies	$	210,986	$	96,271	$	(100,118)	$	207,139
Entities that report NAV	452,391		315,071		(7,710)		759,752
Entities that do not report NAV:
Entities with observable price changes	100,296		95,062		(1,574)		193,784
Entities without observable price changes	388,940		—		—		388,940
Investments accounted for under the equity method	N/A		N/A		N/A		65,459
Total investments	$	1,152,613	$	506,404	$	(109,402)	$	1,615,074

Cumulative gains and losses (realized and unrealized) on investments in privately held entities that do not report NAV still held as of June 30, 2023 aggregated to a gain of $6.1 million, which consisted of upward adjustments aggregating $96.5 million, downward adjustments aggregating $1.2 million, and impairments aggregating $89.2 million.

Our investment loss for the three and six months ended June 30, 2023 and 2022 consisted of the following (in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2023			2022		2023			2022
Realized (losses) gains	$	(371)	(1)	$	28,647	$	20,373	(1)	$	51,761
Unrealized losses	(77,897)			(68,128)		(143,752)			(331,561)
Investment loss	$	(78,268)		$	(39,481)	$	(123,379)		$	(279,800)

(1)Includes impairments of $23.0 million primarily related to three non-real estate investments in privately held entities that do not report NAV.

During the six months ended June 30, 2023, gains and losses on investments in privately held entities that do not report NAV still held as of June 30, 2023 aggregated to a loss of $23.3 million, which consisted of upward adjustments aggregating $3.8 million and downward adjustments and impairments aggregating $27.1 million.

During the six months ended June 30, 2022, gains and losses on investments in privately held entities that do not report NAV still held as of June 30, 2022 aggregated to a loss of $7.6 million, which consisted of upward adjustments aggregating $12.2 million and downward adjustments and impairments aggregating $19.8 million.

Unrealized losses related to investments still held (excluding investments accounted for under the equity method of accounting) as of June 30, 2023 and 2022 aggregated $47.6 million and $300.6 million during the six months ended June 30, 2023 and 2022, respectively.

Our investment loss for the six months ended June 30, 2023 also included $279 thousand of equity in earnings of our equity method investments.

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

8. OTHER ASSETS

The following table summarizes the components of other assets as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Acquired in-place leases	$	524,456	$	615,638
Deferred compensation plan	38,402		33,534
Deferred financing costs – unsecured senior line of credit	34,680		31,747
Deposits	6,940		20,805
Furniture, fixtures, and equipment	24,102		23,186
Net investment in direct financing lease	39,723		39,352
Notes receivable	15,518		19,875
Operating lease right-of-use assets	535,331		558,255
Other assets	89,094		80,724
Prepaid expenses	20,387		28,294
Property, plant, and equipment	146,558		148,530
Total	$	1,475,191	$	1,599,940

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, 2023 and December 31, 2022. 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, 2023.


			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, 2023	$	150,892	$	150,892	$	—	$	—
As of December 31, 2022	$	207,139	$	207,139	$	—	$	—

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 investment income in our consolidated financial statements. 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.

9. FAIR VALUE MEASUREMENTS (continued)

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, 2023 and December 31, 2022, the carrying values of investments in privately held entities that report NAV aggregated $677.4 million and $759.8 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.

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, 2023 and December 31, 2022 (in thousands). These investments were measured at various times during the period from January 1, 2018 to June 30, 2023.


			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)(1)		Significant Unobservable Inputs (Level 3)(2)
Investments in privately held entities that do not report NAV
As of June 30, 2023	$	215,443	$	—	$	200,910	$	14,533
As of December 31, 2022	$	212,262	$	—	$	193,784	$	18,478

(1)These amounts represent the total carrying amounts of our equity investments in privately held entities with observable price changes, which are included in the investments balance of $1.5 billion and $1.6 billion, respectively, in our unaudited consolidated balance sheets as of June 30, 2023 and December 31, 2022. For more information, refer to Note 7 – “Investments” to our unaudited consolidated financial statements.

(2)These amounts are included in the investments in privately held entities without observable price changes balances aggregating $393.1 million and $388.9 million as of June 30, 2023 and December 31, 2022, respectively, disclosed in Note 7 – “Investments” to our unaudited consolidated financial statements. The aforementioned balances represent the carrying amounts 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 in 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 adjusted 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.

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 7 – “Investments” to our unaudited consolidated financial statements for additional information.

