Alexandria Real Estate Equities, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (loss) $ 59,546
$ 28,559
$ 148,597
$ (69,591 )
Other comprehensive income (loss)
Unrealized gains (losses) on available-for-sale equity securities:
Unrealized holding gains (losses) arising during the period 17,018
(38,621 ) 23,414
(70,055 )
Reclassification adjustment for (gains) losses included in net income (loss) —
(8,540 ) 2,482
(18,627 )
Unrealized gains (losses) on available-for-sale equity securities, net 17,018
(47,161 ) 25,896
(88,682 )

Unrealized gains (losses) on interest rate hedge agreements:
Unrealized interest rate hedge gains (losses) arising during the period 145
2,982
812
(7,655 )
Reclassification adjustment for amortization of interest expense included in net income (loss) 198
1,702
1,810
3,725
Unrealized gains (losses) on interest rate hedge agreements, net 343
4,684
2,622
(3,930 )

Unrealized gains on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period 3,836
(1,322 ) 7,592
842
Reclassification adjustment for cumulative foreign currency translation losses included in net income (loss) upon sale or liquidation —
3,779
2,421
10,807
Unrealized gains on foreign currency translation, net 3,836
2,457
10,013
11,649

Total other comprehensive income (loss) 21,197
(40,020 ) 38,531
(80,963 )
Comprehensive income (loss) 80,743
(11,461 ) 187,128
(150,554 )
Less: comprehensive income attributable to noncontrolling interests (5,783 ) (4,081 ) (18,914 ) (11,587 )
Comprehensive income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 74,960
$ (15,542 ) $ 168,214
$ (162,141 )



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	87,179		$	60,547		$	223,997		$	202,065
Other comprehensive loss
Unrealized (losses) gains on interest rate hedge agreements:
Unrealized interest rate hedge (losses) gains arising during the period	(1,126		)	661			(1,684		)	2,643
Reclassification adjustment for amortization of interest income included in net income	114			(1,131		)	(1,815		)	(1,809		)
Unrealized (losses) gains on interest rate hedge agreements, net	(1,012		)	(470		)	(3,499		)	834

Unrealized gains (losses) on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period	590			(3,243		)	2,800			(3,572		)
Unrealized gains (losses) on foreign currency translation, net	590			(3,243		)	2,800			(3,572		)

Total other comprehensive loss	(422		)	(3,713		)	(699		)	(2,738		)
Comprehensive income	86,757			56,834			223,298			199,327
Less: comprehensive income attributable to noncontrolling interests	(8,412		)	(5,817		)	(16,071		)	(11,705		)
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	$	78,345		$	51,017		$	207,227		$	187,622

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)

Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity

7.00% Series D
Cumulative
Convertible
Preferred
Stock

6.45% Series E
Cumulative
Redeemable
Preferred
Stock

Number of
Common
Shares

Common
Stock

Additional
Paid-In Capital

Retained
Earnings
Accumulated Other Comprehensive Income
Noncontrolling
Interests

Total
Equity

Redeemable
Noncontrolling
Interests
Balance as of December 31, 2016 $ 86,914
$ 130,000
87,665,880
$ 877
$ 4,672,650
$ —
$ 5,355
$ 475,175
$ 5,370,971
$ 11,307
Net income —
—
—
—
—
129,705
—
18,139
147,844
753
Total other comprehensive income —
—
—
—
—
—
38,509
22
38,531
—
Distributions to noncontrolling interests —
—
—
—
—
—
—
(16,790 ) (16,790 ) (642 )
Contributions from noncontrolling interests —
—
—
—
—
—
—
9,877
9,877
—
Issuances of common stock —
—
6,249,309
62
705,329
—
—
—
705,391
—
Issuances pursuant to stock plan —
—
409,360
4
30,638
—
—
—
30,642
—
Repurchase of 7.00% Series D preferred stock (12,528 ) —
—
—
391
(5,797 ) —
—
(17,934 ) —
Redemption of 6.45% Series E preferred stock —
(130,000 ) —
—
5,132
(5,482 ) —
—
(130,350 ) —
Dividends declared on common stock —
—
—
—
—
(238,425 ) —
—
(238,425 ) —
Dividends declared on preferred stock —
—
—
—
—
(6,364 ) —
—
(6,364 ) —
Distributions in excess of earnings —
—
—
—
(126,363 ) 126,363
—
—
—
—
Balance as of September 30, 2017 $ 74,386
$ —
94,324,549
$ 943
$ 5,287,777
$ —
$ 43,864
$ 486,423
$ 5,893,393
$ 11,418



	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	7.00% Series D Cumulative Convertible Preferred Stock		Number of Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance as of March 31, 2019	$	57,461	111,180,659		$	1,112		$	7,518,716		$	—		$	(10,712	)	$	777,448		$	8,344,025		$	10,889
Net income	—		—		—			—			78,767			—			8,194			86,961			218
Total other comprehensive loss	—		—		—			—			—			(422		)	—			(422		)	—
Distributions to noncontrolling interests	—		—		—			—			—			—			(14,674		)	(14,674		)	(207		)
Contributions from and sales of noncontrolling interests	—		—		—			—			—			—			487			487			94
Issuance of common stock	—		602,484		6			85,388			—			—			—			85,394			—
Issuance pursuant to stock plan	—		327,699		3			17,244			—			—			—			17,247			—
Taxes paid related to net settlement of equity awards	—		(125,274	)	(1		)	(3,996		)	—			—			—			(3,997		)	—
Dividends declared on common stock ($1.00 per share)	—		—		—			—			(113,541		)	—			—			(113,541		)	—
Dividends declared on preferred stock ($0.4375 per share)	—		—		—			—			(1,005		)	—			—			(1,005		)	—
Reclassification of distributions in excess of earnings	—		—		—			(35,779		)	35,779			—			—			—			—
Balance as of June 30, 2019	$	57,461	111,985,568		$	1,120		$	7,581,573		$	—		$	(11,134	)	$	771,455		$	8,400,475		$	10,994

~~The accompanying notes are an integral part of these consolidated financial statements.~~

Alexandria Real Estate Equities, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Nine Months Ended September 30,
2017 2016
Operating Activities
Net income (loss) $ 148,597
$ (69,591 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 309,069
218,168
Loss on early extinguishment of debt 670
3,230
Gain on sales of real estate – rental properties (270 ) —
Impairment of real estate 203
193,237
Gain on sales of real estate – land parcels (111 ) (90 )
Equity in (earnings) losses of unconsolidated real estate joint ventures (15,050 ) 270
Distributions of earnings from unconsolidated real estate joint ventures 249
286
Amortization of loan fees 8,578
8,792
Amortization of debt premiums (1,873 ) (117 )
Amortization of acquired below-market leases (14,908 ) (2,905 )
Deferred rent (74,362 ) (30,679 )
Stock compensation expense 18,649
19,007
Investment gains (8,425 ) (28,721 )
Investment losses 6,418
10,670
Changes in operating assets and liabilities:
Restricted cash (912 ) (278 )
Tenant receivables (224 ) 843
Deferred leasing costs (39,925 ) (21,621 )
Other assets (10,662 ) (14,813 )
Accounts payable, accrued expenses, and tenant security deposits 30,619
6,163
Net cash provided by operating activities 356,330
291,851

Investing Activities
Proceeds from sales of real estate 4,263
27,332
Additions to real estate (660,877 ) (638,568 )
Purchases of real estate (590,884 ) (18,108 )
Deposits for investing activities 4,700
(54,998 )
Investments in unconsolidated real estate joint ventures (248 ) (6,924 )
Return of capital from unconsolidated real estate joint ventures 38,576
—
Additions to investments (128,190 ) (68,384 )
Sales of investments 18,896
35,295
Repayment of notes receivable —
9,054
Net cash used in investing activities $ (1,313,764 ) $ (715,301 )

Alexandria Real Estate Equities, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Nine Months Ended September 30,
2017 2016
Financing Activities
Borrowings from secured notes payable $ 145,272
$ 215,330
Repayments of borrowings from secured notes payable (2,882 ) (234,096 )
Proceeds from issuance of unsecured senior notes payable 424,384
348,604
Borrowings from unsecured senior line of credit 2,634,000
2,349,000
Repayments of borrowings from unsecured senior line of credit (2,348,000 ) (2,084,000 )
Repayments of borrowings from unsecured senior bank term loans (200,000 ) (200,000 )
Change in restricted cash related to financing activities (10,467 ) 7,742
Payment of loan fees (4,343 ) (16,499 )
Repurchase of 7.00% Series D cumulative convertible preferred stock (17,934 ) (98,633 )
Redemption of 6.45% Series E cumulative redeemable preferred stock (130,350 ) —
Proceeds from the issuance of common stock 705,391
367,802
Dividends on common stock (229,814 ) (177,966 )
Dividends on preferred stock (8,317 ) (17,487 )
Financing costs paid for sale of noncontrolling interests —
(8,093 )
Contributions from and sale of noncontrolling interests 9,877
68,621
Distributions to and purchase of noncontrolling interests (17,432 ) (62,605 )
Net cash provided by financing activities 949,385
457,720

Effect of foreign exchange rate changes on cash and cash equivalents 1,579
(1,440 )

Net (decrease) increase in cash and cash equivalents (6,470 ) 32,830
Cash and cash equivalents as of the beginning of period 125,032
125,098
Cash and cash equivalents as of the end of period $ 118,562
$ 157,928

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest, net of interest capitalized $ 86,232
$ 58,820

Non-Cash Investing Activities:
Change in accrued construction $ (38,767 ) $ 23,023
Contribution of real estate to an unconsolidated real estate joint venture $ 6,998
$ —

Non-Cash Financing Activities:
Redemption of redeemable noncontrolling interests $ —
$ (5,000 )

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	7.00% Series D Cumulative Convertible Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance as of March 31, 2018	$	74,386	100,696,361	$	1,007	$	6,117,976		$	—		$	1,228		$	528,538		$	6,723,135		$	10,212
Net income	—		—	—		—			54,730			—			5,606			60,336			211
Total other comprehensive loss	—		—	—		—			—			(3,713		)	—			(3,713		)	—
Redemption of noncontrolling interests	—		—	—		—			—			—			—			—			(100		)
Distributions to noncontrolling interests	—		—	—		—			—			—			(12,309		)	(12,309		)	(212		)
Contributions from noncontrolling interests	—		—	—		257			—			—			6,978			7,235			750
Issuance of common stock	—		2,456,037	25		300,813			—			—			—			300,838			—
Issuance pursuant to stock plan	—		193,719	1		12,644			—			—			—			12,645			—
Dividends declared on common stock ($0.93 per share)	—		—	—		—			(97,591		)	—			—			(97,591		)	—
Dividends declared on preferred stock ($0.4375 per share)	—		—	—		—			(1,302		)	—			—			(1,302		)	—
Reclassification of distributions in excess of earnings	—		—	—		(44,163		)	44,163			—			—			—			—
Balance as of June 30, 2018	$	74,386	103,346,117	$	1,033	$	6,387,527		$	—		$	(2,485	)	$	528,813		$	6,989,274		$	10,861

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	7.00% Series D Cumulative Convertible Preferred Stock			Number of Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance as of December 31, 2018	$	64,336		111,011,816		$	1,110		$	7,286,954		$	—		$	(10,435	)	$	541,963		$	7,883,928		$	10,786
Net income	—			—		—			—			207,926			—			15,636			223,562			435
Total other comprehensive loss	—			—		—			—			—			(699		)	—			(699		)	—
Distributions to noncontrolling interests	—			—		—			—			—			—			(24,175		)	(24,175		)	(415		)
Contributions from and sales of noncontrolling interests	—			—		—			202,246			—			—			238,031			440,277			188
Issuance of common stock	—			602,484		6			85,388			—			—			—			85,394			—
Issuance pursuant to stock plan	—			523,691		5			34,180			—			—			—			34,185			—
Taxes paid related to net settlement of equity awards	—			(152,423	)	(1		)	(4,085		)	—			—			—			(4,086		)	—
Repurchases of 7.00% Series D preferred stock	(6,875		)	—		—			215			(2,580		)	—			—			(9,240		)	—
Dividends declared on common stock ($1.97 per share)	—			—		—			—			(223,115		)	—			—			(223,115		)	—
Dividends declared on preferred stock ($0.875 per share)	—			—		—			—			(2,031		)	—			—			(2,031		)	—
Cumulative effect of adjustment upon adoption of new lease accounting standard on January 1, 2019	—			—		—			—			(3,525		)	—			—			(3,525		)	—
Reclassification of distributions in excess of earnings	—			—		—			(23,325		)	23,325			—			—			—			—
Balance as of June 30, 2019	$	57,461		111,985,568		$	1,120		$	7,581,573		$	—		$	(11,134	)	$	771,455		$	8,400,475		$	10,994

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	7.00% Series D Cumulative Convertible Preferred Stock		Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance as of December 31, 2017	$	74,386	99,783,686	$	998	$	5,824,258	$	—		$	50,024		$	521,994		$	6,471,660		$	11,509
Net income	—		—	—		—		190,360			—			11,280			201,640			425
Total other comprehensive loss	—		—	—		—		—			(2,738		)	—			(2,738		)	—
Reclassification of cumulative net unrealized gains on non-real estate investments upon adoption of new financial instruments standard on January 1, 2018	—		—	—		—		140,521			(49,771		)	—			90,750			—
Redemption of noncontrolling interests	—		—	—		—		—			—			—			—			(1,397		)
Distributions to noncontrolling interests	—		—	—		—		—			—			(18,018		)	(18,018		)	(426		)
Contributions from noncontrolling interests	—		—	—		257		—			—			13,557			13,814			750
Issuance of common stock	—		3,299,637	33		400,174		—			—			—			400,207			—
Issuance pursuant to stock plan	—		262,794	2		24,132		—			—			—			24,134			—
Dividends declared on common stock ($1.83 per share)	—		—	—		—		(189,571		)	—			—			(189,571		)	—
Dividends declared on preferred stock ($0.875 per share)	—		—	—		—		(2,604		)	—			—			(2,604		)	—
Reclassification of distributions in excess of earnings	—		—	—		138,706		(138,706		)	—			—			—			—
Balance as of June 30, 2018	$	74,386	103,346,117	$	1,033	$	6,387,527	$	—		$	(2,485	)	$	528,813		$	6,989,274		$	10,861

The accompanying notes are an integral part of these consolidated financial statements.



Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2019			2018
Operating Activities
Net income	$	223,997		$	202,065
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	268,524			233,071
Impairment of real estate	—			6,311
Loss on early extinguishment of debt	7,361			—
Equity in earnings of unconsolidated real estate joint ventures	(2,408		)	(2,234		)
Distributions of earnings from unconsolidated real estate joint ventures	1,679			287
Amortization of loan fees	4,613			5,136
Amortization of debt premiums	(1,583		)	(1,181		)
Amortization of acquired below-market leases	(15,202		)	(11,368		)
Deferred rent	(52,441		)	(55,890		)
Stock compensation expense	22,466			15,223
Investment income	(105,056		)	(98,091		)
Changes in operating assets and liabilities:
Tenant receivables	573			1,552
Deferred leasing costs	(23,471		)	(29,705		)
Other assets	560			(15,055		)
Accounts payable, accrued expenses, and tenant security deposits	(21,272		)	8,120
Net cash provided by operating activities	308,340			258,241

Investing Activities
Additions to real estate	(577,322		)	(431,225		)
Purchases of real estate	(715,030		)	(688,698		)
Deposits (paid) returned for investing activities	(9,000		)	5,500
Acquisitions of interests in unconsolidated real estate joint ventures	—			(35,922		)
Investments in unconsolidated real estate joint ventures	(95,950		)	(44,486		)
Additions to investments	(104,902		)	(118,775		)
Sales of investments	49,967			44,707
Net cash used in investing activities	$	(1,452,237	)	$	(1,268,899	)



Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2019			2018
Financing Activities
Borrowings from secured notes payable	$	—		$	9,044
Repayments of borrowings from secured notes payable	(302,878		)	(3,162		)
Proceeds from issuance of unsecured senior notes payable	854,209			899,321
Borrowings from unsecured senior line of credit	2,114,000			2,469,000
Repayments of borrowings from unsecured senior line of credit	(1,808,000		)	(2,519,000		)
Payment of loan fees	(15,796		)	(8,003		)
Taxes paid related to net settlement of equity awards	(4,086		)	—
Repurchase of 7.00% Series D cumulative convertible preferred stock	(9,240		)	—
Proceeds from issuance of common stock	85,394			400,207
Dividends on common stock	(218,914		)	(183,040		)
Dividends on preferred stock	(2,132		)	(2,604		)
Contributions from and sales of noncontrolling interests	441,251			14,564
Distributions to and purchases of noncontrolling interests	(24,590		)	(19,841		)
Net cash provided by financing activities	1,109,218			1,056,486

Effect of foreign exchange rate changes on cash and cash equivalents	774			(1,173		)

Net (decrease) increase in cash, cash equivalents, and restricted cash	(33,905		)	44,655
Cash, cash equivalents, and restricted cash as of the beginning of period	272,130			277,186
Cash, cash equivalents, and restricted cash as of the end of period	$	238,225		$	321,841

Supplemental Disclosures and Non-Cash Investing and Financing Activities:
Cash paid during the period for interest, net of interest capitalized	$	71,338		$	68,885
Change in accrued construction	$	5,558		$	48,074
Accrued construction for current-period additions to real estate	$	181,922		$	183,573
Assumption of secured notes payable in connection with purchase of properties	$	(28,200	)	$	—
Right-of-use asset	$	239,653		$	—
Lease liability	$	(245,638	)	$	—

The accompanying notes are an integral part of these consolidated financial statements.

Alexandria Real Estate Equities, Inc.

Notes to Consolidated Financial Statements

(Unaudited)


1.	Organization and basis of presentation

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500^® ~~company, is an~~ urban office REIT, is the first and longest-tenured owner, operator, and developer uniquely focused on collaborative life science, technology, and ~~technology~~agtech campuses in AAA innovation cluster locations. As used in this quarterly report on Form 10‑Q, references to the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements include the accounts of Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

We have prepared the accompanying interim consolidated financial statements in accordance with GAAP and in conformity with the rules and regulations of the SEC. In our opinion, the interim consolidated financial statements presented herein reflect all adjustments, of a normal recurring nature, that are necessary to fairly present the interim consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2019. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10‑K for the year ended December 31, ~~2016.~~2018. Any references to our market capitalization, number or quality of buildings or tenants, quality of location, square footage, number of leases, or occupancy percentage, and any amounts derived from these values in these notes to consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review.


2.	Summary of significant accounting policies

Reclassifications

Certain prior-period amounts have been reclassified to conform to current-period presentation. Refer to the “Lease Accounting” section within this Note 2 – “Summary of Significant Accounting Policies.”

Consolidation

On an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly owned by us in accordance with the consolidation guidance. Our evaluation considers all of our variable interests, including equity ownership, as well as fees paid to us for our involvement in the management of each partially owned entity. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:

The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and

We have a variable interest in the legal entity – i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets.

If an entity does not meet both criteria above, we apply other accounting literature, such as the cost or equity method of accounting. If an entity does meet both criteria above, we evaluate such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.

A legal entity is determined to be a VIE if it has any of the following three characteristics:


1)	The entity does not have sufficient equity to finance its activities without additional subordinated financial support;


2)	The entity is established with non-substantive voting rights (i.e., where the entity deprives the majority economic interest holder(s) of voting rights); or


3)	The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:

The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:

Substantive participating rights in day-to-day management of the entity’s activities; or

Substantive kick-out rights over the party responsible for significant decisions;

The obligation to absorb the entity’s expected losses; or

The right to receive the entity’s expected residual returns.


2.	Summary of significant accounting policies (continued)

Once we consider the sufficiency of equity and voting rights of each legal entity, we then evaluate the characteristics of the equity holders’ interests, as a group, to see if they qualify as controlling financial interests. Our real estate joint ventures consist of limited partnerships or limited liability companies. For an entity structured as a limited partnership or a limited liability company, our evaluation of whether the equity holders (equity partners other than us in each of our joint ventures) lack the characteristics of a controlling financial interest includes the evaluation of whether the limited partners or non-managing members (the noncontrolling equity holders) lack both substantive participating rights and substantive kick-out rights, defined as follows:

Participating rights provide the noncontrolling equity holders the ability to direct significant financial and operating decisions made in the ordinary course of business that most significantly influence the entity’s economic performance.

Kick-out rights allow the noncontrolling equity holders to remove the general partner or managing member without cause.

If we conclude that any of the three characteristics of a VIE are met, including that the equity holders lack the characteristics of a controlling financial interest because they lack both substantive participating rights and substantive kick-out rights, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.

Variable interest model

If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits – that is, (i) we have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) we have the obligation to absorb losses of ~~the VIE that could potentially be significant to the VIE,~~ or the right to receive benefits from the VIE that could potentially ~~could~~ be significant to the VIE (benefits). We consolidate VIEs whenever we determine that we are the primary beneficiary. Refer to Note 34 – ~~“Investments in~~“Consolidated and Unconsolidated Real ~~Estate”~~Estate Joint Ventures” to these unaudited consolidated financial statements for information on specific joint ventures that qualify as VIEs. If we have a variable interest in a VIE but we are not the primary beneficiary, we account for our investment using the equity method of accounting.

Voting model

If a legal entity fails to meet any of the three characteristics of a VIE (due to insufficiency of equity, existence of non-substantive voting rights, or lack of a controlling financial interest), we then evaluate such entity under the voting model. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares and that other equity holders do not have substantive participating rights. Refer to Note 4 – ~~“Investments in~~“Consolidated and Unconsolidated Real Estate Joint Ventures” to these unaudited consolidated financial statements for further information on ~~one of~~ our unconsolidated real estate joint ventures that ~~qualifies~~qualify for evaluation under the voting model.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and equity; the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements; and the amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Investments in real estate ~~and properties classified as held for sale~~

In January 2017, the FASB issued an ASU that clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer real estate transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. We early adopted this accounting standard effective October 1, 2016, and since then have evaluated all of our acquisitions under the new framework.


2.	~~Summary of significant accounting policies (continued)~~

Evaluation of business combination or asset acquisition

We evaluate each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine whether the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination. An acquisition of an integrated set of assets and activities that does not meet the definition of a business ~~and need to be~~is accounted for as ~~a business combination.~~an asset acquisition. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or

The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction).

An acquired process is considered substantive if:

The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce) that is skilled, knowledgeable, and experienced in performing the process;

The process cannot be replaced without significant cost, effort, or delay; or

The process is considered unique or scarce.


2.	Summary of significant accounting policies (continued)

Generally, we expect that acquisitions of real estate or in-substance real estate will not meet the ~~revised~~ definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort, or delay. When evaluating acquired service or management contracts, we consider the nature of the services performed, the terms of the contract relative to similar ~~arm’s length~~arm’s-length contracts, and the availability of comparable vendors in evaluating whether the acquired contract constitutes a substantive process.

Recognition of real estate acquired

For acquisitions of real estate or in-substance real estate that are accounted for as business combinations, we ~~recognize~~allocate the acquisition consideration (excluding acquisition costs) to the assets acquired, ~~(including the intangible value of acquired above- or below-market leases, acquired in-place leases, tenant relationships, and other intangible assets or liabilities),~~ liabilities assumed, noncontrolling interests, and previously existing ownership interests at fair value as of the acquisition date. Assets include intangible assets such as tenant relationships, acquired in-place leases, and favorable intangibles associated with in-place leases in which we are the lessor. Liabilities include unfavorable intangibles associated with in-place leases in which we are the lessor. In addition, for acquired in-place operating leases in which we are the lessee, acquisition consideration is allocated to lease liabilities and related right-of-use assets, adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. Any excess (deficit) of the consideration transferred relative to the fair value of the net assets acquired is accounted for as goodwill (bargain purchase gain). Acquisition costs related to business combinations are expensed as incurred.

~~Acquisitions~~Generally, we expect that acquisitions of real estate ~~and~~or in-substance real estate ~~that do~~will not meet the definition of a business ~~are accounted for as~~because substantially all of the fair value is concentrated in a single identifiable asset ~~acquisitions.~~or group of similar identifiable assets (i.e., land, buildings, and related intangible assets). The accounting model for asset acquisitions is similar to the accounting model for business combinations, except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. Any excess (deficit) of the consideration transferred relative to the sum of the fair value of the assets acquired and liabilities assumed is allocated to the individual assets and liabilities based on their relative fair values. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. ~~Additionally, because~~Incremental and external direct acquisition costs (such as legal and third-party services) are capitalized.

We exercise judgment to determine the accounting model for asset acquisitions is a cost accumulation model, preexisting interests in the acquired assets, if any, are not remeasured to fair value but continue to be accounted for at their historical cost.

~~The relative fair values~~key assumptions used to allocate the ~~cost~~purchase price of ~~an asset acquisition are determined by the same methodologies and assumptions we utilize to determine fair value in a business combination.~~

~~If a~~ real estate ~~property is~~ acquired ~~with~~among its components. The allocation of the consideration to the various components of properties acquired during the year can have an ~~in-place lease~~effect on our net income due to the differing depreciable and amortizable lives of each component and the recognition of the related depreciation and amortization expense in our consolidated statements of income. We apply judgment in utilizing available comparable market information to assess relative fair value. We assess the relative fair values of tangible and intangible assets based on numerous factors, including estimated cash flow projections that ~~contains~~utilize appropriate discount and capitalization rates and available comparable market information. Estimates of future cash flows are based on a ~~bargain fixed-rate renewal option for~~number of factors, including the ~~period beyond the non-cancelable lease term, we evaluate factors, such as the business conditions in the industry in which the lessee operates, the~~ historical operating results, known and anticipated trends, and market/economic conditions inthat may affect the area in which the property is located, and the ability of the lessee to sublease its space during the renewal term, in order to determine the likelihood that the lessee will renew. When we determine there is reasonable assurance that such bargain renewal option will be exercised, we consider the option in determining the intangible value of such lease and its related amortization period. property.

The value of tangible assets acquired is based upon our estimation of fair value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. ~~We assess~~If there is a bargain fixed-rate renewal option for the ~~fair~~period beyond the non-cancelable lease term of an in-place lease, we evaluate intangible factors such as the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, in order to determine the likelihood that the lessee will renew. When we determine there is reasonable assurance that such bargain purchase option will be exercised, we consider the option in determining the intangible value of ~~tangible~~such lease and ~~intangible~~its related amortization period. We also recognize the relative fair values of assets ~~based on numerous factors, including estimated cash flow projections that utilize appropriate discount~~acquired, the liabilities assumed, and ~~capitalization rates and available market information. Estimates~~any noncontrolling interest in acquisitions of ~~future cash flows are based on~~less than a ~~number~~100% interest when the acquisition constitutes a change in control of ~~factors, including~~ the ~~historical operating results, known trends, and market/economic conditions, that may affect the property.~~acquired entity.


2.	~~Summary of significant accounting policies (continued)~~

The values allocated to buildings and building improvements, land improvements, tenant improvements, and equipment are depreciated on a straight-line basis using the shorter of the ~~term of the~~ respective ground lease ~~and~~term, estimated useful life, or up to 40 years, for buildings and building improvements, an estimated life, ofor up to 20 years, for land improvements, the respective lease term or estimated useful life for tenant improvements, and the shorter of the lease term or estimated useful life for equipment. The values of acquired above- and below-market leases are amortized over the terms of the related leases and recognized as either increases (for below-market leases) or decreases (for above-market leases) to rental revenue. The values of acquired above- and below-market ground leases are amortized over the terms of the related ground leases and recognized as either increases (for below-market ground leases) or decreases (for above-market ground leases) to rental operating expense. The values of acquired in-place leases are classified in other assets in the accompanying consolidated balance sheets and amortized over the remaining terms of the related leases.


2.	Summary of significant accounting policies (continued)

Capitalized project costs

We capitalize project costs, including pre-construction costs, interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project. Capitalization of development, redevelopment, pre-construction, and construction costs is required while activities are ongoing to prepare an asset for its intended use. Fluctuations in our development, redevelopment, pre-construction, and construction activities could result in significant changes to total expenses and net income. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment, pre-construction, or construction activity cease, interest, property taxes, insurance, and certain other costs would no longer be eligible for capitalization and would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Real estate sales

A property is classified as held for sale when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Depreciation of assets ceases upon designation of a property as held for sale.

If the disposal of a property represents a strategic shift that has (or will have) a major effect on our operations or financial results, such as (i) a major line of business, (ii) a major geographic area, (iii) a major equity method investment, or (iv) other major parts of an entity, then the operations of the property, including any interest expense directly attributable to it, are classified as discontinued operations in our consolidated statements of income, and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. The disposal of an individual property generally will not represent a strategic shift and therefore will typically not meet the criteria for classification as a discontinued operation.

We recognize gains/losses on real estate sales in accordance with the accounting standard on the derecognition of nonfinancial assets arising from contracts with noncustomers. Our ordinary output activities consist of the leasing of space to our tenants in our operating properties, not the sales of real estate. Therefore, sales of real estate (in which we are the seller) qualify as contracts with noncustomers. In our transactions with noncustomers, we apply certain recognition and measurement principles consistent with our method of recognizing revenue arising from contracts with customers. Derecognition of the asset is based on the transfer of control. If a real estate sales contract includes our ongoing involvement with the property, then we evaluate each promised good or service under the contract to determine whether it represents a separate performance obligation, constitutes a guarantee, or prevents the transfer of control. If a good or service is considered a separate performance obligation, an allocated portion of the transaction price is recognized as revenue as we transfer the related good or service to the buyer.

The recognition of gain or loss on the sale of a partial interest also depends on whether we retain a controlling or noncontrolling interest. If we retain a controlling interest upon completion of the sale, we continue to reflect the asset at its book value, record a noncontrolling interest for the book value of the partial interest sold, and recognize additional paid-in capital for the difference between the consideration received and the partial interest at book value. Conversely, if we retain a noncontrolling interest upon completion of the partial sale of real estate, we would recognize a gain or loss as if 100% of the real estate were sold.

Impairment of long-lived assets

~~On a quarterly basis,~~Prior to and subsequent to the end of each quarter, we review current activities and changes in the business conditions of all of our ~~properties prior to and subsequent to the end of each quarter~~long-lived assets to determine the existence of any triggering events or impairment indicators requiring an impairment analysis. If triggering events or impairment indicators are identified, we review an estimate of the future undiscounted cash flows, ~~for the properties,~~ including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.


2.	~~Summary of significant accounting policies (continued)~~

Long-lived assets to be held and used, including our rental properties, CIP, land held for development, right-of-use assets related to operating leases in which we are the lessee, and intangibles, are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. ~~Impairment~~Triggering events or impairment indicators ~~or triggering events~~ for long-lived assets to be held and used ~~including our rental properties, CIP, land held for development, and intangibles,~~ are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the ~~property,~~asset, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.


2.	Summary of significant accounting policies (continued)

Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. If an impairment loss is not required to be recognized, the recognition of depreciation or amortization is adjusted prospectively, as necessary, to reduce the carrying amount of the real estate to its estimated disposition value over the remaining period that the ~~real estate~~asset is expected to be held and used. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives.

We use the held for sale impairment model for our properties classified as held for sale. The held for sale impairment model is different from the held and used impairment model. Under the held for sale impairment model, an impairment loss is recognized if the carrying amount of the long-lived asset classified as held for sale exceeds its fair value less cost to sell. Because of these two different models, it is possible for a long-lived asset previously classified as held and used to require the recognition of an impairment charge upon classification as held for sale.

International operations

In addition to operating properties in the U.S., we have three operating properties in Canada and one operating property in China. The functional currency for our subsidiaries operating in the U.S. is the U.S. dollar. The functional currencies for our foreign subsidiaries are the local currencies in each respective country. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect as of the financial statement date. Income statement accounts of our foreign subsidiaries are translated using the weighted-average exchange rate for the periods presented. Gains or losses resulting from the translation are classified in accumulated other comprehensive income as a separate component of total ~~equity.~~equity and are excluded from net income.

Whenever a foreign investment meets the criteria for classification as held for sale, we evaluate the recoverability of the investment under the held for sale impairment model. We may recognize an impairment charge if the carrying amount of the investment exceeds its fair value less cost to sell. In determining an investment’s carrying amount, we consider its net book value and any cumulative unrealized ~~cumulative~~ foreign currency translation adjustment related to the investment.

The appropriate amounts of foreign exchange rate gains or losses classified in accumulated other comprehensive income ~~will be~~are reclassified to net income ~~only~~ when realized upon the sale of our investment or upon the complete or substantially complete liquidation of our investment.

Investments

We hold ~~equity~~ investments in ~~certain~~ publicly traded companies and ~~investments in certain~~ privately held entities ~~and limited partnerships~~ primarily involved in the life science and technology industries. ~~All~~As a REIT, we generally limit our ownership percentage in the voting stock of ~~our~~each individual entity to less than 10%.

Our equity investments (except those accounted for under the equity method and those that result in ~~actively~~consolidation of the investee) are measured as follows:

Investments in publicly traded ~~public~~ companies are classified as investments with readily determinable fair values. These investments are carried at fair value, with changes in fair value recognized in net income. The fair values for our investments in publicly traded companies are determined based on sales prices/quotes available on securities exchanges.

Investments in privately held entities without readily determinable fair values fall into two categories:

Investments in privately held entities that report NAV per share, such as our privately held investments in limited partnerships, are carried at fair value using NAV as a practical expedient with changes in fair value recognized in net income. We use NAV per share reported by limited partnerships without adjustment, unless we are aware of information indicating that the NAV per share reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. We disclose the timing of liquidation of an investee’s assets and the date when redemption restrictions will lapse (or indicate if this timing is unknown) if the investee has communicated this information to us or has announced it publicly.

Investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative that measures these investments at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

For investments in privately held entities that do not report NAV per share, an observable price is a price observed in an orderly transaction for an identical or similar investment of the same issuer. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered ~~available-for-sale~~observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold.


2.	Summary of significant accounting policies (continued)

We monitor investments in privately held entities that do not report NAV per share throughout the year for new developments, including operating results, prospects and results of clinical trials, new product initiatives, new collaborative agreements, capital-raising events, and merger and acquisition activities. These investments are ~~reflected~~evaluated on the basis of a qualitative assessment for indicators of impairment by monitoring the presence of the following triggering events or impairment indicators: (i) a significant deterioration in the ~~accompanying consolidated balance sheets at fair value. Fair value has been determined based upon~~earnings performance, asset quality, or business prospects of the ~~closing price as~~investee; (ii) a significant adverse change in the regulatory, economic, or technological environment of ~~each balance sheet date, with unrealized gains~~the investee, (iii) a significant adverse change in the general market condition, including the research and ~~losses shown~~development of technology and products that the investee is bringing or attempting to bring to the market, or (iv) significant concerns about the investee’s ability to continue as a ~~separate component~~going concern. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment loss in an amount equal to the investment’s carrying value in excess of other comprehensive income. The classification of each investment is determined at the time each investment is made, and such determination is reevaluated at each balance sheet date. The cost of each investment sold is determined by the specific identification method, with realized gains or losses classified in other income in the accompanying consolidated statements of income. its estimated fair value.

Investments in privately held entities are ~~generally~~ accounted for under the cost method when our interest in the entity is so minor that we have virtually no influence over the entity’s operating and financial policies. Certain investments in privately held entities require accounting under the equity method, unless our interest in the entity is deemed to be so minor that we have virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we initially recognize our investment ~~initially~~ at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. ~~Additionally, we generally limit~~We had no investments accounted for under the equity method as of June 30, 2019.

We recognize both realized and unrealized gains and losses in our ~~ownership percentage~~consolidated statements of income, classified within investment income. Unrealized gains and losses represent changes in fair value for investments in publicly traded companies, changes in NAV, as a practical expedient to estimate fair value, for investments in privately held entities that report NAV per share, and observable price changes on our investments in privately held entities that do not report NAV per share. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the ~~voting stock~~carrying values of ~~each individual entity~~investments in privately held entities that do not report NAV per share to ~~less than 10%.~~their estimated fair value. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost.

Revenues

The table below provides detail of our consolidated total revenues for the three and six months ended June 30, 2019 (in thousands):



	June 30, 2019
	Three Months Ended		Six Months Ended
Income from rentals:
Revenues subject to the new lease accounting standard:
Operating leases	$	358,461	$	701,802
Direct financing lease	604		1,205
Revenues subject to the new lease accounting standard	359,065		703,007
Revenues subject to the revenue recognition accounting standard	12,553		23,360
Income from rentals	371,618		726,367
Other income	2,238		6,331
Total revenues	$	373,856	$	732,698

During the three and six months ended June 30, 2019, revenues that were subject to the new lease accounting standard aggregated $359.1 million and $703.0 million, respectively, and represented 96.0% and 95.9%, respectively, of our total revenues.

During the three and six months ended June 30, 2019, our total revenues also included $14.8 million, or 4.0%, and $29.7 million, or 4.1%, respectively, subject to other accounting guidance. For a detailed discussion related to our revenue streams, refer to the “Lease Accounting” and “Recognition of Revenue Arising From Contracts With Customers” sections within this Note 2 – “Summary of Significant Accounting Policies.”


2.	Summary of significant accounting policies (continued)

Lease accounting

Transition

On January 1, 2019, we adopted a new lease accounting standard that sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors). The new lease accounting standard requires the use of the modified retrospective transition method. Upon adoption of the new lease accounting standard, we elected the following practical expedients and accounting policies provided by this lease standard:

Package of practical expedients – requires us not to reevaluate our existing or expired leases as of January 1, 2019, under the new lease accounting standard.

Optional transition method practical expedient – requires us to apply the new lease accounting standard prospectively from the adoption date of January 1, 2019.

Single component accounting policy – requires us to account for lease and nonlease components within a lease under the new lease accounting standard if certain criteria are met.

Land easements practical expedient – requires us to continue to account for land easements existing as of January 1, 2019, under the accounting standards applied to them prior to January 1, 2019.

Short-term lease accounting policy – requires us not to record the related lease liabilities and right-of-use assets for operating leases in which we are the lessee with a term of 12 months or less.

Upon adoption of the new lease accounting standard, we elected the package of practical expedients and the optional transition method, which permitted January 1, 2019 to be our initial application date. Our election of the package of practical expedients and the optional transition method allowed us not to reassess:


•	Whether any contracts effective prior to January 1, 2019, are leases or contain leases. This practical expedient is primarily applicable to entities that have contracts containing embedded leases. As of December 31, 2018, we had no such contracts; therefore, this practical expedient had no effect on us.

•

The lease classification for any leases that commenced prior to January 1, 2019. Our election of the package of practical expedients requires us not to revisit the classification of our leases that commenced prior to January 1, 2019. For example, all of our leases that were classified as operating leases in accordance with the lease accounting standards in effect prior to January 1, 2019, continue to be classified as operating leases after adoption of the new lease accounting standard.

•

Previously capitalized initial direct costs for any leases that commenced prior to January 1, 2019. Our election of the package of practical expedients and the optional transition method requires us not to reassess whether initial direct leasing costs capitalized prior to the adoption of the new lease accounting standard in connection with the leases that commenced prior to January 1, 2019, qualify for capitalization under the new lease accounting standard.

We ~~periodically assess~~applied the package of practical expedients consistently to all leases (i.e., in which we are the lessee or the lessor) that commenced before January 1, 2019. The election of this package permits us to “run off” our ~~investments~~leases that commenced before January 1, 2019, for the remainder of their lease terms and to apply the new lease accounting standard to leases commencing or modified after January 1, 2019.

For our leases that had commenced prior to January 1, 2019, under the package of practical expedients and optional transition method we are not required to reassess whether initial direct leasing costs capitalized prior to the adoption of the new lease accounting standard in ~~available-for-sale equity securities~~connection with such leases qualified for capitalization under the new lease accounting standard. Therefore, we continue to amortize these initial direct leasing costs over their respective lease terms.

On January 1, 2019, as required by the new lease accounting standard, we recognized a cumulative adjustment to retained earnings aggregating $3.5 million to write off initial direct leasing costs that were capitalized in connection with leases that were executed but had not commenced before January 1, 2019. These costs were capitalized in accordance with the lease accounting standards existing prior to January 1, 2019, and ~~privately held companies~~would not qualify for capitalization under the new lease accounting standard.


2.	Summary of significant accounting policies (continued)

Under the package of practical expedients that we elected upon adoption of the new lease accounting standard, all of our operating leases existing as of January 1, 2019, for which we are the lessee, continue to be classified as operating leases subsequent to the adoption of the new lease accounting standard. In accordance with the new lease accounting standard, we were required to classify in our consolidated balance sheets the present value of remaining future rental payments aggregating $590.3 million related to ground and office leases in which we are the lessee existing as of January 1, 2019. Consequently, on January 1, 2019, we recognized a lease liability aggregating $218.7 million classified within accounts payable, accrued expenses, and tenant security deposits in our consolidated balance sheets, which included approximately $27.0 million reclassified out of the deferred rent liabilities balance in accordance with the new lease standard. We have also recognized a corresponding right-of-use asset, which was classified within other assets in our consolidated balance sheets. The present value of the remaining lease payments was calculated for each operating lease existing as of January 1, 2019, in which we were the lessee by using each respective remaining lease term and a corresponding estimated incremental borrowing rate. The incremental borrowing rate is the interest rate that we estimated we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments.

Subsequent application of the new lease accounting guidance

Definition of a lease

Effective January 1, 2019, when we enter into a contract or amend an existing contract, we evaluate whether the contract meets the definition of a lease. To meet the definition of a lease, the contract must meet all three criteria:


(i)	One party (lessor) must hold an identified asset,


(ii)	The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract, and


(iii)	The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract.

Lease classification

The new lease accounting standard also sets new criteria for determining the classification of finance leases for lessees and sales-type leases for lessors. The criteria to determine whether a lease should be accounted for as a finance/sales-type lease include any of the following:


(i)	Ownership is transferred from lessor to lessee by the end of the lease term,


(ii)	An option to purchase is reasonably certain to be exercised,


(iii)	The lease term is for the major part of the underlying asset’s remaining economic life,


(iv)	The present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset, or


(v)	The underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

If any of these criteria is met, a lease is classified as a finance lease by the lessee and as a sales-type lease by the lessor. If none of the criteria are met, a lease is classified as an operating lease by the lessee but may still qualify as a direct financing lease or an operating lease for the lessor. The existence of a residual value guarantee from an unrelated third party other than the lessee may qualify the lease as a direct financing lease by the lessor. Otherwise, the lease is classified as an operating lease by the lessor. Therefore, under the ~~cost~~new lease accounting standard, lessees apply a dual approach by classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, which corresponds to a similar evaluation performed by lessors.

Lessor accounting

Costs to execute leases

The new lease accounting standard requires that lessors (and, if applicable, lessees) capitalize, as initial direct costs, only incremental costs of a lease that would not have been incurred if the lease had not been obtained. Costs that we incur to negotiate or arrange a lease, regardless of its outcome, such as for ~~other-than-temporary impairment.~~ fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs are expensed as incurred.

Operating leases

We ~~monitor~~account for the revenue from our lease contracts utilizing the single component accounting policy. This policy requires us to account for, by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single component if two criteria are met:


(i)	The timing and pattern of transfer of the lease component and the nonlease component(s) associated with it are the same,


(ii)	The lease component would be classified as an operating lease if it were accounted for separately.


2.	Summary of significant accounting policies (continued)

Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases, and contingent rental payments. Nonlease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses under our triple net lease structure, including recoveries for utilities, repairs and maintenance, and common area expenses.

If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the new lease accounting standard. Conversely, if the nonlease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our ~~investments throughout~~leases is predominant. Therefore, we account for all revenues from our operating leases under the ~~year for~~ new ~~developments, including operating results, results~~lease accounting standard and classify these revenues as income from rentals in our consolidated statements of clinical trials, capital-raising events, and merger and acquisition activities. Individual investments are evaluated for impairment when changes in conditions may indicate an impairment exists. The factors that we consider in making these assessments include, but are not limited to, market prices, market conditions, available financing, prospects for favorable or unfavorable clinical trial results, new product initiatives, and new collaborative agreements. If an unrealized lossincome.

We commence recognition of income from rentals related to ~~an available-for-sale equity security~~the operating leases at the date the property is ~~determined~~ready for its intended use by the tenant and the tenant takes possession, or controls the physical use, of the leased asset. Income from rentals related to be other-than-temporary, such unrealized loss is reclassified from other comprehensive income into current earnings. For a cost method investment, if a decline in the fair value of an investment below its carrying value is determined to be other-than-temporary, such investment is written down to its estimated fair value with a charge to current earnings. If there are no identified events or changes in circumstances that might have an adverse effect on our cost method investments, we do not estimate the investment’s fair value. Refer to Note 5 – “Investments” to these unaudited consolidated financial statements for further information.

~~Recognition of~~fixed rental ~~income and tenant recoveries~~

~~Rental revenue from~~payments under operating leases is recognized on a straight-line basis over the respective operating lease terms. We classify ~~amounts currently recognized as rental revenue in our consolidated statements of income, and~~ amounts expected to be received in later ~~years~~periods as deferred rent in ~~the accompanying~~our consolidated balance sheets. Amounts received currently but recognized as revenue in future ~~years~~periods are classified in accounts payable, accrued expenses, and tenant security deposits in ~~the accompanying~~our consolidated balance sheets. ~~We commence recognition~~

Income from rentals related to variable payments includes tenant recoveries and contingent rental payments. Tenant recoveries, including reimbursements of utilities, repairs and maintenance, common area expenses, real estate taxes and insurance, and other operating expenses, are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises. Income from rentals related to other variable payments is recognized when associated contingencies are removed.

Subsequent to lease commencement, we assess collectibility from our tenants of future lease payments for each of our operating leases. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. If we determine that collectibility is not probable, we recognize an adjustment to lower our income from rentals. As of June 30, 2019, we assessed the collectibility of future lease payments under operating leases in which we are the lessor and determined that collectibility was probable.

Reclassification of the prior-year presentation of rental ~~revenue at~~revenues and tenant recoveries

As described above, rental revenues and tenant recoveries related to our operating leases in which we are the ~~date~~lessor qualified for the ~~property is ready for its intended use~~single component practical expedient and were classified as income from rentals in our consolidated statements of income. Prior to the ~~tenant takes possession of or controls the physical use~~adoption of the ~~property.~~new lease accounting standard, we classified rental revenues and tenant recoveries separately in our consolidated statements of income, in accordance with the guidance in effect prior to January 1, 2019. Upon adoption of the new lease accounting standard, our comparative income statements of prior years have been reclassified to conform to the new single component presentation of rental revenues and tenant recoveries.

~~Rental revenue from~~The table below provides a reconciliation of the prior-period presentation of the income statement line items that were reclassified in our consolidated statements of income to conform to the current-period presentation, pursuant to the adoption of the new lease accounting standard and election of the single component practical expedient (in thousands):



	June 30, 2018
	Three Months Ended		Six Months Ended
Rental revenues (presentation prior to January 1, 2019)	$	250,635	$	495,120
Tenant recoveries (presentation prior to January 1, 2019)	72,159		145,329
Income from rentals (presentation effective January 1, 2019)	$	322,794	$	640,449

Direct financing and sales-type leases

As of June 30, 2019, we had one direct financing ~~leases~~lease and no sales-type leases. Income from rentals related to our direct financing lease is recognized over the lease term using the effective interest rate method. At lease ~~inception,~~commencement, we record an asset within other assets in our consolidated balance sheets, which represents our net investment in the direct financing lease. This initial net investment is determined by aggregating the total future ~~minimum~~ lease payments attributable to the direct financing lease and the estimated residual value of the property less unearned income. Over the lease term, the investment in the direct financing lease is reduced and rental income is recognized as ~~rental revenue~~income from rentals in our consolidated statements of income, ~~and produces~~producing a constant periodic rate of return on the net investment in the direct financing lease.

~~Tenant recoveries related~~


2.	Summary of significant accounting policies (continued)

Subsequent to ~~reimbursement~~lease commencement, we assess collectibility from our tenants of future lease payments. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. If we determine that collectibility is not probable, we evaluate our net investment in the direct financing lease for impairment. Upon determination that an impairment has occurred, an impairment charge is recognized to reduce the carrying balance in the net investment in the direct financing lease to its estimated fair value. As of June 30, 2019, we assessed the collectibility of future lease payments under our direct financing lease, and determined that collectibility was probable.

Lessee accounting

We have operating lease agreements in which we are the lessee consisting of ground and office leases. At the lease commencement date (or at the acquisition date if the lease is acquired as part of a real estate ~~taxes, insurance, utilities, repairs~~acquisition), we are required to recognize a liability to account for our future obligations under these operating leases, and ~~maintenance, common area~~a corresponding right-of-use asset.

The lease liability is measured based on the present value of the future lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The present value of the future lease payments is calculated for each operating lease using each respective remaining lease term and a corresponding estimated incremental borrowing rate, 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. Subsequently, the lease liability is accreted by applying a discount rate established at the lease commencement date to the lease liability balance as of the beginning of the period, and is reduced by the payments made during the period. We classify the operating lease liability in accounts payable, accrued expenses, and tenant security deposits in our consolidated balance sheets.

The right-of-use asset is measured based on the corresponding lease liability, adjusted for initial direct leasing costs and any other ~~operating expenses are recognized as revenue in~~consideration exchanged with the ~~period during which~~landlord prior to the ~~applicable expenses are incurred and the tenant’s obligation to reimburse us arises.~~

Tenant receivables consist primarily of amounts due for contractual lease payments, reimbursements of common area maintenance expenses, property taxes, and other expenses recoverable from tenants. Tenant receivables are expected to be collected within one year. We may maintain an allowance for estimated losses that may result from the inability of our tenants to make payments required under the termscommencement of the lease, ~~and for tenant recoveries due. If~~as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. Subsequently, the right-of-use asset is amortized on a ~~tenant fails to make contractual payments beyond any allowance, we may~~straight-line basis during the lease term. We classify the right-of-use asset in other assets in our consolidated balance sheets.

Recognition of revenue arising from contracts with customers

We recognize ~~additional bad debt expense in future periods equal~~revenues associated with transactions arising from contracts with customers, excluding revenues subject to the new lease accounting standard discussed in the “Lease Accounting” section above, in accordance with the revenue recognition accounting standard. A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities.

We generally recognize revenue representing the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in the exchange. In order to determine the recognition of revenue from customer contracts, we use a five-step model to (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

We identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. We consider whether we control the goods or services prior to the transfer to the customer in order to determine whether we should account for the arrangement as a principal or agent. If we determine that we control the goods or services provided to the customer, then we are the principal to the transaction, and we recognize the gross amount of ~~uncollectible tenant receivables~~consideration expected in the exchange. If we simply arrange but do not control the goods or services being transferred to the customer, then we are considered to be an agent to the transaction, and ~~deferred rent arising~~we recognize the net amount of consideration we are entitled to retain in the exchange.

