filings.toolsAlexandria Real Estate Equities 10-Q 2025-06-30
Filed 2025-07-21. 8 sections, 517K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-12993
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 95-4502084 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
26 North Euclid Avenue**,** Pasadena**,** California 91101
(Address of principal executive offices) (Zip code)
(626) 578-0777
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.01 par value per share | ARE | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Smaller reporting company | ☐ | |
| Accelerated filer | ☐ | Emerging growth company | ☐ | |
| Non-accelerated filer | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 15, 2025, 172,958,948 shares of common stock, par value $0.01 per share, were outstanding.
i
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | FINANCIAL STATEMENTS (UNAUDITED) | |
| Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 ............................................................. | 1 | |
| Consolidated Financial Statements for the Three and Six Months Ended June 30, 2025 and 2024: | ||
| Consolidated Statements of Operations ................................................................................................................... | 2 | |
| Consolidated Statements of Comprehensive Income ............................................................................................ | 3 | |
| Consolidated Statements of Changes in Stockholders’ Equity and Noncontrolling Interests .......................... | 4 | |
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 ................................ | 8 | |
| Notes to Consolidated Financial Statements .................................................................................................................... | 10 | |
| Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........................................................................................................................................................................ | 46 |
| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......................................................... | 119 |
| Item 4. | CONTROLS AND PROCEDURES ..................................................................................................................................... | 120 |
| PART II – OTHER INFORMATION | ||
| Item 1. | LEGAL PROCEEDINGS ...................................................................................................................................................... | 121 |
| Item 1A. | RISK FACTORS .................................................................................................................................................................... | 122 |
| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ................................................... | 125 |
| Item 5. | OTHER INFORMATION ....................................................................................................................................................... | 125 |
| Item 6. | EXHIBITS ............................................................................................................................................................................... | 126 |
| SIGNATURES ................................................................................................................................................................................................. | 127 |
ii
GLOSSARY
The following abbreviations or acronyms that may be used in this document
shall have the adjacent meanings set forth below:
| ASU | Accounting Standards Update |
| ATM | At the Market |
| CIP | Construction in Progress |
| EPS | Earnings per Share |
| FASB | Financial Accounting Standards Board |
| FFO | Funds From Operations |
| GAAP | U.S. Generally Accepted Accounting Principles |
| IRS | Internal Revenue Service |
| JV | Joint Venture |
| Nareit | National Association of Real Estate Investment Trusts |
| NAV | Net Asset Value |
| NYSE | New York Stock Exchange |
| REIT | Real Estate Investment Trust |
| RSF | Rentable Square Feet/Foot |
| SEC | Securities and Exchange Commission |
| SF | Square Feet/Foot |
| SoDo | South of Downtown submarket of Seattle |
| SOFR | Secured Overnight Financing Rate |
| SoMa | South of Market submarket of the San Francisco Bay Area |
| U.S. | United States |
| VIE | Variable Interest Entity |
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
Alexandria Real Estate Equities, Inc.
Consolidated Balance Sheets
(In thousands)
| June 30, 2025 | December 31, 2024 | ||
| (Unaudited) | |||
| Assets | |||
| Investments in real estate | $32,160,600 | $32,110,039 | |
| Investments in unconsolidated real estate joint ventures | 40,234 | 39,873 | |
| Cash and cash equivalents | 520,545 | 552,146 | |
| Restricted cash | 7,403 | 7,701 | |
| Tenant receivables | 6,267 | 6,409 | |
| Deferred rent | 1,232,719 | 1,187,031 | |
| Deferred leasing costs | 491,074 | 485,959 | |
| Investments | 1,476,696 | 1,476,985 | |
| Other assets | 1,688,091 | 1,661,306 | |
| Total assets | $37,623,629 | $37,527,449 | |
| Liabilities, Noncontrolling Interests, and Equity | |||
| Secured notes payable | $153,500 | $149,909 | |
| Unsecured senior notes payable | 12,042,607 | 12,094,465 | |
| Unsecured senior line of credit and commercial paper | 1,097,993 | — | |
| Accounts payable, accrued expenses, and other liabilities | 2,360,840 | 2,654,351 | |
| Dividends payable | 229,686 | 230,263 | |
| Total liabilities | 15,884,626 | 15,128,988 | |
| Commitments and contingencies | |||
| Redeemable noncontrolling interests | 9,612 | 19,972 | |
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity: | |||
| Common stock | 1,701 | 1,722 | |
| Additional paid-in capital | 17,200,949 | 17,933,572 | |
