Alexandria Real Estate Equities, Inc.

for Alexandria at this moment in time as the gold standard and leader of our niche. We invented and pioneered life science real estate, a whole new asset class and category, 31 years ago during the early years of the biotechnology revolution. Our North Star was and remains our focus on innovation clusters and ecosystems unique to the life science industry, different than almost every other property type. We're blessed with best assets, best tenants, best mega campus, and best team. Our relentless mission is driven by building the future of life-changing innovation and enabling the world's leading innovators to advance and better human health. The biotechnology revolution started almost 50 years ago, and in those 50 years, we've only been able to therapeutically address less than 10% of the more than 10,000 diseases known to humankind. No one lives in a family, community which has not been struck by the wrath of disease and illness, devastating in so many ways. We now find ourselves on the precipice of an entirely new age of discovery and innovation at the intersection of biology and technology 50 years later. Biology, it's important to remember, is inherently slow and complex. The life science industry, and particularly the innovation engine of the biotech sector, is mission critical for a strong, safe, healthier country and planet, as well as for America's global leadership, future economic growth and security. As opposed to most property types, office industrial and resi, we operate in a highly regulated industry that takes extraordinary time and cost to bring life-changing medicines to patients. To get a lifesaving product on the market, you only can sell that product for a handful of years in a regime of pricing oversight, sometimes control, different than other property types. I wonder what Microsoft would say if they were told you could only license window for a decade and then you lose the right to retain revenue or develop revenue from that innovation. It matters fundamentally if the government is shut down or not operating effectively or efficiently. The four pillars of the life science industry are critical and a critical bedrock to what I've just said about this country's health. We must preserve, protect, and grow the strong and basic translational research It is a critical bedrock of new discoveries, and we must deal hopefully quickly with the current limitation on indirect overhead costs, which is stymieing demand out of the institutional sector. We must preserve, protect, and grow the robust entrepreneurial ecosystem with access to affordable capital. Cost of capital today is high for discovery research engines. From the venture capital to the IPO to the M&A, we are in a continuing difficult environment. Getting better, but difficult nonetheless. That's the second bedrock. The third one is providing a reliable and efficient and time-sensitive regulatory science framework and pathways. Once again, the FDA must compress timeframes and cost of R&D development. We met with Commissioner McCary at the end of September, and he is super focused on this issue. Important to note that total development timeframe for molecules in the Western world, U.S., and the EU ranges in the neighborhood of about 10 to 12 years. versus China, which is about a third of that timeframe in their early stage of development in this industry. Approximate cost to bring products to market in the Western world is somewhere in the range of about $1.5 billion. And in China, it's about 50% to 90% below that. So we're faced with a very different circumstance today that the industry must face. And the fourth pillar is providing reasonable reimbursement for innovative medicines which are costly and time-consuming to bring to market. We at Alexandria successfully navigated the dot-com bust in circa 2000, the great financial crisis circa 2008, 2009, both when we were unrated, non-investment grade. And during the GFC, we had 30% of our gross assets in non-income producing land. at Mission Bay in Cambridge. But this time, the navigation is once again different than before. We've seen the unprecedented bull market, the unprecedented bull biotech market post-GFC 2014 to 21 capped off by the rocket ship of COVID-ray funding and demand. A very low interest rate environment went along with that, which incentivized really foolish speculation by financially motivated real estate companies and they're even more foolish uh capital partners this brought an unwanted and that's unnecessary over supply to many of the innovation sub markets this had never happened in this niche before but they're learning painful lessons that this real estate niche is unique and different from all others this was followed by a biotech bear market we're now in the fifth year which is starting to turn the corner, and we're now witnessing the bottom and early signs of a recovery and strengthening, as we predicted at NARIT in June. The industry is now enduring a government shutdown, and the impact to the FDA is pretty serious. This brings us to the third quarter, a critical juncture in time for this industry. On the one hand, the greatest prospects ever for innovation in our time, and coupled with the relentless change in government shutdown. Quite a juxtaposition. Huge congrats to our first-in-class team who are navigating this difficult environment with relentless grit and determination and unparalleled experience and expertise. While declines in FFO per share, occupancy and guidance, are tough at any point in time alexandria remains strong tough resilient and continuing beacon of light for our life science industry one of our north stars has been our balance sheet working out of the gfc when we're unrated to today we're now one of the top 15 of all reeds it's strong flexible and we have the longest weighted average remaining depth of all S&P 500 REITs at 11.6 years. Over $4 billion of liquidity, strong fixed coverage ratio. 