Total revenues subject to the revenue recognition accounting standard for the three and six months ended June 30, 2019, included $12.6 million and $23.4 million, respectively, primarily related to short-term parking revenues associated with long-term lease agreements. These revenues are classified within income from rentals in our consolidated income statements. Short-term parking revenues do not qualify for the ~~straight-lining~~single lease component practical expedient, discussed in the “Lessor Accounting” subsection of ~~rent. As~~the “Lease Accounting” section within this Note 2, due to the difference in the timing and pattern of ~~September 30, 2017,~~transfer of our parking service obligations and ~~December 31, 2016, no allowance for uncollectible tenant receivables~~associated lease components within the same lease agreement. We recognize short-term parking revenues in accordance with the revenue recognition accounting standard when the services are provided and ~~deferred rent was deemed necessary.~~the performance obligations are satisfied, which normally occurs at a point in time.


2.	Summary of significant accounting policies (continued)

Monitoring of tenant credit quality

During the term of each lease, we monitor the credit quality and any related material changes of our tenants by (i) monitoring the credit rating of tenants that are rated by a nationally recognized credit rating agency, (ii) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (iii) monitoring news reports regarding our tenants and their respective businesses, and (iv) monitoring the timeliness of lease payments. We have a research team consisting of employees who, among them, have doctorate, graduate, and undergraduate degrees in biology, chemistry, industrial biotechnology, and engineering, and experience in the life science and technology industries, as well as in finance. Our research team is responsible for assessing and monitoring the credit quality of our tenants and any material changes in their credit quality.


2.	~~Summary of significant accounting policies (continued)~~

Income taxes

We are organized and operate as a REIT pursuant to the Internal Revenue Code (the “Code”). Under the Code, a REIT that distributes at least 90% of its REIT taxable income to its ~~shareholders~~stockholders annually (excluding net capital gains) and meets certain other conditions is not subject to federal income tax on its distributed taxable income, but could be subject to certain federal, foreign, state, and local taxes. We distribute 100% of our taxable income annually; therefore, a provision for federal income taxes is not required. In addition to our REIT returns, we file federal, foreign, state, and local tax returns for our subsidiaries. We file with jurisdictions located in the U.S., Canada, India, China, and other international locations. Our tax returns are subject to routine examination in various jurisdictions for the ~~2011–2016~~2013 through 2018 calendar years.

~~Recent accounting pronouncements~~

~~Definition of a business~~

On October 1, 2016, we adopted an ASU issued by the FASB in January 2017, which clarified the definition of a business. Refer to “Investments in Real Estate and Properties Classified as Held for Sale” above for additional information.

Employee and non-employee share-based payments

~~On January 1, 2017, we adopted~~We have implemented an ~~ASU issued by the FASB in March 2016, which simplifies several aspects of employee share-based payment accounting, including the accounting for forfeitures. The ASU allows an entity to make an~~entity-wide accounting policy ~~election either to continue to estimate the total number of awards that are expected to vest (the method used prior to January 1, 2017) or~~ to account for forfeitures of share-based awards granted to employees and non-employees when they occur. As a result of this policy, we recognize expense on share-based awards with time-based vesting conditions without reductions for an estimate of forfeitures. This ~~entity-wide~~ accounting policy ~~election~~ only applies to service ~~conditions; for~~condition awards. For performance ~~conditions, the entity continues~~condition awards, we continue to assess the probability that such conditions will be achieved. ~~If an entity elects~~Expenses related to ~~account for~~forfeited awards are reversed as forfeitures ~~when they occur,~~occur. In addition, all nonforfeitable dividends paid on share-based payment awards are initially ~~charged to~~classified in retained earnings and reclassified to compensation cost only ~~when~~if forfeitures of the underlying awards occur. ~~We elected to account for forfeitures when they occur~~Our employee and ~~applied this ASU~~non-employee share-based awards are measured on ~~a modified retrospective basis resulting in a cumulative-effect adjustment aggregating approximately $368 thousand, which was recorded as a decrease to retained earnings~~the grant date and ~~an increase to additional paid-in capital upon adoption~~recognized over the required service period of the ~~ASU on January 1, 2017.~~recipient.


2.	~~Summary of significant accounting policies (continued)~~

Forward equity sales agreements

~~Recent accounting pronouncements (continued)~~

~~Lease accounting, revenue recognition, and financial instruments~~

In February 2016, the FASB issued an ASU that sets out new lease accounting standards for both lessees and lessors. In May 2014, the FASB issued an ASU that will require a new model for recognition of revenue arising from contracts with customers, as well as recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. In January 2016, the FASB issued an ASU that amended the accounting for equity investments. These three ASUs will update the current accounting standards for all of our revenues with the exception of revenues subject to other accounting standards as noted in the table below. Our revenues and gains on sales of real estate for the nine months ended September 30, 2017, and the related effective date for adoption of new ASUs, consisted of the following (in thousands):

Date of ASU Adoption Nine Months Ended September 30, 2017
Revenues subject to the new lease ASU:
Rental revenues 1/1/19 $ 604,570

Tenant recoveries ⁽¹⁾
1/1/19 188,874

$ 793,444

Revenues subject to the new revenue recognition ASU:
Parking and other revenues 1/1/18 32,323

Revenues not subject to the new lease or revenue recognition ASUs:
Investment income subject to the new financial instruments ASU 1/1/18 $ 2,007

Interest and other income within the scope of other existing accounting standards N/A 1,532

3,539

Total revenues $ 829,306

Gains on sales of real estate subject to the new revenue recognition ASU 1/1/18 $ 381


~~(1)~~	~~Includes a portion of tenant recoveries that is subject to the new revenue recognition ASU upon adoption of the new lease ASU on January 1, 2019. See further discussion below.~~


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Lease accounting~~

In February 2016, the FASB issued an ASU that sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors). The ASU is effective for us no later than January 1, 2019, with early adoption permitted. The ASU requires us to identify lease and nonlease components of a lease agreement. This ASU will govern the recognition of revenue for lease components. Revenue related to nonlease components under our lease agreements will be subject to the new revenue recognition standard effective upon adoption of the new lease accounting standard. We expect to adopt the new lease accounting standard on January 1, 2019.

The lease ASU requires the use of the modified retrospective transition method and does not allow for a full retrospective approach. Under the modified retrospective method, an entity will apply the standard to all leases that exist at, or commence after, the beginning of the earliest comparative period presented in the financial statements, with a cumulative adjustment to the opening balance of retained earnings for the effect of applying the standard at the date of initial application. In addition, an entity may elect a practical expedient package, which allows the following:

~~An entity need not reassess whether any expired or existing contracts are or contain leases;~~

~~An entity need not reassess the lease classification for any expired or existing leases; and~~

~~An entity need not reassess initial direct costs for any existing leases.~~

These three practical expedients are available as a single election that must be elected as a package and must be consistently applied to all existing leases at the date of adoption. The FASB has also tentatively noted in Board meeting minutes of May 2017 that lessors that adopt this package of practical expedients are not expected to reassess expired or existing leases at the date of adoption in order to bifurcate lease and nonlease components under the new lease ASU.

~~Lessor accounting~~

We recognized revenue from our lease agreements aggregating $793.4 million for the nine months ended September 30, 2017. This revenue consisted primarily of rental revenue and tenant recoveries aggregating $604.6 million and $188.9 million, respectively.

Under current accounting standards, we recognize rental revenue from our operating leases on a straight-line basis over the respective lease terms. We commence recognition of rental revenue at the date the property is ready for its intended use and the tenant takes possession of or controls the physical use of the property. We recognize rental revenue from direct financing leases over the lease term using the effective interest rate method.

Under the new lease ASU, each lease agreement will be evaluated to identify the lease components and nonlease components within each lease agreement. The total consideration in the lease agreement will be allocated to the lease and nonlease components based on their relative standalone selling prices. Lessors will continue to recognize the lease revenue component using an approach that is substantially equivalent to existing guidance for operating leases (straight-line basis) and direct financing leases (effective interest rate method).

Under current accounting standards, tenant recoveries related to payments of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses, are considered lease components. We recognize these tenant recoveries as revenue when services are rendered in an amount equal to the related operating expenses incurred that are recoverable under the terms of the applicable lease.

We have not completed our analysis of this ASU but expect that our tenant recoveries will be separated into lease and nonlease components. Tenant recoveries that qualify as lease components, which relate to the right to use the leased asset (e.g., property taxes, insurance), will be accounted for under the new lease ASU. Tenant recoveries that qualify as nonlease components, which relate to payments for goods or services that are transferred separately from the right to use the underlying asset, including tenant recoveries related to payments for maintenance activities and common area expenses, will be accounted for under the new revenue recognition ASU upon adoption of the new lease ASU on January 1, 2019.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Lease accounting (continued)~~

Tenant recoveries that are categorized as lease components will generally be variable consideration. Tenant recoveries that are categorized as nonlease components will be recognized at a point in time or over time based on the pattern of transfer of the underlying goods or services to our tenants.

~~Costs to execute leases~~

The new ASU will require that lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this ASU, allocated payroll costs and other costs such as legal costs incurred as part of the leasing process prior to the execution of a lease will no longer qualify for classification as initial direct costs but will instead be expensed as incurred. During the nine months ended September 30, 2017, we capitalized $18.4 million of such costs. Under the new ASU, these costs will be expensed as incurred.

~~Lessee accounting~~

Under the new lease ASU, lessees are required to apply a dual approach by classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases.

The ASU requires the recognition of a right-of-use asset and a related liability to account for our future obligations under our ground lease arrangements for which we are the lessee. For the nine months ended September 30, 2017, we recognized rent expense, included in rental operations expense, aggregating $9.4 million under these ground leases. As of September 30, 2017, the remaining contractual payments under our ground lease agreements for which we are the lessee aggregated $584.0 million. All of our existing ground leases for which we are the lessee are currently classified as operating leases, and therefore, we will have the option, under the practical expedients provided by the lease ASU, to continue to classify these leases as operating leases upon adoption of the ASU. We are still evaluating the impact to our consolidated financial statements from the initial recognition of each lease liability upon adoption and the pattern of recognition of ground lease expense subsequent to adoption.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Revenue recognition~~

In May 2014, the FASB issued an ASU on recognition of revenue arising from contracts with customers, as well as recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers, and subsequently, it issued additional guidance that further clarified the ASU. The revenue recognition ASU has implications for all revenues, excluding those that are under the specific scope of other accounting standards, such as revenue associated with leases (described above) and financial instruments (described below). Our revenues and gains for the nine months ended September 30, 2017, which will become subject to the revenue recognition ASU upon adoption on January 1, 2018, were as follows (in thousands):

Nine Months Ended September 30, 2017
Parking and other revenue $ 32,323
Gain on sales of real estate $ 381

The core principle underlying the revenue recognition ASU is that an entity will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in such exchange. This will require entities to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.

A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities. This distinction may not significantly change the pattern of income recognition, but will determine whether that income is classified as revenue (contracts with customers) or other gains/losses (contracts with noncustomers) in our consolidated income statement.

The ASU will require the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that we (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

~~An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should~~To account for the ~~arrangement as a principal or agent. Principal arrangements, where~~forward equity sales agreements, we consider the ~~entity controls the goods or services provided, will result in the recognition~~accounting guidance governing financial instruments and derivatives. As of ~~the gross amount~~June 30, 2019, none of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but doesn’t control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

The ASU is effective for us on January 1, 2018. Entities can use either a full retrospective or modified retrospective method to adopt the ASU. Under the full retrospective method, all periods presented will be restated upon adoption to conform to the new standard and a cumulative adjustment for effects on periods prior to 2016 will be recorded to retained earnings as of January 1, 2016. Under the modified retrospective approach, prior periods are not restated to conform to the new standard. Instead, a cumulative adjustment for effects of applying the new standard to periods prior to 2018 is recorded to retained earnings as of January 1, 2018. Additionally, incremental disclosures are required to present the 2018 revenues under the prior standard. Under the modified retrospective method, an entity may also elect to apply the standard to either (i) all contracts as of January 1, 2018, or (ii) only to contracts that are not completed as of January 1, 2018.

~~We continue to review the impact that the new standard will have on~~ our consolidated financial statements and our disclosures. We continue to implement changes to our accounting policies, business processes, and internal controls to support the new accounting and disclosure requirements. We expect to complete our assessment and implementation by December 31, 2017.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Revenue recognition (continued)~~

~~Revenue within the scope of the new revenue recognition ASU~~

~~Parking~~

Parking and other revenue aggregated $32.3 million for the nine months ended September 30, 2017. These revenues consist primarily of short term rental revenues that are not considered lease revenue. These revenues will be accounted under the new revenue recognition ASU effective January 1, 2018. Under current accounting standards, we recognize parking when the amounts are fixed or determinable, collectability is reasonably assured, and services have been rendered. Under the new revenue recognition ASU, the recognition of such revenue will occur when the services are provided and the performance obligations are satisfied. These services are normally provided at a point in time, therefore revenue recognition under the new revenue recognition ASU is expectedforward equity sales agreements were deemed to be ~~similar~~liabilities as they did not embody obligations to ~~the recognition pattern under existing accounting standards.~~

~~Sales~~repurchase our shares, nor did they embody obligations to issue a variable number of ~~real estate~~

~~During the nine months ended September 30, 2017, we sold real estate~~shares for contractual sales prices aggregating $10.9 million, which resulted in an aggregate gain of $381 thousand. Our ordinary output activities consist of leasing space to our tenants in our operating properties, not the sale of real estate. Therefore, sales of real estate qualify as contracts with non-customers.

The amount and timing of recognition of gain or loss on those sales may differ significantly under the new standards. The current standards focus on whether the seller retains substantial risks or rewards of ownership as a result of its continuing involvement with the sold property.

Under the new standard, which includes guidance on recognition of gains and losses arising from the derecognition of nonfinancial assets in a transaction with noncustomers, the derecognition model is based on the transfer of control. If a real estate sale contract includes ongoing involvement by the seller with the property, the seller must evaluate each promised good or service under the contract to determine whether it represents a separate performance obligation, constitutes a guarantee, or prevents the transfer of control. If a good or service is considered a separate performance obligation, an allocated portion of the transaction price should be recognized as revenue as the entity transfers the related good or service to the buyer.

~~Under the current standards, a partial sale of real estate in~~ which the ~~seller retains a noncontrolling interest results in the recognition of a gain or loss related to the interest sold.~~

~~Under the new standards, a partial sale of real estate in which the seller retains a noncontrolling interest will result in recognition by the seller of a gain or loss as if 100% of the real estate~~monetary value was sold. Conversely, under the new standards, a partial sale of real estate in which the seller retains a controlling interest will result in the seller’s continuing to reflect the asset at its current book value, recording a noncontrolling interest for the book value of the partial interest sold, and recognizing additional paid-in capital for the difference between the consideration received and the partial interest at book value, consistentpredominantly fixed, varied with ~~the current accounting standards.~~

~~Tenant recoveries~~

As previously noted above in the lease accounting section, certain tenant recoveries may be subject to the new revenue recognition ASU upon our adoption of the lease ASU, no later than January 1, 2019.

~~Revenue within the scope of guidance~~something other than ~~revenue recognition or lease accounting~~

~~Interest and investment income fall outside~~ the scope of the new revenue recognition and lease accounting standards. Investment income is subject to a recently issued accounting pronouncement on financial instruments related to the accounting for equity investments.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Financial instruments~~

In January 2016, the FASB issued an ASU that amended the accounting for equity investments (except for debt securities and equity investments accounted for under the equity method of accounting or that result in consolidation) and the presentation and disclosure requirements for financial instruments. The core principle of the amendment involves the measurement of equity investments at fair value and the recognition of changes in fair value of those investments during each period in net income.

~~As of September 30, 2017, our consolidated balance sheet contained the following amounts related to our investments (in thousands):~~

Cost Net Unrealized Gains Total
Available-for-sale equity securities $ 55,433
$ 45,189
$ 100,622
Investments accounted for under cost method:
Investments in limited partnerships 136,044
N/A
136,044
Investments in other privately held entities 248,596
N/A
248,596
Total investments $ 440,073
$ 45,189
$ 485,262

~~For the nine months ended September 30, 2017, our consolidated statement of income and statement of comprehensive income contained the following amounts related to our investments (in thousands):~~

Nine Months Ended September 30, 2017
Investment income recognized in net income $ 2,007
Unrealized gain recognized in other comprehensive income (component of stockholder’s equity) $ 23,414

The ASU is effective for us on January 1, 2018. The ASU requires the use of the modified retrospective transition method, under which cumulative unrealized gains and losses related to equity investments with readily determinable fair values will be reclassified from accumulated other comprehensive income to retained earnings on January 1, 2018, upon adoption of this ASU. The guidance related to equity investments without readily determinable fair values, including our investments in limited partnerships and other privately held entities, will be applied prospectively to all investments that exist as of the date of adoption. We expect the adoption of this new ASU to increase the volatility of our earnings due to the recognition of changes in fair value of our ~~equity investments~~shares, or varied inversely in ~~net income for reporting periods subsequent~~relation to ~~December 31, 2017.~~

~~The ASU introduces significant changes~~our shares. We then evaluated whether the agreements met the derivatives and hedging guidance scope exception to current accounting for equity investments, including elimination of (i) the classification of equity investments as trading or available-for-sale, and the related recognition of unrealized holding gains and losses on available-for-sale equity securities in other comprehensive income, (ii) the cost method of accounting for equity securities that do not have readily determinable fair values, and (iii) the consideration of impairments as other-than-temporary, and instead requires recognition of impairments under a single-step model. A readily determinable fair value exists on investments for which sales prices/quotes are available on securities exchanges, or are published and are the basis for current transactions.

Under the new ASU, equity investments in publicly traded securities are required to be measured and reported at fair value, with the changes in fair value recognized through earnings. The year-to-date change in unrealized holding gains on available-for-sale equity securities, aggregating $23.4 million for the nine months ended September 30, 2017, would have been recognized in net income under this new ASU.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Financial instruments (continued)~~

~~Equity investments without readily determinable fair values, which are currently subject to the cost method of accounting, will~~ be accounted for ~~under two categories,~~ as ~~follows:~~

~~Equity investments that qualify for the practical expedient to be measured at net asset value (NAV) in accordance with ASC 820,~~ ~~Fair Value Measurement~~, such as our other privately held investments in limited partnerships, are required to be measured using the reported NAV per share or otherwise valued at fair value using other accepted valuation techniques. The aggregate NAV per share of our investments in limited partnerships exceeds our cost basis by approximately $71.8 million as of September 30, 2017. Under a proposed ASU issued recently by the FASB, the cumulative difference between NAVequity instruments and cost basis for these investments is expected to be recognized as a cumulative adjustment to our retained earnings on January 1, 2018. Subsequent changes in NAV per share will be recognized in earnings each reporting period. The year-to-date change in unrealized holding gains on other privately held investments in limited partnerships, aggregating approximately $16.2 million for the nine months ended September 30, 2017, would have been recognized in net income under this new ASU.

Equity investments that do not qualify for the NAV practical expedient, such as our private investments, will be measured at cost less impairments, adjusted for observable price changes that are known or can be reasonably known. An “observable price” is a price observed in an orderly transaction for an identical or similar investment of the same issuer. Investments will be evaluated on the basis of a qualitative assessment for indicators of impairment. If such indicators are present, we are required to estimate the investment’s fair value and recognize an impairment loss equal to the amount by which the investment’s carrying value exceeds its fair value.

The new ASU requires additional disclosures. Equity investments that have readily determinable fair values require disclosure of the unrealized gains and losses recognized through earnings during the period that relate to equity securities still held at the reporting date. Equity investments without readily determinable fair values require disclosure of (i) the carrying amount, (ii) the amount of impairments and downward adjustments, if any, both cumulative and annual, (iii) the amount of upward adjustments, if any, both cumulative and annual, and (iv) qualitative information to facilitate an understanding of the quantitative disclosures.

~~We continue to review the impact~~concluded that the new standard will have on our consolidated financial statements and our disclosures. We also continue to implement changes to our accounting policies, business processes, and internal controls to support the new accounting and disclosure requirements. We expect to complete our assessment and implementation by December 31, 2017.

~~Joint venture distributions~~

In August 2016, the FASB issued an ASU that provides guidance on the classification of cash distributions received from equity method investments, including unconsolidated joint ventures, in the statement of cash flows. The ASU provides two approaches to determine the classification of cash distributions received from equity method investees: (i) the “cumulative earnings” approach, under which distributions up to the amount of cumulative equity in earnings recognized willagreements can be classified as cash flows from operating activities, and those in excess of that amount will be classified as cash inflows from investing activities, and (ii) the “nature of the distribution” approach, under which distributions will be classifiedequity contracts based on the ~~nature~~following assessment: (i) none of the ~~underlying activity that generated cash distributions. An entity may elect either~~agreements’ exercise contingencies were based on observable markets or indices besides those related to the ~~“cumulative earnings” or the “nature~~market for our own stock price and operations; and (ii) none of the ~~distribution” approach. An entity that elects~~settlement provisions precluded the ~~“nature of the distribution” approach but lacks the information~~agreements from being indexed to apply it will apply the “cumulative earnings” approach as an accounting change on a retrospective basis. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and will be applied retrospectively (exceptions apply). We will adopt this ASU on January 1, 2018, and expect to use the “nature of the distribution” approach. We currently present distributions from our equity method investees utilizing the “nature of the distribution” approach; therefore, the adoption of this ASU will have no impact on our consolidated financial statements. During the nine months ended September 30, 2017, distributions received from our equity method investees totaled $38.8 million, consisting of approximately $249 thousand classified as a return on investment (cash flows from operating activities) and approximately $38.6 million classified as a return of investment (cash flows from investing activities).own stock.


2.	~~Summary of significant accounting policies (continued)~~

~~Recent accounting pronouncements (continued)~~

~~Restricted cash~~

In November 2016, the FASB issued an ASU that will require companies to include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The ASU will require disclosure of a reconciliation between the statement of financial position and the statement of cash flows when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. An entity with material restricted cash and restricted cash equivalents balances will be required to disclose the nature of the restrictions. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted, and will be applied retrospectively to all periods presented. As of September 30, 2017, and December 31, 2016, we had $27.7 million and $16.3 million of restricted cash, respectively, on our consolidated balance sheets. Upon adoption of this ASU, restricted cash balances will be included with cash and cash equivalents balances as of the beginning and ending of each period presented in our consolidated statements of cash flows; separate line items reconciling changes in restricted cash balances to the changes in cash and cash equivalents will no longer be presented within the operating, investing, and financing sections of our consolidated statements of cash flows.

~~Allowance for credit losses~~

In June 2016, the FASB issued an ASU that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incurred losses as required currently by the other-than-temporary impairment model. The ASU will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments). The ASU is effective for reporting periods beginning after December 15, 2019, with early adoption permitted, and will be applied as a cumulative adjustment to retained earnings as of the effective date. We are currently assessing the potential effect the adoption of this ASU will have on our consolidated financial statements.

Hedge accounting

In August 2017, the FASB issued an ASU that simplifies hedge accounting. The purpose of this updated ASU is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. For cash flow hedges that are highly effective, the new standard requires all changes (effective and ineffective components) in the fair value of the hedging instrument to be recorded in other comprehensive income and to be reclassified into earnings only when the hedged item impacts earnings.

Under existing standards, a quantitative assessment is made on an ongoing basis to determine whether a hedge is highly effective in offsetting changes in cash flows associated with the hedged item. Currently, hedge accounting requires hedge ineffectiveness to be recognized in earnings. Under the new standard, an entity will still be required to perform an initial quantitative test. However, the new standard allows an entity to elect to subsequently perform only a qualitative assessment unless facts and circumstances change.

The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. For cash flow hedges in existence at the date of adoption, an entity is required to apply a cumulative-effect adjustment for previously recognized ineffectiveness from retained earnings to accumulated other comprehensive income, as of the beginning of the fiscal year when an entity adopts the amendments in this ASU.

We utilize interest rate hedge agreements to ~~hedge~~manage a portion of our exposure to variable interest rates primarily associated with borrowings based on LIBOR. As a result, all of our interest rate hedge agreements are designated as cash flow hedges. ~~During~~At inception of a hedge agreement, we are required to perform an initial quantitative assessment to determine whether a hedge is highly effective in offsetting changes in cash flows associated with the ~~three~~hedged item. Subsequently, we may perform only a qualitative assessment, unless facts and ~~nine months ended September~~circumstances change.

We determined that each our cash flow hedges were highly effective at inception and continue to be highly effective. Therefore, we record all changes (effective and ineffective components) in fair value of our hedges in accumulated other comprehensive income within total equity and reclassify them into earnings when the hedged item affects earnings.

In October 2018, the FASB issued an accounting standard that expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting to include the overnight index swap rate based on the Secured Overnight Financing Rate (“SOFR”). The accounting standard became effective for us and was adopted on January 1, 2019. We have no hedges based on SOFR; therefore, the adoption of this accounting standard had no effect on our consolidated financial statements.


2.	Summary of significant accounting policies (continued)

Joint venture distributions

We use the “nature of the distribution” approach to determine the classification within our statement of cash flows of cash distributions received from equity method investments, including unconsolidated joint ventures. Under this approach, distributions are classified based on the nature of the underlying activity that generated the cash distributions. If we lack the information necessary to apply this approach in the future, we will be required to apply the “cumulative earnings” approach as an accounting change on a retrospective basis. Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities.

Restricted cash

We present cash and cash equivalents separately from restricted cash within our consolidated balance sheets. We include restricted cash with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown in the consolidated statements of cash flows. We provide a reconciliation between the balance sheet and statement of cash flows, as required when the balance includes more than one line item for cash, cash equivalents and restricted cash. We also provide a disclosure of the nature of the restrictions related to material restricted cash balances.

Recent accounting pronouncements

Allowance for credit losses

In June 2016, the FASB issued an accounting standard (further clarified with subsequently issued updates) that will require companies to estimate and recognize lifetime expected losses, rather than incurred losses, which will result in the earlier recognition of credit losses. The accounting standard will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases arising from sales-type and direct financing leases, and off-balance-sheet credit exposures (i.e., loan commitments). The accounting standard is effective for reporting periods beginning after December 15, 2019, with early adoption permitted, and will be applied as a cumulative adjustment to retained earnings as of the effective date. As a lessor, this standard will apply to our net investments in direct financing and sales-type leases and will not apply to the receivables arising from our operating leases. An assessment of the collectibility of operating lease payments and the recognition of an adjustment to lease income based on this assessment will continue to be governed by the lease accounting standard discussed in the “Lease Accounting” section earlier within this Note 2.

In addition to direct financing and sales-type leases, the accounting standard on credit losses will also apply to our receivables that result from revenue transactions within the scope of the revenue recognition standard discussed in the “Recognition of Revenue Arising From Contracts With Customers” section earlier within this Note 2. As of June 30, ~~2017,~~2019, we had one lease classified as a direct financing lease with a net investment balance aggregating $39.5 million, and ~~September~~no leases classified as sales-type leases, which will be subject to this new guidance. As of June 30, ~~2016, we did not~~2019, our receivables resulting from revenue transactions within the scope of revenue recognition standard aggregated $10.3 million. We have ~~any hedge ineffectiveness~~had no collectibility issues related to our ~~interest rate hedge agreements. Therefore,~~direct financing lease and have determined that the collectibility of future payments for this lease is probable. Our receivables resulting from revenue transactions within the scope of the revenue recognition standard are short term in nature and are expected to be collected in full. Based on the aforementioned facts, we do not ~~believe~~expect the adoption of this ASU ~~would~~to have ~~impacted~~a material effect on our ~~operating results~~consolidated financial statements.

Recognition and measurement of financial instruments

In January 2016, the FASB issued an accounting standard (further clarified with subsequently issued updates) that updated the framework for companies to account for financial instruments. We adopted this accounting standard on January 1, 2018. Subsequently in April 2019, the FASB issued an accounting standard that amends the financial instruments standard by clarifying that all adjustments made under the measurement alternative elected for equity securities without readily determinable fair values represent nonrecurring fair value measurement adjustments and therefore require applicable fair value disclosures, including disclosures about the level of the fair value hierarchy within which the fair value measurements are categorized. The standard is effective for reporting periods beginning after December 15, 2019, with early adoption permitted. Except for the ~~nine months ended September 30, 2017.~~expanded fair value disclosures related to our investments in privately held entities that do not report NAV, we do not expect the adoption of this standard to impact our consolidated financial statements.


3.	Investments in real estate

Our consolidated investments in real estate, including real estate assets held for sale as described in Note 16, consisted of the following as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (in thousands):



	June 30, 2019			December 31, 2018
Rental properties:
Land (related to rental properties)	$	1,824,004		$	1,625,349
Buildings and building improvements	10,664,625			9,986,635
Other improvements	1,154,662			976,627
Rental properties	13,643,291			12,588,611
Development and redevelopment of new Class A properties:
Development and redevelopment projects (under construction or pre‑construction)	1,469,016			1,460,814
Future development projects	214,338			98,802
Gross investments in real estate	15,326,645			14,148,227
Less: accumulated depreciation	(2,484,176		)	(2,263,797		)
Net investments in real estate – North America	12,842,469			11,884,430
Net investments in real estate – Asia	30,355			29,263
Investments in real estate	$	12,872,824		$	11,913,693

September 30, 2017 December 31, 2016
Land (related to rental properties) $ 1,206,152
$ 1,131,416
Buildings and building improvements 8,466,889
7,810,269
Other improvements 714,834
584,565
Rental properties 10,387,875
9,526,250
Development and redevelopment of new Class A properties:
Undergoing construction
Development projects – target delivery in 2017 466,047
809,254
Development projects – target delivery in 2018 and 2019 143,038
—
Redevelopment projects – target delivery in 2018 and 2019 59,224
—
Near-term projects undergoing marketing and pre-construction 114,954
—
Intermediate-term developments projects 333,870
—
Future development projects 289,314
253,551
Gross investments in real estate 11,794,322
10,589,055
Less: accumulated depreciation (1,785,115 ) (1,546,798 )
Net investments in real estate – North America 10,009,207
9,042,257
Net investments in real estate – Asia 37,314
35,715
Investments in real estate $ 10,046,521
$ 9,077,972

Acquisitions

Our real estate asset acquisitions during, and subsequent to, the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, consisted of the following (dollars in thousands):



		Square Footage
Market	Number of Properties	Future Development	Operating With Future Development/Redevelopment	Operating	Purchase Price
Greater Boston	—	175,000	—	—	$	81,100
San Francisco	4	—	—	247,770	239,450
San Diego	2	—	53,220	—	23,250
Other	4	—	75,864	—	39,150
Three months ended March 31, 2019	10	175,000	129,084	247,770	382,950		⁽¹⁾

Greater Boston	1	293,000	—	87,163	252,000
San Diego	1	149,000	40,000	—	16,000
Seattle	1	188,400	18,680	—	28,500
Three months ended June 30, 2019	3	630,400	58,680	87,163	296,500
Subsequent acquisitions	4	135,938	—	344,772	178,450
Total acquisitions	17	941,338	187,764	679,705	$	857,900

Square Footage
Three Months Ended Operating Redevelopment Future Development Purchase Price
March 31, 2017 232,470
—
1,508,890
$ 218,500
June 30, 2017 272,634
175,000
1,030,000
244,009
September 30, 2017 168,424
104,212
280,000
110,700
673,528
279,212
2,818,890
$ 573,209


(1)	Excludes $65.0 million paid in January 2019 for two properties at 10260 Campus Point Drive and 4161 Campus Point Court that we acquired in December 2018. Total purchase price was $80.0 million, of which $15.0 million was paid in December 2018.

We evaluated each ~~of the transactions detailed below~~acquisition to determine whether the integrated set of assets and activities acquired met the definition of a business. Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. An integrated set of assets and activities does not qualify as a business if substantially all of the fair value of the gross assets is concentrated in either a single identifiable asset or a group of similar identifiable assets, or if the acquired assets do not include a substantive process.

~~We evaluated~~Based upon our evaluation of each ~~of the completed acquisitions and~~acquisition, we determined that substantially all of the fair value related to each acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets, or is associated with a land parcel with no operations. Accordingly, each transaction did not meet the definition of a business and consequently was accounted for as an asset acquisition. In each of these transactions, we allocated the total consideration for each acquisition to the individual assets and liabilities acquired on a relative fair value basis.


3.	Investments in real estate (continued)

~~Cambridge, Greater Boston~~Sale of real estate asset

~~325~~In February 2019, we completed a partial sale of a 60% interest in 75/125 Binney Street,

~~In March 2017, we acquired land parcels at 325 Binney Street (formerly named 303 Binney Street)~~ a Class A property in our Cambridge submarket ~~of Greater Boston~~aggregating 388,270 RSF, for a ~~purchase~~sales price of ~~$80.3 million. The property is located adjacent~~$438 million, or $1,880 per RSF. We retained control over, and continue to ~~our Alexandria Center~~^® ~~at One Kendall Square campus and is currently entitled~~consolidate, the new joint venture. We accounted for the ~~development of 163,339 RSF for office or office/laboratory space~~$202.2 million difference between the consideration received and ~~45,626 RSF for residential space.~~

~~Route 128, Greater Boston~~

~~266 and 275 Second Avenue~~

In July 2017, we acquired two properties aggregating 203,757 RSF at 266 and 275 Second Avenue in our Route 128 submarket of Greater Boston for a purchase price of $71.0 million. The properties consist of 144,584 RSF of office/laboratory space, which is 100% occupied by multiple tenants. The remaining 59,173 RSF, or 29%the book value of the ~~total RSF, are currently undergoing conversion from office~~60% interest sold as an equity transaction with no gain recognized in earnings. Refer to ~~office/laboratory space through redevelopment.~~Note 4 – “Consolidated and Unconsolidated Real Estate Joint Ventures” to these unaudited consolidated financial statements for additional information.

~~Mission Bay/SoMa, San Francisco~~

~~1455 and 1515 Third Street~~

In November 2016, we acquired the remaining 49% interest in our unconsolidated real estate joint venture with Uber Technologies, Inc. (“Uber”) for $90.1 million, of which $56.8 million is payable in three equal installments upon Uber’s completion of construction milestones. The first installment of $18.9 million was paid during the three months ended June 30, 2017.

~~88 Bluxome Street~~

~~In January 2017, we acquired land parcels aggregating 2.6 acres at 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco for a purchase price of $130.0 million.~~

~~South San Francisco, San Francisco~~

~~201 Haskins Way~~

In September 2017, we acquired a 6.5-acre future development site located at 201 Haskins Way, located in our South San Francisco submarket of San Francisco for a purchase price of $33.0 million. The existing building, aggregating 23,840 RSF, is currently 100% leased through 2020.

~~Greater Stanford, San Francisco~~

~~960 Industrial Road~~

~~In May 2017, we acquired a future ground-up development site at 960 Industrial Road aggregating 11.0 acres in our Greater Stanford submarket of San Francisco for a purchase price of $65.0 million.~~

~~825 and 835 Industrial Road~~

In June 2017, we acquired an 8-acre future development site located at 825 and 835 Industrial Road in our Greater Stanford submarket of San Francisco for a purchase price of $85.0 million. The property is currently entitled for the development of two buildings aggregating 530,000 RSF and a parking structure.


3.4.	~~Investments in~~Consolidated and unconsolidated real estate ~~(continued)~~joint ventures

~~1450 Page Mill Road~~

~~In June 2017,~~From time to time, we ~~acquired~~enter into joint venture agreements through which we own a 77,634 RSF recently developed technology office building at 1450 Page Mill Road, subject to a ground lease, located in Stanford Research Park, a collaborative business community that supports innovative companies in their R&D pursuits, in our Greater Stanford submarket of San Francisco for a purchase price of $85.3 million. The building is 100% leased to Infosys Limited for 12 years.

~~Torrey Pines/Sorrento Mesa, San Diego~~

~~3050 Callan Road and Vista Wateridge~~

In March 2017, we acquired land parcels aggregating 13.5 acres at 3050 Callan Road and Vista Wateridge in our Torrey Pines and Sorrento Mesa submarkets of San Diego, respectively, for an aggregate purchase price of $8.3 million.

~~Rockville, Maryland~~

~~9900 Medical Center Drive~~

In August 2017, we acquired a 45,039 RSF redevelopment property at 9900 Medical Center Drive in our Rockville submarket of Maryland for a purchase price of $6.7 million. The building is adjacent to our existing properties at 9800 and 9920 Medical Center Drive.

~~Research Triangle Park~~

~~5 Laboratory Drive~~

~~In May 2017, we acquired a 175,000 RSF redevelopment property at 5 Laboratory Drive in our Research Triangle Park market for a purchase price of $8.8 million.~~

~~Investments in consolidated real estate joint ventures~~

~~In June 2016, we completed a sale of a 45%~~ partial interest in 10290 Campus Point Drive to an institutional investor, TIAA Global Asset Management and affiliates (“TIAA”). 10290 Campus Point Drive is a 305,006 RSF office/laboratory building in our University Town Center submarket of San Diego, 100% leased to Eli Lilly and Company. Gross proceeds received from our partner related to this real estate joint venture through September 30, 2017 were $92.4 million, including $8.1 million received during the nine months ended September 30, 2017, $15.7 million received during the three months ended December 31, 2016,entities that own, develop, and ~~$68.6 million received during the nine months ended September 30, 2016. Remaining proceeds from our partner of $13.9 million are expected to be received primarily in the fourth quarter of 2017.~~

In December 2016, we completed a separate joint venture agreement with TIAA to sell a 45% partial interest in 10300 Campus Point Drive in our University Town Center submarket of San Diego, which is a 449,759 RSF building primarily leased to Celgene Corporation and The Regents of the University of California, for a sales price of $150.0 million. Gross proceeds received from our partner through September 30, 2017, were $137.3 million. Remaining proceeds of $12.7 million are expected to be received primarily in the fourth quarter of 2017.

We retained controlling interests in each of 10290 Campus Point Drive and 10300 Campus Point Drive following each sale above and, therefore, continue to consolidate both entities. As a result, we accounted for the proceeds from each transaction as equity financings. Each transaction did not qualify as a sale ofoperate real estate ~~and did not result in purchase price adjustments to the carrying value~~properties. As of ~~the net assets sold. Accordingly, the carrying amount of our partner’s share of assets and liabilities is reported at historical cost basis.~~

~~We own partial interests in the following Class A properties through~~June 30, 2019, our real estate joint ventures with TIAA: (i) 30% in 225 Binney Street in our Cambridge submarket of Greater Boston, (ii) 50.1% in 1500 Owens Street in our Mission Bay/SoMa submarket of San Francisco, (iii) 60% in 409 and 499 Illinois Street in our Mission Bay/SoMa submarket of San Francisco, and (iv) 55% in 10290 and 10300 Campus Point Drive in our University Town Center submarket of San Diego.

held the following properties:



	Property	Market	Submarket	Our Ownership Interest				RSF
Consolidated joint ventures⁽¹⁾:
	75/125 Binney Street	Greater Boston	Cambridge		40.0	%		388,270
	225 Binney Street	Greater Boston	Cambridge		30.0	%		305,212
	409 and 499 Illinois Street	San Francisco	Mission Bay/SoMa		60.0	%		455,069
	1500 Owens Street	San Francisco	Mission Bay/SoMa		50.1	%		158,267
	Campus Pointe by Alexandria⁽²⁾	San Diego	University Town Center		55.0	%		798,799
	9625 Towne Centre Drive	San Diego	University Town Center		50.1	%		163,648
Unconsolidated joint ventures⁽¹⁾:
	Menlo Gateway	San Francisco	Greater Stanford		48.3	%	⁽³⁾	772,983
	1401/1413 Research Boulevard	Maryland	Rockville		65.0	%	⁽⁴⁾	(5	)
	704 Quince Orchard Road	Maryland	Gaithersburg		56.8	%	⁽⁴⁾	79,931
	1655 and 1725 Third Street	San Francisco	Mission Bay/SoMa		10.0	%		593,765


3.(1)	~~Investments in~~In addition to the consolidated real estate ~~(continued)~~joint ventures listed, various partners hold insignificant noncontrolling interests in four other joint ventures in North America, and we hold an insignificant noncontrolling interest in one unconsolidated real estate joint venture in North America.

~~Under each of these real estate joint venture arrangements, we are the managing member and earn a fee for continuing to manage the day-to-day operations of each property.~~

For each of our joint ventures with TIAA, we evaluated the partially owned legal entity that owns the property under the variable interest model to determine whether each entity met any of the three characteristics of a VIE, which are as follows:


1)(2)	~~The entity does not have sufficient equity to finance its activities without additional subordinated financial support.~~Includes only 10290 and 10300 Campus Point Drive and 4110 Campus Point Court in our University Town Center submarket.

Each joint venture has significant equity at risk to fund its activities as the ventures are primarily capitalized by contributions from the members and could obtain, if necessary, non-recourse commercial financing arrangements on customary terms.


2)(3)	~~The entity is established with non-substantive voting rights.~~As of June 30, 2019, we had a 48.3% ownership interest in Menlo Gateway and expect our ownership to increase to 49% through future funding of construction costs in 2019.

The voting rights of each joint venture require both members to approve major decisions, which results in voting rights that are disproportionate to the members’ economic interest. However, the activities of each joint venture are conducted on behalf of both members, so the voting rights, while disproportionate, are substantive.


3)(4)	~~The equity holders, as~~Represents our ownership interest; our voting interest is limited to 50%.


(5)	Joint venture with a ~~group, lack~~distinguished retail real estate developer for the ~~characteristics~~development of ~~a controlling financial interest, as evidenced by lack of substantive kick-out rights or substantive participating rights.~~an approximate 90,000 RSF retail shopping center.

~~TIAA lacks substantive kick-out rights as it may not remove us as~~

Our consolidation policy is fully described under the ~~managing member without cause.~~

~~TIAA also lacks substantive participating rights as day-to-day control is vested in us as the managing member and the major decisions that require unanimous consent are primarily protective in nature.~~

~~Based on the analysis detailed in~~“Consolidation” section of Note 2 – “Summary of Significant Accounting Policies” to ~~our~~these unaudited consolidated financial ~~statements, TIAA, as~~statements. Consolidation accounting is highly technical, but its framework is primarily based on the ~~non-managing member~~controlling financial interests and benefits of ~~each~~the joint ventures. We generally consolidate a joint venture ~~lacks the characteristics of~~that is a controlling financial interest in each joint venture because it does not have substantive kick-out rights or substantive participating rights. Therefore, each joint venture meets the criteria to be considered a VIE and, accordingly, is evaluated for consolidation under the variable interest model.

~~After determining that these joint ventures are VIEs, we determined~~legal entity that we ~~are the primary beneficiary of each real estate joint venture as, in our capacity as managing member,~~control (i.e., we have the power to ~~make decisions~~direct the activities of the joint venture that most significantly ~~influence operations~~affect its economic performance) through contractual rights, regardless of our ownership interest, and ~~economic performance of the joint ventures. In addition, through our investment in each joint venture,~~where we determine that we have benefits through the ~~right~~allocation of earnings or losses and fees paid to ~~receive benefits and participate in losses~~us that ~~can~~could be significant to the ~~VIEs. Based on this evaluation, we concluded that we are the primary beneficiary of each~~ joint venture (the “VIE model”). We also generally consolidate joint ventures when we have a controlling financial interest through voting rights and ~~therefore, we consolidate each entity.~~where our voting interest is greater than 50% (the “voting model”). Voting interest differs from ownership interest for some joint ventures. We account for joint ventures that do not meet the consolidation criteria under the equity method of accounting by recognizing our share of income and losses. The table below shows the categorization of our existing significant joint ventures under the consolidation framework:



Property	Consolidation Model	Voting Interest	Consolidation Analysis	Conclusion

75/125 Binney Street	VIE model	Not applicable under VIE model	We have control and benefits that can be significant to the joint venture; therefore, we are the primary beneficiary of each VIE	Consolidated
225 Binney Street
409 and 499 Illinois Street
1500 Owens Street
Campus Pointe by Alexandria
9625 Towne Centre Drive
Menlo Gateway			We do not control the joint venture and are therefore not the primary beneficiary	Equity method of accounting
1401/1413 Research Boulevard
704 Quince Orchard Road	Voting model	Does not exceed 50%	Our voting interest is 50% or less
1655 and 1725 Third Street	Voting model	Does not exceed 50%	Our voting interest is 50% or less

4. Consolidated and unconsolidated real estate joint ventures (continued)

Consolidated VIEs’ balance sheet information

The ~~following~~ table below aggregates the balance sheet information of our consolidated VIEs as of ~~September~~June 30, ~~2017,~~2019, and

December 31, ~~2016~~2018 (in thousands):



	June 30, 2019		December 31, 2018
Investments in real estate	$	1,421,509	$	1,108,385
Cash and cash equivalents	43,412		42,178
Other assets	133,349		74,901
Total assets	$	1,598,270	$	1,225,464

Secured notes payable	$	—	$	—
Other liabilities	51,713		59,336
Total liabilities	51,713		59,336
Redeemable noncontrolling interests	1,082		874
Alexandria Real Estate Equities, Inc.’s share of equity	775,323		624,349
Noncontrolling interests’ share of equity	770,152		540,905
Total liabilities and equity	$	1,598,270	$	1,225,464

September 30, 2017 December 31, 2016
Investments in real estate $ 979,698
$ 993,710
Cash and cash equivalents 29,665
27,498
Other assets 62,886
57,166
Total assets $ 1,072,249
$ 1,078,374

Secured notes payable $ —
$ —
Other liabilities 46,054
66,711
Total liabilities 46,054
66,711
Alexandria Real Estate Equities, Inc.’s share of equity 541,293
538,069
Noncontrolling interests’ share of equity 484,902
473,594
Total liabilities and equity $ 1,072,249
$ 1,078,374


3.	~~Investments in real estate (continued)~~

In determining whether to aggregate the balance sheet information of our consolidated VIEs, we considered the similarity of each VIE, including the primary purpose of these entities to own, manage, operate, and lease real estate properties owned by the VIEs, and the similar nature of our involvement in each VIE as a managing member. Due to the similarity of the characteristics, ~~among these VIE’s,~~ we present the balance sheet information of these entities on an aggregated basis.

For each of our consolidated VIEs, none of its assets have restrictions that limit their use to settle specific obligations of the VIE. There are no creditors or other partners of our consolidated VIEs that have recourse to our general credit. Our maximum exposure to ~~all~~ our consolidated VIEs is limited to our variable interests in each VIE.

~~Sale of real estate assets and impairment charges~~

~~North America~~

In June 2017, we recognized an impairment charge of $203 thousand on a 20,580 RSF property located in a non-cluster market. We had previously recognized an impairment of $1.6 million in December 2016 when management committed to the sale of the property and evaluated this asset under the held for sale impairment model. We completed the sale of this asset in July 2017 for a gross sale price of $800 thousand with no gain or loss.

~~Asia~~

During the year ended December 31, 2016, we completed sales of real estate investments in Asia in multiple transactions. At the date of closing of each sale, the related cumulative unrealized foreign currency translation loss was reclassified to net income. We calculated a related gain or loss on disposal of each asset using the sales proceeds in comparison to the net book value on the date of sale, costs to sell, and any related cumulative unrealized foreign currency translation adjustments. Prior to completing the sales, upon initial classification as held for sale, we considered the net book value, cost to sell and cumulative unrealized foreign currency translation losses in determining the carrying amount for evaluating each real estate asset for impairment.

On March 31, 2016, we evaluated two separate potential transactions to sell land parcels in our India submarket aggregating 28 acres. We determined that these land parcels met the criteria for classification as held for sale as of March 31, 2016, including among others, the following: (i) management’s having the authority committed to sell the real estate, and (ii) the sale was probable within one year. Upon classification as held for sale, we recognized an impairment charge of $29.0 million to lower the carrying amount of the real estate to its estimated fair value less cost to sell of approximately $10.2 million. In determining the carrying amount for evaluating the real estate for impairment, we considered our net book value, cost to sell, and a $10.6 million unrealized cumulative foreign currency translation loss.

During the three months ended June 30, 2016, we sold one of these land parcels totaling five acres for a sales price of $7.5 million at no gain or loss. During the three months ended September 30, 2016, we sold the second of these land parcels totaling 23 acres for a sales price of $5.3 million at no gain or loss. In order to calculate the gain or loss on the sale, we considered our net book value, cost of the sale, and cumulative foreign currency translation loss of $6.9 million as of June 30, 2016, and $3.8 million as of September 30, 2016, which were each reclassified from accumulated other comprehensive income to net income upon the disposition of each asset.

On April 22, 2016, we decided to monetize our remaining real estate investments located in Asia in order to invest capital into our highly leased value-creation pipeline. We determined that these investments met the criteria for classification as held for sale when we achieved the following, among other criteria: (i) committed to sell all of our real estate investments in Asia, (ii) obtained approval from our Board of Directors, and (iii) determined that the sale of each property/land parcel was probable within one year. During the three months ended June 30, 2016, upon classification as held for sale, we recognized an impairment charge of $154.1 million related to our remaining real estate investments located in Asia to lower the carrying costs of the real estate to its estimated fair value less cost to sell. In determining the carrying amount for evaluating the real estate for impairment, we considered our net book value, cost to sell, and a $40.2 million cumulative foreign currency translation loss, which was reclassified to net income upon the disposition of the assets. Impairment of real estate recognized during the three months ended June 30, 2016, of $156.1 million primarily relates to the impairment charge of $154.1 million as described above, as well as an impairment charge of $2.0 million related to properties in North America.


3.	~~Investments in real estate (continued)~~

As of September 30, 2016, we had eight operating properties aggregating 1.2 million RSF and land parcels aggregating 168 acres remaining in Asia, which continued to meet the classification as held for sale. During the three months ended September 30, 2016, we updated our assumptions of fair value for the remaining real estate investments located in Asia, and as a result, we recognized an additional impairment charge of $7.3 million.

During the three months ended December 31, 2016, we completed the sale of our remaining real estate investments in India consisting of six rental properties aggregating approximately 566,355 RSF and four land parcels aggregating approximately 168 acres for an aggregate sales price of $53.4 million with no gain or loss. In order to calculate the gain or loss on the sale, we considered our net book value, cost of the sale, and cumulative foreign currency translation loss of $39.4 million, which was reclassified from accumulated other comprehensive income to net income upon the disposition of each asset.

As a result of the completion of sales in India, we also liquidated legal entities through which we owned our real estate investments in India and reclassified the remaining cumulative foreign currency translation loss of $2.4 million related to the real estate investments in India into earnings during the three months ended March 31, 2017, upon completion of the liquidation.

