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DATE

Tuesday, April 28, 2026 at 2 p.m. ET

CALL PARTICIPANTS

  • Executive Chairman — Joel S. Marcus
  • Chief Financial Officer — Marc E. Binda
  • Co-Chief Executive Officer — Peter M. Moglia
  • Executive Vice President, Science & Technology Operations — Hallie Kuhn
  • Operator

TAKEAWAYS

  • FFO per Share Diluted, as Adjusted -- $1.73, with full-year 2026 guidance reaffirmed at the $6.40 midpoint and the range narrowed.
  • Leasing Volume -- 647 thousand square feet, marking a lower quarter due primarily to 657 thousand square feet of anticipated expirations and no new public biotech leasing, which accounts for 24% of annual rental revenue.
  • Development and Redevelopment Leasing Momentum -- 394 thousand square feet signed or under LOI, consisting of 118 thousand square feet executed and 276 thousand square feet in LOIs for current projects.
  • Occupancy Rate -- 87.7%, a decline of 320 basis points sequentially, mainly from known lease expirations; guidance for year-end 2026 lowered to 87%.
  • Same Property Net Operating Income -- Decreased 11.7% on a cash basis, largely driven by reduced occupancy.
  • G&A Expense Reduction -- Achieved $7.4 million quarterly savings compared to the 2024 average, with a year-end 2026 guidance range of $104 million to $154 million, representing a 14% reduction at the midpoint from 2024.
  • Realized Gains from Venture Investments -- $18 million included in FFO per share diluted, as adjusted, with annual guidance range for 2026 reiterated at $60 million to $90 million.
  • Capitalized Interest -- $70 million, down $12 million from the prior quarter, with 2026 guidance reduced by $5 million at the midpoint and further declines expected.
  • Disposition and Partial Interest Sales Pipeline -- $2.2 billion pending or identified, representing 80% of the $2.9 billion midpoint 2026 guidance.
  • Unsecured Bond Tender Gain -- $366 million gain, contributing to overall debt reduction.
  • Tenant Base Quality -- 80% of top 20 tenants are investment grade and large-cap, representing 55% of total annual rental revenue, with a nearly 10-year weighted average lease term (WALT).
  • Leasing Performance by Market -- Company captured on average twice its proportional market share in its largest three markets: 20% of Greater Boston (153% of market share), 30% of San Francisco Bay (253%), and 67% of San Diego (208%).
  • Balance Sheet and Liquidity -- $4.2 billion in liquidity with the longest average remaining debt maturity among S&P 500 REITs at 10 years; first quarter leverage at 6.8x annualized EBITDA, expected to decline during 2026.
  • Divestiture Mix Update -- Guidance maintains $2.9 billion in expected 2026 dispositions, now forecast as 10%-25% land and 75%-90% core, non-core, and partial interest sales, with the weighted average completion date moved back by about a month.
  • Guidance Adjustments -- Year-end occupancy guidance reduced by 1.5% and same property NOI guidance midpoint reduced by 1% due to changes in the assumed sales mix and anticipated retention of more vacant assets.
  • Advanced Technology Leasing -- Examples cited for pivoting development projects to advanced technology tenants to reduce CapEx and accelerate revenue.
  • Public Biotech Leasing -- No public biotech leases signed during first quarter, a first in company history.
  • Adjusted EBITDA Margin -- 66% for the quarter, with average rent steps approaching 3% on 97% of leases.
  • Joint Venture Strategy -- Increasing focus on JVs for core assets to lower cost of capital; mix of JV, core, and non-core sales expected to be clarified in the next quarter.
  • Tenant Reserve for Wind-downs -- Reserve for wind-downs or tenant failure increased from $23 million to $25 million-$30 million, covering both biotech and ancillary tenants.
  • Guidance for Q4 2026 FFO per Share Diluted, as Adjusted -- Range refined to $1.40-$1.50, midpoint of $1.45, down by $0.05 due to lower capitalized interest.

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RISKS

  • Marc E. Binda said, "a reserve for wind-downs or tenant failure; that number today is somewhere in the $25 million to $30 million range," reflecting rising tenant distress.
  • Occupancy guidance for year-end 2026 was decreased to 87%, and same property net operating income guidance midpoint was further reduced due to revised assumptions on asset sales and retention of vacant properties.
  • Zero public biotech leasing in the quarter, which "gives you a sense of what the environment is out there" and signals continued weak demand from that crucial tenant segment.
  • Leadership uncertainty at the NIH and FDA, as well as capital markets selectivity, are creating "a very tough slog" for most publicly traded biotechs and could continue to pressure leasing demand and occupancy.

SUMMARY

Alexandria Real Estate Equities (ARE 11.30%) prioritized balance sheet strength, expense control, and advancing its disposition strategy amid challenging market conditions. Management highlighted a significant gain from an unsecured bond tender and substantial disposition activity already pending or identified to address capital needs. The company described an ongoing strategic shift in development leasing toward advanced technology tenants and joint venture structures to lower capital costs and speed NOI recognition. Executives cautioned about sustained vacancy headwinds due to scheduled lease expirations through 2027 and updated guidance to reflect slower expected progress on vacant asset sales. Several key portfolio metrics, including occupancy and NOI, were revised downward in response to these market realities.

  • Management confirmed in Q&A that the uptick in the tenant reserve was driven by both biotech and ancillary tenant concerns, not limited to one sector.
  • Executives emphasized that no lease contraction requests have arisen directly in response to AI adoption, with no discernible shift in lab-office ratios or cutback in physical space needs reported by the tenant base.
  • Peter M. Moglia said, "Everything that we have been marketing has been well received and has multiple parties looking at it," with institutional capital (both domestic and international) now targeting core deals, enabling the firm to leverage lower capital costs via JVs.
  • Marc E. Binda noted that of the $97 million annual rental revenue expiring in 2027 across 1.5 million square feet, about 35%-36% is already in early lease negotiations, and management is pursuing quicker revenue recapture through alternative leasing and repositioning across the portfolio.
  • Executives repeatedly stated that leasing volume guidance for the next quarter is directional and based on early transaction activity, not a formal forecast, and they declined to specify renewal versus new or development leasing proportions.
  • For five major development projects under review, management is evaluating pivots to advanced technology tenants or asset sales, with milestone decisions required by early 2027 or earlier.
  • Leadership listed specific macro headwinds inhibiting leasing, including NIH and FDA disruption, capital market selectivity, and shifts in global drug development activity toward China.
  • G&A expense as a percentage of net operating income is running at 6%, significantly below the average S&P 500 REIT level of 14.3%, reflecting sustained discipline in cost management.
  • While declines in capitalized interest are anticipated as a result of project completions, delays, and asset sales, guidance for basis being capitalized was brought down by $200 million from prior projections.
  • Rent steps averaging nearly 3% are in effect on 97% of company leases, supporting future organic rent growth absent further occupancy erosion.

