ALEXANDRIA REAL ESTATE EQUITIES, INC.ARE
ALEXANDRIA REAL ESTATE EQUITIES, INC. Leases Disclosure
Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our 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 December 31, 2025, we had 340 properties aggregating 35.9 million operating RSF in key cluster locations, including
Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus
on developing Class A/A+ properties in AAA life science innovation clusters that offer the scale and strategic design integral to our
Megacampus strategy. Strategically located near top academic and medical research institutions, our Megacampus ecosystems feature
curated amenities and services, and convenient access to transit, creating environments that help our tenants attract and retain top
talent.
As of December 31, 2025, all leases in which we are the lessor were classified as operating leases, with the exception of one
direct financing and one sales-type lease. Our leases are described below.
Operating leases
As of December 31, 2025, our 340 properties were subject to operating lease agreements. Five of these properties are subject
to operating lease agreements that each contain a purchase option as described below:
(i)Two of these properties, representing two land parcels in the San Francisco Bay Area market, are subject to lease
agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during
each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent
commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 66.9 years.
(ii)Two operating properties in the Seattle market, held by a consolidated real estate joint venture, are subject to purchase
options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our
partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option,
the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our
partner’s remaining lease terms for these operating leases are 7.2 years and 18.7 years, respectively.
(iii)One property subject to an operating lease agreement contains a purchase option with an exercise date of March 2034.
Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration.
In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early
termination fee by the tenant.
At the commencement of each lease, we establish the lease term comprising the noncancelable period for each lease together
with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our
assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to
the assessment, including property-based, market-based, and tenant-based factors. We do not reassess the lease term or a lessee
option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract.
Future lease payments to be received under the terms of our operating lease agreements, excluding expense
reimbursements, in effect as of December 31, 2025 are outlined in the table below (in thousands):
Year | Amount | |
2026 | $1,612,549 | |
2027 | 1,500,507 | |
2028 | 1,364,651 | |
2029 | 1,267,782 | |
2030 | 1,198,685 | |
Thereafter | 7,125,656 | |
Total | $14,069,830 |
Refer to Note 3 – “Investments in real estate” to our consolidated financial statements for additional information about our
owned real estate assets, which are the underlying assets under our operating leases.
Direct financing and sales-type leases
As of December 31, 2025, we have one direct financing lease agreement, with a n
et investment balance of $42.6 million, for a parking structure with a remaining lease term of 66.9 years. The lessee has an option to
purchase the underlying asset at fair market value during each of the 30-day periods commencing on the dates that are 15 years, 30
years, and 74.5 years after the rent commencement date of October 1, 2017.
As of December 31, 2025, we also have one sales-type lease for a property in the Seattle market. As of December 31, 2025,
the net investment in this lease is $16.4 million. Upon recognition of the sales-type lease during the three months ended
March 31, 2025, we recognized a gain on sale of real estate aggregating $12.7 million classified in gain on sales of real estate in our
consolidated statement of operations for the year ended December 31, 2025. At the end of the lease term in March 2026, the property
under this lease transfers to the tenant for a sales price of approximately $18.0 million.
As of December 31, 2025, our estimated provision for expected credit loss related to our direct financing lease and sales-type
lease aggregated $1.8 million, which was predominantly related to our direct financing lease. We estimate the provision for expected
credit loss related to our direct financing lease using a probability of default methodology, which incorporates the borrower’s investment-
grade credit rating from S&P Global Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the
real estate securing the investments to estimate potential recoveries in the event of default, among other inputs. The estimate of the
expected credit loss related to our sales-type lease was determined using historical industry losses and transaction-specific information,
including the estimated fair value of the underlying real estate asset securing this transaction, the short-term nature of this lease, and
other available information. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant
accounting policies” to our consolidated financial statements.
The components of our aggregate net investment in our direct financing and sales-type leases as of December 31, 2025 and
2024 are summarized in the table below (in thousands):
December 31, | ||||
2025 | 2024 | |||
Gross investment in direct financing and sales-type leases | $265,839 | $251,405 | ||
Less: unearned income on direct financing lease | (205,037) | (207,734) | ||
Less: provision for expected credit losses | (1,817) | (2,168) | ||
Net investment in leases | $58,985 | $41,503 | ||
Future lease payments to be received under the terms of our direct financing and sales-type leases as of December 31, 2025
are outlined in the table below (in thousands):
Year | Total | |
2026 | $18,446 | |
2027 | 2,097 | |
2028 | 2,160 | |
2029 | 2,224 | |
2030 | 2,291 | |
Thereafter | 238,621 | |
Total | $265,839 |
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):
Year Ended December 31, | ||||||
2025 | 2024 | 2023 | ||||
Income from rentals: | ||||||
Revenues subject to the lease accounting standard: | ||||||
Operating leases | $2,889,721 | $3,005,137 | $2,802,567 | |||
Direct financing and sales-type leases | 4,496 | 2,653 | 2,608 | |||
Revenues subject to the lease accounting standard | 2,894,217 | 3,007,790 | 2,805,175 | |||
Revenues subject to the revenue recognition accounting standard | 50,958 | 41,916 | 37,281 | |||
Income from rentals | $2,945,175 | $3,049,706 | $2,842,456 | |||
Revenues subject to the revenue recognition accounting standard and classified in income from rentals consist primarily of
short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to “Revenues” and
“Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies” to our
consolidated financial statements for additional information.