As of September 30, 2017, our remaining real estate investments in Asia consist of two operating properties in China aggregating 634,328 RSF currently classified as held for sale. Cumulative unrealized foreign currency translation gains of approximately $1.1 million related to these real estate investments will be reclassified from accumulated other comprehensive income to net income upon completion of the sales of these two investments.

The fair value considered in our impairment of each investment was determined based on the following: (i) preliminary nonbinding letters of intent, (ii) significant other observable inputs, including the consideration of certain local government land acquisition programs, and (iii) discounted cash flow analyses.

We evaluated whether our real estate investments in Asia met the criteria for classification as discontinued operations, including, among others, (i) if the properties meet the held for sale criteria, and (ii) if the sale of these assets represents a strategic shift that has or will have a major effect on our operations and financial results. In our assessment, we considered, among other factors, that our total revenue from properties located in Asia was approximately 1.5% of our total consolidated revenues. At the time of evaluation, we also noted total assets related to our investment in Asia were approximately 2.5% of our total assets. Consequently, we concluded that the monetization of our real estate investments in Asia did not represent a strategic shift that will have a major effect in our operations and financial results and, therefore, did not meet the criteria for classification as discontinued operations.

~~Commitments to sell real estate~~

One of our tenants holds a fixed-price option to purchase from us the property that it currently leases. The purchase option is exercisable no later than December 29, 2017. The property subject to this purchase option is one of our older properties and has a net book value of $6.8 million as of September 30, 2017. The option is exercisable at a purchase price of $20.8 million, excluding any customary and ordinary closing costs. As of September 30, 2017, the purchase price option had not been exercised.


4.	~~Investments in unconsolidated real estate joint ventures~~

~~360 Longwood Avenue~~

~~We have a 27.5% ownership interest in an unconsolidated~~Unconsolidated real estate joint ~~venture that, as of June 30, 2017, owned a building aggregating 413,799 RSF~~ventures

Our investments in our Longwood Medical Area submarket of Greater Boston. In July 2017, the unconsolidated real estate joint venture completed the sale of the condominium interest representing 203,090 RSF, or 49%, of the property, to our anchor tenant, pursuant to a fixed-price purchase option in its original lease agreement executed in 2011. Additionally, the unconsolidated real estate joint venture repaid the existing secured construction loan. Our share of the gain recognized was $14.1 million, which is reflected in our equity in earnings of unconsolidated real estate joint ventures, accounted for under the equity method of accounting presented in our ~~unaudited~~ consolidated ~~statement~~balance sheets as of ~~income during~~June 30, 2019, and December 31, 2018, consist of the ~~three months ended September 30, 2017.~~following (in thousands):



Property	June 30, 2019		December 31, 2018
Menlo Gateway	$	279,560	$	186,504
1401/1413 Research Boulevard	7,796		8,197
704 Quince Orchard Road	4,593		4,547
1655 and 1725 Third Street	35,984		34,917
Other	6,229		3,342
	$	334,162	$	237,507

Our maximum exposure to our unconsolidated VIEs is limited to our investment in each VIE.

~~In August 2017, the~~

4. Consolidated and unconsolidated real estate joint ~~venture entered into a mortgage loan agreement,~~ventures (continued)

Our unconsolidated real estate joint ventures have the following non-recourse secured ~~by the remaining interest in the property,~~loans that ~~included~~include the following key terms ~~and amounts outstanding~~ as of ~~September~~June 30, ~~2017 (amounts represent 100% at the joint venture level, dollars~~2019, (dollars in thousands):

Maturity Date Stated Rate
Interest Rate ⁽¹⁾

Debt Balance ⁽²⁾
Outstanding Principal Remaining Commitments Total
9/1/22
⁽³⁾
3.32 % 3.62 % $ 94,086
$ 95,000
$ —
$ 95,000
9/1/22
⁽³⁾
L+1.85 % N/A
$ —
$ —
$ 17,000
$ 17,000



		Maturity Date		Stated Rate	Interest Rate⁽¹⁾	100% at Joint Venture Level
Unconsolidated Joint Venture	Our Share	Maturity Date		Stated Rate	Interest Rate⁽¹⁾	Debt Balance⁽²⁾		Remaining Commitments
1401/1413 Research Boulevard	65.0%		5/17/20	L+2.50%	5.91%	$	22,696	$	5,997
1655 and 1725 Third Street	10.0%		6/29/21	L+3.70%	6.14%	253,366		121,634
704 Quince Orchard Road	56.8%		3/16/23	L+1.95%	4.59%	6,997		7,865
Menlo Gateway, Phase II	48.3%		5/1/35	4.53%	4.59%	8,019		147,784
Menlo Gateway, Phase I	48.3%		8/10/35	4.15%	4.18%	143,334		—
						$	434,412	$	283,280


(1)	~~Represents interest rate including~~Includes interest expense and amortization of loan fees.


(2)	Represents outstanding principal, net of unamortized deferred financing costs.


~~(3)~~5.	The unconsolidated real estate joint venture has two one-year options to extend the stated maturity date to September 1, 2024, subject to certain conditions. Additionally, the loan commitment balance excludes an earn-out advance provision that allows for incremental borrowings up to $48.0 million, subject to certain conditions.Leases

~~During~~On January 1, 2019, we adopted a new lease accounting standard that sets out the ~~nine months ended September 30, 2017,~~principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

As a lessor, we are required to disclose, among other things, the following:

A description of the nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the underlying asset;

Tabular presentation of undiscounted cash flows to be received over the next five years and thereafter separately for operating leases and direct financing leases;

The amount of lease income and its location on the statements of income;

Income classified separately for operating leases and direct financing leases; and

Our risk management strategy to mitigate declines in residual value of the leased assets.

As a ~~cash distribution~~lessee, we are required to disclose, among other things, the following:

A description of ~~$38.8 million from~~ the ~~joint venture, primarily from~~nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the ~~condominium sale~~underlying asset;

The amounts of lease liabilities and ~~loan refinancing.~~

~~We evaluated our ownership interests~~corresponding right-of-use assets and their respective locations in the ~~360 Longwood Avenue joint venture using~~balance sheet;

The weighted-average remaining lease term and weighted-average discount rate of leases;

Tabular presentation of undiscounted cash flows of our remaining lease payment obligations over the ~~consolidation~~next five years and thereafter; and

Total lease costs, including cash paid, amounts expensed, and amounts capitalized.

Refer to the “Lease Accounting” section of Note 2 – “Summary of Significant Accounting Policies” for additional information.

Leases in which we are the lessor

As of June 30, 2019, we had 257 properties aggregating 23.6 million operating RSF located in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle. We focus on developing Class A properties in AAA innovation cluster locations, which we consider to be highly desirable for tenancy by life science and technology entities. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space. As of June 30, 2019, all our leases in which we are the lessor were classified as operating leases with one exception of a direct financing lease. Our operating leases and direct financing lease are described below.

5. Leases (continued)

Operating leases

As of June 30, 2019, our 257 properties were subject to operating lease agreements. Two of these properties, representing two land parcels, 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 73.4 years. Our leases generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain operating leases contain early termination options that require advance notification and payment of a penalty, which in most cases is substantial enough to be deemed economically disadvantageous by a tenant to exercise. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of June 30, 2019, are outlined in the table below (in thousands):



Year	Amount
2019	$	472,242
2020	985,377
2021	977,440
2022	943,926
2023	882,912
Thereafter	6,228,900
Total	$	10,490,797

Refer to Note 3 – “Investments in Real Estate” to these unaudited consolidated financial statements for additional information on our owned real estate assets, which are the underlying assets under our operating leases.

Direct financing lease

As of June 30, 2019, we had one direct financing lease agreement for a parking structure with a remaining lease term of 73.4 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. The components of our net investment in our direct financing lease as of June 30, 2019, and December 31, 2018, are summarized in the table below (in thousands):



	June 30, 2019			December 31, 2018
Gross investment in direct financing lease	$	261,287		$	262,111
Less: unearned income	(221,757		)	(222,962		)
Net investment in direct financing lease	$	39,530		$	39,149

Future lease payments to be received under the terms of our direct financing lease as of June 30, 2019, are outlined in the table below (in thousands):



Year	Total
2019	$	831
2020	1,705
2021	1,756
2022	1,809
2023	1,863
Thereafter	253,323
Total	$	261,287

5. Leases (continued)

Income from rentals

Our total income from rentals includes revenue related to agreements for rental of our investments in real estate, which primarily includes revenues subject to the guidance of the new lease accounting standard, as ~~described in~~well as revenues subject to the revenue recognition accounting standard as summarized below (in thousands):



	June 30, 2019
	Three Months Ended		Six Months Ended
Income from rentals:
Revenues subject to the new lease accounting standard:
Operating leases	$	358,461	$	701,802
Direct financing lease	604		1,205
Revenues subject to the new lease accounting standard	359,065		703,007
Revenues subject to the revenue recognition accounting standard	12,553		23,360
Income from rentals	$	371,618	$	726,367

Our revenues that are subject to the revenue recognition accounting standard relate primarily to parking revenues, which consist of short-term rental revenues that are not considered lease revenue under the new lease accounting standard. Refer to the “Revenues” and “Recognition of revenue arising from contracts with customers” sections of Note 2 – “Summary of Significant Accounting Policies” to these unaudited consolidated financial statements for additional information.

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 ~~this entity~~it meets our business objective to primarily invest in high-demand markets with limited supply of available space, (ii) directly managing our leased properties, conducting frequent property inspections, proactively addressing potential maintenance issues before they arise, and timely resolving any occurring issues, (iii) carefully selecting our tenants and monitoring their credit quality throughout their respective lease terms, and (iv) focusing on making continuous improvements to our sustainability efforts and achievement of our sustainability goals for ground-up development of new buildings, which are targeting Gold of Platinum LEED certification. Our environmentally focused design decisions, careful selection of construction materials, and continuous monitoring of our properties throughout their lives are expected to promote the durability of building infrastructure and enhance residual value of our properties.

Leases in which we are the lessee

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.

Under the new lease accounting standard, we are required to recognize a right-of-use asset and a related liability to account for our future obligations under our ground and office lease arrangements in which we are the lessee. Refer to the “Lessee Accounting” section of Note 2 – “Summary of Significant Accounting Policies” to these unaudited consolidated financial statements.

As of June 30, 2019, the present value of the ~~following characteristics~~remaining contractual payments, aggregating $653.0 million, under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $243.6 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 $237.0 million. As of June 30, 2019, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 45 years, and the weighted-average discount rate was 5.37%.

5. Leases (continued)

Ground lease obligations as of June 30, 2019, included leases for 30 of our properties, which accounted for approximately 12% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a ~~VIE:~~net book value of $8.1 million as of June 30, 2019, our ground lease obligations have remaining lease terms ranging from approximately 34 years to 95 years, including extension options which we are reasonably certain to exercise.

The reconciliation of future lease payments, under non-cancelable operating ground and office leases in which we are the lessee, to the operating lease liability reflected in our consolidated balance sheet as of June 30, 2019, is presented in the table below (in thousands):



Year	Total
2019	$	7,882
2020	14,207
2021	14,257
2022	14,390
2023	14,509
Thereafter	587,788
Total future payments under our operating leases for which we are the lessee	653,033
Effect of discounting	(409,448		)
Operating lease liability	$	243,585

Lessee operating costs

Operating lease costs represent amounts recognized related to ground and office leases in which we are the lessee. For the three and six months ended June 30, 2019 and 2018, our costs for operating leases in which we are the lessee were as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Gross operating lease costs	$	4,870		$	3,952		$	9,424		$	7,820
Capitalized lease costs	(388		)	(36		)	(450		)	(72		)
Expenses for operating leases in which we are the lessee	$	4,482		$	3,916		$	8,974		$	7,748

For the six months ended June 30, 2019 and 2018, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are the lessee, were $8.9 million and $7.4 million, respectively.


1)6.	~~The entity does not have sufficient equity to finance its activities without additional subordinated financial support.~~Cash, cash equivalents, and restricted cash

~~This entity has significant equity~~

Cash, cash equivalents, and ~~non-recourse financing in place to support operations~~restricted cash consisted of the following as of ~~September~~June 30, ~~2017.~~2019, and December 31, 2018 (in thousands):



	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	198,909	$	234,181
Restricted cash:
Funds held in trust under the terms of certain secured notes payable	23,138		22,681
Funds held in escrow related to construction projects and investing activities	12,074		10,558
Other	4,104		4,710
	39,316		37,949
Total	$	238,225	$	272,130


2)	~~The entity is established with non-substantive voting rights.~~

Our 27.5% ownership interest in 360 Longwood Avenue consists of an interest in a joint venture with a development partner. The joint venture with our development partner holds an interest in the property with an institutional investor. Our development partner was responsible for the day-to-day management of construction and development activities, and we are responsible for the day-to-day administrative operations of components of the property following development completion. At the property level, all major decisions (including the development plan, annual budget, leasing plan, and financing plan) require approval of all three investors. Although voting rights within the structure are disproportionate to the members’ economic interests, the activities of the ventures are conducted on behalf of all members, and therefore, the voting rights, while disproportionate, are substantive.


3)	~~The equity holders, as a group, lack the characteristics of a controlling financial interest, as evidenced by lack of substantive kick-out rights or substantive participating rights.~~

The non-managing members have significant participating rights, including in the day-to-day management of development activities and the participation in decisions related to the operations of the property.

Based on our evaluation above, our 360 Longwood Avenue joint venture does not meet the VIE criteria and does not qualify for evaluation under the variable interest model. Therefore, we evaluated this joint venture under the voting model. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares and that noncontrolling equity holders do not have substantive participating rights. Our interest in the 360 Longwood Avenue joint venture is limited to 27.5%, and since we do not have other contractual rights that give us control of the entity, we account for this joint venture under the equity method of accounting.


5.7.	Investments

We hold ~~equity~~ investments in ~~certain~~ publicly traded companies and privately held entities ~~and limited partnerships~~ primarily involved in the life science and technology industries. ~~All of our equity investments~~Investments in ~~actively~~publicly traded ~~public~~ companies are ~~considered available-for-sale~~classified as investments with readily determinable fair values, and are ~~reflected in the accompanying unaudited consolidated balance sheets~~carried at fair ~~value.~~value, with changes in fair value classified in net income. Our investments in privately held entities consist of (i) investments that report NAV, such as our privately held investments in limited partnerships, which are ~~primarily~~carried at fair value using NAV as a practical expedient with changes in fair value classified in net income, and (ii) investments in privately held entities that do not report NAV, which are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

Effective January 1, 2018:

Investments in publicly traded companies are presented at fair value in our consolidated balance sheet, with changes in fair value recognized in net income.

Investments in privately held entities without readily determinable fair values previously accounted for under the cost ~~method.~~

method are accounted for as follows:

Investments in ~~available-for-sale~~privately held entities that report NAV are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV reported by limited partnerships without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date.

Investments in privately held entities that do not report NAV are carried at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments continue to be evaluated on the basis of a qualitative assessment for indicators of impairment by utilizing the same monitoring criteria described above and monitoring the presence of the following impairment indicators: (i) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee; (ii) a significant adverse change in the regulatory, economic, or technological environment of the investee, (iii) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, (iv) significant concerns about the investee’s ability to continue as a going concern. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment loss, without consideration as to whether the impairment is other-than-temporary, in an amount equal to the investment’s carrying value in excess of its estimated fair value.

Investments in privately held entities continue to require accounting under the equity ~~securities with gross unrealized~~method, unless our interest in the entity is deemed to be so minor that we have virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we initially recognize our investment at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses as of ~~September 30, 2017, had been in a continuous unrealized loss position for less than 12 months. We have~~ the ~~ability and intent~~investee subsequent to ~~hold these investments for a reasonable period of time sufficient for~~ the ~~recovery~~date of our investment. We ~~believe~~had no investments accounted for under the equity method as of June 30, 2019.

We classify unrealized and realized gains and losses on our equity investments within investment income in our consolidated statements of income.

Unrealized gains and losses represent (i) changes in fair value for investments in publicly traded companies, (ii) changes in NAV, as a practical expedient to estimate fair value, for investments in privately held entities that ~~these unrealized losses are temporary. Accordingly, there are no other-than-temporary impairments~~report NAV, and (iii) observable price changes on our investments in ~~accumulated~~privately held entities that do not report NAV. An observable price is a price observed in an orderly transaction for an identical or similar investment of the same issuer. Observable price changes result from, among other ~~comprehensive income~~things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to ~~available-for-sale equity securities as~~the same issuer. For these transactions to be considered observable price changes, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold.

Realized gains and losses represent the difference between proceeds received upon disposition of ~~September 30, 2017,~~investments and ~~December 31, 2016.~~their historical or adjusted cost. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV to their estimated fair value.


7.	Investments (continued)

The following ~~table summarizes~~tables summarize our investments as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (in thousands):

September 30, 2017 December 31, 2016
Available-for-sale equity securities, cost basis $ 55,433
$ 41,392
Unrealized gains 50,104
25,076
Unrealized losses (4,915 ) (5,783 )
Available-for-sale equity securities, at fair value 100,622
60,685
Investments accounted for under cost method 384,640
281,792
Total investments $ 485,262
$ 342,477



	June 30, 2019
	Cost		Adjustments		Carrying Amount
Investments:
Publicly traded companies	$	186,688	$	107,396	$	294,084
Entities that report NAV	240,177		142,448		382,625
Entities that do not report NAV:
Entities with observable price changes	41,187		73,575		114,762
Entities without observable price changes	266,383		—		266,383
Total investments	$	734,435	$	323,419	$	1,057,854



	December 31, 2018
	Cost		Adjustments		Carrying Amount
Investments:
Publicly traded companies	$	121,121	$	62,884	$	184,005
Entities that report NAV	204,646		113,159		317,805
Entities that do not report NAV:
Entities with observable price changes	39,421		64,112		103,533
Entities without observable price changes	286,921		—		286,921
Total investments	$	652,109	$	240,155	$	892,264

~~The table below outlines~~

Cumulative adjustments recognized on investments in privately held entities that do not report NAV held as of June 30, 2019, aggregated $73.6 million, which consisted of upward adjustments representing unrealized gains of $74.3 million and downward adjustments representing unrealized losses of $730 thousand.

During the ~~components~~six months ended June 30, 2019, adjustments recognized on investments in privately held entities that do not report NAV aggregated $9.5 million, which consisted of ~~our~~upward adjustments representing unrealized gains of $10.0 million, and downward adjustments representing unrealized losses of $530 thousand.

Our investment income ~~classified within other~~for the three and six months ended June 30, 2019, consisted of the following (in thousands):



	Three Months Ended June 30, 2019
	Unrealized Gains (Losses)			Realized Gains		Total
Investments held at June 30, 2019:
Publicly traded companies	$	15,028		$	—	$	15,028
Entities that report NAV	(3,168		)	—		(3,168		)
Entities that do not report NAV, held at period end	4,024			—		4,024
Total investments held at June 30, 2019	15,884			—		15,884
Investment dispositions during the three months ended June 30, 2019:
Recognized in the current period	—			5,616		5,616
Previously recognized gains	(4,826		)	4,826		—
Total investment dispositions during the three months ended June 30, 2019	(4,826		)	10,442		5,616
Investment income	$	11,058		$	10,442	$	21,500


7.	Investments (continued)



	Six Months Ended June 30, 2019
	Unrealized Gains			Realized Gains		Total
Investments held at June 30, 2019:
Publicly traded companies	$	56,802		$	—	$	56,802
Entities that report NAV	29,261			—		29,261
Entities that do not report NAV, held at period end	9,464			—		9,464
Total investments held at June 30, 2019	95,527			—		95,527
Investment dispositions during the six months ended June 30, 2019:
Recognized in the current period	—			9,529		9,529
Previously recognized gains	(12,263		)	12,263		—
Total investment dispositions during the six months ended June 30, 2019	(12,263		)	21,792		9,529
Investment income	$	83,264		$	21,792	$	105,056

Our investment income infor the ~~accompanying unaudited consolidated statements~~three and six months ended June 30, 2018, consisted of ~~income~~the following (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Investment gains $ 2,644
$ 8,115
$ 8,425
$ 28,721
Investment losses (1,599 ) (3,849 ) (6,418 ) (10,670 )
Investment income $ 1,045
$ 4,266
$ 2,007
$ 18,051



	Three Months Ended June 30, 2018
	Unrealized Gains (Losses)			Realized Gains		Total
Investments held at June 30, 2018:
Publicly traded companies	$	1,138		$	—	$	1,138
Entities that report NAV	4,683			—		4,683
Entities that do not report NAV, held at period end	(754		)	—		(754		)
Total investments held at June 30, 2018	5,067			—		5,067
Investment dispositions during the three months ended June 30, 2018:
Recognized in the current period	—			7,463		7,463
Previously recognized gains	—			—		—
Total investment dispositions during the three months ended June 30, 2018	—			7,463		7,463
Investment income	$	5,067		$	7,463	$	12,530

~~Investment losses include impairments of approximately~~ ~~$4.5 million~~ ~~related to two investments for the nine months ended September 30, 2017 and $3.1 million related to one investment for the three and nine months ended September 30, 2016. We reclassified~~ ~~$0.0 million~~, ~~$(2.5) million~~, ~~$8.5 million, and~~ ~~$18.6 million~~ of previously recorded unrealized gains/(losses) from accumulated other comprehensive income to net income for the three and nine months ended September 30, 2017 and September 30, 2016, respectively, in conjunction with our dispositions of and impairment losses realized from available-for-sale securities.



	Six Months Ended June 30, 2018
	Unrealized Gains			Realized Gains		Total
Investments held at June 30, 2018:
Publicly traded companies	$	52,026		$	—	$	52,026
Entities that report NAV	19,770			—		19,770
Entities that do not report NAV, held at period end	10,289			—		10,289
Total investments held at June 30, 2018	82,085			—		82,085
Investment dispositions during the six months ended June 30, 2018:
Recognized in the current period	—			16,006		16,006
Previously recognized gains	(4,789		)	4,789		—
Total investment dispositions during the six months ended June 30, 2018	(4,789		)	20,795		16,006
Investment income	$	77,296		$	20,795	$	98,091


6.7.	Investments (continued)

Investments in privately held entities that report NAV

Investments in privately held entities that report NAV consist primarily of investments in limited partnerships. We are committed to funding approximately $238.6 million for all investments, primarily consisting of $238.0 million related to investments in limited partnerships. Our funding commitments expire at various dates over the next 11 years, with a weighted-average expiration of 8.7 yearsas of June 30, 2019.

These investments are not redeemable by us, but we normally receive distributions from these investments through their term. Our investments in privately held entities that report NAV generally have expected initial terms in excess of 10 years. The weighted-average remaining term during which these investments are expected to be liquidated was 5.6 years as of June 30, 2019.


8.	Other assets

The following table summarizes the components of other assets as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (in thousands):



	June 30, 2019			December 31, 2018
Acquired below-market ground leases	$	—	⁽¹⁾	$	17,434
Acquired in-place leases	158,569			132,906
Deferred compensation plan	20,178			19,238
Deferred financing costs – $2.2 billion unsecured senior line of credit	14,481			16,060
Deposits	22,054			12,974
Furniture, fixtures, and equipment	16,725			14,787
Interest rate hedge assets	38			2,606
Net investment in direct financing lease	39,530			39,149
Notes receivable	482			528
Operating lease right-of-use asset⁽²⁾	237,025			—
Other assets	15,437			19,861
Prepaid expenses	15,008			13,690
Property, plant, and equipment	155,100			81,024
Total	$	694,627		$	370,257

September 30, 2017 December 31, 2016
Acquired below-market ground leases $ 12,741
$ 12,913
Acquired in-place leases 66,188
63,408
Deferred compensation plan 14,832
11,632
Deferred financing costs – $1.65 billion unsecured senior line of credit
11,453
14,239
Deposits 3,592
3,302
Furniture, fixtures, and equipment 11,443
12,839
Interest rate hedge assets 3,733
4,115
Net investment in direct financing lease 38,057
37,297
Notes receivable 635
694
Prepaid expenses 11,329
9,724
Property, plant, and equipment 27,263
19,891
Other assets 11,790
11,143
Total $ 213,056
$ 201,197

~~The components of our net investment in direct financing lease as of September 30, 2017, and December 31, 2016, are summarized in the table below (in thousands):~~

September 30, 2017 December 31, 2016
Gross investment in direct financing lease $ 263,980
$ 264,954
Less: unearned income (225,923 ) (227,657 )
Net investment in direct financing lease $ 38,057
$ 37,297

~~Future minimum lease payments to be received under our direct financing lease as of September 30, 2017, were as follows (in thousands):~~

Year Total
2017 $ 261
2018 1,607
2019 1,655
2020 1,705
2021 1,756
Thereafter 256,996
Total $ 263,980


7.(1)	~~Fair value measurements (continued)~~Upon the adoption of new lease accounting standards on January 1, 2019, this amount has been included in the calculation of our operating lease right-of-use asset.


(2)	Refer to Note 2 – “Summary of Significant Accounting Policies” and Note 5 – “Leases” to these unaudited consolidated financial statements for additional information.


7.9.	Fair value measurements

We provide fair value information about all financial instruments ~~whether or not recognized in the balance sheet,~~ for which it is practicable to estimate fair value. We measure and disclose the estimated fair value of financial assets and liabilities by utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels, as follows: (i) quoted prices in active markets for identical assets or liabilities (Level 1), (ii) significant other observable inputs (Level 2), and (iii) significant unobservable ~~inputs.~~inputs (Level 3). Significant other observable inputs can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield ~~curves that are observable at commonly quoted intervals.~~curves. Significant unobservable inputs are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016.~~2019.

The following tables set forth the assets and liabilities that we measure at fair value on a recurring basis by level within the fair value hierarchy as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (in thousands):



			June 30, 2019
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments in publicly traded companies	$	294,084	$	294,084	$	—	$	—
Interest rate hedge agreements	$	38	$	—	$	38	$	—
Liabilities:
Interest rate hedge agreements	$	1,699	$	—	$	1,699	$	—

September 30, 2017
Description Total
Quoted Prices in
Active Markets
for Identical
Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs
Assets:
Available-for-sale equity securities $ 100,622
$ 100,622
$ —
$ —
Interest rate hedge agreements $ 3,733
$ —
$ 3,733
$ —
Liabilities:
Interest rate hedge agreements $ 583
$ —
$ 583
$ —



			December 31, 2018
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Investments in publicly traded companies	$	184,005	$	184,005	$	—	$	—
Interest rate hedge agreements	$	2,606	$	—	$	2,606	$	—
Liabilities:
Interest rate hedge agreements	$	768	$	—	$	768	$	—

December 31, 2016
Description Total
Quoted Prices in
Active Markets
for Identical
Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs
Assets:
Available-for-sale equity securities $ 60,685
$ 60,685
$ —
$ —
Interest rate hedge agreements $ 4,115
$ —
$ 4,115
$ —
Liabilities:
Interest rate hedge agreements $ 3,587
$ —
$ 3,587
$ —

Our investments in publicly traded companies have been recognized at fair value. Investments in privately held entities are excluded from the fair value hierarchy above as required by the fair value standards. Refer to Note 7 – “Investments” to these unaudited consolidated financial statements for further details.

Our interest rate hedge agreements have been recognized at fair value. Refer to Note 11 – “Interest Rate Hedge Agreements” to these unaudited consolidated financial statements for further details. The carrying values of cash and cash equivalents, restricted cash, tenant receivables, other assets, accounts payable, accrued expenses, and tenant security deposits approximate fair value. Our available-for-sale equity securities and our interest rate hedge agreements have been recognized at fair value. Refer to Note 5 – “Investments” and Note 9 – “Interest Rate Hedge Agreements” to these unaudited consolidated financial statements for further details.

The fair values of our secured notes payable, unsecured senior notes payable, ~~$1.65~~$2.2 billion unsecured senior line of credit, and unsecured senior bank term ~~loans~~loan were estimated using widely accepted valuation techniques, including discounted cash flow analyses using significant other observable inputs such as available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Because the valuations of our financial instruments are based on these types of estimates, the actual fair value of our financial instruments may differ materially if our estimates do not prove to be accurate. Additionally, the use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.


7.9.	Fair value measurements (continued)

As of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, the book and estimated fair values of our ~~available-for-sale equity securities, interest rate hedge agreements,~~investments in privately held entities that report NAV, secured notes payable, unsecured senior notes payable, $2.2 billion unsecured senior line of credit, and unsecured senior bank term ~~loans~~loan were as follows (in thousands):

September 30, 2017
December 31, 2016

Book Value
Fair Value
Book Value
Fair Value
Assets:

Available-for-sale equity securities $ 100,622

$ 100,622

$ 60,685

$ 60,685
Interest rate hedge agreements $ 3,733

$ 3,733

$ 4,115

$ 4,115

Liabilities:

Interest rate hedge agreements $ 583

$ 583

$ 3,587

$ 3,587
Secured notes payable $ 1,153,890
$ 1,156,769
$ 1,011,292
$ 1,016,782
Unsecured senior notes payable $ 2,801,290
$ 2,943,568
$ 2,378,262
$ 2,431,470
Unsecured senior line of credit $ 314,000
$ 313,993
$ 28,000
$ 27,998
Unsecured senior bank term loans $ 547,860
$ 550,371
$ 746,471
$ 750,422



	June 30, 2019				December 31, 2018
	Book Value		Fair Value		Book Value		Fair Value
Assets:
Investments in privately held entities that report NAV	$	382,625	$	382,625	$	317,805	$	317,805

Liabilities:
Secured notes payable	$	354,186	$	367,193	$	630,547	$	638,860
Unsecured senior notes payable	$	5,140,914	$	5,499,248	$	4,292,293	$	4,288,335
$2.2 billion unsecured senior line of credit	$	514,000	$	513,922	$	208,000	$	208,106
Unsecured senior bank term loan	$	347,105	$	349,250	$	347,415	$	350,240

Nonrecurring fair value measurements

Refer to ~~“Sale of Real Estate Assets and Impairment Charges” in~~ Note 37 – ~~“Investments in Real Estate,” Note 5 – “Investments,”~~“Investments” and Note 1416 – “Assets Classified as Held for Sale” to these unaudited consolidated financial statements for further discussion.


8.10.	Secured and unsecured senior debt

The following table summarizes our secured and unsecured senior debt as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):



	Fixed-Rate/Hedged Variable-Rate Debt			Unhedged Variable-Rate Debt								Weighted-Average
												Interest		Remaining Term (in years)
							Total			Percentage		Rate ⁽¹⁾		Remaining Term (in years)
Secured notes payable	$	354,186		$	—		$	354,186		5.6	%	3.58	%	4.5
Unsecured senior notes payable	5,140,914			—			5,140,914			80.8		4.16		7.3
$2.2 billion unsecured senior line of credit	—			514,000			514,000			8.1		3.53		4.6
Unsecured senior bank term loan	347,105			—			347,105			5.5		3.62		5.5
Total/weighted-average	$	5,842,205		$	514,000		$	6,356,205		100.0	%	4.05	%	6.8
Percentage of total debt	92		%	8		%	100		%

Fixed-Rate/Hedged
Variable-Rate Debt

Unhedged
Variable-Rate Debt
Weighted-Average
Interest
Remaining Term
(in years)
Total Percentage
Rate ⁽¹⁾

Secured notes payable $ 902,207
$ 251,683
$ 1,153,890
24.0 % 3.80 % 2.8
Unsecured senior notes payable 2,801,290
—
2,801,290
58.2
4.16
7.0
$1.65 billion unsecured senior line of credit —
314,000
314,000
6.5
2.00
4.1
2019 Unsecured Senior Bank Term Loan 199,543
—
199,543
4.1
2.84
1.3
2021 Unsecured Senior Bank Term Loan 348,317
—
348,317
7.2
2.56
3.3
Total/weighted average $ 4,251,357
$ 565,683
$ 4,817,040
100.0 % 3.76 % 5.3
Percentage of total debt 88 % 12 % 100 %


(1)	Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.


8.10.	Secured and unsecured senior debt (continued)

The following table summarizes our outstanding indebtedness and respective principal payments as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):



	Stated Rate		Interest Rate ⁽¹⁾		Maturity Date ⁽²⁾	Principal Payments Remaining for the Periods Ending December 31,														Unamortized (Deferred Financing Cost), (Discount) Premium
Debt	Stated Rate		Interest Rate ⁽¹⁾		Maturity Date ⁽²⁾	2019		2020		2021		2022		2023		Thereafter		Principal		Unamortized (Deferred Financing Cost), (Discount) Premium			Total
Secured notes payable
San Diego	4.66	%	4.90	%	1/1/23	$	851	$	1,763	$	1,852	$	1,942	$	26,259	$	—	$	32,667	$	(230	)	$	32,437
Greater Boston	3.93	%	3.19		3/10/23	760		1,566		1,628		1,693		74,517		—		80,164		2,038			82,202
Greater Boston	4.82	%	3.40		2/6/24	1,545		3,206		3,395		3,564		3,742		183,527		198,979		12,300			211,279
San Francisco	4.14	%	4.42		7/1/26	—		—		—		—		—		28,200		28,200		(683		)	27,517
San Francisco	6.50	%	6.50		7/1/36	23		25		26		28		30		619		751		—			751
Secured debt weighted-average interest rate/subtotal	4.55	%	3.58			3,179		6,560		6,901		7,227		104,548		212,346		340,761		13,425			354,186

$2.2 billion unsecured senior line of credit	L+0.825	%	3.53		1/28/24	—		—		—		—		—		514,000		514,000		—			514,000
Unsecured senior bank term loan⁽³⁾	L+0.90	%	3.62		1/2/25	—		—		—		—		—		350,000		350,000		(2,895		)	347,105
Unsecured senior notes payable⁽³⁾	2.75	%	2.96		1/15/20	—		400,000		—		—		—		—		400,000		(453		)	399,547
Unsecured senior notes payable⁽³⁾	4.60	%	4.75		4/1/22	—		—		—		550,000		—		—		550,000		(1,791		)	548,209
Unsecured senior notes payable	3.90	%	4.04		6/15/23	—		—		—		—		500,000		—		500,000		(2,360		)	497,640
Unsecured senior notes payable – green bonds	4.00	%	4.03		1/15/24	—		—		—		—		—		650,000		650,000		(655		)	649,345
Unsecured senior notes payable	3.45	%	3.62		4/30/25	—		—		—		—		—		600,000		600,000		(5,097		)	594,903
Unsecured senior notes payable	4.30	%	4.50		1/15/26	—		—		—		—		—		300,000		300,000		(3,178		)	296,822
Unsecured senior notes payable – green bonds	3.80	%	3.96		4/15/26	—		—		—		—		—		350,000		350,000		(3,321		)	346,679
Unsecured senior notes payable	3.95	%	4.13		1/15/27	—		—		—		—		—		350,000		350,000		(3,795		)	346,205
Unsecured senior notes payable	3.95	%	4.07		1/15/28	—		—		—		—		—		425,000		425,000		(3,610		)	421,390
Unsecured senior notes payable	4.50	%	4.60		7/30/29	—		—		—		—		—		300,000		300,000		(2,235		)	297,765
Unsecured senior notes payable	4.70	%	4.81		7/1/30	—		—		—		—		—		450,000		450,000		(4,087		)	445,913
Unsecured senior notes payable	4.85	%	4.93		4/15/49	—		—		—		—		—		300,000		300,000		(3,504		)	296,496
Unsecured debt weighted-average interest rate/subtotal			4.08			—		400,000		—		550,000		500,000		4,589,000		6,039,000		(36,981		)	6,002,019
Weighted-average interest rate/total			4.05	%		$	3,179	$	406,560	$	6,901	$	557,227	$	604,548	$	4,801,346	$	6,379,761	$	(23,556	)	$	6,356,205

Stated
Rate

Interest Rate ⁽¹⁾
Maturity Unamortized (Deferred Financing Cost), (Discount)/Premium
Debt
Date ⁽²⁾
Principal Total
Secured notes payable
Greater Boston L+1.35 % 2.99 % 8/23/18 $ 211,940
$ (660 ) $ 211,280
Greater Boston L+1.50 % 3.09
1/28/19
⁽³⁾
317,979
(1,595 ) 316,384
Greater Boston L+2.00 % 3.89
4/20/19
⁽³⁾
179,764
(2,104 ) 177,660
Greater Boston, Seattle, and Maryland 7.75 % 8.17
4/1/20 108,940
(835 ) 108,105
San Diego 4.66 % 5.03
1/1/23 35,370
(345 ) 35,025
Greater Boston 3.93 % 3.20
3/10/23 82,000
2,957
84,957
Greater Boston 4.82 % 3.40
2/6/24 203,000
16,706
219,706
San Francisco 6.50 % 6.78
7/1/36 773
—
773
Secured debt weighted-average interest rate/subtotal 3.80 % 3.80
1,139,766
14,124
1,153,890

2019 Unsecured Senior Bank Term Loan L+1.20 % 2.84
1/3/19 200,000
(457 ) 199,543
2021 Unsecured Senior Bank Term Loan L+1.10 % 2.56
1/15/21 350,000
(1,683 ) 348,317
$1.65 billion unsecured senior line of credit L+1.00 % 2.00
10/29/21 314,000
N/A
314,000
Unsecured senior notes payable 2.75 % 2.96
1/15/20 400,000
(1,822 ) 398,178
Unsecured senior notes payable 4.60 % 4.75
4/1/22 550,000
(2,922 ) 547,078
Unsecured senior notes payable 3.90 % 4.04
6/15/23 500,000
(3,381 ) 496,619
Unsecured senior notes payable 4.30 % 4.52
1/15/26 300,000
(3,998 ) 296,002
Unsecured senior notes payable 3.95 % 4.14
1/15/27 350,000
(4,638 ) 345,362
Unsecured senior notes payable 3.95 % 4.09
1/15/28 425,000
(4,334 ) 420,666
Unsecured senior notes payable 4.50 % 4.62
7/30/29 300,000
(2,615 ) 297,385
Unsecured debt weighted average/subtotal 3.75
3,689,000
(25,850 ) 3,663,150
Weighted-average interest rate/total 3.76 % $ 4,828,766
$ (11,726 ) $ 4,817,040


(1)	Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.


(2)	Reflects any extension options that we control.


(3)	Refer to ~~“Secured Construction Loans” below~~the “3.375% and 4.00% Unsecured Senior Notes Payable” and “Extension of Unsecured Senior Bank Term Loan” sections on the next page for ~~options to extend maturity dates.~~additional information.

~~3.95% Unsecured senior notes payable due in 2028~~

In March 2017, we completed a $425.0 million public offering of our unsecured senior notes payable due on January 15, 2028, at a stated interest rate of 3.95%. The unsecured senior notes payable were priced at 99.855% of the principal amount with a yield to maturity of 3.967%. The unsecured senior notes payable are unsecured obligations of the Company and are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P., a 100% owned subsidiary of the Company. The unsecured senior notes payable rank equally in right of payment with all other unsecured senior indebtedness. However, the unsecured senior notes payable are subordinate to existing and future mortgages and other secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and to all existing and future preferred equity and liabilities, whether secured or unsecured, of the Company’s subsidiaries, other than Alexandria Real Estate Equities, L.P. We used the net proceeds, after discounts and issuance costs, of $420.5 million to repay outstanding borrowings under our $1.65 billion unsecured senior line of credit.

~~Repayment of unsecured senior bank term loans~~

During the three months ended March 31, 2017, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan, reducing the total outstanding balance from $400 million to $200 million, and recognized a loss of $670 thousand related to the write-off of unamortized loan fees.

~~Amendment of unsecured senior line of credit and unsecured senior bank term loans~~

On July 29, 2016, we amended our unsecured senior line of credit and completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan reducing the total outstanding balance from $600 million to $400 million, and recognized an aggregate loss on early extinguishment of debt of $3.2 million related to the write-off of unamortized loan fees.


8.10.	Secured and unsecured senior debt (continued)

4.85%, 3.80%, and 4.00% Unsecured senior notes payable

~~Secured construction loans~~

In March 2019, we completed an offering of $850.0 million of unsecured senior notes for net proceeds of $846.1 million. The unsecured senior notes consisted of $300.0 million of 4.85% unsecured senior notes payable on April 15, 2049 (“4.85% Unsecured Senior Notes”); $350.0 million of 3.80% unsecured senior notes payable on April 15, 2026 (“3.80% Unsecured Senior Notes”), which will be allocated to fund certain eligible green development and redevelopment projects and the repayment of a secured note payable related to 50/60 Binney Street, a recently completed Class A property, which was awarded LEED^® Gold certification; and $200.0 million added to our outstanding 4.00% unsecured senior notes payable due on January 15, 2024, issued at a yield to maturity of 3.453%, which are part of the same series that was originally issued in 2018 and will also be used to fund recently completed and future eligible green projects. As of June 30, 2019, these notes had a weighted-average interest rate of 4.18% and a weighted-average maturity of 14.4 years.

3.375% and 4.00% Unsecured senior notes payable

In July 2019, we issued $1.25 billion of unsecured senior notes payable with a weighted-average interest rate of 3.72% and a weighted-average maturity of 19.5 years. The ~~following table summarizes~~unsecured senior notes consisted of $750.0 million of 3.375% unsecured senior notes payable on August 15, 2031 (“3.375% Unsecured Senior Notes”) and $500.0 million of 4.00% unsecured senior notes payable on February 1, 2050 (“4.00% Unsecured Senior Notes Due 2050”).

The proceeds were primarily used to refinance an aggregate $950.0 million of unsecured senior notes payable comprising $400.0 million of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer completed on July 17, 2019, and a subsequent call for redemption. The redemption is expected to settle on August 16, 2019. Additionally, we partially repaid $175.0 million on our unsecured senior bank term loan with the remaining proceeds used to reduce the outstanding balance of our unsecured senior line of credit. The weighted-average interest rate and maturity of the refinanced unsecured senior notes payable and partially repaid unsecured bank term loan were 3.94% and 2.4 years, respectively. As a result of our refinancing and partial repayment, we expect to recognize a loss, primarily related to the early extinguishment of debt, of $43 million during the three months ending September 30, 2019.

Extension of unsecured senior bank term loan

In June 2019, we extended the maturity date of our unsecured senior bank term loan, with a principal balance of $350.0 million, to January 2, 2025 from January 28, 2024. We made a partial repayment of $175.0 million on this outstanding balance in July 2019.

Repayment of secured notes payable

In January 2019, we repaid early one secured note payable aggregating $106.7 million, which was originally due in 2020 and bore interest at 7.75%, and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.

In March 2019, we repaid early the remaining $193.1 million balance of our secured construction ~~loans as~~loan related to 50/60 Binney Street, which was due in 2020 and bore interest at LIBOR+1.5%, and recognized a loss on early extinguishment of ~~September 30, 2017 (dollars in thousands):~~debt of $269 thousand.

Property/Market Stated Rate Maturity Date Outstanding Principal Balance Remaining Commitments Aggregate Commitments
75/125 Binney Street/Greater Boston L+1.35 % 8/23/18 $ 211,940
$ —
$ 211,940
50 and 60 Binney Street/Greater Boston L+1.50 % 1/28/19
⁽¹⁾
317,979
32,021
350,000
100 Binney Street/Greater Boston L+2.00 %
⁽²⁾
4/20/19
⁽³⁾
179,764
124,517
304,281
$ 709,683
$ 156,538
$ 866,221


~~(1)~~	~~We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions.~~


~~(2)~~	~~Refer to the interest rate cap agreements in Note 9 – “Interest Rate Hedge Agreements.”~~


~~(3)~~	~~We have two one-year options to extend the stated maturity date to April 20, 2021, subject to certain conditions.~~

Interest expense

The following table summarizes interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Gross interest	$	64,553		$	53,624		$	122,162		$	103,899
Capitalized interest	(21,674		)	(15,527		)	(40,183		)	(28,887		)
Interest expense	$	42,879		$	38,097		$	81,979		$	75,012

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Gross interest $ 48,123
$ 40,753
$ 137,888
$ 116,520
Capitalized interest (17,092 ) (14,903 ) (45,325 ) (40,790 )
Interest expense $ 31,031
$ 25,850
$ 92,563
$ 75,730


9.11.	Interest rate hedge agreements

We use interest rate derivatives to hedge the variable cash flows associated with certain of our existing LIBOR-based variable-rate debt, including our ~~$1.65~~$2.2 billion unsecured senior line of credit and unsecured senior bank term ~~loans, and secured notes payable,~~loan, and to manage our exposure to interest rate volatility. ~~Our derivative instruments include~~

The fair value of each interest rate ~~swaps~~hedge agreement is determined using widely accepted valuation techniques, including discounted cash flow analyses on the expected cash flows of each derivative. These analyses reflect the contractual terms of the derivatives, including the period to maturity, and use observable market-based inputs, including interest rate ~~caps.~~

Incurves and implied volatilities. The fair values of our interest rate hedge agreements are determined using the ~~ineffective portion~~market-standard methodology of netting the ~~change in~~discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair value ~~is required~~calculation also includes an amount for risk of non-performance of our counterparties using “significant unobservable inputs,” such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be ~~recognized directly in earnings. During~~insignificant to the ~~nine months ended September 30, 2017 and 2016,~~overall fair value of our interest rate hedge ~~agreements were 100% effective; as a result, no hedge ineffectiveness was recognized in earnings.~~ agreements.

Changes in fair value, including accrued interest and adjustments for non-performance risk, ~~on the effective portion~~ of our interest rate hedge agreements that are designated and that qualify as cash flow hedges are classified in accumulated other comprehensive income. Amounts classified in accumulated other comprehensive income are subsequently reclassified into earnings in the period during which the hedged transactions affect earnings. During the next 12 months, we expect to reclassify approximately ~~$1.4~~$1.7 million infrom accumulated other comprehensive income to earnings as ~~a decrease~~an increase of interest expense. As of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, the fair values of our interest rate ~~swap and cap~~hedge agreements aggregating an asset balance were classified in other assets, and the fair ~~value~~values of our interest rate ~~swap~~hedge agreements aggregating a liability balance were classified in accounts payable, accrued expenses, and tenant security deposits, based upon their respective fair values, without any offsetting pursuant to master netting agreements. Refer to Note 79 – “Fair Value Measurements” to these unaudited consolidated financial statements for further details. Under our interest rate hedge agreements, we have no collateral posting requirements.

We have agreements with certain of our derivative counterparties that contain a provision wherein we could be declared in default on our derivative obligations if (i) if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness or (ii) if we default on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender. If we had breached any of these provisions as of ~~September~~June 30, ~~2017,~~2019, we could have been required to settle our obligations under the agreements at their termination value of ~~$352 thousand.~~$1.7 million.

We had the following outstanding interest rate hedge agreements that were designated as cash flow hedges of interest rate risk as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

Interest Rate Hedge Type Number of Contracts
Weighted-Average Interest Pay/
Cap Rate⁽¹⁾

Fair Value
as of 9/30/17
Notional Amount in Effect as of
Effective Date Maturity Date 9/30/17 12/31/17 12/31/18 12/31/19
Swap March 31, 2017 March 31, 2018 4 0.78% $ 692
$ 250,000
$ 250,000
$ —
$ —
Swap March 31, 2017 March 31, 2018 11 1.51% (554 ) 650,000
650,000
—
—
Cap July 29, 2016 April 20, 2019 2 2.00% 66
108,000
126,000
150,000
—
Swap March 29, 2018 March 31, 2019 8 1.16% 2,975
—
—
600,000
—
Swap March 29, 2019 March 31, 2020 1 1.89% (29 )
—
—
—
100,000
Total $ 3,150
$ 1,008,000
$ 1,026,000
$ 750,000
$ 100,000



		Number of Contracts as of 6/30/2019	Weighted-Average Interest Pay Rate⁽¹⁾	Fair Value as of			Notional Amount in Effect as of
Effective Date	Maturity Date	Number of Contracts as of 6/30/2019	Weighted-Average Interest Pay Rate⁽¹⁾	6/30/19			6/30/19		12/31/19
March 29, 2019	March 31, 2020	1	1.89%	$	38		$	100,000	$	100,000
March 29, 2019	March 31, 2020	3	2.84%	(1,699		)	250,000		75,000
Total				$	(1,661	)	$	350,000	$	175,000	⁽²⁾

(1)

In addition to the interest pay rate for each ~~swap~~hedge agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of ~~September~~June 30, ~~2017,~~2019, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments under Note 810 – “Secured and Unsecured Senior Debt” to these unaudited consolidated financial statements.


(2)	Excludes notional amounts aggregating $175.0 million related to the interest rate hedge agreements terminated in July 2019. Refer to the discussion below.

In July 2019, in conjunction with the $175.0 million partial repayment of our unsecured senior bank term loan, we also terminated two interest rate hedge agreements aggregating $175.0 million with a weighted-average interest pay rate of 2.83% and recognized a loss of $1.1 million related to the early termination of interest rate hedge agreements. This loss was classified within interest expense in our consolidated statements of income.


~~10.~~12.	Accounts payable, accrued expenses, and tenant security deposits

The following table summarizes the components of accounts payable, accrued expenses, and tenant security deposits as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (in thousands):



	June 30, 2019		December 31, 2018
Accounts payable and accrued expenses	$	149,302	$	215,539
Accrued construction	281,440		275,882
Acquired below-market leases	154,028		134,808
Conditional asset retirement obligations	14,633		10,343
Deferred rent liabilities⁽¹⁾	2,424		29,547
Interest rate hedge liabilities	1,699		768
Operating lease liability⁽¹⁾	243,585		—
Unearned rent and tenant security deposits	238,774		250,923
Other liabilities	71,532		63,897
Total	$	1,157,417	$	981,707

September 30, 2017 December 31, 2016
Accounts payable and accrued expenses $ 338,296
$ 366,174
Acquired below-market leases 92,388
59,509
Conditional asset retirement obligations 7,457
3,095
Deferred rent liabilities 27,747
34,426
Interest rate hedge liabilities 583
3,587
Unearned rent and tenant security deposits 240,501
231,416
Other liabilities 33,098
33,464
Total $ 740,070
$ 731,671


(1)	Refer to Note 2 – “Summary of Significant Accounting Policies” and Note 5 – “Leases” to these unaudited consolidated financial statements for additional information.

Some of our properties may contain asbestos, which, under certain conditions, requires remediation. Although we believe that the asbestos is appropriately contained in accordance with environmental regulations, our practice is to remediate the asbestos upon the development or redevelopment of the affected property. We recognize a liability for the fair value of a conditional asset retirement obligation (including asbestos) when the fair value of the liability can be reasonably estimated. For certain properties we do not recognize an asset retirement obligation when there is an indeterminate settlement date for the obligation because the period in which we may remediate the obligation may not be estimated with any level of precision to provide for a meaningful estimate of the retirement obligation. ~~These conditional asset retirement obligations are included in the table above.~~


~~11.~~13.	Earnings per share

~~In March 2017,~~From time to time we ~~entered~~enter into ~~agreements to sell an aggregate of 6.9 million shares of our common stock, which consist of an initial issuance of 2.1 million shares and the remaining 4.8 million shares subject to~~ forward equity sales agreements, ~~at a public offering price of $108.55 per share, less issuance costs and underwriters’ discount.~~which are discussed in Note 14 – “Stockholders’ Equity” to these unaudited consolidated financial statements for additional information. We issued the initial 2.1 million shares at closing in March 2017 for net proceeds, after underwriters’ discount and issuance costs, of $217.8 million and expect to settle the forward equity sales agreements on the remaining 4.8 million shares of common stock no later than March 2018, for net proceeds of $495.5 million, after underwriters’ discount and issuance costs, with further adjustments as provided for in the sales agreements.