| Accumulated other comprehensive loss | (27,415) | (46,252) | |
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity | 17,175,235 | 17,889,042 | |
| Noncontrolling interests | 4,554,156 | 4,489,447 | |
| Total equity | 21,729,391 | 22,378,489 | |
| Total liabilities, noncontrolling interests, and equity | $37,623,629 | $37,527,449 |
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, | ||||||
| 2025 | 2024 | 2025 | 2024 | ||||
| Revenues: | |||||||
| Income from rentals | $737,279 | $755,162 | $1,480,454 | $1,510,713 | |||
| Other income | 24,761 | 11,572 | 39,744 | 25,129 | |||
| Total revenues | 762,040 | 766,734 | 1,520,198 | 1,535,842 | |||
| Expenses: | |||||||
| Rental operations | 224,433 | 217,254 | 450,828 | 435,568 | |||
| General and administrative | 29,128 | 44,629 | 59,803 | 91,684 | |||
| Interest | 55,296 | 45,789 | 106,172 | 86,629 | |||
| Depreciation and amortization | 346,123 | 290,720 | 688,185 | 578,274 | |||
| Impairment of real estate | 129,606 | 30,763 | 161,760 | 30,763 | |||
| Total expenses | 784,586 | 629,155 | 1,466,748 | 1,222,918 | |||
| Equity in (losses) earnings of unconsolidated real estate joint ventures | (9,021) | 130 | (9,528) | 285 | |||
| Investment loss | (30,622) | (43,660) | (80,614) | (376) | |||
| Gain on sales of real estate | — | — | 13,165 | 392 | |||
| Net (loss) income | (62,189) | 94,049 | (23,527) | 313,225 | |||
| Net income attributable to noncontrolling interests | (44,813) | (47,347) | (92,414) | (95,978) | |||
| Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s stockholders | (107,002) | 46,702 | (115,941) | 217,247 | |||
| Net income attributable to unvested restricted stock awards | (2,609) | (3,785) | (5,269) | (7,444) | |||
| Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $(109,611) | $42,917 | $(121,210) | $209,803 | |||
| Net (loss) income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders: | |||||||
| Basic | $(0.64) | $0.25 | $(0.71) | $1.22 | |||
| Diluted | $(0.64) | $0.25 | $(0.71) | $1.22 |
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, | ||||||
| 2025 | 2024 | 2025 | 2024 | ||||
| Net (loss) income | $(62,189) | $94,049 | $(23,527) | $313,225 | |||
| Other comprehensive income (loss) | |||||||
| Unrealized gains (losses) on foreign currency translation: | |||||||
| Unrealized foreign currency translation gains (losses) arising during the period | 18,787 | (3,895) | 18,837 | (11,814) | |||
| Unrealized gains (losses) on foreign currency translation, net | 18,787 | (3,895) | 18,837 | (11,814) | |||
| Total other comprehensive income (loss) | 18,787 | (3,895) | 18,837 | (11,814) | |||
| Comprehensive (loss) income | (43,402) | 90,154 | (4,690) | 301,411 | |||
| Less: comprehensive income attributable to noncontrolling interests | (44,813) | (47,347) | (92,414) | (95,978) | |||
| Comprehensive (loss) income attributable to Alexandria Real Estate Equities, Inc.’s stockholders | $(88,215) | $42,807 | $(97,104) | $205,433 |
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, 2025 | 170,129,883 | $1,701 | $17,509,148 | $— | $(46,202) | $4,525,299 | $21,989,946 | $9,612 | ||||||||
| Net (loss) income | — | — | — | (107,002) | — | 44,612 | (62,390) | 201 | ||||||||
| Total other comprehensive income | — | — | — | — | 18,787 | — | 18,787 | — | ||||||||
| Contributions from and sales of noncontrolling interests | — | — | 19 | — | — | 41,628 | 41,647 | — | ||||||||
| Distributions to and redemption of noncontrolling interests | — | — | — | — | — | (57,383) | (57,383) | (201) | ||||||||
| Issuance pursuant to stock plan | 25,786 | — | 27,776 | — | — | — | 27,776 | — | ||||||||
| Taxes related to net settlement of equity awards | (9,600) | — | (693) | — | — | — | (693) | — | ||||||||
| Repurchase of common stock | — | — | — | — | — | — | — | — | ||||||||
| Dividends declared on common stock ($1.32 per share) | — | — | — | (228,299) | — | — | (228,299) | — | ||||||||
| Reclassification of distributions and net loss | — | — | (335,301) | 335,301 | — | — | — | — | ||||||||
| Balance as of June 30, 2025 | 170,146,069 | $1,701 | $17,200,949 | $— | $(27,415) | $4,554,156 | $21,729,391 | $9,612 |
The accompanying notes are an integral part of these consolidated financial stateme
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements
Certain information and statements included in this quarterly report on Form 10-Q, including, without limitation, statements
containing the words “forecast,” “guidance,” “goals,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,”
“seeks,” “should,” “targets,” or “will,” or the negative of those words or similar words, constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that
may affect our future plans of operations, business strategy, results of operations, and financial position. A number of important factors
could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including,
but not limited to, the following:
- Operating factors, such as a failure to operate our business successfully in comparison to market expectations or in
comparison to our competitors, our inability to obtain capital when desired or refinance debt maturities when desired, and/
or a failure to maintain our status as a REIT for federal tax purposes;
-
Market and industry factors, such as adverse developments concerning the life science industry and/or our tenants;
-
Government factors, such as any unfavorable effects resulting from federal, state, local, and/or foreign government
policies, laws, and/or funding levels;
- Global factors, such as negative economic, social, political, financial, credit market, banking conditions, and/or regional
armed hostilities; and
- Other factors, such as climate change, cyber intrusions, and/or changes in laws, regulations, and financial accounting
standards.