INDUSTRY GLOSSARY

  • LOI (Letter of Intent): Nonbinding document indicating preliminary agreement terms for lease or sale prior to final contract execution.
  • WALT (Weighted Average Lease Term): The average remaining time to expiration across all leases, weighted by rent or rentable square feet.
  • SCIF (Sensitive Compartmented Information Facility): A secure area within a building designed for handling classified or sensitive information, required by certain advanced technology tenants.

Full Conference Call Transcript

Joel S. Marcus: Thank you, Paula, and welcome everybody to our first quarter earnings call. With me today are Marc, Peter, and Hallie. First of all, as I always do, I want to say thank you to our family team for their awesome efforts during a tough first quarter operating environment. As they know well, we are motivated each and every day by our solemn mission to enable this precious life science industry, one of the most treasured and innovative industries on the face of the planet, to discover and bring to patients lifesaving and life-changing therapies. Many of our friends and loved ones still suffer from the likes of Parkinson's, ALS, dementia, to name a few, and pancreatic, colon, breast, etc. cancers.

In 2026 we celebrate the fiftieth anniversary of the DNA and biotech revolution, and we have still addressed less than 10% of human disease. The life science industry is highly regulated and dependent upon the proper functioning of four key pillars. As we have said before, basic translational research is critical. There remains strong bipartisan support in Washington to fully fund the NIH. There was a great victory this quarter in the defeat of the 15% limitation on reimbursement of institutional indirect costs, which I think will be very well received and implemented over the coming quarters and years. Unfortunately, in 2024 the entire NSF National Science Foundation Advisory Board was fired. Their role is science and engineering advice.

That was kind of a shock. Leadership challenges remain at the NIH and HHS and FDA. Number two, strong innovation coupled with open and vibrant capital markets. Obviously, we are in one of the greatest innovation times in the history of humankind. On the capital markets, they have been very selective. Private funding has been very solid but deliberate and discriminating. On the public side, the markets have been open for good data and key milestones, but for most public biotechs in preclinical or in the clinic that do not have data or milestones to finance off of, it has been a very tough slog. Number three, a reliable and efficient regulatory framework.

There is a continuing need to reduce time and cost into and through the clinic. FDA progress has been sluggish and leadership and staffing pressures have been abundant. And China continues to pressure the industry here at home. Number four, the health payment and reimbursement environment for innovative medicines. CMS is actually operating quite well under the leadership of Dr. Oz, but both sides of the aisle are focused on drug pricing. It is hard to imagine that they have not figured out an approach to cut out the middleman, which takes 40% to 60% of medicine pricing, which would ease the burden both on the recipients of care and on the innovative drug discoverers.

We get asked often about AI in all realms, and I think it is fair to say that most of you know by now we have about 37 trillion cells in each of our bodies, and AI can support but not replace physical experimentation. Biology is just way too complex at this stage. R&D cannot go fully in silico given the massive complexity of biology. For example, Novartis' CEO, who just joined the board of Anthropic, said we only understand less than 5% of the functioning of the human body today. Drug development is very complex, from target discovery to hit generation to lead optimization to clinical trials and on to commercialization.

It is pretty clear that the authorities in this area believe AI will not replace physical experimentation. Most current usage is still document-centric, not biology-breaking. Push-button drug discovery is overhyped, and even native AI companies in this sector have not proven dominance whatsoever. It is pretty clear that AI is not fully autonomous discovery, but is aimed at compressing timelines, increasing throughput, and recovering lost institutional knowledge, and that is all really good. I think most experts believe that AI will have a small impact on real estate requirements and could even increase the need for additional dry and wet space as they run experiments designed by AI.

Moving to the first quarter, as all of you know, it was a very tough operating environment, but we made very solid progress on our path forward laid out in detail at our Investor Day. Number one was to maintain a strong, flexible balance sheet, and Marc will talk more about that. Number two is to reduce capital spend and funding needs going forward. We are well on our way to refining and reducing CapEx in our pipeline. We have also been fortunate to sign quite a number of LOIs leading to leases, which will reduce the CapEx into the lease statistics as we go forward.

A cornerstone to this year in this reset is to substantially complete a large-scale core, non-core, and sales of partial interest disposition plan. We are on track even though the first quarter was relatively quiet, but we fully intend, like last year, to meet our goal. I think it is fair to say—and Peter can expound on this during Q&A—the transaction market for life science assets is even better this year than it was last year, and we have a high level of confidence. Four, we want to steadily improve occupancy and increase NOI focused on leasing. The pinch point in leasing has been that this is one of our lower quarters; we look to bounce back nicely next quarter.

This is maybe the first quarter in the history of the company that I can remember where we did not sign a single public biotech lease. That gives you a sense of what the environment is out there. In our pre-read, we highlighted the sale which closed during the fourth quarter, but it is emblematic of the quality and value of the underlying life science assets that we continue to hold, especially on the mega campus platform. Our disposition of 409 and 499 Illinois Street in Mission Bay received a record pricing of $16.45 per square foot, the highest ever achieved for lab assets in San Francisco, and by the way, it was 40% occupied.

It is fair to say that this year what is critical for us is to continue our path forward. The mega campuses will continue to differentiate us. Our balance sheet will remain strong and flexible. We have worked on continuing to lower G&A. The quality of our assets continues to be outstanding, as recognized by our tenants, as well as our operational excellence and clearly a best-in-class team throughout. Finally, if you look at our top 20 tenants, 80% of the top 20 are investment grade and large-cap companies, and that is very reassuring. Fifty-five percent of our total ARR comes from that, and for the top 20 we have almost a 10-year WALT, which is really great.