To account for the forward equity sales agreements, we considered the accounting guidance governing financial instruments and derivatives and concluded that our forward equity sales agreements were not liabilities as they did not embody obligations to repurchase our shares nor did they embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to our shares. We then evaluated whether the agreements met the derivatives and hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements can be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

~~We also~~ considered the potential dilution resulting from the forward equity sales agreements on the EPS calculations. ~~We use~~At inception, the ~~treasury method to~~agreements do not have an effect on the computation of basic EPS as no shares are delivered until settlement. The common shares issued upon the settlement of the forward equity sales agreements, weighted for the period these common shares were outstanding, are included in the denominator of basic EPS. To determine the dilution resulting from the forward equity sales agreements during the period of time prior to ~~settlement. The~~settlement, we calculate the number of weighted-average shares outstanding – diluted ~~used in~~using the ~~computation of EPS for~~treasury stock method. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, includes~~2019, the effect ~~from the assumed issuance of 4.8 million~~on our weighted-average shares ~~pursuant to the settlement of~~– diluted from the forward equity sales agreements atentered into during the ~~contractual price, less~~three months ended June 30, 2019, was 68 thousand and 34 thousand weighted-average incremental shares, respectively. For the ~~assumed repurchase of common shares at~~three and six months ended June 30, 2018, the ~~average market price using the net proceeds of $495.5 million, adjusted as provided for in the forward equity sales agreements. The impact to~~effect on our weighted-average shares – diluted ~~for~~from the ~~three and nine months ended September 30, 2017,~~forward equity sales agreements entered into in January 2018 was ~~698~~355 thousand and ~~430~~313 thousand ~~respectively,~~ weighted-average incremental ~~shares.~~shares, respectively.


~~11.~~	~~Earnings per share (continued)~~

For purposes of calculating diluted EPS, we did not assume conversion of our 7.00% Series D cumulative convertible preferred stock (“Series D Convertible Preferred Stock”) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, since the result was antidilutive to EPS attributable to Alexandria Real Estate Equities, Inc.’s common stockholders from continuing operations during ~~those periods.~~each period. Refer to ~~“7.00% Series D Cumulative Convertible Preferred Stock Repurchases” in~~ Note 1214 – “Stockholders’ Equity” to these unaudited consolidated financial statements for ~~further discussion of the partial repurchases of~~additional information about our Series D Convertible Preferred Stock.

We account for unvested restricted stock awards that contain nonforfeitable rights to dividends as participating securities and include these securities in the computation of EPS using the two-class method. Our Series D Convertible Preferred Stock and forward equity sales agreements are not participating securities and are therefore ~~are~~ not included in the computation of EPS using the two-class method. Under the two-class method, we allocate net income ~~after preferred stock dividends, preferred stock redemption charge, and~~(after amounts attributable to noncontrolling interests, dividends on preferred stock, and preferred stock redemption charge) to common ~~stock~~stockholders and unvested restricted stock awards by using the weighted-average shares of each class outstanding for quarter-to-date and year-to-date periods independently, based on their respective participation rights to dividends declared (or accumulated) and undistributed earnings.


13.	Earnings per share (continued)

The table below is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (in thousands, except per share amounts):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	87,179		$	60,547		$	223,997		$	202,065
Net income attributable to noncontrolling interests	(8,412		)	(5,817		)	(16,071		)	(11,705		)
Dividends on preferred stock	(1,005		)	(1,302		)	(2,031		)	(2,604		)
Preferred stock redemption charge	—			—			(2,580		)	—
Net income attributable to unvested restricted stock awards	(1,432		)	(1,412		)	(3,134		)	(2,765		)
Numerator for basic and diluted EPS – net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	76,330		$	52,016		$	200,181		$	184,991

Denominator for basic EPS – weighted-average shares of common stock outstanding	111,433			101,881			111,245			100,878
Dilutive effect of forward equity sales agreements	68			355			34			313
Denominator for diluted EPS – weighted-average shares of common stock outstanding	111,501			102,236			111,279			101,191
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	0.68		$	0.51		$	1.80		$	1.83
Diluted	$	0.68		$	0.51		$	1.80		$	1.83

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income (loss) $ 59,546
$ 28,559
$ 148,597
$ (69,591 )
Net income attributable to noncontrolling interests (5,773 ) (4,084 ) (18,892 ) (11,614 )
Dividends on preferred stock (1,302 ) (5,007 ) (6,364 ) (16,388 )
Preferred stock redemption charge —
(13,095 ) (11,279 ) (25,614 )
Net income attributable to unvested restricted stock awards (1,198 ) (921 ) (3,498 ) (2,807 )
Numerator for basic and diluted EPS – net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 51,273
$ 5,452
$ 108,564
$ (126,014 )

Denominator for basic EPS – weighted-average shares of common stock outstanding 92,598
76,651
90,336
74,526
Dilutive effect of forward equity sales agreements 698
751
430
—
Denominator for diluted EPS – adjusted – weighted-average shares of common stock outstanding 93,296
77,402
90,766
74,526
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted $ 0.55
$ 0.07
$ 1.20
$ (1.69 )


~~12.~~14.	Stockholders’ equity

~~ATM common stock offering program~~Common equity transactions

~~In October 2016,~~During the three and six months ended June 30, 2019, we ~~established an ATM common stock offering program that allowed us to sell up to~~completed issuances and entered into forward equity sales agreement for an aggregate of ~~$600.0~~8.7 million shares of common stock at a weighted-average price of $144.50 per share, for aggregate net proceeds of approximately $1.2 billion as follows:

Issued 602,484 shares of common stock, at a weighted-average price of $145.58 per share, for net proceeds of $86.1 million.

Entered into forward equity sales agreements to sell an aggregate of 8.1 million shares of common stock, at a weighted-average price of $144.42 per share, for aggregate proceeds (net of underwriters’ discounts) of approximately $1.1 billion, to be further adjusted as provided in the forward equity sales agreements, including:

(i) agreements to issue 4.4 million shares at a price of $145.00 per share expiring in June 2020.

(ii) agreements to issue 3.7 million shares at a weighted-average price of $143.73 per share expiring in July 2020.

In connection with these forward equity sales agreements, we incurred initial issuance costs aggregating $700 thousand.

The following table presents a detail of shares of common stock issued and the remaining aggregate amount available for future sales of common stock under our ATM program as of June 30, 2019 (dollars in thousands, except per share amounts):



	Shares Issued	Average Issue Price per Share		Gross Proceeds		Net Proceeds
Cumulative activity through December 31, 2018	855,458	$	127.45	$	109,031	$	106,956
Six months ended June 30, 2019	602,484	$	145.58	87,710		86,094
Cumulative activity through June 30, 2019	1,457,942			196,741		$	193,050
Common stock reserved for settlement of the forward equity sales agreements				530,791
Remaining availability as of June 30, 2019				22,468
Total August 2018 ATM common stock offering program				$	750,000

7.00% Series D cumulative convertible preferred stock

As of June 30, 2019 and December 31, 2018, 2.3 million and 2.6 million shares of our ~~common stock.~~Series D Convertible Preferred Stock were outstanding, respectively. During the six months ended June 30, 2017, we completed our ATM program with the sale of 2.1 million shares of common stock for gross proceeds of $245.8 million, or $118.97 per share, and net proceeds of approximately $241.8 million. There is no remaining availability under this ATM program.

In August 2017, we established a new ATM common stock offering program that allows us to sell up to an aggregate of $750.0 million of our common stock. During the three months ended September 30, 2017, we sold an aggregate of 2.1 million shares of common stock for gross proceeds of $249.9 million, or $119.94 per share, and received net proceeds of $245.8 million. As of September 30, 2017, the remaining aggregate amount available under our current program for future sales of common stock is $500.1 million.


~~12.~~	~~Stockholders’ equity (continued)~~

~~Forward equity sales agreements~~

~~Refer to Note 11 – “Earnings per Share” to these unaudited consolidated financial statements for a discussion related to our forward equity sales agreements executed in March 2017.~~

~~7.00% Series D cumulative convertible preferred stock repurchases~~

~~During the nine months ended September 30, 2017,~~2019, we repurchased, in privately negotiated transactions, ~~501,115~~275,000 outstanding shares of our Series D Convertible Preferred Stock at an aggregate price of ~~$17.9~~$9.2 million, or ~~$35.79~~$33.60 per ~~share, all of which were completed during the first and second quarters of 2017. As a result of these repurchases, we~~share. We recognized a preferred stock redemption charge of ~~$5.8~~$2.6 million during the six months ended June 30, 2019, including the write-off of original issuance costs of approximately ~~$391~~$215 thousand. ~~During~~

The dividends on our Series D Convertible Preferred Stock are cumulative and accrue from the ~~three months ended September 30, 2017, we did~~date of original issuance. We pay dividends quarterly in arrears at an annual rate of $1.75 per share. Our Series D Convertible Preferred Stock has no stated maturity and is not ~~repurchase~~subject to any ~~additional outstanding shares~~sinking fund or mandatory redemption provisions. We are not allowed to redeem our Series D Convertible Preferred Stock, except to preserve our status as a REIT. Investors in our Series D Convertible Preferred Stock generally have no voting rights. We may, at our option, be able to cause some or all of our Series D Convertible Preferred ~~Stock.~~

~~During~~Stock to be automatically converted if the ~~nine months ended September~~closing sale price per share of our common stock equals or exceeds 150% of the then-applicable conversion price of the Series D Convertible Preferred Stock for at least 20 trading days in a period of 30 ~~2016, we repurchased 3.0 million outstanding shares~~consecutive trading days ending on the trading day immediately prior to our issuance of a press release announcing the exercise of our conversion option. Holders of our Series D Convertible Preferred Stock, at their option, may, at any time and from time to time, convert some or all of their outstanding shares initially at a conversion rate of 0.2477 shares of common stock per $25.00 liquidation preference, which was equivalent to an ~~aggregate~~initial conversion price of ~~$98.6 million, or $32.72~~approximately $100.93 per share ~~including~~of common stock. The conversion rate for the ~~repurchase of 1.1 million outstanding shares of our~~ Series D Convertible Preferred Stock ~~during~~is subject to adjustments for certain events, including, but not limited to, certain dividends on our common stock in excess of $0.78 per share per quarter and dividends on our common stock payable in shares of our common stock. As of June 30, 2019, the ~~three months ended September 30, 2016, at an aggregate~~Series D Convertible Preferred Stock had a conversion rate of approximately 0.2509 shares of common stock per $25.00 liquidation preference, which is equivalent to a conversion price of ~~$39.3 million, or $36.31~~approximately $99.64 per ~~share. During the nine months ended September 30, 2016, we recognized a preferred stock redemption charge~~share of ~~$25.6 million, including the write-off of original issuance costs of approximately $2.4 million.~~ common stock.

Dividends

During the three months ended ~~September~~June 30, ~~2016, we recognized a preferred stock redemption charge of $13.1 million, including the write-off of original issuance costs of approximately $845 thousand.~~

~~6.45% Series E cumulative redeemable preferred stock redemption~~

In March 2017, we announced the redemption of our 6.45% Series E cumulative redeemable preferred stock (“Series E Redeemable Preferred Stock”) and recognized a preferred stock redemption charge of $5.5 million related to the write-off of original issuance costs. On April 14, 2017, we completed the redemption of all 5.2 million outstanding shares of our Series E Redeemable Preferred Stock at a redemption price of $25.00 per share, or an aggregate of $130.0 million, plus accrued dividends, using funds primarily from the proceeds of our March 2017 common stock offering discussed in Note 11 – “Earnings per Share” to these unaudited consolidated financial statements.

~~Dividends~~

~~In September 2017,~~2019, we declared cash dividends on our common stock ~~for the three months ended September 30, 2017,~~ aggregating ~~$82.3~~$113.5 million, or ~~$0.86~~$1.00 per ~~share. Also in September 2017, we declared~~share, and cash dividends on our Series D Convertible Preferred Stock ~~for the three months ended September 30, 2017,~~ aggregating ~~approximately $1.3~~$1.0 million, or $0.4375 per share. In ~~October 2017,~~July 2019, we paid the cash dividends on our common stock and Series D Convertible Preferred Stock declared for the three months ended ~~September~~June 30, ~~2017.~~2019.

~~For~~


14.	Stockholders’ equity (continued)

During the ~~nine~~six months ended ~~September~~June 30, ~~2017, our~~2019, we declared cash dividends on our common stock ~~aggregated $238.4~~aggregating $223.1 million, or ~~$2.55~~$1.97 per share, ~~our declared~~and cash dividends on our Series D Convertible Preferred Stock ~~aggregated $3.9~~aggregating $2.0 million, or ~~$1.3125~~$0.8750 per ~~share, and our declared cash dividends on our Series E Redeemable Preferred Stock aggregated $2.1 million, or $0.4031 per~~ share. ~~All outstanding shares of our Series E Redeemable Preferred Stock were redeemed on April 14, 2017.~~


~~12.~~	~~Stockholders’ equity (continued)~~

Accumulated other comprehensive income (loss)

~~Accumulated~~The following table presents the changes in each component of accumulated other comprehensive income (loss) attributable to Alexandria Real Estate Equities, Inc. ~~consists of~~’s stockholders during the ~~following~~six months ended June 30, 2019 (in thousands):



	Net Unrealized Gains (Losses) on:
	Interest Rate Hedge Agreements			Foreign Currency Translation			Total
Balance as of December 31, 2018	$	1,838		$	(12,273	)	$	(10,435	)

Other comprehensive (loss) income before reclassifications	(1,684		)	2,800			1,116
Amounts reclassified from other comprehensive income to net income	(1,815		)	—			(1,815		)
Net other comprehensive (loss) income	(3,499		)	2,800			(699		)

Balance as of June 30, 2019	$	(1,661	)	$	(9,473	)	$	(11,134	)

Net Unrealized Gain (Loss) on:

Available-for- Sale Equity Securities
Interest Rate
Hedge Agreements
Foreign Currency Translation
Total
Balance as of December 31, 2016
$ 19,293

$ 405

$ (14,343 )
$ 5,355

Other comprehensive income before reclassifications
23,414

812

7,592

31,818
Amounts reclassified from other comprehensive income
2,482

1,810

2,421

6,713

25,896

2,622

10,013

38,531
Amounts attributable to noncontrolling interests
—

—

(22 )
(22 )
Net other comprehensive income
25,896

2,622

9,991

38,509

Balance as of September 30, 2017
$ 45,189

$ 3,027

$ (4,352 )
$ 43,864

Common stock, preferred stock, and excess stock authorizations

~~In May 2017, our stockholders approved an amendment to our~~Our charter ~~to increase~~authorizes the ~~authorized~~issuance of 200.0 million shares of common stock, ~~from 100.0 million to 200.0 million shares,~~ of which ~~94.3~~112.0 million shares were issued and outstanding as of ~~September~~June 30, ~~2017.~~2019. Our charter also authorizes the issuance of up to 100.0 million shares of preferred stock, of which ~~3.0~~2.3 million shares were issued and outstanding as of ~~September~~June 30, ~~2017.~~2019. In addition, 200.0 million shares of “excess stock” (as defined in our charter) are authorized, none of which were issued and outstanding as of ~~September~~June 30, ~~2017.~~2019.


~~13.~~15.	Noncontrolling interests

Noncontrolling interests represent the third-party interests in certain entities in which we have a controlling interest. These entities owned ~~nine projects~~12 properties as of ~~September~~June 30, ~~2017,~~2019, and are included in our consolidated financial statements. Noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. Distributions, profits, and losses related to these entities are allocated in accordance with the respective operating agreements.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019 and 2018, we distributed $24.6 million and $18.4 million, respectively, to our consolidated ~~joint ventures distributed $17.4 million to our~~real estate joint venture partners. During the nine months ended September 30, 2016, our distributions to noncontrolling interests aggregated $62.6 million, which primarily consisted of the second installment of $54.0 million paid to acquire the previously outstanding 10% noncontrolling interest in our 1.2 million RSF campus at Alexandria Technology Square^® ~~in our Cambridge submarket of Greater Boston. The total purchase price was $108.3 million, and the first installment of $54.3 million was paid on April 1, 2015.~~

In 2016, we sold our partial interests in 10290 Campus Point Drive and 10300 Campus Point Drive. As described in Note 3 – “Investments in Real Estate” to these unaudited consolidated financial statements, since we retained controlling interests in both joint ventures following the sales and continued to consolidate these entities, we accounted for the proceeds received as equity financing transactions. These transactions did not qualify as sales of real estate and did not result in purchase accounting adjustments to the carrying value. Accordingly, the carrying amounts of our partner’s share of assets and liabilities are reported at historical cost basis.

Certain of our noncontrolling interests have the right to require us to redeem their ownership interests in the respective entities. We classify these ownership interests in the entities as redeemable noncontrolling interests outside of total equity in ~~the accompanying unaudited~~our consolidated balance sheets. Redeemable noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. If the amount of a redeemable noncontrolling interest is less than the maximum redemption value at the balance sheet date, such amount is adjusted to the maximum redemption value. Subsequent declines in the redemption value are recognized only to the extent that previous increases have been recognized.


~~14.~~16.	Assets classified as held for sale

As of ~~September~~June 30, ~~2017, two operating~~2019, three properties aggregating ~~634,328~~458,842 RSF ~~located in China, which represent our remaining real estate investments in Asia,~~ were classified as held for ~~sale. For additional information, refer to Note 3 – “Investments~~sale and did not meet the criteria for classification as discontinued operations in ~~Real Estate” to these unaudited~~our consolidated financial statements.

The following is a summary of net assets as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, for our ~~remaining~~ real estate investments ~~in Asia~~ that were classified as held for sale as of each respective date (in thousands):



	June 30, 2019			December 31, 2018
Total assets	$	52,603		$	31,260
Total liabilities	(1,910		)	(2,476		)
Total accumulated other comprehensive income	728			768
Net assets classified as held for sale	$	51,421		$	29,552

September 30, 2017 December 31, 2016
Total assets $ 41,658
$ 39,643
Total liabilities (2,480 ) (2,342 )
Total accumulated other comprehensive (income) loss (1,082 ) 828
Net assets classified as held for sale – Asia $ 38,096
$ 38,129


17.	Subsequent events

Issuance of unsecured senior notes payable

In July 2019, we issued $1.25 billion of unsecured senior notes. The net proceeds were primarily used to refinance an aggregate $950.0 million of unsecured senior notes payable comprising $400.0 million of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer and subsequent call for redemption. The remaining net proceeds were used to make a partial repayment of $175.0 million on our unsecured senior bank term loan balance and to reduce the outstanding balance of our unsecured senior line of credit. Refer to Note 10 – “Secured and Unsecured Senior Debt” to these unaudited consolidated financial statements for further discussion.

Acquisitions

In July 2019, we acquired a 55% interest in 4224 and 4242 Campus Point Court and 10210 Campus Point Drive, located adjacent to our Campus Pointe by Alexandria campus in our University Town Center submarket of San Diego, for $140.3 million. The joint venture will include three operating properties aggregating 314,092 RSF, which are currently 83% occupied by multiple tenants. The properties, which have future value-creation opportunities, will be integrated into the current campus to create a 1.9 million RSF mega campus.


~~15.~~18.	Condensed consolidating financial information

Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under the Securities Act of 1933, as amended, that are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or the “Guarantor Subsidiary”), an indirectly 100% owned subsidiary of the Issuer. The Issuer’s other subsidiaries, including, but not limited to, the subsidiaries that own substantially all of its real estate (collectively, the “Combined Non-Guarantor Subsidiaries”), will not provide a guarantee of such securities, including the subsidiaries that are partially or 100% owned by the LP. The following condensed consolidating financial information presents the condensed consolidating balance sheets as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016,~~2018, the condensed consolidating statements of income and comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, and the condensed consolidating statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, for the Issuer, the Guarantor Subsidiary, and the Combined Non-Guarantor Subsidiaries, as well as the eliminations necessary to arrive at the information on a consolidated basis. In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Issuer’s interests in the Guarantor Subsidiary and the Combined Non-Guarantor Subsidiaries, (ii) the Guarantor Subsidiary’s interests in the Combined Non-Guarantor Subsidiaries, and (iii) the Combined Non-Guarantor Subsidiaries’ interests in the Guarantor Subsidiary, where applicable, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All intercompany balances and transactions between the Issuer, the Guarantor Subsidiary, and the Combined Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.” All assets and liabilities have been allocated to the Issuer, the Guarantor Subsidiary, and the Combined Non-Guarantor Subsidiaries generally based on legal entity ownership.


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Balance Sheet

as of ~~September~~June 30, ~~2017~~2019

(In thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc. (Issuer)		Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)		Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated		Alexandria Real Estate Equities, Inc. (Issuer)		Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)		Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Investments in real estate	$	—	$	—	$	10,046,521	$	—		$	10,046,521	$	—	$	—	$	12,872,824	$	—		$	12,872,824
Investments in unconsolidated real estate JVs	—		—		33,692		—			33,692		—		—		334,162		—			334,162
Cash and cash equivalents	37,916		—		80,646		—			118,562		89,615		—		109,294		—			198,909
Restricted cash	138		—		27,575		—			27,713		194		—		39,122		—			39,316
Tenant receivables	—		—		9,899		—			9,899		—		—		9,228		—			9,228
Deferred rent	—		—		402,353		—			402,353		—		—		585,082		—			585,082
Deferred leasing costs	—		—		208,265		—			208,265		—		—		247,468		—			247,468
Investments	—		1,689		483,573		—			485,262		—		1,203		1,056,651		—			1,057,854
Investments in and advances to affiliates	9,158,536		8,276,072		168,449		(17,603,057		)	—		13,719,957		12,260,877		249,708		(26,230,542		)	—
Other assets	48,095		—		164,961		—			213,056		55,481		—		639,146		—			694,627
Total assets	$	9,244,685	$	8,277,761	$	11,625,934	$	(17,603,057	)	$	11,545,323	$	13,865,247	$	12,262,080	$	16,142,685	$	(26,230,542	)	$	16,039,470
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	—	$	—	$	1,153,890	$	—		$	1,153,890	$	—	$	—	$	354,186	$	—		$	354,186
Unsecured senior notes payable	2,801,290		—		—		—			2,801,290		5,140,914		—		—		—			5,140,914
Unsecured senior line of credit	314,000		—		—		—			314,000		514,000		—		—		—			514,000
Unsecured senior bank term loans	547,860		—		—		—			547,860
Unsecured senior bank term loan												347,105		—		—		—			347,105
Accounts payable, accrued expenses, and tenant security deposits	91,163		—		648,907		—			740,070		119,829		—		1,037,588		—			1,157,417
Dividends payable	83,402		—		—		—			83,402		114,379		—		—		—			114,379
Total liabilities	3,837,715		—		1,802,797		—			5,640,512		6,236,227		—		1,391,774		—			7,628,001
Redeemable noncontrolling interests	—		—		11,418		—			11,418		—		—		10,994		—			10,994
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	5,406,970		8,277,761		9,325,296		(17,603,057		)	5,406,970		7,629,020		12,262,080		13,968,462		(26,230,542		)	7,629,020
Noncontrolling interests	—		—		486,423		—			486,423		—		—		771,455		—			771,455
Total equity	5,406,970		8,277,761		9,811,719		(17,603,057		)	5,893,393		7,629,020		12,262,080		14,739,917		(26,230,542		)	8,400,475
Total liabilities, noncontrolling interests, and equity	$	9,244,685	$	8,277,761	$	11,625,934	$	(17,603,057	)	$	11,545,323	$	13,865,247	$	12,262,080	$	16,142,685	$	(26,230,542	)	$	16,039,470


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Balance Sheet

as of December 31, ~~2016~~2018

(In thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc. (Issuer)		Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)		Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Investments in real estate	$	—	$	—	$	11,913,693	$	—		$	11,913,693
Investments in unconsolidated real estate JVs	—		—		237,507		—			237,507
Cash and cash equivalents	119,112		—		115,069		—			234,181
Restricted cash	193		—		37,756		—			37,949
Tenant receivables	—		—		9,798		—			9,798
Deferred rent	—		—		530,237		—			530,237
Deferred leasing costs	—		—		239,070		—			239,070
Investments	—		1,262		891,002		—			892,264
Investments in and advances to affiliates	12,235,577		10,949,631		222,983		(23,408,191		)	—
Other assets	56,353		—		313,904		—			370,257
Total assets	$	12,411,235	$	10,950,893	$	14,511,019	$	(23,408,191	)	$	14,464,956
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	—	$	—	$	630,547	$	—		$	630,547
Unsecured senior notes payable	4,292,293		—		—		—			4,292,293
Unsecured senior line of credit	208,000		—		—		—			208,000
Unsecured senior bank term loan	347,415		—		—		—			347,415
Accounts payable, accrued expenses, and tenant security deposits	111,282		—		870,425		—			981,707
Dividends payable	110,280		—		—		—			110,280
Total liabilities	5,069,270		—		1,500,972		—			6,570,242
Redeemable noncontrolling interests	—		—		10,786		—			10,786
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	7,341,965		10,950,893		12,457,298		(23,408,191		)	7,341,965
Noncontrolling interests	—		—		541,963		—			541,963
Total equity	7,341,965		10,950,893		12,999,261		(23,408,191		)	7,883,928
Total liabilities, noncontrolling interests, and equity	$	12,411,235	$	10,950,893	$	14,511,019	$	(23,408,191	)	$	14,464,956

Alexandria
Real Estate
Equities, Inc.
(Issuer)

Alexandria
Real Estate
Equities, L.P.
(Guarantor
Subsidiary)

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Assets
Investments in real estate $ —
$ —
$ 9,077,972
$ —
$ 9,077,972
Investments in unconsolidated real estate JVs —
—
50,221
—
50,221
Cash and cash equivalents 30,603
—
94,429
—
125,032
Restricted cash 102
—
16,232
—
16,334
Tenant receivables —
—
9,744
—
9,744
Deferred rent —
—
335,974
—
335,974
Deferred leasing costs —
—
195,937
—
195,937
Investments —
4,440
338,037
—
342,477
Investments in and advances to affiliates 8,152,965
7,444,919
151,594
(15,749,478 ) —
Other assets 45,646
—
155,551
—
201,197
Total assets $ 8,229,316
$ 7,449,359
$ 10,425,691
$ (15,749,478 ) $ 10,354,888
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable $ —
$ —
$ 1,011,292
$ —
$ 1,011,292
Unsecured senior notes payable 2,378,262
—
—
—
2,378,262
Unsecured senior line of credit 28,000
—
—
—
28,000
Unsecured senior bank term loans 746,471
—
—
—
746,471
Accounts payable, accrued expenses, and tenant security deposits 104,044
—
627,627
—
731,671
Dividends payable 76,743
—
171
—
76,914
Total liabilities 3,333,520
—
1,639,090
—
4,972,610
Redeemable noncontrolling interests —
—
11,307
—
11,307
Alexandria Real Estate Equities, Inc.’s stockholders’ equity 4,895,796
7,449,359
8,300,119
(15,749,478 ) 4,895,796
Noncontrolling interests —
—
475,175
—
475,175
Total equity 4,895,796
7,449,359
8,775,294
(15,749,478 ) 5,370,971
Total liabilities, noncontrolling interests, and equity $ 8,229,316
$ 7,449,359
$ 10,425,691
$ (15,749,478 ) $ 10,354,888


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Statement of Income

for the Three Months Ended ~~September~~June 30, ~~2017~~2019

(In thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated			Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Rental	$	—		$	—		$	216,021		$	—		$	216,021
Tenant recoveries	—			—			67,058			—			67,058
Income from rentals																$	—		$	—		$	371,618		$	—		$	371,618
Other income	3,230			(2,589		)	5,736			(4,086		)	2,291			5,198			—			2,531			(5,491		)	2,238
Total revenues	3,230			(2,589		)	288,815			(4,086		)	285,370			5,198			—			374,149			(5,491		)	373,856

Expenses:
Rental operations	—			—			83,469			—			83,469			—			—			105,689			—			105,689
General and administrative	16,598			—			5,124			(4,086		)	17,636			26,453			—			5,472			(5,491		)	26,434
Interest	23,958			—			7,073			—			31,031			40,877			—			2,002			—			42,879
Depreciation and amortization	1,787			—			106,001			—			107,788			1,752			—			132,685			—			134,437
Total expenses	42,343			—			201,667			(4,086		)	239,924			69,082			—			245,848			(5,491		)	309,439

Equity in earnings of unconsolidated real estate JVs	—			—			14,100			—			14,100			—			—			1,262			—			1,262
Equity in earnings of affiliates	92,886			88,900			1,702			(183,488		)	—			142,651			118,947			2,338			(263,936		)	—
Investment (loss) income																—			(29		)	21,529			—			21,500
Net income	53,773			86,311			102,950			(183,488		)	59,546			78,767			118,918			153,430			(263,936		)	87,179
Net income attributable to noncontrolling interests	—			—			(5,773		)	—			(5,773		)	—			—			(8,412		)	—			(8,412		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	53,773			86,311			97,177			(183,488		)	53,773			78,767			118,918			145,018			(263,936		)	78,767
Dividends on preferred stock	(1,302		)	—			—			—			(1,302		)	(1,005		)	—			—			—			(1,005		)
Net income attributable to unvested restricted stock awards	(1,198		)	—			—			—			(1,198		)	(1,432		)	—			—			—			(1,432		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	51,273		$	86,311		$	97,177		$	(183,488	)	$	51,273		$	76,330		$	118,918		$	145,018		$	(263,936	)	$	76,330


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Statement of Income

for the Three Months Ended ~~September~~June 30, ~~2016~~2018

(In thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Income from rentals	$	—		$	—		$	322,794		$	—		$	322,794
Other income	4,965			—			3,112			(5,837		)	2,240
Total revenues	4,965			—			325,906			(5,837		)	325,034

Expenses:
Rental operations	—			—			91,908			—			91,908
General and administrative	23,001			—			5,775			(5,837		)	22,939
Interest	32,139			—			5,958			—			38,097
Depreciation and amortization	1,647			—			117,205			—			118,852
Impairment on real estate	—			—			6,311			—			6,311
Total expenses	56,787			—			227,157			(5,837		)	278,107

Equity in earnings of unconsolidated real estate JVs	—			—			1,090			—			1,090
Equity in earnings of affiliates	106,552			98,795			1,943			(207,290		)	—
Investment (loss) income	—			(97		)	12,627			—			12,530
Net income	54,730			98,698			114,409			(207,290		)	60,547
Net income attributable to noncontrolling interests	—			—			(5,817		)	—			(5,817		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	54,730			98,698			108,592			(207,290		)	54,730
Dividends on preferred stock	(1,302		)	—			—			—			(1,302		)
Net income attributable to unvested restricted stock awards	(1,412		)	—			—			—			(1,412		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	52,016		$	98,698		$	108,592		$	(207,290	)	$	52,016

Alexandria
Real Estate
Equities, Inc.
(Issuer)

Alexandria
Real Estate
Equities, L.P.
(Guarantor
Subsidiary)

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Revenues:
Rental $ —
$ —
$ 166,591
$ —
$ 166,591
Tenant recoveries —
—
58,681
—
58,681
Other income 1,077
91
7,852
(3,913 ) 5,107
Total revenues 1,077
91
233,124
(3,913 ) 230,379

Expenses:
Rental operations —
—
72,002
—
72,002
General and administrative 15,568
—
4,199
(3,913 ) 15,854
Interest 21,318
—
4,532
—
25,850
Depreciation and amortization 1,722
—
75,411
—
77,133
Impairment of real estate —
—
8,114
—
8,114
Loss on early extinguishment of debt 3,230
—
—
—
3,230
Total expenses 41,838
—
164,258
(3,913 ) 202,183

Equity in earnings of unconsolidated real estate JVs —
—
273
—
273
Equity in earnings of affiliates 65,236
55,532
1,100
(121,868 ) —
Gain on sale of real estate – land parcels —
—
90
—
90
Net income 24,475
55,623
70,329
(121,868 ) 28,559
Net income attributable to noncontrolling interests —
—
(4,084 ) —
(4,084 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders 24,475
55,623
66,245
(121,868 ) 24,475
Dividends on preferred stock (5,007 ) —
—
—
(5,007 )
Preferred stock redemption charge (13,095 ) —
—
—
(13,095 )
Net income attributable to unvested restricted stock awards (921 ) —
—
—
(921 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 5,452
$ 55,623
$ 66,245
$ (121,868 ) $ 5,452


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Statement of Income

for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019

(In thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated			Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)		Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Rental	$	—		$	—		$	635,156		$	—		$	635,156
Tenant recoveries	—			—			188,874			—			188,874
Income from rentals																$	—		$	—	$	726,367		$	—		$	726,367
Other income	11,337			(2,577		)	10,199			(13,683		)	5,276			10,232			—		6,946			(10,847		)	6,331
Total revenues	11,337			(2,577		)	834,229			(13,683		)	829,306			10,232			—		733,313			(10,847		)	732,698

Expenses:
Rental operations	—			—			237,536			—			237,536			—			—		207,190			—			207,190
General and administrative	55,272			—			14,510			(13,683		)	56,099			50,803			—		11,155			(10,847		)	51,111
Interest	72,907			—			19,656			—			92,563			76,706			—		5,273			—			81,979
Depreciation and amortization	5,217			—			303,852			—			309,069			3,415			—		265,109			—			268,524
Impairment of real estate	—			—			203			—			203
Loss on early extinguishment of debt	670			—			—			—			670			—			—		7,361			—			7,361
Total expenses	134,066			—			575,757			(13,683		)	696,140			130,924			—		496,088			(10,847		)	616,165

Equity in earnings of unconsolidated real estate JVs	—			—			15,050			—			15,050			—			—		2,408			—			2,408
Equity in earnings of affiliates	252,434			242,345			4,694			(499,473		)	—			328,618			219,918		4,323			(552,859		)	—
Gain on sales of real estate – rental properties	—			—			270			—			270
Gain on sales of real estate – land parcels	—			—			111			—			111
Investment income																—			113		104,943			—			105,056
Net income	129,705			239,768			278,597			(499,473		)	148,597			207,926			220,031		348,899			(552,859		)	223,997
Net income attributable to noncontrolling interests	—			—			(18,892		)	—			(18,892		)	—			—		(16,071		)	—			(16,071		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	129,705			239,768			259,705			(499,473		)	129,705			207,926			220,031		332,828			(552,859		)	207,926
Dividends on preferred stock	(6,364		)	—			—			—			(6,364		)	(2,031		)	—		—			—			(2,031		)
Preferred stock redemption charge	(11,279		)	—			—			—			(11,279		)	(2,580		)	—		—			—			(2,580		)
Net income attributable to unvested restricted stock awards	(3,498		)	—			—			—			(3,498		)	(3,134		)	—		—			—			(3,134		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	108,564		$	239,768		$	259,705		$	(499,473	)	$	108,564		$	200,181		$	220,031	$	332,828		$	(552,859	)	$	200,181


~~15.~~18.	Condensed consolidating financial information (continued)

Condensed Consolidating Statement of Income

for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2018

(In thousands)

(Unaudited)



	Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)		Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Income from rentals	$	—		$	—	$	640,449		$	—		$	640,449
Other income	9,089			—		6,037			(10,402		)	4,724
Total revenues	9,089			—		646,486			(10,402		)	645,173

Expenses:
Rental operations	—			—		183,679			—			183,679
General and administrative	44,891			—		10,871			(10,402		)	45,360
Interest	63,234			—		11,778			—			75,012
Depreciation and amortization	3,324			—		229,747			—			233,071
Impairment of real estate	—			—		6,311			—			6,311
Total expenses	111,449			—		442,386			(10,402		)	543,433

Equity in earnings of unconsolidated real estate JVs	—			—		2,234			—			2,234
Equity in earnings of affiliates	292,720			197,677		3,897			(494,294		)	—
Investment income	—			376		97,715			—			98,091
Net income	190,360			198,053		307,946			(494,294		)	202,065
Net income attributable to noncontrolling interests	—			—		(11,705		)	—			(11,705		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	190,360			198,053		296,241			(494,294		)	190,360
Dividends on preferred stock	(2,604		)	—		—			—			(2,604		)
Net income attributable to unvested restricted stock awards	(2,765		)	—		—			—			(2,765		)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	184,991		$	198,053	$	296,241		$	(494,294	)	$	184,991

Alexandria
Real Estate
Equities, Inc.
(Issuer)

Alexandria
Real Estate
Equities, L.P.
(Guarantor
Subsidiary)

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Revenues:
Rental $ —
$ —
$ 486,505
$ —
$ 486,505
Tenant recoveries —
—
165,385
—
165,385
Other income 7,086
115
24,091
(10,638 ) 20,654
Total revenues 7,086
115
675,981
(10,638 ) 672,544

Expenses:
Rental operations —
—
205,164
—
205,164
General and administrative 45,224
—
11,840
(10,638 ) 46,426
Interest 60,729
—
15,001
—
75,730
Depreciation and amortization 4,997
—
213,171
—
218,168
Impairment of real estate —
—
193,237
—
193,237
Loss of early extinguishment of debt 3,230
—
—
—
3,230
Total expenses 114,180
—
638,413
(10,638 ) 741,955

Equity in losses of unconsolidated real estate JVs —
—
(270 ) —
(270 )
Equity in earnings (losses) of affiliates 25,889
(6,282 ) (98 ) (19,509 ) —
Gain on sale of real estate – land parcels —
—
90
—
90
Net (loss) income (81,205 ) (6,167 ) 37,290
(19,509 ) (69,591 )
Net income attributable to noncontrolling interests —
—
(11,614 ) —
(11,614 )
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s stockholders (81,205 ) (6,167 ) 25,676
(19,509 ) (81,205 )
Dividends on preferred stock (16,388 ) —
—
—
(16,388 )
Preferred stock redemption charge (25,614 ) —
—
—
(25,614 )
Net income attributable to unvested restricted stock awards (2,807 ) —
—
—
(2,807 )
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ (126,014 ) $ (6,167 ) $ 25,676
$ (19,509 ) $ (126,014 )

~~(1) Upon completion of 13 projects pursuing LEED~~^® ~~certification.~~

~~(2) Upon completion of one project pursuing Fitwel certification.~~

Acquisitions

Our real estate asset acquisitions during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, consisted of the following (dollars in thousands):

Property Submarket/Market Date of Purchase Number of Properties Anticipated Use Occupancy Square Footage Purchase Price
Operating Redevelopment Future Development

First half of 2017 acquisitions:
325 Binney Street Cambridge/Greater Boston 3/29/17 — Office/lab, residential N/A —
—
208,965
$ 80,250

88 Bluxome Street Mission Bay/SoMa/San Francisco 1/10/17 1 Office/lab 100% 232,470
—
1,070,925
130,000

960 Industrial Road Greater Stanford/San Francisco 5/17/17 1 Office/lab 100% 195,000
—
500,000
64,959

825 and 835 Industrial Road Greater Stanford/San Francisco 6/1/17 — Office/lab N/A —
—
530,000
85,000

1450 Page Mill Road ⁽¹⁾
Greater Stanford/San Francisco 6/1/17 1 Office 100% 77,634
—
—
85,300

3050 Callan Road and Vista Wateridge
Torrey Pines/Sorrento Mesa/
San Diego
3/24/17 — Office/lab N/A —
—
229,000
8,250

5 Laboratory Drive Research Triangle Park/RTP 5/25/17 1 Office/lab N/A —
175,000
—
8,750

4 505,104
175,000
2,538,890
462,509

Third quarter of 2017 acquisitions:
266 and 275 Second Avenue Route 128/Greater Boston 7/11/17 2 Office/lab 100% 144,584
59,173
—
71,000

201 Haskins Way
South San Francisco/
San Francisco
9/11/17 1 Office/lab 100% 23,840
—
280,000
33,000

9900 Medical Center Drive Rockville/Maryland 8/4/17 1 Office/lab N/A —
45,039
—
6,700

4 168,424
104,212
280,000
110,700

Pending:
1455 and 1515 Third Street
(acquisition of remaining 49% interest)
Mission Bay/SoMa/San Francisco 11/10/16 2 Ground lease 100% 422,980
—
—
37,800
⁽²⁾
Other 60,000

279,212
2,818,890
$ 671,009



Property	Submarket/Market	Date of Purchase	Number of Properties	Operating Occupancy			Square Footage				Unlevered Yields				Purchase Price
							Future Development	Active Redevelopment	Operating With Future Development/ Redevelopment	Operating	Initial Stabilized		Initial Stabilized (Cash)
							Future Development	Active Redevelopment	Operating With Future Development/ Redevelopment	Operating	Initial Stabilized		Initial Stabilized (Cash)
Value-creation
10 Necco Street	Seaport Innovation District/Greater Boston	3/26/19	—	N/A			175,000	—	—	—	⁽¹	⁾	⁽¹	⁾		81,100
Other		7/10/19	—	N/A			135,938	—	—	—	⁽¹	⁾	⁽¹	⁾		25,000
			—				310,938	—	—	—						106,100
Operating with value-creation
5 Necco Street	Seaport Innovation District/Greater Boston	5/9/19⁽²⁾	1	87	%		—	—	—	87,163	5.2	%	5.1	%		252,000
15 Necco Street	Seaport Innovation District/Greater Boston	5/9/19⁽²⁾	—	N/A			293,000	—	—	—	⁽¹	⁾	⁽¹	⁾		252,000
601 Dexter Avenue North	Lake Union/Seattle	6/18/19	1	100	%		188,400	—	18,680	—	⁽¹	⁾	⁽¹	⁾		28,500
3911 and 3931 Sorrento Valley Boulevard	Sorrento Valley/ San Diego	1/9/19	2	100	%		—	—	53,220	—	7.2	%	6.6	%		23,250
4075 Sorrento Valley Boulevard	Sorrento Valley/ San Diego	5/13/19	1	100	%		149,000	—	40,000	—	⁽¹	⁾	⁽¹	⁾		16,000
Other		2/6/19	4				—	—	75,864	—						39,150
			9				630,400	—	187,764	87,163						358,900
Operating
4224/4242 Campus Point Court and 10210 Campus Point Drive (55% interest in consolidated JV)	University Town Center/ San Diego	7/9/19	3	83	%	⁽³⁾	—	—	—	314,092	6.9	%	6.0	%		140,250
3170 Porter Drive	Greater Stanford/ San Francisco	1/10/19	1	100	%		—	—	—	98,626	7.5	%	5.1	%		100,250
Shoreway Science Center	Greater Stanford/ San Francisco	1/10/19	2	100	%		—	—	—	82,462	7.2	%	5.5	%		73,200
260 Townsend Street	Mission Bay/SoMa/ San Francisco	3/14/19	1	100	%		—	—	—	66,682	7.4	%	5.8	%		66,000
Other		7/12/19	1	100	%		—	—	—	30,680						13,200
			8				—	—	—	592,542						392,900
Total acquisitions			17				941,338	—	187,764	679,705						857,900

10260 Campus Point Drive and 4161 Campus Point Court	University Town Center/San Diego	1/2/19	2	100	%		N/A	N/A	N/A	N/A	⁽⁴	⁾	⁽⁴	⁾		65,000
Pending	Various															627,100
Total															$	1,550,000

~~We expect to provide total estimated costs at completion and related yields of development and redevelopment projects in the future.~~

(1)

~~Technology office building, subject~~We expect to ~~a 51-year ground lease, located~~provide total estimated costs and related yields in ~~Stanford Research Park, a collaborative business community that supports innovative companies in their research and~~the future subsequent to the commencement of development ~~pursuits. This recently constructed building is 100% leased to Infosys Limited for 12 years, and we expect initial stabilized yields of 7.3% and 5.8% (cash basis).~~or redevelopment.


(2)	~~Acquisition~~The seller accepted our offer on April 30, 2019, and we completed the acquisition of 5 and 15 Necco Street on May 9, 2019. The 5 Necco building is 87% leased for 12 years and expected to be occupied later in 2019. The remaining 13% of RSF is targeted for retail space.

(3)

The property is currently 83% occupied and a lease for 10% of the ~~remaining 49% interest in our unconsolidated real estate joint venture with Uber Technologies, Inc. (“Uber”) was completed in November 2016. A portion~~property will commence during the fourth quarter of ~~the consideration is payable in three equal installments~~2019 upon ~~Uber’s~~ completion of ~~construction milestones. The first installment~~renovations, increasing occupancy to 93%.


(4)	Refer to the “New Class A Development and Redevelopment Properties: Summary of $18.9 million was paid during the three months ended June 30, 2017. We expect the second and third installments to be paid during the three months ending December 31, 2017, and March 31, 2018, respectively.Pipeline” section within this Item 2 for additional information.

Real estate asset sales

Our completed and pending real estate asset sales ~~completed~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, consisted of the following (dollars in ~~thousands)~~thousands, except for sales price per RSF):

Net Operating
Income ⁽¹⁾

Net Operating Income
(Cash Basis) ⁽¹⁾
Contractual Sales Price Gain
Property/Market/Submarket Date of Sale RSF
6146 Nancy Ridge Drive/San Diego/Sorrento Mesa 1/6/17 21,940
N/A N/A $ 3,000
$ 270

1401/1413 Research Boulevard/Maryland/Rockville ⁽²⁾
5/17/17 90,000
N/A N/A 7,937
111

360 Longwood Avenue/Greater Boston/Longwood Medical Area ⁽³⁾
7/6/17 203,090
$ 4,313
$ 4,168
65,701
14,106

$ 76,638
$ 14,487

Capitalization Rate

(Cash Basis)⁽¹⁾

Sales Price per RSF

Consideration in Excess of Book Value⁽²⁾

Property

Submarket/Market

Date of Sale

Square Footage

Capitalization Rate

Sales Price

Sales of noncontrolling partial interests in core Class A properties:

75/125 Binney Street (sale of 60% noncontrolling interest)

Cambridge/Greater Boston

2/13/19

388,270

4.2%

4.3%

438,000

1,880

202,246

Pending⁽³⁾

San Francisco Bay Area

Pending

TBD

140,000

TBD

Pending⁽³⁾

San Diego

Pending

TBD

287,500

TBD

865,500

2019 guidance range

820,000

920,000


(1)	Capitalization rates are calculated based upon net operating income (cash basis), annualized for the quarter preceding the date on which the property is sold.


(2)	We retained or expect to retain control over and consolidate these joint ventures. For consolidated joint ventures, we account for the difference between the consideration received and the book value of the interest to be sold as an equity transaction, with no gain or loss recognized in earnings.


(3)	We expect to complete this partial interest sale during the third quarter of 2019.

Disciplined management of ground-up developments


(1)	Represents ~~annualized amounts for the quarter ended prior to the date of sale. Net operating income (cash basis) excludes straight-line rent and amortization of acquired below-market leases.~~developments commenced since January 1, 2008, comprising 33 projects aggregating 8.3 million RSF.


(2)	~~In May 2017, we completed the sale~~Represents developments commenced and delivered since January 1, 2008, comprising 23 projects aggregating 5.5 million RSF.

Sustainability


(1)	Upon completion of ~~a partial interest~~20 projects in ~~our land parcels at 1401/1413 Research Boulevard, located in our Rockville submarket. The sale was executed with a distinguished retail real estate developer~~process targeting LEED certification.

(2)

Carbon pollution reduction is for ~~the development~~directly managed buildings and reflects sum of a 90,000 RSF retail shopping center. We contributed the land parcels at a fair value of $7.9 million into a new entity, our partner contributed $3.9 million, and we received a distribution of $0.7 million. In addition, the real estate joint venture obtained a non-recourse secured construction loan with aggregate commitments of $25.0 million, which is expected to fund the remaining construction costs to complete the project, and we do not expect to make additional equity contributions to the real estate joint venture.annual like-for-like progress since 2015.


(3)	~~Represents the sale~~Upon completion of ~~a condominium interest for 49%~~three projects in process targeting WELL certification.

(4)

Upon completion of ~~the building RSF, or 203,090 RSF,~~10 projects in our unconsolidated real estate joint venture property. Net operating income, net operating income (cash basis), contractual sales price, and gain represent our 27.5% share related to the sale of the condominium interest. In August 2017, the unconsolidated real estate joint venture entered into a mortgage loan agreement, secured by the remaining interest in the property. During the nine months ended September 30, 2017, we received a cash distribution of $38.8 million from the joint venture, primarily from the condominium sale and loan refinancing.process targeting Fitwel certification.

~~Disciplined management of ground-up development~~

~~External growth – value-creation~~New Class A development and redevelopment ~~of new Class A properties placed into service in the last 12 months~~properties: recent deliveries



~~100 Binney Street~~	~~360 Longwood Avenue~~	~~1455 and 1515 Third Street~~	~~ARE Spectrum~~
~~Greater Boston/Cambridge~~	~~Greater Boston/Longwood Medical Area~~	~~San Francisco/Mission Bay/SoMa~~	~~San Diego/Torrey Pines~~
~~341,776 RSF~~	~~413,799 RSF~~	~~422,980 RSF~~	~~165,938 RSF~~
~~Bristol-Myers Squibb Company~~ ~~Facebook, Inc.~~	~~Dana-Farber Cancer Institute, Inc.~~ ~~The Children’s Hospital Corporation~~ ~~Brigham and Women’s Hospital~~	~~Uber Technologies, Inc.~~	~~The Medicines Company~~ ~~Celgene Corporation~~ ~~Wellspring Biosciences LLC~~

399 Binney Street

266 and 275 Second Avenue

279 East Grand Avenue

681 Gateway Boulevard

Greater Boston/Cambridge

Greater Boston/Route 128

San Francisco/South San Francisco

164,000 RSF

203,757 RSF

211,405 RSF

142,400 RSF

In Service:

123,403

RSF

100% Occupied

40,137

RSF

100% Occupied

164,206

RSF

100% Occupied

142,400

RSF

89.2% Occupied



~~10290 Campus Point Drive~~	~~5200 Illumina Way, Parking Structure~~	~~4796 Executive Drive~~	~~400 Dexter Avenue North~~
~~San Diego/University Town Center~~	~~San Diego/University Town Center~~	~~San Diego/University Town Center~~	~~Seattle/Lake Union~~
~~305,006 RSF~~	~~N/A~~	~~61,755 RSF~~	~~258,896 RSF~~
~~Eli Lilly and Company~~	~~Illumina, Inc.~~	~~Otonomy, Inc.~~	~~Juno Therapeutics, Inc.~~ ~~ClubCorp Holdings, Inc.~~

Alexandria PARC

188 East Blaine Street

Alexandria Center^® for AgTech, Phase I

San Francisco/Greater Stanford

Seattle/Lake Union

Research Triangle/Research Triangle

197,498 RSF

198,000 RSF

175,000 RSF

In Service:

48,547

RSF

96.8% Occupied

117,779

RSF

100% Occupied

129,946

RSF

100% Occupied

RSF presented represents RSF for the ~~cumulative~~total project, unless otherwise indicated. Refer to “New Class A Development and Redevelopment Properties: Projected 2019-2020 Deliveries and Pre-Construction Projects” sections of this Item 2 for information on the RSF ~~that have been placed into service.~~in service and under construction, if applicable.