Refer to Note 3 – “Investments in real estate” and Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements for additional information.

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 and 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, 2023 and December 31, 2022, the book and estimated fair values of our secured notes payable and unsecured senior notes payable and the 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, 2023
	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	$	91,939		$	—		$	91,461		$	—	$	91,461
Unsecured senior notes payable	$	11,091,424		$	—		$	9,256,835		$	—	$	9,256,835
Unsecured senior line of credit	$	—		$	—		$	—		$	—	$	—
Commercial paper program	$	—		$	—		$	—		$	—	$	—


	December 31, 2022
	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	$	59,045		$	—		$	58,811		$	—	$	58,811
Unsecured senior notes payable	$	10,100,717		$	—		$	8,539,015		$	—	$	8,539,015
Unsecured senior line of credit	$	—		$	—		$	—		$	—	$	—
Commercial paper program	$	—		$	—		$	—		$	—	$	—

10. SECURED AND UNSECURED SENIOR DEBT

The following table summarizes our outstanding indebtedness and respective principal payments remaining as of June 30, 2023 (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					2023		2024			2025			2026			2027			Thereafter			Principal				Total
Secured notes payable
Greater Boston(3)	SOFR+2.70	%	8.08	%		11/19/26		$	—		$	—		$	—		$	92,266		$	—		$	—		$	92,266	$	(976)	$	91,290
San Francisco Bay Area	6.50	%	6.50			7/1/36		30			32			34			36			38			479			649		—		649
Secured debt weighted average interest rate/subtotal			8.07					30			32			34			92,302			38			479			92,915		(976)		91,939

Unsecured senior line of credit and commercial paper program(4)	(4)		N/A		(4)	1/22/28	(4)	(4)			—			—			—			—			—		(4)	—		—		—
Unsecured senior notes payable	3.45	%	3.62			4/30/25		—			—			600,000			—			—			—			600,000		(1,621)		598,379
Unsecured senior notes payable	4.30	%	4.50			1/15/26		—			—			—			300,000			—			—			300,000		(1,266)		298,734
Unsecured senior notes payable – green bond	3.80	%	3.96			4/15/26		—			—			—			350,000			—			—			350,000		(1,387)		348,613
Unsecured senior notes payable	3.95	%	4.13			1/15/27		—			—			—			—			350,000			—			350,000		(1,825)		348,175
Unsecured senior notes payable	3.95	%	4.07			1/15/28		—			—			—			—			—			425,000			425,000		(1,943)		423,057
Unsecured senior notes payable	4.50	%	4.60			7/30/29		—			—			—			—			—			300,000			300,000		(1,359)		298,641
Unsecured senior notes payable	2.75	%	2.87			12/15/29		—			—			—			—			—			400,000			400,000		(2,676)		397,324
Unsecured senior notes payable	4.70	%	4.81			7/1/30		—			—			—			—			—			450,000			450,000		(2,611)		447,389
Unsecured senior notes payable	4.90	%	5.05			12/15/30		—			—			—			—			—			700,000			700,000		(5,901)		694,099
Unsecured senior notes payable	3.375	%	3.48			8/15/31		—			—			—			—			—			750,000			750,000		(5,309)		744,691
Unsecured senior notes payable – green bond	2.00	%	2.12			5/18/32		—			—			—			—			—			900,000			900,000		(8,345)		891,655
Unsecured senior notes payable	1.875	%	1.97			2/1/33		—			—			—			—			—			1,000,000			1,000,000		(8,408)		991,592
Unsecured senior notes payable – green bond	2.95	%	3.07			3/15/34		—			—			—			—			—			800,000			800,000		(8,364)		791,636
Unsecured senior notes payable – green bond	4.75	%	4.88			4/15/35		—			—			—			—			—			500,000			500,000		(5,636)		494,364
Unsecured senior notes payable	4.85	%	4.93			4/15/49		—			—			—			—			—			300,000			300,000		(3,044)		296,956
Unsecured senior notes payable	4.00	%	3.91			2/1/50		—			—			—			—			—			700,000			700,000		10,168		710,168
Unsecured senior notes payable	3.00	%	3.08			5/18/51		—			—			—			—			—			850,000			850,000		(11,798)		838,202
Unsecured senior notes payable	3.55	%	3.63			3/15/52		—			—			—			—			—			1,000,000			1,000,000		(14,331)		985,669
Unsecured senior notes payable	5.15	%	5.26			4/15/53		—			—			—			—			—			500,000			500,000		(7,920)		492,080
Unsecured debt weighted average interest rate/subtotal			3.65					—			—			600,000			650,000			350,000			9,575,000			11,175,000		(83,576)		11,091,424
Weighted-average interest rate/total			3.69	%				$	30		$	32		$	600,034		$	742,302		$	350,038		$	9,575,479		$	11,267,915	$	(84,552)	$	11,183,363

