Alexandria Real Estate Equities, Inc.

Consolidated Statements of ~~Income~~Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Income from rentals	$	435,856	$	371,618	$	873,461	$	726,367
Other income	1,100		2,238		3,414		6,331
Total revenues	436,956		373,856		876,875		732,698

Expenses:
Rental operations	123,911		105,689		253,014		207,190
General and administrative	31,775		26,434		63,738		51,111
Interest	45,014		42,879		90,753		81,979
Depreciation and amortization	168,027		134,437		343,523		268,524
Impairment of real estate	13,218		—		15,221		—
Loss on early extinguishment of debt	—		—		—		7,361
Total expenses	381,945		309,439		766,249		616,165

Equity in earnings of unconsolidated real estate joint ventures	3,893		1,262		777		2,408
Investment income	184,657		21,500		162,836		105,056
Net income	243,561		87,179		274,239		223,997
Net income attributable to noncontrolling interests	(13,907)		(8,412)		(25,820)		(16,071)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	229,654		78,767		248,419		207,926
Dividends on preferred stock	—		(1,005)		—		(2,031)
Preferred stock redemption charge	—		—		—		(2,580)
Net income attributable to unvested restricted stock awards	(3,054)		(1,432)		(3,574)		(3,134)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	226,600	$	76,330	$	244,845	$	200,181

Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic	$	1.82	$	0.68	$	1.99	$	1.80
Diluted	$	1.82	$	0.68	$	1.99	$	1.80

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenues:
Rental $ 216,021
$ 166,591
$ 635,156
$ 486,505
Tenant recoveries 67,058
58,681
188,874
165,385
Other income 2,291
5,107
5,276
20,654
Total revenues 285,370
230,379
829,306
672,544

Expenses:
Rental operations 83,469
72,002
237,536
205,164
General and administrative 17,636
15,854
56,099
46,426
Interest 31,031
25,850
92,563
75,730
Depreciation and amortization 107,788
77,133
309,069
218,168
Impairment of real estate —
8,114
203
193,237
Loss on early extinguishment of debt —
3,230
670
3,230
Total expenses 239,924
202,183
696,140
741,955

Equity in earnings (losses) of unconsolidated real estate joint ventures 14,100
273
15,050
(270 )
Gain on sales of real estate – rental properties —
—
270
—
Gain on sales of real estate – land parcels —
90
111
90
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 )
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders 53,773
24,475
129,705
(81,205 )
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 )
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 51,273
$ 5,452
$ 108,564
$ (126,014 )

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 )

Dividends declared per share of common stock $ 0.86
$ 0.80
$ 2.55
$ 2.40

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

Alexandria Real Estate Equities, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	243,561	$	87,179	$	274,239	$	223,997
Other comprehensive income (loss)
Unrealized losses on interest rate hedge agreements:
Unrealized interest rate hedge losses arising during the period	—		(1,126)		—		(1,684)
Reclassification adjustment for amortization to interest expense included in net income	—		114		—		(1,815)

Unrealized losses on interest rate hedge agreements, net	—		(1,012)		—		(3,499)

Unrealized gains (losses) on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period	2,526		590		(3,331)		2,800
Unrealized gains (losses) on foreign currency translation, net	2,526		590		(3,331)		2,800

Total other comprehensive income (loss)	2,526		(422)		(3,331)		(699)
Comprehensive income	246,087		86,757		270,908		223,298
Less: comprehensive income attributable to noncontrolling interests	(13,907)		(8,412)		(25,820)		(16,071)
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s stockholders	$	232,180	$	78,345	$	245,088	$	207,227

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 )

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
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of March 31, 2020	124,325,684	$	1,243	$	9,336,949	$	—	$	(15,606)	$	1,579,666	$	10,902,252	$	12,013
Net income	—	—		—		229,654		—		13,690		243,344		217
Total other comprehensive income	—	—		—		—		2,526		—		2,526		—
Distributions to noncontrolling interests	—	—		—		—		—		(21,295)		(21,295)		(201)
Contributions from and sales of noncontrolling interests	—	—		155		—		—		53,353		53,508		93
Issuance pursuant to stock plan	289,361	3		19,351		—		—		—		19,354		—
Taxes related to net settlement of equity awards	(56,426)	—		(9,154)		—		—		—		(9,154)		—
Dividends declared on common stock ($1.06 per share)	—	—		—		(133,681)		—		—		(133,681)		—
Reclassification of earnings in excess of distributions	—	—		95,973		(95,973)		—		—		—		—
Balance as of June 30, 2020	124,558,619	$	1,246	$	9,443,274	$	—	$	(13,080)	$	1,625,414	$	11,056,854	$	12,122

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

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 Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

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 )
(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 Loss		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 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 Statement of Changes in Stockholders’ Equity and Noncontrolling Interests

(Dollars in thousands)

(Unaudited)


	Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
	Number of Common Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance as of December 31, 2019	120,800,315	$	1,208	$	8,874,367	$	—	$	(9,749)	$	1,288,352	$	10,154,178	$	12,300
Net income	—	—		—		248,419		—		25,385		273,804		435
Total other comprehensive loss	—	—		—		—		(3,331)		—		(3,331)		—
Redemption of noncontrolling interests	—	—		—		—		—		—		—		(300)
Distributions to noncontrolling interests	—	—		—		—		—		(37,776)		(37,776)		(406)
Contributions from and sales of noncontrolling interests	—	—		56,011		—		—		349,453		405,464		93
Issuance of common stock	3,392,622	34		504,304		—		—		—		504,338		—
Issuance pursuant to stock plan	471,289	5		42,337		—		—		—		42,342		—
Taxes related to net settlement of equity awards	(105,607)	(1)		(16,018)		—		—		—		(16,019)		—
Dividends declared on common stock ($2.09 per share)	—	—		—		(263,662)		—		—		(263,662)		—
Cumulative effect of adjustment upon adoption of credit loss ASU on January 1, 2020	—	—		—		(2,484)		—		—		(2,484)		—
Reclassification of distributions in excess of earnings	—	—		(17,727)		17,727		—		—		—		—
Balance as of June 30, 2020	124,558,619	$	1,246	$	9,443,274	$	—	$	(13,080)	$	1,625,414	$	11,056,854	$	12,122

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 Loss		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 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 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 ($0.8750 per share)	—		—	—		—		(2,031)		—		—		(2,031)		—
Cumulative effect of adjustment upon adoption of lease ASUs 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 Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2020		2019
Operating Activities:
Net income	$	274,239	$	223,997
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	343,523		268,524
Impairment of real estate	15,221		—
Loss on early extinguishment of debt	—		7,361
Equity in earnings of unconsolidated real estate joint ventures	(777)		(2,408)
Distributions of earnings from unconsolidated real estate joint ventures	3,438		1,679
Amortization of loan fees	4,984		4,613
Amortization of debt premiums	(1,776)		(1,583)
Amortization of acquired below-market leases	(29,751)		(15,202)
Deferred rent	(43,964)		(52,441)
Stock compensation expense	19,114		22,466
Investment income	(162,836)		(105,056)
Changes in operating assets and liabilities:
Tenant receivables	2,900		573
Deferred leasing costs	(22,621)		(23,471)
Other assets	(1,187)		560
Accounts payable, accrued expenses, and other liabilities	(6,850)		(21,272)
Net cash provided by operating activities	393,657		308,340

Investing Activities:
Additions to real estate	(725,742)		(577,322)
Purchases of real estate	(699,901)		(715,030)
Change in escrow deposits	18,719		(9,000)
Investments in unconsolidated real estate joint ventures	(2,861)		(95,950)
Return of capital from unconsolidated real estate joint ventures	20,225		—
Additions to non-real estate investments	(75,968)		(104,902)
Sales of non-real estate investments	68,468		49,967
Net cash used in investing activities	$	(1,397,060)	$	(1,452,237)


Alexandria Real Estate Equities, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	Six Months Ended June 30,
	2020		2019
Financing Activities:
Repayments of borrowings from secured notes payable	$	(3,088)	$	(302,878)
Proceeds from issuance of unsecured senior notes payable	699,532		854,209
Borrowings from unsecured senior lines of credit	1,470,000		2,114,000
Repayments of borrowings from unsecured senior lines of credit	(1,414,000)		(1,808,000)
Proceeds from issuance of commercial paper notes	8,179,900		—
Repayments of borrowings from commercial paper program	(8,179,900)		—
Payments of loan fees	(7,957)		(15,796)
Taxes paid related to net settlement of equity awards	(6,890)		(4,086)
Repurchase of 7.00% Series D cumulative convertible preferred stock	—		(9,240)
Proceeds from issuance of common stock	504,338		85,394
Dividends on common stock	(256,259)		(218,914)
Dividends on preferred stock	—		(2,132)
Contributions from and sales of noncontrolling interests	55,775		441,251
Distributions to and redemption of noncontrolling interests	(38,482)		(24,590)
Net cash provided by financing activities	1,002,969		1,109,218

Effect of foreign exchange rate changes on cash and cash equivalents	(715)		774

Net decrease in cash, cash equivalents, and restricted cash	(1,149)		(33,905)
Cash, cash equivalents, and restricted cash as of the beginning of period	242,689		272,130
Cash, cash equivalents, and restricted cash as of the end of period	$	241,540	$	238,225

Supplemental Disclosures and Non-Cash Investing and Financing Activities:
Cash paid during the period for interest, net of interest capitalized	$	90,717	$	71,338
Accrued construction for current-period additions to real estate	$	148,431	$	181,922
Assumption of secured notes payable in connection with purchase of properties	$	—	$	(28,200)
Right-of-use asset	$	32,700	$	239,653
Lease liability	$	(32,700)	$	(245,638)
Contribution of assets from real estate joint venture partner	$	350,000	$	—
Issuance of noncontrolling interest to joint venture partner	$	(292,930)	$	—

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~~

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, longest-tenured, and pioneering 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,~~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.~~2020. 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~~10-K for the year ended December 31, ~~2016.~~2019. 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~~

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:~~

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., 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)~~

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~~the general partner or the managing member of ~~our~~a joint ~~ventures)~~venture) 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 Real Estate”~~“Consolidated and unconsolidated real 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~~(i.e., 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 Unconsolidated Real Estate Joint Ventures”~~“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~~our acquisitions of real estate or in-substance real estate ~~will~~do 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 finance or 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 other 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 useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense in our consolidated statements of operations. 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 and liabilities based on available comparable market information, including estimated replacement costs, rental rates, and recent market transactions. In addition, we may use estimated cash flow projections that ~~contains~~utilize appropriate discount and capitalization rates. 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)~~

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~~improvements; estimated life, ofor up to 20 years, for land ~~improvements,~~improvements; the respective lease term or estimated useful life for tenant ~~improvements,~~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~~in-place leases and ~~recognized as either increases (for below-market leases) or decreases (for~~associated favorable intangibles (i.e., acquired 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~~our consolidated balance sheets and are amortized over the remaining terms of the related ~~leases.~~leases as a reduction of income from rentals in our consolidated statements of operations. The values of unfavorable intangibles (i.e., acquired below-market leases) associated with acquired in-place leases are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets and are amortized over the remaining terms of the related leases as an increase in income from rentals in our consolidated statements of operations.

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,~~operations, 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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~~charge 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~~charge 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 3 operating properties in Canada and 1 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~~Revenue and expense 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, technology, and ~~technology~~agtech industries. ~~All~~As a REIT, we generally limit our ownership of ~~our~~each individual entity’s voting stock 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 ~~considered available-for-sale~~classified as investments with readily determinable fair values and are ~~reflected~~presented at fair value in ~~the accompanying~~our consolidated balance sheets, 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 or 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 presented at fair ~~value. Fair~~ value ~~has been determined based upon the closing price as of each balance sheet date, with unrealized gains and losses shown~~using NAV as a ~~separate component~~practical expedient, with changes in fair value recognized in net income. We use NAV per share reported by limited partnerships generally 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. 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 under which these investments are measured 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 arises from an orderly transaction for an identical or similar investment of the same issuer, which is observed by an investor without expending undue cost and effort. Observable price changes result from, among other ~~comprehensive income. The classification~~things, equity transactions of ~~each investment is determined at~~ the ~~time each investment is made,~~same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. To determine whether these transactions are indicative of an observable price change, we evaluate, among other factors, whether these transactions have similar rights and ~~such determination is reevaluated at each balance sheet date. The cost~~obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

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 ~~each investment sold is determined~~clinical trials, new product initiatives, new collaborative agreements, capital-raising events, and merger and acquisition activities. These investments are evaluated on the basis of a qualitative assessment for indicators of impairment by monitoring the ~~specific identification method, with realized gains~~presence of the following triggering events or ~~losses classified in other income~~impairment indicators: (i) a significant deterioration in the ~~accompanying consolidated statements~~earnings performance, asset quality, or business prospects of ~~income.~~ 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, including the research and 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 going concern. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of 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 our ownership percentage in the voting stock of each individual entity to less than 10%.~~


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

We ~~periodically assess our~~had no investments ~~in available-for-sale equity securities and privately held companies~~ accounted for under the ~~cost~~equity method as of June 30, 2020.

We recognize both realized and unrealized gains and losses in our consolidated statements of operations, classified within investment income. Unrealized gains and losses represent changes in fair value for ~~other-than-temporary impairment. We monitor each of~~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 ~~throughout~~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 ~~year for new developments,~~carrying values of investments in privately held entities that do not report NAV per share to their estimated fair value. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost.

In April 2019, the FASB issued an accounting standard that amends the financial instruments standard by clarifying that all private investments that do not report NAV and are adjusted under the measurement alternative (for observable price changes and impairments) described above represent nonrecurring fair value measurement adjustments and therefore require applicable fair value disclosures, including ~~operating results, results~~disclosures about the level 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 loss related to an available-for-sale equity security is determined 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~~hierarchy within which the fair value ~~with a charge~~measurements are categorized. The accounting standard became effective for us and was adopted on January 1, 2020. Beginning in 2020, pursuant to ~~current earnings. If there are no identified events or changes~~the requirements of this new standard, we provide incremental fair value disclosures related to our investments in ~~circumstances~~privately held entities that ~~might have an adverse effect on our cost method investments, we~~ do not ~~estimate the investment’s fair value. Refer to~~report NAV per share in Note 59 – ~~“Investments”~~“Fair Value Measurements” to these unaudited consolidated financial ~~statements~~statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues

The table below provides detail of our consolidated total revenues for ~~further information.~~the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$	430,339	$	358,461	$	859,083	$	701,802
Direct financing lease	616		604		1,228		1,205
Revenues subject to the lease accounting standard	430,955		359,065		860,311		703,007
Revenues subject to the revenue recognition accounting standard	4,901		12,553		13,150		23,360
Income from rentals	435,856		371,618		873,461		726,367
Other income	1,100		2,238		3,414		6,331
Total revenues	$	436,956	$	373,856	$	876,875	$	732,698

~~Recognition~~

During the three and six months ended June 30, 2020, revenues that were subject to the lease accounting standard aggregated $431.0 million and $860.3 million, respectively, and represented 98.6% and 98.1%, respectively, of our total revenues. During the three and six months ended June 30, 2020, our total revenues also included $6.0 million, or 1.4%, and $16.6 million, or 1.9%, 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 to these unaudited consolidated financial statements.

Lease accounting

Transition

On January 1, 2019, we adopted a new lease accounting standard that sets 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 required 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 – required 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 – required us to apply the new lease accounting standard prospectively from the adoption date of January 1, 2019.

•Single component accounting policy – required 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 – required 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 – required 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, were leases or contained leases. This practical expedient was primarily applicable to entities that had 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 required 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, continued to be classified as operating leases after adoption of the new lease 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 required 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, qualified for capitalization under the new lease accounting standard.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

We applied the package of practical expedients consistently to all leases (i.e., in which we were the lessee or the lessor) that commenced before January 1, 2019. The election of this package permitted us to “run off” our 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 commenced prior to January 1, 2019, under the package of practical expedients and optional transition method, we were not required to reassess whether initial direct leasing costs capitalized prior to the adoption of the new lease accounting standard in 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 would not qualify for capitalization under the new lease accounting standard.

Under the package of practical expedients, all of our operating leases existing as of January 1, 2019, in which we were the lessee, continued to be classified as operating leases subsequent to the adoption of the new lease accounting standard. In accordance with the lease accounting standard adopted on January 1, 2019, we classified the present value of the remaining future rental payments associated with these operating leases in our consolidated balance sheets. Consequently, on January 1, 2019, we recognized a lease liability aggregating $218.7 million, which represented the present value of the remaining future rental payments aggregating $590.3 million related to our ground and office leases, in which we were the lessee, existing as of January 1, 2019.

This liability was classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets and 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 standard

Definition of a lease

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 criteria to determine whether a lease should be accounted for as a finance lease for lessees or a sales-type lease for lessors 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, 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Lessor accounting

Costs to execute leases

We capitalize initial direct costs, which represent 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 fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Operating leases

We account for the revenue from our lease contracts by 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) are the same; and

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

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 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 leases is predominant. Therefore, we account for all revenues from our operating leases under the lease accounting standard and classify these revenues as income ~~and~~from rentals in our consolidated statements of operations.

We commence recognition of income from rentals related to the operating leases at the date the tenant ~~recoveries~~

~~Rental revenue~~takes possession or controls the physical use of the leased asset. Income from rentals related to fixed rental 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 other liabilities in our consolidated balance sheets.

Income from rentals related to variable payments includes tenant ~~security deposits~~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 ~~accompanying~~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.

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. Furthermore, we may recognize a general allowance at a portfolio level (not the individual level), if we do not expect to collect future lease payments in full.

Due to the uncertainties posed to the business and operations of our tenants by the COVID-19 pandemic, during the three months ended March 31, 2020, we recognized an adjustment aggregating $1.6 million to lower our income from rentals and deferred rent related to certain leases where we determined that the collection of future lease payments was not probable. For these leases, we ceased the recognition of income from rentals on a straight-line basis and began the recognition of income from rentals on a cash basis when lease payments are collected. We will not resume straight-line recognition of income from rentals for these leases until we determine that collectibility of future payments related to these leases is probable. During the three months ended June 30, 2020, 0 further adjustments were required.

During the six months ended June 30, 2020, we also recorded a general allowance aggregating $3.5 million, which was primarily incurred and recognized during the three months ended March 31, 2020, for a pool of deferred rent balances, which at the portfolio level (not the individual level) was not expected to be collected in full through the lease term. We recorded the general allowance as a reduction of our income from rentals and deferred rent balance within our consolidated statements of operations and consolidated balance ~~sheets. We commence recognition~~sheets, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Direct financing and sales-type leases

As 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.~~

~~Rental revenue from~~June 30, 2020, 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~~operations, producing a constant periodic rate of return on the net investment in the direct financing lease.

~~Tenant recoveries related~~We evaluate our net investment in the direct financing lease for impairment under the new current expected credit loss standard that we adopted on January 1, 2020. For more information, refer to ~~reimbursement~~the “Allowance for credit losses” section within this Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements.

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 other ~~operating expenses are recognized as revenue~~liabilities in our consolidated balance sheets.

The right-of-use asset is measured based on the ~~period during which~~corresponding lease liability, adjusted for initial direct leasing costs and any other consideration exchanged with the ~~applicable expenses are incurred and~~landlord prior to 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 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Total revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of operations for the ~~straight-lining~~three and six months ended June 30, 2020, included $4.9 million and $13.2 million, respectively, primarily related to short-term parking revenues associated with long-term lease agreements. During the three and six months ended June 30, 2019, revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of ~~rent. As~~operations were $12.6 million and $23.4 million, respectively. Short-term parking revenues do not qualify for the single lease component practical expedient, discussed in the “Lessor accounting” subsection of ~~September 30, 2017,~~the “Lease accounting” section within this Note 2, due to the difference in the timing and ~~December 31, 2016, no allowance for uncollectible tenant receivables~~pattern of transfer of our parking service obligations and ~~deferred rent was deemed necessary.~~associated lease components within the same lease agreement. We recognize short-term parking revenues in accordance with the revenue recognition accounting standard when the service is provided and the performance obligation is satisfied, which normally occurs at a point in time.

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,~~

Allowance for credit losses

On January 1, 2020, we adopted an accounting standard (further clarified in subsequently issued updates) that requires companies to estimate and ~~undergraduate degrees in biology, chemistry, industrial biotechnology, and engineering, and experience~~recognize lifetime expected losses, rather than incurred losses, which results in the ~~life science~~earlier recognition of credit losses even if the expected risk of credit loss is remote. The accounting standard applies to most financial assets measured at amortized cost and ~~technology industries,~~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 (e.g., loan commitments). The standard does not apply to the receivables arising from operating leases. An assessment of the collectibility of operating lease payments and the recognition of an adjustment to lease income based on this assessment is governed by the lease accounting standard discussed in the “Lease accounting” section earlier within this Note 2 to these unaudited consolidated financial statements.

Upon adoption of the accounting standard, we had one lease subject to this standard classified as ~~well as in finance. Our research team is responsible for assessing and monitoring~~a direct financing lease with a net investment balance aggregating $39.9 million prior to the credit ~~quality~~loss adjustment. In this direct financing lease, the payment obligation of the lessee is collateralized by real estate property. Historically, we have had no collection issues related to this direct financing lease; therefore, we assessed the probability of default on this lease based on the lessee’s financial condition, credit rating, business prospects, remaining lease term, and expected value of the underlying collateral upon its repossession. Based on the aforementioned considerations, we estimated a credit loss adjustment related to this direct financing lease aggregating $2.2 million, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the investment in the direct financing lease balance from $39.9 million to $37.7 million in our ~~tenants~~consolidated balance sheets on January 1, 2020. Subsequent to the initial recognition, at each reporting date we recognize a credit loss adjustment, if necessary, for our current estimate of expected credit losses, which is classified within rental operations in our consolidated statements of operations. For further details, refer to Note 5 – “Leases” to these unaudited consolidated financial statements.

In addition to our direct financing lease, the accounting standard on credit losses applies to our receivables that result from revenue transactions within the scope of the revenue recognition accounting standard discussed in the “Recognition of revenue arising from contracts with customers” section earlier within this Note 2. Upon adoption of the standard on January 1, 2020, our receivables resulting from revenue transactions within the scope of revenue recognition accounting standard aggregated $16.1 million. Among other factors, we considered the short-term nature of these receivables, our positive assessment of the financial condition and ~~any material changes~~business prospects of the payors, and minimal historical collectibility issues. Based on the aforementioned considerations, we estimated the credit loss related to our trade receivables to approximate $259 thousand, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the tenant receivables balance in ~~their credit quality.~~our consolidated balance sheets on January 1, 2020.


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~~2014 through 2019 calendar years.

~~Recent accounting pronouncements~~

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

~~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~~Employee and ~~Properties Classified as Held for Sale” above for additional information.~~

~~Employee~~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. Our employee and non-employee share-based awards are measured on the grant date and recognized over the recipient’s required service period.

Forward equity sales agreements

We ~~elected to~~ account for ~~forfeitures when~~our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of June 30, 2020, none of our forward equity sales agreements were deemed to be liabilities as they ~~occur~~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, varied with something other than the fair value of our shares, or varied inversely in relation to our shares. We also evaluated whether the agreements met the derivatives and ~~applied this ASU~~hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements can be classified as equity contracts based on a modified retrospective basis resulting in a cumulative-effect adjustment aggregating approximately $368 thousand, which was recorded as a decrease to retained earnings and an increase to additional paid-in capital upon adoptionthe following assessment: (i) none of the ~~ASU~~agreements’ exercise contingencies were based on ~~January 1, 2017.~~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.