~~External growth – value-creation~~

New Class A development and redevelopment ~~of new Class A properties placed into service in the last 12 months~~properties: recent deliveries (continued)

The following table presents value-creation development and redevelopment of new Class A properties placed into service ~~during the 12 months ended September 30, 2017~~ (dollars in thousands):

Property/Market/Submarket Our Ownership Interest Date Delivered RSF in Service Total Project
Unlevered Yields ⁽¹⁾
Prior to 10/1/16 Placed into Service Total Average Cash Initial Stabilized Cash Basis Initial Stabilized
4Q16 1Q17 2Q17 3Q17 Leased RSF Investment
Consolidated development projects
100 Binney Street/Greater Boston/Cambridge 100% 9/21/17 —
—
—
—
341,776
341,776
100% 432,931 $ 439,000
⁽²⁾
8.5 %
⁽²⁾
7.4 %
⁽²⁾
8.2 %
⁽²⁾
1455 and 1515 Third Street/
San Francisco/Mission Bay/SoMa
100% 11/10/16 —
422,980
—
—
—
422,980
100% 422,980 $ 155,000
14.5 % 7.0 % 14.4 %
ARE Spectrum/San Diego/
Torrey Pines
100% Various 102,938
—
31,336
31,664
—
165,938
98% 336,461 $ 278,000
6.9 % 6.1 % 6.4 %
5200 Illumina Way, Parking Structure/San Diego/
University Town Center
100% 5/15/17 —
—
—
N/A
—
N/A
100% N/A $ 60,000
7.0 % 7.0 % 7.0 %
4796 Executive Drive/
San Diego/
University Town Center
100% 12/1/16 —
61,755
—
—
—
61,755
100% 61,755 $ 41,000
8.0 % 7.0 % 7.4 %
400 Dexter Avenue North/Seattle/
Lake Union
100% Various —
—
241,276
—
17,620
258,896
89% 290,111 $ 232,000
7.3 % 6.9 % 7.2 %

Consolidated redevelopment projects
10290 Campus Point Drive/
San Diego/
University Town Center
55% 12/2/16 —
305,006
—
—
—
305,006
100% 305,006 $ 231,000
7.7 % 6.8 % 7.1 %

Unconsolidated joint venture development project
360 Longwood Avenue/
Greater Boston/
Longwood Medical Area ⁽³⁾
27.5% Various 313,407
100,392
—
—
—
413,799
80% 413,799
⁽³⁾
$ 108,965
8.2 % 7.3 % 7.8 %
Total 416,345
890,133
272,612
31,664
359,396
1,970,150



Property/Market/Submarket	Our Ownership Interest	Date Delivered	RSF Placed Into Service					Occupancy Percentage⁽¹⁾	Total Project			Unlevered Yields
			RSF Placed Into Service						Total Project			Initial Stabilized			Initial Stabilized (Cash)
			Prior to 10/1/18	4Q18	1Q19	2Q19	Total		RSF	Investment		Initial Stabilized			Initial Stabilized (Cash)
Consolidated development projects
213 East Grand Avenue/San Francisco/ South San Francisco	100%	12/31/18	—	300,930	—	—	300,930	100%	300,930	$	256,600		7.4	%		6.5	%
399 Binney Street/Greater Boston/Cambridge	100%	1/25/19	—	—	123,403	—	123,403	100%	164,000	$	182,000		7.7	%		7.2	%
279 East Grand Avenue/San Francisco/ South San Francisco	100%	Various	—	—	139,810	24,396	164,206	100%	211,405	$	151,000		7.8	%		8.1	%
188 East Blaine Street/Seattle/Lake Union	100%	Various	—	—	90,615	27,164	117,779	100%	198,000	$	190,000		6.7	%		6.7	%

Consolidated redevelopment projects
266 and 275 Second Avenue/Greater Boston/ Route 128	100%	Various	27,315	—	—	12,822	40,137	100%	203,757	$	89,000		8.4	%		7.1	%
Alexandria Center^® for AgTech, Phase I/ Research Triangle/Research Triangle	100%	Various	45,143	8,380	2,614	73,809	129,946	100%	175,000	$	77,100		7.6	%		7.5	%
9625 Towne Centre Drive/San Diego/ University Town Center	50.1%	11/1/18	—	163,648	—	—	163,648	100%	163,648	$	89,000		7.3	%		7.3	%
9900 Medical Center Drive/Maryland/Rockville	100%	11/19/18	—	45,039	—	—	45,039	60.6%	45,039	$	16,800		8.6	%		8.4	%
681 Gateway Boulevard/San Francisco/ South San Francisco	100%	Various	—	—	66,000	76,400	142,400	89.2%	142,400	$	116,300		8.5	%		8.2	%
Alexandria PARC/San Francisco/Greater Stanford	100%	3/29/19	—	—	48,547	—	48,547	96.8%	197,498	$	152,600		7.3	%		6.2	%

Unconsolidated joint venture redevelopment project (RSF represents 100%; dollars and yields represent our share)
704 Quince Orchard Road/Maryland/Gaithersburg	56.8%	Various	—	4,762	10,250	3,470	18,482	100%	79,931	$	13,300		8.9	%		8.8	%
Total			72,458	522,759	481,239	218,061	1,294,517						7.6	%		7.1	%

Development and redevelopment projects recently placed into service will drive contractual growth in cash rents aggregating $70 million, of which $60 million will commence through the third quarter of 2018 ($10 million in the fourth quarter of 2017, $23 million in first quarter of 2018, $14 million in the second quarter of 2018, and $13 million in the third quarter of 2018).


(1)	~~Upon stabilization~~Relates to total operating RSF in service as of ~~the property.~~June 30, 2019.

~~(2)~~

Improvement of our initial yields is due to 18% overall cost savings. Cost savings were driven primarily by: (i) the redesign of space for Bristol-Myers Squibb Company drove 61% of the cost savings, (ii) competitive bidding and project management drove 25% of the cost savings, and (iii) a slightly lower amount of office/laboratory space and higher office space drove 14% of the cost savings. Adjacent is our originally disclosed total project investment and unlevered yields:


~~(3)~~	~~Refer to the “Real Estate Asset Sales” section within this Item 2 for additional information.~~

Unlevered Yields
Investment Average Cash Initial Stabilized Cash Basis Initial Stabilized
Final $ 439,000
8.5 % 7.4 % 8.2 %
Original $ 535,000
7.9 % 7.0 % 7.7 %

~~Development of new~~New Class A development and redevelopment properties: ~~2017~~projected 2019 deliveries ~~(projects undergoing construction)~~



~~510 Townsend Street~~	~~505 Brannan Street, Phase I~~	~~ARE Spectrum~~	~~400 Dexter Avenue North~~
~~San Francisco/Mission Bay/SoMa~~	~~San Francisco/Mission Bay/SoMa~~	~~San Diego/Torrey Pines~~	~~Seattle/Lake Union~~
~~300,000 RSF~~	~~150,000 RSF~~	~~170,523 RSF~~	~~31,215 RSF~~
~~Stripe, Inc.~~	~~Pinterest, Inc.~~	~~Vertex Pharmaceuticals Incorporated~~	~~Negotiating/Juno Therapeutics, Inc.~~

~~The following table sets forth a summary of our development of new Class A properties anticipated to be delivered in 2017, as of September 30, 2017 (dollars in thousands):~~

Project RSF Percentage Occupancy
Property/Market/Submarket In Service CIP Total Leased Negotiating Total Initial Stabilized
ARE Spectrum/San Diego/Torrey Pines 165,938
170,523 336,461 98 % — % 98 % 1Q17 4Q17
400 Dexter Avenue North/Seattle/Lake Union 258,896
31,215 290,111 89 % 11 % 100 % 1Q17 4Q17
510 Townsend Street/San Francisco/Mission Bay/SoMa —
300,000 300,000 100 % — % 100 % 4Q17 4Q17
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa —
150,000 150,000 100 % — % 100 % 4Q17 4Q17
Total 424,834
651,738 1,076,572 97 % 2 % 99 %

Unlevered Yields
Property/Market/Submarket Our Ownership Interest Cost to Complete Total at Completion
Average
Cash
Initial Stabilized Cash Basis Initial Stabilized
In Service CIP
ARE Spectrum/San Diego/Torrey Pines 100% $ 103,170
$ 143,149
$ 31,681
$ 278,000
6.9 % 6.1 % 6.4 %
400 Dexter Avenue North/Seattle/Lake Union 100% 188,919
19,243
23,838
232,000
7.3 % 6.9 % 7.2 %
510 Townsend Street/San Francisco/Mission Bay/SoMa 100% —
187,133
50,867
238,000
7.9 % 7.0 % 7.2 %
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa 99.7% —
116,522
24,478
141,000
8.6 % 7.0 % 8.2 %
Total $ 292,089
$ 466,047
$ 130,864
$ 889,000

~~Development and redevelopment of new Class A properties: 2018 and 2019 deliveries (projects undergoing construction, and near-term projects undergoing marketing and pre-construction)~~



399 Binney Street	266 and 275 Second Avenue	1655 and ~~1715~~1725 Third Street	~~213 East Grand Avenue~~	279 East Grand Avenue
Greater Boston/Cambridge	Greater Boston/Route 128	San Francisco/Mission Bay/SoMa	San Francisco/South San Francisco	~~San Francisco/South San Francisco~~
164,000 SF	~~59,173~~ RSF	~~580,000 SF~~	~~300,930~~203,757 RSF	~~199,000 SF~~
~~Multi-Tenant~~593,765 RSF	~~Multi-Tenant~~	~~Uber Technologies, Inc.~~	~~Merck & Co., Inc.~~	~~Multi-Tenant~~211,405 RSF



~~681~~Menlo Gateway ~~Boulevard~~	~~9625 Towne Centre Drive~~ Alexandria Center^® – Long Island City	~~1818 Fairview Avenue~~188 East Blaine Street	~~9900 Medical Center Drive~~704 Quince Orchard Road	~~5 Laboratory Drive~~ Alexandria Center^® for AgTech, Phase I
San Francisco/Greater Stanford	New York City/New York City	Seattle/Lake Union	Maryland/Gaithersburg	Research Triangle/Research Triangle
772,983 RSF	176,759 RSF	198,000 RSF	79,931 RSF	175,000 RSF

Square footage represents development and redevelopment projects by period of projected initial occupancy. Multi-tenant projects may have occupancy by tenants over a period of time.

Refer to “New Class A Development and Redevelopment Properties: Recent Deliveries” and “New Class A Development and Redevelopment Properties: Projected 2019-2020 Deliveries and Pre-Construction Projects” sections within this Item 2 for information on the RSF in service and under construction.

New Class A development and redevelopment properties: projected 2020 deliveries and pre-construction projects



88 Bluxome Street	201 Haskins Way	Alexandria District for Science and Technology⁽¹⁾	3115 Merryfield Row	9880 Campus Point Drive and 4150 Campus Point Court
San Francisco/Mission Bay/SoMa	San Francisco/South San Francisco	San Francisco/Greater Stanford	San Diego/Torrey Pines	San Diego/University Town Center
1,070,925 RSF	315,000 RSF	526,178 RSF	87,000 RSF	269,102 RSF



1165 Eastlake Avenue East	9800 Medical Center Drive	9950 Medical Center Drive	8 Davis Drive	Alexandria Center^® for AgTech, Phase II
Seattle/Lake Union	Maryland/Rockville	Maryland/Rockville	Research Triangle/Research Triangle ~~Park/RTP~~	Research Triangle/Research Triangle
~~126,971~~100,086 RSF	~~163,648~~174,640 RSF	~~205,000~~84,264 RSF	~~45,039~~150,000 RSF	~~175,000~~160,000 RSF
~~Marketing~~	~~Takeda Pharmaceuticals~~ ~~Company Ltd.~~	~~Multi-Tenant~~	~~Multi-Tenant~~	~~Multi-Tenant~~

~~Development~~

Square footage represents development and redevelopment projects by period of ~~new~~projected initial occupancy. Multi-tenant projects may have occupancy by tenants over a period of time.


(1)	Campus includes 825 and 835 Industrial Road.

New Class A development and redevelopment properties: ~~2018~~projected 2019–2020 deliveries and ~~2019 deliveries (projects undergoing construction, and near-term~~pre-construction projects ~~undergoing marketing and pre-construction) (continued)~~

The following table sets forth a summary of our new Class A development and redevelopment ~~and anticipated near-term commencements of new Class A~~ properties projected to be delivered in ~~2018~~2019 and ~~2019,~~2020, as of ~~September~~June 30, ~~2017~~2019, and pre-construction projects (dollars in thousands):

Property/Market/Submarket Dev/Redev Project RSF Percentage
Project
Start ⁽¹⁾

Occupancy ⁽¹⁾
In Service CIP Total Leased Negotiating Total Initial Stabilized
Developments under construction
100 Binney Street/Greater Boston/Cambridge Dev 341,776
91,155
432,931
100 % — % 100 % 3Q15 3Q17 1Q18
213 East Grand Avenue/San Francisco/South San Francisco Dev —
300,930
300,930
100 % — % 100 % 2Q17 1Q19 2019
341,776
392,085
733,861
100 % — % 100 %

Redevelopments under construction
266 and 275 Second Avenue/Greater Boston/Route 128 Redev 144,584
59,173
203,757
84 % — % 84 % 3Q17 2Q18 2018
5 Laboratory Drive/Research Triangle Park/RTP Redev —
175,000
175,000
— % 39 % 39 % 2Q17 3Q18 2019
9625 Towne Centre Drive/San Diego/University Town Center Redev —
163,648
163,648
100 % — % 100 % 3Q15 4Q18 2018
9900 Medical Center Drive/Maryland/Rockville Redev —
45,039
45,039
— % — % — % 3Q17 2Q18 2018
144,584
442,860
587,444
57 % 12 % 69 %

Near-term projects undergoing marketing and pre-construction
399 Binney Street/Greater Boston/Cambridge Dev —
164,000
164,000
— % 73 %
⁽²⁾
73 % 4Q17 4Q18 2019
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa ⁽³⁾
Dev —
580,000
580,000
100 %
⁽³⁾
— % 100 % 2Q18 2019 2019
279 East Grand Avenue/San Francisco/South San Francisco Dev —
199,000
199,000
TBD TBD 2019 TBD
1818 Fairview Avenue East/Seattle/Lake Union Dev —
205,000
205,000
TBD 2019 TBD
681 Gateway Boulevard/San Francisco/South San Francisco ⁽⁴⁾
Redev 126,971
—
126,971
4Q18 2019 TBD
126,971
1,148,000
1,274,971



		Square Footage									Project Start/Projected Start
Property/Market/Submarket	Dev/Redev		CIP			Total Project	Percentage					Occupancy⁽¹⁾
Property/Market/Submarket	Dev/Redev	In Service	Construction	Pre-Construction	Total	Total Project	Leased		Leased/Negotiating			Initial	Stabilized
2019 deliveries: consolidated projects
266 and 275 Second Avenue/Greater Boston/Route 128	Redev	184,721	19,036	—	19,036	203,757	100	%	100	%	3Q17	1Q18	2019
Alexandria Center^® for AgTech, Phase I/Research Triangle/ Research Triangle	Redev	129,946	45,054	—	45,054	175,000	97		100		2Q17	2Q18	2019
399 Binney Street/Greater Boston/Cambridge	Dev	123,403	40,597	—	40,597	164,000	98		98		4Q17	1Q19	2019
279 East Grand Avenue/San Francisco/South San Francisco	Dev	164,206	47,199	—	47,199	211,405	100		100		4Q17	1Q19	2020
188 East Blaine Street/Seattle/Lake Union	Dev	117,779	80,221	—	80,221	198,000	67		79		2Q18	1Q19	2020
Alexandria Center^® – Long Island City/New York City/ New York City	Redev	36,661	140,098	—	140,098	176,759	21		21		4Q18	4Q19	2020

2019 deliveries: unconsolidated joint venture projects
(amounts represent 100%)
704 Quince Orchard Road/Maryland/Gaithersburg	Redev	38,304	41,627	—	41,627	79,931	48		67		1Q18	4Q18	2019
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa	Dev	—	593,765	—	593,765	593,765	100		100		1Q18	3Q19	3Q19
Menlo Gateway/San Francisco/Greater Stanford	Dev	251,995	520,988	—	520,988	772,983	100		100		4Q17	4Q19	4Q19
2019 deliveries		1,047,015	1,528,585	—	1,528,585	2,575,600	90	%	92	%

2020 projected deliveries: consolidated projects
9880 Campus Point Drive and 4150 Campus Point Court/ San Diego/University Town Center⁽²⁾	Dev	—	98,000	171,102	269,102	269,102	66	%	69	%	1Q19	2020	2022
9800 Medical Center Drive/Maryland/Rockville	Dev	—	174,640	—	174,640	174,640	82		82		1Q19	2020	2020
9950 Medical Center Drive/Maryland/Rockville	Dev	—	84,264	—	84,264	84,264	100		100		1Q19	2020	2020
201 Haskins Way/San Francisco/South San Francisco	Dev	—	315,000	—	315,000	315,000	—		29		2Q19	2020	2021
Alexandria District for Science and Technology/San Francisco/ Greater Stanford	Dev	—	526,178	—	526,178	526,178	37		46		2Q19	2020	2021
							74	%	79	%
2020 projected deliveries: marketing and pre-construction projects
Third quarter of 2019 acquisitions:
Pending acquisition/San Francisco Bay Area⁽³⁾	Redev	—	—	250,000	250,000	250,000					3Q19	2020	2021/22
Pending acquisition/San Francisco Bay Area⁽³⁾	Redev	—	—	92,000	92,000	92,000					3Q19	2020	2021
1165 Eastlake Avenue East/Seattle/Lake Union	Dev	—	—	100,086	100,086	100,086					4Q19	2020	2020
8 Davis Drive/Research Triangle/Research Triangle	Dev	—	—	150,000	150,000	150,000					4Q19	2020	2021
Alexandria Center^® for AgTech, Phase II/Research Triangle/ Research Triangle	Dev	—	—	160,000	160,000	160,000					4Q19	2020	2021
3115 Merryfield Row/San Diego/Torrey Pines	Dev	—	—	87,000	87,000	87,000					4Q19	2020	2021
2020 projected deliveries		—	1,198,082	1,010,188	2,208,270	2,208,270

Pre-leased pre-construction project:
88 Bluxome Street/San Francisco/Mission Bay/SoMa	Dev	—	—	1,070,925	1,070,925	1,070,925	58	%	58	%	2020	2022	TBD
Total		1,047,015	2,726,667	2,081,113	4,807,780	5,854,795

Our Ownership Interest Unlevered Yields
Property/Market/Submarket In Service CIP
Cost to
Complete

Total at
Completion
Average Cash Initial Stabilized Cash Basis Initial Stabilized

Developments under construction
100 Binney Street/Greater Boston/Cambridge 100% $ 280,163
$ 70,143
$ 88,694
$ 439,000
⁽⁵⁾
8.5 %
⁽⁵⁾
7.4 %
⁽⁵⁾
8.2 %
⁽⁵⁾
213 East Grand Avenue/San Francisco/South San Francisco 100% —
72,895
187,105
260,000
7.8 % 6.4 % 7.2 %
$ 280,163
$ 143,038
$ 275,799
$ 699,000
8.2 % 7.0 % 7.8 %
Redevelopments under construction
266 and 275 Second Avenue/Greater Boston/Route 128 $ 60,596
$ 9,646
TBD
5 Laboratory Drive/Research Triangle Park/RTP 100% —
10,461

9625 Towne Centre Drive/San Diego/University Town Center 100% —
31,880
$ 61,120
$ 93,000
7.9 % 7.0 % 7.0 %
9900 Medical Center Drive/Maryland/Rockville 100% —
7,237
TBD TBD TBD
TBD
TBD

100% $ 60,596
$ 59,224

Near-term projects undergoing marketing and pre-construction ⁽⁶⁾
Various $ —
$ 114,954


(1)	~~Anticipated project start dates and initial~~Initial occupancy dates are subject to leasing and/or market conditions. Multi-tenant projects may have occupancy by tenants over a period of time. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.


(2)	~~Represents executed letters of intent for three leases under negotiation aggregating 119,389 RSF.~~Refer to footnote 3 on the next page.

(3)

~~Executed an agreement to purchase a 10% interest in a joint venture with Uber and the Golden State Warriors. Our initial cash contribution is expected~~Pending acquisitions anticipated to be inundergoing construction during the ~~range from $35 million to $40 million, to be funded at closing~~third quarter of ~~the joint venture in 2018. The joint venture will acquire land with completed below-grade improvements~~2019. Refer to the ~~building foundation~~“Acquisitions” section within this Item 2 for additional information.

New Class A development and redevelopment properties: projected 2019–2020 deliveries and pre-construction projects (continued)



	Our Ownership Interest						Cost to Complete								Unlevered Yields
Property/Market/Submarket			In Service		CIP		Construction Loan			ARE Funding			Total at Completion		Initial Stabilized				Initial Stabilized (Cash)
Property/Market/Submarket			In Service		CIP		Construction Loan			ARE Funding			Total at Completion		Initial Stabilized				Initial Stabilized (Cash)
2019 deliveries: consolidated projects
266 and 275 Second Avenue/Greater Boston/Route 128	100	%	$	79,231	$	6,712		$	—		$	3,057	$	89,000		8.4	%			7.1	%
Alexandria Center^® for AgTech, Phase I/Research Triangle/Research Triangle⁽¹⁾	100	%	51,984		18,383			—			6,733		77,100			7.6				7.5
399 Binney Street/Greater Boston/Cambridge	100	%	135,088		42,258			—			4,654		182,000			7.7				7.2
279 East Grand Avenue/San Francisco/South San Francisco	100	%	85,655		42,369			—			22,976		151,000			7.8				8.1
188 East Blaine Street/Seattle/Lake Union	100	%	91,075		51,957			—			46,968		190,000			6.7				6.7
Alexandria Center^® – Long Island City/New York City/New York City	100	%	16,107		67,832			—			100,361		184,300			5.5				5.6

2019 deliveries: unconsolidated joint venture projects⁽²⁾
(amounts represent our share)
704 Quince Orchard Road/Maryland/Gaithersburg	56.8	%	4,301		4,275			3,952			772		13,300			8.9				8.8
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa	10.0	%	—		65,482			11,537			981		78,000			7.8				6.0
Menlo Gateway/San Francisco/Greater Stanford	48.3	%	125,779		222,228			74,940			7,053		430,000			6.9				6.3
2019 deliveries			589,220		521,496			90,429			193,555		1,394,700			7.1				6.7

2020 projected deliveries: consolidated projects
9880 Campus Point Drive and 4150 Campus Point Court/San Diego/ University Town Center⁽³⁾	100	%	—		98,463			—			156,537		255,000			6.3		⁽³⁾		6.4		⁽³⁾
9800 Medical Center Drive/Maryland/Rockville	100	%	—		19,997			—			75,403		95,400			7.7				7.2
9950 Medical Center Drive/Maryland/Rockville	100	%	—		9,753			—			44,547		54,300			7.3				6.8
201 Haskins Way/San Francisco/South San Francisco	100	%	—		91,459						204,541		296,000			6.6				6.6
Alexandria District for Science and Technology/San Francisco/Greater Stanford	100	%	—		188,255			—			388,745		577,000			6.5				6.2
			—		407,927			—			869,773		1,277,700			6.6				6.4
								$	90,429		$	1,063,328	$	2,672,400		6.9	%			6.6	%
2020 projected deliveries: marketing and pre-construction projects
1165 Eastlake Avenue East/Seattle/Lake Union	100	%	—		31,115
8 Davis Drive/Research Triangle/Research Triangle	100	%	—		2,880
Alexandria Center^® for AgTech, Phase II/Research Triangle/Research Triangle⁽¹⁾	100	%	—		2,774
3115 Merryfield Row/San Diego/Torrey Pines	100	%	—		31,196
2020 projected deliveries			—		475,892
Total			$	589,220	$	997,388

(1)

New strategic collaborative campus, Alexandria Center^® for AgTech – Research Triangle consists of Phase I at 5 Laboratory Drive, including campus amenities, and ~~parking garage~~Phase II at 9 Laboratory Drive. 5 Laboratory Drive includes the high-quality LaunchLabs and ~~will construct two buildings aggregating 580,000 RSF, which will be 100% leased~~amenities that create a dynamic ecosystem to ~~Uber upon completion.~~accelerate discovery and commercialization.


~~(4)~~	The building is 100% occupied through September 2018, after which we expect to redevelop the building from office to office/laboratory space and expand by an additional 15,000 to 30,000 RSF. We expect the project to be delivered in 2019.


~~(5)~~(2)	Refer to ~~“External Growth – Value-Creation Development~~the “Consolidated and ~~Redevelopment of New Class A Properties Placed into Service in the Last 12 Months”~~Unconsolidated Real Estate Joint Ventures” section within this Item 2 for additional information.


~~(6)~~(3)	~~The design and budget of these projects are in process, and the estimated~~Represents a two-phase development project ~~costs with related yields will be disclosed at a later date~~ as ~~they become available.~~follows:

Initial phase represents 9880 Campus Point Drive, a 98,000 RSF project to development GradLabs™, a highly flexible, first-of-its-kind life science platform designed to provide post-seed-stage life science companies with turnkey, fully furnished office/laboratory suites and an accelerated, scalable path for growth. As of the date of this report, the project is 7% leased and we expect initial occupancy in 2020. The previous R&D building located at 9880 Campus Point Drive was previously demolished and as of June 30, 2019, continues to be included in our same property performance results. Refer to the “Same Properties” subsection of the “Results of Operations” section within this Item 2 for additional information.

Subsequent phase represents 4150 Campus Point Court, a 171,102 RSF, 100% leased pre-construction project with occupancy expected in 2022.

Project costs represent development costs for 9880 Campus Point Drive and 4150 Campus Point Court. Yields represent expected returns for Campus Pointe by Alexandria including 9880, 10290 and 10300 Campus Point Drive and 4150 Campus Point Court.

~~Development of new~~New Class A development and redevelopment properties: ~~intermediate-term development projects~~



~~325 Binney Street~~	~~201 Haskins Way~~	~~960 Industrial Road~~	~~825 and 835 Industrial Road~~	~~Alexandria Center~~^®~~for Life Science~~
~~Greater Boston/Cambridge~~	~~San Francisco/South San Francisco~~	~~San Francisco/Greater Stanford~~	~~San Francisco/Greater Stanford~~	~~New York City/Manhattan~~

~~The following table summarizes the key information for our near-term development projects in North America as of September 30, 2017 (dollars in thousands, except per SF amounts):~~

Market Property/Submarket Book Value Project SF Per SF
Greater Boston
325 Binney Street/Cambridge ⁽¹⁾
$ 85,518
208,965
$ 409

50 Rogers Street/Cambridge 6,426
183,644
(2) 35

San Francisco 960 Industrial Road/Greater Stanford 67,902
500,000
(3) 136

825 and 835 Industrial Road/Greater Stanford 90,018
530,000
170

201 Haskins Way/South San Francisco 33,950
280,000
(4) 121

New York City
Alexandria Center^®for Life Science/Manhattan
—
420,000
—

San Diego 5200 Illumina Way/University Town Center 11,239
386,044
29

Campus Point Drive/University Town Center 13,395
315,000
43

Seattle 1150 Eastlake Avenue East/Lake Union 18,922
260,000
73

Maryland 9800 Medical Center Drive/Rockville 6,500
180,000
36

Total $ 333,870
3,263,653
$ 102


~~(1)~~	We acquired 325 Binney Street (formerly named 303 Binney Street), a land parcel that is currently entitled for the development of 163,339 RSF for office or office/laboratory space and 45,626 RSF for residential space.


~~(2)~~	Represents a multifamily residential development with approximately 130-140 units (adjacent to 161 First Street). As part of our successful efforts to increase the entitlements on our Alexandria Center^® ~~at Kendall Square development, we were required to develop two multifamily residential projects, one of which was previously completed and sold. We may market this project for sale.~~


~~(3)~~	~~The intermediate-term development project undergoing entitlements for 500,000 RSF will replace the existing 195,000 RSF of operating property.~~


~~(4)~~	~~The intermediate-term development project undergoing entitlements for 280,000 RSF will replace the existing 23,840 RSF of operating property.~~

~~Summary~~summary of pipeline

The following table summarizes the key information for all our development and redevelopment projects in North America as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

Property/Submarket
Our
Ownership
Interest
Book Value Square Footage
Undergoing
Construction Near-Term Projects Undergoing Marketing and Pre-Construction Intermediate-Term Development Future Development
Total ⁽¹⁾

Greater Boston
Undergoing construction
100 Binney Street/Cambridge 100% $ 70,143
91,155
—
—
—
91,155

266 and 275 Second Avenue/Route 128 100% 9,646
59,173
—
—
—
59,173

Near-term projects undergoing marketing and pre-construction
399 Binney (Alexandria Center^® at One Kendall Square)
100% 76,263
—
164,000
—
—
164,000

Intermediate-term development
325 Binney Street/Cambridge 100% 85,518
—
—
208,965
—
208,965

50 Rogers Street/Cambridge 100% 6,426
—
—
183,644
—
183,644

Future development projects

Alexandria Technology Square^®/Cambridge
100% 7,787
—
—
—
100,000
100,000

Other future projects 100% 7,315
—
—
—
221,955
221,955

$ 263,098
150,328
164,000
392,609
321,955
1,028,892

San Francisco
Undergoing construction
510 Townsend Street/Mission Bay/SoMa 100% $ 187,133
300,000
—
—
—
300,000

505 Brannan Street, Phase I/Mission Bay/SoMa 99.7% 116,522
150,000
—
—
—
150,000

213 East Grand Avenue/South San Francisco 100% 72,895
300,930
—
—
—
300,930

Near-term projects undergoing marketing and pre-construction
1655 and 1715 Third Street/Mission Bay/SoMa 10% —
—
580,000
—
—
580,000

279 East Grand Avenue/South San Francisco 100% 17,998
—
199,000
—
—
199,000

Intermediate-term development
960 Industrial Road/Greater Stanford 100% 67,902
—
—
500,000
(2) —
500,000

825 and 835 Industrial Road/Greater Stanford 100% 90,018
—
—
530,000
—
530,000

201 Haskins Way/South San Francisco 100% 33,950
—
—
280,000
(3) —
280,000

Future development projects

88 Bluxome Street/Mission Bay/SoMa 100% 160,901
—
—
—
1,070,925
(4) 1,070,925

505 Brannan Street, Phase II/Mission Bay/SoMa 99.7% 14,988
—
—
—
165,000
165,000

East Grand Avenue/South San Francisco 100% 5,988
—
—
—
90,000
90,000

Other future projects 100% —
—
—
—
95,620
95,620

$ 768,295
750,930
779,000
1,310,000
1,421,545
4,261,475

New York City
Alexandria Center^®for Life Science/Manhattan
100% $ —
—
—
420,000
—
420,000

$ —
—
—
420,000
—
420,000

(1)    Total pipeline SF represents operating RSF plus incremental SF targeted for intermediate-term and future development.
(2)    The intermediate-term development project undergoing entitlements for 500,000 RSF will replace the existing 195,000 RSF of operating property.
(3)    The intermediate-term development project undergoing entitlements for 280,000 RSF will replace the existing 23,840 RSF of operating property.
(4)    The future development project undergoing entitlements for 1,070,925 developable square feet will replace the existing 232,470 RSF operating property.



Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Projected Deliveries⁽¹⁾							Future	Total
					2019	2020		2021–2022
					Construction	Construction	Pre-Construction	Pre-Construction		Intermediate-Term

Greater Boston
399 Binney (Alexandria Center^® at One Kendall Square)/Cambridge	100	%	$	42,258	40,597	—	—	—		—		—	40,597
266 and 275 Second Avenue/Route 128	100	%	6,712		19,036	—	—	—		—		—	19,036
325 Binney Street/Cambridge	100	%	104,421		—	—	—	—		208,965	⁽²⁾	—	208,965
15 Necco Street/Seaport Innovation District	100	%	159,242		—	—	—	—		293,000		—	293,000
99 A Street/Seaport Innovation District	96.9	%	38,681		—	—	—	—		235,000	⁽³⁾	—	235,000
Alexandria Technology Square^®/Cambridge	100	%	7,787		—	—	—	—		—		100,000	100,000
100 Tech Drive/Route 128	100	%	—		—	—	—	—		—		300,000	300,000
215 Presidential Way/Route 128	100	%	5,481		—	—	—	—		—		130,000	130,000
231 Second Avenue/Route 128	100	%	1,251		—	—	—	—		—		32,000	32,000
10 Necco Street/Seaport Innovation District	100	%	83,425		—	—	—	—		—		175,000	175,000
Other value-creation projects	100	%	8,592		—	—	—	—		—		41,955	41,955
			457,850		59,633	—	—	—		736,965		778,955	1,575,553
San Francisco
1655 and 1725 Third Street/Mission Bay/SoMa	10.0	%	(4)		593,765	—	—	—		—		—	593,765
279 East Grand Avenue/South San Francisco	100	%	42,369		47,199	—	—	—		—		—	47,199
Menlo Gateway/Greater Stanford	48.3	%	(4)		520,988	—	—	—		—		—	520,988
201 Haskins Way/South San Francisco	100	%	91,459		—	315,000	—	—		—		—	315,000
Alexandria District for Science and Technology/ Greater Stanford	100	%	188,255		—	526,178	—	—		—		—	526,178
Pending acquisition/San Francisco Bay Area	(5	)	(5)		—	—	250,000	—		—		—	250,000
Pending acquisition/San Francisco Bay Area	(5	)	(5)		—	—	92,000	—		—		—	92,000
88 Bluxome Street/Mission Bay/SoMa	100	%	182,805		—	—	—	1,070,925	⁽³⁾	—		—	1,070,925
505 Brannan Street, Phase II/Mission Bay/SoMa	99.7	%	17,038		—	—	—	—		165,000		—	165,000
960 Industrial Road/Greater Stanford	100	%	86,402		—	—	—	—		533,000	⁽³⁾	—	533,000
East Grand Avenue/South San Francisco	100	%	6,008		—	—	—	—		—		90,000	90,000
Pending acquisition/San Francisco Bay Area	(5	)	(5)		—	—	—	—		—		700,000	700,000
Other value-creation projects	100	%	45,237		—	—	—	—		418,000		25,000	443,000
			$	659,573	1,161,952	841,178	342,000	1,070,925		1,116,000		815,000	5,347,055

(1) Represents square footage of development and redevelopment projects by period of projected initial occupancy. Multi-tenant projects may have occupancy by tenants over a period of time. (2) We are seeking additional entitlements to increase the density of the site from its current 208,965 RSF. (3) Represents total square footage upon completion of development of a new Class A property. RSF presented includes rentable square footage of buildings currently in operation at properties that were recently acquired for their inherent future development opportunities, with the intent to demolish the existing property upon expiration of the existing in-place leases and commencement of future construction. Refer to the definition of “Investments in Real Estate – Value-Creation Square Feet Currently in Rental Properties” in the “Non-GAAP Measures and Definitions” section within this Item 2 for additional information. (4) This property is held by an unconsolidated real estate joint venture. Refer to the “Consolidated and Unconsolidated Real Estate Joint Ventures” section within this Item 2 for additional information on our ownership interest. (5) Refer to the “Acquisitions” section within this Item 2 for additional information.

~~Summary~~

New Class A development and redevelopment properties: summary of pipeline (continued)

Property/Submarket
Our
Ownership
Interest
Book Value Square Footage
Undergoing
Construction Near-Term Projects Undergoing Marketing and Pre-Construction Intermediate-Term Development Future Development
Total ⁽¹⁾

San Diego
Undergoing construction
ARE Spectrum/Torrey Pines 100% $ 143,149
170,523
—
—
—
170,523

9625 Towne Centre Drive/University Town Center 100% 31,880
163,648
—
—
—
163,648

Intermediate-term development
5200 Illumina Way/University Town Center 100% 11,239
—
—
386,044
—
386,044

Campus Point Drive/University Town Center 100% 13,395
—
—
315,000
—
315,000

Future development projects

Vista Wateridge/Sorrento Mesa 100% 3,909
—
—
—
163,000
163,000

Other future projects 100% 33,147
—
—
—
259,895
259,895

$ 236,719
334,171
—
701,044
422,895
1,458,110

Seattle
Undergoing construction
400 Dexter Avenue North/Lake Union 100% $ 19,243
31,215
—
—
—
31,215

Near-term projects undergoing marketing and pre-construction
1818 Fairview Avenue East/Lake Union 100% 20,693
—
205,000
—
—
205,000

Intermediate-term development
1150 Eastlake Avenue East/Lake Union 100% 18,922
—
—
260,000
—
260,000

Future development projects

1165/1166 Eastlake Avenue East/Lake Union 100% 18,631
—
—
—
—
106,000
106,000

$ 77,489
31,215
205,000
260,000
106,000
602,215

Maryland
Undergoing construction
9900 Medical Center Drive/Rockville 100% $ 7,237
45,039
—
—
—
45,039

Intermediate-term development
9800 Medical Center Drive/Rockville 100% 6,500
—
—
180,000
—
180,000

Future development projects

Other future projects 100% 4,035
—
—
—
61,000
61,000

$ 17,772
45,039
—
180,000
61,000
286,039

Research Triangle Park
Undergoing construction
5 Laboratory Drive/Research Triangle Park 100% $ 10,461
175,000
—
—
—
175,000

Future development projects

6 Davis Drive/Research Triangle Park 100% 16,673
—
—
—
1,000,000
1,000,000

Other future projects 100% 4,149
—
—
—
76,262
76,262

$ 31,283
175,000
—
—
1,076,262
1,251,262

Non-cluster markets – other future projects 100% 11,791
—
—
—
571,705
571,705

$ 1,406,447
1,486,683
1,148,000
3,263,653
3,981,362
9,879,698



Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Projected Deliveries⁽¹⁾					Future		Total
					2019	2020		2021–2022
					Construction	Construction	Pre-Construction	Pre-Construction	Intermediate-Term
New York City
Alexandria Center^® – Long Island City/New York City	100	%	$	67,832	140,098	—	—	—	—	—		140,098
Alexandria Center^®for Life Science – New York City/New York City	100	%	19,159		—	—	—	—	550,000	—		550,000
219 East 42nd Street/New York City	100	%	—		—	—	—	—	—	579,947	⁽²⁾	579,947
Other value-creation projects	(3	)	(3)		—	—	—	—	—	135,938		135,938
			86,991		140,098	—	—	—	550,000	715,885		1,405,983
San Diego
Campus Pointe by Alexandria/University Town Center	(4	)	140,263		—	98,000	171,102	—	120,000	410,345	⁽⁴⁾	799,447
3115 Merryfield Row/Torrey Pines	100	%	31,196		—	—	87,000	—	—	—		87,000
5200 Illumina Way/University Town Center	100	%	11,734		—	—	—	—	451,832	—		451,832
Townsgate by Alexandria/Del Mar Heights	100	%	18,749		—	—	—	—	125,000	—		125,000
4075 Sorrento Valley Boulevard/Sorrento Valley	100	%	7,545		—	—	—	—	—	149,000	⁽⁵⁾	149,000
Vista Wateridge/Sorrento Mesa	100	%	4,022		—	—	—	—	—	163,000		163,000
Pending acquisition/San Diego	(3	)	(3)		—	—	—	—	—	700,000		700,000
Other value-creation projects	100	%	5,931		—	—	—	—	—	222,895		222,895
			219,440		—	98,000	258,102	—	696,832	1,645,240		2,698,174
Seattle
188 East Blaine Street/Lake Union	100	%	51,957		80,221	—	—	—	—	—		80,221
1165 Eastlake Avenue East/Lake Union	100	%	31,115		—	—	100,086	—	—	—		100,086
1150 Eastlake Avenue East/Lake Union	100	%	27,810		—	—	—	—	260,000	—		260,000
701 Dexter Avenue North/Lake Union	100	%	39,577		—	—	—	—	217,000	—		217,000
601 Dexter Avenue/Lake Union	100	%	29,837		—	—	—	—	—	188,400	⁽⁵⁾	188,400
			$	180,296	80,221	—	100,086	—	477,000	188,400		845,707

(1) Represents square footage of development and redevelopment projects by period of projected initial occupancy. Multi-tenant projects may have occupancy by tenants over a period of time. (2) Includes 349,947 RSF in operation with an opportunity to either convert the existing office space into office/laboratory space through future redevelopment or to expand the building by an additional 230,000 RSF through ground-up development. The building is currently occupied by Pfizer Inc. with a remaining lease term of six years. (3) Refer to the “Acquisitions” section within this Item 2 for additional information. (4) RSF consists of our acquisition of 4161 Campus Point Court during the first quarter of 2019 aggregating 159,884 RSF and 10260 Campus Point Drive aggregating 109,164 RSF. Both of these buildings are currently operating under short-term leases. Upon lease expirations, we expect to demolish 4161 Campus Point Court and combine its RSF with other existing entitlements at this campus to complete a new ground-up development aggregating 301,181 RSF. We also expect to convert 10260 Campus Point Drive to office/laboratory space through redevelopment. Refer to “Consolidated and Unconsolidated Real Estate Joint Ventures” within this Item 2 for additional information on our ownership interest. (5) Represents total square footage upon completion of development of a new Class A property. RSF presented includes rentable square footage of buildings currently in operation at properties that were recently acquired for their inherent future development opportunities, with the intent to demolish the existing property upon expiration of the existing in-place leases and commencement of future construction. Refer to the definition of “Investments in Real Estate – Value-Creation Square Feet Currently in Rental Properties” in the “Non-GAAP Measures and Definitions” section within this Item 2 for additional information.

New Class A development and redevelopment properties: summary of pipeline (continued)



Property/Submarket	Our Ownership Interest		Book Value		Square Footage
					Projected Deliveries⁽¹⁾					Future	Total
					2019	2020		2021–2022
					Construction	Construction	Pre-Construction	Pre-Construction	Intermediate-Term
Maryland
704 Quince Orchard Road/Gaithersburg	56.8	%	(2)		41,627	—	—	—	—	—	41,627
9800 Medical Center Drive/Rockville	100	%	$	21,212	—	174,640	—	—	—	64,000	238,640
9950 Medical Center Drive/Rockville	100	%	9,753		—	84,264	—	—	—	—	84,264
			30,965		41,627	258,904	—	—	—	64,000	364,531
Research Triangle
Alexandria Center^® for AgTech, Phase I/ Research Triangle	100	%	18,383		45,054	—	—	—	—	—	45,054
Alexandria Center^® for AgTech, Phase II/ Research Triangle	100	%	2,774		—	—	160,000	—	—	—	160,000
8 Davis Drive/Research Triangle	100	%	3,594		—	—	150,000	—	70,000	—	220,000
6 Davis Drive/Research Triangle	100	%	15,499		—	—	—	—	—	800,000	800,000
Other value-creation projects	100	%	4,149		—	—	—	—	—	76,262	76,262
			44,399		45,054	—	310,000	—	70,000	876,262	1,301,316
Other value-creation projects	100	%	3,840		—	—	—	—	—	122,800	122,800
			$	1,683,354	1,528,585	1,198,082	1,010,188	1,070,925	3,646,797	5,206,542	13,661,119	⁽³⁾
					2,726,667		2,081,113		8,853,339


(1)	Represents square footage of development and redevelopment projects by period of projected initial occupancy. Multi-tenant projects may have occupancy by tenants over a period of time.


(2)	This property is held by an unconsolidated real estate joint venture. Refer to the “Consolidated and Unconsolidated Real Estate Joint Ventures” section within this Item 2 for additional information on our ownership interest.

(3)

Total ~~pipeline SF represents operating~~rentable square footage includes 1.0 million RSF ~~plus incremental SF targeted~~of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction. Refer to the “Non-GAAP Measures and Definitions”section within this Item 2 for ~~intermediate-term and future development.~~ additional detail on value-creation square feet currently included in rental properties.

Summary of capital expenditures

Our construction spending for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, consisted of the following (in thousands):


	Nine Months Ended			Six Months Ended
Construction Spending	September 30, 2017			June 30, 2019
Additions to real estate –consolidated projects	$	660,877		$	577,322
Investments in unconsolidated real estate joint ventures	248			95,950
Contributions from noncontrolling interests				(5,523		)
Construction spending (cash basis)⁽¹⁾	661,125			667,749
Decrease in accrued construction	(38,767		)
Construction spending	$	622,358
Change in accrued construction				5,558
Construction spending for the six months ended June 30, 2019				673,307
Projected construction spending for the six months ending December 31, 2019				626,693
Guidance midpoint				$	1,300,000


(1)	Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.

The following table summarizes the total projected construction spending for the year ending December 31, ~~2017,~~2019, which includes interest, property taxes, insurance, payroll, and other indirect project costs (in thousands):



Projected Construction Spending	Year Ending December 31, 2019
Development, redevelopment, and pre-construction projects	$	1,041,000
Investments in unconsolidated real estate joint ventures		102,000
Contributions from noncontrolling interests (consolidated real estate joint ventures)		(22,000	)
Generic laboratory infrastructure/building improvement projects		150,000
Non-revenue-enhancing capital expenditures and tenant improvements		29,000
Guidance midpoint	$	1,300,000

Projected Construction Spending Year Ending
December 31, 2017
Development and redevelopment projects $ 203,000
Contributions from noncontrolling interests (consolidated joint ventures) (7,000 )
Generic laboratory infrastructure/building improvement projects 41,000
Non-revenue-enhancing capital expenditures and tenant improvements 6,000
Projected construction spending for three months ending December 31, 2017 243,000
Actual construction spending for the nine months ended September 30, 2017 622,358
Guidance range $ 815,000
– 915,000

~~2017 Disciplined Allocation of Capital~~ ⁽²⁾

~~88% to Urban Innovation Submarkets~~


~~(1)~~	~~Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.~~


~~(2)~~	Represents the percentage of projected spending by submarket, including completed and projected acquisitions in our sources and uses of capital guidance ranging from $620 million to $720 million, for the year ending December 31, 2017.

Non-revenue-enhancing capital expenditures, tenant improvements, and leasing costs

The table below presents the average per RSF of property-related non-revenue-enhancing capital expenditures, tenant improvements, and leasing costs, excluding capital expenditures and tenant improvements that are recoverable from tenants, revenue enhancing, or related to properties that have undergone redevelopment (dollars in thousands, except per RSF amounts):



Non-Revenue-Enhancing Capital Expenditures⁽¹⁾	Six Months Ended June 30, 2019				Recent Average per RSF⁽²⁾
Non-Revenue-Enhancing Capital Expenditures⁽¹⁾	Amount		Per RSF		Recent Average per RSF⁽²⁾
Non-revenue-enhancing capital expenditures	$	5,257	$	0.23	$	0.50

Tenant improvements and leasing costs:
Re-tenanted space	$	14,425	$	26.59	$	22.26
Renewal space	8,185		14.75		13.74
Total tenant improvements and leasing costs/weighted average	$	22,610	$	20.60	$	17.15

Non-Revenue-Enhancing Capital Expenditures ⁽¹⁾
Nine Months Ended September 30, 2017
Recent Average
per RSF ⁽²⁾
Amount RSF Per RSF
Non-revenue-enhancing capital expenditures $ 5,431
18,576,742
$ 0.29
$ 0.41

Tenant improvements and leasing costs:
Re-tenanted space $ 15,542
596,653
$ 26.05
$ 18.11
Renewal space 22,200
1,334,824
16.63
10.14
Total tenant improvements and leasing costs/weighted average $ 37,742
1,931,477
$ 19.54
⁽³⁾
$ 12.52


(1)	Excludes amounts that are recoverable from tenants, related to revenue-enhancing capital expenditures, or related to properties that have undergone redevelopment.


(2)	Represents the average of ~~the five years ended December 31, 2016,~~2015 to 2018 and the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019, annualized.


~~(3)~~	Includes approximately $9.7 million, or $17.40 per RSF, of leasing commissions related to lease renewals and re-leasing space for five leases in our Greater Boston and San Francisco markets with a weighted average lease term of 10 years and rental rate increases of 28.1% and 20.5% (cash basis).

Results of operations

We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results and provide context for the disclosures included in our most recent annual report on Form 10-K for the year ended December 31, 2018, and our subsequent quarterly reports on Form 10-Q. We believe ~~this~~such tabular presentation promotes a better understanding for investors of the corporate-level decisions made and activities performed that significantly ~~impact~~affect comparison of our operating results from period to period. We also believe this tabular presentation will supplement for investors an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments ~~for~~of held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt and preferred stock redemption charges are related to corporate-level financing decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses ~~for~~on non-real estate investments and impairments of real estate and non-real estate investments are not related to the operating performance of our real estate assets as they result from strategic, corporate-level non-real estate investment decisions and external market conditions. Impairments of non-real estate investments are not related to the operating performance of our real estate as they represent the write-down of a non-real estate investment when its fair value declines below its carrying value due to changes in general market or other ~~conditions.~~conditions outside of our control. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail within this Item 2. ~~Items~~2. Key items included in net income ~~(loss)~~ attributable to Alexandria’s common stockholders ~~(amounts are shown after deducting any amounts attributable to noncontrolling interests)~~for the three and six months ended June 30, 2019 and 2018 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016 2017 2016 2017 2016
(In millions, except per share amounts) Amount Per Share – Diluted Amount Per Share – Diluted
Gain on sales of real estate ⁽¹⁾
$ 14.1
$ 0.1
$ 0.15
$ —
$ 14.5
$ 0.1
$ 0.15
$ —
Gain on sales of non-real estate investments —
—
—
—
—
4.4
—
0.06

Impairment of: ��
Rental properties ⁽²⁾
—
(6.3 ) —
(0.08 ) (0.2 ) (94.7 ) —
(1.27 )
Land parcels ⁽²⁾
—
(1.8 ) —
(0.02 ) —
(98.0 ) —
(1.32 )
Non-real estate investments ⁽³⁾
—
(3.1 ) —
(0.04 ) (4.5 ) (3.1 ) (0.05 ) (0.04 )
Loss on early extinguishment of debt —
(3.2 ) —
(0.04 ) (0.7 ) (3.2 ) (0.01 ) (0.04 )
Preferred stock redemption charge ⁽⁴⁾
—
(13.1 ) —
(0.17 ) (11.3 ) (25.6 ) (0.12 ) (0.34 )
$ 14.1
$ (27.4 ) $ 0.15
$ (0.35 ) $ (2.2 ) $ (220.1 ) $ (0.03 ) $ (2.95 )
Weighted-average shares of common stock outstanding – diluted 93.3
77.4
90.8
74.5



	Amount					Per Share – Diluted					Amount						Per Share – Diluted
	Three Months Ended June 30,										Six Months Ended June 30,
(In millions, except per share amounts)	2019		2018			2019		2018			2019			2018			2019			2018
Unrealized gains on non-real estate investments⁽¹⁾	$	11.1	$	5.1		$	0.10	$	0.05		$	83.3		$	77.3		$	0.75		$	0.76
Realized gain on non-real estate investment	—		—			—		—			—			8.3			—			0.08
Impairment of real estate	—		(6.3		)	—		(0.06		)	—			(6.3		)	—			(0.06		)
Loss on early extinguishment of debt⁽²⁾	—		—			—		—			(7.4		)	—			(0.07		)	—
Preferred stock redemption charge⁽³⁾	—		—			—		—			(2.6		)	—			(0.02		)	—
Total	$	11.1	$	(1.2	)	$	0.10	$	(0.01	)	$	73.3		$	79.3		$	0.66		$	0.78
Weighted-average shares of common stock outstanding for calculation of EPS – diluted						111.5		102.2									111.3			101.2


(1)	Refer to Note 47 – ~~“Investments in Unconsolidated Real Estate Joint Ventures”~~“Investments” to our unaudited consolidated financial statements under Item 1 of this report for more information.