Global Trade Policies
We have been monitoring and will continue to monitor macroeconomic trends and uncertainties. In particular, we are
assessing how recent fluctuations in international trade relations and trade policies could adversely affect our business or the
businesses of our tenants.
In early March 2025, the U.S. government imposed or indicated that it would impose a series of tariffs on certain goods from
Canada and Mexico as well as raise tariffs on Chinese imports. President Trump has also indicated his intent to impose a “major”
pharmaceutical-specific tariff, which could adversely affect our business and/or the business of our tenants. As a result of these
developments, the global securities and trade markets have reacted with volatility, and trade tensions remain high.
The imposition of tariffs or the potential future imposition of additional or modified tariffs in the current geopolitical climate could
have material adverse effects on the net profitability, revenues, or operations of Alexandria and many other companies. While we are
evaluating the potential impacts of such tariffs, as well as our ability to mitigate such impacts, these recent trends may in the meantime
interrupt supply chains, fragment international business relationships, and create unknown risks that would thereby affect our or our
tenants’ business operations.
This list of risks and uncertainties is not exhaustive. Additional information regarding risk factors that may affect us is included
under Part I; “Item 1A. Risk factors”; and “Item 7. Management’s discussion and analysis of financial condition and results of
operations” in our annual report on Form 10-K for the year ended December 31, 2024 and under respective sections in this quarterly
report on Form 10-Q. Readers of this quarterly report on Form 10-Q should also read our other documents filed publicly with the SEC
for further discussion regarding such factors.
Overview
We are a Maryland corporation formed in October 1994 that has elected to be taxed as a REIT for federal income tax
purposes. Alexandria Real Estate Equities, Inc. (NYSE: ARE), an S&P 500® company, is a best-in-class, mission-driven life science
REIT making a positive and lasting impact on the world. With our founding in 1994, Alexandria pioneered the life science real estate
niche. Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative Megacampus™ ecosystems in
AAA life science innovation cluster locations, including Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland,
Research Triangle, and New York City. As of June 30, 2025, Alexandria has a total market capitalization of $25.7 billion and an asset
base in North America that includes 39.7 million RSF of operating properties and 4.4 million RSF of Class A/A+ properties undergoing
construction and one 100% pre-leased committed near-term project expected to commence construction in the next year.
We develop dynamic Megacampus ecosystems that enable and inspire some of the world’s most brilliant minds and innovative
companies to create life-changing scientific and technological innovations. We believe in the utmost professionalism, humility, and
teamwork. Our tenants include multinational pharmaceutical companies; public and private biotechnology companies; life science
product, service, and medical device companies; digital health, advanced technology, and agtech companies; academic and medical
research institutions; U.S. government research agencies; non-profit organizations; and venture capital firms. Alexandria has a long-
standing and proven track record of developing Class A/A+ properties clustered in highly dynamic and collaborative Megacampus
environments that enhance our tenants’ ability to successfully recruit and retain world-class talent and inspire productivity, efficiency,
creativity, and success. Alexandria also provides strategic capital to transformative life science companies through our venture capital
platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in
higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
As of June 30, 2025:
-
Investment-grade or publicly traded large cap tenants represented 53% of our annual rental revenue;
-
Approximately 97% of our leases (on an annual rental revenue basis) contained effective annual rent escalations
approximating 3% that were either fixed or indexed based on a consumer price index or other index;
- Approximately 91% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay
substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other
operating expenses (including increases thereto) in addition to base rent;
- Approximately 92% of our leases (on an annual rental revenue basis) provided for the recapture of capital expenditures
(such as HVAC maintenance and/or replacement, roof replacement, and parking lot resurfacing) that we believe would
typically be borne by the landlord in traditional office leases; and
- 84% of our leasing activity during the last twelve months was generated from our existing tenant base.