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

~~Recent accounting pronouncements (continued)~~

Issuer and guarantor subsidiaries of guaranteed securities

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

In ~~February 2016,~~March 2020, the ~~FASB~~SEC issued an ~~ASU that sets out new lease accounting standards~~amendment to reduce and simplify financial disclosure requirements for ~~both lessees~~issuers and ~~lessors. In May 2014, the FASB issued an ASU that will require a new model for recognition~~guarantors 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).registered debt offerings. The ~~ASU~~guidance is effective for ~~us no later than~~filings on or after January ~~1, 2019,~~4, 2021, with early adoption permitted. Upon evaluation of the guidance, we elected to early adopt the amendment as of and for the six months ended June 30, 2020.

Generally, a parent entity must provide separate subsidiary issuer or guarantor financial statements, unless it qualifies for disclosure exceptions provided in the amendment. Currently, a parent entity must fully own the subsidiary issuer or guarantor and guarantee its registered security fully and unconditionally to qualify for disclosure exceptions under the existing guidance. Pursuant to the amendment, a parent entity may be eligible for disclosure exceptions if it meets the following criteria:

•The ~~ASU requires~~subsidiary issuer or guarantor is a consolidated subsidiary of the parent company, and

•The subsidiary issues a registered security that is:

•Issued jointly and severally with the parent company, or

•Fully and unconditionally guaranteed by the parent company.

A parent entity that meets the above criteria may instead present summarized financial information (“alternative disclosures”). We evaluated the criteria and determined that we are eligible for the exceptions, which allow 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.provide alternative disclosures.

The ~~lease ASU requires the use~~amendment also allows for further simplification 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 account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount 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 expected to be similar to the recognition pattern under existing accounting standards.

~~Sales of real estate~~

During the nine months ended September 30, 2017, we sold real estate 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 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, consistent 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 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 in net income for reporting periods subsequent to December 31, 2017.

The ASU introduces significant changes 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~~alternative disclosures. A parent entity was required to provide disclosures within the footnotes to the consolidated financial statements. However, the amendment allows for such disclosures 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 NAV 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 investmentprovided outside of the ~~same issuer. Investments will be evaluated on~~financial statements, including within the ~~basis~~“Management’s Discussion and Analysis of ~~a qualitative assessment for indicators~~Financial Condition and Results of ~~impairment. If~~Operations” section in Item 2. As such, ~~indicators~~our disclosures 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 that the new standard will have on~~no longer presented in our ~~consolidated~~ financial statements and ~~our disclosures. We also continue~~have been relocated to ~~implement changes to our accounting policies, business processes,~~the “Management’s Discussion and ~~internal controls to support the new accounting~~Analysis of Financial Condition and ~~disclosure requirements. We expect to complete our assessment and implementation by December 31, 2017.~~Results of Operations” section in Item 2.

Joint venture distributions

~~In August 2016,~~We use the ~~FASB issued an ASU that provides guidance on~~“nature of the distribution” approach to determine the classification within our statement of cash flows of cash distributions received from equity method investments, including our unconsolidated joint ~~ventures, in the statement of cash flows. The ASU provides two approaches to determine the classification of cash~~ventures. Under this approach, distributions received from equity method investees: (i) the “cumulative earnings” approach, under which distributions up to the amount of cumulative equity in earnings recognized will 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 beare classified based on the nature of the underlying activity that generated the cash distributions. ~~An entity may elect either the “cumulative earnings” or the “nature of the distribution” approach. An entity that elects the “nature of the distribution” approach but lacks~~If we lack the information necessary to apply itthis approach in the future, we will be required to 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 expectUnder the cumulative earnings approach, distributions up to ~~use~~ the ~~“nature~~amount of ~~the distribution” approach. We currently present distributions from our~~cumulative 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 thousandin earnings recognized are classified as ~~a return on investment (cash flows~~cash inflows from operating ~~activities)~~activities, and ~~approximately $38.6 million~~those in excess of that amount are classified as ~~a return of investment (cash flows~~cash inflows from investing ~~activities).~~activities.


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~~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 ~~statement~~consolidated statements of cash flows. ~~The ASU will require disclosure of~~We provide a reconciliation between the ~~statement of financial position~~balance sheets and ~~the statement~~statements of cash flows, as required when the ~~statement of financial position~~balance 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~~cash. We also provide a disclosure of 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~~restrictions related to ~~all periods presented. As of September 30, 2017, and December 31, 2016, we had $27.7 million and $16.3 million of~~material 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.balances.

Lessee operating costs

Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. Our operating lease obligations related to our office leases have remaining terms of up to 14 years, exclusive of extension options. For the three and six months ended June 30, 2020 and 2019, 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,
	2020		2019		2020		2019
Gross operating lease costs	$	5,816	$	4,870	$	11,437	$	9,424
Capitalized lease costs	(880)		(388)		(1,720)		(450)
Expenses for operating leases in which we are the lessee	$	4,936	$	4,482	$	9,717	$	8,974

For the six months ended June 30, 2020 and 2019, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are the lessee, were $10.5 million and $8.9 million, respectively.

6. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash consisted of the following ~~characteristics of a VIE:~~


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

~~This entity has significant equity and non-recourse financing in place to support operations~~ as of ~~September~~June 30, ~~2017.~~2020, and December 31, 2019 (in thousands):


	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	206,860	$	189,681
Restricted cash:
Funds held in trust under the terms of certain secured notes payable	24,495		24,331
Funds held in escrow related to construction projects and investing activities	4,579		23,252
Other	5,606		5,425
	34,680		53,008
Total	$	241,540	$	242,689


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.

7. INVESTMENTS


5.	~~Investments~~

We hold ~~equity~~ investments in ~~certain~~ publicly traded companies and privately held entities ~~and limited partnerships~~ primarily involved in the life science, technology, and ~~technology industries. All of our equity~~agtech industries, further described below.

Investments in publicly traded companies

Our investments in ~~actively~~publicly traded ~~public~~ companies are ~~considered available-for-sale~~classified as investments with readily determinable fair values and are ~~reflected~~presented at fair value in ~~the accompanying unaudited~~our consolidated balance sheets, atwith changes in fair ~~value.~~ value classified in investment income in our consolidated statements of operations.

Investments in privately held companies

Our investments in privately held entities consist of (i) investments in entities that report NAV, and (ii) investments in privately held entities that do not report NAV. These investments are ~~primarily~~accounted for as follows:

Investments in privately held entities that report NAV

Investments in entities that report NAV, such as our privately held investments in limited partnerships, 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 generally 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

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 in the “Investments” section in Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements, and by 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, and/or

(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 charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

Investments in privately held entities are accounted for 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 at cost ~~method.~~

~~Investments in available-for-sale equity securities with gross unrealized~~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, 2020.

Investment income/loss recognition and classification

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

(iii)observable price changes of our investments in ~~accumulated~~privately held entities that do not report NAV.

An observable price arises from 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 of 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. To determine whether these transactions are indicative of ~~September 30, 2017,~~an observable price change, we evaluate, among other factors, whether these transactions have similar rights and ~~December 31, 2016.~~obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

7. INVESTMENTS (continued)

Realized gains and losses represent the difference between proceeds received upon disposition of investments and 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.

The following ~~table summarizes~~tables summarize our investments as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016~~2019 (in thousands):


	June 30, 2020
	Cost		Unrealized Gains (Losses)		Carrying Amount
Investments:
Publicly traded companies	$	159,129	$	262,841	$	421,970
Entities that report NAV	302,954		218,602		521,556
Entities that do not report NAV:
Entities with observable price changes	48,565		74,708		123,273
Entities without observable price changes	251,666		—		251,666
Total investments	$	762,314	$	556,151	$	1,318,465

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


	December 31, 2019
	Cost		Unrealized Gains (Losses)		Carrying Amount
Investments:
Publicly traded companies	$	148,109	$	170,528	$	318,637
Entities that report NAV	271,276		162,626		433,902
Entities that do not report NAV:
Entities with observable price changes	42,045		68,489		110,534
Entities without observable price changes	277,521		—		277,521
Total investments	$	738,951	$	401,643	$	1,140,594

~~The table below outlines~~

Cumulative adjustments recognized on investments in privately held entities that do not report NAV, held as of June 30, 2020, aggregated $74.7 million, which consisted of upward adjustments representing unrealized gains of $77.0 million and downward adjustments representing unrealized losses of $2.3 million.

During the ~~components~~six months ended June 30, 2020, adjustments recognized on investments in privately held entities that do not report NAV aggregated $6.2 million, which consisted of ~~our investment income classified within other income~~upward adjustments of $7.5 million primarily representing unrealized gains, and downward adjustments of $1.3 million representing unrealized losses. Additionally, we recognized an impairment charge of $24.5 million primarily related to four investments in privately held entities that do not report NAV. Refer to the ~~accompanying~~“Investments” section of Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements ~~of income (in thousands):~~for further details.

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

~~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~~Our investment income/loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016. We reclassified~~ ~~$0.0 million~~, ~~$(2.5) million~~, ~~$8.5 million, and~~ ~~$18.6 million~~2020, consisted of ~~previously recorded unrealized gains/(losses) from accumulated other comprehensive income to net income~~the following (in thousands):


	Three Months Ended June 30, 2020
	Unrealized Gains (Losses)		Realized Gains (Losses)		Total
Investments held at June 30, 2020:
Publicly traded companies	$	113,669	$	—	$	113,669
Entities that report NAV	52,985		—		52,985
Entities that do not report NAV, held at period end	2,290		(4,702)		(2,412)
Total investments held at June 30, 2020	168,944		(4,702)		164,242
Investment dispositions during the three months ended June 30, 2020:
Recognized in the current period	—		20,415		20,415
Previously recognized losses	2,708		(2,708)		—
Total investment dispositions during the three months ended June 30, 2020	2,708		17,707		20,415
Investment income	$	171,652	$	13,005	$	184,657

7. INVESTMENTS (continued)


	Six Months Ended June 30, 2020
	Unrealized Gains (Losses)		Realized Gains (Losses)		Total
Investments held at June 30, 2020:
Publicly traded companies	$	100,916	$	—	$	100,916
Entities that report NAV	55,976		—		55,976
Entities that do not report NAV, held at period end	6,219		(24,482)		(18,263)
Total investments held at June 30, 2020	163,111		(24,482)		138,629
Investment dispositions during the six months ended June 30, 2020:
Recognized in the current period	—		24,207		24,207
Previously recognized gains	(8,603)		8,603		—
Total investment dispositions during the six months ended June 30, 2020	(8,603)		32,810		24,207
Investment income	$	154,508	$	8,328	$	162,836

Our investment income/loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and September~~2019, consisted of the following (in thousands):


	Three Months Ended June 30, 2019
	Unrealized Gains (Losses)		Realized Gains (Losses)		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


	Six Months Ended June 30, 2019
	Unrealized Gains (Losses)		Realized Gains (Losses)		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

Investments in privately held entities that report NAV

We are committed to funding approximately $224.9 million for all investments in privately held entities primarily related to our investments in limited partnerships. Our funding commitments expire at various dates over the next 11 years, with a weighted-average expiration of 8.5 yearsas of June 30, ~~2016, respectively,~~2020. These investments are not redeemable by us, but we may receive distributions from these investments throughout their term. Our investments in ~~conjunction with our dispositions~~privately held entities that report NAV generally have expected initial terms in excess of ~~and impairment losses realized from available-for-sale securities.~~10 years. The weighted-average remaining term during which these investments are expected to be liquidated was 5.3 years as of June 30, 2020.


6.	~~Other assets~~

8. OTHER ASSETS

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


	June 30, 2020		December 31, 2019
Acquired in-place leases	$	312,885	$	281,650
Deferred compensation plan	27,753		22,225
Deferred financing costs – $2.95 billion unsecured senior lines of credit	13,628		13,064
Deposits	12,574		31,028
Furniture, fixtures, and equipment	31,027		23,031
Net investment in direct financing lease	37,455		39,916
Notes receivable	2,240		435
Operating lease right-of-use asset	283,637		264,709
Other assets	40,179		32,040
Prepaid expenses	14,442		11,324
Property, plant, and equipment	154,860		174,292
Total	$	930,680	$	893,714

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
9. FAIR VALUE MEASUREMENTS

~~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.	~~Fair value measurements (continued)~~


7.	~~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 no0 transfers between the levels in the fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020.

Assets and ~~2016.~~liabilities measured at fair value on a recurring basis

The following ~~tables set~~table sets forth the assets ~~and liabilities~~ that we measure at fair value on a recurring basis by level in the fair value hierarchy (in thousands). There were no liabilities measured at fair value on a recurring basis as of June 30, 2020, and December 31, 2019.


			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments in publicly traded companies:
As of June 30, 2020	$	421,970	$	421,970	$	—	$	—
As of December 31, 2019	$	318,637	$	318,637	$	—	$	—

Our investments in publicly traded companies represent investments with readily determinable fair values, and are carried at fair value, with changes in fair value classified in net income. We also hold investments in privately held entities, which consist of (i) investments that report NAV, and (ii) investments that do not report NAV, further described below.

Our investments in privately held entities that report NAV, 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 classified in net income. As of June 30, 2020, and December 31, 2019, the carrying values of investments in privately held entities that report NAV aggregated $521.6 million and $433.9 million, respectively. These investments are excluded from the fair value hierarchy above as required by the fair value accounting standards. We estimate the fair value of each of our investments in limited partnerships based on the most recent NAV reported by each limited partnership. As a result, the determination of fair values of our investments in privately held entities that report NAV generally does not involve significant estimates, assumptions, or judgments.

9. FAIR VALUE MEASUREMENTS (continued)

Assets and liabilities measured at fair value on a nonrecurring basis

On January 1, 2020, we adopted a new accounting standard described within the “Investments” section in Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements. Beginning in 2020, in accordance with this new accounting standard, we provide fair value disclosures, including disclosures about the level in the fair value hierarchy, for our investments in privately held entities that do not report NAV, which were adjusted to their fair value by applying the measurement alternative described within the “Investments” section in Note 2 – “Summary of significant accounting policies” to these unaudited consolidated financial statements.

The following table sets forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of ~~September~~June 30, ~~2017,~~2020 (in thousands). These investments were measured at various times during the period from January 1, 2018, to June 30, 2020.


			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Investments in privately held entities that do not report NAV	$	140,089	$	—	$	123,273	⁽¹⁾	$	16,816	⁽²⁾

(1)This balance represents the total carrying amount of our equity investments in privately held entities with observable price changes, included in our total investments balance of $1.3 billion in our consolidated balance sheets as of June 30, 2020. For more information, refer to Note 7 – “Investments” to these unaudited consolidated financial statements.

(2)This amount is included in the $251.7 million balance of investments in privately held entities without observable price changes disclosed in Note 7 – “Investments” to these unaudited consolidated financial statements, and ~~December 31, 2016 (in thousands):~~represents the carrying amount of investments in privately held entities that do not report NAV for which impairments have been recognized in accordance with the measurement alternative guidance described within the “Investments” section in Note 2 – “Summary of significant accounting policies.”

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
$ —
Our investments in privately held entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of our investments in privately held entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments.

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
$ —
We also subject our investments in privately held entities that do not report NAV to a qualitative assessment for indicators of impairment. If indicators of impairment are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. During the six months ended June 30, 2020, we recognized an impairment charge of $24.5 million primarily related to four investments in privately held entities that do not report NAV.

The estimates of fair value typically incorporate valuation techniques that include an income approach reflecting a discounted cash flow analysis, and a market approach that includes a comparative analysis of acquisition multiples and pricing multiples generated by market participants. In certain instances, we may use multiple valuation techniques for a particular investment and estimate its fair value based on an average of multiple valuation results.

Refer to the “Formation of a consolidated real estate joint venture, impairment of an unconsolidated real estate joint venture, and sales of partial interests” section in Note 4 – “Consolidated and unconsolidated real estate joint ventures,” Note 7 – “Investments,” and Note 15 – “Assets classified as held for sale” to these unaudited consolidated financial statements for further discussion on assets and liabilities measured at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, tenant receivables, ~~other assets,~~deposits, notes receivable, accounts payable, accrued expenses, and ~~tenant security deposits~~other short-term liabilities approximate their 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~~and our $2.2 billion and $750 million unsecured senior ~~line~~lines of credit ~~and unsecured senior bank term loans~~ 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.	~~Fair value measurements (continued)~~

9. FAIR VALUE MEASUREMENTS (continued)

As of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, the book and estimated fair values of our ~~available-for-sale equity securities, interest rate hedge agreements,~~ secured notes payable, unsecured senior notes payable, and $2.2 billion and $750 million unsecured senior ~~line~~lines of credit ~~and unsecured senior bank term loans~~ were as follows (in thousands):


	June 30, 2020
	Book Value		Fair Value Hierarchy											Estimated Fair Value
					Level 1			Level 2			Level 3
Liabilities:
Secured notes payable	$	344,784	$	—		$	371,062		$	—		$	371,062
Unsecured senior notes payable	$	6,738,486	$	—		$	7,859,363		$	—		$	7,859,363
$2.2 billion unsecured senior line of credit	$	440,000	$	—		$	436,167		$	—		$	436,167
$750 million unsecured senior line of credit	$	—	$	—		$	—		$	—		$	—


	December 31, 2019
	Book Value		Fair Value Hierarchy											Estimated Fair Value
					Level 1			Level 2			Level 3
Liabilities:
Secured notes payable	$	349,352	$	—		$	363,344		$	—		$	363,344
Unsecured senior notes payable	$	6,044,127	$	—		$	6,571,668		$	—		$	6,571,668
$2.2 billion unsecured senior line of credit	$	384,000	$	—		$	383,928		$	—		$	383,928

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

~~Nonrecurring fair value measurements~~

10. SECURED AND UNSECURED SENIOR DEBT

~~Refer~~ The following table summarizes our outstanding indebtedness and respective principal payments as of June 30, 2020 (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											2020			2021			2022			2023			2024			Thereafter			Principal			Total
Secured notes payable
San Diego	4.66	%	4.90	%		1/1/23	$	893	$	1,852		$	1,942		$	26,259		$	—		$	—		$	30,946		$	(164)		$	30,782
Greater Boston	3.93	%	3.19			3/10/23	790		1,628			1,693			74,517			—			—			78,628			1,503			80,131
Greater Boston	4.82	%	3.40			2/6/24	1,623		3,394			3,564			3,742			183,527			—			195,850			9,688			205,538
San Francisco	4.14	%	4.42			7/1/26	—		—			—			—			—			28,200			28,200			(595)			27,605
San Francisco	6.50	%	6.50			7/1/36	25		26			28			30			32			587			728			—			728
Secured debt weighted-average interest rate/subtotal	4.55	%	3.57				3,331		6,900			7,227			104,548			183,559			28,787			334,352			10,432			344,784

Commercial paper program⁽³⁾	N/A		N/A		⁽³⁾	N/A	—		—			—			—			—			—			—			—			—
$750 million unsecured senior line of credit⁽⁴⁾	L+1.05	%	N/A		⁽⁴⁾	4/14/22	—		—			—			—			—			—			—			—			—
$2.2 billion unsecured senior line of credit	L+0.825	%	1.33			1/28/24	—		—			—			—			440,000			—			440,000			—			440,000
Unsecured senior notes payable	3.90	%	4.04			6/15/23	—		—			—			500,000			—			—			500,000			(1,769)			498,231
Unsecured senior notes payable – green bond	4.00	%	4.03			1/15/24	—		—			—			—			650,000			—			650,000			(449)			649,551
Unsecured senior notes payable	3.45	%	3.62			4/30/25	—		—			—			—			—			600,000			600,000			(4,236)			595,764
Unsecured senior notes payable	4.30	%	4.50			1/15/26	—		—			—			—			—			300,000			300,000			(2,704)			297,296
Unsecured senior notes payable – green bond	3.80	%	3.96			4/15/26	—		—			—			—			—			350,000			350,000			(2,840)			347,160
Unsecured senior notes payable	3.95	%	4.13			1/15/27	—		—			—			—			—			350,000			350,000			(3,308)			346,692
Unsecured senior notes payable	3.95	%	4.07			1/15/28	—		—			—			—			—			425,000			425,000			(3,194)			421,806
Unsecured senior notes payable	4.50	%	4.60			7/30/29	—		—			—			—			—			300,000			300,000			(2,017)			297,983
Unsecured senior notes payable	2.75	%	2.87			12/15/29	—		—			—			—			—			400,000			400,000			(3,889)			396,111
Unsecured senior notes payable	4.70	%	4.81			7/1/30	—		—			—			—			—			450,000			450,000			(3,719)			446,281
Unsecured senior notes payable	4.90	%	5.05			12/15/30	—		—			—			—			—			700,000			700,000			(8,230)			691,770
Unsecured senior notes payable	3.38	%	3.48			8/15/31	—		—			—			—			—			750,000			750,000			(7,212)			742,788
Unsecured senior notes payable	4.85	%	4.93			4/15/49	—		—			—			—			—			300,000			300,000			(3,389)			296,611
Unsecured senior notes payable	4.00	%	3.91			2/1/50	—		—			—			—			—			700,000			700,000			10,442			710,442
Unsecured debt weighted average/subtotal			3.93				—		—			—			500,000			1,090,000			5,625,000			7,215,000			(36,514)			7,178,486
Weighted-average interest rate/total			3.91	%			$	3,331	$	6,900		$	7,227		$	604,548		$	1,273,559		$	5,653,787		$	7,549,352		$	(26,082)		$	7,523,270

(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

(2)Reflects any extension options that we control.

(3)Under our commercial paper program, we have the ability to ~~“Sale~~issue up to $1.0 billion in commercial paper notes bearing interest at short-term fixed rates, generally with a maturity of ~~Real Estate Assets~~30 days or less and ~~Impairment Charges”~~with a maximum maturity of 397 days from the date of issuance. Borrowings under the program will be used to fund short-term capital needs and are backed by our $2.2 billion unsecured senior line of credit. In the event we are unable to issue commercial paper notes or refinance outstanding borrowings under terms equal to or more favorable than those under the $2.2 billion unsecured senior line of credit, we expect to borrow under the $2.2 billion unsecured senior line of credit at L+0.825%. The commercial paper notes sold during the three months ended June 30, 2020, were issued at a weighted-average yield to maturity of 0.79%.

(4)During the three months ended June 30, 2020, we did not draw on our $750 million unsecured senior line of credit. Pursuant to the terms of the $750 million unsecured senior line of credit agreement, the outstanding commitments will be reduced by 100% of net proceeds from the issuance of new corporate debt and 50% of the net proceeds from the settlement of our forward equity sales agreements entered into in ~~Note 3 – “Investments~~July 2020. As of the date of this report, none of our forward equity sales agreements entered into in ~~Real Estate,” Note 5 – “Investments,” and Note 14 – “Assets Classified as Held for Sale” to these unaudited consolidated financial statements for further discussion.~~July 2020 have been settled.