We have one of the longest durations of debt, and Marc will talk about that. Finally, 78% of our ARR comes from our mega campus platform which we have been working hard on. With that kind of intro to the quarter, let me turn it over to Marc for his detailed comments.

Marc E. Binda: Thank you, Joel.

First, congratulations to the entire Alexandria Real Estate Equities, Inc. team for the outstanding operational execution of the steps of our path forward set forth at our December Investor Day, despite a very challenging industry backdrop, including: first, outperformance on capturing leasing demand in our largest markets relative to our market share—I will get to that later; second, positive development and redevelopment leasing momentum with the execution of development and redevelopment leases and letters of intent aggregating 394 thousand square feet; third, focus on improving occupancy with cumulative leasing of vacant space of 1.1 million square feet that will deliver in September on average; fourth, continued general and administrative expense savings of $7.4 million compared to the 2024 quarterly average; fifth, a $366 million gain associated with our unsecured bond tender which reduced our overall debt; and sixth, significant fundraising efforts with $2.2 billion of dispositions and sales of partial interests pending or identified and in process.

FFO per share diluted, as adjusted, was $1.73 for first quarter 2026. We reaffirm the midpoint of our guidance for FFO per share diluted, as adjusted, for 2026 at $6.40 while tightening the range. Leasing volume for the quarter was 647 thousand square feet. The decline in total lease volume was driven by: first, as expected, lower renewals and releasing space, given the 657 thousand square feet of key known lease expirations that we anticipated would become vacant during the quarter; and second, limited demand from public biotech with zero leasing volume in the first quarter, a segment of our tenant base which accounts for 24% of our annual rental revenue.

A bright spot for the quarter includes the positive momentum on development leasing with 118 thousand square feet executed and another 276 thousand square feet of signed letters of intent for existing development and redevelopment space. Looking ahead to the second quarter, we expect an uptick in total leasing volume of around 900 thousand square feet given early activity to date.

Free rent and rental rate changes on renewed and released space were under pressure in first quarter 2026, which reflects the market realities, and includes a 48 thousand square foot lease at 40 Arsenal in Watertown for a 12-year term, which was a significant contributor to the rental rate reduction of about 15.8% on a cash basis for the quarter. Alexandria Real Estate Equities, Inc. continues to dominate in our largest markets. This is a really important takeaway. In our largest three markets during first quarter 2026, we captured on average around twice the leasing volume compared with our market share of life science real estate.

For Greater Boston, we captured approximately 20% of the total leases in the market, which is 153% of our market share. For San Francisco Bay, we captured 30% of the total leases in the market, which is 253% of our market share. And for San Diego, we captured approximately 67% of the total leases in the market, which is 208% of our market share. These stats highlight Alexandria Real Estate Equities, Inc.'s dominant brand, sponsorship, mega campus quality, location, and the best team in the business.

Occupancy at the end of first quarter 2026 was 87.7%, down 320 basis points from the prior quarter, primarily driven by the 657 thousand square feet of key known lease expirations which went vacant during the quarter. We have an additional 747 thousand square feet of key lease expirations expected to go vacant in 2026, with approximately 45% of that expected to expire in the second quarter, which should put pressure on occupancy for second quarter 2026. For the balance of 2026, we expect occupancy to benefit from the 1.1 million square feet of vacant space that has been leased and is expected to deliver in September on a weighted average basis.

We updated the midpoint of our guidance range for year-end 2026 occupancy from 88.5% to 87% (a reduction of 1.5%), which was primarily due to a reduction in the anticipated benefit from a range of several potential disposition properties that have vacant space. Our initial guidance assumed a 2% benefit, and we now assume around a 1% benefit, as we no longer expect to sell as many assets with significant vacant space. It is important to highlight that we have had good leasing interest on some of these types of properties with vacant space.

Tenants continue to prioritize asset quality, location, best-in-class operations, sponsorship, and brand trust, which distinguishes Alexandria Real Estate Equities, Inc., as well as our mega campuses, which represent 78% of our total annual rental revenue at first quarter 2026. Importantly, this has led to significant occupancy outperformance by Alexandria Real Estate Equities, Inc. in the mid- to high-80% range across our largest three markets, compared to market occupancy in the mid- to high-70% range for these same markets at the end of first quarter 2026. Same property net operating income was down 11.7% on a cash basis for first quarter 2026, which was primarily driven by a reduction in occupancy.

Consistent with my commentary on our last earnings call, we expect stronger performance in the second half of 2026 primarily driven by improved occupancy compared with the corresponding prior-year period. It is important to also highlight that our anticipated same property pool all had lower occupancy in 2025 compared with 2025, which, all things being equal, should help same property performance in 2026. We updated the midpoint of our guidance range for same property net operating income from down 8.5% to down 9.5% (a 1% reduction) due to a decrease in the anticipated benefit from a range of several disposition properties which have vacant space, similar to the dynamics I described for the change in occupancy guidance.

Despite the current challenges in the life science real estate market, we continue to benefit from a very high-quality tenant base with 55% of our annual rental revenue coming from investment-grade or publicly traded large-cap tenants, long remaining lease terms of 7.5 years, average rent steps approaching 3% on 97% of our leases, and strong adjusted EBITDA margins of 66% for first quarter 2026. We continue to focus on one of the pillars of our path forward, which includes the continuing successful reduction and management of general and administrative expenses.

We remain on track with our guidance range of $104 million to $154 million for 2026, which represents around 14% savings at the midpoint compared to our 2024 benchmark, or about $24 million in annual savings. On a combined basis for 2025 and 2026, we expect G&A expense savings of around $76 million in aggregate relative to 2024, and our trailing twelve-month G&A as a percentage of net operating income through first quarter 2026 of 6% is less than half the average of all S&P 500 REITs over the last three years at around 14.3%.

For first quarter 2026, realized gains included in FFO per share diluted, as adjusted, from our venture investments were $18 million, and we reiterated our guidance range for realized investment gains of $60 million to $90 million for 2026. Capitalized interest for first quarter 2026 was $70 million, which was down around $12 million from the prior quarter. The decline was primarily driven by a pause on construction and preconstruction activities on assets that were sold or designated for sale in fourth quarter 2025.