(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)Represents a secured construction loan held by our consolidated real estate joint venture at 99 Coolidge Avenue, of which we have a 75.0% interest. As of June 30, 2023, this joint venture has $103.0 million available under existing lender commitments. The interest rate shall be reduced from SOFR+2.70% to SOFR+2.10% over time upon the completion of certain leasing, construction, and financial covenant milestones.

(4)Refer to “$5.0 billion unsecured senior line of credit” and “$2.0 billion commercial paper program” on the next page.

10. SECURED AND UNSECURED SENIOR DEBT (continued)

The following table summarizes our secured and unsecured senior debt and amounts outstanding under our unsecured senior line of credit and commercial paper program as of June 30, 2023 (dollars in thousands):


	Fixed-Rate Debt			Variable-Rate Debt									Weighted-Average
											Interest		Remaining Term (in years)
				Total			Percentage				Rate(1)
Secured notes payable	$	649		$	91,290		$	91,939			0.8	%	8.07	%		3.5
Unsecured senior notes payable	11,091,424			—			11,091,424				99.2		3.65			13.5
Unsecured senior line of credit and commercial paper program	—			—			—			(2)	—		N/A		(2)	4.6	(3)
Total/weighted average	$	11,092,073		$	91,290		$	11,183,363			100.0	%	3.69	%		13.4	(3)
Percentage of total debt	99.2		%	0.8		%	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)As of June 30, 2023, we had no outstanding balance on our unsecured senior line of credit and no commercial paper notes outstanding.

(3)We calculate the weighted-average remaining term of our commercial paper notes by using the maturity date of our unsecured senior line of credit. Using the maturity date of our outstanding commercial paper notes, the consolidated weighted-average maturity of our debt is 13.4 years. The commercial paper notes sold during the six months ended June 30, 2023 were issued at a weighted-average yield to maturity of 5.16% and had a weighted-average maturity term of 13 days.

Unsecured senior notes payable

In February 2023, we opportunistically issued $1.0 billion of unsecured senior notes payable with a weighted-average interest rate of 4.95% and a weighted-average maturity of 21.2 years. The unsecured senior notes consisted of $500.0 million of 4.75% green unsecured senior notes due 2035 and $500.0 million of 5.15% unsecured senior notes due 2053.

$5.0 billion unsecured senior line of credit

In June 2023, we amended our unsecured senior line of credit to increase the aggregate commitments available for borrowing to $5.0 billion from $4.0 billion. As of June 30, 2023, our unsecured senior line of credit has aggregate commitments of $5.0 billion and bears an interest rate of SOFR plus 0.835%. In addition to the cost of borrowing, the unsecured senior line of credit is subject to an annual facility fee of 0.14% based on the aggregate commitments outstanding. Based upon our ability to achieve certain annual sustainability targets, the interest rate and facility fee rate are also subject to upward or downward adjustments of up to four basis points with respect to the interest rate and up to one basis point with respect to the facility fee rate.

During the three months ended March 31, 2023, we achieved certain annual sustainability targets, as described in our unsecured senior line of credit agreement, which reduced the borrowing rate by four basis points for a one-year period to SOFR plus 0.835%, from SOFR plus 0.875%, and reduced the facility fee by one basis point to 0.14% from 0.15%. As of June 30, 2023, we had no outstanding balance on our unsecured senior line of credit.

$2.0 billion co****mmercial paper program

Our commercial paper program provides us with the ability to issue up to $2.0 billion of commercial paper notes that bear interest at short-term fixed rates with a maturity of generally 30 days or less and 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. The commercial paper notes sold during the six months ended June 30, 2023 were issued at a weighted-average yield to maturity of 5.16% and had a weighted-average maturity term of 13 days. As of June 30, 2023, we had no commercial paper notes outstanding.

In July 2023, we increased the aggregate amount we may issue from time to time under our commercial paper program to $2.5 billion from $2.0 billion.