8.	~~Secured and unsecured senior debt~~

10. SECURED AND UNSECURED SENIOR DEBT (continued)

The following table summarizes our secured and unsecured senior debt as of ~~September~~June 30, ~~2017~~2020 (dollars in thousands):


	Fixed-Rate Debt			Variable-Rate Debt								Weighted-Average
														Interest	Remaining Term (in years)
										Total		Percentage		Rate⁽¹⁾
Secured notes payable	$	344,784		$	—		$	344,784		4.6	%	3.57	%	3.5
Unsecured senior notes payable	6,738,486			—			6,738,486			89.6		4.10		10.6
Unsecured senior lines of credit⁽²⁾	—			440,000			440,000			5.8		1.33		3.6
Total/weighted average	$	7,083,270		$	440,000		$	7,523,270		100.0	%	3.91	%	9.9
Percentage of total debt	94		%	6		%	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)~~	(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.	~~Secured and unsecured senior debt (continued)~~

~~The following table summarizes our outstanding indebtedness~~ as of ~~September~~the end of the applicable period, including expense/income related to the amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

(2)Includes our commercial paper program, which had 0 outstanding balance as of June 30, ~~2017 (dollars in thousands):~~2020.

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 for options to extend maturity dates.~~

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

In March ~~2017,~~2020, we completed ~~a $425.0 million public~~an offering of ~~our~~$700.0 million of unsecured senior notes payable due on ~~January~~December 15, ~~2028,~~2030, at ~~a stated~~an 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 the4.90% for net proceeds ~~after discounts and issuance costs,~~ of ~~$420.5 million~~$691.6 million. The net proceeds were used to ~~repay~~reduce the outstanding ~~borrowings~~indebtedness under our ~~$1.65~~$2.2 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 commercial paper program. Since January 1, 2019, we have completed the issuances of $3.4 billion in unsecured senior ~~bank term loans~~notes, with a weighted-average interest rate of 3.95% and a weighted-average maturity as of June 30, 2020, of 15.2 years.

~~On July 29, 2016,~~$1.0 billion commercial paper program

In September 2019, we ~~amended~~established a commercial paper program, which received credit ratings of A-2 from S&P Global Ratings and Prime-2 from Moody’s Investors Service. Under this program, we have the ability to issue up to $750.0 million of commercial paper notes generally with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our $2.2 billion unsecured senior line of credit, and ~~completed~~at all times we expect to retain a ~~partial principal~~minimum undrawn amount of borrowing capacity under our $2.2 billion unsecured senior line of credit equal to any outstanding balance on our commercial paper program. The net proceeds from the issuances of the notes are expected to be used for general working capital and other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of ~~$200~~other debt and selective development, redevelopment, or acquisition of properties.

In March 2020, we increased the aggregate amount we may issue from time to time under our commercial paper program from $750.0 million to $1.0 billion. During the three months ended June 30, 2020, the commercial paper notes were issued at a weighted-average yield to maturity of 0.79%. As of June 30, 2020, we had 0 outstanding borrowings under our commercial paper program.

Additional $750 million unsecured senior line of credit

In April 2020, we closed an additional unsecured senior line of credit with $750.0 million of available commitments. The new unsecured senior line of credit matures on April 14, 2022, and bears interest at LIBOR plus 1.05%. In addition to the cost of borrowing, this line of credit is subject to an annual facility fee of 0.20% based on the aggregate commitment outstanding.

Pursuant to the terms of the new line of credit agreement, the outstanding commitments and any outstanding borrowings from the $750 million unsecured senior line of credit will be reduced by 100% of net cash proceeds from certain new debt transactions and 50% of net cash proceeds from new equity offerings as defined in the agreement. Therefore, upon full or partial settlement of our ~~2019 Unsecured Senior Bank Term Loan reducing~~forward equity sales agreements entered into in July 2020, described further under the ~~total~~“Common equity transactions” section of Note 13 – “Stockholders’ equity” to these unaudited consolidated financial statements, the outstanding ~~balance~~commitments and any outstanding borrowings from ~~$600~~the $750 million ~~to $400 million, and recognized an aggregate loss on early extinguishment~~unsecured senior line of ~~debt~~credit will be reduced by 50% of ~~$3.2 million~~net proceeds received from the settlement related to the ~~write-off~~aforementioned agreements entered into in July 2020. As of ~~unamortized loan fees.~~


8.	~~Secured and unsecured senior debt (continued)~~

~~Secured construction loans~~

~~The following table summarizes~~the date of this report, none of our ~~secured construction loans~~forward equity sales agreements entered into in July 2020 have been settled. Including our existing $2.2 billion unsecured senior line of credit, we have $2.95 billion in aggregate commitments under our unsecured senior lines of credit as of ~~September~~June 30, ~~2017 (dollars in thousands):~~2020.

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~~2020 and ~~2016~~2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Gross interest	$	75,807	$	64,553	$	146,226	$	122,162
Capitalized interest	(30,793)		(21,674)		(55,473)		(40,183)
Interest expense	$	45,014	$	42,879	$	90,753	$	81,979

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

11. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES


9.	~~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 billion unsecured senior line of credit, unsecured senior bank term loans, and secured notes payable, and to manage our exposure to interest rate volatility. Our derivative instruments include interest rate swaps and interest rate caps.

In our interest rate hedge agreements, the ineffective portion of the change in fair value is required to be recognized directly in earnings. During the nine months ended September 30, 2017 and 2016, our interest rate hedge agreements were 100% effective; as a result, no hedge ineffectiveness was recognized in earnings. 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 million in accumulated other comprehensive income to earnings as a decrease of interest expense. As of September 30, 2017, and December 31, 2016, the fair values of our interest rate swap and cap agreements aggregating an asset balance were classified in other assets, and the fair value of our interest rate swap 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 7 – “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 (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 30, 2017, we could have been required to settle our obligations under the agreements at their termination value of $352 thousand.

~~We had the following outstanding interest rate hedge agreements that were designated as cash flow hedges of interest rate risk as of September 30, 2017 (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

~~(1)~~

In addition to the interest pay rate for each swap agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of September 30, 2017, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments under Note 8 – “Secured and Unsecured Senior Debt” to these unaudited consolidated financial statements.


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

The following table summarizes the components of accounts payable, accrued expenses, and ~~tenant security deposits~~other liabilities as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016~~2019 (in thousands):


	June 30, 2020		December 31, 2019
Accounts payable and accrued expenses	$	233,661	$	198,994
Accrued construction	232,060		275,818
Acquired below-market leases	186,329		194,773
Conditional asset retirement obligations	29,551		14,037
Deferred rent liabilities	3,632		2,897
Operating lease liability	291,710		271,808
Unearned rent and tenant security deposits	283,332		275,863
Other liabilities	82,906		86,078
Total	$	1,343,181	$	1,320,268

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

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.~~

14. NONCONTROLLING INTERESTS

Noncontrolling interests represent the third-party interests in certain entities in which we have a controlling interest. These entities owned ~~nine projects~~41 properties as of ~~September~~June 30, ~~2017,~~2020, 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,~~2020 and 2019, we distributed $38.2 million and $24.6 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.~~	~~Assets classified as held for sale~~

15. ASSETS CLASSIFIED AS HELD FOR SALE

As of ~~September~~June 30, ~~2017, two operating~~2020, four properties aggregating ~~634,328~~518,765 RSF ~~located in China, which represent our remaining real estate investments in Asia,~~ were classified as held for ~~sale. For additional information, refer~~sale in our consolidated financial statements, none of which met the criteria for classification as discontinued operations.

In June 2020, we decided to sell a real estate investment aggregating 60,759 RSF located in Greater Boston, which met the criteria for classification as held for sale but did not meet the criteria for classification as discontinued operations in our consolidated financial statements. We determined the estimated fair value of this asset less costs to sell was greater than the carrying amount of the asset. Refer to “Impairment of long-lived assets” within Note 32 – ~~“Investments in Real Estate”~~“Summary of significant account policies” to these unaudited consolidated financial ~~statements.~~statements for additional information.

The following is a summary of net assets as of ~~September~~June 30, ~~2017,~~2020, and December 31, ~~2016,~~2019, for our ~~remaining~~ real estate investments ~~in Asia~~ that were classified as held for sale as of each respective date (in thousands):


	June 30, 2020		December 31, 2019
Total assets	$	45,388	$	59,412
Total liabilities	(2,089)		(2,860)
Total accumulated other comprehensive income	1,611		536
Net assets classified as held for sale	$	44,910	$	57,088

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
16. SUBSEQUENT EVENTS


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

Real estate acquired in July 2020

~~Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under~~

In July 2020, we completed the ~~Securities Act~~acquisition of ~~1933, as amended, that are fully~~three properties for an aggregate purchase price of $141.7 million, comprising 749,003 RSF of operating and ~~unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or~~future development and redevelopment opportunities strategically located across multiple markets.

Forward equity sales agreements

In July 2020, we entered into forward equity sales agreements aggregating $1.1 billion to sell an aggregate of 6.9 million shares of our common stock (including the ~~“Guarantor Subsidiary”),~~exercise of an ~~indirectly 100% owned subsidiary~~underwriters’ option) at a public offering price of ~~the Issuer. The Issuer’s other subsidiaries, including, but not limited~~$160.50 per share, before underwriting discounts. Refer 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 30, 2017, and December 31, 2016, the condensed consolidating statements of income and comprehensive income for the three and nine months ended September 30, 2017 and 2016, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2017 and 2016, for the Issuer, the Guarantor Subsidiary, and the Combined Non-Guarantor Subsidiaries, as well as the eliminations necessaryNote 13 – “Stockholders’ equity” to ~~arrive at the information on a~~these unaudited 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.

for additional information.


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

~~Condensed Consolidating Balance Sheet~~

~~as of September 30, 2017~~

~~(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 $ —
$ —
$ 10,046,521
$ —
$ 10,046,521
Investments in unconsolidated real estate JVs —
—
33,692
—
33,692
Cash and cash equivalents 37,916
—
80,646
—
118,562
Restricted cash 138
—
27,575
—
27,713
Tenant receivables —
—
9,899
—
9,899
Deferred rent —
—
402,353
—
402,353
Deferred leasing costs —
—
208,265
—
208,265
Investments —
1,689
483,573
—
485,262
Investments in and advances to affiliates 9,158,536
8,276,072
168,449
(17,603,057 ) —
Other assets 48,095
—
164,961
—
213,056
Total assets $ 9,244,685
$ 8,277,761
$ 11,625,934
$ (17,603,057 ) $ 11,545,323
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable $ —
$ —
$ 1,153,890
$ —
$ 1,153,890
Unsecured senior notes payable 2,801,290
—
—
—
2,801,290
Unsecured senior line of credit 314,000
—
—
—
314,000
Unsecured senior bank term loans 547,860
—
—
—
547,860
Accounts payable, accrued expenses, and tenant security deposits 91,163
—
648,907
—
740,070
Dividends payable 83,402
—
—
—
83,402
Total liabilities 3,837,715
—
1,802,797
—
5,640,512
Redeemable noncontrolling interests —
—
11,418
—
11,418
Alexandria Real Estate Equities, Inc.’s stockholders’ equity 5,406,970
8,277,761
9,325,296
(17,603,057 ) 5,406,970
Noncontrolling interests —
—
486,423
—
486,423
Total equity 5,406,970
8,277,761
9,811,719
(17,603,057 ) 5,893,393
Total liabilities, noncontrolling interests, and equity $ 9,244,685
$ 8,277,761
$ 11,625,934
$ (17,603,057 ) $ 11,545,323


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

~~Condensed Consolidating Balance Sheet~~

~~as of~~ ~~December 31, 2016~~

~~(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 $ —
$ —
$ 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.~~	~~Condensed consolidating financial information (continued)~~

~~Condensed Consolidating Statement of Income~~

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

~~(In thousands)~~

~~(Unaudited)~~

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
Other income 3,230
(2,589 ) 5,736
(4,086 ) 2,291
Total revenues 3,230
(2,589 ) 288,815
(4,086 ) 285,370

Expenses:
Rental operations —
—
83,469
—
83,469
General and administrative 16,598
—
5,124
(4,086 ) 17,636
Interest 23,958
—
7,073
—
31,031
Depreciation and amortization 1,787
—
106,001
—
107,788
Total expenses 42,343
—
201,667
(4,086 ) 239,924

Equity in earnings of unconsolidated real estate JVs —
—
14,100
—
14,100
Equity in earnings of affiliates 92,886
88,900
1,702
(183,488 ) —
Net income 53,773
86,311
102,950
(183,488 ) 59,546
Net income attributable to noncontrolling interests —
—
(5,773 ) —
(5,773 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders 53,773
86,311
97,177
(183,488 ) 53,773
Dividends on preferred stock (1,302 ) —
—
—
(1,302 )
Net income attributable to unvested restricted stock awards (1,198 ) —
—
—
(1,198 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 51,273
$ 86,311
$ 97,177
$ (183,488 ) $ 51,273


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

~~Condensed Consolidating Statement of Income~~

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

~~(In thousands)~~

~~(Unaudited)~~

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

~~Condensed Consolidating Statement of Income~~

~~for the Nine Months Ended September 30, 2017~~

~~(In thousands)~~

~~(Unaudited)~~

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
Other income 11,337
(2,577 ) 10,199
(13,683 ) 5,276
Total revenues 11,337
(2,577 ) 834,229
(13,683 ) 829,306

Expenses:
Rental operations —
—
237,536
—
237,536
General and administrative 55,272
—
14,510
(13,683 ) 56,099
Interest 72,907
—
19,656
—
92,563
Depreciation and amortization 5,217
—
303,852
—
309,069
Impairment of real estate —
—
203
—
203
Loss on early extinguishment of debt 670
—
—
—
670
Total expenses 134,066
—
575,757
(13,683 ) 696,140

Equity in earnings of unconsolidated real estate JVs —
—
15,050
—
15,050
Equity in earnings of affiliates 252,434
242,345
4,694
(499,473 ) —
Gain on sales of real estate – rental properties —
—
270
—
270
Gain on sales of real estate – land parcels —
—
111
—
111
Net income 129,705
239,768
278,597
(499,473 ) 148,597
Net income attributable to noncontrolling interests —
—
(18,892 ) —
(18,892 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders 129,705
239,768
259,705
(499,473 ) 129,705
Dividends on preferred stock (6,364 ) —
—
—
(6,364 )
Preferred stock redemption charge (11,279 ) —
—
—
(11,279 )
Net income attributable to unvested restricted stock awards (3,498 ) —
—
—
(3,498 )
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 108,564
$ 239,768
$ 259,705
$ (499,473 ) $ 108,564


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

~~Condensed Consolidating Statement of Income~~

~~for the Nine Months Ended September 30, 2016~~

~~(In thousands)~~

~~(Unaudited)~~

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 )


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

~~Condensed Consolidating Statement of Comprehensive Income~~

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

~~(In thousands)~~

~~(Unaudited)~~

Alexandria
Real Estate
Equities, Inc.
(Issuer)

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

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Net income $ 53,773
$ 86,311
$ 102,950
$ (183,488 ) $ 59,546
Other comprehensive income
Unrealized gains on available-for-sale equity securities:
Unrealized holding gains arising during the period —
65
16,953
—
17,018
Reclassification adjustment for losses included in net income —
—
—
—
—
Unrealized gains on available-for-sale equity securities, net —
65
16,953
—
17,018

Unrealized gains (losses) on interest rate hedge agreements:
Unrealized interest rate hedge gains (losses) arising during the period 174
—
(29 ) —
145
Reclassification adjustment for amortization of interest expense included in net income 195
—
3
—
198
Unrealized gains (losses) on interest rate hedge agreements, net 369
—
(26 ) —
343

Unrealized gains on foreign currency translation:
Unrealized foreign currency translation gains arising during the period —
—
3,836
—
3,836
Reclassification adjustment for cumulative foreign currency translation losses included in net income upon sale or liquidation —
—
—
—
—
Unrealized gains on foreign currency translation, net —
—
3,836
—
3,836

Total other comprehensive income 369
65
20,763
—
21,197
Comprehensive income 54,142
86,376
123,713
(183,488 ) 80,743
Less: comprehensive income attributable to noncontrolling interests —
—
(5,783 ) —
(5,783 )
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 54,142
$ 86,376
$ 117,930
$ (183,488 ) $ 74,960


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

~~Condensed Consolidating Statement of Comprehensive Income~~

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

~~(In thousands)~~

~~(Unaudited)~~

Alexandria
Real Estate
Equities, Inc.
(Issuer)

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

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Net income $ 24,475
$ 55,623
$ 70,329
$ (121,868 ) $ 28,559
Other comprehensive income (loss)
Unrealized losses on available-for-sale equity securities:
Unrealized holding gains (losses) arising during the period —
58
(38,679 ) —
(38,621 )
Reclassification adjustment for gains included in net income —
(159 ) (8,381 ) —
(8,540 )
Unrealized losses on available-for-sale equity securities, net —
(101 ) (47,060 ) —
(47,161 )

Unrealized gains (losses) on interest rate hedge agreements:
Unrealized interest rate hedge gains arising during the period 2,979
—
3
—
2,982
Reclassification adjustment for amortization of interest expense (income) included in net income 1,714
—
(12 ) —
1,702
Unrealized gains (losses) on interest rate hedge agreements, net 4,693
—
(9 ) —
4,684

Unrealized gains on foreign currency translation:
Unrealized foreign currency translation losses arising during the period —
—
(1,322 ) —
(1,322 )
Reclassification adjustment for cumulative foreign currency translation losses included in net income upon sale or liquidation —
—
3,779
—
3,779
Unrealized gains on foreign currency translation, net —
—
2,457
—
2,457

Total other comprehensive income (loss) 4,693
(101 ) (44,612 ) —
(40,020 )
Comprehensive income (loss) 29,168
55,522
25,717
(121,868 ) (11,461 )
Less: comprehensive income attributable to noncontrolling interests —
—
(4,081 ) —
(4,081 )
Comprehensive income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 29,168
$ 55,522
$ 21,636
$ (121,868 ) $ (15,542 )


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

~~Condensed Consolidating Statement of Comprehensive Income~~

~~for the Nine Months Ended September 30, 2017~~

~~(In thousands)~~

~~(Unaudited)~~

Alexandria
Real Estate
Equities, Inc.
(Issuer)

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

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Net income $ 129,705
$ 239,768
$ 278,597
$ (499,473 ) $ 148,597
Other comprehensive income
Unrealized gains on available-for-sale equity securities:
Unrealized holding gains arising during the period —
20
23,394
—
23,414
Reclassification adjustment for losses included in net income —
4
2,478
—
2,482
Unrealized gains on available-for-sale equity securities, net —
24
25,872
—
25,896

Unrealized gains (losses) on interest rate hedge agreements:
Unrealized interest rate hedge gains (losses) arising during the period 1,062
—
(250 ) —
812
Reclassification adjustment for amortization of interest expense included in net income 1,804
—
6
—
1,810
Unrealized gains (losses) on interest rate hedge agreements, net 2,866
—
(244 ) —
2,622

Unrealized gains on foreign currency translation:
Unrealized foreign currency translation gains arising during the period —
—
7,592
—
7,592
Reclassification adjustment for cumulative foreign currency translation losses included in net income upon sale or liquidation —
—
2,421
—
2,421
Unrealized gains on foreign currency translation, net —
—
10,013
—
10,013

Total other comprehensive income 2,866
24
35,641
—
38,531
Comprehensive income 132,571
239,792
314,238
(499,473 ) 187,128
Less: comprehensive income attributable to noncontrolling interests —
—
(18,914 ) —
(18,914 )
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 132,571
$ 239,792
$ 295,324
$ (499,473 ) $ 168,214


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

~~Condensed Consolidating Statement of Comprehensive Income~~

~~for the Nine Months Ended September 30, 2016~~

~~(In thousands)~~

~~(Unaudited)~~

Alexandria
Real Estate
Equities, Inc.
(Issuer)

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

Combined
Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Net (loss) income $ (81,205 ) $ (6,167 ) $ 37,290
$ (19,509 ) $ (69,591 )
Other comprehensive loss
Unrealized losses on available-for-sale equity securities:
Unrealized holding gains (losses) arising during the period —
136
(70,191 ) —
(70,055 )
Reclassification adjustment for losses (gains) included in net income —
(148 ) (18,479 ) —
(18,627 )
Unrealized losses on available-for-sale equity securities, net —
(12 ) (88,670 ) —
(88,682 )

Unrealized losses on interest rate hedge agreements:
Unrealized interest rate hedge (losses) gains arising during the period (7,658 ) —
3
—
(7,655 )
Reclassification adjustment for amortization of interest expense (income) included in net income 3,737
—
(12 ) —
3,725
Unrealized losses on interest rate hedge agreements, net (3,921 ) —
(9 ) —
(3,930 )

Unrealized gains on foreign currency translation:
Unrealized foreign currency translation gains arising during the period —
—
842
—
842
Reclassification adjustment for cumulative foreign currency translation losses included in net (loss) income upon sale or liquidation —
—
10,807
—
10,807
Unrealized gains on foreign currency translation, net —
—
11,649
—
11,649

Total other comprehensive loss (3,921 ) (12 ) (77,030 ) —
(80,963 )
Comprehensive loss (85,126 ) (6,179 ) (39,740 ) (19,509 ) (150,554 )
Less: comprehensive income attributable to noncontrolling interests —
—
(11,587 ) —
(11,587 )
Comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ (85,126 ) $ (6,179 ) $ (51,327 ) $ (19,509 ) $ (162,141 )


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

~~Condensed Consolidating Statement of Cash Flows~~

~~for the Nine Months Ended September 30, 2017~~

~~(In thousands)~~

~~(Unaudited)~~

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
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 5,217
—
303,852
—
309,069
Loss on early extinguishment of debt 670
—
—
—
670
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 )
Distributions of earnings from unconsolidated real estate JVs —
—
249
—
249
Amortization of loan fees 5,665
—
2,913
—
8,578
Amortization of debt discounts (premiums) 441
—
(2,314 ) —
(1,873 )
Amortization of acquired below-market leases —
—
(14,908 ) —
(14,908 )
Deferred rent —
—
(74,362 ) —
(74,362 )
Stock compensation expense 18,649
—
—
—
18,649
Equity in earnings of affiliates (252,434 ) (242,345 ) (4,694 ) 499,473
—
Investment gains —
(17 ) (8,408 ) —
(8,425 )
Investment losses —
2,599
3,819
—
6,418
Changes in operating assets and liabilities:

Restricted cash (36 ) —
(876 ) —
(912 )
Tenant receivables —
—
(224 ) —
(224 )
Deferred leasing costs —
—
(39,925 ) —
(39,925 )
Other assets (10,576 ) —
(86 ) —
(10,662 )
Accounts payable, accrued expenses, and tenant security deposits (9,813 ) (9 ) 40,441
—
30,619
Net cash (used in) provided by operating activities (112,512 ) (4 ) 468,846
—
356,330

Investing Activities
Proceeds from sales of real estate —
—
4,263
—
4,263
Additions to real estate —
—
(660,877 ) —
(660,877 )
Purchases of real estate —
—
(590,884 ) —
(590,884 )
Deposits for investing activities —
—
4,700
—
4,700
Investments in subsidiaries (753,137 ) (588,808 ) (12,160 ) 1,354,105
—
Investments in unconsolidated real estate JVs —
—
(248 ) —
(248 )
Return of capital from unconsolidated real estate JVs —
—
38,576
—
38,576
Additions to investments —
—
(128,190 ) —
(128,190 )
Sales of investments —
204
18,692
—
18,896
Net cash used in investing activities $ (753,137 ) $ (588,604 ) $ (1,326,128 ) $ 1,354,105
$ (1,313,764 )