We expect capitalized interest to decline in 2026 due to a combination of factors, including: first, the completion and delivery of some of our current development and redevelopment projects under construction; and second, the potential for pauses or ultimate dispositions related to land, including some portion of the land with real estate basis averaging $1.2 billion, with preconstruction milestones in August 2026 on a weighted average basis. We have reduced our guidance for capitalized interest by $5 million at the midpoint of our range with a corresponding increase to interest expense due to anticipated earlier completion of certain construction and preconstruction milestones and pauses related to several projects in 2026.

We enhanced our disclosures for capitalized interest to highlight construction and preconstruction milestones broken down by year, including the following: first, land with $567 million of real estate basis with preconstruction milestones in April 2027 on a weighted average basis; and second, development and redevelopment projects under evaluation for business and financial strategy of $1.3 billion spread across five projects with construction milestones in March 2027 on a weighted average basis. We continue to evaluate each project individually.

If in the future we decide not to move forward with these projects beyond these construction milestones, capitalization of interest for these projects would cease along with other related project costs, including payroll, which are highlighted on Page 42 of our supplemental package. We have 1.9 million square feet of projects under construction and expected to stabilize through 2028, which are 77% leased, including around 600 thousand square feet which is expected to stabilize in 2026 and is 93% leased. We also have 1.6 million square feet spread across five different projects for which we are evaluating the business and financial strategy; I will walk through the four largest. First, 421 Park Drive is located in our Fenway mega campus.

This is a ground-up development intended for laboratory use. We expect this project to be attractive to the many nearby institutions, and the outcome for this project will depend on tenant interest. We expect to have critical construction milestones in early 2027, which we are evaluating. Second, 40 Sylvan Road is located in our Waltham mega campus. We believe this project could be attractive to advanced technology tenants that may find certain elements of the building attractive and may not require a full conversion to lab. This project has critical construction milestones in the second half of 2026, which we are also carefully evaluating.

Third, 311 Arsenal Street is located on and is highly integrated into our In the Charles mega campus located in Watertown in Greater Boston. We are seeing good activity for this project from advanced technology users, and we recently executed approximately 82 thousand square feet of letters of intent with four tenants for this kind of use, which increased the lease negotiating percentage for this project up to 28%. And fourth, 3000 Minuteman Road is located in our mega campus along Route 495 north of Boston. We believe this site will be attractive to advanced technology tenants as evidenced by the 160 thousand square foot letter of intent we recently signed for a portion of the project.

For both 311 Arsenal Street and 3000 Minuteman Road, if we complete these advanced technology leases, we may place all or some portion of these spaces into the operating pool, which may reduce operating occupancy in the near term but, more importantly, will reduce our capital needs and generate near-term revenue upon delivery.

We continue to focus on our disciplined strategy to recycle capital from dispositions and partial interest sales to support our funding needs, with a focus on the substantial completion of our large-scale non-core asset program in 2026, and we expect land to comprise 10% to 25% of the $2.9 billion midpoint of our guidance for 2026 dispositions and sales of partial interests, with core, non-core, and sales of partial interests to comprise the balance of 75% to 90%. Our guidance assumes a weighted average completion date of August 2026, which is about a month later than our initial guidance provided at our Investor Day.

We believe there is strong institutional interest for our core assets at a reasonable cost of capital and accordingly we believe that joint ventures for some of our core assets could be a significant component of our capital plan, and we expect to have more details over the next quarter on the mix of dispositions as well as the timing as this continues to evolve. Our team is making good progress with about 80% of the $2.9 billion midpoint for dispositions and sales of partial interests pending or identified and in process. We expect to make decisions on the remaining 20% over the next several months.

In early December, our board authorized a reload and extension of the common stock repurchase program of up to $500 million. Our guidance does not assume any common stock repurchases in 2026 based upon current market conditions, and we are currently prioritizing our fundraising efforts to go towards our existing capital needs before we consider future common stock repurchases. We continue to have a strong and flexible balance sheet. Our corporate credit ratings continue to rank in the top 15% of all publicly traded U.S. REITs. We have tremendous liquidity of $4.2 billion and the longest average remaining debt maturity among all S&P 500 REITs of 10 years.

We reiterated our guidance range for fourth quarter 2026 net debt to annualized adjusted EBITDA of 5.6x to 6.2x. As expected, our first quarter 2026 leverage increased to 6.8x on a quarterly annualized basis, and we expect leverage to come down in 2026 as we make progress on our dispositions and sales of partial interests. We tightened the range of our guidance for 2026 FFO per share diluted, as adjusted, with no change to the midpoint of $6.40.

We made a number of changes to the underlying assumptions for guidance, which were primarily driven by two items: first, we reduced rental rate changes and rental rate changes on a cash basis by 7% and 3% respectively, primarily for two transactions which include a 48 thousand square foot long-term lease completed during first quarter 2026 in Watertown to an entertainment studio user and an 81 thousand square foot lease completed in April with an exciting growth-stage life science company to backfill a struggling tenant located in Torrey Pines. We continue to focus on capturing demand and meeting the market for the right tenants.

Second, our initial guidance assumptions for occupancy and same property performance included a 2% to 3% benefit respectively for a range of assets that could be considered for sale during 2026. Due to changes in the mix of assets considered for sale this year since our initial guidance, we now have a smaller assumption for sales of assets with significant vacancy. Accordingly, we reduced our outlook for occupancy and same property performance by 1.5% and 1% respectively to reflect an updated assumption that we hold on to more assets with vacancy, in part due to good tenant interest on these types of assets.

At our Investor Day in December, we provided a guidance range for fourth quarter 2026 FFO per share diluted, as adjusted, of $1.40 to $1.60 with a midpoint of $1.50. We refined this range to $1.40 to $1.50, which implies a $0.05 decline at the midpoint of the range to $1.45, which is primarily related to a decline in capitalized interest as I discussed earlier.

It is important to note that while our guidance for fourth quarter 2026 implies a $0.05 reduction in the midpoint to $1.45, the midpoint for the full year 2026 FFO per share diluted, as adjusted, was unchanged at $6.40 and benefited from later timing on the projected timing of dispositions and sales of partial interests, which was moved back by about a month.