96, almost 97% of our fixed rate debt is at 3.9, 3.7 blended interest rate. And one area of laser focus for us will be to continue to reduce our current non-income producing assets on the balance sheet from the current 20% as we've diagrammed for you in the supplement and press release, to about 10 to 15%. As opposed to the great financial crisis where we had 30% non-income producing assets as a percentage of gross assets with an unrated balance sheet, there was pent-up demand and no supply coming out of the GFC year. So we kept our land at Mission Bay and Cambridge for future development, which provided a decade of unprecedented growth. Alexandria has and will continue in this environment to accelerate its transition from substantial development to a build-a-suit on mega campus only development model. We intend to continue to decrease construction spend, preserve capital, and not create further supply. And then finally, let me make a couple of comments before I turn it over to Mark for an in-depth review of the quarter and kind of factors impacting 2026. Let me make a couple of comments about leasing. The lifeblood of Alexandria's sector-leading platform with the largest number of clients and strongest tenant base is our leasing and our tenant base, of course. 53% of our leases Our two investment grade or big cap tenants with an average almost nine and a half years weighted average lease term for our top 20 tenants and 18 of the top 20 farmers are our tenants, a best example of our brand being the most trusted in the industry. And congrats to our team for the historic lease executed in this third quarter for 16 years with the credit existing credit tenant for almost 500,000 square feet at our campus point, Mega Campus in San Diego. We're proud to say that our ARR from Mega Campus is 77% and is continuing to approach 80%. We continue to benefit from stellar operating margins and a very disciplined G&A run rate. 3Q was a solid quarter of leasing. However, institutional demand is still stuck due to the NIH issues, and particularly the reimbursement of indirect costs. Coupled with, we need to see more green shoots from early-stage venture-backed companies, as well as the larger cadre of public biotech companies, which have yet to recover in a meaningful way. We're starting to see green shoots on that, but that will be a critical litmus test going forward. And finally, before I turn it over to Mark for comments, let me just say we intend to continue to meet the market for our tenants and continue to successfully lease and dominate our space. And with that, Mark.

Thanks, Joel. This is Mark Benda, Chief Financial Officer. Good afternoon. I plan to cover the performance for the third quarter as well as some key emerging trends expected to impact 2026. Our team continues to navigate a challenging environment given macro industry and policy factors beyond our control. Please refer to our earnings release for our EPS results. FFO per share diluted as adjusted was $2.22 for 3Q25 and included the following three key impacts compared with the prior quarter. First, occupancy was effectively down 1.1% for the quarter after considering the benefit from the exclusion of assets with vacancy which were sold or designated for sale during the quarter and was driven by a challenging life science supply and demand dynamic. Second, there was a $0.03 reduction in rental income associated with one tenant in our Seattle market to adjust rental income to cash basis. Importantly, that tenant remains in occupancy and is current on rent pending future critical milestones in the first half of 2026. And third, other income was down $8.7 million or about $0.05 compared to the prior quarter. Current quarter other income of 16 million remains consistent with the prior eight quarter average. And as we discussed in our prior call, 2Q25 did have some lumpy fees in there. Leasing volume for the quarter remains solid at 1.2 million square feet in line with the five quarter average. This includes the previously announced 467,000 square foot bill to suit lease with a multinational pharma tenant that was executed in July. deep well of approximately 700 tenant relationships. Rental rate growth for lease renewals and releasing a space for the quarter was solid at 15.2% and 6.1% on a cash basis, which is at the high end of our guidance range for the year. We reduced our guidance for 2025 rental rate increases on renewals and releasing space by 2%, primarily due to one short-term renewal in Canada that was executed in October, as well as some higher free rent. Lease terms on leasing continue to be long at 14.6 years for the quarter, which is well above our historical average. And tenant improvement leasing costs on renewals and releasing the space for the quarter are relatively consistent with the prior year and down from the first half of the year. Occupancy at the end of the quarter was 90.6%, which was