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

~~Condensed Consolidating Statement of Cash Flows (continued)~~

~~for the Nine Months Ended September 30, 2017~~

~~(In thousands)~~

~~(Unaudited)~~

Alexandria Real
Estate Equities,
Inc. (Issuer) Alexandria Real
Estate Equities,
L.P. (Guarantor
Subsidiary) Combined
Non-Guarantor
Subsidiaries Eliminations Consolidated
Financing Activities
Borrowings from secured notes payable $ —
$ —
$ 145,272
$ —
$ 145,272
Repayments of borrowings from secured notes payable —
—
(2,882 ) —
(2,882 )
Proceeds from issuance of unsecured senior notes payable 424,384
—
—
—
424,384
Borrowings from unsecured senior line of credit 2,634,000
—
—
—
2,634,000
Repayments of borrowings from unsecured senior line of credit (2,348,000 ) —
—
—
(2,348,000 )
Repayments of borrowings from unsecured senior bank term loans (200,000 ) —
—
—
(200,000 )
Transfer to/from parent company 47,558
588,608
717,939
(1,354,105 ) —
Change in restricted cash related to financing activities —
—
(10,467 ) —
(10,467 )
Payment of loan fees (3,956 ) —
(387 ) —
(4,343 )
Repurchase of 7.00% Series D cumulative convertible preferred stock (17,934 ) —
—
—
(17,934 )
Redemption of 6.45% Series E cumulative redeemable preferred stock (130,350 ) —
—
—
(130,350 )
Proceeds from the issuance of common stock 705,391
—
—
—
705,391
Dividends on common stock (229,814 ) —
—
—
(229,814 )
Dividends on preferred stock (8,317 ) —
—
—
(8,317 )
Contributions from noncontrolling interests —
—
9,877
—
9,877
Distributions to noncontrolling interests —
—
(17,432 ) —
(17,432 )
Net cash provided by financing activities 872,962
588,608
841,920
(1,354,105 ) 949,385

Effect of foreign exchange rate changes on cash and cash equivalents —
—
1,579
—
1,579

Net increase (decrease) in cash and cash equivalents 7,313
—
(13,783 ) —
(6,470 )
Cash and cash equivalents as of the beginning of period 30,603
—
94,429
—
125,032
Cash and cash equivalents as of the end of period $ 37,916
$ —
$ 80,646
$ —
$ 118,562

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest, net of interest capitalized $ 67,091
$ —
$ 19,141
$ —
$ 86,232

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


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

~~Condensed Consolidating Statement of Cash Flows~~

~~for the Nine Months Ended September 30, 2016~~

~~(In thousands)~~

~~(Unaudited)~~

Alexandria Real
Estate Equities,
Inc. (Issuer)

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

Combined
Non-Guarantor
Subsidiaries
Eliminations Consolidated
Operating Activities
Net (loss) income $ (81,205 ) $ (6,167 ) $ 37,290
$ (19,509 ) $ (69,591 )
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization 4,997
—
213,171
—
218,168
Loss on early extinguishment of debt 3,230
—
—
—
3,230
Impairment of real estate —
—
193,237
—
193,237
Gain on sale of real estate – land parcels —
—
(90 ) —
(90 )
Equity in losses of unconsolidated real estate JVs —
—
270
—
270
Distributions of earnings from unconsolidated real estate JVs —
—
286
—
286
Amortization of loan fees 5,826
—
2,966
—
8,792
Amortization of debt discounts (premiums) 353
—
(470 ) —
(117 )
Amortization of acquired below-market leases —
—
(2,905 ) —
(2,905 )
Deferred rent —
—
(30,679 ) —
(30,679 )
Stock compensation expense 19,007
—
—
—
19,007
Equity in earnings of affiliates (25,889 ) 6,282
98
19,509
—
Investment gains —
(566 ) (28,155 ) —
(28,721 )
Investment losses —
188
10,482
—
10,670

Changes in operating assets and liabilities:

Restricted cash (16 ) —
(262 ) —
(278 )
Tenant receivables —
—
843
—
843
Deferred leasing costs —
—
(21,621 ) —
(21,621 )
Other assets (8,332 ) —
(6,481 ) —
(14,813 )
Accounts payable, accrued expenses, and tenant security deposits (35,351 ) (592 ) 42,106
—
6,163
Net cash (used in) provided by operating activities (117,380 ) (855 ) 410,086
—
291,851

Investing Activities
Proceeds from sales of real estate —
—
27,332
—
27,332
Additions to real estate —
—
(638,568 ) —
(638,568 )
Purchase of real estate —
—
(18,108 ) —
(18,108 )
Deposits for investing activities —
—
(54,998 ) —
(54,998 )
Investments in subsidiaries (301,852 ) (365,132 ) (7,405 ) 674,389
—
Investments in unconsolidated real estate JVs —
—
(6,924 ) —
(6,924 )
Additions to investments —
—
(68,384 ) —
(68,384 )
Sales of investments —
1,174
34,121
—
35,295
Repayment of notes receivable —
—
9,054
—
9,054
Net cash used in investing activities $ (301,852 ) $ (363,958 ) $ (723,880 ) $ 674,389
$ (715,301 )


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

~~Condensed Consolidating Statement of Cash Flows (continued)~~

~~for the Nine Months Ended September 30, 2016~~

~~(In thousands)~~

~~(Unaudited)~~

Alexandria Real
Estate Equities,
Inc. (Issuer)

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

Combined
Non-Guarantor
Subsidiaries
Eliminations Consolidated
Financing Activities
Borrowings from secured notes payable $ —
$ —
$ 215,330
$ —
$ 215,330
Repayments of borrowings from secured notes payable —
—
(234,096 ) —
(234,096 )
Proceeds from issuance of unsecured senior notes payable 348,604
—
—
—
348,604
Borrowings from unsecured senior line of credit 2,349,000
—
—
—
2,349,000
Repayments of borrowings from unsecured senior line of credit (2,084,000 ) —
—
—
(2,084,000 )
Repayment of borrowings from unsecured bank term loans (200,000 ) —
—
—
(200,000 )
Transfer to/from parent company (69,139 ) 364,813
378,715
(674,389 ) —
Change in restricted cash related to financing activities —
—
7,742
—
7,742
Payment of loan fees (12,401 ) —
(4,098 ) —
(16,499 )
Repurchase of 7.00% Series D cumulative convertible preferred stock (98,633 ) —
—
—
(98,633 )
Proceeds from the issuance of common stock 367,802
—
—
—
367,802
Dividends on common stock (177,966 ) —
—
—
(177,966 )
Dividends on preferred stock (17,487 ) —
—
—
(17,487 )
Financing costs paid for sale of noncontrolling interests —
—
(8,093 ) —
(8,093 )
Contributions from and sale of noncontrolling interests —
—
68,621
—
68,621
Distributions to and purchase of noncontrolling interests —
—
(62,605 ) —
(62,605 )
Net cash provided by financing activities 405,780
364,813
361,516
(674,389 ) 457,720

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

Net (decrease) increase in cash and cash equivalents (13,452 ) —
46,282
—
32,830
Cash and cash equivalents as of the beginning of period 31,982
—
93,116
—
125,098
Cash and cash equivalents as of the end of period $ 18,530
$ —
$ 139,398
$ —
$ 157,928

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest, net of interest capitalized $ 58,062
$ —
$ 758
$ —
$ 58,820

Non-Cash Investing Activities:
Change in accrued construction $ —
$ —
$ 23,023
$ —
$ 23,023

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

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

Certain information and statements included in this quarterly report on Form ~~10‑Q,~~10-Q, including, without limitation, statements containing the words “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of ~~these~~those words or similar words, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, results of operations, and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the following:

•Operating factors such as a failure to operate our business successfully in comparison to market expectations or in comparison to our competitors, our inability to obtain capital when desired or refinance debt maturities when desired, and/or a failure to maintain our status as a REIT for federal tax purposes.

•Market and industry factors such as adverse developments concerning the life science, technology, and ~~technology~~agtech industries and/or our tenants.

•Government factors such as any unfavorable effects resulting from federal, state, local, and/or foreign government policies, laws, and/or funding levels.

•Global factors such as negative economic, political, financial, credit market, and/or banking conditions.

•Uncertain global, national, and local impacts of the ongoing COVID-19 pandemic.

•Other factors such as climate change, cyber intrusions, and/or changes in laws, regulations, and financial accounting standards.

This list of risks and uncertainties is not exhaustive. Additional information regarding risk factors that may affect us is included under “Item 1A. Risk ~~Factors”~~factors” and “Item 7. Management’s ~~Discussion~~discussion and ~~Analysis~~analysis of ~~Financial Condition~~financial condition and ~~Results~~results of ~~Operations” in~~operations” of our annual report on Form ~~10‑K~~10-K for the ~~fiscal~~ year ended December 31, ~~2016.~~2019, and respective sections within this quarterly report on Form 10-Q. Readers of this quarterly report on Form ~~10‑Q~~10-Q should also read our other documents filed publicly with the SEC for further discussion regarding such factors.

The COVID-19 pandemic

In December 2019, a novel coronavirus, which causes respiratory illness and spreads from person to person (COVID-19), was first identified during an investigation into an outbreak in Wuhan, China. The first case of COVID-19 in the U.S. was reported on January 20, 2020. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19. As of July 24, 2020, according to the World Health Organization, over 15 million novel coronavirus cases have been reported worldwide. The U.S. has reported more than 3.9 million cases of COVID-19 and over 140,000 deaths as of July 24, 2020.

COVID-19 disease, treatment, and measures to combat the pandemic

Most patients with COVID-19 have had mild to severe respiratory illness with symptoms of fever, chills, cough, shortness of breath, fatigue, and loss of taste. Many individuals with COVID-19 are asymptomatic and show limited to no symptoms, highlighting the ongoing challenge of containing the continued spread of COVID-19. Some patients develop pneumonia in both lungs and/or multi-organ failure, which in some cases leads to death. There is currently no specific treatment or vaccine for COVID-19, however since scientists shared the virus’s genetic makeup in January 2020, intense research has been underway around the world. At this time, while there are no FDA-approved drugs for the treatment of COVID-19, the FDA has granted emergency use authorization for the antiviral drug remdesivir to treat severe COVID-19. In addition, the U.S. National Institutes of Health (“NIH”) has recommended the corticosteroid dexamethasone for patients with severe COVID-19 who require supplemental oxygen or mechanical ventilation.

Vaccine testing in humans started with record speed in March 2020 and as of July 24, 2020, has evolved to over 165 potential vaccines in different stages of development. The current vaccines in development use a myriad of different scientific approaches to attempt to provoke an immune response, including:

•Genetic vaccines that use part of the coronavirus’s genetic code;

•Viral vector vaccines that use a virus to deliver coronavirus genes into cells;

•Protein-based vaccines that use a coronavirus protein or protein fragment to stimulate the immune system; and

•Whole-virus vaccines that use a weakened or inactivated version of the coronavirus.

At least 27 potential vaccines are currently in human clinical trials and in order to accelerate vaccine development, a number of these potential vaccines are in combined Phase I/II trials. Phase I trials typically include a small number of participants to test safety and dosage as well as to confirm that the vaccine stimulates the immune system. Phase II trials involve hundreds of participants split into groups, such as children and the elderly, to determine whether the vaccine acts differently in each subpopulation. Phase III trials involve delivering the vaccine to tens of thousands of people and waiting to see how many become infected, and the severity of symptoms, compared with volunteers who receive a placebo. Regulators in each country will review the trial results to make a determination as to whether the drug or vaccine should be approved. As of July 24, 2020, there are four potential vaccines in Phase III trials.

Regulators around the world are expected to expedite approvals or to allow for emergency use authorizations before issuing formal approvals for vaccines that prove successful in clinical trials. Vaccine candidates that demonstrate significant safety and efficacy in Phase II or Phase III trials may become available as early as year-end 2020 or in early 2021. Furthermore, the U.S. government’s Operation Warp Speed program has announced a handful of company partners to which it will allocate billions of dollars in federal funding to help expedite the development and manufacturing of coronavirus vaccines and treatments.

Shelter-in-place and stay-at-home orders

On March 19, 2020, California became the first state to set mandatory stay-at-home restrictions to help combat the spread of the coronavirus. The order included the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms, conference or convention centers, and other businesses not deemed to support critical infrastructure. Exceptions for essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores, and delivery restaurants, have allowed these services to remain open. Subsequently, almost all states issued similar orders, including New York, Massachusetts, Washington, Maryland, and North Carolina, where our remaining properties outside California are located. Countries around the world also implemented measures to slow the spread of the coronavirus, from national quarantines to school closures or similar types of stay-at-home orders or movement limitations.

Most state orders expired or were rescinded between May and early June 2020, and authorities began reopening businesses, including retail stores, restaurants, bars, salons, houses of worship, entertainment venues such as movie theaters and museums, and manufacturing facilities and offices. Daily new COVID-19 cases in the U.S., which declined to approximately 18,000 new cases by June 9, 2020, from the low- to mid-30,000 daily range in April 2020, began to increase after reopenings commenced across the country. On July 19, 2020, a new daily record of 74,000 new cases was reported, with daily case numbers rising significantly, particularly in South and Southwest states, including Alabama, Arizona, Florida, Mississippi, North Carolina, Texas, Tennessee, and California, all of which reported single-day records for new cases and deaths. As a result of the resurgence of new infections, states have begun to reconsider their reopenings and have warned that new lockdowns may be needed to reverse the increasing trend of infections.

Impact to the global and U.S. economy

As a result of the unprecedented measures taken in the U.S. and around the world, the disruption and impact to the U.S. and global economies and financial markets by the COVID-19 pandemic have been significant. It is feared that this pandemic could trigger, or has already triggered, a period of prolonged global economic slowdown or global recession. The International Monetary Fund (“IMF”) estimated in April 2020 that the global economy could be facing its worst recession since the Great Depression of the 1930s, with a 3% negative growth in 2020 rather than an expansion of 3.3% as it projected in January 2020.

In June 2020, the IMF revised its April forecast downward, projecting global growth to shrink by 4.9% in 2020, or 1.9% below the April 2020 forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast according to the IMF. In 2021, global growth is projected at 5.4%. Overall, this would leave 2021 U.S. gross domestic product some 6.5% lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.

The IMF is currently projecting all advanced economies will contract in 2020, including an 8% contraction in the U.S. Based on the data provided by the U.S. Bureau of Labor Statistics on July 2, 2020, the unemployment rate in the U.S. is up by 7.6% since February 2020 to 11.1%, although down from the 13.3% from the month before. The July 2020 data reported 4.8 million jobs created in June 2020; however, the recent surge in new COVID-19 cases could make these job gains temporary. Stock markets around the globe have rebounded substantially since March 2020; however, since the pandemic was declared, access to capital has become much more challenging for most companies or non-existent for some.

The unprecedented disruption and impact to the U.S. and global economies and financial markets by the COVID-19 pandemic resulted in the U.S. President’s signing into law on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a $2 trillion economic stimulus package. The CARES Act allocated over $140 billion to the U.S. health system to support COVID-19-related manufacturing, production, diagnostics, and treatments, and to accelerate the market entrance of necessary vaccines and cures. The CARES Act also designated $945.4 million specifically to the NIH, which is a tenant of ours in our Maryland market, to combat COVID-19, which includes, but is not limited to, providing support for research, construction, and acquisition of equipment for vaccine and infectious disease research facilities, including the acquisition of real property. In addition, on April 24, 2020, the U.S. President signed the Paycheck Protection Program and Health Care Enhancement Act into law, which provided an additional $484 billion relief package to primarily assist distressed small businesses and to prevent them from shutting their operations and laying off their employees. This package designated $75 billion to hospitals and $25 billion for a new COVID-19 testing program. It is too early to determine if the CARES Act and the $484 billion relief package were effective or sufficient to offset some of the most severe economic effects of the pandemic. Furthermore, the programs initiated under the aforementioned COVID-19 relief and stimulus packages are set to expire in the coming weeks. Unless the government extends the deadlines or introduces new relief measures, the impact of expirations on the U.S. economy could be severe and could lead to further deterioration of economic conditions, higher unemployment rates, and prolonged recession, which in turn could materially affect our (or our tenants’) performance, financial condition, results of operations, and cash flows.

See “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report, for additional discussion of the risks posed by the COVID-19 pandemic, and uncertainties we, our tenants, and the national and global economies face as a result.

Overview

We are a Maryland corporation formed in October 1994 that has elected to be taxed as a REIT for federal income tax purposes. We are anS&P 500^®urban office REIT and the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, technology, and ~~technology~~agtech campuses in AAA innovation cluster locations, with a total market capitalization of ~~$16.1~~$27.7 billion and an asset base in North America of ~~28.6~~43.0 million SF as of ~~September~~June 30, ~~2017.~~2020. The asset base in North America includes ~~20.6~~28.8 million RSF of operating properties ~~including 1.5~~and 2.3 million RSF of Class A properties undergoing construction, 6.6 million RSF of near-term and intermediate-term development and redevelopment ~~of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 8.0~~projects, and 5.3 million SF of future ~~development projects, including 1.1 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.3 million SF of intermediate-term~~ development projects. Founded in 1994, we pioneered this niche and have since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research ~~Triangle Park.~~Triangle. We have a longstanding and proven track record of developing Class A properties clustered in urban life science, technology, and ~~technology~~agtech campuses that provide our 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. Alexandria also provides strategic capital to transformative life science, technology, and agtech companies through our venture capital arm. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

As of ~~September~~June 30, ~~2017:~~2020:

•Investment-grade or publicly traded large cap tenants represented ~~50%~~51% of our total annual rental revenue;

•Approximately ~~97%~~94% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from approximately 3.0% to 3.5%) or indexed based on a consumer price index or other index;

•Approximately 93% 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; and

•Approximately 95% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from 3% to 3.5%) or indexed based on a consumer price index or other index; and

~~Approximately 94%~~92% of our leases (on an RSF basis) provided for the recapture of capital expenditures (such as ~~HVAC~~heating, ventilation, and air conditioning systems maintenance and/or replacement, roof replacement, and parking lot resurfacing) that we believe would typically be borne by the landlord in traditional office leases.

Our primary business objective is to maximize stockholder value by providing our stockholders with the greatest possible total return and long-term asset value based on a multifaceted platform of internal and external growth. A key element of our strategy is our unique focus on Class A properties clustered in urban campuses. These key urban campus locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space. They generally represent highly desirable locations for tenancy by life science, technology, and ~~technology~~agtech entities because of their close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Our strategy also includes drawing upon our deep and broad real estate, life science, technology, and ~~technology~~agtech relationships in order to identify and attract new and leading tenants and to source additional value-creation real estate.

Executive summary

~~“Green Star” designation from the Global Real Estate Sustainability Benchmark (“GRESB”)~~

During the three months ended September 30, 2017, we were awarded a “Green Star” designation by GRESB and recognized as the top-ranked company in the U.S. in the GRESB Health & Well-being Module for our practices promoting the health, safety, and well-being of our tenants, employees, and partners.

~~Increased common stock dividend~~

Common stock dividend for the three months ended September 30, 2017, of $0.86 per common share, up 6 cents, or 8%, over the three months ended September 30, 2016; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

~~Strong internal growth~~

~~Total revenues:~~

~~$285.4 million, up 23.9%, for the three months ended September 30, 2017, compared to $230.4 million for the three months ended September 30, 2016~~

~~$829.3 million, up 23.3%, for the nine months ended September 30, 2017, compared to $672.5 million for the nine months ended September 30, 2016~~

~~Executed key leases during the three months ended September 30, 2017:~~

~~199,846 RSF at our development project at 100 Binney Street in our Cambridge submarket, including 130,803 RSF leased to Facebook, Inc.~~

~~153,203 RSF renewal and expansion at 455 Mission Bay Boulevard South with Nektar Therapeutics in our Mission Bay/SoMa submarket~~

~~84,550 RSF at 10300 Campus Point Drive, in our University Town Center submarket~~

~~•Continued substantial leasing activity and strong rental rate growth, in light of minimal contractual lease expirations for 2017, and a highly leased value-creation pipeline:~~

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

~~Same property net operating income growth:~~

~~2.2% and 7.8% (cash basis) for the three months ended September 30, 2017, compared to the three months ended September 30, 2016~~

~~2.3% and 6.2% (cash basis) for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016~~

~~Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased value-creation pipeline~~

~~Key development projects placed into service during the three months ended September 30, 2017, weighted toward the end of the quarter:~~

341,776 RSF, 100% leased to Bristol-Myers Squibb Company and Facebook, Inc. at 100 Binney Street in our Cambridge submarket; expect delivery of the remaining 91,155 RSF, 100% leased in the first quarter of 2018; improvements in initial stabilized yield and initial stabilized yield (cash basis) of 50 and 40 bps to 8.2% and 7.4%, respectively, primarily driven by 18% cost savings from (i) redesign of space, (ii) competitive bidding and project management, and (iii) lower amount of office/laboratory space and higher office space; and

~~17,620 RSF leased to ClubCorp Holdings, Inc. at 400 Dexter Avenue North in our Lake Union submarket.~~

~~81% leased on 1.5 million RSF development and redevelopment projects undergoing construction.~~

~~Deliveries of new Class A properties drive significant growth in net operating income:~~

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

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).

Completed strategic acquisitions of four development and redevelopment properties during the three months ended September 30, 2017, for an aggregate purchase price of $110.7 million, consisting of: (i) a future development project aggregating 280,000 RSF in our South San Francisco submarket, (ii) two properties aggregating 203,757 RSF, including 59,173 RSF of space undergoing redevelopment in our Route 128 submarket, and (iii) a redevelopment project consisting of 45,039 RSF in our Rockville submarket.

Operating results


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income attributable to Alexandria’s common stockholders – diluted:
In millions	$	226.6	$	76.3	$	244.8	$	200.2
Per share	$	1.82	$	0.68	$	1.99	$	1.80
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions	$	225.0	$	192.7	$	446.4	$	382.5
Per share	$	1.81	$	1.73	$	3.63	$	3.44

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Change 2017 2016 Change
Net income (loss) attributable to Alexandria’s common stockholders – diluted:
In millions $ 51.3
$ 5.5
$ 45.8
N/A
$ 108.6
$ (126.0 ) $ 234.6
N/A
Per share $ 0.55
$ 0.07
$ 0.48
N/A
$ 1.20
$ (1.69 ) $ 2.89
N/A
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions $ 140.8
$ 107.6
$ 33.1
30.8 % $ 407.5
$ 305.8
$ 101.7
33.3 %
Per share $ 1.51
$ 1.39
$ 0.12
8.6 % $ 4.49
$ 4.09
$ 0.40
9.8 %

The operating results shown above include certain items related to corporate-level investing and financing decisions. Refer to the tabular presentation of these items at the beginning of the “Results of ~~Operations”~~operations” section within this Item 2 for additional information.