(2)	Refer to Note 310 – ~~“Investments in Real Estate”~~“Secured and Unsecured Senior Debt” to our unaudited consolidated financial statements under Item 1 of this report for more information.


(3)	Refer to Note ~~5 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for more information.~~


~~(4)~~	~~Refer to Note 12~~14 – “Stockholders’ Equity” to our unaudited consolidated financial statements under Item 1 of this report for more information.

Same Properties

We supplement an evaluation of our results of operations with an evaluation of operating performance of certain of our properties, referred to as Same Properties. For more information on the determination of our Same Properties portfolio, refer to the definition of “Same Property Comparisons” in the “Non-GAAP Measures and Definitions” section within this Item 2. The following table presents information regarding our Same Properties for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2019:


	September 30, 2017		June 30, 2019
	Three Months Ended	Nine Months Ended	Three Months Ended	Six Months Ended
Percentage change in net operating income over comparable period from prior year	2.2%	2.3%	4.3%	3.5%
Percentage change in net operating income (cash basis) over comparable period from prior year	7.8%	6.2%	9.5%	9.7%
Operating margin	69%	70%	72%	72%
Number of Same Properties	169	166	200	195
RSF	15,182,829	14,419,701	19,650,971	18,901,509
Occupancy – current-period average	95.9%	96.0%	96.6%	96.5%
Occupancy – same-period prior-year average	96.9%	97.2%	96.2%	96.3%

The following table reconciles the number of Same Properties to total properties for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2019:



Development – under construction		Properties
~~505 Brannan~~399 Binney Street		1
~~510 Townsend Street~~		1
~~ARE Spectrum~~		3
~~213~~279 East Grand Avenue		1
~~100 Binney~~188 East Blaine Street		1
~~400 Dexter Avenue North~~9800 Medical Center Drive		1
9950 Medical Center Drive		1
Alexandria District for Science and Technology		2
201 Haskins Way		1
		8
Development – placed into service after January 1, ~~2016~~2018		Properties
~~50 and 60~~100 Binney Street		21
~~430~~213 East ~~29th Street~~Grand Avenue		1
~~5200 Illumina Way, Building 6~~		1
~~4796 Executive Drive~~		1
~~360 Longwood Avenue (unconsolidated real estate joint venture)~~		1
~~1455 and 1515 Third Street~~		2
		82
Redevelopment – under construction		Properties
Alexandria Center^® for AgTech, Phase I		1
266 and 275 Second Avenue		2
Alexandria Center^® – Long Island City		1
		4
Redevelopment – placed into service after January 1, 2018		Properties
9625 Towne Centre Drive		1
~~5 Laboratory Drive~~Alexandria PARC		4
681 Gateway Boulevard		1
9900 Medical Center Drive		1
~~266 and 275 Second Avenue~~		2
		57



~~Redevelopment – placed into service after January 1, 2016~~	~~Properties~~
~~10151 Barnes Canyon Road~~	1
~~11 Hurley Street~~	1
~~10290 Campus Point Drive~~	1
	3
Acquisitions after January 1, ~~2016~~2018	Properties
~~Torrey~~100 Tech Drive	1
219 East 42nd Street	1
Summers Ridge Science Park	4
2301 5th Avenue	1
9704, 9708, 9712, and 9714 Medical Center Drive	4
9920 Belward Campus Drive	1
21 Firstfield Road	1
50 and 55 West Watkins Mill Road	2
10260 Campus Point Drive and 4161 Campus Point Court	2
99 A Street	1
3170 Porter Drive	1
Shoreway Science Center	32
~~Alexandria Center~~^® ~~at One Kendall Square~~ 3911, 3931, and 4075 Sorrento Valley Boulevard	93
~~88 Bluxome~~260 Townsend Street	1
~~960 Industrial Road~~5 Necco Street	1
~~1450 Page Mill Road~~601 Dexter Avenue North	1
~~201 Haskins Way~~Other	16
	1633

Unconsolidated real estate JVs	6
Properties held for sale	2
Total properties excluded from Same Properties	4062
Same Properties	~~166~~195	⁽¹⁾
Total properties in North America as of ~~September~~ June 30, ~~2017~~ 2019	~~206~~257


(1)	Includes 9880 Campus Point Drive, a building we acquired in 2001. The building was occupied through January 2018 and subsequently demolished. The 98,000 RSF project is currently in active development.

Comparison of results for the three months ended ~~September~~June 30, ~~2017,~~2019, to the three months ended ~~September~~June 30, ~~2016~~2018

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the three months ended ~~September~~June 30, ~~2016. For a reconciliation of net operating income from net income, the most directly comparable financial measure presented in accordance with GAAP, refer~~2018. Refer to the “Non-GAAP Measures and Definitions” section within this Item 2.2 for definitions of “Tenant Recoveries” and “Net Operating Income” and their reconciliations from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income, respectively.


	Three Months Ended September 30,											Three Months Ended June 30,
(Dollars in thousands)	2017			2016			$ Change			% Change		2019			2018			$ Change			% Change
Income from rentals:
Same Properties	$	163,817		$	159,424		$	4,393		2.8	%	$	245,715		$	235,576		$	10,139		4.3	%
Non-Same Properties	52,204			7,167			45,037			628.4		43,910			15,059			28,851			191.6
Total rental	216,021			166,591			49,430			29.7
Rental revenues												289,625			250,635			38,990			15.6

Same Properties	58,117			56,858			1,259			2.2		75,783			69,693			6,090			8.7
Non-Same Properties	8,941			1,823			7,118			390.5		6,210			2,466			3,744			151.8
Total tenant recoveries	67,058			58,681			8,377			14.3
Tenant recoveries												81,993			72,159			9,834			13.6

Income from rentals												371,618			322,794			48,824			15.1

Same Properties	120			16			104			650.0		93			72			21			29.2
Non-Same Properties	2,171			5,091			(2,920		)	(57.4	)	2,145			2,168			(23		)	(1.1	)
Total other income	2,291			5,107			(2,816		)	(55.1	)
Other income												2,238			2,240			(2		)	(0.1	)

Same Properties	222,054			216,298			5,756			2.7		321,591			305,341			16,250			5.3
Non-Same Properties	63,316			14,081			49,235			349.7		52,265			19,693			32,572			165.4
Total revenues	285,370			230,379			54,991			23.9		373,856			325,034			48,822			15.0

Same Properties	68,107			65,674			2,433			3.7		88,958			82,277			6,681			8.1
Non-Same Properties	15,362			6,328			9,034			142.8		16,731			9,631			7,100			73.7
Total rental operations	83,469			72,002			11,467			15.9
Rental operations												105,689			91,908			13,781			15.0

Same Properties	153,947			150,624			3,323			2.2		232,633			223,064			9,569			4.3
Non-Same Properties	47,954			7,753			40,201			518.5		35,534			10,062			25,472			253.2
Net operating income	$	201,901		$	158,377		$	43,524		27.5	%	$	268,167		$	233,126		$	35,041		15.0	%

Net operating income – Same Properties	$	153,947		$	150,624		$	3,323		2.2	%	$	232,633		$	223,064		$	9,569		4.3	%
Straight-line rent revenue and amortization of acquired below-market leases	(5,744		)	(13,105		)	7,361			(56.2	)
Straight-line rent revenue												(14,664		)	(23,294		)	8,630			(37.0	)
Amortization of acquired below-market leases												(2,927		)	(3,403		)	476			(14.0	)
Net operating income – Same Properties (cash basis)	$	148,203		$	137,519		$	10,684		7.8	%	$	215,042		$	196,367		$	18,675		9.5	%

~~Rental~~Income from rentals

Total income from rentals for the three months ended June 30, 2019, increased by $48.8 million, or 15.1%, to $371.6 million, compared to $322.8 million for the three months ended June 30, 2018, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Income from rentals – rental revenues

Total rental revenues for the three months ended ~~September~~June 30, ~~2017,~~2019, increased by ~~$49.4~~$39.0 million, or ~~29.7%~~15.6%, to ~~$216.0~~$289.6 million, compared to ~~$166.6~~$250.6 million for the three months ended ~~September~~June 30, ~~2016.~~2018. The increase was primarily due to an increase in rental revenues from our Non-Same Properties ~~totaling $45.0~~aggregating $28.9 million primarily related to ~~1,592,628~~1.2 million RSF of development and redevelopment projects placed into service subsequent to ~~July~~April 1, ~~2016,~~2018, and 1629 operating properties ~~totaling 1,468,708~~aggregating 2.0 million RSF ~~acquired.~~acquired subsequent to April 1, 2018.

Rental revenues from our Same Properties for the three months ended ~~September~~June 30, ~~2017,~~2019, increased by ~~$4.4~~$10.1 million, or ~~2.8%~~4.3%, to ~~$163.8~~$245.7 million, compared to ~~$159.4~~$235.6 million for the three months ended ~~September~~June 30, ~~2016.~~2018. The increase was primarily due to significant rental rate increases on lease renewals and re-leasing of space since ~~July~~April 1, 2016. Refer to “Leasing” within the “Operating Summary” section of this Item 2 for additional information on our leasing activity. The increase was partially offset by a decrease in rental revenue as a result of a decrease in Same Properties’ occupancy to 95.9% for the three months ended September 30, 2017, from 96.9% for the three months ended September 30, 2016. Refer to “Same Properties” in the section above within this Item 2 for additional information on the change in our Same Properties’ occupancy rates.2018.

~~Tenant~~Income from rentals – tenant recoveries

Tenant recoveries for the three months ended ~~September~~June 30, ~~2017,~~2019, increased by ~~$8.4~~$9.8 million, or ~~14.3%~~13.6%, to ~~$67.1~~$82.0 million, compared to ~~$58.7~~$72.2 million for the three months ended ~~September~~June 30, ~~2016.~~2018. This increase is primarily due to an increase from our Non-Same Properties described above. Same Properties’ tenant recoveries for the three months ended June 30, 2019, increased by ~~$7.1~~$6.1 million, or 8.7%, primarily due to the increase in recoverable operating expenses for the three months ended ~~September~~June 30, ~~2017,~~2019, as discussed under “Rental ~~Operating Expenses”~~Operations” below. As of ~~September~~June 30, ~~2017,~~2019, 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

Other income

Other income for the three months ended June 30, 2019 and 2018, was $2.2 million and $2.2 million, respectively, primarily consisting of construction management fees and interest income earned during each respective period.

Rental operations

Total rental operating expenses for the three months ended June 30, 2019, increased by $13.8 million, or 15.0%, to $105.7 million, compared to $91.9 million for the three months ended June 30, 2018. Approximately $7.1 million of the increase was due to an increase in rental operating expenses from our Non-Same Properties primarily related to development and redevelopment projects and acquired properties as discussed above under “Income from Rentals.”

Same Properties’ rental operating expenses increased by $6.7 million, or 8.1%, to $89.0 million during the three months ended June 30, 2019, compared to $82.3 million for the three months ended June 30, 2018. Approximately $2.5 million of the increase was due to the higher tax expense stemming from a new 3.5% gross receipts tax on rental revenues in the city of San Francisco that went into effect on January 1, 2019, and an increase in property tax expense resulting from the higher assessed values of some of our properties in Greater Boston. The remaining $4.2 million increase was mainly a result of the higher repairs and maintenance expenses, contract services, and payroll incurred during the three months ended June 30, 2018.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2019, increased by $3.5 million, or 15.2%, to $26.4 million, compared to $22.9 million for the three months ended June 30, 2018. Approximately $1 million of the increase reflects incremental leasing costs recognized in expense in the current period, resulting from our adoption of a new accounting standard on leases on January 1, 2019. For a detailed discussion related to this new standard, refer to the “Lease Accounting” section of Note 2 – “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this report.

The remaining increase of approximately $2.5 million of general and administrative expenses was due to a 23.2% increase in our employee headcount since April 1, 2018, to accommodate the continued growth in the depth and breadth of our operations in multiple markets, including development and redevelopment projects placed into service and properties acquired subsequent to April 1, 2018, as discussed under “Income from Rentals” above. As a percentage of net operating income, our general and administrative expenses for the three months ended June 30, 2019 and 2018, were 9.5% and 9.4%, respectively.

Interest expense

Interest expense for the three months ended June 30, 2019 and 2018, consisted of the following (dollars in thousands):



	Three Months Ended June 30,
Component	2019			2018			Change
Interest incurred	$	64,553		$	53,624		$	10,929
Capitalized interest	(21,674		)	(15,527		)	(6,147		)
Interest expense	$	42,879		$	38,097		$	4,782

Average debt balance outstanding ⁽¹⁾	$	6,129,748		$	5,406,946		$	722,802
Weighted-average annual interest rate ⁽²⁾	4.2		%	4.0		%	0.2		%


(1)	Represents the average debt balance outstanding during the respective periods.


(2)	Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.

The net change in interest expense during the three months ended June 30, 2019, compared to the three months ended June 30, 2018, resulted from the following (dollars in thousands):



Component	Interest Rate⁽¹⁾			Effective Date	Change
Increases in interest incurred due to:
Issuances of debt:
$650 million unsecured senior notes payable – green bonds		4.03	%	June 2018/ March 2019	$	5,798
$450 million unsecured senior notes payable		4.81	%	June 2018	4,707
$300 million unsecured senior notes payable		4.93	%	March 2019	3,640
$350 million unsecured senior notes payable – green bonds		3.96	%	March 2019	3,338
Fluctuations in interest rate and average balance:
Higher rates for interest rate hedge agreements in effect					1,245
Total increases					18,728
Decreases in interest incurred due to:
Repayments of debt:
Secured construction loan		3.29	%	March 2019	(2,885		)
Secured notes payable		8.15	%	January 2019	(2,089		)
2019 unsecured senior bank term loan		2.75	%	September 2018	(1,585		)
Fluctuations in interest rate and average balance:
$2.2 billion unsecured senior line of credit and senior bank term loan					(1,228		)
Other decrease in interest					(12		)
Total decreases					(7,799		)
Change in interest incurred					10,929
Increase in capitalized interest					(6,147		)
Total change in interest expense					$	4,782


(1)	Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2019, increased by $15.6 million, or 13.1%, to $134.4 million, compared to $118.9 million for the three months ended June 30, 2018. The increase is primarily due to additional depreciation from 1.2 million RSF of development and redevelopment projects placed into service subsequent to April 1, 2018, and 29 operating properties aggregating 2.0 million RSF acquired subsequent to April 1, 2018.

Investment income

During the three months ended June 30, 2019, we recognized $21.5 million of investment income, which consisted of $10.4 million of realized gains and $11.1 million of unrealized gains. Realized gains of $10.4 million for the three months ended June 30, 2019, primarily consisted of proceeds received from our investments in privately held entities that report NAV. Unrealized gains of $11.1 million recognized during the three months ended June 30, 2019, primarily consisted of increases in the fair values of our investments in publicly traded companies.

During the three months ended June 30, 2018, we recognized $12.5 million of investment income, which consisted of $7.5 million of realized gains and $5.1 million of unrealized gains. Refer to Note 7 – “Investments” to these unaudited consolidated financial statements for further details.

Sales of real estate assets

During the three months ended June 30, 2018, we recognized an impairment of real estate of $6.3 million related to one land parcel located in Northern Virginia that was classified as held for sale as of June 30, 2018, and was sold in July 2018 for a sales price of $6.0 million with no gain or loss.

Comparison of results for the six months ended June 30, 2019, to the six months ended June 30, 2018

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the six months ended June 30, 2019, compared to the six months ended June 30, 2018. Refer to the “Non-GAAP Measures and Definitions” section within this Item 2 for definitions of “Tenant Recoveries” and “Net Operating Income” and their reconciliations from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income, respectively.



	Six Months Ended June 30,
(Dollars in thousands)	2019			2018			$ Change		% Change
Income from rentals:
Same Properties	$	464,450		$	447,953		$	16,497	3.7	%
Non-Same Properties	99,738			47,167			52,571		111.5
Rental revenues	564,188			495,120			69,068		13.9

Same Properties	145,512			137,079			8,433		6.2
Non-Same Properties	16,667			8,250			8,417		102.0
Tenant recoveries	162,179			145,329			16,850		11.6

Income from rentals	726,367			640,449			85,918		13.4

Same Properties	234			134			100		74.6
Non-Same Properties	6,097			4,590			1,507		32.8
Other income	6,331			4,724			1,607		34.0

Same Properties	610,196			585,166			25,030		4.3
Non-Same Properties	122,502			60,007			62,495		104.1
Total revenues	732,698			645,173			87,525		13.6

Same Properties	172,145			162,043			10,102		6.2
Non-Same Properties	35,045			21,636			13,409		62.0
Rental operations	207,190			183,679			23,511		12.8

Same Properties	438,051			423,123			14,928		3.5
Non-Same Properties	87,457			38,371			49,086		127.9
Net operating income	$	525,508		$	461,494		$	64,014	13.9	%

Net operating income – Same Properties	$	438,051		$	423,123		$	14,928	3.5	%
Straight-line rent revenue	(28,935		)	(48,429		)	19,494		(40.3	)
Amortization of acquired below-market leases	(5,972		)	(7,162		)	1,190		(16.6	)
Net operating income – Same Properties (cash basis)	$	403,144		$	367,532		$	35,612	9.7	%

Income from rentals

Total income from rentals for the six months ended June 30, 2019, increased by $85.9 million, or 13.4%, to $726.4 million, compared to $640.4 million for the six months ended June 30, 2018, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Income from rentals – rental revenues

Total rental revenues for the six months ended June 30, 2019, increased by $69.1 million, or 13.9%, to $564.2 million, compared to $495.1 million for the six months ended June 30, 2018. The increase was primarily due to an increase in rental revenues from our Non-Same Properties aggregating $52.6 million primarily related to 1.4 million RSF of development and redevelopment projects placed into service subsequent to January 1, 2018, and 33 operating properties aggregating 2.3 million RSF acquired subsequent to January 1, 2018.

Rental revenues from our Same Properties for the six months ended June 30, 2019, increased by $16.5 million, or 3.7%, to $464.5 million, compared to $448.0 million for the six months ended June 30, 2018. The increase was primarily due to significant rental rate increases on lease renewals and re-leasing of space since January 1, 2018. Refer to the “Leasing” subsection of the “Operating Summary” section within this Item 2 for additional information on our leasing activity.

Income from rentals – tenant recoveries

Tenant recoveries for the six months ended June 30, 2019, increased by $16.9 million, or 11.6%, to $162.2 million, compared to $145.3 million for the six months ended June 30, 2018. This increase is consistent with the increase in our rental operating expenses of $23.5 million, or 12.8%, as discussed under “Rental Operations” below. Same Properties’ tenant recoveries for the six months ended June 30, 2019, increased by $8.4 million, or 6.2%, primarily due to the increase in recoverable operating expenses for the six months ended June 30, 2019, as discussed below. As of June 30, 2019, 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

~~Same Properties’ tenant recoveries remained relatively consistent during the three months ended September 30, 2017, and 2016.~~

Other income

Other income for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, consisted~~2018 was, $6.3 million and $4.7 million, respectively, primarily consisting of ~~the following (in thousands):~~construction management fees and interest income earned during each respective year.

Three Months Ended September 30,
2017 2016 Change
Management fee income $ 658
$ 46
$ 612
Interest and other income 588
795
(207 )
Investment income 1,045
4,266
(3,221 )
Total other income $ 2,291
$ 5,107
$ (2,816 )

~~Refer to Note 5 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for more information on investment income.~~

Rental ~~operating expenses~~operations

Total rental operating expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, increased by ~~$11.5~~$23.5 million, or ~~15.9%~~12.8%, to ~~$83.5~~$207.2 million, compared to ~~$72.0~~$183.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2018. Approximately ~~$9.0~~$13.4 million of the increase was due to an increase in rental operating expenses from our Non-Same Properties primarily related to ~~1,592,628~~1.4 million RSF of development and redevelopment projects placed into service subsequent to ~~July~~January 1, ~~2016,~~2018, and 1633 operating properties ~~totaling 1,468,708~~aggregating 2.3 million RSF ~~acquired.~~acquired subsequent to January 1, 2018.

Same Properties’ rental operating expenses increased by ~~$2.4~~ $10.1 million, or ~~3.7%~~6.2%, to $172.1 million during the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the ~~three~~$162.0 million for the six months ended ~~September~~June 30, ~~2016, primarily~~2018. Approximately $3.8 million of the increase was due to the higher tax expense stemming from a new 3.5% gross receipts tax on rental revenues in the city of San Francisco that went into effect on January 1, 2019, and an increase in property tax expense resulting from the higher assessed values of some of our properties in Greater Boston. The remaining $6.3 million increase was mainly a result of the higher repairs and maintenance ~~expenses. The increase in Same Properties’ rental operating~~ expenses ~~was partially offset by property tax refunds~~and payroll incurred during the ~~three~~six months ended ~~September~~June 30, ~~2017.~~2018.

General and administrative expenses

General and administrative expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, increased by ~~$1.8~~$5.8 million, or ~~11.2%~~12.7%, to ~~$17.6~~$51.1 million, compared to ~~$15.9~~$45.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2016. General~~2018. Approximately $2 million of the increase reflects incremental leasing costs recognized in expense in the current period, resulting from our adoption of a new accounting standard on leases on January 1, 2019. For a detailed discussion related to this new standard, refer to the “Lease Accounting” section of Note 2 – “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this report.

The remaining increase of approximately $3.8 million of general and administrative expenses ~~increased primarily~~was due to a 28.2% increase in our employee headcount since January 1, 2018, to accommodate the continued growth in the depth and breadth of our operations in multiple markets, including ~~a 29.7% increase in total rental revenue to $216.0 million for the three months ended September 30, 2017, compared to $166.6 million for the same period in 2016,~~development and ~~including a 4.1 million RSF, or 16.7%, increase in our North America asset base~~redevelopment projects placed into service and properties acquired subsequent to ~~October~~January 1, ~~2016.~~2018, as discussed under “Income from Rentals” above. As a percentage of ~~total assets,~~net operating income, our general and administrative expenses for the ~~three~~trailing 12 months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, quarter annualized, declined to 0.6% from 0.7%~~2018, were 9.5% and 9.4%, respectively.

Interest expense

Interest expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, consisted of the following (dollars in thousands):


	Three Months Ended September 30,									Six Months Ended June 30,
Component	2017			2016			Change			2019			2018			Change
Interest incurred	$	48,123		$	40,753		$	7,370		$	122,162		$	103,899		$	18,263
Capitalized interest	(17,092		)	(14,903		)	(2,189		)	(40,183		)	(28,887		)	(11,296		)
Interest expense	$	31,031		$	25,850		$	5,181		$	81,979		$	75,012		$	6,967

Average debt balance outstanding ⁽¹⁾	$	4,887,491		$	4,244,247		$	643,244		$	5,958,590		$	5,251,827		$	706,763
Weighted-average annual interest rate ⁽²⁾	3.9		%	3.8		%	0.1		%	4.1		%	4.0		%	0.1		%


(1)	Represents the average debt balance outstanding during the ~~three months ended September 30, 2017 and 2016.~~respective periods.


(2)	Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.

The net change in interest expense during the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2018, resulted from the following (dollars in thousands):


Component	Interest Rate⁽¹⁾		Effective Date	Change			Interest Rate⁽¹⁾			Effective Date	Change
Increases in interest incurred due to:
Issuance of $425 million unsecured senior note payable		4.09%	March 2017	$	4,210
Assumption of $203 million secured note payable		3.40%	November 2016	1,840
Higher average balance and interest rate on secured construction loans		Various	Various	2,640
Higher average interest rate on unsecured senior line of credit and term loans				1,880
Issuances of debt:
$650 million unsecured senior notes payable – green bonds								4.03	%	June 2018/ March 2019	$	10,292
$450 million unsecured senior notes payable								4.81	%	June 2018	10,002
$300 million unsecured senior notes payable								4.93	%	March 2019	4,044
$350 million unsecured senior notes payable – green bonds								3.96	%	March 2019	3,709
Fluctuations in interest rate and average balance:
$2.2 billion unsecured senior line of credit and senior bank term loan											1,338
Total increases				10,570							29,385
Decreases in interest incurred due to:
Repayments of debt:
Variable-rate unsecured senior bank term loan		Various	February 2017	(750		)
$76 million secured note payable		2.81%	December 2016	(460		)
Lower average notional amounts of interest rate hedge agreements in effect				(1,500		)
Amortization of loan fees				(240		)
Secured construction loan								3.29	%	March 2019	(3,591		)
Secured notes payable								8.15	%	January 2019	(4,188		)
2019 Unsecured senior bank term loan								2.75	%	September 2018	(2,991		)
Other decrease in interest				(250		)					(352		)
Total decreases				(3,200		)					(11,122		)
Change in interest incurred				7,370							18,263
Increase in capitalized interest ⁽²⁾				(2,189		)
Increase in capitalized interest											(11,296		)
Total change in interest expense				$	5,181						$	6,967


(1)	Represents the weighted-average interest rate as of the end of the applicable period, ~~plus the impact of debt premiums/discounts,~~including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and ~~deferred financing costs.~~


~~(2)~~	Increase in capitalized interest is primarily due to an increase in our highly leased development and redevelopment projects undergoing construction in our value-creation pipeline during the three months ended September 30, 2017, compared to the three months ended September 30, 2016.other bank fees.

In anticipation of LIBOR cessation at the end of 2021, we have been actively reducing borrowings outstanding on our LIBOR-based loans. As of June 30, 2019, our outstanding debt included only two LIBOR-based loans: our $2.2 billion unsecured senior line of credit with an outstanding balance of $514.0 million and our unsecured senior bank term loan with an outstanding balance of $350.0 million. The aggregate outstanding balance of the aforementioned LIBOR-based loans represented less than 15% of our total debt balance outstanding as of June 30, 2019. Refer to “Item 3. Quantitative and Qualitative Disclosures About Market Risk” within this quarterly report on Form 10-Q for our sensitivity analysis of interest rate risk related to LIBOR fluctuations.

Depreciation and amortization

Depreciation and amortization expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2019, increased by ~~$30.7~~$35.5 million, or ~~39.7%~~15.2%, to ~~$107.8~~$268.5 million, compared to ~~$77.1~~$233.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2018. The increase is primarily due to additional depreciation from ~~1,592,628~~1.4 million RSF of development and redevelopment projects placed into service subsequent to ~~July~~January 1, ~~2016,~~2018, and 1633 operating properties ~~totaling 1,468,708~~aggregating 2.3 million RSF acquired subsequent to ~~July~~January 1, ~~2016.~~2018.

Investment income

~~Sale~~During six months ended June 30, 2019, we recognized $105.1 million of investment income, which included $21.8 million of realized gains and $83.3 million of unrealized gains. Realized gains of $21.8 million for the six months ended June 30, 2019, primarily related to the sales of our investments in publicly traded companies. Unrealized gains of $83.3 million during the six months ended June 30, 2019, primarily consisted of increases in fair values of our investments in publicly traded companies aggregating $44.5 million and increases in fair values of our investments in privately held entities that report NAV aggregating $29.3 million.

During the six months ended June 30, 2018, we recognized $98.1 million of investment income, which included $20.8 million of realized gains and $77.3 million of unrealized gains. Refer to Note 7 – “Investments” to these unaudited consolidated financial statements for further details.

Sales of real estate assets

During the six months ended June 30, 2018, we recognized an impairment ~~charges, and gain on sales~~ of real estate of $6.3 million related to one land parcel located in Northern Virginia that was classified as held for sale as of June 30, 2018, and was sold in July 2018 for a sales price of $6.0 million with no gain or loss.

During the three months ended September 30, 2017, we recognized a gain of $14.1 million upon the completion of the sale of a condominium interest in our unconsolidated real estate joint venture property at 360 Longwood Avenue in our Longwood Medical Area submarket. This gain is reflected in our equity in earnings of unconsolidated real estate joint ventures in our consolidated statements of income. Refer to Note 4 – “Investments in Unconsolidated Real Estate Joint Ventures” to our unaudited consolidated financial statements under Item 1 of this report for more information.

Impairment of real estate recognized during the three months ended September 30, 2016, of $8.1 million primarily relates to our decision to sell our real estate investments in Asia. Refer to “Sale of Real Estate Assets and Impairment Charges” in Note 3 – “Investments in Real Estate” to our unaudited consolidated financial statements under Item 1 of this report for more information.

Loss on early extinguishment of debt

During the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2019, we ~~recognized a loss on~~repaid early ~~extinguishment of debt related to the write-off of a portion of unamortized loan fees~~one secured note payable aggregating ~~$2.4~~$106.7 million, ~~upon the amendment of our unsecured senior line of credit~~which was originally due in ~~July 2016. Additionally, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan~~2020 and bore interest at 7.75%, and recognized a loss on early extinguishment of debt of ~~$869 thousand related to~~$7.1 million, including the write-off of unamortized loan fees. ~~No such losses were recognized~~Additionally, during the ~~three~~six months ended ~~September~~June 30, ~~2017.~~2019, we repaid early the remaining $193.1 million balance of our secured construction loan related to 50/60 Binney Street and recognized a loss on early extinguishment of debt of $269 thousand.

Preferred stock redemption charge

During the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2019, we repurchased, ~~1.1 million~~in privately negotiated transactions, 275,000 outstanding shares of our Series D Convertible Preferred Stock and recognized a preferred stock redemption charge of ~~$13.1~~$2.6 million. ~~We did not repurchase any shares of our Series D Convertible Preferred Stock during the three months ended September 30, 2017.~~

~~Comparison of results for the nine months ended September 30, 2017, to the nine months ended September 30, 2016~~

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. For a reconciliation of net operating income from net income, the most directly comparable financial measure presented in accordance with GAAP, refer to the “Non-GAAP Measures and Definitions” section within this Item 2.

Nine Months Ended September 30,
(Dollars in thousands)

2017 2016 $ Change % Change
Same Properties $ 457,237
$ 445,740
$ 11,497
2.6 %
Non-Same Properties 177,919
40,765
137,154
336.5

Total rental 635,156
486,505
148,651
30.6

Same Properties 155,017
151,588
3,429
2.3

Non-Same Properties 33,857
13,797
20,060
145.4

Total tenant recoveries 188,874
165,385
23,489
14.2

Same Properties 341
77
264
342.9

Non-Same Properties 4,935
20,577
(15,642 ) (76.0 )
Total other income 5,276
20,654
(15,378 ) (74.5 )

Same Properties 612,595
597,405
15,190
2.5

Non-Same Properties 216,711
75,139
141,572
188.4

Total revenues 829,306
672,544
156,762
23.3

Same Properties 182,281
176,967
5,314
3.0

Non-Same Properties 55,255
28,197
27,058
96.0

Total rental operations 237,536
205,164
32,372
15.8

Same Properties 430,314
420,438
9,876
2.3

Non-Same Properties 161,456
46,942
114,514
243.9

Net operating income $ 591,770
$ 467,380
$ 124,390
26.6 %

Net operating income – Same Properties $ 430,314
$ 420,438
$ 9,876
2.3 %
Straight-line rent revenue and amortization of acquired below-market leases (13,439 ) (28,024 ) 14,585
(52.0 )
Net operating income – Same Properties (cash basis) $ 416,875
$ 392,414
$ 24,461
6.2 %

~~Rental revenues~~

Total rental revenues for the nine months ended September 30, 2017, increased by $148.7 million, or 30.6%, to $635.2 million, compared to $486.5 million for the nine months ended September 30, 2016. The increase was primarily due to an increase in rental revenues from our Non-Same Properties totaling $137.2 million related to 2,355,756 RSF of development and redevelopment projects placed into service subsequent to January 1, 2016, and 16 operating properties totaling 1,468,708 RSF acquired subsequent to January 1, 2016.

Rental revenues from our Same Properties for the nine months ended September 30, 2017, increased by $11.5 million, or 2.6%, to $457.2 million, compared to $445.7 million for the nine months ended September 30, 2016. The increase was primarily due to significant rental rate increases on lease renewals and re-leasing of space since January 1, 2016. Refer to “Leasing” within the “Operating Summary” section of this Item 2 for additional information on our leasing activity. The increase was slightly offset by a decrease in rental revenue as a result of a decrease in Same Properties’ occupancy to 96.0% for the nine months ended September 30, 2017, from 97.2% for the nine months ended September 30, 2016. Refer to “Same Properties” in the section above within this Item 2 for additional information on the change in our Same Properties’ occupancy rates.

~~Tenant recoveries~~

Tenant recoveries for the nine months ended September 30, 2017, increased by $23.5 million, or 14.2%, to $188.9 million, compared to $165.4 million for the nine months ended September 30, 2016. This increase is relatively consistent with the increase in our rental operating expenses of $32.4 million, or 15.8%, as discussed under “Rental Operating Expenses” below. Same Properties’ tenant recoveries increased by $3.4 million, or 2.3%, primarily due to the increase in recoverable operating expenses for the nine months ended September 30, 2017, as discussed below. As of September 30, 2017, 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

~~Other income~~

~~Other income for the nine months ended September 30, 2017 and 2016, consisted of the following (in thousands):~~

Nine Months Ended September 30,
2017 2016 Change
Management fee income $ 1,643
$ 380
$ 1,263
Interest and other income 1,626
2,223
(597 )
Investment income 2,007
18,051
(16,044 )
Total other income $ 5,276
$ 20,654
$ (15,378 )

~~Refer to Note 5 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for more information on investment income.~~

~~Rental operating expenses~~

Total rental operating expenses for the nine months ended September 30, 2017, increased by $32.4 million, or 15.8%, to $237.5 million, compared to $205.2 million for the nine months ended September 30, 2016. Approximately $27.1 million of the increase was due to an increase in rental operating expenses from our Non-Same Properties primarily related to 2,355,756 RSF of development and redevelopment projects placed into service subsequent to January 1, 2016, and 16 operating properties totaling 1,468,708 RSF acquired subsequent to January 1, 2016.

Same Properties’ rental operating expenses increased by $5.3 million, or 3.0%, to $182.3 million during the nine months ended September 30, 2017, compared to $177.0 million for the nine months ended September 30, 2016, primarily due to higher utility expenses, higher snow removal services, and higher repair and maintenance expenses resulting from a comparably colder winter. The increase in Same Properties’ rental operating expenses was partially offset by property tax refunds during the nine months ended September 30, 2017.

~~General and administrative expenses~~

General and administrative expenses for the nine months ended September 30, 2017, increased by $9.7 million, or 20.8%, to $56.1 million, compared to $46.4 million for the nine months ended September 30, 2016. General and administrative expenses increased primarily due to the continued growth in the depth and breadth of our operations in multiple markets, including a 30.6% increase in total rental revenue to $635.2 million for the nine months ended September 30, 2017, compared to $486.5 million for the same period in 2016, and including a 4.1 million RSF, or 16.7%, increase in our North America asset base subsequent to October 1, 2016. As a percentage of total assets, our general and administrative expenses for the nine months ended September 30, 2017 and 2016, year-to-date annualized, declined to 0.6% from 0.7%, respectively.

~~Interest expense~~

~~Interest expense for the nine months ended September 30, 2017 and 2016, consisted of the following (dollars in thousands):~~

Nine Months Ended September 30,
Component 2017 2016 Change
Interest incurred $ 137,888
$ 116,520
$ 21,368
Capitalized interest (45,325 ) (40,790 ) (4,535 )
Interest expense $ 92,563
$ 75,730
$ 16,833

Average debt balance outstanding ⁽¹⁾
$ 4,675,967
$ 4,150,540
$ 525,427
Weighted-average annual interest rate ⁽²⁾
3.9 % 3.7 % 0.2 %


~~(1)~~	~~Represents the average total debt balance outstanding during the nine months ended September 30, 2017 and 2016.~~


~~(2)~~	~~Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.~~

~~The net change in interest expense during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, resulted from the following (dollars in thousands):~~

Component
Interest Rate⁽¹⁾
Effective Date Change
Increases in interest incurred due to:
Issuance of debt:
$425 million unsecured senior note payable 4.09% March 2017 $ 9,730
$350 million unsecured senior note payable 4.14% June 2016 6,160
Secured construction loan 3.89% April 2016 2,770
Assumption of $203 million secured note payable 3.40% November 2016 5,520
Higher average balance and interest rate on secured construction loans Various Various 4,460
Higher average interest rate on unsecured senior line of credit and term loans 2,790
Total increases 31,430
Decreases in interest incurred due to:
Repayments of debt:
Secured notes payable ⁽²⁾
Various Various (4,550 )
Unsecured senior bank term loan Various February 2017 (2,960 )
Lower average notional amounts of interest rate hedge agreements in effect (1,910 )
Amortization of loan fees (220 )
Other decrease in interest (422 )
Total decreases (10,062 )
Change in interest incurred 21,368
Increase in capitalized interest ⁽³⁾
(4,535 )
Total change in interest expense $ 16,833


~~(1)~~	~~Represents the interest rate as of the end of the applicable period, plus the impact of debt premiums/discounts, interest rate hedge agreements, and deferred financing costs.~~


~~(2)~~	~~Decrease is primarily due to the repayment of four secured notes payable aggregating $270.6 million, subsequent to January 1, 2016.~~

~~(3)~~

Increase in capitalized interest is primarily due to an increase in our highly leased development and redevelopment projects undergoing construction in our value-creation pipeline during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. The increase was also partially due to the increase in the weighted-average interest rate required for capitalization of interest to 3.96% effective during the nine months ended September 30, 2017, from 3.70% effective during the nine months ended September 30, 2016, as a result of the increase in rates applicable to borrowings outstanding during each respective period.

~~Depreciation and amortization~~

Depreciation and amortization expense for the nine months ended September 30, 2017, increased by $90.9 million, or 41.7%, to $309.1 million, compared to $218.2 million for the nine months ended September 30, 2016. The increase is primarily due to additional depreciation from 2,355,756 RSF of development and redevelopment projects placed into service subsequent to January 1, 2016, and 16 operating properties totaling 1,468,708 RSF acquired subsequent to January 1, 2016.

~~Sale of real estate assets, impairment charges, and gain on sales of real estate~~

Impairment of real estate recognized during the nine months ended September 30, 2017, of $203 thousand related to our 20,580 RSF property located in a non-cluster market that was classified as held for sale as of June 30, 2017, and was sold in July 2017 with no gain or loss.

Impairment of real estate recognized during the nine months ended September 30, 2016, of $193.2 million primarily related to our decision to monetize our real estate investments in Asia. Refer to “Sale of Real Estate Assets and Impairment Charges” in Note 3 – “Investments in Real Estate” to our unaudited consolidated financial statements under Item 1 of this report for more information.

In January 2017, we completed the sale of a vacant property at 6146 Nancy Ridge Drive located in our Sorrento Mesa submarket of San Diego for a purchase price of $3.0 million and recognized a gain of $270 thousand. In May 2017, we recognized a gain of $111 thousand upon the sale of a partial interest in our land parcels at 1401/1413 Research Boulevard, located in the Rockville submarket of Maryland.

In July 2017, we recognized a gain of $14.1 million upon the completion of the sale of a condominium interest in our unconsolidated real estate joint venture property at 360 Longwood Avenue in our Longwood Medical Area submarket. This gain is reflected in our equity in earnings of unconsolidated real estate joint ventures in our consolidated statement of income. Refer to Note 4 – “Investment in Unconsolidated Real Estate Joint Ventures” to our unaudited consolidated financial statement under Item 1 of this report for more information.

~~Loss on early extinguishment of debt~~

During the nine months ended September 30, 2017, we repaid $200 million of our 2019 Unsecured Senior Bank Term Loan to reduce the total outstanding balance from $400 million to $200 million and recognized a loss of $670 thousand related to the write-off of unamortized loan fees. During the nine months ended September 30, 2016, we recognized a loss on early extinguishment of debt related to the write-off of a portion of unamortized loan fees aggregating $2.4 million, upon the amendment of our unsecured senior line of credit in July 2016. Additionally, during the nine months ended September 30, 2016, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan to reduce the total outstanding balance from $600 million to $400 million, and recognized a loss on early extinguishment of debt of $869 thousand related to the write-off of unamortized loan fees.

~~Preferred stock redemption charge~~

During the nine months ended September 30, 2017 and 2016, we repurchased, in privately negotiated transactions, 501,115 and 3.0 million outstanding shares, respectively, of our Series D Convertible Preferred Stock and recognized a preferred stock redemption charge of $5.8 million and $25.6 million, respectively.

In March 2017, we announced the redemption of our Series E Redeemable Preferred Stock and recognized a preferred stock redemption charge of $5.5 million. Refer to Note 12 – “Stockholders’ Equity” to our unaudited consolidated financial statements under Item 1 of this report for more information.

Projected results

On June 20, 2019, we filed a Current Report on Form 8-K with updated guidance for the year ending December 31, 2019. We present further updated guidance for EPS attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, based on our current view of existing market conditions and other assumptions for the year ending December 31, ~~2017,~~2019, as set forth, and as adjusted, in the ~~table~~tables below. The tables below also provide a reconciliation of EPS ~~per share~~ attributable to Alexandria’s common stockholders – diluted, the most directly comparable GAAP measure, to funds from operations aper share and funds from operations per share, as adjusted, non-GAAP ~~measure,~~measures, and other key assumptions included in our updated guidance for the year ending December 31, ~~2017.~~2019. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of “Forward-Looking Statements” ~~within~~in this Item 2.



	Guidance
Summary of Key Changes in Guidance	As of ~~10/30/17~~7/29/19	As of ~~7/31/17~~	6/20/19
EPS, FFO per share, and FFO per share, as adjusted	See updates below			~~See below~~
Rental rate ~~increase up 1%~~increases	~~20.5%~~27.0% to ~~23.5%~~30.0%	~~19.5%~~26.0% to ~~22.5%~~	29.0%
Rental rate ~~increase~~increases (cash basis) ~~up 3%~~	~~10.5%~~14.0% to ~~13.5%~~17.0%	~~7.5%~~13.0% to ~~10.5%~~	16.0%

Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted
As of 10/30/17 As of 7/31/17
Earnings per share $1.57 to $1.59 $1.40 to $1.46
Depreciation and amortization 4.45 4.45
Less: our share of gain on sale of real estate from unconsolidated JVs (0.15) —
Allocation of unvested restricted stock awards (0.04) (0.04)
Funds from operations per share $5.83 to $5.85 $5.81 to $5.87
Add: impairment of non-real estate investments ⁽¹⁾
0.05 0.05
Add: loss on early extinguishment of debt 0.01 0.01
Add: preferred stock redemption charge ⁽²⁾
0.12 0.12
Funds from operations per share, as adjusted $6.01 to $6.03 $5.99 to $6.05

Key Assumptions ⁽³⁾
(Dollars in millions)
2017 Guidance
Low High
Occupancy percentage for operating properties in North America as of December 31, 2017 96.6%
97.2%

Lease renewals and re-leasing of space:
Rental rate increases 20.5%
23.5%
Rental rate increases (cash basis) 10.5%
13.5%

Same property performance:
Net operating income increase 2.0%
4.0%
Net operating income increase (cash basis) 5.5%
7.5%

Straight-line rent revenue $ 107
$ 112
General and administrative expenses ⁽⁴⁾
$ 68
$ 73
Capitalization of interest ⁽⁴⁾
$ 48
$ 58
Interest expense ⁽⁴⁾
$ 131
$ 141



~~Key Credit Metrics~~		~~As of 10/30/17~~
~~Net debt to Adjusted EBITDA – fourth quarter of 2017, annualized~~		~~5.3x to 5.8x~~
~~Net debt and preferred stock to Adjusted EBITDA – fourth quarter of 2017, annualized~~		~~5.3x to 5.8x~~
~~Fixed-charge coverage ratio – fourth quarter of 2017, annualized~~		~~Greater than 4.0x~~
~~Value-creation pipeline as a percentage of gross investments in real estate as of December 31, 2017~~		~~Less than 10%~~



Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted, as Adjusted	As of 7/29/19		As of 6/20/19
Earnings per share⁽¹⁾	$2.39 to $2.47		$2.65 to $2.75
Depreciation and amortization		4.85		4.85
Allocation of unvested restricted stock awards		(0.05)		(0.05)
Funds from operations per share⁽²⁾	$7.19 to $7.27		$7.45 to $7.55
Unrealized gains on non-real estate investment⁽¹⁾		(0.75)		(0.65)
Loss on early extinguishment of debt⁽³⁾		0.45		0.07
Preferred stock redemption charge		0.02		0.02
Allocation to unvested restricted stock awards		0.01		0.01
Funds from operations per share, as adjusted	$6.92 to $7.00		$6.90 to $7.00
Midpoint		$6.96		$6.95


(1)	~~Primarily related to two non-real estate~~Excludes future unrealized gains or losses from changes in fair value of equity investments ~~during the three months ended~~after June 30, ~~2017.~~2019, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(2)

~~Includes charges aggregating $5.8 million related~~Calculated in accordance with standards established by the Advisory Board of Governors of Nareit (the “Nareit Board of Governors”). Refer to the ~~repurchases~~definition of ~~501,115 outstanding shares of our Series D Convertible Preferred Stock during~~“Funds From Operations and Funds From Operations, As Adjusted, Attributable to Alexandria’s Common Stockholders” in the ~~three months ended March 31, 2017. Additionally, in March 2017, we announced the redemption of our Series E Redeemable Preferred Stock~~“Non-GAAP Measures and ~~recognized a $5.5 million preferred stock redemption charge. We completed the redemption in April 2017. Excludes any charges related to future repurchases of our Series D Convertible Preferred Stock.~~Definitions” section within this Item 2 for additional information.

(3)

In July 2019, we issued $1.25 billion of unsecured senior notes payable and made a partial repayment of $175.0 million on our unsecured senior bank term loan. Also in July 2019, we refinanced an aggregate $950.0 million of unsecured senior notes payable comprising $400.0 million of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer completed on July 17, 2019, and a subsequent call for redemption. The redemption is expected to settle on August 16, 2019. As a result of our refinancing and partial repayment, we expect to recognize a loss, primarily related to the early extinguishment of debt, of $43 million, or $0.38 per share, during the three months ending September 30, 2019.



Key Assumptions⁽¹⁾ (Dollars in millions)	2019 Guidance
Key Assumptions⁽¹⁾ (Dollars in millions)	Low		High
Occupancy percentage for operating properties in North America as of December 31, 2019⁽²⁾	97.2%		97.8%

Lease renewals and re-leasing of space:
Rental rate increases	27.0%		30.0%
Rental rate increases (cash basis)	14.0%		17.0%

Same property performance:
Net operating income increase	1.0%		3.0%
Net operating income increase (cash basis)	6.0%		8.0%

Straight-line rent revenue	$	95	$	105	⁽³⁾
General and administrative expenses	$	108	$	113
Capitalization of interest	$	79	$	89
Interest expense	$	167	$	177

(1)

The completion of our development and redevelopment projects will result in an increase in interest expense and other project costs because these project costs will no longer qualify for capitalization and will therefore be expensed as incurred. Our assumptions for ~~Same Properties~~occupancy, rental rate increases, same property net operating income ~~growth, rental rate growth,~~increase, straight-line rent revenue, general and administrative expenses, capitalization of interest, and interest expense ~~are included~~presented in the ~~tables~~table above ~~and~~ are subject to a number of variables and uncertainties, including those discussed as “Forward-Looking Statements” under Part I; “Item 1A. Risk Factors”; and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10‑K for the year ended December 31, ~~2016.~~2018. To the extent our full-year earnings guidance is updated during the year, we will provide ~~additional~~ disclosure supporting reasons for any significant changes to such guidance.

~~(4)~~(2)

WeOn June 20, 2019, we updated guidance for occupancy percentage for operating properties in North America as of December 31, 2019, to reflect the pending acquisition of a campus located in our San Diego market that includes multiple operating buildings aggregating 560,000 RSF which is 76% leased. Additionally, as expected, we will commence renovations on 116,556 RSF at 3545 Cray Court in our Torrey Pines submarket upon expiration of the existing lease in the third quarter of 2019. In aggregate for these items, we expect a temporary decline in occupancy percentage in North America of approximately 1% from the second quarter to ~~be at~~ the ~~top end~~third quarter of 2019.


(3)	Approximately 45% of straight-line rent revenue represents initial free rent on recently delivered and expected 2019 deliveries of new Class A properties from our ~~guidance ranges for general~~development and ~~administrative expenses and capitalization of interest, and the low end of our guidance range for interest expense.~~redevelopment pipeline.



Key Credit Metrics		2019 Guidance
Net debt to Adjusted EBITDA – fourth quarter of 2019, annualized		Less than or equal to 5.3x
Net debt and preferred stock to Adjusted EBITDA – fourth quarter of 2019, annualized		Less than or equal to 5.4x
Fixed-charge coverage ratio – fourth quarter of 2019, annualized		Greater than 4.0x
Value-creation pipeline as a percentage of gross investments in real estate as of December 31, 2019		Less than 15%

Consolidated and unconsolidated real estate joint ventures

We present components of balance sheet and operating results information for the noncontrolling ~~interests’~~interest share of our consolidated real estate joint ventures and for our share of investments in unconsolidated real estate joint ventures to help investors estimate balance sheet and operating results information related to our partially owned entities. These amounts are estimated by computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint ventures that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint ventures to arrive at our proportionate share of each component presented. Refer to Note 4 – “Consolidated and Unconsolidated Real Estate Joint Ventures” to our unaudited consolidated financial statements under Item 1 of this report for further discussion.