down 20 basis points from the prior quarter. As of September 30th, certain assets with vacancy were designated for held for sale and were removed from our operating occupancy metric, which benefited occupancy at September 30 by 90 basis points. As a result, the decline in occupancy for our operating properties on an apples-to-apples basis declined by 110 basis points during the quarter. While occupancy declined due to oversupply in certain of our submarkets, it's important to highlight that our mega campus platform, which represents 77% of our annual rental revenue as of 3Q25, outperformed overall market occupancy in our three largest markets by 18%. Our outlook for year-end occupancy was reduced by 90 basis points to a range of 90% to 91.6%. Our outlook assumes up to a 1% benefit from assets with vacancy, which could potentially be sold or designated as held for sale by December 31st, which implies an 80 basis point decline in occupancy by the end of 2025 based upon the midpoint of our guidance. Our team continues to execute with 617,458 square feet of leasing completed to date for spaces that are vacant today and expected to deliver upon the completion of construction in May of next year on average. Looking ahead to next year, we have 1.2 million square feet of lease expirations through the end of 2026, which are in great assets in AAA locations, but are expected to go vacant and we expect downtime on those assets. Same property NOI was down 6% and 3.1% on a cash basis for the quarter. The decline in same property was primarily driven by lower occupancy. In addition, we provided an alternative same property presentation which recasts the first and second quarter results based upon the third quarter same property pool to provide a consistent quarterly trend view given several assets that were removed from the third quarter same property pool as they were either sold or designated as held for sale. It's important to note that this alternative presentation shows higher same property performance in the first half of 2025, which means there will be a tougher benchmark in the first half of 2026. We reduced our outlook for same property performance for 2025 by 1%, primarily due to slower than anticipated leasing caused by a slower realization of demand. Despite this change, we continue to benefit from a very high quality tenant base with 53% of our ARR coming from investment grade or publicly traded large cap tenants, long remaining average lease terms of seven and a half years, average rent steps approaching 3% on 97% of our leases, solid rental rate increases of renewed and releasing space during the quarter, and our adjusted EBITDA margins remain strong at 71% for the most recent quarter, consistent with our five-year average. On G&A, We continue to make great progress towards our goal of annual savings for 2025 of approximately $49 million compared to 2024 through a number of prudent and strategic cost savings initiatives. Our trailing 12 months G&A cost as a percentage of NOI was 5.7%, which represents approximately half the average of other S&P 500 REITs. We expect that around half of the 2025 savings will continue into 2026 given the temporary nature of some of the 2025 savings. With projects under construction and expected to generate significant NOI over the next few years, and other earlier stage projects undergoing important entitlement design and site work necessary to be ready for future ground-up development, we are required to capitalize a portion of our gross interest costs. We have and will continue to curtail our large development pipeline coming off a decade bull run for the industry fueled by the rocket ship demand of COVID. Given the lack of clarity on near-term demand, as well as significant availability in some of our sub markets, we're carefully evaluating on a project by project basis, the 4.2 billion of land subject to capitalization during the first nine months of the year. With pre-construction milestones in April 2026 on average, we continue to evaluate whether to progress pre-construction or construction efforts beyond the current milestones and in various cases will likely pause or curtail activity. If we decide to pause on a project as it reaches the next milestone, capitalization of interest, payroll, and other required costs would cease on that project. While these ultimate decisions have not yet been made, we would like our funding program for next year to include a significant component of land dispositions, which would help us achieve one of our strategic objectives over the near to intermediate term to significantly reduce the size of our land bank. Sales of land could result in a significant reduction in capitalized interest and potential impairment charges. We expect steady to slightly lower capitalized interest in 4Q25 and lower capitalized interest beginning in the first quarter of 2026. Despite positive recent activity for the biotech XBI index, private and public biotech companies continue to remain challenged given the five-year bear market for the sector. Given these and other factors unique to our venture investments, we did revise our guidance down to a range of 100 to 120 million. It's important to point out that for the first nine months of 2025, we realized 95 million of gains from our venture investments, which were included in FFO per share as adjusted, were about 32 million per quarter. Based upon the midpoint of our revised guidance