~~Core operating metrics~~Alexandria and ~~internal growth~~its tenants at the vanguard of advancing solutions for COVID-19

Safe and effective vaccines and therapies, in addition to widespread testing, are desperately needed to combat the global COVID-19 pandemic. Over 80 of our life science tenants are advancing solutions for COVID-19. By maintaining essential business operations across our campuses, Alexandria has enabled several of our life science tenants to continue mission-critical COVID-19-related research and development. Refer to the “Alexandria and its innovative tenants are at the vanguard of the life science ecosystem advancing solutions for COVID-19” section within this Item 2 for additional information.

Strong and flexible balance sheet with significant liquidity

•$4.2 billion of liquidity as of June 30, 2020, pro forma for our $1.1 billion forward equity sales agreements entered into in July 2020.

•Zero debt maturing until 2023.

•9.9 years weighted-average remaining term of debt as of June 30, 2020.

•Investment-grade credit rating, which ranks in the top 10% among all publicly traded REITs, of Baa1/Stable from Moody’s Investors Service and BBB+/Stable from S&P Global Ratings, both as of June 30, 2020.

Continued dividend strategy to share cash flows with stockholders

Common stock dividend declared for the three months ended ~~September~~June 30, ~~2017~~2020, of $1.06 per common share, aggregating $4.12 per common share for the twelve months ended June 30, 2020, up 25 cents, or 6%, over the twelve months ended June 30, 2019. Our FFO payout ratio of 59% for the three months ended June 30, 2020, allows us to share cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

~~Percentage~~A REIT industry-leading, high-quality tenant roster

•51% of annual rental revenue ~~in effect from:~~from investment-grade or publicly traded large cap tenants.

~~Investment-grade tenants: 50%~~

~~Class A properties in AAA locations: 78%~~

~~Occupancy in North America: 96.1%~~

~~Operating margin: 71%~~

~~Adjusted EBITDA margin: 68%~~

•Weighted-average remaining lease term of ~~Top 20 tenants: 13.2~~7.8 years.

Continued strength in collections drives lowest tenant receivables balance since 2012

•As of July 24, 2020, we have collected 99% of July 2020 rents and tenant recoveries.

•We have collected 99.4% of June 2020 rents and tenant recoveries.

•As of June 30, 2020, our tenant receivables balance was $7.2 million, our lowest balance since 2012.

High-quality revenues and cash flows, strong Adjusted EBITDA margin, and operational excellence


Percentage of annual rental revenue in effect from:
Investment-grade or publicly traded large cap tenants	51	%
Class A properties in AAA locations	74	%
Occupancy of operating properties in North America	94.8	%	⁽¹⁾
Operating margin	72	%
Adjusted EBITDA margin	69	%
Weighted-average remaining lease term:
All tenants	7.8		years
Top 20 tenants	11.2		years

(1)Includes 647,771 RSF, or 2.3%, of vacancy in our North America markets, representing lease-up opportunities at properties recently acquired, primarily at our SD Tech by Alexandria campus (joint venture), 601, 611, and 651 Gateway Boulevard (joint venture), and 5505 Morehouse Drive. Excluding these vacancies, occupancy of operating properties in North America was 97.1% as of June 30, 2020. Refer to “Summary of occupancy percentages in North America” within this Item 2 for additional information regarding vacancy from recently acquired properties.

Strong leasing activity during the second quarter of 2020 and continued rental rate growth

•Continued strong leasing activity and rental rate growth in light of modest contractual lease expirations at the beginning of 2020 and a highly leased value-creation pipeline; continued rental rate growth during the six months ended June 30, 2020, over expiring rates on renewed and re-leased space:


	June 30, 2020
	Three Months Ended	Six Months Ended
Total leasing activity – RSF	1,077,510	1,780,865
Leasing of development and redevelopment space – RSF	196,039	210,271
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)	699,130	1,251,152
Rental rate increases	37.2%	41.1%
Rental rate increases (cash basis)	15.0%	17.9%

Guidance for unique and opportunistic value-creation acquisitions and construction

•Our initial 2020 guidance issued on December 3, 2019, included guidance midpoint for our 2020 construction spending and acquisitions of $1.6 billion and $950 million, respectively, and reflected a strong outlook for 2020, including continued strong demand for our value-creation development and redevelopment projects.

•Our guidance issued on April 27, 2020, reduced our 2020 forecasted construction spend, acquisitions, real estate dispositions and partial interest sales, and issuance of common equity. These reductions were deemed necessary while we monitored the impact of COVID-19 on many areas of our business, including the overall macro and capital market environments.

•Our guidance issued on July 27, 2020, was updated to address the continuing tenant demand for our development and redevelopment pipeline in part due to COVID-19 requirements, as well as existing and anticipated attractive acquisition opportunities in our markets, which will be partially funded through forecasted real estate dispositions and partial interest sales. Key updates to our sources and uses include:

•Increased midpoint for our 2020 construction spending guidance range from $960.0 million to $1.35 billion.

•An additional $900 million to $1.3 billion of real estate acquisitions in the second half of 2020, including acquisitions completed in July 2020.

•Increased midpoint of our real estate dispositions and partial interest sales from $50.0 million to $1.25 billion, which is expected to fund a portion of the increase in construction spending and acquisitions in addition to providing significant capital for growth over the next two to three quarters.

•See “Key capital events” below for additional details on our July 2020 forward equity offering.

•Refer to “Projected results” and “Capital resources” within this Item 2 for detailed assumptions for our updated 2020 guidance.

2020 Nareit Gold Investor CARE Award winner

2020 recipient of the Nareit Gold Investor CARE (Communications and Reporting Excellence) Award in the Large Cap Equity REIT category as the best-in-class REIT that delivers transparent, quality, and efficient communications and reporting to the investment community; our fifth Nareit Gold Investor CARE Award over the last six years, and our third consecutive Gold Award.

Continued strong net operating income and internal growth

•Total revenues:

•$437.0 million, up 16.9%, for the three months ended June 30, 2020, compared to $373.9 million for the three months ended June 30, 2019.

•$876.9 million, up 19.7%, for the six months ended June 30, 2020, compared to $732.7 million for the six months ended June 30, 2019.

•Net operating income (cash basis) of $1.1 billion for the three months ended June 30, 2020 annualized, increased by $165.0 million, or 17.6%, compared to the three months ended June 30, 2019 annualized.

•94% of our leases contain contractual annual rent escalations approximating 3.0%.

•Same property net operating income growth:

•1.6% and 4.5% (cash basis) for the six months ended June 30, 2020, over the six months ended June 30, 2019.

•0.6% and 2.5% (cash basis) for the three months ended June 30, 2020, over the three months ended June 30, 2019.

•Includes the effect of temporary reduction in same property occupancy of 80 basis points related to downtime in connection with leases aggregating 152,045 RSF, with 63% already leased for delivery in the third quarter of 2020 at significantly higher rental rates. Excluding the impact of the temporary vacancies, the same property net operating income growth for the three months ended June 30, 2020, would have been 1.6% and 4.2% (cash basis), respectively. We expect occupancy and other contractual rental increases in the second half of 2020 will increase same property NOI and same property NOI (cash basis) to within our guidance range for the year ending December 31, 2020.

•Minimal remaining 2020 contractual lease expirations, aggregating 2.3% of annual rental revenue.

Highly leased value-creation pipeline, including COVID-19-focused R&D space

•Current projects aggregating 3.3 million RSF, including COVID-19-focused R&D spaces, are highly leased at 61% and will generate significant revenues and cash flows.

•As of July 27, 2020, construction activities were in process at all of our active value-creation projects.

•Significant pre-leasing at two new value-creation projects in our Sorrento Mesa submarket:

•Near-term development project at SD Tech by Alexandria, aggregating 176,428 RSF, is 59% pre-leased; and

•Active redevelopment project at 9877 Waples Street, a recently acquired property aggregating 63,774 RSF, is 100% pre-leased.

•Annual net operating income (cash basis), including our share of unconsolidated real estate joint ventures, is expected to increase $29 million upon the burn-off of initial free rent on recently delivered projects.

Completed acquisitions

Refer to the “Acquisitions” subsection of the “Investments in real estate” section within this Item 2 for information on our strategic acquisitions.

Balance sheet management

Key metrics as of June 30, 2020

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%

•$27.7 billion of total market capitalization.

•$20.2 billion of total equity capitalization.

~~Key capital events~~

~~In August 2017, we~~•$4.2 billion of liquidity as of June 30, 2020, pro forma for our $1.1 billion forward equity sales agreements entered into an ATM common stock 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, we had $500.1 million available for future sales of common stock under the ATM program.in July 2020.

~~Corporate social responsibility and industry leadership~~

•

~~48%~~

As of ~~total annual rental revenue is expected from LEED~~^® ~~certified projects upon completion~~June 30, 2020

Goal for Fourth Quarter of ~~13 in-process projects.~~2020, Annualized

During three months ended September 30, 2017, we expanded our support of the U.S. military with the kickoff of the future headquarters of The Honor Foundation in San Diego, in partnership with the Navy SEAL Foundation. We will provide 8,000 RSF of collaborative and innovative space at 11055 Roselle Street located in our Sorrento Valley submarket, where the organization will offer programs and events to help transition Navy SEALs and other U.S. Special Operations personnel back into private-sector jobs and careers.

~~Incremental annual net operating income from development and redevelopment of new Class A properties~~

Quarter Annualized

Trailing 12 Months

~~(1)~~Net debt and preferred stock to Adjusted EBITDA

RSF and percentage leased represent 100% of each property. Incremental annual net operating income represents incremental annual net operating income upon stabilization of our development and redevelopment

5.8x

6.2x

Less than or equal to 5.3x

Fixed-charge coverage ratio

4.2x

Greater than or equal to 4.4x


~~(1)~~	~~Our share of the cost basis associated with unconsolidated square feet is classified in investments in unconsolidated real estate joint ventures in our unaudited consolidated balance sheets.~~


~~(2)~~	~~Refer to footnotes 2 through 4 on the “Summary of Pipeline” section within this Item 2.~~

~~(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,~~2020, consisted of the following (dollars in thousands):


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)

Six months ended June 30, 2020:
275 Grove Street	Route 128/ Greater Boston	1/10/20	1	99%		—		—	—	509,702	8.0%		6.7%			$	226,512
601, 611, and 651 Gateway Boulevard (51% interest in consolidated JV)	South San Francisco/ San Francisco	1/28/20	3	73%	⁽¹⁾	260,000		—	300,010	475,993	⁽²⁾		⁽²⁾				⁽²⁾
3330 and 3412 Hillview Avenue	Greater Stanford/ San Francisco	2/5/20	2	100%		—		—	—	106,316	7.6%		4.2%				105,000
987 and 1075 Commercial Street	Greater Stanford/ San Francisco	4/14/20	2	N/A		700,000	⁽³⁾	—	26,738	—	⁽⁴⁾		⁽⁴⁾				113,250
9808 and 9868 Scranton Road⁽⁵⁾	Sorrento Mesa/ San Diego	1/10/20	2	88%		—		—	—	219,628	7.3%		6.8%				102,250
4555 Executive Drive	University Town Center/San Diego	6/2/20	1	100%		200,000	⁽³⁾	—	41,475	—	⁽⁴⁾		⁽⁴⁾				43,000
Other	Various		4	51%		579,825		63,774	71,021	180,960	N/A		N/A				109,817
			15	80%		1,739,825		63,774	439,244	1,492,599				$	699,829

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

(1)Includes 201,570 RSF of vacancy as of June 30, 2020. Refer to the “Summary of occupancy percentages in North America” section earlier within this Item 2 for additional details.

(2)Refer to the Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional details on this transaction.

(3)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation. We intend 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 footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(4)We expect to provide total estimated costs ~~at completion~~ and related yields offor development and redevelopment projects in the ~~future.~~future, subsequent to the commencement of construction.


~~(1)~~	Technology office building, subject to a 51-year ground lease, located in Stanford Research Park, a collaborative business community that supports innovative companies in their research and 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).

~~(2)~~

Acquisition of the remaining 49% interest in our unconsolidated real estate joint venture with Uber Technologies, Inc. (“Uber”) was completed in November 2016. A portion of the consideration 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. We expect the second and third installments to be paid during the three months ending December 31, 2017, and March 31, 2018, respectively.

~~Real estate asset sales~~

~~Our~~(5)In April 2020, we completed the sale of a partial interest in properties at 9808 and 9868 Scranton Road to the existing SD Tech by Alexandria consolidated real estate ~~asset sales completed during~~joint venture, of which we own 50%. We received proceeds of $51.1 million for the ~~nine months ended September 30, 2017, consisted~~50% interest in the properties that our joint venture partner acquired through the joint venture. We continue to control and consolidate this joint venture; therefore, we accounted for the sale as an equity transaction with no gain or loss recognized in earnings.

Sustainability

(1)Relative to a 2015 baseline for buildings in operation that Alexandria directly manages.

(2)Relative to a 2015 baseline for buildings in operation that Alexandria indirectly and directly manages.

(3)Reflects sum of ~~the following (dollars~~annual like-for-like progress from 2015 to 2019.

(4)Reflects progress for all buildings in ~~thousands):~~operation in 2019 that Alexandria indirectly and directly manages.

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


~~(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.~~

~~(2)~~

In May 2017, we completed the sale of a partial interest 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 for the development 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.

~~(3)~~

Represents the sale of a condominium interest for 49% of the building RSF, or 203,090 RSF, 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.

(1)Projects targeting Fitwel or WELL 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: current projects



~~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~~



~~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.~~

~~RSF represents the cumulative RSF that have been placed into service.~~

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


~~(1)~~	~~Upon stabilization of the property.~~

~~(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 Class A properties: 2017 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~~The Arsenal on the Charles

945 Market Street

~~266 and 275 Second Avenue~~

~~1655 and 1715 Third Street~~

~~213 East Grand Avenue~~

~~279 East Grand Avenue~~201 Haskins Way

Greater Boston/~~Cambridge~~
Cambridge/Inner Suburbs

~~Greater Boston/Route 128~~

San Francisco/Mission Bay/SoMa

San Francisco/South San Francisco

~~San Francisco/South San Francisco~~

~~164,000 SF~~205,690 RSF

~~59,173~~255,765 RSF

~~580,000 SF~~

~~300,930~~315,000 RSF

~~199,000 SF~~

~~Multi-Tenant~~

~~Uber Technologies, Inc.~~

~~Merck & Co., Inc.~~

~~Multi-Tenant~~

~~681 Gateway Boulevard~~Alexandria District for
Science and Technology

~~9625 Towne Centre~~3160 Porter Drive

~~1818 Fairview Avenue East~~

~~9900 Medical~~

Alexandria Center ~~Drive~~

~~5 Laboratory Drive~~^® –

Long Island City

San Francisco/~~South~~ Greater Stanford

San ~~Francisco~~Francisco/Greater Stanford

~~San Diego/University Town Center~~

~~Seattle/Lake Union~~

~~Maryland/Rockville~~

~~Research Triangle Park/RTP~~New York City/New York City

~~126,971~~526,178 RSF

~~163,648~~92,147 RSF

~~205,000~~140,098 RSF

~~45,039 RSF~~

~~175,000 RSF~~

~~Marketing~~

~~Takeda Pharmaceuticals~~
~~Company Ltd.~~

~~Multi-Tenant~~

~~Development and redevelopment of new~~

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

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

properties: current projects (continued)

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

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 occupancy dates are subject to leasing and/or market conditions. 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.~~

~~(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 to be in the range from $35 million to $40 million, to be funded at closing of the joint venture in 2018. The joint venture will acquire land with completed below-grade improvements to the building foundation and parking garage and will construct two buildings aggregating 580,000 RSF, which will be 100% leased to Uber upon completion.


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


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

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

~~325 Binney~~9880 Campus Point Drive and
4150 Campus Point Court

9877 Waples Street

~~201 Haskins Way~~

~~960 Industrial Road~~

~~825 and 835 Industrial Road~~

~~Alexandria Center~~^®~~for Life Science~~

1165 Eastlake Avenue East

~~Greater Boston/Cambridge~~San Diego/University Town Center

San ~~Francisco/South San Francisco~~Diego/Sorrento Mesa

~~San Francisco/Greater Stanford~~Seattle/Lake Union

199,621 RSF

~~San Francisco/Greater Stanford~~63,774 RSF

~~New York City/Manhattan~~100,086 RSF

~~5200 Illumina Way~~

~~Campus Point Drive~~

~~1150 Eastlake Avenue East~~

~~9800~~9804 Medical Center Drive

9950 Medical Center Drive

Alexandria Center^® for AgTech

~~San Diego/University Town Center~~Maryland/Rockville

~~Seattle/Lake Union~~Research Triangle/Research Triangle

176,832 RSF

~~Maryland/Rockville~~84,264 RSF

160,000 RSF

New Class A development and redevelopment properties: current projects (continued)

The following ~~table summarizes the key information for~~tables set forth a summary of our ~~near-term~~new Class A development ~~projects in North America~~and redevelopment properties under construction as of ~~September~~June 30, ~~2017~~2020 (dollars in ~~thousands, except per SF amounts)~~thousands):


Property/Market/Submarket			Square Footage											Percentage
		Dev/Redev		In Service		CIP		Total			Leased				Leased/Negotiating				Initial Occupancy⁽¹⁾
Developments and redevelopments under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner Suburbs	Redev		630,598	⁽²⁾	205,690		836,288		75	%		89	%				2021
945 Market Street/San Francisco/Mission Bay/SoMa	Redev		—		255,765		255,765		—			—					2020	⁽³⁾
201 Haskins Way/San Francisco/South San Francisco	Dev		—		315,000		315,000		33			33				4Q20-1Q21
Alexandria District for Science and Technology/San Francisco/Greater Stanford	Dev		—		526,178		526,178		59			59				4Q20-1Q21
3160 Porter Drive/San Francisco/Greater Stanford	Redev		—		92,147		92,147		20			20					1H21
Alexandria Center^® – Long Island City/New York City/New York City	Redev		36,661		140,098		176,759		21			28				4Q20-1Q21
9880 Campus Point Drive and 4150 Campus Point Court/San Diego/ University Town Center⁽⁴⁾	Dev		69,481		199,621		269,102		89			91					4Q19
9877 Waples Street/Sorrento Mesa/San Diego	Redev		—		63,774		63,774		100			100					2021
1165 Eastlake Avenue East/Seattle/Lake Union	Dev		—		100,086		100,086		100			100				4Q20-1Q21
9804 Medical Center Drive/Maryland/Rockville	Dev		—		176,832		176,832		100			100					2H20
9950 Medical Center Drive/Maryland/Rockville	Dev		—		84,264		84,264		100			100					2H20
704 Quince Orchard Road/Maryland/Gaithersburg⁽⁵⁾	Redev		59,034		20,998		80,032		90			90					4Q18
Alexandria Center^® for AgTech/Research Triangle/Research Triangle⁽⁶⁾	Dev		180,400		160,000		340,400		50			50					2021
Total			976,174		2,340,453		3,316,627		61	%		65	%

(1)Initial occupancy dates are subject to leasing and/or market conditions. Construction disruptions resulting from COVID-19 and observance of social distancing measures may further impact construction and occupancy forecasts and will continue to be monitored closely. 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)We expect to redevelop an additional 154,855 RSF of an office space (acquired lease with space in operating RSF) into office/laboratory space upon expiration of the existing leases in the third quarter of 2020 and the first quarter of 2021.

(3)Various options are under evaluation for this property, including ongoing discussion with a company interested in this property. We expect to update the initial occupancy date later this year.

(4)Refer to footnote 2 on the next page.

(5)704 Quince Orchard Road is an unconsolidated real estate joint venture. RSF represents 100%.

(6)The new strategic collaborative agtech campus consists of Phase I at 5 Laboratory Drive, including campus amenities, and Phase II at 9 Laboratory Drive.

New Class A development and redevelopment properties: current projects (continued)

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


	Our Ownership Interest											Unlevered Yields
Property/Market/Submarket					In Service		CIP		Cost to Complete		Total at Completion				Initial Stabilized				Initial Stabilized (Cash Basis)

Developments and redevelopments under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner Suburbs	100	%	$	428,539	$	109,107	TBD
945 Market Street/San Francisco/Mission Bay/SoMa	99.5	%	—		197,330
201 Haskins Way/San Francisco/South San Francisco	100	%	—		211,100		$	102,900	$	314,000		6.6	%			6.5	%
Alexandria District for Science and Technology/San Francisco/Greater Stanford	100	%	—		368,998		$	220,002	$	589,000		6.4	%			6.1	%
3160 Porter Drive/San Francisco/Greater Stanford	100	%	—		39,264		TBD
Alexandria Center^® – Long Island City/New York City/New York City	100	%	16,549		98,263		$	69,488	$	184,300		5.5	%			5.6	%
9880 Campus Point Drive and 4150 Campus Point Court/San Diego/ University Town Center⁽¹⁾	⁽¹⁾		78,429		58,269		$	118,302	$	255,000		6.3	%	⁽²⁾		6.4	%	⁽²⁾
9877 Waples Street/Sorrento Mesa/San Diego	100	%	—		17,064		$	12,136	$	29,200		8.6	%			7.9	%
1165 Eastlake Avenue East/Seattle/Lake Union	100	%	—		75,486		$	62,514	$	138,000		6.5	%	⁽³⁾		6.3	%	⁽³⁾
9804 Medical Center Drive/Maryland/Rockville	100	%	—		55,498		$	39,902	$	95,400		7.7	%			7.2	%
9950 Medical Center Drive/Maryland/Rockville	100	%	—		34,340		$	19,960	$	54,300		7.3	%			6.8	%
Alexandria Center^® for AgTech/Research Triangle/Research Triangle	100	%	86,015		26,247		TBD
Consolidated projects			609,532		1,290,966
704 Quince Orchard Road/Maryland/Gaithersburg⁽⁴⁾	56.8	%	8,599		2,825		$	1,876	$	13,300		8.9	%			8.8	%
Total			$	618,131	$	1,293,791


~~(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.~~

(1)Refer to the “Consolidated and unconsolidated real estate joint ventures” section under this Item 2 for additional information.

(2)Represents a two-phase development project as follows:

•Initial phase represents 9880 Campus Point Drive, a 98,000 RSF project to develop Alexandria 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 June 30, 2020, 199,621 RSF and 69,481 RSF are classified in construction in process and in-service, respectively. The R&D building located at 9880 Campus Point Drive was demolished and as of June 30, 2020, continues to be included in our same property performance results. Refer to the “Same properties” subsection of the “Results of operations” section under this Item 2 for additional information.

•Subsequent phase represents 4150 Campus Point Court, a 171,102 RSF, 100% leased project undergoing pre-construction, and we expect to commence vertical construction in 1Q21, with occupancy expected in 2022.

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

(3)Unlevered yields represent anticipated aggregate returns for 1165 Eastlake Avenue, an amenity-rich research headquarters for Adaptive Biotechnologies Corporation, and 1208 Eastlake Avenue, an adjacent multi-tenant office/laboratory building.

(4)704 Quince Orchard Road is an unconsolidated real estate joint venture. Cost and yield amounts represent our share.