In addition, we also provided several key current considerations on Page 6 of our supplemental package that highlight several factors that could have an impact on our results in and beyond 2026, including 1.5 million square feet of lease expirations for 2027 with approximately $97 million of annual rental revenue that are expected to have downtime and which we are closely monitoring. We remain keenly focused on executing steps for our path forward that we established at our Investor Day, including maintaining a strong and flexible balance sheet, reducing funding needs, substantially completing our large-scale non-core disposition plan, focusing on improving occupancy and NOI, and successfully managing G&A, among others.

With 10 thousand known diseases and limited cures and treatments, the industry has a lot to accomplish, and we continue to believe that life science companies will continue to recognize Alexandria Real Estate Equities, Inc. as the market leader with the best assets in the best locations and the best on-the-ground teams to operate these mission-critical research facilities. Now I will turn it back to Joel. Operator, let us go to questions, please.

Operator: We will now open the call for questions. To withdraw yourself from queue, today's first question comes from Farrell Granath with BofA. Please go ahead.

Farrell Granath: Hello. Good afternoon. Thank you for taking my question. I first wanted to address the change in occupancy guidance. You made commentary about the consideration of those assets no longer being considered for disposition, but the disposition guidance did maintain at the $2.9 billion. I am just wondering if you could bridge that change—what other assets were maybe being considered? Is it more assets that do not have as much vacancy, or is it land? I am just trying to understand that mix.

Marc E. Binda: Yes. It was a change in the mix. As you said, the midpoint was unchanged. There were a handful of assets that we had been considering for sale that had vacancy, where we have seen, in some cases, good leasing interest from tenants. So we ended up changing some of the assumptions to other assets that have more stabilized occupancy. The ultimate mix—we gave a broader range this time around of 75% to 90% for both core, non-core, as well as joint venture. That is really where the change in the mix will come in within that component. We should be able to have more color on what that looks like over, I would say, the next quarter or two.

Farrell Granath: Thank you. And my second question is about the leasing to the entertainment studio for the Arsenal lease. Just curious about that type of exit opportunity of the demand that is in the market and maybe being an alternative use. How much of the near-term or line-of-sight leasing is potentially for this alternate use versus life science?

Joel S. Marcus: Yes, Farrell, the entertainment tenant was an existing tenant and it was a renewal. Given the fact that rental rates for that type of space have come down in the area, it seemed prudent to renew a tenant in hand rather than empty out the space and reposition it. So it was not a new use. It was already there, and that is an asset that we have owned for probably 20 years. At 311 Arsenal, we have had very good activity with a range of advanced technology companies where we can utilize the space at a less CapEx investment. Rental rates are not as planned as lab, but those represent good opportunities.

It depends on the location and the type of space; it is hard to generalize.

Operator: Thank you. And our next question today comes from Nicholas Gregory Joseph at Citi. Please go ahead.

Nicholas Gregory Joseph: It is Nicholas Gregory Joseph here with Seth. With the FDA leadership uncertainty and NIH budget pressures, have you seen any behavioral changes on the private biotech tenant side around expansion decisions or sublease activity or requests for lease modifications?

Joel S. Marcus: On the private side, venture continues to raise money and deploy that money. They have done it in a much more judicious fashion than during the bull market run of the last decade and then the rocket ship of COVID, just given market conditions and the fact that some companies can execute an IPO but it is pretty difficult. Overall, the FDA impact on the private side is really more impactful on the public markets, but it does impact the private markets in the sense of confidence in raising money. Hallie, any comments you want to make?

Hallie Kuhn: I think that is right. Overall FDA uncertainty is a factor. There are some things that the FDA has tried to do and announce in trying to expedite regulatory review processes and the like, which is hopefully net positive for the industry, but that is not really playing out, as Joel mentioned, on the private side yet. The public companies are contending with that a bit more.

Nicholas Gregory Joseph: That is helpful. Thank you. And then just curious, any changes to the current tenant watch list relative to the past few quarters?

Joel S. Marcus: Marc, you could comment on that.

Marc E. Binda: We continue to evaluate tenants on a tenant-by-tenant basis. At our Investor Day, we had identified something around $23 million. That number has crept up in terms of a reserve for wind-downs or tenant failure; that number today is somewhere in the $25 million to $30 million range. It is through a variety of tenants—both private and public biotech as well as ancillary revenue-producing tenants that also service those types of tenants.

Joel S. Marcus: If you look at the current environment over the last year or two, as distinguished from historical biotech, it is the first time that owners have more aggressively, at the private level, tried to combine companies or wind down companies where they feel the opportunities for the marketplace just are not there. That is part of capital discipline and the judiciousness with which people are watching dollars, given tight public capital markets. That is the big change we have seen compared to historical.

Operator: Thank you. And our next question today comes from Ronald Kamdem with Morgan Stanley. Please go ahead.

Ronald Kamdem: Great. Thanks so much. I was looking through some of the disclosure on the 2027 expirations, which were really helpful. It seems like there were some added expirations coming in 2027 versus prior. As we are thinking on a same-store basis, it seems likely that 2027 could be down similar magnitudes as 2026, given it is a pretty similar setup with the expiration level. Is that a fair way to think about it? Or what breadcrumbs would you provide for that? Thanks.

Joel S. Marcus: I will ask Marc to comment, but from a top-side view, it is early in the year and so much can change. Just look at what changed last year from inauguration through the year—it was hard to believe the impact to the industry. It is pretty clear that, number one, we cannot give 2027 guidance at the moment. Number two, we are hopeful—as you see from some of the breadcrumbs—the movement in leasing, whether it be for life science or alternative advanced technology, is gaining some good foothold. That gives us hope that we can address some of these. As I said, one of our key elements to the path forward is increasing occupancy and hence NOI. Marc?

Marc E. Binda: We are not ready to give guidance for 2027. You are right that there are some expirations that we expect to have downtime. A lot of the answer will be how quickly we can lease up vacant space and developments to blend into an occupancy number that makes sense. A lot will depend on where the industry goes and these macro factors. We will continue to lease and, I hope, continue to outperform in terms of capturing demand.

Joel S. Marcus: A couple of examples that Marc mentioned—311 Arsenal and 3000 Minuteman—are really good examples where we were having chronic vacancy and figuring out strategy, whether to hold and lease, reposition, or dispose. Those incremental achievements this quarter have been positive and show a change we are seeing.

