Alexandria Real Estate Equities, Inc. Q2 FY2025 earnings call

• Leasing: Leased ~770,000 square feet in Q2 with favorable leasing spreads. Tenant improvements and leasing commissions on renewals were down 40% compared to previous quarters. Focus on Megacampus platform and high-quality buildings.
• Development Pipeline: Delivered ~218,000 square feet of lab space, contributing to incremental NOI. Progress on stabilization pipeline projects like 311 Arsenal, Sylvan Road Asset, etc.
• Asset Sales: Closed on approximately $84 million in asset sales in Q2. Has ~$1.1 billion to add to the sales pipeline for the next two quarters. Non-core asset pool includes land, unstabilized, and stabilized properties.
• Industry Factors: Monitors FDA, tariffs, and drug pricing. Optimistic on Fed rate cuts, NIH funding stability, and M&A/licensing activity in the biopharma sector.

Alexandria Real Estate Equities demonstrated solid performance in life science real estate. In Q2 2025, they leased approximately 770,000 square feet with leasing spreads of 5.5% and 6.1% on a cash basis. They delivered ~218,000 square feet of 90% leased Class A-plus laboratory space, contributing approximately $15 million in annual incremental net operating income. The initial weighted average stabilized yield for Q2 deliveries was 6.6%, driven by higher rental rates and reduced construction costs. Occupancy at the end of the quarter was 90.8%, with a year-end guidance of 90.9% to 92.5%.

• Occupancy: Year-end 2025 occupancy guidance is 90.9% to 92.5%.
• FFO per share: Midpoint of $9.26 per share for 2025 FFO per share diluted.
• Capitalized interest: Reiterated guidance, expecting steady to slightly higher in the back half of 2025 due to active pipeline and high interest rates.
• Venture investments: Full year 2025 range for venture investment gains is $100 million to $130 million.

• Macroeconomic headwinds and interest rate uncertainties.
• Monitoring FDA delays and NIH funding disbursement issues.
• Tariff impacts on biopharma, though muted, are monitored.
• Uncertainty around drug pricing and most favored nations (MFN) policies.

Q: Thoughts on the California Campus Point lease and free rent trends?

A: The deal was due to a big pharma's R&D hub needs for a world-class location. Free rent uptick was due to one particular lease, and it's TBD what the future holds for free rent.

Q: Tenant perspective on build-to-suit vs vacant space?

A: Big pharma prefers build-to-suit in Megacampuses for recruitment and retention of talent, as they offer premium amenities and a world-class environment.

Q: Occupancy trajectory and capitalized interest?

A: Occupancy guidance remains as stated, and capitalized interest is part of the $3 billion pipeline with project-by-project decisions based on milestones.

Q: NIH budget and FDA leadership?

A: Concerns on NIH grant disbursement and FDA transition, but they are being monitored closely.

Q: Build-to-suit pipeline and asset sales?

A: Focus is on the Megacampus platform, and they are selling non-core assets. Prospects for build-to-suit are increasing but are case-specific.

Q: '26 vacates and cap rates on dispositions?

A: '26 vacates are case-specific, and cap rates on dispositions reflect asset transition and the non-core nature of the assets being sold.