Consolidated Real Estate Joint Ventures (controlled by us through contractual rights or majority voting rights)
Property/Market/Submarket	Noncontrolling⁽¹⁾ Interest Share
75/125 Binney Street/Greater Boston/Cambridge		60.0	%
225 Binney Street/Greater Boston/Cambridge		~~70.0%~~70.0
~~1500 Owens Street/San Francisco/Mission Bay/SoMa~~		~~49.9%~~%
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa		~~40.0%~~40.0	%
~~10290 and 10300~~ 1500 Owens Street/San Francisco/Mission Bay/SoMa		49.9	%
Campus ~~Point~~Pointe by Alexandria/San Diego/University Town Center⁽²⁾		45.0	%
9625 Towne Centre Drive/San Diego/University Town Center		~~45.0%~~49.9	%

Unconsolidated Real Estate Joint Ventures (controlled jointly or by our JV partners through contractual rights or majority voting rights)
Property/Market/Submarket	Our Ownership Share⁽³⁾
~~360 Longwood Avenue/Greater Boston/Longwood Medical Area~~1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa		~~27.5%~~10.0	%
Menlo Gateway/San Francisco/Greater Stanford		48.3	%	⁽⁴⁾
1401/1413 Research Boulevard/Maryland/Rockville		~~65.0%~~65.0	%	⁽²⁾⁽⁵⁾
704 Quince Orchard Road/Maryland/Gaithersburg		56.8	%	⁽⁵⁾


(1)	In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in ~~three~~four other ~~properties~~joint ventures in North America.


(2)	~~The~~Includes 10290 and 10300 Campus Point Drive and 4110 Campus Point Court in our University Town Center submarket.


(3)	In addition to the unconsolidated real estate joint ventures listed, we hold one other insignificant unconsolidated real estate joint venture ~~is expected to fund the remaining construction costs~~in North America.


(4)	As of ~~the project with funds from its construction loan shown below,~~June 30, 2019, we had a 48.3% ownership interest in Menlo Gateway and we expect our ownership to increase to 49% through future funding of construction costs in 2019.


(5)	Represents our ownership interest; our voting interest ~~percentage~~is limited to ~~remain at 65% at completion of the project. Refer to “Real Estate Asset Sales” within this Item 2 for additional information on the contribution of land parcels to the real estate joint venture.~~50%.

~~As of September 30, 2017, our~~Our unconsolidated real estate joint ventures have the following non-recourse secured loans that include the following key terms ~~(amounts represent 100%~~as of ~~the loan amounts at the joint venture level, dollars~~June 30, 2019, (dollars in thousands):

~~360 Longwood Avenue~~



		Maturity Date		Stated Rate	Interest Rate⁽¹⁾	100% at Joint Venture Level
Unconsolidated Joint Venture	Our Share	Maturity Date		Stated Rate	Interest Rate⁽¹⁾	Debt Balance⁽²⁾		Remaining Commitments
1401/1413 Research Boulevard	65.0%		5/17/20	L+2.50%	5.91%	$	22,696	$	5,997
1655 and 1725 Third Street	10.0%		6/29/21	L+3.70%	6.14%	253,366		121,634
704 Quince Orchard Road	56.8%		3/16/23	L+1.95%	4.59%	6,997		7,865
Menlo Gateway, Phase II	48.3%		5/1/35	4.53%	4.59%	8,019		147,784
Menlo Gateway, Phase I	48.3%		8/10/35	4.15%	4.18%	143,334		—
						$	434,412	$	283,280

~~1401/1413 Research Boulevard~~

Maturity Date Stated Rate
Interest Rate ⁽¹⁾

Debt Balance ⁽²⁾
Outstanding Principal Remaining Commitments Total
5/17/20
⁽⁴⁾
L+2.50 %
⁽⁵⁾
5.07 % $ 3,699
$ 3,829
$ 21,171
$ 25,000


(1)	~~Represents interest rate including~~Includes interest expense and amortization of loan fees.


(2)	Represents outstanding principal, net of unamortized deferred financing costs.


~~(3)~~	The unconsolidated real estate joint venture has two one-year options to extend the stated maturity date to September 1, 2024, subject to certain conditions. Additionally, the loan commitment balance excludes an earn-out advance provision that allows for incremental borrowings up to $48.0 million, subject to certain conditions.


~~(4)~~	The unconsolidated real estate joint venture has an option to extend the stated maturity date to July 1, 2020. In addition, there are two one-year options to convert the construction loan to a permanent loan and extend the stated maturity date to May 17, 2022.


~~(5)~~	~~The outstanding borrowing bears interest at a floating rate with an interest rate floor equal to 3.15%.~~

The following tables present information related to the operating results and financial positions of our consolidated and unconsolidated real estate joint ventures (in thousands):


	Noncontrolling Interest Share of Consolidated Real Estate JVs								Our Share of Unconsolidated Real Estate JVs						Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures						Our Share of Unconsolidated Real Estate Joint Ventures
	September 30, 2017								September 30, 2017						June 30, 2019						June 30, 2019
	Three Months Ended				Nine Months Ended				Three Months Ended			Nine Months Ended			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
Total revenues	$	13,400			$	41,022			$	1,044		$	5,849		$	20,874		$	38,679		$	3,230		$	6,051
Rental operations	(4,189		)		(11,772		)		(489		)	(2,194		)	(5,842		)	(10,752		)	(723		)	(1,290		)
	9,211				29,250				555			3,655			15,032			27,927			2,507			4,761
General and administrative	(52		)		(126		)		(10		)	(40		)	(94		)	(128		)	(33		)	(65		)
Interest	—				—				(168		)	(1,552		)	—			—			(239		)	(469		)
Depreciation and amortization	(3,608		)		(10,985		)		(383		)	(1,119		)	(6,744		)	(12,163		)	(973		)	(1,819		)
Gain on sale of real estate	—				—				14,106			14,106
Fixed returns allocated to redeemable noncontrolling interests⁽¹⁾															218			435			—			—
	$	5,551		⁽¹⁾	$	18,139		⁽¹⁾	$	14,100		$	15,050		$	8,412		$	16,071		$	1,262		$	2,408

Straight-line rent and below-market lease revenue															$	779		$	1,801		$	563		$	1,016
Funds from operations															$	15,156		$	28,234		$	2,235		$	4,227

September 30, 2017
Noncontrolling Interest Share of Consolidated Real Estate JVs
Our Share of Unconsolidated
Real Estate JVs

Investments in real estate $ 476,339
$ 57,340

Cash and cash equivalents 13,957
4,317

Other assets 29,534
3,707

Secured notes payable —
(28,278 )
Other liabilities (21,989 ) (3,394 )
Redeemable noncontrolling interests (11,418 )
⁽¹⁾
—

$ 486,423
$ 33,692

(1)

~~Redeemable~~Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in ~~our consolidated real estate project at 213 East Grand Avenue since August 2005, located~~one property in our South San Francisco submarket, aggregating 300,930 RSF, which earns a fixed preferred return of 8.4% rather than a variable return based upon their ownership percentage of the joint venture. Operating results information presented above excludes an allocation of results attributable tosubmarket. These redeemable noncontrolling interests ~~since they~~ earn a fixed ~~preferred return.~~return on their investment rather than participate in the operating results of the property.

~~For~~



	As of June 30, 2019
	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures			Our Share of Unconsolidated Real Estate Joint Ventures
Investments in real estate	$	713,892		$	444,845
Cash and cash equivalents	21,439			7,350
Restricted cash	—			99
Other assets	70,029			28,881
Secured notes payable	—			(117,103		)
Other liabilities	(22,911		)	(29,910		)
Redeemable noncontrolling interests	(10,994		)	—
	$	771,455		$	334,162

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, we distributed $17.4 million and $10.9 million, respectively, to~~2018, our consolidated real estate joint ventures distributed an aggregate of $24.6 million and $18.4 million, respectively, to our joint venture partners. The increase is primarily related to the distributions to real estate joint ventures formed with TIAA in December 2015 and December 2016 at 10300 Campus Point Drive in our University Town Center submarket of San Diego. Refer to our consolidated statements of cash flows and Note 34 – ~~“Investments in~~“Consolidated and Unconsolidated Real ~~Estate”~~Estate Joint Ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Investments

We ~~hold~~present our equity investments at fair value whenever fair value or NAV is readily available. Adjustments for our limited partnership investments represent changes in ~~certain publicly traded companies, privately held entities,~~reported NAV as a practical expedient to estimate fair value. For investments without readily available fair values, we adjust the carrying amount whenever such investments have an observable price change and ~~limited partnerships primarily involved in the life science and technology industries.~~further adjustments are not made until another price change, if any, is observed. Refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

As of September 30, 2017, our investments aggregated $485.3 million, or approximately 4.2% of our total assets. The charts and table below present selected investment statistics as of September 30, 2017 (dollars in thousands, unless stated otherwise):

Public/Private Investment Mix
(Cost)
Tenant/Non-Tenant Mix
(Cost)

Investment
Type
Cost Net Unrealized Gains Total Number of Investments
Public $ 55,433
$ 45,189
$ 100,622
259
Private 384,640
—
384,640
Average Cost
Total $ 440,073
$ 45,189
$ 485,262
$1.7M



	June 30, 2019
	Three Months Ended		Six Months Ended		Year Ended December 31, 2018
Realized gains	$	10,442	$	21,792	$	37,129	⁽¹⁾
Unrealized gains	11,058		83,264		99,634
Investment income	$	21,500	$	105,056	$	136,763

~~Liquidity~~

Net Debt to Adjusted EBITDA⁽¹⁾

Net Debt and Preferred Stock to Adjusted EBITDA ⁽¹⁾

Fixed-Charge Coverage Ratio ⁽¹⁾
Liquidity ⁽²⁾
$1.7B

(In millions)
Availability under our $1.65 billion unsecured senior line of credit $ 1,336
Remaining construction loan commitments 156
Available-for-sale equity securities, at fair value 101
Cash, cash equivalents, and restricted cash 146
$ 1,739



Investments	Cost		Adjustments		Carrying Amount
Fair value:
Publicly traded companies	$	186,688	$	107,396	$	294,084
Entities that report NAV	240,177		142,448		382,625

Entities that do not report NAV:
Entities with observable price changes	41,187		73,575		114,762
Entities without observable price changes	266,383		—		266,383
June 30, 2019	$	734,435	$	323,419	$	1,057,854

March 31, 2019	$	688,543	$	312,361	$	1,000,904


(1)	Includes realized gains of $14.7 million related to two publicly traded non-real estate investments and impairment of $5.5 million primarily related to one privately held non-real estate investment. Excluding these gains and impairment, our realized gains on non-real estate investments were $27.9 million for the year ended December 31, 2018.



Public/Private Mix (Cost)		Tenant/Non-Tenant Mix (Cost)


$734.4M
Cost
$1.1B
Carrying Amount

Liquidity



Net Debt to Adjusted EBITDA⁽¹⁾ Net Debt and Preferred Stock to Adjusted EBITDA⁽¹⁾	Unsecured Senior Line of Credit Balance
	(In millions)

















Fixed-Charge Coverage Ratio⁽¹⁾	Liquidity⁽²⁾
	$3.4B




	(In millions)
	Availability under our $2.2 billion unsecured senior line of credit	$	1,686
	Outstanding forward equity sales agreements	1,132
	Cash, cash equivalents, and restricted cash	238
	Investments in publicly traded companies	294
		$	3,350


(1)	Quarter annualized.


(2)	As of ~~September~~June 30, ~~2017.~~2019.

We expect to meet certain long-term liquidity requirements, such as requirements for development, redevelopment, other construction projects, capital improvements, tenant improvements, property acquisitions, leasing costs, non-revenue-enhancing capital expenditures, scheduled debt maturities, distributions to noncontrolling interests, ~~repurchase/redemption~~repurchases/redemptions of preferred stock, and payment of dividends through net cash provided by operating activities, periodic asset sales, strategic real estate joint venture capital, and long-term secured and unsecured indebtedness, including borrowings under our ~~$1.65~~$2.2 billion unsecured senior line of credit, unsecured senior bank term ~~loans,~~loan, and ~~the~~ issuance of additional debt and/or equity securities.

We expect to continue meeting our short-term liquidity and capital requirements, as further detailed in this section, generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make the distributions necessary to continue qualifying as a REIT.

Over the next several years, our balance sheet, capital structure, and liquidity objectives are as follows:

Retain positive cash flows from operating activities after payment of dividends and distributions to noncontrolling interests for investment in development and redevelopment projects and/or acquisitions;

~~Maintain significant liquidity from net cash provided by operating activities, cash, cash equivalents,~~Improve credit profile and ~~restricted cash, available-for-sale equity securities, available borrowing capacity under our $1.65 billion unsecured senior line~~relative long-term cost of ~~credit, and available commitments under our secured construction loans;~~

~~Reduce the aggregate amount outstanding under our unsecured senior bank term loans;~~

~~Maintain a well-laddered debt maturity profile;~~

~~Decrease the ratio of net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA, allowing for some variation from quarter to quarter and year to year;~~capital;

Maintain diverse sources of capital, including sources from net cash provided by operating activities, unsecured debt, secured debt, selective real estate asset sales, ~~joint venture capital,~~partial interest sales, non-real estate investment sales, preferred stock, and common stock;

Maintain commitment to long-term capital to fund growth;

Maintain prudent laddering of debt maturities;

Maintain solid credit metrics;

Maintain significant balance sheet liquidity;

Mitigate unhedged variable-rate debt exposure through the reduction of short-term and medium-term variable-rate bank debt;

Maintain a large unencumbered asset pool to provide financial flexibility;

Fund preferred stock and common stock dividends and distributions to noncontrolling interests from net cash provided by operating activities;

Manage a disciplined level of value-creation projects as a percentage of our gross investments in real estate; and

Maintain high levels of pre-leasing and percentage leased in value-creation projects.

The following table presents the availability under our ~~$1.65~~$2.2 billion unsecured senior line of ~~credit, available commitments under our secured construction loans, available-for-sale~~credit; forward equity ~~securities,~~sales agreements; cash, cash equivalents, and restricted ~~cash~~cash; and investments in publicly traded companies as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

Description
Aggregate
Commitments

Outstanding
Balance
Remaining Commitments/Liquidity
$1.65 billion unsecured senior line of credit $ 1,650,000
$ 314,000
$ 1,336,000
Secured construction loans:
50 and 60 Binney Street/Greater Boston 350,000
317,979
32,021
100 Binney Street/Greater Boston 304,281
179,764
124,517
$ 2,304,281
$ 811,743
1,492,538
Available-for-sale equity securities, at fair value 100,622
Cash, cash equivalents, and restricted cash 146,275
Total liquidity $ 1,739,435



Description	Stated Rate		Aggregate Commitments		Outstanding Balance		Remaining Commitments/Liquidity
$2.2 billion unsecured senior line of credit	L+0.825	%	$	2,200,000	$	514,000	$	1,686,000
Outstanding forward equity sales agreements							1,132,209
Cash, cash equivalents, and restricted cash							238,225
Investments in publicly traded companies							294,084
Total liquidity							$	3,350,518

~~Refer to Note 8 – “Secured and Unsecured Senior Debt” to our unaudited consolidated financial statements under Item 1 of this report for a discussion of our secured construction loans.~~

Cash, ~~and~~ cash equivalents, and restricted cash

As of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~,2018, we had ~~$118.6~~$238.2 million and ~~$125.0~~$272.1 million, respectively, of cash, cash equivalents, and ~~cash equivalents.~~restricted cash. We expect existing cash, ~~and~~ cash equivalents, and restricted cash, cash flows from operating activities, proceeds from real estate asset sales, non-real estate investment sales, borrowings under our ~~$1.65~~$2.2 billion unsecured senior line of credit, ~~secured construction loan borrowings,~~ issuances of unsecured notes payable, and issuances of common stock to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, ~~distribution~~distributions to noncontrolling interests, scheduled debt repayments, acquisitions, and certain capital expenditures, including expenditures related to construction activities.

~~Restricted cash~~

~~Restricted cash consisted of the following as of September 30, 2017, and~~ ~~December 31, 2016~~ ~~(in thousands):~~

September 30, 2017 December 31, 2016
Funds held in trust under the terms of certain secured notes payable $ 17,853
$ 7,387
Funds held in escrow related to construction projects and investing activities 4,544
4,541
Other 5,316
4,406
Total $ 27,713
$ 16,334

Cash flows

We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows for the six months ended June 30, 2019 and 2018 (in thousands):


	Nine Months Ended September 30,									Six Months Ended June 30,
	2017			2016			Change			2019			2018			Change
Net cash provided by operating activities	$	356,330		$	291,851		$	64,479		$	308,340		$	258,241		$	50,099
Net cash used in investing activities	$	(1,313,764	)	$	(715,301	)	$	(598,463	)	$	(1,452,237	)	$	(1,268,899	)	$	(183,338	)
Net cash provided by financing activities	$	949,385		$	457,720		$	491,665		$	1,109,218		$	1,056,486		$	52,732

Operating activities

Cash flows provided by operating activities are primarily dependent upon the occupancy level of our asset base, the rental rates of our leases, the ~~collectability~~collectibility of rent and recovery of operating expenses from our tenants, the timing of completion of development and redevelopment projects, and the timing of acquisitions and dispositions of operating properties. Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, increased to ~~$356.3~~$308.3 million, compared to ~~$291.9~~$258.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2018. This increase was primarily attributable to (i) cash flows generated byfrom our highly leased development and redevelopment projects recently placed into service, (ii) income-producing acquisitions since January 1, ~~2016,~~2018, and (iii) increases in rental rates on lease renewals and re-leasing of space since January 1, ~~2016.~~2018.

Investing activities

Cash ~~flows~~ used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, consisted of the following (in thousands):


	Nine Months Ended September 30,									Six Months Ended June 30,				Increase (Decrease)
	2017			2016			Change			2019		2018
Proceeds from sales of real estate	$	4,263		$	27,332		$	(23,069	)
Sources of cash from investing activities:
Sales of investments										$	49,967	$	44,707	$	5,260
Returns of deposits for investing activities										—		5,500		(5,500		)
										49,967		50,207		(240		)
Uses of cash for investing activities:
Purchases of real estate										715,030		688,698		26,332
Additions to real estate	(660,877		)	(638,568		)	(22,309		)	577,322		431,225		146,097
Purchases of real estate	(590,884		)	(18,108		)	(572,776		)
Deposits for investing activities	4,700			(54,998		)	59,698
Deposits paid for investing activities										9,000		—		9,000
Investments in unconsolidated real estate joint ventures										95,950		44,486		51,464
Additions to investments	(128,190		)	(68,384		)	(59,806		)	104,902		118,775		(13,873		)
Sales of investments	18,896			35,295			(16,399		)
Repayment of notes receivable	—			9,054			(9,054		)
Other	38,328			(6,924		)	45,252
Acquisitions of interests in unconsolidated real estate joint ventures										—		35,922		(35,922		)
										1,502,204		1,319,106		183,098

Net cash used in investing activities	$	(1,313,764	)	$	(715,301	)	$	(598,463	)	$	1,452,237	$	1,268,899	$	183,338

Capital resources

We expect that our principal liquidity needs for the year ending December 31, ~~2017,~~2019, will be satisfied by the following multiple sources of capital, as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.

Key Sources and Uses of Capital
(In millions)
2017 Guidance Key Items Remaining after 9/30/17
Range Midpoint
Sources of capital:
Net cash provided by operating activities after dividends $ 115
$ 135
$ 125

Incremental debt 388
298
343

Real estate dispositions and common equity 1,080
1,350
1,215
⁽¹⁾

Total sources of capital $ 1,583
$ 1,783
$ 1,683

Uses of capital:
Construction $ 815
$ 915
$ 865
$ 243

Acquisitions 620
720
670
⁽²⁾
$ 79
⁽³⁾
7.00% Series D convertible preferred stock repurchases 18
18
18
⁽⁴⁾

6.45% Series E redeemable preferred stock redemption 130
130
130

Total uses of capital $ 1,583
$ 1,783
$ 1,683

Incremental debt (included above):
Issuance of unsecured senior notes payable $ 425
$ 425
$ 425

Borrowings – secured construction loans 200
250
225

Repayments of secured notes payable (5 ) (10 ) (8 )
Repayment of unsecured senior bank term loan (200 ) (200 ) (200 )
$1.65 billion unsecured senior line of credit/other (32 ) (167 ) (99 )
Incremental debt $ 388
$ 298
$ 343



Summary of Key Changes in Key Sources and Uses of Capital Guidance (In millions)	Guidance Midpoint
	As of 7/29/19			As of 6/20/19
Issuance of unsecured senior notes payable	$	2,100		$	850
Repayments of unsecured senior notes payable	$	(950	)	$	—
Repayments of unsecured senior bank term loan	$	(175	)	$	—



Key Sources and Uses of Capital (In millions)	2019 Guidance									Certain Completed Items
Key Sources and Uses of Capital (In millions)	Range						Midpoint			Certain Completed Items
Sources of capital:
Net cash provided by operating activities after dividends	$	170		$	210		$	190
Incremental debt	610			570			590
Real estate dispositions and partial interest sales	820			920			870			$	438		⁽¹⁾
Common equity	1,150			1,250			1,200			$	1,218		⁽²⁾
Total sources of capital	$	2,750		$	2,950		$	2,850

Uses of capital:
Construction	$	1,250		$	1,350		$	1,300
Acquisitions	1,500			1,600			1,550			(1)
Total uses of capital	$	2,750		$	2,950		$	2,850

Incremental debt (included above):
Issuance of unsecured senior notes payable	$	2,100		$	2,100		$	2,100		$	2,100		⁽³⁾
Assumption of secured note payable	28			28			28			$	28
Repayments of unsecured senior notes payable	(950		)	(950		)	(950		)	$	(950	)	⁽³⁾
Repayments of secured notes payable	(310		)	(320		)	(315		)	$	(300	)
Repayments of unsecured senior bank term loan	(175		)	(175		)	(175		)	$	(175	)	⁽³⁾
$2.2 billion unsecured senior line of credit/other	(83		)	(113		)	(98		)
Incremental debt	$	610		$	570		$	590

(1)

Includes 6.2 million shares of our common stock issued during the nine months ended September 30, 2017, for net proceeds of $705.4 million, and 4.8 million shares of our common stock subject to forward equity sales agreements, with anticipated aggregate net proceeds of $495.5 million to be settled in the three months ended December 31, 2017, subject to adjustments as provided in the forward equity sales agreements. Also includes dispositions completed during the nine months ended September 30, 2017. Refer to the “Acquisitions” and “Real Estate Asset Sales” subsections of the “Investments in Real Estate” section within this Item 2 for additional information.

(2)

~~Acquisitions guidance increased by $80.0~~Includes 602,484 shares of common stock for net proceeds of $86.1 million ~~from $590.0~~issued under our ATM program during the second quarter of 2019 and unsettled forward equity sales agreements to sell an aggregate of 8.1 million inshares of our July 31, 2017, forecast primarily for the completed acquisition of 201 Haskins Way in September 2017 and one pending acquisition. Refer to the “Acquisitions” section within this Item 2 for additional information.common stock.

(3)

~~Includes the second construction milestone installment payment~~In July 2019, we issued $1.25 billion of unsecured senior notes payable and made a partial repayment of $175.0 million on our unsecured senior bank term loan. Also in July 2019, we refinanced an aggregate $950.0 million of unsecured senior notes payable comprising $400.0 million of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer completed on July 17, 2019, and a subsequent call for the 2016 acquisition of the remaining 49% interest in our unconsolidated real estate joint venture with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket and one pending acquisition.

~~(4)~~

~~Guidance for repurchases~~redemption. The redemption is expected to settle on August 16, 2019. As a result of our ~~7.00% Series D preferred stock decreased by $77.0~~refinancing and partial repayment, we expect to recognize a loss, primarily related to the early extinguishment of debt, of $43 million, ~~to reflect actual redemptions through~~or $0.38 per share, during the ~~third quarter 2017.~~three months ending September 30, 2019.

The key assumptions behind the sources and uses of capital in the table above include a favorable capital market environment, performance of our core operating properties, lease-up and delivery of current and future development and redevelopment projects, ~~completion of pending~~ and ~~projected acquisitions, and continued substantial~~ leasing ~~activity of our operating properties.~~activity. Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed as “Forward-Looking Statements” under Part I; “Item 1A. Risk Factors”; and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10‑K for the year ended December 31, ~~2016.~~2018. We expect to update our forecast of sources and uses of capital on a quarterly basis.

Sources of capital

Net cash provided by operating activities after dividends

We expect to retain ~~$115~~$170.0 million to ~~$135~~$210.0 million of net cash flows from operating activities after payment of common stock and preferred stock dividends, and ~~after deduction for~~ distributions to noncontrolling ~~interests. Changes~~interests for the year ending December 31, 2019. For purposes of this calculation, changes in operating assets and liabilities are excluded ~~from this calculation~~ as they represent timing differences. ~~Net cash provided by operating activities after dividends in 2017 is expected to be driven by~~For the ~~completion of~~year ending December 31, 2019, we expect our recently delivered projects, our highly pre-leased value-creation projects expected to be completed, along with ~~recently delivered projects, certain future projects, recently acquired properties, and~~ contributions from Same Properties ~~which will~~and recently acquired properties, to contribute significant increases in ~~rental revenue,~~income from rentals, net operating income, and cash flows. We anticipate significant contractual near-term growth in annual cash rents of $58 million related to the commencement of contractual rents on the projects recently placed into service that are near the end of their initial free rent period. Refer to the “Cash Flows” subsection of the “Liquidity” section within this Item 2 of this report for a discussion of cash flows provided by operating activities for the six months ended June 30, 2019.

Debt

In February 2019, S&P Global Ratings raised our corporate issuer credit rating to BBB+/Stable from BBB/Positive. The rating upgrade reflects our consistently strong operating performance and continued successful delivery of our value-creation pipeline.

The table below reflects the total commitments, outstanding balances, applicable margins, maturity dates, ~~applicable rates,~~ and facility fees for each of ~~these~~the following facilities as of ~~September~~June 30, ~~2017 (dollars in thousands):~~2019:

September 30, 2017
Facility Balance
Maturity Date ⁽¹⁾
Applicable Margin Facility Fee
$1.65 billion unsecured senior line of credit $ 314,000
October 2021 L+1.00% 0.20%
2019 Unsecured Senior Bank Term Loan $ 199,543
January 2019 L+1.20% N/A
2021 Unsecured Senior Bank Term Loan $ 348,317
January 2021 L+1.10% N/A



	Commitment	Balance⁽¹⁾	Applicable Rate	Maturity Date	Facility Fee
Unsecured senior line of credit	$2.2 billion	$514 million	L+0.825%	January 2024⁽²⁾	0.15%
Unsecured senior bank term loan	$350 million	$350 million	L+0.90%	January 2025	N/A


(1)	Excludes loan fees and premiums (discounts) as of June 30, 2019.


(2)	Includes ~~any~~two six-month extension options that we control.

~~Borrowings under the $1.65~~As of June 30, 2019, we had $514.0 million outstanding balance on our $2.2 billion unsecured senior line of credit and a $350 million outstanding principal balance on our unsecured senior bank term loan. Borrowings under the $2.2 billion unsecured senior line of credit and our unsecured senior bank term loan bear interest at LIBOR or the base rate specified in the ~~amended $1.65 billion unsecured senior line of credit~~ agreement plus, in either case, a specified margin (the “Applicable Margin”)~~. The Applicable Margin for LIBOR borrowings under the $1.65 billion unsecured senior line of credit is~~ based on our existing credit ratings as set by certain rating agencies.

We use our ~~$1.65~~$2.2 billion unsecured senior line of credit to fund working capital, construction activities, and, from time to time, acquisition of properties. Borrowings under the ~~$1.65~~$2.2 billion unsecured senior line of credit will bear interest at a “Eurocurrency ~~Rate”~~Rate,” a “LIBOR Floating Rate,” or a “Base Rate” specified in the ~~amended $1.65~~$2.2 billion unsecured senior line of credit agreement plus, in ~~either~~any case, the Applicable Margin. The Eurocurrency Rate specified in the ~~amended $1.65~~$2.2 billion unsecured senior line of credit agreement is, as applicable, the rate per annum equal to either (i) the LIBOR or a successor rate thereto as ~~approved~~agreed to by the administrative agent and the Company for loans denominated in a LIBOR quoted currency (i.e., U.S. dollars, euro, sterling, or yen), (ii) the average annual yield rates applicable to Canadian dollar bankers’ acceptances for loans denominated in Canadian dollars, (iii) the Bank Bill Swap Reference Bid rate for loans denominated in Australian dollars, or (iv) the rate designated with respect to the applicable alternative currency for loans denominated in a non-LIBOR quoted currency (other than Canadian or Australian dollars). The LIBOR Floating Rate means, for any day, one month LIBOR, or a successor rate thereto as agreed to by the administrative agent and the Company for loans denominated in U.S. dollars. The Base Rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the federal funds rate plus 1/2 of 1.00%, (ii) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (iii) the Eurocurrency Rate plus 1.00%. Our ~~$1.65~~$2.2 billion unsecured senior line of credit contains a feature that allows lenders to competitively bid on the interest rate for borrowings under the facility. This may result in an interest rate that is below the stated rate. In addition to the cost of borrowing, the ~~facility~~$2.2 billion unsecured senior line of credit is subject to an annual facility fee of ~~0.20%~~0.15% based on the aggregate commitments outstanding.

We expect to fund a ~~significant~~ portion of our capital needs in ~~2017~~2019 from the issuance of unsecured senior notes payable, and from borrowings ~~available~~ under ~~existing secured construction loans, and~~ our ~~$1.65~~$2.2 billion unsecured senior line of credit.

In March ~~2017,~~2019, we completed an offering of ~~$425.0~~$850.0 million of unsecured senior notes for net proceeds of $846.1 million. The unsecured senior notes consisted of $300.0 million of 4.85% Unsecured Senior Notes; $350.0 million of 3.80% Unsecured Senior Notes, the proceeds from which were allocated to fund recently completed and future eligible green projects and the repayment of a secured note payable related to 50/60 Binney Street, a recently completed Class A property, which was awarded LEED^® Gold certification; and $200.0 million added to our outstanding 4.00% unsecured senior notes due on January 15, 2024, issued at a yield to maturity of 3.453%, which are part of the same series that was originally issued in ~~2028, at an~~2018 and will also be used to fund recently completed and future eligible green projects. As of June 30, 2019, these notes had a weighted-average interest rate of ~~3.95%. Net~~4.18% and a weighted-average maturity of 14.4 years.

In June 2019, we extended the maturity date of our unsecured senior bank term loan to January 2, 2025 from January 28, 2024, and in July 2019 we made a partial repayment of $175.0 million on its $350.0 million principal balance outstanding as of June 30, 2019.

In July 2019, we issued $1.25 billion of unsecured senior notes payable with a weighted-average interest rate of 3.72% and a weighted-average maturity of 19.5 years. The unsecured senior notes consisted of $750.0 million of 3.375% Unsecured Senior Notes and $500.0 million of 4.00% Unsecured Senior Notes. The proceeds were primarily used to refinance an aggregate $950.0 million of ~~$420.5~~unsecured senior notes payable comprising $400.0 million ~~were~~of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer and a subsequent call for redemption. In July 2019, we tendered $318.6 million, or 79.64% of our outstanding 2.75% unsecured senior notes payable and $384.9 million, including $135,000 tendered via guaranteed deliveries, or 69.98%, of our outstanding 4.60% unsecured senior notes payable. The call for redemption of the remaining 2.75% and 4.60% unsecured senior notes payable is expected to settle on August 16, 2019. Additionally, we made a partial repayment of $175.0 million on the outstanding balance of our unsecured senior bank term loan, and used ~~initially~~the remaining proceeds to reduce the outstanding ~~borrowings on~~balance of our ~~$1.65 billion~~ unsecured senior line of credit. ~~Refer to “3.95% Unsecured Senior Notes Payable Due in 2028” in Note 8 – “Secured~~The weighted-average interest rate and ~~Unsecured Senior Debt” to our unaudited consolidated financial statements under Item 1~~maturity of ~~this report for additional information regarding our~~the refinanced unsecured senior notes ~~payable.~~payable and partially repaid unsecured bank term loan were 3.94% and 2.4 years, respectively. As a result of our refinancing and partial repayment, we expect to recognize a loss, primarily related to the early extinguishment of debt, of $43 million during the three months ending September 30, 2019.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, we ~~completed a partial repayment of $200~~repaid early one secured note payable aggregating $106.7 million, ~~of our 2019 Unsecured Senior Bank Term Loan, reducing the total outstanding balance from $400 million to $200 million,~~which was originally due in 2020 and bore interest at 7.75%, and recognized a loss on early extinguishment of debt of ~~$670 thousand related to~~$7.1 million, including the write-off of unamortized loan fees. Additionally, we repaid early the remaining $193.1 million balance of our secured construction loan related to 50/60 Binney Street and recognized a loss on early extinguishment of debt of $269 thousand.

Management of LIBOR transition

On July 27, 2017, the Financial Conduct Authority (“FCA”) announced that it would phase out LIBOR as a benchmark by the end of 2021. In June 2017, the ARRC selected the Secured Overnight Financing Rate (“SOFR”), a new index calculated by reference to short-term repurchase agreements backed by Treasury securities, as its preferred replacement for U.S. dollar LIBOR. Since 2012, we have been closely monitoring developments in the LIBOR transition and, subsequently, in the SOFR markets, and have implemented numerous proactive measures to minimize the potential impact to the Company, specifically:

We have been actively reducing borrowings outstanding on our LIBOR-based unsecured senior line of credit, unsecured senior bank term loans, and construction loans through repayments: from January 2017 to July 2019, we retired approximately $1.2 billion of such debt.

As of June 30, 2019, our outstanding debt included only two LIBOR-based loans: our $2.2 billion unsecured senior line of credit with an outstanding balance of $514.0 million and our unsecured senior bank term loan with an outstanding balance of $350.0 million. The aggregate outstanding balance of the aforementioned LIBOR-based loans represented less than 15% of our total debt balance outstanding as of June 30, 2019.

In July 2019, we completed a partial repayment of $175.0 million of our unsecured senior bank term loan balance and repaid all outstanding borrowings under our unsecured senior line of credit, further reducing our exposure to LIBOR. In addition, we will seek opportunities to further retire the remaining balance of the unsecured senior bank term loan prior to the end of 2021.

All of our interest rate swap agreements mature prior to LIBOR cessation at the end of 2021.

Our unsecured senior line of credit and unsecured senior bank term loan contain fallback language generally consistent with the ARRC’s Amendment Approach, which provides a streamlined amendment approach for negotiating a benchmark replacement and introduces clarity with respect to the fallback trigger events and an adjustment to be applied to the successor rate.

We continue to monitor developments by the ARRC and other governing bodies involved in LIBOR transition.

Refer to “Item 1A. Risk Factors” within this quarterly report on Form 10-Q for additional information about LIBOR replacement.

Real estate dispositions and common equity

We expect to continue the disciplined execution of select sales of ~~non-strategic land and non-core/“core-like”~~ operating assets. ~~The sale of non-strategic land and non-core/“core-like” operating assets provides~~Future sales will provide an important source of capital to fund a portion of our highly leased value-creation development and redevelopment projects. We may also consider additional sales of partial interests in core Class A properties and/or development projects. For ~~2017,~~2019, we expect real estate dispositions and issuances of common equity ranging from ~~$1.1~~$2.0 billion to ~~$1.4 billion. Refer to “Forward Equity Sales Agreements” below within~~$2.2 billion, which includes the sale of a 60% interest in 75/125 Binney Street, a Class A property located in our Cambridge submarket for a sales price of $438.0 million. We completed this ~~Item 2 for additional information related to our forward equity sales agreements executed in~~partial interest sale during the three months ended March ~~2017.~~31, 2019. The amount of asset sales necessary to meet our forecasted sources of capital will vary depending upon the amount of EBITDA associated with the assets sold. In addition, the amount of common equity issued will be subject to market conditions.

For additional information, refer to “Sale of Real Estate Assets and Impairment Charges” in Note 3 – “Investments in Real Estate” and Note 4 – “Investments in Unconsolidated Real Estate Joint Ventures” to our unaudited consolidated financial statements under Item 1 of this report and “Real Estate Asset Sales” ~~under~~subsection of the “Investments in Real Estate” section within this Item 2.

~~ATM common stock offering program~~

~~In October 2016, we established an ATM common stock offering program that allowed us to sell up to an aggregate of $600.0 million of our common stock.~~

Common equity transactions

During the three and six months ended June 30, ~~2017,~~2019, we completed ~~our ATM program with the sale~~issuances and entered into forward equity sales agreement for an aggregate of ~~2.1~~8.7 million shares of common stock ~~for gross proceeds~~at a weighted-average price of ~~$245.8 million, or $118.97~~$144.50 per share, ~~and~~for aggregate net proceeds of approximately ~~$241.8 million.~~ $1.2 billion as follows:

~~In August 2017, we established a new ATM~~Issued 602,484 shares of common stock, ~~offering program that allows us~~at a weighted-average price of $145.58 per share, for net proceeds of $86.1 million.

Entered into forward equity sales agreements to sell ~~up to~~ an aggregate of ~~$750.0 million of our common stock. During the three months ended September 30, 2017, we sold an aggregate of 2.1~~8.1 million shares of common stock, ~~for gross proceeds~~at a weighted-average price of ~~$249.9 million, or $119.94~~$144.42 per share, ~~and received net~~for aggregate proceeds (net of underwriters’ discounts) of approximately ~~$245.8 million. As of September 30, 2017, the remaining aggregate amount available under our current program for future sales of common stock is $500.1 million.~~

~~Forward equity sales agreements~~

~~In March 2017, we executed an offering~~$1.1 billion, to sell an aggregate 6.9 million shares of our common stock, including a forward equity component, at a public offering price of $108.55 per share. Approximately 60% of the proceeds was initially targeted to fund value-creation acquisitions and construction, with approximately 40% targeted to fund balance sheet improvements, including reduction in our projected net debt to Adjusted EBITDA – fourth quarter of 2017, annualized by 0.2x, and redemption of our Series E Redeemable Preferred Stock. Aggregate net proceeds from the sale, after underwriters’ discount and issuance costs, of $713.3 million consisted of the following:

~~2.1 million shares issued at closing with net proceeds of $217.8 million; and~~

~~4.8 million shares subject to forward equity sales agreements expiring no later than March 2018 with net proceeds of $495.5 million, which will~~ be further adjusted as provided in the ~~sales agreements. As of September 30, 2017, these~~ forward equity sales agreements, ~~have not been settled.~~ including:

(i) agreements to issue 4.4 million shares at a price of $145.00 per share expiring in June 2020.

(ii) agreements to issue 3.7 million shares at a weighted-average price of $143.73 per share expiring in July 2020.

We expect to settle ~~these contracts with shares by December 31, 2017.~~our forward equity sales agreements in 2019.

We expect to establish a new ATM program during the third quarter of 2019.

Other sources

Under our current shelf registration statement filed with the SEC, we may offer common stock, preferred stock, debt, and other securities. These securities may be issued, from time to time, at our discretion based on our needs and market conditions, including, as necessary, ~~the balancing of~~to balance our use of incremental debt capital.

WeAdditionally, we hold interests, together with ~~certain third parties,~~joint venture partners, in ~~companies~~joint ventures that we consolidate in our financial statements. These ~~third parties~~joint venture partners may contribute equity into these entities primarily related to their share of funds for construction and financing-related activities. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we received $441.3 million of contributions from and sales of noncontrolling ~~interests of $9.9 million.~~interests.

Uses of capital

Summary of capital expenditures

~~Our~~One of our primary ~~use~~uses of capital relates to the development, redevelopment, pre-construction, and construction of properties. We currently have projects in our ~~visible~~ growth pipeline aggregating ~~1.5~~3.4 million RSF of ~~new~~ Class A office/laboratory and tech office space undergoing construction and pre-construction, and intermediate-term and future value-creation projects supporting an aggregate of ~~8.0~~7.3 million SF of ground-up development in North America. We incur capitalized construction costs related to development, redevelopment, pre-construction, and other construction activities. We also incur additional capitalized project costs, including interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project, during periods when activities necessary to prepare an asset for its intended use are in progress. Refer to ~~“Development of New~~the “New Class A ~~Properties: 2017 Deliveries,” “Development~~Development and Redevelopment ~~of New Class A~~ Properties: ~~2018~~Projected 2019-2020 Deliveries and ~~2019 Deliveries”,~~Pre-Construction Projects” and “Summary of Capital ~~Expenditures,”~~Expenditures” subsections of the “Investments in Real Estate” section within this Item 2 for more information on our capital expenditures.

We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, of ~~$45.3~~$40.2 million and ~~$40.8~~$28.9 million, respectively, is classified in investments in real estate. Indirect project costs, including construction administration, legal fees, and office costs that clearly relate to projects under development or construction, are capitalized as incurred during the period an asset is undergoing activities to prepare it for its intended use. We capitalized payroll and other indirect project costs related to development, redevelopment, pre-construction, and construction projects, which aggregated ~~$18.3~~$20.7 million and ~~$10.5~~$13.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively.The increase in capitalized payroll and other indirect project costs for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the same period in ~~2016,~~2018 was primarily due to ~~10 new~~an increase in our value-creation pipeline projects undergoing construction and pre-construction activities aggregating eight projects with ~~approximately 3.3~~1.2 million ~~developable SF that increased pre-construction activities~~RSF in ~~2017.~~2019 over 2018. Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. ~~Additionally, should~~Should we cease activities necessary to prepare an asset for its intended use, the interest, taxes, insurance, and certain other direct project costs related to this asset would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Fluctuations in our development, redevelopment, and construction activities could result in significant changes to total expenses and net income. For example, had we experienced a 10% reduction in development, redevelopment, and construction activities without a corresponding decrease in indirect project costs, including interest and payroll, total expenses would have increased by approximately ~~$6.4~~$6.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019.

We ~~also~~use third-party brokers to assist in our leasing activity, who are paid on a contingent basis upon successful leasing. We are required to capitalize ~~and defer~~ initial direct costs ~~to originate leases with independent third parties~~ related ~~to evaluating a prospective lessee’s financial condition, negotiating lease terms, preparing the lease agreement, and closing the lease transaction. Costs that we capitalized and deferred relate~~ to successful leasing transactions, which result directly from and are essential to the lease transaction, and would not have been incurred had that lease transaction not ~~occurred. The initial direct costs~~been successfully executed. During the six months ended June 30, 2019, we capitalized ~~and deferred also include the portion of our employees’~~ total compensation and payroll-related benefits directly related to time spent performing activities previously described and related to the respective lease that would not have been performed but for that lease. Total initial direct leasing costs ~~capitalized during the nine months ended September 30, 2017~~of $29.9 million. Effective January 1, 2019, costs that we incur to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax, or legal advice to negotiate lease terms, and ~~2016, were $44.4 million and $23.9 million, respectively, of which $10.3 million and $9.4 million, respectively, represented capitalized and deferred payroll~~other costs directly related and essential to our leasing activities during each respective period. The increase in direct leasing costs capitalized during the nine months ended September 30, 2017, compared to nine months ended September 30, 2016, was due to the increase in leasing activity in 2017. For the nine months ended September 30, 2017, we completed 3.2 million RSF of new, renewed, and re-leased space with a weighted-average lease term of 7.5 years compared to 1.9 million RSF of leasing activity with a weighted-average lease term of 5.7 years during the nine months ended September 30, 2016.are expensed as incurred.

Acquisitions

Refer to the “Acquisitions” insection of Note 3 – “Investments in Real Estate” to our unaudited consolidated financial statements under Item 1, and the “Acquisitions” ~~under~~subsection of the “Investments in Real Estate” section ~~within this~~under Item 2 of this report for ~~more~~ information on our acquisitions.

7.00% Series D cumulative convertible preferred stock repurchases

As of June 30, 2019, we had 2.3 million shares of our Series D Convertible Preferred Stock outstanding. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we repurchased, in privately negotiated transactions, ~~501,115~~275,000 shares of our Series D Convertible Preferred Stock at an aggregate price of ~~$17.9~~$9.2 million, or ~~$35.79~~$33.60 per ~~share. We~~share, and recognized a preferred stock redemption charge of ~~$5.8 million during the nine months ended September 30, 2017, including the write-off of original issuance costs of approximately $391 thousand. During the remainder of 2017, we~~$2.6 million.

We may seek to repurchase additional shares of our Series D Convertible Preferred Stock in the future, subject to market conditions. To the extent that we repurchase ~~additional~~ shares of our Series D Convertible Preferred Stock, we expect to fund such amounts with the proceeds from issuances, if any, of our common stock, subject to market conditions.

~~6.45% Series E cumulative redeemable preferred stock redemption~~

In March 2017, we announced the redemption of our Series E Redeemable Preferred Stock. On April 14, 2017, we completed the redemption of all 5.2 million outstanding shares of our Series E Redeemable Preferred Stock at a redemption price of $25.00 per share, or an aggregate $130.0 million, plus accrued dividends.

Dividends

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, we paid the following dividends (in thousands):

Nine Months Ended September 30,
2017 2016 Change
Common stock dividends $ 229,814
$ 177,966
$ 51,848
7.00% Series D cumulative convertible preferred stock dividends 4,125
11,198
(7,073 )
6.45% Series E cumulative redeemable preferred stock dividends 4,192
6,289
(2,097 )
$ 238,131
$ 195,453
$ 42,678



	Six Months Ended June 30,
	2019		2018		Change
Common stock	$	218,914	$	183,040	$	35,874
Series D Cumulative Convertible Preferred Stock	2,132		2,604		(472		)
	$	221,046	$	185,644	$	35,402

The increase in dividends paid on our common stock ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2019, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016~~,2018, was primarily due to an increase in number of common shares outstanding ~~at each record date of December 31, 2016, and December 31, 2015,~~subsequent to January 1, 2018, as a result of issuances of common stock ~~issuances~~ under our ATM program and settlement of forward equity sales agreements, and partially due to the increase in the related dividends to ~~$2.52~~$1.94 per common share paid during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2019, from ~~$2.37~~$1.80 per common share paid during the ~~nine~~six months ended ~~September~~June 30, ~~2016. The decrease in dividends~~2018.

Dividends paid on our Series D Convertible Preferred Stock ~~was primarily~~during the six months ended June 30, 2019, decreased from the dividends paid during the six months ended June 30, 2018, due to ~~the~~a decrease in number of shares outstanding ~~to 3.0 million~~as a result of the repurchase of 402,000 outstanding shares as of ~~September~~our Series D Convertible Preferred Stock during 2018 and the repurchase of 275,000 outstanding shares of our Series D Convertible Preferred Stock during the six months ended June 30, ~~2017, from 6.5 million shares as of September 30, 2016, due to the repurchases of shares since October 1, 2016.~~2019.

Contractual obligations and commitments

Contractual obligations as of ~~September~~June 30, ~~2017,~~2019, consisted of the following (in thousands):


			Payments by Period										Payments by Period
	Total		2017		2018-2019		2020-2021		Thereafter		Total		2019		2020-2021		2022-2023		Thereafter
Secured and unsecured debt ^{(1) (2)}	$	4,828,766	$	732	$	925,546	$	1,181,834	$	2,720,654
Secured and unsecured debt ⁽¹⁾⁽²⁾											$	6,379,761	$	3,179	$	413,461	$	1,161,775	$	4,801,346
Estimated interest payments on fixed-rate and hedged variable-rate debt ⁽³⁾	1,006,863		35,059		306,472		247,533		417,799		1,800,551		117,691		452,263		394,042		836,555
Estimated interest payments on variable-rate debt ⁽⁴⁾	8,735		1,765		6,970		—		—
Ground lease obligations	584,022		4,037		24,346		23,724		531,915		644,656		7,029		27,329		27,223		583,075
Other obligations	3,607		399		3,107		101		—		8,377		853		1,135		1,676		4,713
Total	$	6,431,993	$	41,992	$	1,266,441	$	1,453,192	$	3,670,368	$	8,833,345	$	128,752	$	894,188	$	1,584,716	$	6,225,689


(1)	Amounts represent principal amounts due and exclude unamortized ~~debt premiums/discounts~~premiums (discounts) and deferred financing costs reflected onin the consolidated balance ~~sheets.~~sheets under Item 1 of this report.


(2)	Payment dates reflect any extension options that we control.


(3)	~~Estimated interest payments on our fixed-rate and hedged variable-rate debt~~Amounts are based upon contractual interest rates, including ~~the impact of~~expenses related to our interest rate hedge agreements, interest payment dates, and scheduled maturity dates.


~~(4)~~	~~The interest payments on variable-rate debt are based on the interest rates in effect as of September 30, 2017.~~

Secured notes payable

Secured notes payable as of ~~September~~June 30, ~~2017,~~2019, consisted of ~~nine~~six notes secured by 2011 properties. Our secured notes payable typically require monthly payments of principal and interest and had a weighted-average interest rate of approximately ~~3.80%~~3.58%. As of ~~September~~June 30, ~~2017,~~2019, the total book ~~values~~value of our ~~investment~~investments in real estate securing debt ~~were~~was approximately ~~$2.3~~$1.1 billion. As of ~~September~~June 30, ~~2017,~~2019, our entire secured notes payable balance of $354.2 million, including unamortized discounts and deferred financing ~~cost, were composed of approximately $902.2 million and $251.7 million of fixed-rate/hedged variable-rate debt and variable-rate debt, respectively.~~costs, was fixed-rate debt.

Unsecured senior notes payable, ~~unsecured senior bank term loans, and $1.65~~$2.2 billion unsecured senior line of credit, and unsecured senior bank term loan

The requirements of, and our actual performance with respect to, the key financial covenants under our ~~2.75%~~ unsecured senior notes payable (“2.75% Unsecured Senior Notes”), 4.60% unsecured senior notes payable (“4.60% Unsecured Senior Notes”), 3.90% unsecured senior notes payable (“3.90% Unsecured Senior Notes”), 4.30% unsecured senior notes payable (“4.30% Unsecured Senior Notes”), 3.95% unsecured senior notes payable due in 2027 (“3.95% Unsecured Senior Notes Due in 2027”), 4.50% unsecured senior notes payable (“4.50% Unsecured Senior Notes”), and 3.95% unsecured senior notes payable due in 2028 (“3.95% Unsecured Senior Notes Due in 2028) as of ~~September~~June 30, ~~2017,~~2019, were as follows:



Covenant Ratios⁽¹⁾	Requirement	~~Actual~~June 30, 2019
Total Debt to Total Assets	Less than or equal to 60%	~~37%~~36%
Secured Debt to Total Assets	Less than or equal to 40%	9%2%
Consolidated EBITDA⁽²⁾ to Interest Expense	Greater than or equal to 1.5x	~~6.4x~~6.5x
Unencumbered Total Asset Value to Unsecured Debt	Greater than or equal to 150%	~~272%~~258%


(1)	~~For definitions of~~All covenant ratio titles utilize terms as defined in the ratios, refer to the indenture at Exhibits 4.3, 4.13, and 4.18 hereto and the related supplemental indentures at Exhibits 4.4, 4.7, 4.9, 4.11, 4.14, 4.16, and 4.19 hereto, which are each listed under Item 6 of this report.respective debt agreements.