Ronald Kamdem: My second question was just on the dispositions. It sounds like there is a bit of a pivot away from some of the more vacant assets. I think you said you are considering JVs now. Is there also a change in pricing expectations? And is there any market concentration where you are seeing more or less traction?

Joel S. Marcus: I will ask Peter to comment. In general, the mix is very dependent upon traction of leasing. Where we see leasing progress, especially if we can lease for lower CapEx and get quicker NOI realization, we are going to pivot on that particular asset in a positive way. That does not mean that we would hold the asset indefinitely; we might choose to sell it. Peter, a comment or two on the transaction market?

Peter M. Moglia: We have found that there is a good amount of core-type capital in the market that is looking for high-quality assets. We wanted to leverage that and have found a way to do it through JVs. That does not mean that our non-core asset sales would suffer because of that. There are still a lot of people out there looking at those types of acquisitions as well. Everything that we have been marketing has been well received and has multiple parties looking at it. We have a lot of confidence that we are going to hit our numbers, despite the fact that we did not do much this quarter, which we let people know early.

The amount of money from the core side that is coming into the market has allowed us to lower our cost of capital overall by doing some of these JVs.

Operator: Thank you. And our next question today comes from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone: Thank you. Joel, you mentioned the FDA and judicious capital markets as being some factors out there in the environment. Are there any other items that you think right now are impacting the demand for space? Has there been any change in the type of space folks want, or is this just going to take a while to play out?

Joel S. Marcus: The pinch points are several. One is the turmoil at NIH, which certainly impacted us directly in a number of markets, and now that is easing up with the defeat of the limitation on indirect cost reimbursement and the NIH initially going to the Hill wanting a reduction in their budget, which I have never actually heard of when Congress on both sides of the aisle were in favor of more or less fully funding the NIH. That is early-stage stuff and hopefully gets worked out over time; there is some positive there. The FDA is a huge problem.

Almost every day there is something—for example, today it looks like they may try to pull an approved drug off the market because the FDA claims there may have been some manipulation in data. Almost every day you are getting a shock effect from the FDA, both at the leadership and at the core level. That is very real because as people think about funding, whether preclinical or into the clinic, you have to be mindful of time, cost, and approvability. Another pinch point is the capital markets. Public biotech—whether preclinical or clinical—cannot really finance unless they have data or a milestone, and that is a killer situation.

Zero public biotech leases this quarter to the leading franchise is unheard of. Finally, the China effect—capital is flowing to China for perceived ease of time frames and cost. I think that ultimately will backfire like a lot of offshoring that has taken place because Chinese data is not going to be allowed without rigorous FDA approvability and oversight. Still, a lot of people are trying to get drugs into the clinic in China and then bring them over, and that certainly impacted space. Senator Todd Young from Indiana has a bill and an effort to try to curtail some of this with China.

It is a bit like how we offshored autos and steel over the last many decades and then realized that you cannot do that, or rare earth minerals—you cannot leave them in the hands of a potential adversary. I think there will be congressional action; it probably will come after the midterms, unfortunately, but I think it will happen. This is a critical industry and we continue to lead the world, but China is a powerhouse and their government has poured immeasurable resources into this while we are kind of in array at the moment, which is unfortunate. But I think we will get our act together.

Anthony Paolone: That is really helpful. Thank you. And then second, on 421 Park Drive, I did not quite get what the considerations or options were as you evaluate that. I think there is a little bit of leasing there, but is it a change of use?

Joel S. Marcus: 421 is state-of-the-art lab. We sold several floors of that on a condo basis to a major institution in Boston, and the rest remains for lease or for sale in the sense of condominium interests. The NIH 15% issue kind of brought a halt to almost all demand, certainly in the Boston area and to some extent across the country. Now that has been overturned in the circuit courts and the administration has not chosen to fight it. Going forward, there likely will be institutional leasing or sale of condominium interests. We are waiting for that to evolve. I do not think we would pivot to another use there likely.

It could be office from Longwood Medical Center or the Fenway; there is a huge amount of medical-related office demand there, so that is a possibility, but we feel pretty good about the future there now that the 15% issue has gone by the wayside. It will just take a little bit of time.

Operator: And our next question today comes from James Hall Kammert with Evercore. Please go ahead.

James Hall Kammert: Good day. Thank you very much. Joel and team, pardon my ignorance. What do you define as advanced technology tenants? I am trying to get a sense of what those industries or tenants represent and what would be the tenants of that sort in the market across your three primary Boston, San Diego, and San Francisco markets?

Joel S. Marcus: A lot of that is secret sauce. An example—you were just at Campus Point when you did the tour with us. That campus holds primarily—we are delivering the Bristol Myers West Coast research headquarters hub. We just broke ground with Novartis, and there is a lot of early-stage biotech there. The campus, in addition to being heavily big pharma, is heavily advanced technology. Two tenants really make up maybe 25% of the rent roll there. One is Amazon—this is not a fulfillment or distribution center; this is a very sophisticated and research-oriented part of Amazon, and they have been there for quite a long time.

Then we did a build-to-suit on that property—we showed you the building—several stories of brand new office for Leidos, who manufacture advanced screening technology at airports, etc. We built several floors of SCIF space below that. We consider both the Amazon use and the Leidos use as advanced technology uses. Advanced technology is pretty broad. We have been involved in it since early days; for example, Google—although Google is not necessarily an office or a lab-type tenant, although we have leased to some of their subsidiaries—laboratory would be advanced technology.

It is a broad definition, but I do not necessarily, on a public call, want to get into how we view this and how we are trying to position some of our spaces because it is a highly competitive marketplace. The demand there is large and the funding there is large.

James Hall Kammert: Very helpful, thank you. As regards to the fourth quarter $140 million to $150 million run rate, does that contemplate at the lower end $3.7 billion of potentially capital recycling, or closer to the midpoint of $2.9 billion? I am just trying to square modeling assumptions. Thank you.

Marc E. Binda: We did bring down that range, Jim. At Investor Day we gave a range of $4.0 billion to $5.5 billion—so $4.75 billion as the average amount of basis being capitalized for fourth quarter 2026. We brought that range down by about $200 million. That is where we expect things to fall out. Obviously, things can change, but that is our best guess for now.