A key element of our business strategy is our unique focus on Class A/A+ properties primarily located in collaborative
Megacampus ecosystems in AAA life science innovation clusters. Our Megacampus ecosystems are designed for optionality and
scalability, offering our tenants a clear path to address their growth requirements, including through our future developments and
redevelopments. Strategically located near top academic and medical research institutions and equipped with curated amenities and
services, and convenient access to transit, our Megacampus ecosystems are designed to support our tenants in attracting and retaining
top talent and in meeting our tenants’ growth needs, which we believe is a key
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
The primary market risk to which we believe we may be exposed is interest rate risk, which may result from many factors,
including government monetary and tax policies, domestic and international economic and political considerations, and other factors
that are beyond our control.
In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate
risks on our operations, we may utilize a variety of financial instruments, including interest rate hedge agreements, caps, floors, and
other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest
rates may carry additional risks, such as counterparty credit risk and the legal enforceability of hedge agreements. As of June 30, 2025,
we did not have any outstanding interest rate hedge agreements.
Our future earnings and fair values relating to our outstanding debt are primarily dependent upon prevalent market rates of
interest. The following tables illustrate the effect of a 1% change in interest rates, assuming a zero percent interest rate floor, on our
fixed- and variable-rate debt as of June 30, 2025 (in thousands):
| Annualized effect on future earnings due to variable-rate debt: | |
| Rate increase of 1% | $(3,841) |
| Rate decrease of 1% | $3,841 |
| Effect on fair value of total consolidated debt: | |
| Rate increase of 1% | $(766,508) |
| Rate decrease of 1% | $876,870 |
These amounts are determined by considering the effect of the hypothetical interest rates on our borrowings as of June 30,
- These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an
environment. Furthermore, in the event of a change of such magnitude, we would consider taking actions to further mitigate our
exposure to the change. Because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity
analyses assume no changes in our capital structure.
Equity price risk
We have exposure to equity price market risk because we hold equity investments in publicly traded companies and privately
held entities. All of our investments in actively traded public companies are reflected in our consolidated balance sheets at fair value.
Our investments in privately held entities that report NAV per share are measured at fair value using NAV as a practical expedient to fair
value. Our equity investments in privately held entities that do not report NAV per share are measured at cost less impairments,
adjusted for observable price changes during the period. Changes in fair value of public investments, changes in NAV per share
reported by privately held entities, and observable price changes of privately held entities that do not report NAV per share are
classified as investment income (loss) in our consolidated statements of operations. There is no assurance that future declines in value
will not have a material adverse effect on our future results of operations. The following table illustrates the effect that a 10% change in
the value of our equity investments would have on earnings as of June 30, 2025 (in thousands):
| Equity price risk: | |
| Fair value increase of 10% | $147,670 |
| Fair value decrease of 10% | $(147,670) |
Foreign currency exchange rate risk
We have exposure to foreign currency exchange rate risk related to our subsidiaries operating in Canada and Asia. The
functional currencies of our foreign subsidiaries are the local currencies in each respective country. Gains or losses resulting from the
translation of our foreign subsidiaries’ balance sheets and statements of operations are classified in accumulated other comprehensive
income (loss) as a separate component of total equity and are excluded from net income (loss). Gains or losses will be reflected in our
consolidated statements of operations when there is a sale or partial sale of our investment in these operations or upon a complete or
substantially complete liquidation of the investment. The following tables illustrate the effect that a 10% change in foreign currency rates
relative to the U.S. dollar would have on our potential future earnings and on the fair value of our net investment in foreign subsidiaries
based on our current operating assets outside the U.S. as of June 30, 2025 (in thousands):
| Effect on potential future earnings due to foreign currency exchange rate: | |
| Rate increase of 10% | $53 |
| Rate decrease of 10% | $(53) |
| Effect on the fair value of net investment in foreign subsidiaries due to foreign currency exchange rate: | |
| Rate increase of 10% | $38,953 |
| Rate decrease of 10% | $(38,953) |
The sensitivity analyses assume a parallel shift of all foreign currency exchange rates with respect to the U.S. dollar; however,
foreign currency exchange rates do not typically move in such a manner, and actual results may differ materially.