(2)	The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as described in Exchange Act Release No. 47226.

The requirements of, and our actual performance with respect to, the key financial covenants under our $1.65 billion unsecured senior line of credit and unsecured senior bank term loans as of September 30, 2017, were as follows:



~~Covenant Ratios~~ ⁽¹⁾	~~Requirement~~	~~Actual~~
~~Leverage Ratio~~	~~Less than or equal to 60.0%~~	~~30.9%~~
~~Secured Debt Ratio~~	~~Less than or equal to 45.0%~~	~~7.3%~~
~~Fixed-Charge Coverage Ratio~~	~~Greater than or equal to 1.50x~~	~~3.83x~~
~~Unsecured Leverage Ratio~~	~~Less than or equal to 60.0%~~	~~32.6%~~
~~Unsecured Interest Coverage Ratio~~	~~Greater than or equal to 1.50x~~	~~6.49x~~


~~(1)~~	For definitions of the ratios, refer to the amended unsecured senior line of credit and unsecured senior bank term loan agreements at Exhibits 10.1, 10.2, and 10.3 hereto, which are each listed under Item 6 of this report.

In addition, the terms of the indentures, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s subsidiaries to (i) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (ii) incur certain secured or unsecured indebtedness.

The requirements of, and our actual performance with respect to, the key financial covenants under our $2.2 billion unsecured senior line of credit and unsecured senior bank term loan as of June 30, 2019, were as follows:



Covenant Ratios⁽¹⁾	Requirement	June 30, 2019
Leverage Ratio	Less than or equal to 60.0%	30.0%
Secured Debt Ratio	Less than or equal to 45.0%	1.6%
Fixed-Charge Coverage Ratio	Greater than or equal to 1.50x	3.92x
Unsecured Interest Coverage Ratio	Greater than or equal to 1.75x	6.24x


(1)	All covenant ratio titles utilize terms as defined in the respective debt agreements.

Estimated interest payments

Estimated interest payments on our fixed-rate and hedged variable-rate debt were calculated based upon contractual interest rates, including estimated interest expense related to interest rate hedge agreements, interest payment dates, and scheduled maturity dates. As of ~~September~~June 30, ~~2017, approximately 88%~~2019, 92% of our debt was fixed-rate debt or variable-rate debt subject to interest rate hedge agreements. Refer to ~~Note 9 –~~the “Interest Rate Hedge Agreements” ~~to our unaudited consolidated financial statements under Item 1 of this report~~subsection below for ~~further~~additional information. The remaining ~~12%~~8% of our debt as of ~~September~~June 30, ~~2017,~~2019, was unhedged variable-rate debt based ~~primarily~~ on LIBOR. ~~Interest payments on~~For additional information regarding our ~~unhedged variable-rate~~ debt, ~~have been calculated based on interest rates in effect as of September 30, 2017. Refer~~refer to Note 810 – “Secured and Unsecured Senior Debt” to our unaudited consolidated financial statements under Item 1 of this ~~report for additional information regarding our debt.~~report.

Interest rate hedge agreements

Our derivative instruments consist of interest rate hedge agreements. We utilize interest rate derivatives to hedge a portion of our exposure to volatility in variable interest rates primarily associated with our ~~$1.65~~$2.2 billion unsecured senior line of credit and unsecured senior bank term ~~loans, and variable-rate secured construction loans. Our derivative instruments include interest rate swaps and interest rate caps.~~loan.

Our interest rate ~~swap~~hedge agreements involve the receipt of variable-rate amounts from a counterparty in exchange for our payment of fixed-rate amounts to the counterparty over the life of the agreement without the exchange of the underlying notional amount. Interest received under all of our interest rate ~~swap~~hedge agreements is based on one-month LIBOR. The net difference between the interest paid and the interest received is reflected as an adjustment to interest expense in our consolidated statements of income.

We have entered into master derivative agreements with our counterparties. These master derivative agreements (all of which are adapted from the standard International Swaps and Derivatives Association, Inc. form) define certain terms between us and each of our respective counterparties to address and minimize certain risks associated with our interest rate hedge agreements. In order to limit our risk of non-performance by an individual counterparty under our interest rate hedge agreements, these agreements are spread among various counterparties. The largest aggregate notional amount in effect at any single point in time with an individual counterparty in our interest rate hedge agreements existing as of ~~September~~June 30, ~~2017,~~2019, was ~~$250~~$100.0 million. If one or more of our counterparties fail to perform under our interest rate hedge agreements, we may incur higher costs associated with our variable-rate LIBOR-based debt than the interest costs we originally anticipated. We have not posted any collateral related to our interest rate hedge agreements.

Ground lease obligations

Ground lease obligations as of ~~September~~June 30, ~~2017,~~2019, included leases for 2730 of our properties, which accounted for approximately ~~13%~~12% of our total number of ~~properties, and one land development parcel.~~properties. Excluding one ground lease that expires in 2036 related to one operating property ~~that expires in 2036~~ with a net book value of ~~$9.4~~$8.1 million as of ~~September~~June 30, ~~2017,~~2019, our ground lease obligations have remaining lease terms ranging from approximately 3634 to 9795 years, including available extension ~~options.~~options which we are reasonably certain to exercise.

As of June 30, 2019, the remaining contractual payments under ground and office lease agreements in which we are the lessee aggregated $644.7 million and $8.4 million, respectively. As of June 30, 2019, all of our ground and office leases, in which we are the lessee, were classified as operating leases. Under the new lease accounting standard effective on January 1, 2019, described in detail under the “Lease Accounting” section of Note 2 – “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this report, we are required to recognize a right-of-use asset and a related liability to account for our future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is measured based on the present value of the remaining lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The right-of-use asset is equal to the corresponding operating lease liability, adjusted for the initial direct leasing cost and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. As of June 30, 2019, the present value of the remaining contractual payments, aggregating $653.0 million, under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $243.6 million, which is classified in accounts payable, accrued expenses, and tenant security deposits in our consolidated balance sheet. As of June 30, 2019, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 45 years, and the weighted-average discount rate was 5.37%. 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 $237.0 million. We classify the right-of-use asset in other assets in our consolidated balance sheets.

Commitments

As of ~~September~~June 30, ~~2017,~~2019, remaining aggregate costs under contract for the construction of properties undergoing development, redevelopment, and improvements under the terms of leases approximated ~~$571.6~~$985.9 million. We expect payments for these obligations to occur over one to three years, subject to capital planning adjustments from time to time. We may have the ability to cease the construction of certain properties, which would result in the reduction of our commitments. ~~We are also committed to funding approximately $173.6 million for certain non-real estate investments over the next several years.~~

We executed an agreement to purchase a 10% interest in a joint venture with Uber and the Golden State Warriors. The Golden State Warriors organization owns two land parcels at 1655 and 1715 Third Street in our Mission Bay/SoMa submarket of San Francisco and is expected to contribute the land to this joint venture. Our initial cash contribution is expected to be in a range from $35 million to $40 million and will be funded at closing of the joint venture in 2018. The joint venture will acquire the land parcels after completion of below-grade improvements to the building foundation and parking garage and will complete vertical construction of two buildings aggregating 580,000 RSF, which will be leased to Uber.

~~We have existing office space aggregating 46,356 RSF at 161 First Street/50 Rogers Street in our Alexandria Center~~^® at Kendall Square (“ACKS”) campus that we are required to partially convert to multifamily residential space, pursuant to our entitlements for our ACKS campus. Pursuant to these requirements, we expect to begin construction of the conversion to multifamily residential in the first half of 2018.

In addition, we have letters of credit and performance obligations aggregating ~~$39.5~~$9.2 million primarily related to ~~our~~construction projects.

In November 2017, we entered into an agreement with a real estate developer in the San Francisco Bay Area to ~~purchase~~own a ~~10%~~49% interest in a real estate joint venture at Menlo Gateway in our Greater Stanford submarket of San Francisco. Our total equity contribution commitment is $269.0 million, of which we have contributed $267.5 million through June 30, 2019.

We are committed to funding approximately $238.6 million for non-real estate investments, which primarily consists of $238.0 million related to investments in limited partnerships. Our funding commitments expire at various dates over the next 11 years, with ~~Uber and the Golden State Warriors.~~a weighted-average expiration of 8.7 years as of June 30, 2019.

Exposure to environmental liabilities

In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at substantially all of our properties.

Accumulated other comprehensive income (loss)

~~Accumulated~~The following table presents the changes in each component of accumulated other comprehensive income (loss) attributable to Alexandria Real Estate Equities, Inc. ~~consists of~~’s common stockholders during the ~~following~~six months ended June 30, 2019 (in thousands):

Net Unrealized Gain (Loss) on:
Available-for- Sale Equity Securities Interest Rate
Hedge Agreements Foreign Currency Translation Total
Balance as of December 31, 2016 $ 19,293
$ 405
$ (14,343 ) $ 5,355

Other comprehensive income before reclassifications 23,414
812
7,592
31,818
Amounts reclassified from other comprehensive income 2,482
1,810
2,421
6,713
25,896
2,622
10,013
38,531
Amounts attributable to noncontrolling interests —
—
(22 ) (22 )
Net other comprehensive income 25,896
2,622
9,991
38,509

Balance as of September 30, 2017 $ 45,189
$ 3,027
$ (4,352 ) $ 43,864



	Net Unrealized Gains (Losses) on:
	Interest Rate Hedge Agreements			Foreign Currency Translation			Total
Balance as of December 31, 2018	$	1,838		$	(12,273	)	$	(10,435	)

Other comprehensive (loss) income before reclassifications	(1,684		)	2,800			1,116
Amounts reclassified from other comprehensive income to net income	(1,815		)	—			(1,815		)
Net other comprehensive (loss) income	(3,499		)	2,800			(699		)

Balance as of June 30, 2019	$	(1,661	)	$	(9,473	)	$	(11,134	)

~~Available-for-sale equity securities~~Interest rate hedge agreements

Changes in our accumulated other comprehensive income (loss) balance relate to the increase in fair value of our investments in certain publicly held entities. We reclassify amounts from accumulated other comprehensive income upon recognition of gains and losses on sales and impairment write-downs of investments in these publicly held entities.

~~Interest rate hedge agreements~~

~~Changes in our accumulated other comprehensive income balance relate to~~include the change in fair value of our interest rate hedge agreements. We reclassify amounts from accumulated other comprehensive income (loss) as we recognize interest expense related to the hedged variable-rate debt instrument.

Foreign currency translation

Changes in our accumulated other comprehensive income (loss) balance ~~relate to~~include the changes in the foreign exchange rates for our real estate investments in Canada and Asia. Additionally, we reclassify unrealized foreign currency translation gains and losses into net income as we dispose of these holdings.

Critical accounting policies

Refer to our annual report on Form 10‑K for the year ended December 31, ~~2016,~~2018, for a discussion of our critical accounting policies ~~which include~~related to investments in real estate, ~~and properties classified as held for sale,~~ impairment of long-lived assets, ~~capitalization of costs, accounting for~~equity investments, and interest rate hedge ~~agreements,~~agreements. On January 1, 2019, we adopted a new lease accounting guidance that resulted in changes to the accounting policies related to the recognition of rental ~~revenue~~revenues and tenant recoveries, and to the monitoring of tenant credit quality, during the six months ended June 30, 2019. Refer to the “Lease Accounting” section of Note 2 – “Summary of Significant Accounting Policies” to our unaudited consolidated financial statements under Item 1 of this report for a discussion of our critical accounting policies related to rental revenues, tenant recoveries, and monitoring of tenant credit quality. ~~There were no significant changes to these policies during the nine months ended September 30, 2017.~~

Non-GAAP measures and definitions

This section contains additional information of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors, as well as the definitions of other terms used in this report.

Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders

GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the ~~NAREIT~~Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate investment and disposition decisions, financing decisions, capital ~~structures, and~~structure, capital market ~~transactions. We compute funds~~transactions, and variances resulting from ~~operations in accordance with~~the volatility of market conditions outside of our control. On January 1, 2019, we adopted standards established by the ~~NAREIT~~Nareit Board of Governors in its ~~April 2002~~November 2018 White Paper ~~and related implementation guidance~~ (the ~~“NAREIT~~“Nareit White Paper”). on a prospective basis. The ~~NAREIT~~Nareit White Paper defines funds from operations as net income (computed in accordance with GAAP), excluding gains ~~(losses) from~~or losses on sales of ~~depreciable~~ real estate, and ~~land parcels and~~ impairments of ~~depreciable~~ real estate, ~~(excluding land parcels),~~ plus real estate-related depreciation and amortization, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the ~~NAREIT~~Nareit White Paper, ~~less/plus~~excluding significant ~~gains/~~gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on ~~the sale of~~non-real estate investments, ~~plus~~gains or losses on early extinguishment of debt, preferred stock redemption charges, ~~impairments of non-depreciable real estate, impairments of non-real estate investments, and~~ deal costs, and the amount of such items that is allocable to our unvested restricted stock awards. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.

The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures for the three and six months ended June 30, 2019 (in thousands):



	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures				Our Share of Unconsolidated Real Estate Joint Ventures
	June 30, 2019				June 30, 2019
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Net income	$	8,412	$	16,071	$	1,262	$	2,408
Depreciation and amortization	6,744		12,163		973		1,819
Funds from operations	$	15,156	$	28,234	$	2,235	$	4,227

The following tables present a reconciliation of net income ~~(loss)~~ attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the most directly comparable financial measure ~~calculated and~~ presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, and funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted, and the related per share ~~amounts. Per share~~ amounts ~~allocable to unvested restricted stock awards are not material~~for the three and ~~are not presented separately within the per share table below.~~six months ended June 30, 2019 and 2018. Per share amounts may not add due to rounding.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2019			2018			2019			2018
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	51,273		$	5,452		$	108,564		$	(126,014	)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted													$	76,330		$	52,016		$	200,181		$	184,991
Depreciation and amortization	107,788			77,133			309,069			218,168			134,437			118,852			268,524			233,071
Noncontrolling share of depreciation and amortization from consolidated real estate JVs	(3,608		)	(2,224		)	(10,985		)	(6,751		)	(6,744		)	(3,914		)	(12,163		)	(7,781		)
Our share of depreciation and amortization from unconsolidated real estate JVs	383			658			1,119			2,052			973			807			1,819			1,451
Gain on sales of real estate – rental properties	—			—			(270		)	—
Our share of gain on sales of real estate from unconsolidated real estate JVs	(14,106		)	—			(14,106		)	—
Gain on sales of real estate – land parcels	—			(90		)	(111		)	(90		)
Impairment of real estate – rental properties	—			6,293			203			94,688
Assumed conversion of 7.00% Series D cumulative convertible preferred stock⁽¹⁾													1,005			—			2,031			2,604
Allocation to unvested restricted stock awards	(957		)	(438		)	(2,185		)	(14		)	(1,445		)	(1,042		)	(3,740		)	(3,212		)
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted ⁽¹⁾	140,773			86,784			391,298			182,039
Non-real estate investment income	—			—			—			(4,361		)
Impairment of land parcels and non-real estate investments	—			4,886			4,491			101,028
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted⁽²⁾													204,556			166,719			456,652			411,124
Unrealized gains on non-real estate investments													(11,058		)	(5,067		)	(83,264		)	(77,296		)
Realized gain on non-real estate investment													—			—			—			(8,252		)
Impairment real estate – land parcel													—			6,311			—			6,311
Loss on early extinguishment of debt	—			3,230			670			3,230			—			—			7,361			—
Preferred stock redemption charge	—			13,095			11,279			25,614			—			—			2,580			—
Removal of assumed conversion of 7.00% Series D cumulative convertible preferred stock⁽¹⁾													(1,005		)	—			(2,031		)	(2,604		)
Allocation to unvested restricted stock awards	—			(359		)	(227		)	(1,736		)	179			(18		)	1,157			1,140
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	140,773		$	107,636		$	407,511		$	305,814		$	192,672		$	167,945		$	382,455		$	330,423


(1)	The assumed conversion requires the add back of preferred dividends paid on our 7.00% Series D cumulative convertible preferred stock, as shown here. Refer to “Weighted-Average Shares of Common Stock Outstanding – Diluted” within this section of this Item 2 for additional information.


(2)	Calculated in accordance with standards established by the Nareit Board of Governors.


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(Per share)	2017			2016		2017			2016			2019			2018			2019			2018
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	0.55		$	0.07	$	1.20		$	(1.69	)
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted												$	0.68		$	0.51		$	1.80		$	1.83
Depreciation and amortization	1.11			0.97		3.26			2.85			1.15			1.13			2.32			2.23
Our share of gain on sales of real estate from unconsolidated real estate JVs	(0.15		)	—		(0.15		)	—
Impairment of real estate – rental properties	—			0.08		—			1.27
Allocation to unvested restricted stock awards												—			(0.01		)	(0.04		)	(0.03		)
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted ⁽¹⁾	1.51			1.12		4.31			2.43			1.83			1.63			4.08			4.03
Non-real estate investment income	—			—		—			(0.06		)
Unrealized gains on non-real estate investments												(0.10		)	(0.05		)	(0.75		)	(0.76		)
Realized gain on non-real estate investment												—			—			—			(0.08		)
Impairment of land parcels and non-real estate investments	—			0.06		0.05			1.34			—			0.06			—			0.06
Loss on early extinguishment of debt	—			0.04		0.01			0.04			—			—			0.07			—
Preferred stock redemption charge	—			0.17		0.12			0.34			—			—			0.02			—
Allocation to unvested restricted stock awards												—			—			0.02			0.02
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	1.51		$	1.39	$	4.49		$	4.09		$	1.73		$	1.64		$	3.44		$	3.27

Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted	93,296			77,402		90,766			74,778
Weighted-average shares of common stock outstanding⁽²⁾ for calculationsof:
EPS – diluted												111,501			102,236			111,279			101,191
Funds from operations – diluted, per share												112,077			102,236			111,857			101,933
Funds from operations – diluted, as adjusted, per share												111,501			102,236			111,279			101,191


(1)	Calculated in accordance with standards established by the ~~NAREIT~~Nareit Board of ~~Governors in its April 2002 White Paper and related implementation guidance.~~Governors.


(2)	Refer to “Weighted-Average Shares of Common Stock Outstanding – Diluted” within this section of this Item 2 for additional information.

Adjusted EBITDA and Adjusted EBITDA ~~margins~~margin

We use Adjusted EBITDA as a supplemental performance measure of ~~real estate rental~~our operations, for financial and operational ~~decision making,~~decision-making, and as a supplemental ~~or additional~~ means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and ~~impairments.~~ impairments of real estate. Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains and impairments that result from our non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of income outside of revenues.

We believe Adjusted EBITDA provides investors with relevant and useful information ~~because~~as it allows investors to ~~view income from~~evaluate the operating performance of our business activities without having to account for differences recognized because of real estate ~~rental operations on an unleveraged basis before~~and non-real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the ~~effects~~volatility of ~~interest, taxes, depreciation and amortization, stock compensation expense,~~market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt ~~gains or losses on sales of real estate, and impairments.~~

~~By excluding interest expense and gains or losses on early extinguishment of debt, Adjusted EBITDA allows~~to allow investors to measure our performance independent of our indebtedness and capital structure and indebtedness. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods without the variances caused by the volatility of the expense (which depends on market forces outside our control).structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, and significant impairments and significant gains on the sale of non-real estate investments allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of real estate and non-real estate investment and disposition decisions. We believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical ~~cash~~ expenditures or future ~~cash~~ requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

Our calculation of Adjusted EBITDA margin divides Adjusted EBITDA by our revenues, as adjusted. We believe that revenues, as adjusted, provides a denominator for Adjusted EBITDA margin that is calculated on a basis more consistent with that of the Adjusted EBITDA numerator. Specifically, revenues, as adjusted, includes the same realized gains on, and impairments of, non-real estate investments that are included in the reconciliation of Adjusted EBITDA. We believe that the consistent application of results from our non-real estate investments to both the numerator and denominator of Adjusted EBITDA margin provides a more useful calculation for the comparison across periods.

The following table reconciles net income and revenues, the most directly comparable financial ~~measure~~measures calculated and presented in accordance with GAAP, to Adjusted EBITDA and revenues, as adjusted, respectively, for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017				2016			2019			2018			2019			2018
Net income (loss)	$	59,546		$	28,559		$	148,597			$	(69,591	)
Net income														$	87,179		$	60,547		$	223,997		$	202,065
Interest expense	31,031			25,850			92,563				75,730			42,879			38,097			81,979			75,012
Income taxes	1,305			355			3,405				2,374			890			1,106			2,187			2,046
Depreciation and amortization	107,788			77,133			309,069				218,168			134,437			118,852			268,524			233,071
Stock compensation expense	7,893			7,451			18,649				19,007			11,437			7,975			22,466			15,223
Impairment of real estate														—			6,311			—			6,311
Loss on early extinguishment of debt	—			3,230			670				3,230			—			—			7,361			—
Gain on sales of real estate – rental properties	—			—			(270		)		—
Our share of gain on sales of real estate from unconsolidated real estate JVs	(14,106		)	—			(14,106		)		—
Gain on sales of real estate – land parcels	—			(90		)	(111		)		(90		)
Impairment of real estate and non-real estate investments	—			11,179			4,694				196,302
Unrealized gains on non-real estate investments														(11,058		)	(5,067		)	(83,264		)	(77,296		)
Adjusted EBITDA	$	193,457		$	153,667		$	563,160			$	445,130		$	265,764		$	227,821		$	523,250		$	456,432

Revenues	$	285,370		$	230,379		$	833,797		⁽¹⁾	$	672,544		$	373,856		$	325,034		$	732,698		$	645,173
Non-real estate investments – total realized gains														10,442			7,463			21,792			20,795
Revenues, as adjusted														$	384,298		$	332,497		$	754,490		$	665,968

Adjusted EBITDA Margins	68		%	67		%	68		%		66		%
Adjusted EBITDA margin														69%			69%			69%			69%


~~(1)~~	Excludes impairment charges aggregating $4.5 million, primarily related to two non-real estate investments. We believe excluding impairment of non-real estate investments improves the consistency and comparability of the Adjusted EBITDA margins from period to period.

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental amount, in effect as of the end of the period, related to our operating RSF. Annual rental revenue ~~and measures computed~~is presented using 100% of the annual rental revenue ~~are presented at~~of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% ~~for all~~of the RSF of our consolidated properties ~~under~~and our ~~management, including~~share of the RSF of properties held ~~by our consolidated and~~in unconsolidated real estate joint ventures. As of ~~September~~June 30, ~~2017,~~2019, approximately 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses, along with base rent, are classified in ~~tenant recoveries~~income from rentals in our consolidated statements of income.

~~Average cash yield~~

~~See definition of initial stabilized yield (unlevered).~~

Cash interest

Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt ~~premiums/discounts. See~~premiums (discounts). Refer to the definition of ~~fixed-charge coverage ratio~~“Fixed-Charge Coverage Ratio” below in this section of this Item 2 for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.

Class A properties and AAA locations

Class A properties are properties clustered in AAA locations that provide innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Class A properties generally command higher annual rental rates than other classes of similar properties.

AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.

~~Fixed-charge coverage ratio~~

Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees and amortization of debt premiums (discounts). The fixed-charge coverage ratio calculation below is not directly comparable to the computation of ratio of earnings to fixed charges as defined in Item 503(d) of Regulation S-K and to the computation of “Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends” included in Exhibit 12.1 to this quarterly report on Form 10‑Q.

The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Adjusted EBITDA $ 193,457
$ 153,667
$ 563,160
$ 445,130

Interest expense $ 31,031
$ 25,850
92,563
75,730
Capitalized interest 17,092
14,903
45,325
40,790
Amortization of loan fees (2,840 ) (3,080 ) (8,578 ) (8,792 )
Amortization of debt premiums 652
5
1,873
117
Cash interest 45,935
37,678
131,183
107,845
Dividends on preferred stock 1,302
5,007
6,364
16,388
Fixed charges $ 47,237
$ 42,685
$ 137,547
$ 124,233

Fixed-charge coverage ratio:
– period annualized 4.1x
3.6x
4.1x
3.6x
– trailing 12 months 4.0x
3.6x
4.0x
3.6x

Development, redevelopment, and pre-construction

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties, and property enhancements identified during the underwriting of certain acquired properties, located in ~~world-class~~ collaborative life science, technology, and ~~technology~~agtech campuses in AAA urban innovation clusters. These projects are generally focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

Development projects generally consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory, or tech office, or agtech space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory, ~~and~~ tech office, and agtech space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.

Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.

Fixed-charge coverage ratio



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Adjusted EBITDA	$	265,764		$	227,821		$	523,250		$	456,432

Interest expense	$	42,879		$	38,097		$	81,979		$	75,012
Capitalized interest	21,674			15,527			40,183			28,887
Amortization of loan fees	(2,380		)	(2,593		)	(4,613		)	(5,136		)
Amortization of debt premiums	782			606			1,583			1,181
Cash interest	62,955			51,637			119,132			99,944
Dividends on preferred stock	1,005			1,302			2,031			2,604
Fixed charges	$	63,960		$	52,939		$	121,163		$	102,548

Fixed-charge coverage ratio:
– period annualized	4.2x			4.3x			4.3x			4.5x
– trailing 12 months	4.2x			4.3x			4.2x			4.3x

Initial stabilized yield (unlevered)

Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income at stabilization and our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are generally expected to increase over time due to contractual annual rent ~~escalations, and our average cash yields are generally expected to be greater than our initial stabilized yields (cash basis).~~escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.

Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.

Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.

~~Average cash yield reflects cash rents, including contractual rent escalations after initial rental concessions have elapsed, calculated on~~Investment-grade or publicly traded large cap tenants

Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended June 30, 2019, as reported by Bloomberg Professional Services. In addition, we monitor the credit quality and related material changes of our tenants. Material changes that cause a ~~straight-line basis, and our total cash investment~~tenant’s market capitalization to decline below $10 billion, which are not immediately reflected in the ~~property.~~twelve‑month average, may result in their exclusion from this measure.

Investments in real estate – value-creation square feet currently in rental properties

The following table represents RSF of buildings in operation as of June 30, 2019, that will be redeveloped or replaced with new development RSF upon commencement of future construction:



Property/Submarket		RSF
2021-2022 Pre-construction and future:
Pre-construction:
88 Bluxome Street/Mission Bay/SoMa		232,470
Future:
960 Industrial Road/Greater Stanford		110,000
99 A Street/Seaport Innovation District		8,715
		118,715
		351,185
Future:
219 East 42nd Street/New York City		349,947
4161 Campus Point Court/University Town Center		159,884
10260 Campus Point Drive/University Town Center		109,164
4045 Sorrento Valley Boulevard/Sorrento Valley		10,926
4075 Sorrento Valley Boulevard/Sorrento Valley		40,000
601 Dexter Avenue North/Lake Union		18,680
		688,601
Total value-creation RSF currently included in rental properties		1,039,786

Joint venture financial information

We present components of balance sheet and operating results information related to our joint ventures, which are not presented in accordance with, or intended to be ~~presentations~~presented in accordance with, GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control, and do not consolidate, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.

The components of balance sheet and operating results information related to joint ventures do not represent our legal claim to those items. ~~The joint venture agreement for~~For each entity that we do not wholly own, the joint venture agreement generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.

We believe this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in our consolidated results.

The components of balance sheet and operating results information related to joint ventures are limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. Refer to Note 4 – “Consolidated and Unconsolidated Real Estate Joint Ventures” to our unaudited consolidated financial statements under Item 1 of this report for more information on our unconsolidated real estate joint ventures. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of income and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are prepared in accordance with GAAP.

Net cash provided by operating activities after dividends

Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.

Net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA

Net debt to Adjusted EBITDA ~~is a~~and net debt and preferred stock to Adjusted EBITDA are non-GAAP financial ~~measure~~measures that we believe isare useful to investors as a supplemental ~~measure~~measures in evaluating our balance sheet leverage. Net debt is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Net debt and preferred stock is equal to the sum of net debt, as discussed above, plus preferred stock outstanding as of ~~period end.~~the end of the period. Refer to “Adjusted ~~EBITDA”~~EBITDA and Adjusted EBITDA margin” within this section of this Item 2 for further information on the calculation of Adjusted EBITDA.

The following table reconciles debt to net debt, and to net debt and preferred stock, and computes the ratio of each to Adjusted EBITDA as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018 (dollars in thousands):


	September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018
Secured notes payable	$	1,153,890		$	1,011,292		$	354,186		$	630,547
Unsecured senior notes payable	2,801,290			2,378,262			5,140,914			4,292,293
Unsecured senior line of credit	314,000			28,000			514,000			208,000
Unsecured senior bank term loans	547,860			746,471
Unsecured senior bank term loan							347,105			347,415
Unamortized deferred financing costs	27,803			29,917			36,905			31,413
Cash and cash equivalents	(118,562		)	(125,032		)	(198,909		)	(234,181		)
Restricted cash	(27,713		)	(16,334		)	(39,316		)	(37,949		)
Net debt	$	4,698,568		$	4,052,576		$	6,154,885		$	5,237,538

Net debt	$	4,698,568		$	4,052,576		$	6,154,885		$	5,237,538
7.00% Series D cumulative convertible preferred stock	74,386			86,914			57,461			64,336
6.45% Series E cumulative redeemable preferred stock	—			130,000
Net debt and preferred stock	$	4,772,954		$	4,269,490		$	6,212,346		$	5,301,874

Adjusted EBITDA:
– quarter annualized	$	773,828		$	662,836		$	1,063,056		$	968,888
– trailing 12 months	$	728,869		$	610,839		$	1,004,724		$	937,906

Net debt to Adjusted EBITDA:
– quarter annualized	6.1		x	6.1		x	5.8		x	5.4		x
– trailing 12 months	6.4		x	6.6		x	6.1		x	5.6		x
Net debt and preferred stock to Adjusted EBITDA:
– quarter annualized	6.2		x	6.4		x	5.8		x	5.5		x
– trailing 12 months	6.5		x	7.0		x	6.2		x	5.7		x



Maryland		95-4502084
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	ARE	New York Stock Exchange
7.00% Series D Cumulative Convertible Preferred Stock	ARE/PD	New York Stock Exchange



Large accelerated filer☒	☒	Accelerated filer	☐
Non-accelerated filer☐ ~~(Do not check if a smaller reporting company)~~	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page
PART I – FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS (UNAUDITED)

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2017,~~2019, and December 31, ~~2016~~2018	1

	Consolidated Financial Statements ~~of Income~~ for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:

	Consolidated Statements of Income	2

	Consolidated Statements of Comprehensive Income ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~	3

	Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity and Noncontrolling Interests ~~for the Nine Months Ended September 30, 2017~~	4

	Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	58

	Notes to Consolidated Financial Statements	710

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	5558

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~119~~125

Item 4.	CONTROLS AND PROCEDURES	~~120~~126

PART II – OTHER INFORMATION

Item 1A.	RISK FACTORS	~~121~~127

Item 6.	EXHIBITS	~~123~~130

SIGNATURES		~~126~~131



ASU	Accounting Standards Update
ATM	At the Market
BPS	Basis Points
CIP	Construction in Progress
EPS	Earnings per Share
FASB	Financial Accounting Standards Board
FFO	Funds ~~from~~From Operations
GAAP	U.S. Generally Accepted Accounting Principles
HVAC	Heating, Ventilation, and Air Conditioning
JV	Joint Venture
LEED^®	Leadership in Energy and Environmental Design
LIBOR	London Interbank Offered Rate
~~NAREIT~~Nareit	National Association of Real Estate Investment Trusts
NAV	Net Asset Value
~~NYSE~~	~~New York Stock Exchange~~
REIT	Real Estate Investment Trust
RSF	Rentable Square Feet/Foot
SEC	Securities and Exchange Commission
SF	Square Feet/Foot
SoMa	South of Market (submarket of the San Francisco market)
U.S.	United States
VIE	Variable Interest Entity



	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	7.00% Series D Cumulative Convertible Preferred Stock			6.45% Series E Cumulative Redeemable Preferred Stock			Number of Common Shares	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance as of December 31, 2016	$	86,914		$	130,000		87,665,880	$	877	$	4,672,650		$	—		$	5,355	$	475,175		$	5,370,971		$	11,307
Net income	—			—			—	—		—			129,705			—		18,139			147,844			753
Total other comprehensive income	—			—			—	—		—			—			38,509		22			38,531			—
Distributions to noncontrolling interests	—			—			—	—		—			—			—		(16,790		)	(16,790		)	(642		)
Contributions from noncontrolling interests	—			—			—	—		—			—			—		9,877			9,877			—
Issuances of common stock	—			—			6,249,309	62		705,329			—			—		—			705,391			—
Issuances pursuant to stock plan	—			—			409,360	4		30,638			—			—		—			30,642			—
Repurchase of 7.00% Series D preferred stock	(12,528		)	—			—	—		391			(5,797		)	—		—			(17,934		)	—
Redemption of 6.45% Series E preferred stock	—			(130,000		)	—	—		5,132			(5,482		)	—		—			(130,350		)	—
Dividends declared on common stock	—			—			—	—		—			(238,425		)	—		—			(238,425		)	—
Dividends declared on preferred stock	—			—			—	—		—			(6,364		)	—		—			(6,364		)	—
Distributions in excess of earnings	—			—			—	—		(126,363		)	126,363			—		—			—			—
Balance as of September 30, 2017	$	74,386		$	—		94,324,549	$	943	$	5,287,777		$	—		$	43,864	$	486,423		$	5,893,393		$	11,418



	Date of ASU Adoption	Nine Months Ended September 30, 2017
Revenues subject to the new lease ASU:
Rental revenues	1/1/19	$	604,570
Tenant recoveries ⁽¹⁾	1/1/19	188,874
				$	793,444

Revenues subject to the new revenue recognition ASU:
Parking and other revenues	1/1/18			32,323

Revenues not subject to the new lease or revenue recognition ASUs:
Investment income subject to the new financial instruments ASU	1/1/18	$	2,007
Interest and other income within the scope of other existing accounting standards	N/A	1,532
				3,539

Total revenues				$	829,306

Gains on sales of real estate subject to the new revenue recognition ASU	1/1/18			$	381



	Nine Months Ended September 30, 2017
Parking and other revenue	$	32,323
Gain on sales of real estate	$	381



	Cost		Net Unrealized Gains		Total
Available-for-sale equity securities	$	55,433	$	45,189	$	100,622
Investments accounted for under cost method:
Investments in limited partnerships	136,044		N/A		136,044
Investments in other privately held entities	248,596		N/A		248,596
Total investments	$	440,073	$	45,189	$	485,262



	Nine Months Ended September 30, 2017
Investment income recognized in net income	$	2,007
Unrealized gain recognized in other comprehensive income (component of stockholder’s equity)	$	23,414



	September 30, 2017			December 31, 2016
Available-for-sale equity securities, cost basis	$	55,433		$	41,392
Unrealized gains	50,104			25,076
Unrealized losses	(4,915		)	(5,783		)
Available-for-sale equity securities, at fair value	100,622			60,685
Investments accounted for under cost method	384,640			281,792
Total investments	$	485,262		$	342,477



	Stated Rate		Interest Rate ⁽¹⁾		Maturity				Unamortized (Deferred Financing Cost), (Discount)/Premium
Debt	Stated Rate		Interest Rate ⁽¹⁾		Date ⁽²⁾		Principal		Unamortized (Deferred Financing Cost), (Discount)/Premium			Total
Secured notes payable
Greater Boston	L+1.35	%	2.99	%	8/23/18		$	211,940	$	(660	)	$	211,280
Greater Boston	L+1.50	%	3.09		1/28/19	⁽³⁾	317,979		(1,595		)	316,384
Greater Boston	L+2.00	%	3.89		4/20/19	⁽³⁾	179,764		(2,104		)	177,660
Greater Boston, Seattle, and Maryland	7.75	%	8.17		4/1/20		108,940		(835		)	108,105
San Diego	4.66	%	5.03		1/1/23		35,370		(345		)	35,025
Greater Boston	3.93	%	3.20		3/10/23		82,000		2,957			84,957
Greater Boston	4.82	%	3.40		2/6/24		203,000		16,706			219,706
San Francisco	6.50	%	6.78		7/1/36		773		—			773
Secured debt weighted-average interest rate/subtotal	3.80	%	3.80				1,139,766		14,124			1,153,890

2019 Unsecured Senior Bank Term Loan	L+1.20	%	2.84		1/3/19		200,000		(457		)	199,543
2021 Unsecured Senior Bank Term Loan	L+1.10	%	2.56		1/15/21		350,000		(1,683		)	348,317
$1.65 billion unsecured senior line of credit	L+1.00	%	2.00		10/29/21		314,000		N/A			314,000
Unsecured senior notes payable	2.75	%	2.96		1/15/20		400,000		(1,822		)	398,178
Unsecured senior notes payable	4.60	%	4.75		4/1/22		550,000		(2,922		)	547,078
Unsecured senior notes payable	3.90	%	4.04		6/15/23		500,000		(3,381		)	496,619
Unsecured senior notes payable	4.30	%	4.52		1/15/26		300,000		(3,998		)	296,002
Unsecured senior notes payable	3.95	%	4.14		1/15/27		350,000		(4,638		)	345,362
Unsecured senior notes payable	3.95	%	4.09		1/15/28		425,000		(4,334		)	420,666
Unsecured senior notes payable	4.50	%	4.62		7/30/29		300,000		(2,615		)	297,385
Unsecured debt weighted average/subtotal			3.75				3,689,000		(25,850		)	3,663,150
Weighted-average interest rate/total			3.76	%			$	4,828,766	$	(11,726	)	$	4,817,040



Property/Market	Stated Rate				Maturity Date		Outstanding Principal Balance		Remaining Commitments		Aggregate Commitments
75/125 Binney Street/Greater Boston		L+1.35	%		8/23/18		$	211,940	$	—	$	211,940
50 and 60 Binney Street/Greater Boston		L+1.50	%		1/28/19	⁽¹⁾	317,979		32,021		350,000
100 Binney Street/Greater Boston		L+2.00	%	⁽²⁾	4/20/19	⁽³⁾	179,764		124,517		304,281
							$	709,683	$	156,538	$	866,221



Interest Rate Hedge Type			Number of Contracts	Weighted-Average Interest Pay/ Cap Rate⁽¹⁾	Fair Value as of 9/30/17			Notional Amount in Effect as of
Interest Rate Hedge Type	Effective Date	Maturity Date	Number of Contracts	Weighted-Average Interest Pay/ Cap Rate⁽¹⁾	Fair Value as of 9/30/17			9/30/17		12/31/17		12/31/18		12/31/19
Swap	March 31, 2017	March 31, 2018	4	0.78%	$	692		$	250,000	$	250,000	$	—	$	—
Swap	March 31, 2017	March 31, 2018	11	1.51%	(554		)	650,000		650,000		—		—
Cap	July 29, 2016	April 20, 2019	2	2.00%	66			108,000		126,000		150,000		—
Swap	March 29, 2018	March 31, 2019	8	1.16%	2,975			—		—		600,000		—
Swap	March 29, 2019	March 31, 2020	1	1.89%	(29		)	—		—		—		100,000
Total					$	3,150		$	1,008,000	$	1,026,000	$	750,000	$	100,000



	Net Unrealized Gain (Loss) on:
	Available-for- Sale Equity Securities		Interest Rate Hedge Agreements		Foreign Currency Translation			Total
Balance as of December 31, 2016	$	19,293	$	405	$	(14,343	)	$	5,355

Other comprehensive income before reclassifications	23,414		812		7,592			31,818
Amounts reclassified from other comprehensive income	2,482		1,810		2,421			6,713
	25,896		2,622		10,013			38,531
Amounts attributable to noncontrolling interests	—		—		(22		)	(22		)
Net other comprehensive income	25,896		2,622		9,991			38,509

Balance as of September 30, 2017	$	45,189	$	3,027	$	(4,352	)	$	43,864


	Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated			Alexandria Real Estate Equities, Inc. (Issuer)			Alexandria Real Estate Equities, L.P. (Guarantor Subsidiary)			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities
Net income	$	129,705		$	239,768		$	278,597		$	(499,473	)	$	148,597		$	207,926		$	220,031		$	348,899		$	(552,859	)	$	223,997
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	5,217			—			303,852			—			309,069			3,415			—			265,109			—			268,524
Loss on early extinguishment of debt	670			—			—			—			670			—			—			7,361			—			7,361
Gain on sales of real estate – rental properties	—			—			(270		)	—			(270		)
Impairment of real estate	—			—			203			—			203
Gain on sales of real estate – land parcels	—			—			(111		)	—			(111		)
Equity in earnings of unconsolidated real estate JVs	—			—			(15,050		)	—			(15,050		)	—			—			(2,408		)	—			(2,408		)
Distributions of earnings from unconsolidated real estate JVs	—			—			249			—			249			—			—			1,679			—			1,679
Amortization of loan fees	5,665			—			2,913			—			8,578			4,412			—			201			—			4,613
Amortization of debt discounts (premiums)	441			—			(2,314		)	—			(1,873		)
Amortization of debt premiums																(17		)	—			(1,566		)	—			(1,583		)
Amortization of acquired below-market leases	—			—			(14,908		)	—			(14,908		)	—			—			(15,202		)	—			(15,202		)
Deferred rent	—			—			(74,362		)	—			(74,362		)	—			—			(52,441		)	—			(52,441		)
Stock compensation expense	18,649			—			—			—			18,649			22,466			—			—			—			22,466
Equity in earnings of affiliates	(252,434		)	(242,345		)	(4,694		)	499,473			—			(328,618		)	(219,918		)	(4,323		)	552,859			—
Investment gains	—			(17		)	(8,408		)	—			(8,425		)
Investment losses	—			2,599			3,819			—			6,418
Investment income																—			(113		)	(104,943		)	—			(105,056		)
Changes in operating assets and liabilities:
Restricted cash	(36		)	—			(876		)	—			(912		)
Tenant receivables	—			—			(224		)	—			(224		)	—			—			573			—			573
Deferred leasing costs	—			—			(39,925		)	—			(39,925		)	—			—			(23,471		)	—			(23,471		)
Other assets	(10,576		)	—			(86		)	—			(10,662		)	(462		)	—			1,022			—			560
Accounts payable, accrued expenses, and tenant security deposits	(9,813		)	(9		)	40,441			—			30,619			1,239			—			(22,511		)	—			(21,272		)
Net cash (used in) provided by operating activities	(112,512		)	(4		)	468,846			—			356,330			(89,639		)	—			397,979			—			308,340

Investing Activities
Proceeds from sales of real estate	—			—			4,263			—			4,263
Additions to real estate	—			—			(660,877		)	—			(660,877		)	—			—			(577,322		)	—			(577,322		)
Purchases of real estate	—			—			(590,884		)	—			(590,884		)	—			—			(715,030		)	—			(715,030		)
Deposits for investing activities	—			—			4,700			—			4,700
Returns of deposits for investing activities																—			—			(9,000		)	—			(9,000		)
Investments in subsidiaries	(753,137		)	(588,808		)	(12,160		)	1,354,105			—			(1,155,762		)	(1,091,328		)	(22,402		)	2,269,492			—
Investments in unconsolidated real estate JVs	—			—			(248		)	—			(248		)	—			—			(95,950		)	—			(95,950		)
Return of capital from unconsolidated real estate JVs	—			—			38,576			—			38,576
Additions to investments	—			—			(128,190		)	—			(128,190		)	—			—			(104,902		)	—			(104,902		)
Sales of investments	—			204			18,692			—			18,896			—			172			49,795			—			49,967
Net cash used in investing activities	$	(753,137	)	$	(588,604	)	$	(1,326,128	)	$	1,354,105		$	(1,313,764	)	$	(1,155,762	)	$	(1,091,156	)	$	(1,474,811	)	$	2,269,492		$	(1,452,237	)



	Three Months Ended September 30, 2017	Nine Months Ended September 30, 2017
Total leasing activity – RSF	786,925	3,189,483
Lease renewals and re-leasing of space:
Rental rate increases	24.2%	25.2%
Rental rate increases (cash basis)	10.0%	13.3%
RSF (included in total leasing activity above)	448,472	1,931,477



Delivery Date	RSF	Percentage Leased	Incremental Annual Net Operating Income
YTD 3Q17	663,672	100%		$51 million
4Q17	651,738	95%	$38 million to $42 million



	As of
	September 30, 2017
Total market capitalization	$	16.1	billion
Liquidity	$	1.7	billion

Net debt to Adjusted EBITDA:
Quarter annualized	6.1x
Trailing 12 months	6.4x

Fixed-charge coverage ratio:
Quarter annualized	4.1x
Trailing 12 months	4.0x

Unhedged variable-rate debt as a percentage of total debt	12%
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America	12%


•	~~48%~~$732.7 million, up 13.6%, for the six months ended June 30, 2019, compared to $645.2 million for the six months ended June 30, 2018.



Percentage of ~~total~~ annual rental revenue ~~is expected from LEED~~^® ~~certified projects upon completion~~in effect from:
Investment-grade or publicly traded large cap tenants	53	%
Class A properties in AAA locations	77	%
Occupancy of ~~13 in-process projects.~~operating properties in North America	97.4	%
Operating margin	72	%
Adjusted EBITDA margin	69	%
Weighted-average remaining lease term:
All tenants	8.4	years
Top 20 tenants	12.0	years



	As of June 30, 2019		Goal for Fourth Quarter of 2019, Annualized
	Quarter Annualized	Trailing 12 Months	Goal for Fourth Quarter of 2019, Annualized
Net debt to Adjusted EBITDA	5.8x	6.1x	Less than or equal to 5.3x
Fixed-charge coverage ratio	4.2x	4.2x	Greater than 4.0x



	Percentage Leased/Negotiating	Quarter Annualized
		As of June 30, 2019	Goal for Fourth Quarter of 2019
Value-creation pipeline as a percentage of gross investments in real estate:		As of June 30, 2019	Goal for Fourth Quarter of 2019
New Class A development and redevelopment projects:
Undergoing construction with initial occupancy targeted for 2019 and 2020 and our pre-leased pre-construction project at 88 Bluxome Street	74%	5%	Less than 15%
Undergoing pre-construction, marketing, and future value-creation projects	N/A	6%	Less than 15%


(i)	Refinancing of an aggregate $950.0 million of unsecured senior notes payable comprising $400.0 million of 2.75% unsecured senior notes payable due 2020 and $550.0 million of 4.60% unsecured senior notes payable due 2022, pursuant to a cash tender offer completed on July 17, 2019, and subsequent call for redemption. The redemption is expected to settle on August 16, 2019.


(ii)	Partial repayment of $175.0 million on our unsecured senior bank term loan. The remaining outstanding balance of the ~~quarter. 91,155 RSF at 100 Binney Street in our Cambridge submarket~~term loan will ~~be placed in service in the first quarter of 2018.~~mature on January 2, 2025, if not repaid before maturity.



Favorable Lease Structure⁽¹⁾			Same Property Net Operating Income Growth

Stable cash flows
Percentage of triple net leases		97%
Increasing cash flows
Percentage of leases containing annual rent escalations		95%
Lower capex burden
Percentage of leases providing for the recapture of capital expenditures		94%


Margins⁽²⁾			Rental Rate Growth: Renewed/Re-Leased Space

Adjusted EBITDA	Operating
68%	71%
68%	71%



Same Property Net Operating Income Growth	Favorable Lease Structure⁽¹⁾
	Strategic Lease Structure by Owner and Operator of Collaborative Life Science, Technology, and AgTech Campuses
	Stable cash flows
	Percentage of triple net leases		97%
	Increasing cash flows
	Percentage of leases containing annual rent escalations		95%
	Lower capex burden
	Percentage of leases providing for the recapture of capital expenditures		96%


Rental Rate Growth: Renewed/Re-Leased Space	Margins⁽²⁾

	Operating	Adjusted EBITDA
	72%	69%
	72%	69%


(1)	Percentages calculated based on RSF as of ~~September~~June 30, ~~2017.~~2019.


(2)	Represents percentages for the three months ended ~~September~~June 30, ~~2017.~~2019.



Long-Duration Cash Flows ~~from~~From High-Quality, Diverse, and Innovative Tenants

~~Annual Rental Revenue from~~ Investment-Grade ~~Tenants~~⁽¹⁾or Publicly Traded Large Cap Tenants ^{A REIT Industry-Leading Tenant Roster}		Long-Duration Lease Terms
		Long-Duration Lease Terms
50	%
53%		8.4 Years
of ARE’s		Weighted-Average
Annual Rental Revenue⁽¹⁾		Remaining Term

Tenant Mix





Percentage of ARE’s Annual Rental Revenue⁽¹⁾


(1)	Represents annual rental revenue in effect as of ~~September~~June 30, ~~2017.~~2019. Refer to the “Non-GAAP Measures and Definitions” section within this Item 2 for additional information.


(2)	73% of our annual rental revenue for technology tenants is from investment-grade or publicly traded large cap tenants.



High-Quality Cash Flows ~~from~~From Class A Properties in AAA Locations

Class A Properties in AAA Locations	AAA Locations

~~78%~~77%
of ARE’s Annual Rental Revenue⁽¹⁾
	Percentage of ARE’s Annual Rental Revenue⁽¹⁾

Solid Demand for Class A Properties in AAA Locations Drives Solid Occupancy

Solid Historical Occupancy⁽²⁾	Occupancy ~~across~~Across Key Locations

~~95%~~96%
Over 10 Years
	~~Occupancy of Operating Properties as of~~ ~~September 30, 2017~~


(2)	Average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of ~~September~~June 30, ~~2017.~~2019.


~~(3)~~	In December 2016, Eli Lilly and Company vacated 125,409 RSF, or 3% of RSF in San Diego, at 10300 Campus Point Drive in our University Town Center submarket and relocated and expanded into 305,006 RSF at 10290 Campus Point Drive.

~~5200 Illumina Way~~

~~Campus Point Drive~~

~~1150 Eastlake Avenue East~~

~~9800 Medical Center Drive~~

~~San Diego/University Town Center~~

~~San Diego/University Town Center~~

~~Seattle/Lake Union~~

~~Maryland/Rockville~~