Joel S. Marcus: Let me add one other thing. For a variety of technologies we call “advanced”—it is a broad range—there are needs for highly secure spaces, heavy floor loading capacity, very enhanced HVAC systems, etc. Hallie highlighted some of that in a prior quarter. We are particularly interested in that kind of advanced technology tenant. We would not consider a generic office AI tenant in the same category. I hope that is helpful.

Operator: Thank you. Our next question today comes from Vikram L. Malhotra with Mizuho. Please go ahead.

Vikram L. Malhotra: Good afternoon. Thanks for taking the questions. I wanted to go back to that $140 to $150 run rate. You have revised the guide now a couple of times. At this point, is that truly the $140 bottom? What is the biggest variable that could push that $140 lower? And just to clarify, is that $140 the initial run rate going into 2027?

Joel S. Marcus: We give you our best judgment based on facts and circumstances as we know them at the quarter-end point in time. Things change a lot—imagine what happened in 2026 when the leadership and nature of Health and Human Services changed dramatically, and then tariffs came shortly thereafter. We will update quarterly. Marc?

Marc E. Binda: Cap interest is one of those drivers—that drove the number down by around $0.05 from the last time we updated that number at Investor Day. In terms of risk factors, a couple come to mind. We have to execute on the disposition plan. As Peter said, we are very focused on that and are feeling incrementally more confident on our ability to execute there. Tenant wind-downs can sometimes be unpredictable. That reserve number, as I mentioned earlier on the call, had grown from $23 million to something closer to $25 million to $30 million, but we have continued to work through that.

Those are a couple of things we are watching closely, but the $1.45 midpoint is our best estimate at this point.

Vikram L. Malhotra: Great. And on G&A, given the discipline you have embarked on, is there simultaneously maybe a relook at G&A to cut that further over the next two years, both core G&A and performance-based? And second, can you touch on AI and square footage needs? Is the lab-to-office ratio changing? Any anecdotes from your tenant base on their use of AI and what that means for future space?

Marc E. Binda: We have been focused on managing G&A very carefully for many years. We had a big reduction last year—$50-plus million of savings. We have been highlighting for a while that some of that would not necessarily continue into 2026, but still a meaningful improvement. Part of that has been some restructuring of comp plans; there was forfeited comp for some of the executives last year. We continue to do what is right for the organization and put people in the right positions to succeed. We have an outstanding team.

Joel S. Marcus: On AI and square footage, as I noted earlier, we have not seen any tenant come to us and say they want to reduce because of AI. We do not have back-office space that would be highly susceptible to that. We also have not seen people say they are expanding because of AI. It is too early. Hallie, thoughts?

Hallie Kuhn: We are really not seeing material changes from AI on the ground in terms of tenant demand or lab-office ratios shifting. We are still in the early innings of AI’s impact on drug discovery and development. Biology is massively complex. AI cannot replace physical experimentation or validation in a lab. We hope AI will compress timelines, increase efficiencies, reduce costs, and recover lost institutional knowledge. Some of our companies are incorporating AI into lab workflows in a lab-in-the-loop fashion—generate in silico hypotheses and then test them in biological systems. As far as AI’s impact on real estate demand and types of space, it remains neutral.

If AI allows a company to increase the number of targeted experiments run at one time, demand for both dry and wet space could rise, but we just do not know yet. We are not seeing a shift today.

Operator: Alright. Thank you. Our next question today comes from Richard Anderson at Cantor Fitzgerald. Please go ahead.

Richard Anderson: Thanks. I will keep it to one question. Earlier someone asked about lease expiration activity in 2027. There is roughly $97 million of annual revenue related to 1.5 million square feet. Is it prudent to assume the entirety of that $97 million gets put into a delay bucket as you look to re-lease that space? Or is progress going to be made in front of next year such that it may not be that draconian?

Marc E. Binda: If you are talking about those expirations in a vacuum, we do expect there to be downtime on those particular spaces. We are making good progress and have identified something like 35% to 36% where we have early negotiations. We will try our best to beat the amount of downtime we have indicated to get revenue as soon as possible. That also does not consider all the other things we are focused on—filling vacant space today, particularly some developments with alternative uses Joel mentioned, and converting things to revenue as soon as possible elsewhere in the portfolio to make up for that. TBD.

Richard Anderson: And just real quick: the assets that you are no longer selling that have some vacancy—you are holding because you are seeing some leasing success. Is that a result of the market coming toward you, or a change of strategy for these assets, maybe bringing in tech-type tenants?

Marc E. Binda: One example is a property in San Diego we had considered as a potential sale. If there was the ability to get near-term revenue and put in a reasonable amount of capital, we would certainly consider that. The asset I am thinking about is 160 thousand square feet, and we have somebody looking at that very closely now. It is a nice asset. It is really asset by asset. It was not that we just decided to sell fewer non-core assets. Assets that needed a lot of capital or were non-core—not really associated with the mega campuses—are definitely assets we continue to look to sell if it makes sense. In some cases, when we saw good activity, we pivoted.

Joel S. Marcus: Another good example would be the Minuteman assets north of Boston. We signed a pretty big LOI there, which changes the calculus—less CapEx and quicker time to delivery. That changes what you want to do with such an asset. In one case there is life science use; in another case it is advanced technology use. It really depends on the market.

Operator: Thank you. And our next question today comes from Wesley Golladay at Baird. Please go ahead.

Wesley Golladay: Hey, everyone. We are now about five years past the COVID boom where tenants were funded on weaker science, and you called out aggressive wind-downs. Where are we as far as winding down these COVID-era tenants? Are we in the later innings?

Joel S. Marcus: That is a hard question to answer the way you framed it. I would not call it COVID-era tenants per se. Maybe you are referring to companies that got formed on the prospects of a super buoyant market. Too much money flowed to too many deals on both the public and private side. Some of those naturally get wound down. In today’s market, wind-downs come from recognition that if you are going after a particular disease and someone just hit a huge milestone, you might not be first-in-class and will be a follower. Do you want to put money into that if it is not a frontline therapy?

That calculus comes into this as well, along with side-effect profiles and other technical issues. It is more complicated than just flushing out “COVID companies.”