~~(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~~

New Class A development and redevelopment properties: 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~~2020 (dollars in thousands):


Property/Submarket	Our Ownership Interest				Book Value		Square Footage
										Development and Redevelopment						Total
										Under Construction		Near Term		Intermediate Term	Future

Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs	100	%	$	126,156		205,690		—		—		200,000		405,690
15 Necco Street/Seaport Innovation District	98.2	%	179,347			—		293,000		—		—		293,000
215 Presidential Way/Route 128	100	%	6,613			—		112,000		—		—		112,000
325 Binney Street/Cambridge	100	%	116,712			—		—		402,000		—		402,000
99 A Street/Seaport Innovation District	95.9	%	42,959			—		—		235,000		—		235,000
10 Necco Street/Seaport Innovation District	100	%	88,365			—		—		175,000		—		175,000
Alexandria Technology Square^®/Cambridge	100	%	7,881			—		—		—		100,000		100,000
100 Tech Drive/Route 128	100	%	—			—		—		—		300,000		300,000
231 Second Avenue/Route 128	100	%	1,093			—		—		—		32,000		32,000
Other value-creation projects	100	%	9,587			—		—		—		16,955		16,955
			578,713			205,690		405,000		812,000		648,955		2,071,645
San Francisco
201 Haskins Way/South San Francisco	100	%	211,100			315,000		—		—		—		315,000
Alexandria District for Science and Technology/Greater Stanford	100	%	611,255			526,178		—		587,000	⁽¹⁾	700,000	⁽¹⁾	1,813,178
945 Market Street/Mission Bay/SoMa	99.5	%	197,330			255,765		—		—		—		255,765
3160 Porter Drive/Greater Stanford	100	%	39,264			92,147		—		—		—		92,147
88 Bluxome Street/Mission Bay/SoMa	100	%	256,334			—		1,070,925	⁽²⁾	—		—		1,070,925
Alexandria Technology Center^® – Gateway/South San Francisco	45.0	%	44,025			—		217,000		300,010	⁽¹⁾	291,000		808,010
505 Brannan Street, Phase II/Mission Bay/SoMa	99.7	%	18,770			—		—		165,000		—		165,000
3825 and 3875 Fabian Way/Greater Stanford	100	%	—			—		—		250,000	⁽¹⁾	228,000	⁽¹⁾	478,000
East Grand Avenue/South San Francisco	100	%	6,112			—		—		—		90,000		90,000
Other value-creation projects	100	%	44,096			—		—		191,000		25,000		216,000
			$	1,428,286		1,189,090		1,287,925		1,493,010		1,334,000		5,304,025

(1)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have 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 footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information. (2)Includes 488,899 RSF pre-leased to Pinterest, Inc., for which we expect demolition of the existing building to commence in January 2021.

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.

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


Property/Submarket	Our Ownership Interest				Book Value		Square Footage
										Development and Redevelopment						Total
										Under Construction		Near Term		Intermediate Term	Future

New York City
Alexandria Center^® – Long Island City/New York City	100	%	$	98,263		140,098		—		—		—		140,098
Alexandria Center^® for Life Science – New York City/New York City	100	%	42,157			—		—		550,000	⁽¹⁾	—		550,000
47-50 30th Street/New York City	100	%	28,497			—		—		135,938		—		135,938
219 East 42nd Street/New York City	100	%	—			—		—		—		579,947	⁽²⁾	579,947
			168,917			140,098		—		685,938		579,947		1,405,983
San Diego
Campus Pointe by Alexandria/University Town Center	⁽³⁾		111,126			199,621		—		390,164	⁽⁴⁾	359,281	⁽⁴⁾	949,066
9877 Waples Street/Sorrento Mesa	100	%	17,064			63,774		—		—		—		63,774
3115 Merryfield Row/Torrey Pines	100	%	49,409			—		125,000		—		—		125,000
SD Tech by Alexandria/Sorrento Mesa	⁽³⁾		47,444			—		176,428	⁽⁵⁾	190,074		388,000		754,502
10931 and 10933 Torrey Pines Road/Torrey Pines	100	%	—			—		—		242,000	⁽⁴⁾	—		242,000
University District/University Town Center	100	%	51,559			—		—		600,000	⁽⁴⁾⁽⁶⁾	—		600,000
Townsgate by Alexandria/Del Mar Heights	100	%	21,735			—		—		185,000		—		185,000
5200 Illumina Way/University Town Center	51	%	12,302			—		—		—		451,832		451,832
Vista Wateridge/Sorrento Mesa	100	%	4,175			—		—		—		163,000		163,000
4045 and 4075 Sorrento Valley Boulevard/Sorrento Valley	100	%	7,668			—		—		—		149,000	⁽⁴⁾	149,000
Other value-creation projects	100	%	—			—		—		—		50,000		50,000
			322,482			263,395		301,428		1,607,238		1,561,113		3,733,174
Seattle
1165 Eastlake Avenue East/Lake Union	100	%	75,486			100,086		—		—		—		100,086
1150 Eastlake Avenue East/Lake Union	100	%	41,687			—		—		260,000		—		260,000
701 Dexter Avenue North/Lake Union	100	%	47,081			—		—		217,000		—		217,000
601 Dexter Avenue North/Lake Union	100	%	33,787			—		—		—		188,400	⁽⁴⁾	188,400
Other value-creation projects	100	%	53,877			—		—		—		579,825		579,825
			$	251,918		100,086		—		477,000		768,225		1,345,311

(1)We have been negotiating a long-term ground lease for the future site of a new building approximating 550,000 RSF. Beginning March 2020, due to the impacts of COVID-19 on New York City, the City has been using the site as a temporary morgue. The use of this site by the City has resulted in delays to deadlines for both ground lease negotiations and ultimately the timing to commence and complete key milestone construction dates. (2)Includes 349,947 RSF in operation with an opportunity either to 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 approximately five years. (3)Refer to the “Consolidated and unconsolidated real estate joint ventures” section within this Item 2 for additional information on our ownership interest. (4)Represents total square footage upon completion of development of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have inherent future development opportunities. We intend 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 footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information. (5)During the three months ended June 30, 2020, we pre-leased 59% of this project and expect to commence construction over the next six to eight months. (6)Includes our recently acquired project at 4555 Executive Drive and 9363 and 9393 Towne Centre Drive in our University Town Center submarket, which are currently under evaluation for development, subject to future market conditions.

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
									Development and Redevelopment						Total
									Under Construction	Near Term	Intermediate Term			Future

Maryland
704 Quince Orchard Road/Gaithersburg	56.8	%	$	—	⁽¹⁾	20,998		—	—	—	20,998
9804 and 9800 Medical Center Drive/Rockville	100.0	%	56,905			176,832		—	—	64,000	240,832
9950 Medical Center Drive/Rockville	100.0	%	34,340			84,264		—	—	—	84,264
14200 Shady Grove Road/Rockville	100.0	%	27,285			—		—	290,000	145,000	435,000
			118,530			282,094		—	290,000	209,000	781,094	��
Research Triangle
Alexandria Center^® for AgTech, Phase II/Research Triangle	100.0	%	26,247			160,000		—	—	—	160,000
8 Davis Drive/Research Triangle	100.0	%	15,985			—		150,000	70,000	—	220,000
6 Davis Drive/Research Triangle	100.0	%	15,761			—		—	—	800,000	800,000
Other value-creation projects	100.0	%	4,185			—		—	—	76,262	76,262
			62,178			160,000		150,000	70,000	876,262	1,256,262
Other value-creation projects	100.0	%	3,842			—		—	—	146,800	146,800
Total			2,934,866			2,340,453		2,144,353	5,435,186	6,124,302	16,044,294		⁽²⁾

Key pending acquisition
Mercer Mega Block/Lake Union	⁽³⁾		⁽³⁾			—		—	—	800,000	800,000
			—			—		—	—	800,000	800,000
			$	2,934,866		2,340,453		2,144,353	5,435,186	6,924,302	16,844,294


~~(1)~~	~~Total pipeline SF represents operating RSF plus incremental SF targeted for intermediate-term and future development.~~

(1)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.

(2)Total square footage includes 1,821,610 RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

(3)Refer to the “Acquisitions” subsection of this “Investments in real estate” section within this Item 2 for additional information.

Summary of capital expenditures

Our construction spending for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, consisted of the following (in thousands):


Construction Spending	Six Months Ended June 30, 2020
Additions to real estate – consolidated projects	$	725,742
Investments in unconsolidated real estate joint ventures	2,861
Contributions from noncontrolling interests	(5,704)
Construction spending (cash basis)	722,899
Change in accrued construction	(56,497)
Construction spending for the six months ended June 30, 2020	666,402
Projected construction spending for the six months ending December 31, 2020	683,598
Guidance midpoint	$	1,350,000

Nine Months Ended
Construction Spending September 30, 2017
Additions to real estate –consolidated projects
$ 660,877

Investments in unconsolidated real estate joint ventures 248

Construction spending (cash basis)⁽¹⁾
661,125

Decrease in accrued construction (38,767 )
Construction spending $ 622,358

The following table summarizes the total projected construction spending for the year ending December 31, ~~2017,~~2020, which includes interest, property taxes, insurance, payroll, and other indirect project costs (in thousands):

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)~~Projected Construction Spending

~~Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.~~

Year Ending December 31, 2020

~~(2)~~Development, redevelopment, and pre-construction projects

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⁾
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

$			1,170,000
~~(1)~~Contributions from noncontrolling interests (consolidated real estate joint ventures)			~~Excludes amounts that are recoverable from tenants, revenue-enhancing, or related to properties that have undergone redevelopment.~~

(20,000)

~~(2)~~Revenue-enhancing and repositioning capital expenditures

~~Represents the average of the five years ended December 31, 2016, and the nine months ended September 30, 2017.~~

	144,000
~~(3)~~Non-revenue-enhancing capital expenditures	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).		56,000
Guidance midpoint		$	1,350,000

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, 2019, 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, gains or losses on early termination of interest rate hedge agreements, 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~~investments when ~~its~~their fair ~~value declines~~values decline below ~~its~~their respective carrying ~~value~~values 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) are~~for the three and six months ended June 30, 2020 and 2019, were 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


	Three Months Ended June 30,															Six Months Ended June 30,
	2020		2019		2020		2019		2020			2019		2020		2019
(In millions, except per share amounts)	Amount						Per Share – Diluted							Amount				Per Share – Diluted
Unrealized gains on non-real estate investments⁽¹⁾	$	171.7	$	11.1	$	1.38	$	0.10	$	154.5		$	83.3	$	1.25	$	0.75
Impairment of real estate⁽²⁾	(13.2)		—		(0.11)		—		(22.9)		⁽³⁾	—		(0.18)		—
Impairment of non-real estate investments⁽¹⁾	(4.7)		—		(0.04)		—		(24.5)			—		(0.20)		—
Loss on early extinguishment of debt	—		—		—		—		—			(7.4)		—		(0.07)
Preferred stock redemption charge	—		—		—		—		—			(2.6)		—		(0.02)
Total	$	153.8	$	11.1	$	1.23	$	0.10	$	107.1		$	73.3	$	0.87	$	0.66


~~(1)~~	~~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.~~


~~(2)~~	~~Refer to Note 3 – “Investments in Real Estate” 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 – “Stockholders’ Equity” to our unaudited consolidated financial statements under Item 1 of this report for more information.~~

(1)Refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for more information.

(2)Refer to the section titled “Sales 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 detail.

(3)Amount includes $7.6 million impairment of our investment in a recently developed retail property held by our unconsolidated real estate joint venture. This impairment was recognized during the three months ended March 31, 2020, and was classified in equity in earnings of unconsolidated real estate joint ventures within our consolidated statements of operations. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional detail.

Same ~~Properties~~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”~~property comparisons” in the “Non-GAAP ~~Measures~~measures and ~~Definitions”~~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:~~2020:


	September 30, 2017			June 30, 2020
	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%	Percentage change in net operating income over comparable period from prior year	0.6%	⁽¹⁾	1.6%
Percentage change in net operating income (cash basis) over comparable period from prior year	7.8%	6.2%	Percentage change in net operating income (cash basis) over comparable period from prior year	2.5%	⁽¹⁾	4.5%
Operating margin	69%	70%	Operating margin	73%		73%
Number of Same Properties	169	166	Number of Same Properties	228		213
RSF	15,182,829	14,419,701	RSF	21,779,066		21,191,416
Occupancy – current-period average	95.9%	96.0%	Occupancy – current-period average	96.3%		96.6%
Occupancy – same-period prior-year average	96.9%	97.2%	Occupancy – same-period prior-year average	97.1%		97.1%

(1)Includes the effect of temporary reduction in same property occupancy of 80 basis points related to downtime in connection with leases aggregating 152,045 RSF, with 63% already leased for delivery in the third quarter of 2020 at significantly higher rental rates. Excluding the impact of the temporary vacancies, the same property net operating income growth for the three months ended June 30, 2020, would have been 1.6% and 4.2% (cash basis), respectively. We expect occupancy and other contractual rental increases in the second half of 2020 will increase same property NOI and same property NOI (cash basis) to within our guidance range for the year ending December 31, 2020.

The following table reconciles the number of ~~Same Properties~~same properties to total properties for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:



Development – under construction		Properties
9804 Medical Center Drive		1
~~505 Brannan Street~~9950 Medical Center Drive		1
~~510 Townsend Street~~Alexandria District for Science and Technology		12
~~ARE Spectrum~~201 Haskins Way		31
~~213~~1165 Eastlake Avenue East ~~Grand Avenue~~		1
~~100 Binney Street~~4150 Campus Point Court		1
~~400 Dexter Avenue North~~ Alexandria Center^® for AgTech, Phase II		1
		8
Development – placed into service after January 1, ~~2016~~2019		Properties
~~50 and 60~~399 Binney Street		21
~~430~~279 East ~~29th Street~~Grand Avenue		1
~~5200 Illumina Way, Building 6~~188 East Blaine Street		1
~~4796 Executive Drive~~		13
~~360 Longwood Avenue (unconsolidated real estate joint venture)~~	1
~~1455 and 1515 Third Street~~	2
	8
Redevelopment – under construction		Properties
~~9625 Towne Centre~~ Alexandria Center^® – Long Island City		1
945 Market Street		1
3160 Porter Drive		1
The Arsenal on the Charles		5 ~~Laboratory Drive~~	1
~~9900 Medical Center Drive~~9877 Waples Street		1
~~266 and 275 Second Avenue~~	2
	5


						9
Redevelopment – placed into service after January 1, ~~2016~~2019						Properties
~~10151 Barnes Canyon Road~~Alexandria PARC						14
~~11 Hurley Street~~681 and 685 Gateway Boulevard						12
~~10290 Campus Point Drive~~266 and 275 Second Avenue						12
Alexandria Center^® for AgTech, Phase I						31
						9


Acquisitions after January 1, ~~2016~~2019	Properties
~~Torrey Ridge~~25, 35, and 45 West Watkins Mill Road	3
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~~4224/4242 Campus Point Court and 10210 Campus Point Drive	3
3825 and 3875 Fabian Way	12
SD Tech by Alexandria	1611
The Arsenal on the Charles	6
275 Grove Street	1
601, 611, and 651 Gateway Boulevard	3
3330 and 3412 Hillview Avenue	2
9605 Medical Center Drive	1
220 2nd Avenue South	1
987 and 1075 Commercial Street	2
4555 Executive Drive	1
Other	8
	53

Unconsolidated real estate JVs	6
Properties held for sale	3
Total properties excluded from Same Properties	4091
Same Properties	~~166~~213	⁽¹⁾
Total properties in North America as of ~~September~~June 30, ~~2017~~2020	~~206~~304

(1)Includes 9880 Campus Point Drive and 3545 Cray Court. The 9880 Campus Point Drive building was occupied through January 2018 and is currently in active development, and 3545 Cray Court is currently undergoing renovations.

Comparison of results for the three months ended ~~September~~June 30, ~~2017,~~2020, to the three months ended ~~September~~June 30, ~~2016~~2019

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,~~2020, compared to the three months ended ~~September~~June 30, ~~2016. For a reconciliation~~2019. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for definitions of ~~net~~“Tenant recoveries” and “Net operating ~~income~~income” and their reconciliations from ~~net income,~~ the most directly comparable financial ~~measure~~measures presented in accordance with GAAP, ~~refer~~income from rentals and net income (loss), respectively.

See additional discussion related to the ~~“Non-GAAP Measures~~COVID-19 pandemic and ~~Definitions” section~~its impact to us under “The COVID-19 pandemic” within this Item 2. In addition, refer to “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q for a discussion about risks that COVID-19 directly or indirectly may pose to our business.


	Three Months Ended June 30,
(Dollars in thousands)	2020		2019		$ Change		% Change
Income from rentals:
Same Properties	$	272,951	$	273,543	$	(592)	(0.2	%)
Non-Same Properties	68,604		16,082		52,522		326.6
Rental revenues	341,555		289,625		51,930		17.9

Same Properties	81,618		79,637		1,981		2.5
Non-Same Properties	12,683		2,356		10,327		438.3
Tenant recoveries	94,301		81,993		12,308		15.0

Income from rentals	435,856		371,618		64,238		17.3

Same Properties	32		93		(61)		(65.6)
Non-Same Properties	1,068		2,145		(1,077)		(50.2)
Other income	1,100		2,238		(1,138)		(50.8)

Same Properties	354,601		353,273		1,328		0.4
Non-Same Properties	82,355		20,583		61,772		300.1
Total revenues	436,956		373,856		63,100		16.9

Same Properties	94,006		94,140		(134)		(0.1)
Non-Same Properties	29,905		11,549		18,356		158.9
Rental operations	123,911		105,689		18,222		17.2

Same Properties	260,595		259,133		1,462		0.6
Non-Same Properties	52,450		9,034		43,416		480.6
Net operating income	$	313,045	$	268,167	$	44,878	16.7	%

Net operating income – Same Properties	$	260,595	$	259,133	$	1,462	0.6	%
Straight-line rent revenue	(18,873)		(22,441)		3,568		(15.9)
Amortization of acquired below-market leases	(4,637)		(5,292)		655		(12.4)
Net operating income – Same Properties (cash basis)	$	237,085	$	231,400	$	5,685	2.5	%

Three Months Ended September 30,
(Dollars in thousands)

2017 2016 $ Change % Change
Same Properties $ 163,817
$ 159,424
$ 4,393
2.8 %
Non-Same Properties 52,204
7,167
45,037
628.4

Total rental 216,021
166,591
49,430
29.7

Same Properties 58,117
56,858
1,259
2.2

Non-Same Properties 8,941
1,823
7,118
390.5

Total tenant recoveries 67,058
58,681
8,377
14.3

Same Properties 120
16
104
650.0

Non-Same Properties 2,171
5,091
(2,920 ) (57.4 )
Total other income 2,291
5,107
(2,816 ) (55.1 )

Same Properties 222,054
216,298
5,756
2.7

Non-Same Properties 63,316
14,081
49,235
349.7

Total revenues 285,370
230,379
54,991
23.9

Same Properties 68,107
65,674
2,433
3.7

Non-Same Properties 15,362
6,328
9,034
142.8

Total rental operations 83,469
72,002
11,467
15.9

Same Properties 153,947
150,624
3,323
2.2

Non-Same Properties 47,954
7,753
40,201
518.5

Net operating income $ 201,901
$ 158,377
$ 43,524
27.5 %

Net operating income – Same Properties $ 153,947
$ 150,624
$ 3,323
2.2 %
Straight-line rent revenue and amortization of acquired below-market leases (5,744 ) (13,105 ) 7,361
(56.2 )
Net operating income – Same Properties (cash basis) $ 148,203
$ 137,519
$ 10,684
7.8 %
Income from rentals

Total income from rentals for the three months ended June 30, 2020, increased by $64.2 million, or 17.3%, to $435.9 million, compared to $371.6 million for the three months ended June 30, 2019, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Rental revenues

Total rental revenues for the three months ended ~~September~~June 30, ~~2017,~~2020, increased by ~~$49.4~~$51.9 million, or ~~29.7%~~17.9%, to ~~$216.0~~$341.6 million, compared to ~~$166.6~~$289.6 million for the three months ended ~~September~~June 30, ~~2016.~~2019. The increase was primarily due to an increase in rental revenues from our Non-Same Properties ~~totaling $45.0~~aggregating $52.5 million primarily related to ~~1,592,628~~455,903 RSF of development and redevelopment projects placed into service subsequent to ~~July~~April 1, ~~2016,~~2019, and 1642 operating properties ~~totaling 1,468,708~~aggregating 3.8 million RSF ~~acquired.~~acquired subsequent to April 1, 2019.

Rental revenues from our Same Properties for the three months ended ~~September~~June 30, ~~2017, increased~~2020, decreased by ~~$4.4~~$0.6 million, or ~~2.8%~~0.2%, to ~~$163.8~~$273.0 million, compared to ~~$159.4~~$273.5 million for the three months ended ~~September~~June 30, ~~2016.~~2019. The decrease was primarily due to a temporary reduction in same property occupancy of 80 basis points related to downtime in connection with leases that will begin occupancy during the second half of 2020 at significantly higher rental rates. The decrease in rental revenues from Same Properties was also due to the effect of reduced revenues from our transient parking, retail tenants, and amenities, some of which were temporarily closed as a result of shelter-in-place orders during the three months ended June 30, 2020. The decrease was partially offset by rental rate increases on lease renewals and re-leasing of space since April 1, 2019.

Tenant recoveries

Tenant recoveries for the three months ended June 30, 2020, increased by $12.3 million, or 15.0%, to $94.3 million, compared to $82.0 million for the three months ended June 30, 2019. This increase was primarily due to an increase from our Non-Same Properties as described above.

Same Properties’ tenant recoveries for the three months ended June 30, 2020, increased by $2.0 million, or 2.5%, primarily due to an increase in recoverable property tax expense resulting from higher assessed values of our properties during the three months ended June 30, 2020. As of June 30, 2020, 93% 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, 2020 and 2019, was $1.1 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, 2020, increased by $18.2 million, or 17.2%, to $123.9 million, compared to $105.7 million for the three months ended June 30, 2019. Approximately $18.4 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 placed into service and acquired properties as discussed above under “Income from rentals.”

Same Properties’ rental operating expenses decreased by $0.1 million, or 0.1%, to $94.0 million during the three months ended June 30, 2020, compared to $94.1 million for the three months ended June 30, 2019. The decrease was primarily due to reduced operating expenses from retail tenants and amenities, some of which were temporarily closed as a result of COVID-19 shelter-in-place orders during the three months ended June 30, 2020. The decrease in expenses related to COVID-19 was partially offset by an increase in recoverable property tax expense resulting from higher assessed values of our properties during the three months ended June 30, 2020.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2020, increased by $5.3 million, or 20.2%, to $31.8 million, compared to $26.4 million for the three months ended June 30, 2019. The increase was primarily due to 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, 2019, as discussed under Income from rentals” above. As a percentage of net operating income, our general and administrative expenses for the trailing twelve months ended June 30, 2020 and 2019, were 10.3% and 9.5%, respectively.