Our exposure to market risk elements for the six months ended June 30, 2025 was consistent with the risk elements presented
above, including the effects of changes in interest rates, equity prices, and foreign currency exchange rates.
Item 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
As of June 30, 2025, we had performed an evaluation, under the supervision of our principal executive officers and principal
financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and
procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized, and reported
within the requisite time periods. Based on our evaluation, the principal executive officers and principal financial officer concluded that
our disclosure controls and procedures were effective as of June 30, 2025.
Changes in internal control over financial reporting
There has not been any change in our internal control over financial reporting during the three months ended June 30, 2025
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 2006, ARE-East River Science Park, LLC, a subsidiary of Alexandria Real Estate Equities, Inc., was granted an option to
incorporate a land parcel adjacent to and north of the Alexandria Center® for Life Science – New York City (“ACLS-NYC”) campus
(“Option Parcel”) into the existing ground lease of that campus. The Option Parcel will allow ARE-East River Science Park, LLC to
develop a future world-class life science building within the ACLS-NYC campus. ARE-East River Science Park, LLC’s investment in pre-
construction costs related to the development of the Option Parcel, including costs related to design, engineering, environmental,
survey/title, and permitting and legal costs, aggregated $173.8 million as of June 30, 2025.
On August 6, 2024, ARE-East River Science Park, LLC filed a lawsuit in the U.S. District Court for the Southern District of New
York against its landlord, New York City Health + Hospitals Corporation (“H+H”), and the New York City Economic Development
Corporation (“EDC”). On January 24, 2025, ARE-East River Science Park, LLC filed a first amended complaint. The lawsuit alleges two
principal claims against H+H and EDC: fraud in the inducement, and, in the alternative, breach of contract in violation of the implied
covenant of good faith and fair dealing. As alleged in the complaint, ARE-East River Science Park, LLC’s claims arise from H+H’s and
EDC’s misrepresentations and concealment of material facts in connection with a floodwall, which H+H and EDC are seeking to require
ARE-East River Science Park, LLC to integrate into the development of the Option Parcel. ARE-East River Science Park, LLC alleges
that H+H’s and EDC’s misconduct have prevented it from commencing the development of the Option Parcel. In light of the pending
litigation, the closing date for our option and thus the commencement date for construction of the third tower at the campus are
presently indeterminate. Among other things, ARE-East River Science Park, LLC is seeking significant damages and equitable relief
from the court to confirm our understanding that the option is in full force and effect.
This matter exposes us to potential losses ranging from zero to the full amount of the investment in the project aggregating
$173.8 million as of June 30, 2025, depending on any collection of damages and/or the ability to develop the project. We performed a
probability-weighted recoverability analysis based on initial estimates of various possible outcomes and determined no impairment was
present as of June 30, 2025.
Item 1A. RISK FACTORS
In addition to the information set forth in this quarterly report on Form 10-Q, one should also carefully review and consider the
information contained in the other reports and periodic filings that we make with the SEC, including, without limitation, the information
contained under the caption “Item 1A. Risk factors” in our annual report on Form 10-K for the year ended December 31, 2024. Those risk
factors could materially affect our business, financial condition, and results of operations. The risks that we describe in our public filings
are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we presently deem to be
immaterial, also may materially adversely affect our business, financial condition, and results of operations.
There have been no material changes in our risk factors from those disclosed under the caption “Item 1A. Risk factors” in our
annual report on Form 10-K for the year ended December 31, 2024, except for the following updates:
Changes to regulatory, funding, staffing, trade, and other policies and actions by the U.S. government could
adversely affect our business operations or those of our tenants and our venture investment portfolio companies.
Domestic and international policy shifts may introduce considerable uncertainty to the macroeconomic and regulatory
landscape in which we, our tenants, and our venture investment portfolio companies operate. Our tenants and our venture
investment portfolio companies include entities in the pharmaceutical, biotechnology, medical device, life science, and related
industries, academic and private institutions, government institutions that determine their research and development budgets
based on several factors, including the availability of government and other funding, and the operational efficiency and reliability
of public regulatory institutions.
Since January 2025, the current U.S. administration has enacted and proposed substantial policy changes that affect
federal health agencies, research funding, public health priorities, and international trade. These measures — ranging from
staffing and budget reductions at the U.S. Food and Drug Administration (“FDA”) and the National Institutes of Health (“NIH”) to
sweeping tariff actions, as described below — may significantly disrupt the life science ecosystem in which we, our tenants, and
our venture investment portfolio companies operate.