Hallie Kuhn: I would add that in a capital-constrained environment with a high cost of capital, boards and investors on both the public and private sides are being more judicious about where they are spending capital. If companies do not have a strong line of sight on milestones, or miss milestones, investors have to make allocation decisions. That is really what is creating the decision-making to wind down a company or contract in terms of capital allocation. It is not necessarily that companies built over COVID are being flushed out.

Wesley Golladay: Appreciate that. And you made the comment about no leases with public biotechs. Maybe talk about the pipeline—are public biotechs just hesitant due to the macro environment?

Joel S. Marcus: I think that is probably a one-quarter blip. We will be back in the second quarter with positive leasing. It just goes to show that we have never seen that before. Overall ARR from public biotech compared to demand in that sector—that is the sector that is most obviously lacking in demand. The primary reason is they cannot, unless they have good data or a critical milestone, go to the market and do a secondary offering just to extend cash runway. It is really hard to do, both private and public.

Operator: Thank you. And our next question comes from John Kim of BMO Capital Markets. Please go ahead.

John Kim: Thank you. On your second quarter leasing indication of around 900 thousand to 950 thousand square feet, how much visibility do you have on that? Can you provide commentary on how much of that is new versus renewal versus new development? And lastly, how big is your leasing pipeline overall beyond the second quarter?

Joel S. Marcus: Number one, it is not guidance. It is an indication based on activity and transaction work. We will not give other comments on that at the moment. We would not give an indication of general direction unless we felt pretty comfortable, I will say that.

John Kim: Capitalized interest—your guidance implies a $58 million run rate going forward. It looks like you are going to be capitalizing about a third less assets by the fourth quarter, so simple math suggests it would be about $46 million by the fourth quarter. Is that math right? Is that how we should be looking at interest as we head into 2027?

Marc E. Binda: If you look at the basis today, it is north of $6 billion of basis that we are capitalizing. We think the second half comes down because we have some big deliveries—there is one big delivery in San Diego—and we have assets with milestones that will either be put on pause or, in some cases, sold as land. In our supplemental, we gave what we think that basis under capitalization is going to be in the fourth quarter—around $4.5 billion to $4.6 billion at the midpoint of the revised range. We also tried to give a sense of how much basis is out there that has milestones in 2027. Some of that is land, and we broke that out carefully.

Some is land and some is the five assets we are evaluating for business and financial strategy with milestones in early 2027. Those are being capitalized today. The big one is 421 Park. We do not know what is going to happen there; it will depend on demand and how quickly we can lease up that project. That is the best framing we can give at this point.

Operator: Thank you. And our next question today comes from Michael Albert Carroll at RBC Capital Markets. Please go ahead.

Michael Albert Carroll: Thanks. Marc, I wanted to circle back on those five projects that Alexandria Real Estate Equities, Inc. is evaluating for a potential change in business strategy. What are the exact options here? Are you going to build them for a different use like advanced technologies, and if that does not work, keep them as is waiting for a better market? So is it lease for a different use or hold off until a better market?

Marc E. Binda: For most of these assets, we are considering whether we pivot away from a traditional lab use to some type of advanced technology use or other interested parties that would find the nature of those buildings attractive for other uses. For 311 Arsenal Street, we have seen activity for those types of uses—over 80 thousand square feet of LOIs. For 40 Sylvan, similar. For 3000 Minuteman, we signed a big LOI for a non-lab use. The potential pivot on most of those assets is toward other types of uses. As Joel mentioned, we could also consider these as potential sale candidates down the road.

421 Park was a bit different; we could consider condo interests or, conceivably, office, but it is intended to be a lab building. All these assets have milestones where we need to make decisions or capitalization of interest would turn off, and those milestones are coming up on average in the early part of next year.

Michael Albert Carroll: If you do change the scope of those specific development projects, could that impact your construction budget in 2026, or is the $500 million more of a 2027-and-beyond impact?

Marc E. Binda: We have a good handle on this year’s capital plan. It would really be more of an item that could impact spending for next year.

Operator: Thank you. And our next question today comes from Dylan Robert Burzinski with Green Street. Please go ahead.

Dylan Robert Burzinski: Hi, thanks for taking the question. On the $97 million of vacates in 2027, it looks like excluding that amount, there is another roughly 1.54 million square feet of lease expirations. Do you have a good handle on that—are those likely to renew? We are trying to figure out the likelihood of that $97 million moving higher as we get closer to 2027.

Marc E. Binda: It is a little too early to tell on what happens with the rest of the expirations for 2027. What we know now is that the 1.5 million square feet for the $97 million of rent you referenced are likely to have some downtime. It is hard to predict at this point what the retention rate looks like on the balance. For this year, at the beginning of the year for 2026 expirations when we carved out the key lease expirations, we thought we would be somewhere in the 60%-plus retention rate. We are not prepared to comment on 2027 yet.

Dylan Robert Burzinski: Appreciate it. And beyond next quarter, is 3.5 to 4.0 million square feet of annualized leasing volume a good amount to use as a run rate?

Joel S. Marcus: I do not think you should assume that as a run rate. We are in a different time now. The run rate will evolve over time, given a more life science/advanced technology mix and the assets. Historically, give or take, 1 million square feet per quarter has been a common run rate over time. Whether we get back to that, time will tell.

Operator: Thank you. And our final question today comes from James Feldman with Wells Fargo. Please go ahead.

James Feldman: Congrats on getting to the end of the call. Just wanted the latest temperature on opportunistic capital looking at this space from the real estate perspective. You mentioned JVs are looking a little more interesting. Has anything changed? Is it global or domestic capital?

Peter M. Moglia: It is a combination of both domestic and international capital that is looking at these assets.

James Feldman: Has the appetite changed?

Peter M. Moglia: Over the last two years up until this year, there was really no money looking at core; it was all opportunistic, and for the right reasons—people were raising money based on double-digit IRRs. Now we have folks saying, “I want good-quality, safer assets, and I know I can get a real estate deal that will provide a spread over bonds that I like for the risk I am going to take.” Now that core money is there—both domestically and internationally—we are leveraging that to get a better cost of capital overall for our program.

Operator: Thank you. That concludes our question and answer session. I would like to turn the conference back over to Joel S. Marcus for any closing remarks.

Joel S. Marcus: Yes. Thank you, operator, and thank you, everybody. We appreciate it.

Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.