Interest expense

Interest expense for the three months ended June 30, 2020 and 2019, consisted of the following (dollars in thousands):


	Three Months Ended June 30,
Component	2020			2019			Change
Interest incurred	$	75,807		$	64,553		$	11,254
Capitalized interest	(30,793)			(21,674)			(9,119)
Interest expense	$	45,014		$	42,879		$	2,135

Average debt balance outstanding⁽¹⁾	$	7,461,439		$	6,129,748		$	1,331,691
Weighted-average annual interest rate⁽²⁾	4.1		%	4.2		%	(0.1)		%

(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, 2020, compared to the three months ended June 30, 2019, resulted from the following (dollars in thousands):


Component	Interest Rate⁽¹⁾				Effective Date		Change
Increases in interest incurred due to:
Issuances of debt:
$700 million unsecured senior notes payable		3.91	%	July/September 2019	$	6,921
$750 million unsecured senior notes payable		3.48	%	July 2019	6,348
$400 million unsecured senior notes payable		2.87	%	September 2019	2,765
$700 million unsecured senior notes payable		5.05	%	March 2020	8,585
Fluctuations in interest rate and average balance:
$1.0 billion commercial paper program					709
Other increase in interest					436
Total increases					25,764
Decreases in interest incurred due to:
Repayments of debt:
$550 million unsecured senior notes payable		4.75	%	July/August 2019	(6,339)
$400 million unsecured senior notes payable		2.96	%	July/August 2019	(2,792)
Unsecured senior bank term loan		Various		Various	(3,088)
$2.2 billion unsecured senior line of credit					(2,177)
Interest rate hedge agreement in effect during the three months ended June 30, 2019					(114)
Total decreases					(14,510)
Change in interest incurred					11,254
Increase in capitalized interest					(9,119)
Total change in interest expense					$	2,135

(1)Represents the weighted-average interest rate as of the end of the applicable period, including 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, 2020, increased by $33.6 million, or 25.0%, to $168.0 million, compared to $134.4 million for the three months ended June 30, 2019. The increase was primarily due to additional depreciation from 455,903 RSF of development and redevelopment projects placed into service subsequent to April 1, 2019, and 42 operating properties aggregating 3.8 million RSF acquired subsequent to April 1, 2019.

Impairment charges

During the three months ended June 30, 2020, we recognized impairment charges aggregating $13.2 million, which primarily consisted of a $10 million write-off of the pre-acquisition deposit for a previously pending acquisition of an operating tech office property for which our revised economic projections declined from our initial underwriting. We recognized this impairment charge in April 2020, concurrently with the submission of our notice to terminate the transaction.

Investment income

During the three months ended June 30, 2020, we recognized investment income aggregating $184.7 million, which included $13.0 million of realized gains and $171.7 million of unrealized gains. Realized gains consisted of $17.7 million of realized gains, partially offset by an impairment charge of $4.7 million primarily related to two investments in privately held entities that do not report NAV. Unrealized gains of $171.7 million primarily consisted of increases in fair values of our investments in publicly traded companies during the three months ended June 30, 2020. For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report. For our impairments accounting policy, refer to the “Investments” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report.

During the three months ended June 30, 2019, we recognized investment income aggregating $21.5 million, which included $10.4 million of realized gains and $11.1 million of unrealized gains.

Comparison of results for the six months ended June 30, 2020, to the six months ended June 30, 2019

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, 2020, compared to the six months ended June 30, 2019. 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.

See additional discussion related to the COVID-19 pandemic and its impact to us under “The COVID-19 pandemic” within this Item 2. In addition, refer to “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q for a discussion about risks that COVID-19 directly or indirectly may pose to our business.


	Six Months Ended June 30,
(Dollars in thousands)	2020		2019		$ Change		% Change
Income from rentals:
Same Properties	$	529,138	$	522,721	$	6,417	1.2	%
Non-Same Properties	150,359		41,467		108,892		262.6
Rental revenues	679,497		564,188		115,309		20.4

Same Properties	162,493		153,902		8,591		5.6
Non-Same Properties	31,471		8,277		23,194		280.2
Tenant recoveries	193,964		162,179		31,785		19.6

Income from rentals	873,461		726,367		147,094		20.3

Same Properties	114		265		(151)		(57.0)
Non-Same Properties	3,300		6,066		(2,766)		(45.6)
Other income	3,414		6,331		(2,917)		(46.1)

Same Properties	691,745		676,888		14,857		2.2
Non-Same Properties	185,130		55,810		129,320		231.7
Total revenues	876,875		732,698		144,177		19.7

Same Properties	188,816		181,678		7,138		3.9
Non-Same Properties	64,198		25,512		38,686		151.6
Rental operations	253,014		207,190		45,824		22.1

Same Properties	502,929		495,210		7,719		1.6
Non-Same Properties	120,932		30,298		90,634		299.1
Net operating income	$	623,861	$	525,508	$	98,353	18.7	%

Net operating income – Same Properties	$	502,929	$	495,210	$	7,719	1.6	%
Straight-line rent revenue	(33,492)		(45,225)		11,733		(25.9)
Amortization of acquired below-market leases	(7,372)		(7,757)		385		(5.0)
Net operating income – Same Properties (cash basis)	$	462,065	$	442,228	$	19,837	4.5	%

Income from rentals

Total income from rentals for the six months ended June 30, 2020, increased by $147.1 million, or 20.3%, to $873.5 million, compared to $726.4 million for the six months ended June 30, 2019, as a result of increases in rental revenues and tenant recoveries, as discussed below.

Rental revenues

Total rental revenues for the six months ended June 30, 2020, increased by $115.3 million, or 20.4%, to $679.5 million, compared to $564.2 million for the six months ended June 30, 2019. The increase was primarily due to an increase in rental revenues from our Non-Same Properties aggregating $108.9 million primarily related to 926,892 RSF of development and redevelopment projects placed into service subsequent to January 1, 2019, and 53 operating properties aggregating 4.2 million RSF acquired subsequent to January 1, 2019. The increase was partially offset by the effect of the reduction in rental revenues from our transient parking, retail tenants, and amenities, some of which were temporarily closed as a result of shelter-in-place orders.

Rental revenues from our Same Properties for the six months ended June 30, 2020, increased by $6.4 million, or 1.2%, to $529.1 million, compared to $522.7 million for the six months ended June 30, 2019. The increase was primarily due to significant rental rate increases on lease renewals and re-leasing of space since ~~July~~January 1, ~~2016. Refer to “Leasing” within the “Operating Summary” section of this Item 2 for additional information on our leasing activity.~~2019. The increase was partially offset by ~~a decrease in rental revenue as a result of a decrease~~temporary reduction in Same ~~Properties’~~Property occupancy of 50 basis points related to ~~95.9% for~~downtime in connection with leases that will begin occupancy during the ~~three~~second half of 2020 at significantly higher rental rates. The increase was also partially offset by the effect of reduced revenues generated from our transient parking, retail tenants, and amenities, some of which were temporarily closed due to shelter-in-place orders.

The increase in total rental revenues was partially offset by the $5.1 million reduction to rental revenues recognized during the six months ended ~~September~~June 30, ~~2017, from 96.9% for~~2020, related to the ~~three months ended September 30, 2016. Refer~~specific write-off aggregating $1.6 million and a general allowance aggregating $3.5 million related to ~~“Same Properties” in the section above within this Item 2 for additional information on the change in our Same Properties’ occupancy rates.~~deferred rent balances of tenants that are or may potentially be impacted by uncertainties surrounding COVID-19.

Tenant recoveries

Tenant recoveries for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2020, increased by ~~$8.4~~$31.8 million, or ~~14.3%~~19.6%, to ~~$67.1~~$194.0 million, compared to ~~$58.7~~$162.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2016. Non-Same~~2019. This increase is consistent with the increase in our rental operating expenses of $45.8 million, or 22.1%, as discussed under “Rental operations” below. Same Properties’ tenant recoveries for the six months ended June 30, 2020, increased by ~~$7.1~~$8.6 million, or 5.6%, primarily due to the increase in recoverable operating expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2020, as discussed under “Rental ~~Operating Expenses”~~operations” below. As of ~~September~~June 30, ~~2017, 97%~~2020, 93% 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~~2020 and ~~2016, consisted~~2019 was, $3.4 million and $6.3 million, respectively, primarily consisting of construction management fees and interest income earned during each respective period. The decrease is due primarily to lower construction management fees recognized due to the ~~following (in thousands):~~completion of certain projects.

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,~~2020, increased by ~~$11.5~~$45.8 million, or ~~15.9%~~22.1%, to ~~$83.5~~$253.0 million, compared to ~~$72.0~~$207.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2019. Approximately ~~$9.0~~$38.7 million of the increase was due to an increase in rental operating expenses from our Non-Same Properties primarily related to ~~1,592,628~~926,892 RSF of development and redevelopment projects placed into service subsequent to ~~July~~January 1, ~~2016,~~2019, and 1653 operating properties ~~totaling 1,468,708~~aggregating 4.2 million RSF ~~acquired.~~acquired subsequent to January 1, 2019.

Same Properties’ rental operating expenses increased by ~~$2.4~~ $7.1 million, or ~~3.7%~~3.9%, to $188.8 million during the six months ended June 30, 2020, compared to the $181.7 million for the six months ended June 30, 2019. Approximately $5.8 million of the increase was due to an increase in property tax expense resulting from higher assessed values of our properties. The remaining $1.3 million was mainly a result of the higher repairs and maintenance expenses, contract services, payroll, and property insurance costs, which were partially offset by reduced operating expenses related to retail tenants, some of which were temporarily closed due to COVID-19 shelter-in-place orders during the three months ended ~~September~~June 30, 2017, compared to the three months ended September 30, 2016, primarily due to higher repairs and maintenance expenses. The increase in Same Properties’ rental operating expenses was partially offset by property tax refunds during the three months ended September 30, 2017.2020.

General and administrative expenses

General and administrative expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2020, increased by ~~$1.8~~$12.6 million, or ~~11.2%~~24.7%, to ~~$17.6~~$63.7 million, compared to ~~$15.9~~$51.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2016. General and administrative expenses increased~~2019. The increase was primarily due to ~~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.~~2019, 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 twelve months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, quarter annualized, declined to 0.6% from 0.7%~~2019, were 10.3% and 9.5%, respectively.

Interest expense

Interest expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, consisted of the following (dollars in thousands):


	Three Months Ended September 30,										Six Months Ended June 30,
Component	2017			2016			Change			Component	2020			2019			Change
Interest incurred	$	48,123		$	40,753		$	7,370		Interest incurred	$	146,226		$	122,162		$	24,064
Capitalized interest	(17,092		)	(14,903		)	(2,189		)	Capitalized interest	(55,473)			(40,183)			(15,290)
Interest expense	$	31,031		$	25,850		$	5,181		Interest expense	$	90,753		$	81,979		$	8,774

Average debt balance outstanding ⁽¹⁾	$	4,887,491		$	4,244,247		$	643,244		Average debt balance outstanding⁽¹⁾	$	7,358,158		$	5,958,590		$	1,399,568
Weighted-average annual interest rate ⁽²⁾	3.9		%	3.8		%	0.1		%	Weighted-average annual interest rate⁽²⁾	4.0		%	4.1		%	(0.1)		%

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


~~(1)~~	~~Represents the average debt balance outstanding during the three months ended September 30, 2017 and 2016.~~


~~(2)~~	~~Represents annualized total interest incurred divided by the average debt balance outstanding in 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~~six months ended ~~September~~June 30, ~~2017,~~2020, compared to the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2019, 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 bond		4.03	%	June 2018/ March 2019	$	1,792
$350 million unsecured senior notes payable – green bond		3.96	%	March 2019	2,968
$300 million unsecured senior notes payable		4.93	%	March 2019	3,236
$750 million unsecured senior notes payable		3.48	%	July 2019	12,696
$700 million unsecured senior notes payable		3.91	%	July/September 2019	13,842
$400 million unsecured senior notes payable		2.87	%	September 2019	5,530
$700 million unsecured senior notes payable		5.05	%	March 2020	9,062
Fluctuations in interest rate and average balance:
$1.0 billion commercial paper program					3,599
Interest rate hedge agreement in effect during the six months ended June 30, 2019					1,815
Other increase in interest					722
Total increases					55,262
Decreases in interest incurred due to:
Repayments of debt:
$550 million unsecured senior notes payable		4.75	%	July/August 2019	(12,678)
$400 million unsecured senior notes payable		2.96	%	July/August 2019	(5,583)
Secured construction loan		3.29	%	March 2019	(1,778)
Unsecured senior bank term loan		Various		Various	(5,975)
$2.2 billion unsecured senior line of credit					(5,184)
Total decreases					(31,198)
Change in interest incurred					24,064
Increase in capitalized interest					(15,290)
Total change in interest expense					$	8,774

(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

Component
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
Total increases 10,570
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 )
Other decrease in interest (250 )
Total decreases (3,200 )
Change in interest incurred 7,370
Increase in capitalized interest ⁽²⁾
(2,189 )
Total change in interest expense $ 5,181


~~(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)~~	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.

Depreciation and amortization

Depreciation and amortization expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020, increased by ~~$30.7~~$75.0 million, or ~~39.7%~~27.9%, to ~~$107.8~~$343.5 million, compared to ~~$77.1~~$268.5 million for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2019. The increase iswas primarily due to additional depreciation from ~~1,592,628~~926,892 RSF of development and redevelopment projects placed into service subsequent to ~~July~~January 1, ~~2016,~~2019, and 1653 operating properties ~~totaling 1,468,708~~aggregating 4.2 million RSF acquired subsequent to ~~July~~January 1, ~~2016.~~2019.

Impairment charges

~~Sale of real estate assets,~~During the six months ended June 30, 2020, we recognized impairment charges ~~and gain on sales~~aggregating $15.2 million, which primarily consisted of ~~real estate~~a $10 million write-off of the pre-acquisition deposit for a previously pending acquisition of an operating tech office property for which our revised economic projections declined from our initial underwriting. We recognized this impairment charge in April 2020, concurrently with the submission of our notice to terminate the transaction.

Investment income

During the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2020, we recognized investment income aggregating $162.8 million, which included $8.3 million of realized gains and $154.5 million of unrealized gains. Realized gains consisted of $32.8 million of realized gains, partially offset by an impairment charge of $24.5 million primarily related to four investments in privately held entities that do not report NAV. Unrealized gains of $154.5 million during the six months ended June 30, 2020, primarily consisted of increases in fair values of our investments in publicly traded companies. For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report. For our impairments accounting policy, refer to the “Investments” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report.

During the six months ended June 30, 2019, we recognized investment income aggregating $105.1 million, which included $21.8 million of realized gains and $83.3 million of unrealized gains.

Loss on early extinguishment of debt

During the six months ended June 30, 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 ~~gain~~loss on early extinguishment of ~~$14.1~~debt of $7.1 million, ~~upon~~including the ~~completion~~write-off of unamortized loan fees. Additionally, during the ~~sale~~six months ended June 30, 2019, we repaid early the remaining $193.1 million balance of our secured construction loan related to 50/60 Binney Street and recognized a ~~condominium interest~~loss on early extinguishment of debt of $269 thousand.

Equity in ~~our~~earnings of unconsolidated real estate joint ~~venture property at 360 Longwood Avenue in our Longwood Medical Area submarket. This gain is reflected in our~~ventures

During the six months ended June 30, 2020, we recognized equity in earnings of unconsolidated real estate joint ventures of $777 thousand. This balance consisted of earnings from our unconsolidated real estate joint ventures of approximately $8.4 million, partially offset by the impairment charge discussed below.

In March 2020, the impact of COVID-19 pandemic and the resulting State of Maryland’s shelter-in-place order led to the closure of a retail center owned by one of our unconsolidated joint ventures. We evaluated the recoverability of our investment in this joint venture and recognized a $7.6 million impairment charge to lower the carrying amount of our investment balance, which primarily consisted of real estate, to its estimated fair value less costs to sell. This impairment charge was classified in equity in earnings of unconsolidated real estate joint ventures within our consolidated statements of ~~income.~~operations for the six months ended June 30, 2020. Refer to Note 4 – ~~“Investments in Unconsolidated Real Estate Joint Ventures”~~“Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for ~~more~~additional 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 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, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan and recognized a loss on early extinguishment of debt of $869 thousand related to the write-off of unamortized loan fees. No such losses were recognized during the three months ended September 30, 2017.

~~Preferred stock redemption charge~~

During the three months ended September 30, 2016, we repurchased 1.1 million outstanding shares of our Series D Convertible Preferred Stock and recognized a preferred stock redemption charge of $13.1 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

We present 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,~~2020, 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.~~2020. 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”~~“Forward-looking statements” in this Item 2.

Guidance for 2020 has been updated to reflect our current view of existing market conditions and assumptions for the year ending December 31, 2020, and reflects the estimated impact stemming from the COVID-19 pandemic on our financial and operating results. Refer to the following tables for complete details on our updated 2020 guidance assumptions. There can be no assurance that actual amounts will not be materially higher or lower than these expectations.


Projected 2020 Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted	As of 7/27/20			As of 4/27/20
Earnings per share⁽¹⁾	$3.00 to $3.08			$1.69 to $1.79
Depreciation and amortization of real estate assets		5.15	5.15
Impairment of real estate – rental properties⁽²⁾		0.06	0.06
Allocation of unvested restricted stock awards		(0.05)	(0.04)
Funds from operations per share⁽³⁾	$8.16 to $8.24			$6.86 to $6.96
Unrealized (gains) losses on non-real estate investments		(1.25)	0.14
Impairment of non-real estate investments		0.20	0.16
Impairment of real estate⁽⁴⁾		0.12	0.10
Allocation to unvested restricted stock awards		0.01	(0.01)
Other		0.02	—
Funds from operations per share, as adjusted⁽¹⁾	$7.26 to $7.34			$7.25 to $7.35
Midpoint		$7.30	$7.30

(1)Excludes unrealized gains or losses after June 30, 2020, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(2)Includes a $7.6 million impairment on our investment in a recently developed retail property held by our unconsolidated real estate joint venture.

(3)Calculated in accordance with standards established by the Advisory Board of Governors of Nareit (the “Nareit Board of Governors”). Refer to the definition of “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in the “Non-GAAP measures and definitions” section within this Item 2.2 for additional information.

(4)Includes eight cents related to an impairment charge of $10 million recognized in April 2020 to write off the carrying amount of the pre-acquisition deposit related to an operating tech office property for which our revised economic projections declined from our initial underwriting. The impairment was recognized concurrently with the submission of our notice to terminate the transaction.


Key Assumptions⁽¹⁾ (Dollars in millions)	As of 7/27/20									As of 4/27/20
			Low			High			Low			High
Occupancy percentage for operating properties in North America as of December 31, 2020	94.8%			95.4%			94.8%			95.4%
Lease renewals and re-leasing of space:
Rental rate increases	28.0%			31.0%			28.0%			31.0%
Rental rate increases (cash basis)	14.0%			17.0%			14.0%			17.0%
Same property performance:
Net operating income increase	1.0%			3.0%			1.0%			3.0%
Net operating income increase (cash basis)	4.5%			6.5%			4.5%			6.5%
Straight-line rent revenue	$	98		$	108		$	98		$	108
General and administrative expenses	$	121		$	126		$	121		$	126
Capitalization of interest	$	117		$	127		$	102		$	112
Interest expense	$	170		$	180		$	185		$	195

(1)Our assumptions presented in the table above 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, 2019, as well as in “Item 1A. Risk Factors” within “Part II – Other Information” of this quarterly report on Form 10-Q.



~~Summary of Key Changes in Guidance~~	~~As of 10/30/17~~	~~As of 7/31/17~~
~~EPS, FFO per share, and FFO per share, as adjusted~~	~~See below~~	~~See below~~
~~Rental rate increase up 1%~~	~~20.5% to 23.5%~~	~~19.5% to 22.5%~~
~~Rental rate increase (cash basis) up 3%~~	~~10.5% to 13.5%~~	~~7.5% to 10.5%~~

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~~2020 Guidance

~~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,~~2020, annualized

~~5.3x~~Less than or equal to ~~5.8x~~5.3x

Fixed-charge coverage ratio – fourth quarter of ~~2017,~~2020, annualized

Greater than ~~4.0x~~or equal to 4.4x

~~Value-creation pipeline as a percentage of gross investments in real estate as of December 31, 2017~~

~~Less than 10%~~


~~(1)~~			~~Primarily related to two non-real estate investments during the three months ended June 30, 2017.~~


~~(2)~~	Includes charges aggregating $5.8 million related to the repurchases of 501,115 outstanding shares of our Series D Convertible Preferred Stock during the three months ended March 31, 2017. Additionally, in March 2017, we announced the redemption of our Series E Redeemable Preferred Stock 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.

~~(3)~~

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 net operating income growth, rental rate growth, straight-line rent revenue, general and administrative expenses, capitalization of interest, and interest expense are included in the tables 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. 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)~~	~~We expect to be at the top end of our guidance ranges for general and administrative expenses and capitalization of interest, and the low end of our guidance range for interest expense.~~

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

Property/Market/Submarket

Noncontrolling⁽¹⁾

Interest Share

225 Binney Street/Greater Boston/Cambridge

70.0

75/125 Binney Street/Greater Boston/Cambridge

60.0

409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa

40.0

1500 Owens Street/San Francisco/Mission Bay/SoMa

49.9

Alexandria Technology Center^® – Gateway/San Francisco/South San Francisco⁽²⁾

55.0

500 Forbes Boulevard/San Francisco/South San Francisco

90.0

Campus Pointe by Alexandria/San Diego/University Town Center⁽³⁾

45.0

5200 Illumina Way/San Diego/University Town Center

49.0

9625 Towne Centre Drive/San Diego/University Town Center

49.9

SD Tech by Alexandria/San Diego/Sorrento Mesa⁽⁴⁾

50.0

~~Consolidated Real Estate Joint Ventures~~

~~Property/Market/Submarket~~

~~Noncontrolling~~ ⁽¹⁾

~~Interest Share~~

~~225 Binney Street/Greater Boston/Cambridge~~

~~70.0%~~

~~1500 Owens Street/San Francisco/Mission Bay/SoMa~~

~~49.9%~~

~~409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa~~

~~40.0%~~

~~10290 and 10300 Campus Point Drive/San Diego/University Town Center~~

~~45.0%~~

Unconsolidated Real Estate Joint Ventures

~~Property/Market/Submarket~~

~~Our Share~~

~~360 Longwood Avenue/Greater Boston/Longwood Medical Area~~

~~27.5%~~

~~1401/1413 Research Boulevard/Maryland/Rockville~~

~~65.0%~~

⁽²⁾


~~(1)~~Property/Market/Submarket			~~In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in three other properties in North America.~~

Our Ownership Share⁽⁵⁾
~~(2)~~1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa	The joint venture is expected to fund the remaining construction costs of the project with funds from its construction loan shown below, and we expect our ownership interest percentage 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.	10.0	%
Menlo Gateway/San Francisco/Greater Stanford		49.0	%
704 Quince Orchard Road/Maryland/Gaithersburg		56.8	%	⁽⁶⁾

~~As of September 30, 2017,~~

(1)In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in six other joint ventures in North America.

(2)Excludes 600, 630, 650, 901, and 951 Gateway Boulevard in our South San Francisco submarket. Noncontrolling interest share is anticipated to be 49% as we make further contributions over time.

(3)Excludes 9880 Campus Point Drive in our University Town Center submarket.

(4)Excludes 5505 Morehouse Drive in our Sorrento Mesa submarket.

(5)In addition to the unconsolidated real estate joint ventures listed, we hold an interest in two other insignificant unconsolidated real estate joint ventures in North America.

(6)Represents our ownership interest; our voting interest is limited to 50%.