for realized investment gains of 110 million, this implies 15 million for the fourth quarter. or 17 million decline over the average quarterly run rate for the last three quarters. We continue to stand out as our corporate credit ratings rank in the top 15% of all publicly traded US REITs. We have the longest average remaining debt maturity among all S&P 500 REITs at 11.6 years and tremendous liquidity of 4.2 billion. We updated our guidance for year-end leverage to 5.5 to 6.0 times for 4Q25 net debt to annualize adjusted EBITDA. The increase from our prior target of 5.2 times was primarily due to two factors. First, a reduction in our disposition guidance to a midpoint of 1.5 billion related to 450 million of potential dispositions expected to be delayed into 2026. And second, a projected reduction in annualized EBITDA in the fourth quarter from lower same property net operating income and lower realized investment gains. We've completed $508 million of dispositions to date, which leaves $1 billion to complete in the fourth quarter, all of which are subject to non-fundable deposits, signed LOIs, or purchase and sale negotiations. In connection with our disposition program, We recognized impairments of real estate of $323.9 million during the quarter, with approximately two-thirds of that coming from an investment in our Long Island City redevelopment property. Three items to highlight here. First, we acquired the site in 2018. That submarket suffered a substantial setback when Amazon abandoned its plan for a new HQ in that location in 2019, and it never recovered. Second, despite the lower rental rate price point and our dominance in that submarket, it has been challenging to get a critical mass of life science tenants to go to this location. And ultimately, we don't view it as a life science destination that can scale. And third, this location has become more of an industrial flex and cinema submarket rather than life science. Ultimately, at the end of September, we decided future capital needs and the sale proceeds related to this project would be better recycled into our mega campuses where we have greater conviction long term. Looking forward, we have a number of assets under consideration for sale either by the end of this year or sometime in 2026 that have estimated values below our carrying values ranging from zero to 685 million. Although these potential impairments have not been triggered and final decisions to proceed have not been made, we updated our guidance range for 2025 to reflect these potential additional impairments in the fourth quarter. We anticipate an end to the large-scale non-core asset program by the end of 2026 or early 2027. We also expect dispositions to provide the vast majority of our capital needs for next year. Turning to capital allocation, two points here. First, we are continuing to evaluate some of our development and redevelopment projects expected to stabilize in 2027 and 2028 for opportunities to pivot. Second, we estimate our 2026 construction spending to be similar to slightly higher than the midpoint of construction spending for 2025 of $1.75 billion, which includes the recently announced build-a-suit in San Diego and higher capex and repositioning costs necessary to lease vacant space related to our operating properties. But the goal is to continue to reduce non-income producing assets and other development pipeline and our development pipeline over time. Next, on dividend policy, the Board's approach has been to share cash flows from operating activities with investors as well as to retain a meaningful amount for reinvestment, which has allowed us to retain $475 million at the midpoint of our guidance range for 2025. In addition, the cumulative growth in dividends in FFO has been highly correlated since 2013. Given the factors that we described in our press release that are expected to impact 2026 earnings and cash flows, we anticipate that our board of directors will carefully evaluate future dividend levels accordingly. We provided updated guidance for FFO per share diluted as adjusted for 2025, which was reduced by 25 cents or about 2.7% to a midpoint of $9.01 per share. This change was primarily due to lower investment gains and lower same property performance driven by lower occupancy. Looking ahead to 2026, as is our longstanding practice, we will provide detailed guidance at our Investor Day on December 3rd. In advance of that, we've shared five important trends that will impact earnings for 2026. including core operations and occupancy, capitalized interest, realized gains on non-real estate investments, G&A, and our disposition program. Please refer to page six of our supplemental package for more information. Given the various factors impacting 2026 earnings, it's important to recognize the tremendous intrinsic value of our highly differentiated mega campus assets included in Consensus NAV, which is significantly above our current trading price today with that Consensus NAV coming in at around $117 per share. To be clear, we continue to be the dominant leader for life science real estate with the best assets in the best locations and the best tenants. Our focus in irreplaceable world-class mega campuses will continue to set us apart and give us an opportunity to capture premium economics for the long term as the demand and supply picture improves over time. Now we'll turn it back to Joel.

Operator, please start questions.