Reductions in FDA Workforce and Budget
In 2025, the FDA laid off approximately 3,500 employees, representing approximately 19% of its workforce at the
beginning of the year. Such workforce reductions at the FDA have raised some concerns regarding the agency’s capacity to
perform timely regulatory reviews and approvals of drugs and other medical products. Recent and/or potential further reductions
in workforce or other personnel changes at the FDA, including terminations, may disrupt the agency’s review and approval
processes for our tenants’ and our venture investment portfolio companies’ products. Such disruptions could lead to setbacks in
research and development timelines, negatively impacting life science companies’ ability to advance their pipelines, secure
investor funding, or achieve commercial viability, which could severely affect their operations and financial performance and, as
a result adversely impact our operating and financial results.
NIH Grant Cuts and Impact on Research Institutions
The current U.S. administration has implemented significant policy changes affecting the NIH, leading to substantial
disruptions in biomedical research across the U.S. These actions included staff layoffs and funding cuts, as described below,
and resulted in the suspension of numerous research projects, posing risks to scientific advancement and introducing
uncertainty for some of our tenants and venture investment portfolio companies.
- NIH budget freeze and workforce cuts. On January 27, 2025, the U.S. administration issued an executive order to
suspend NIH grant funding, freezing much of NIH’s nearly $48 billion budget for 2025. Though the suspension was
eventually blocked and reversed, during the first half of 2025 the NIH laid off approximately 5,000 employees and
contractors across its approximately 20,000-person workforce.
In May 2025, the White House introduced a budget proposal for fiscal year 2026 that would reduce the NIH budget by
40%, from $48 billion to $27.5 billion. The proposal has been met with push back from Congress, and, until a new
budget is approved by the legislature, the NIH budget will remain at 2024 levels through a continuing resolution.
Should the NIH budget be significantly reduced, it may affect funding of early research that drives the formation of new
life companies, potentially impacting the U.S.'s global life science leadership and long-term demand for life science
real estate.
- Termination of NIH grants and funding commitments to major research institutions. On January 20, 2025, President
Trump issued an executive order directing every U.S. agency, including the NIH, to “terminate, to the maximum extent
allowed by law” all grants relating to diversity, equity, and inclusion. On January 29, 2025, the President issued an
executive order to make it “the policy of the United States to combat anti-Semitism vigorously, using all available and
appropriate legal tools, to prosecute, remove, or otherwise hold to account the perpetrators of unlawful anti-Semitic
harassment and violence.” As a result of one or both executive orders, the NIH, the world’s largest funder of
biomedical research, has withheld funding from certain U.S. research institutions.
- 15% cap on indirect cost reimbursements of all NIH grants. On February 7, 2025, the NIH introduced a policy limiting
indirect cost reimbursements to 15% for all NIH grants, representing a significant reduction from historic levels, which
were approximately double that rate on average, and in some cases significantly higher. This change threatens to
substantially impact the ability of research institutions to support their infrastructure and administrative costs, including
their ability to lease life science facilities.
A coalition of 22 state attorneys general, along with organizations like the Association of American Medical Colleges,
filed lawsuits challenging the NIH’s policy changes, particularly the 15% cap on indirect costs. On April 7, 2025, a federal court
issued a permanent injunction blocking the enforcement of this cap. However, the U.S. administration has signaled its intent to
appeal and/or pursue similar funding restrictions through future legislative or administrative actions. If implemented, any such
funding cap could negatively impact our tenants that depend on grant funding for its operations. It could also reduce the
financial resources available to such tenants, forcing them to scale back operations, reduce leased space, or delay their plans
for lease expansion.
Termination of federal research funding that affected prominent academic institutions has already led to reductions in
postdoctoral hiring and the closure of critical programs. Moreover, recent changes to visa rules have introduced new uncertainty
around the ability of international graduate students and postdoctoral researchers to remain in the U.S. following graduation.
Many of these individuals represent years of training investment and historically have formed a key segment of the U.S. biotech
workforce. As limitations on their residency and employment take effect, a growing share of talent is migrating to foreign
markets. The U.S. life sciences real estate market has historically benefited from robust domestic R&D activity and venture
capital investment. However, other countries are increasingly positioned to attract top-tier biomedical talent, venture capital, and
clinical trials. The global leadership in biotechnology currently held by the U.S. may begin to shift abroad. The reduced
attractiveness of the U.S. as a destination for research and commercialization could lead to a substantial long-term decline in
the size of our life science tenant base and of life science real estate.