Deferred leasing costs
The following table summarizes our deferred leasing costs as of December 31, 2025 and 2024 (in thousands):
December 31, | ||||
2025 | 2024 | |||
Deferred leasing costs | $1,054,765 | $1,061,924 | ||
Accumulated amortization | (596,454) | (575,965) | ||
Deferred leasing costs, net | $458,311 | $485,959 | ||
Residual value risk management strategy
Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual
value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business
objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property
inspections, proactively addressing potential maintenance issues, and/or timely resolving any occurring issues, and (iii) carefully
selecting our tenants and monitoring their credit quality throughout their respective lease terms.
Leases in which we are the lessee
Operating lease agreements
We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these
leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or
covenants imposed by the leases, nor guarantees of residual value.
We recognize a right-of-use asset, which is classified within in our consolidated balance sheets, and a related
liability, which is classified within in our consolidated balance sheets, to
account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”
in Note 2 – “Summary of significant accounting policies” to our consolidated financial statements.
As of December 31, 2025, the present value of the remaining contractual payments aggregating $773.4 million under our
operating lease agreements, including our extension options that we are reasonably certain to exercise, was $360.5 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 $697.9 million. As of December 31, 2025, the weighted-average
remaining lease term of operating leases in which we are the lessee was approximately 61 years, including extension options that we
are reasonably certain to exercise, and the weighted-average discount rate was 4.7%. The weighted-average discount rate is based on
the incremental borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on
a collateralized basis over a similar term for an amount equal to the lease payments.
Ground lease obligations as of December 31, 2025, included leases for 31 of our properties, which accounted for
approximately 9% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property
with a net book value of $5.1 million as of December 31, 2025, our ground lease obligations have remaining lease terms ranging from
approximately 29 to 97 years, including extension options that we are reasonably certain to exercise.
The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating
lease liability reflected in our consolidated balance sheet as of December 31, 2025 is in the table below (in thousands):
Year | Total | |
2026 | $22,768 | |
2027 | 21,849 | |
2028 | 21,517 | |
2029 | 21,024 | |
2030 | 20,744 | |
Thereafter | 665,496 | |
Total future payments under our operating leases in which we are the lessee | 773,398 | |
Effect of discounting | (412,855) | |
Operating lease liability | $360,543 |
Lessee operating costs
Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed
annual rent payments and may also include escalation clauses and renewal options. For the years ended December 31, 2025, 2024,
and 2023, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are
the lessee aggregated $171.9 million, $167.8 million, and $32.2 million, respectively. The increases in both 2024 and 2025 primarily
relate to two separate payments of $135.0 million made in connection with amendments to our ground lease agreement at the
Alexandria Technology Square® Megacampus in our Cambridge submarket. One payment was made in December 2024 and the other
in January 2025 as prepayments for a 24-year lease extension.
Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension
options. For the years ended December 31, 2025, 2024, and 2023, our costs for operating leases in which we are the lessee were as
follows (in thousands):
Year Ended December 31, | ||||||
2025 | 2024 | 2023 | ||||
Gross operating lease costs | $45,965 | $40,740 | $39,879 | |||
Capitalized lease costs | (2,949) | (1,780) | (5,544) | |||
Expenses for operating leases in which we are the lessee | $43,016 | $38,960 | $34,335 | |||
During the year ended December 31, 2025, we recognized lease impairment charges aggregating $45.1 million, primarily
related to a ground lease entered into in 2021 for a future development opportunity in the San Francisco Bay Area market. Based on
our financial outlook for this project, we made the determination to no longer proceed with this project and recognized an impairment
charge to write off our remaining right-of-use asset balance. As of December 31, 2025 and 2024, we had no operating lease liability
associated with this ground lease, as the related lease obligation had been fully prepaid.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jan 26, 2026 | Showing above |
| 2024 | Jan 27, 2025 | |
| 2023 | Jan 29, 2024 | |
| 2022 | Jan 30, 2023 | |
| 2021 | Jan 31, 2022 | |
| 2020 | Feb 1, 2021 | |
| 2019 | Feb 4, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.