Alexandria Real Estate Equities, Inc. Q4 FY2025 earnings call

• Navigated a fast-changing life science industry landscape in 2025, dealing with events like HHS Secretary nomination and FDA departures.
• Investor Day path forward is North Star for 2026, focusing on dispositions, strong balance sheet, leasing, and reducing CapEx.
• 4Q 2025 highlights: $1.5 billion in dispositions across 26 transactions, 1.2 million sq ft leasing volume (highest in last year), occupancy up, same-property net operating income had specific changes.
• 2025 achievements: $51.3 million G&A cost savings (30% reduction), reduced non-income-producing assets as a percentage of gross assets from 20% at end of 2024 to 17% at end of 2025.

In 4Q '25, FFO per share diluted as adjusted was $2.16, and for the full year 2025 it was $9.01, which was the midpoint of prior guidance. Leasing volume in 4Q was 1.2 million square feet, up 14% over the prior 4-quarter average. Occupancy at the end of 2025 was 90.9%, up 30 basis points from the prior quarter. Megacampuses represent about 78% of annual rental revenue and outperformed the total market occupancy in the largest 3 markets by 19% for occupancy.

• 2026 occupancy range 87.7% to 89.3%, expecting a dip in 1Q 2026 and growth in the second half.
• Same-property NOI guidance: weaker in first half of 2026, stronger in the back half.
• Expect $2.9 billion midpoint for 2026 dispositions and sales of partial interest.
• Capitalized interest guidance for 2026 is $250 million, down 24% from 2025.

• Fast-changing life science industry landscape and regulatory changes pose challenges.
• Oversupply in numerous submarkets leads to impairments, with 50%-60% of real estate impairments in 4Q related to land.
• Volatility in leasing due to tenant wind-downs, elevated free rent, and rental rate changes.

Q: Any updates on the FDA and early-stage Series A, B type funding?

A: FDA Commissioner is focused on compressing drug development time, but defections at the FDA pose questions on agency ability. Early-stage public biotech IPO window is needed for new company formation and R&D expansion.

Q: Color on tenant improvements (TIs) and free rents?

A: TIs are stable for renewals and re-leasing, but free rent is elevated to win deals, with rental rates stable in some cases but free rent being the tool to execute on deals.

Q: Concerns about public biotech expansion space?

A: Public biotechs need to raise more capital and have expansion space, but historically early-stage public biotechs are critical for R&D expansion, and we're seeing some demand but it's further and fewer between than past years.

Q: Capital allocation and buyback plans?

A: Prioritize debt reduction via dispositions before considering buybacks, with current thinking being to get farther along on the disposition program first.

Q: Development exposure outlook?

A: Targeting around 10% development exposure as a percentage of non-income-producing land to overall gross assets, focusing on Megacampuses for future development.