Drug Pricing Regulation — Most Favored Nation Executive Order
On May 12, 2025, President Trump issued an executive order titled “Delivering Most-Favored-Nation Prescription Drug
Pricing to American Patients,” directing the U.S. Department of Health and Human Services to establish pricing benchmarks for
prescription drugs based on the lowest prices paid in other developed countries. While the President announced that the
“prescription drug and pharmaceutical prices will be reduced, almost immediately, by 30% to 80%,” many of the proposed
changes would require formal rulemaking and are expected to face legal challenges. Although the implementation timeline and
extent of any actual price reductions remain uncertain. If enacted, these changes could materially affect our life science tenants
by potentially diminishing their profitability and constraining future growth, which in turn can reduce their future demand for life
science space.
Dismissal of the Entire Independent Vaccine Advisory Panel at the U.S. Centers for Disease Control and Prevention (CDC)
In June 2025, the U.S. Health Secretary unilaterally dismissed all 17 members of the Advisory Committee on
Immunization Practices (ACIP) at the CDC, and withdrew a recommendation for administering COVID shots to children and
pregnant women. Shortly thereafter, the Health Secretary named eight new members to serve on the panel, including several
anti-vaccine advocates.
Reductions in Medicaid Funding under the One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act was signed into law. Included in the bill is an estimated $1 trillion in cuts
to Medicaid spending, implemented through Medicaid work requirements, patient cost-sharing, and a phasedown of Medicaid
provider taxes and state-directed payments. Such reductions in Medicaid spending could result in lower revenue for some life
science tenants, adversely impacting financial performance and potentially resulting in reduced life science real estate
requirements.
The Rapid Expansion of China’s Biotechnology Sector May Adversely Impact Demand for U.S. Life Sciences Real Estate
The U.S. life sciences real estate market has historically benefited from robust domestic R&D activity and venture
capital investment. The accelerated growth of China’s biotechnology industry—fueled by state subsidies, regulatory reform, and
inexpensive talent —poses a potential threat to U.S. lab space demand. Given lower operational costs and faster clinical trial
recruitment timelines, China may attract biotech firms to conduct R&D activities in China rather than the U.S.
Additionally, the U.S. biopharma sector is increasingly sourcing innovative assets from China, with over one-third of in-
licensed molecules at major U.S. pharmaceutical companies now originating from Chinese firms. If biopharma companies
increasingly rely on acquiring or in-licensing assets from China instead of looking to innovation developed in the U.S., it could
negatively impact the fundamentals of the U.S. biotech market leading to reduced investment and fewer U.S.-based biotech
companies. Should this occur, demand for domestic lab space could decline.
Tariff Escalation, Trade Disruption, and Financial Market Instability
Beginning in March 2025, the U.S. government implemented a series of trade actions that have reshaped global
economic relations and triggered market volatility, specifically:
- On February 1, 2025, President Trump signed executive orders imposing a 25% tariff on all goods from Mexico and
Canada and a 10% tariff on China.
- On March 3, 2025, the President increased tariffs on all products from China from 10% to 20%. He also implemented
new 25% tariffs on imports from Mexico and Canada.
- On April 2, 2025, the President declared a national emergency to address the U.S. trade deficit and imposed a 10%
universal import tariff on all goods, with higher rates for 57 trading partners. This announcement led to a significant
stock market decline, with the S&P 500 Index, Dow Jones Industrial Average, and the Nasdaq Composite dropping by
approximately 6.0%, 5.5%, and 5.8%, respectively.
- On April 9, 2025, facing a global market meltdown, the President announced a 90-day pause on tariffs for most
countries but raised the tax rate on Chinese imports to 125%. Following the announcement, the S&P 500 Index surged
9.5%. However, on April 10, 2025, U.S. stocks fell as the initial euphoria over the pause on tariffs faded. Subsequently,
on June 12, 2025, the President announced that the 125% tariff would be replaced with a 55% tariff on select Chinese
goods. Pharmaceutical ingredients and critical materials remain partially exempt.
- On April 14, 2025, the U.S. government launched an investigation into pharmaceuticals to justify tariffs that may be
implemented on pharmaceutical products. In 2024, over $200 billion in pharmaceutical products were imported to the
U.S., and it is estimated that U.S. tariffs could add $46 billion in costs to the pharmaceutical industry.