10. SECURED AND UNSECURED SENIOR DEBT (continued)

Interest expense

The following table summarizes interest expense for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest incurred	$	108,746	$	92,459	$	209,570	$	179,662
Capitalized interest	(91,674)		(68,202)		(178,744)		(125,965)
Interest expense	$	17,072	$	24,257	$	30,826	$	53,697

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, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Accounts payable and accrued expenses	$	366,357	$	389,741
Accrued construction	666,872		624,440
Acquired below-market leases	370,822		417,656
Conditional asset retirement obligations	54,920		52,723
Deferred rent liabilities	16,765		18,321
Operating lease liability	386,545		406,700
Unearned rent and tenant security deposits	500,952		449,622
Other liabilities	130,854		112,056
Total	$	2,494,087	$	2,471,259

As of June 30, 2023 and December 31, 2022, 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 consolidated 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 consider 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, 2023 and 2022 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	133,705	$	309,382	$	255,398	$	191,990
Net income attributable to noncontrolling interests	(43,768)		(37,168)		(87,599)		(69,345)
Net income attributable to unvested restricted stock awards	(2,677)		(2,934)		(5,283)		(4,134)
Numerator for basic and diluted EPS – net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	87,260	$	269,280	$	162,516	$	118,511

Denominator for basic EPS – weighted-average shares of common stock outstanding	170,864		161,412		170,824		159,814
Dilutive effect of forward equity sales agreements	—		—		—		—
Denominator for diluted EPS – weighted-average shares of common stock outstanding	170,864		161,412		170,824		159,814
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	0.51	$	1.67	$	0.95	$	0.74
Diluted	$	0.51	$	1.67	$	0.95	$	0.74

13. STOCKHOLDERS’ EQUITY

Common equity transactions

Pursuant to our outstanding forward equity sales agreements, we have the ability to issue an aggregate of 699 thousand shares of common stock and to receive net proceeds of approximately $102.8 million. During the six months ended June 30, 2023, we did not issue any new equity under our ATM program, including any shares to settle our forward equity agreements outstanding as of December 31, 2022. In addition, the remaining amount available under our ATM program for future sales of common stock aggregated $141.9 million as of June 30, 2023.

Dividends

During the three months ended March 31, 2023, we declared cash dividends on our common stock aggregating $209.3 million, or $1.21 per share. In April 2023, we paid the cash dividends on our common stock declared for the three months ended March 31, 2023.

During the three months ended June 30, 2023, we declared cash dividends on our common stock aggregating $214.6 million, or $1.24 per share. In July 2023, we paid the cash dividends on our common stock declared for the three months ended June 30, 2023.

Accumulated other comprehensive loss

The change in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the six months ended June 30, 2023 was primarily due to net unrealized gains of $4.2 million on foreign currency translation related to our operations in Canada.

Common stock, preferred stock, and excess stock authorizations

Our charter authorizes the issuance of 400.0 million shares of common stock, of which 170.9 million shares were issued and outstanding as of June 30, 2023. 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, 2023. 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, 2023.

14. NONCONTROLLING INTERESTS

Noncontrolling interests represent the third-party interests in certain entities in which we have a controlling interest. As of June 30, 2023, these entities owned 65 properties, which 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, 2023 and 2022, we distributed $134.6 million and $92.1 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, 2023, we had two properties and one land parcel aggregating 168,414 RSF which were classified as held for sale in our consolidated financial statements. For additional information on the sales of real estate assets that were previously classified as held for sale, refer to the “Sales of real estate assets and impairment charges” section of Note 3 – “Investments in real estate” to our unaudited consolidated financial statements.

The disposal of properties classified as held for sale does not represent a strategic shift that has (or will have) a major effect on our operations or financial results and therefore does not meet the criteria for classification as a discontinued operation. We cease depreciation of our properties upon their classification as held for sale. Refer to the “Real estate sales” subsection of the “Investments in real estate” section in Note 2 – “Summary of significant accounting policies” for additional information.

The following is a summary of net assets as of June 30, 2023 and December 31, 2022 for our real estate investments that were classified as held for sale as of each respective date (in thousands):


	June 30, 2023		December 31, 2022
Total assets	$	58,412	$	117,197
Total liabilities	(2,775)		(2,034)
Total accumulated other comprehensive income	2,404		898
Net assets classified as held for sale	$	58,041	$	116,061

16. SUBSEQUENT EVENT

Commercial paper program upsizing

In July 2023, we increased the aggregate amount we may issue from time to time under our commercial paper program to $2.5 billion from $2.0 billion.

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