If financial markets continue to be disrupted, we may face the following risks:
- Restricted access to capital. Market instability may hinder our ability to raise capital, including through dispositions,
sales of partial interests, and new debt capital, and could potentially delay our current or future development and
redevelopment projects.
- Rising construction costs. Our general contractors may face difficulty procuring construction materials at reasonable
prices, particularly those subject to tariffs or disrupted supply, which may lead to project delays and/or increased costs.
Rising costs and procurement challenges could significantly impact the yields and delay net operating income
commencement from our current and future development and redevelopment pipeline.
- Risks to tenant operations. Many of our tenants rely on the import and export of materials, components, and/or
specialized equipment. As a result, their products may become prohibitively expensive to manufacture or sell. These
challenges may adversely affect our tenants’ ability to meet their lease obligations or to renew their leases with us.
- Macroeconomic impact. Widespread tariffs, restricted trade, increased market volatility, and reduced investor
confidence may trigger inflationary pressure and elevate the risk of a U.S. recession.
The cost increases that may result from tariffs, trade conflicts, and financial market volatility may significantly impact our
development and redevelopment projects. Elevated material costs may lead to higher overall project budgets and extended
construction timelines or require modifications to project scope to preserve economic feasibility. Any such adjustments may adversely
affect our ability to deliver space on time and within budget, delay occupancy and commencement of rental income, and impact
projected net operating income and yields.
Any of the aforementioned and future developments may adversely affect occupancy rates, rental income, and the value of
our real estate portfolio in several ways. First, regulatory delays and reduced NIH funding may slow the pace of innovation and
company formation, leading to fewer early-stage tenants seeking lab space. Established tenants may face financial strain due to
reduced grant support, drug pricing pressures, and increased operational costs from tariffs, prompting them to downsize, consolidate,
or defer expansion plans. This could result in lower leasing, increased vacancy rates, and downward pressure on rental rates across
our portfolio.
Second, macroeconomic volatility and restricted access to capital markets may impair our ability to fund new developments or
raise new debt or equity capital at favorable terms. Rising construction costs and supply chain disruptions could delay project
completions, reduce development yields, and impact the timing of rental income generation. Additionally, if tenants are unable to absorb
higher operating costs or pass them on to customers, their financial health may deteriorate, increasing the risk of lease defaults or
renegotiations.
Finally, the growing competitiveness of international markets—particularly China’s rapidly expanding biotech sector—may
shift R&D activity abroad, reducing domestic demand for specialized lab infrastructure. If U.S.-based life sciences companies
increasingly rely on foreign innovation or relocate operations to more favorable regulatory or cost environments, the long-term
fundamentals of the U.S. life sciences real estate market could weaken. This may lead to asset devaluation, reduced investor
confidence, and a more challenging environment for sustaining growth and delivering shareholder value.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities
On December 9, 2024, we announced that our Board of Directors authorized a share repurchase program, allowing the
repurchase of shares with an aggregate value up to $500.0 million until December 31, 2025 in the open market, through privately
negotiated transactions, or otherwise, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the
Exchange Act. During the three months ended June 30, 2025, we did not repurchase any shares of our common stock under the
program. As of June 30, 2025, we had remaining authorization to repurchase shares with an aggregate value up to $241.8 million.
Item 5. OTHER INFORMATION
Disclosure of 10b5-1 plans
During the three months ended June 30, 2025, none of our officers or directors adopted or terminated any contract, instruction,
or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)
or any “non-Rule 10b5-1 trading arrangement.”
Updates to Federal Income Tax Considerations in Form S-3 Registration Statement
Updates to our discussion of federal income tax considerations are included in Exhibit 99.1 attached hereto, which is
incorporated herein by reference. Exhibit 99.1 supplements, supersedes and replaces where inconsistent with, and should be read
together with, the disclosure under the heading “Federal Income Tax Considerations” in the prospectus dated February 1, 2024, which
is a part of our Registration Statement on Form S-3 (File No. 333-276803), as amended. Our updated discussion addresses recently
enacted tax law changes.
Item 6. EXHIBITS
(*) Incorporated by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on July 21, 2025.
| ALEXANDRIA REAL ESTATE EQUITIES, INC. | |
| /s/ Joel S. Marcus | |
| Joel S. Marcus Executive Chairman (Principal Executive Officer) | |
| /s/ Peter M. Moglia | |
| Peter M. Moglia Chief Executive Officer and Chief Investment Officer (Principal Executive Officer) | |
| /s/ Marc E. Binda | |
| Marc E. Binda Chief Financial Officer and Treasurer (Principal Financial Officer) |