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, 2020 (dollars in thousands):


		Maturity Date			Stated Rate	Interest Rate⁽¹⁾		100% at Joint Venture Level
Unconsolidated Joint Venture	Our Share								Debt Balance⁽²⁾
704 Quince Orchard Road	56.8%		3/16/23	L+1.95%	2.40%	$	11,602
1655 and 1725 Third Street	10.0%		3/10/25	4.50%	4.57%	598,020
Menlo Gateway, Phase II	49.0%		5/1/35	4.53%	4.59%	106,580
Menlo Gateway, Phase I	49.0%		8/10/35	4.15%	4.18%	140,843
						$	857,045

~~360 Longwood Avenue~~(1)Includes interest expense and amortization of loan fees.

(2)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2020.

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

~~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 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 Joint Ventures						Our Share of Unconsolidated Real Estate Joint Ventures
	June 30, 2020						June 30, 2020
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Total revenues	$	39,869	$	77,646	$	10,011	$	20,655
Rental operations	(10,302)		(20,397)		(1,199)		(2,617)
	29,567		57,249		8,812		18,038
General and administrative	(102)		(219)		(50)		(134)
Interest	—		—		(2,011)		(3,982)
Depreciation and amortization	(15,775)		(31,645)		(2,858)		(5,501)
Impairment of real estate	—		—		—		(7,644)
Fixed returns allocated to redeemable noncontrolling interests⁽¹⁾	217		435		—		—
	$	13,907	$	25,820	$	3,893	$	777

Straight-line rent and below-market lease revenue	$	1,274	$	3,236	$	5,698	$	11,551
Funds from operations⁽²⁾	$	29,682	$	57,465	$	6,751	$	13,922

(1)Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in one property in our South San Francisco submarket. These redeemable noncontrolling interests earn a fixed return on their investment rather than participate in the operating results of the property.

(2)Refer to the definition of “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in the “Non-GAAP measures and definitions” section within this Item 2 for the definition and the reconciliation from the most directly comparable GAAP measure.


	As of June 30, 2020
	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures		Our Share of Unconsolidated Real Estate Joint Ventures
Investments in real estate	$	1,491,601	$	459,843
Cash, cash equivalents, and restricted cash	48,327		9,338
Other assets	168,342		49,503
Secured notes payable	—		(186,254)
Other liabilities	(70,734)		(5,572)
Redeemable noncontrolling interests	(12,122)		—
	$	1,625,414	$	326,858

Noncontrolling Interest Share of Consolidated Real Estate JVs Our Share of Unconsolidated
Real Estate JVs
September 30, 2017 September 30, 2017
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
Total revenues $ 13,400
$ 41,022
$ 1,044
$ 5,849
Rental operations (4,189 ) (11,772 ) (489 ) (2,194 )
9,211
29,250
555
3,655
General and administrative (52 ) (126 ) (10 ) (40 )
Interest —
—
(168 ) (1,552 )
Depreciation and amortization (3,608 ) (10,985 ) (383 ) (1,119 )
Gain on sale of real estate —
—
14,106
14,106
$ 5,551
⁽¹⁾
$ 18,139
⁽¹⁾
$ 14,100
$ 15,050

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 noncontrolling interests in our consolidated real estate project at 213 East Grand Avenue since August 2005, located 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 to noncontrolling interests since they earn a fixed preferred return.

~~For~~During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, we distributed $17.4 million and $10.9 million, respectively, to~~2019, our consolidated real estate joint ventures distributed an aggregate of $38.2 million and $24.6 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 Real Estate”~~“Consolidated and unconsolidated real 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,~~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 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.


	June 30, 2020
(In thousands)	Three Months Ended					Six Months Ended				Year Ended December 31, 2019
Realized gains	$	13,005	⁽¹⁾	$	8,328	⁽¹⁾	$	33,158	⁽²⁾
Unrealized gains	171,652			154,508			161,489
Investment income	$	184,657		$	162,836		$	194,647


Investments (In thousands)	Cost					Unrealized Gains			Carrying Amount
Fair value:
Publicly traded companies	$	159,129		$	262,841	⁽³⁾	$	421,970
Entities that report NAV	302,954			218,602			521,556

Entities that do not report NAV:
Entities with observable price changes	48,565			74,708			123,273
Entities without observable price changes	251,666			—			251,666
June 30, 2020	$	762,314	⁽⁴⁾	$	556,151		$	1,318,465

March 31, 2020	$	738,983		$	384,499		$	1,123,482

(1)Includes realized gains for the three and six months ended June 30, 2020, of $17.7 million and $32.8 million, respectively, and impairments related to investments in privately held entities that do not report NAV of $4.7 million and ~~limited partnerships primarily involved~~$24.5 million, respectively.

(2)Includes realized gains of $50.3 million and impairments related to investments in privately held entities that do not report NAV of $17.1 million for the ~~life science~~year ended December 31, 2019.

(3)Includes gross unrealized gains and ~~technology industries.~~

Aslosses of ~~September 30, 2017, our investments aggregated $485.3~~$279.7 million ~~or approximately 4.2% of our total assets. The charts~~ and ~~table below present selected investment statistics~~$16.9 million, respectively, as of ~~September~~June 30, ~~2017 (dollars in thousands, unless stated otherwise):~~2020.

(4)Represents 3.3% of gross assets as of June 30, 2020.

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

~~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


~~(1)~~			~~Quarter annualized.~~Public/Private Mix (Cost)



~~(2)~~			~~As of September 30, 2017.~~Tenant/Non-Tenant Mix (Cost)

Capital resources

We expect that our principal liquidity needs for the year ending December 31, ~~2017,~~2020, 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

Our initial 2020 guidance issued on December 3, 2019, included ranges for 2020 construction spending and acquisitions of $1.55 billion to $1.65 billion and $900 million to $1.0 billion, respectively, and reflected a strong outlook for 2020, including continued strong demand for our value-creation development and redevelopment projects. Our guidance issued on April 27, 2020 reduced our 2020 forecasted construction spending, acquisitions, real estate dispositions and partial interest sales, and issuance of common equity. These reductions were deemed necessary while we monitored the impact of COVID-19 on many areas of our business, including the overall macro and capital market environments. The following table provides key updates to our 2020 guidance issued on February 3, 2020 and April 27, 2020, based on our current view of existing market conditions and assumptions for the year ending December 31, 2020, and reflects increases in uses of capital to address the continuing tenant demand for our development and redevelopment pipeline and existing and anticipated attractive acquisition opportunities. Our updated 2020 construction spending guidance range increased since April 27, 2020, and is now closer to our initial forecast for 2020 disclosed in our guidance issued on February 3, 2020. Additionally, our initial guidance for 2020 anticipated meaningful acquisition opportunities and our updated 2020 acquisition guidance range continues to reflect opportunistic offerings in the market. The increase above our initial acquisition guidance range is expected to be funded through forecasted real estate dispositions and partial interest sales. Proceeds from forecasted sales are also expected to fund a portion of the increase in construction spending and to provide significant capital for growth over the next two to three quarters.


Key Sources and Uses of Capital (In millions)	As of 7/27/20
			Range							Midpoint	Certain Completed Items						As of 4/27/20 Midpoint	As of 2/3/20 Midpoint
Sources of capital:
Net cash provided by operating activities after dividends	$	185		$	225	$	205				$	205		$	220
Incremental debt	415			575		495		see below					335			380
Real estate dispositions and partial interest sales	1,000			1,500		1,250		$	51	⁽¹⁾	50		⁽¹⁾	50		⁽¹⁾
Common equity	2,090			2,090		2,090		$	2,087	⁽²⁾	1,020		⁽¹⁾	1,900		⁽¹⁾
Total sources of capital	$	3,690		$	4,390	$	4,040				$	1,610		$	2,550

Uses of capital:
Construction (refer to the “Investments in real estate” section within Item 2 for additional information)	$	1,200		$	1,500	$	1,350				$	960		$	1,600
Acquisitions (refer to the “Executive summary” section within Item 2 for additional information)	1,600			2,000		1,800		$	842		650			950
Total uses of capital	$	2,800		$	3,500	$	3,150				$	1,610		$	2,550

Incremental debt (included above):
Issuance of unsecured senior notes payable⁽³⁾	$	700		$	700	$	700	$	700		$	700		$	600
$3.0 billion unsecured senior lines of credit and other	(285)			(125)		(205)					(365)			(220)
Incremental debt	$	415		$	575	$	495				$	335		$	380

Excess sources of capital						$	890				$	—		$	—

~~(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 “Real Estate Asset Sales” section within this Item 2 for additional information.


~~(2)~~	Acquisitions guidance increased by $80.0 million from $590.0 million in 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.


~~(3)~~	Includes the second construction milestone installment payment 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 of our 7.00% Series D preferred stock decreased by $77.0 million to reflect actual redemptions through the third quarter 2017.~~

(1)In April 2020, we completed the sale of a partial interest in properties at 9808 and 9868 Scranton Road in our Sorrento Mesa submarket to the existing SD Tech by Alexandria consolidated real estate joint venture, of which we own 50%. We received proceeds of $51.1 million for the 50% interest in the properties that our joint venture partner acquired through the joint venture. Our previous guidance disclosures included a combined amount for real estate dispositions, partial interest sales, and common equity. Amounts presented have been split into two separate categories for (i) actual real estate dispositions and partial interest sales completed through July 27, 2020, and (ii) common equity.

(2)In January 2020 and July 2020, we entered into forward equity sales agreements aggregating $1.0 billion and $1.1 billion, respectively, to sell an aggregate of 6.9 million shares for each offering (13.8 million in aggregate) of our common stock (including the exercise of an underwriters’ option) at a public offering price of $155.00 per share and $160.50 per share, respectively, before underwriting discounts. In March 2020, we settled 3.4 million shares from our forward equity sales agreements and received proceeds of $500.0 million. As of the date of this report, 10.4 million shares of our common stock remain outstanding under forward equity sales agreements, for which we expect to receive proceeds of $1.6 billion, to be further adjusted as provided in the agreements, that will fund pending and recently completed acquisitions and the construction of our highly leased development projects. We expect to settle the remaining outstanding forward equity sales agreements in 2020.

(3)We may opportunistically seek to refinance additional near term maturities in 2020, subject to market conditions.

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”~~“Forward-looking statements” under Part I; “Item 1A. Risk ~~Factors”~~factors”; and “Item 7. Management’s ~~Discussion~~discussion and ~~Analysis~~analysis of ~~Financial Condition~~financial condition and ~~Results~~results of ~~Operations”~~operations” of our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016.~~2019. 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~~$185.0 million to ~~$135~~$225.0 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~~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, 2020, 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 $29 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 for a discussion of cash flows provided by operating activities for the six months ended June 30, 2020.

Debt

~~The table below reflects the~~As of June 30, 2020, we have an outstanding ~~balances, maturity dates, applicable rates, and facility fees for each~~balance of ~~these facilities as~~$440.0 million on our $2.2 billion unsecured senior line of ~~September 30, 2017 (dollars in thousands):~~

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


~~(1)~~	~~Includes any extension options that we control.~~

~~Borrowings under the $1.65~~credit. Our $2.2 billion unsecured senior line of credit ~~bear~~bears an interest atrate of LIBOR ~~or the base rate specified in the amended $1.65 billion~~plus 0.825% and matures on January 28, 2024, which includes two six-month extension options that we control. As of June 30, 2020, we have no outstanding balance on our $750 million unsecured senior line of credit, ~~agreement~~which bears an interest rate of LIBOR plus ~~in either case, a specified margin (the “Applicable Margin”). The Applicable Margin for LIBOR borrowings under~~1.050% and matures on April 14, 2022. In addition to the ~~$1.65~~cost of borrowing, the $2.2 billion and $750 million unsecured senior ~~line~~lines of credit isare subject to an annual facility fee of 0.15% and 0.20%, respectively, based on ~~our existing credit ratings as set by certain rating agencies.~~the aggregate commitments outstanding.

We use our ~~$1.65 billion~~ unsecured senior ~~line~~lines of credit to fund working capital, construction activities, and, from time to time, acquisition of properties. Borrowings under the ~~$1.65 billion~~ unsecured senior ~~line~~lines of credit ~~will~~ bear interest at a “Eurocurrency ~~Rate”~~Rate,” a “LIBOR Floating Rate,” or a “Base Rate” specified in ~~the amended $1.65 billion~~each respective unsecured senior line of credit agreement plus, in ~~either~~any case, the Applicable Margin. The Eurocurrency Rate specified in the ~~amended $1.65 billion~~ unsecured ~~line~~senior lines of credit ~~agreement~~agreements 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~~the Administrative Agent 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~~

Pursuant to the ~~cost~~terms of ~~borrowing,~~ the ~~facility is subject~~new line of credit agreement, the outstanding commitments and any outstanding borrowings from the $750 million unsecured senior line of credit will be reduced by 100% of net cash proceeds from certain new debt transactions and 50% of net cash proceeds from new equity offerings as defined in the agreement. Therefore, upon full or partial settlement of our forward equity sales agreements entered into in July 2020, described further under the “Common equity transactions” section of Note 13 – “Stockholders’ equity” to ~~an annual facility fee~~our unaudited consolidated financial statements, the outstanding commitments and any outstanding borrowings from the $750 million unsecured senior line of ~~0.20% based on~~credit will be reduced by 50% of net proceeds received from the ~~aggregate commitments outstanding.~~settlement of the aforementioned July 2020 agreements (January 2020 forward equity sales agreements are excluded). As of the date of this report, none of our forward equity sales agreements entered into in July 2020 have been settled.

We expect to fund a ~~significant~~ portion of our capital needs ~~in 2017~~for the remainder of 2020 from the ~~issuance~~settlement of our outstanding forward equity sales agreements, from issuances under our commercial paper program discussed below, from borrowings under our $2.95 billion unsecured senior lines of credit, and from real estate dispositions and partial interest sales.

We established a commercial paper program with the ability to issue up to $1.0 billion of commercial paper notes generally with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our $2.2 billion unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our $2.2 billion unsecured senior line of credit equal to any outstanding balance on our commercial paper program. We use borrowings under the program to fund short-term capital needs. The notes issued under our commercial paper program are sold under customary terms in the commercial paper market. They are typically issued at a discount to par, representing a yield to maturity dictated by market conditions at the time of issuance. In the event we are unable to issue commercial paper notes or refinance outstanding commercial paper notes under terms equal to or more favorable than those under the $2.2 billion unsecured senior line of credit, we expect to borrow under the $2.2 billion unsecured senior line of credit at LIBOR plus 0.825%. The commercial paper notes sold during the three months ended June 30, 2020, were issued at a weighted-average yield to maturity of 0.79%. As of June 30, 2020, we had no outstanding borrowings under our commercial paper program.

In March 2020, we completed an offering of $700.0 million of unsecured senior notes payable ~~borrowings available~~due on December 15, 2030, at an interest rate of 4.90% for net proceeds of $691.6 million. The net proceeds were used to reduce the outstanding indebtedness under ~~existing secured construction loans, and~~ our ~~$1.65~~$2.2 billion unsecured senior line of ~~credit.~~

~~In March 2017,~~credit and commercial paper program. Since January 1, 2019, we have completed ~~an offering~~the issuances of ~~$425.0 million of~~$3.4 billion in unsecured senior notes, ~~due in 2028, at an~~with a weighted-average interest rate of 3.95%~~. Net proceeds~~ and a weighted-average maturity as of ~~$420.5 million were~~June 30, 2020, of 15.2 years.

Proactive management of transition away from LIBOR

LIBOR has been used ~~initially~~extensively in the U.S. and globally as a reference rate for various commercial and financial contracts, including variable-rate debt and interest rate swap contracts. However, it is expected that LIBOR will no longer be used after 2021. To address the increased risk of LIBOR discontinuation, in the U.S. the Alternative Reference Rates Committee (“ARRC”) was established to ~~reduce~~help ensure the successful transition from LIBOR. In June 2017, the ARRC selected SOFR, a new index calculated by reference to short-term repurchase agreements backed by U.S. Treasury securities, as its preferred replacement for U.S. dollar LIBOR. We have been closely monitoring developments related to the transition away from LIBOR and have implemented numerous proactive measures to minimize the potential impact of the transition to the Company, specifically:

•We have proactively reduced outstanding LIBOR-based borrowings under our unsecured senior bank term loans and secured construction loans through repayments. From January 2017 through June 2020, we retired approximately $1.5 billion of such debt.

•During 2020, we increased the aggregate amount of our commercial paper program to $1.0 billion from $750.0 million. This program provides us with ability to issue commercial paper notes bearing interest at short-term fixed rates, generally with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is not subjected to LIBOR and is used for funding short-term working capital needs. As of June 30, 2020, we had no borrowings outstanding under our commercial paper program.

•We prudently manage outstanding borrowings under our $2.2 billion and $750 million unsecured senior lines of credit. As of June 30, 2020, we have not drawn any amounts on our ~~$1.65~~$750 million unsecured senior line of credit. Excluding LIBOR-based debt held by one of our unconsolidated real estate joint ventures, borrowings under our $2.2 billion unsecured senior line of ~~credit.~~ credit represented our only LIBOR-based debt outstanding as of June 30, 2020, which represented less than 6% of our total debt balance outstanding as of June 30, 2020.

•Our unsecured senior lines of credit 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 actively monitor developments by the ARRC and other governing bodies involved in LIBOR transition.

Refer to ~~“3.95% Unsecured Senior Notes Payable Due in 2028” in~~ Note 810 – “Secured and ~~Unsecured Senior Debt”~~unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report and “Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2019, for additional information ~~regarding~~about our ~~unsecured senior notes payable.~~

~~During the nine months ended September 30, 2017, we completed a partial repayment~~management 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 on early extinguishment of debt of $670 thousandrisks related to the ~~write-off of unamortized loan fees.~~ transition away from LIBOR.

Real estate dispositions and ~~common equity~~partial interest sales

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 pending and recently completed opportunistic acquisitions and our highly leased value-creation development and redevelopment ~~projects.~~projects, and also provide significant capital for growth over the next two to three quarters. We may also consider additional sales of partial interests in core Class A properties and/or development projects. For ~~2017,~~2020, we expect real estate dispositions and ~~issuances of common equity~~partial interest sales ranging from ~~$1.1~~$1.0 billion to ~~$1.4~~$1.5 billion. ~~Refer to “Forward Equity Sales Agreements” below within this Item 2 for additional information related to our forward equity sales agreements executed in March 2017.~~ 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. As of the date of this report, we have received proceeds of $51.1 million from our partial interest sale at 9808 and 9868 Scranton Road in our Sorrento Mesa submarket.

As a REIT, generally we are subject to a 100% tax on the net income from real estate asset sales that the IRS characterizes as “prohibited transactions.” We do not expect our sales will be categorized as prohibited transactions. However, unless we meet certain “safe harbor” requirements, whether a real estate asset sale is a prohibited transaction will be based on the facts and circumstances of the sale. Our real estate asset sales may not always meet such safe harbor requirements. Refer to “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2019, for additional information about the “prohibited transaction” tax.

Common equity transactions

In January 2020, we entered into forward equity sales agreements aggregating $1.0 billion to sell an aggregate of 6.9 million shares of our common stock (including the exercise of an underwriters’ option) at a public offering price of $155.00 per share, before underwriting discounts. In March 2020, we settled 3.4 million shares from our forward equity sales agreement and received proceeds of $500.0 million. We expect to receive proceeds of approximately $519.6 million upon settlement of the remaining outstanding forward equity sales agreements, to be further adjusted as provided in the sales agreements.

In addition, in July 2020, we entered into forward equity sales agreements to sell an aggregate of 6.9 million shares of our common stock (including the exercise of an underwriters’ option) at a public offering price of $160.50 per share, before underwriting discounts. We expect to receive proceeds of approximately $1.1 billion, to be further adjusted as provided in the sales agreements. As of the date of this report, no shares have been settled under these forward equity sales agreements.

We expect to settle the outstanding forward equity sales agreements in 2020, and use proceeds to fund pending and recently completed acquisitions and the construction of our highly leased development and redevelopment projects.

In February 2020, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $850.0 million of our common stock. As of June 30, 2020, the remaining availability under this ATM program was approximately $843.7 million. 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 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. 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.

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 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 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. We expect to settle these contracts with shares by December 31, 2017.

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~~real estate 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,~~2020, we received $55.8 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~~2.3 million RSF of ~~new~~ Class A office/laboratory and tech office space undergoing construction, 6.6 million RSF of near-term and ~~future value-creation~~intermediate-term development and redevelopment projects, ~~supporting an aggregate of 8.0~~and 5.3 million SF of ~~ground-up~~future development projects 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 and 2019 Deliveries”,~~redevelopment properties: current projects” and “Summary of ~~Capital Expenditures,”~~capital 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~~2020 and ~~2016,~~2019, of ~~$45.3~~$55.5 million and ~~$40.8~~$40.2 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~~$32.3 million and ~~$10.5~~$20.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.The increase in capitalized payroll and other indirect project costs for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, compared to the same period in ~~2016,~~2019 was primarily due to ~~10 new~~an increase in our value-creation pipeline projects undergoing construction and pre-construction activities aggregating six projects with ~~approximately 3.3~~4.4 million ~~developable SF that increased pre-construction activities~~RSF in ~~2017.~~2020 over 2019. 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~~$8.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2020.

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 that 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, 2020, 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 $26.4 million. 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”~~real estate” to our unaudited consolidated financial statements under Item 1 of this report, and the “Acquisitions” ~~under~~subsection of the “Investments in ~~Real Estate”~~real estate” section within this Item 2 ~~of this report~~ for ~~more~~ information on our acquisitions.

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

Dividends

During the ~~nine~~six months ended ~~September~~June 30, 2017, we repurchased, in privately negotiated transactions, 501,115 shares of our Series D Convertible Preferred Stock at an aggregate price of $17.9 million, or $35.79 per share. We 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 may seek to repurchase additional shares of our Series D Convertible Preferred Stock, 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 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 months ended September 30, 2017~~2020 and ~~2016,~~2019, we paid the following dividends (in thousands):


	Six Months Ended June 30,
	2020		2019		Change
Common stock	$	256,259	$	218,914	$	37,345
Series D Convertible Preferred Stock	—		2,132		(2,132)
	$	256,259	$	221,046	$	35,213

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

The increase in dividends paid on our common stock ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2020, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016~~,2019, 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, 2019, 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~~$2.06 per common share paid during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2020, from ~~$2.37~~$1.94 per common share paid during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~. 2019.

The decrease in dividends paid on our Series D Convertible Preferred Stock during the six months ended June 30, 2020, compared to the six months ended June 30, 2019, was ~~primarily~~ due to ~~the~~a decrease in number of shares outstanding ~~to 3.0~~as a result of the repurchase of 275,000 outstanding shares of our Series D Convertible Preferred Stock in 2019 and the conversion of the remaining 2.3 million outstanding shares as of ~~September~~our Series D Convertible Preferred Stock into shares of our common stock during 2019. As of June 30, ~~2017, from 6.5 million~~2020, we had no outstanding shares as of ~~September 30, 2016, due to the repurchases of shares since October 1, 2016.~~Series D Convertible Preferred Stock.

Contractual obligations and commitments

Contractual obligations as of ~~September~~June 30, ~~2017,~~2020, consisted of the following (in thousands):


			Payments by Period
	Total		2020		2021–2022		2023–2024		Thereafter
Secured and unsecured debt⁽¹⁾⁽²⁾	$	7,549,352	$	3,331	$	14,127	$	1,878,107	$	5,653,787
Estimated interest payments on fixed-rate debt⁽³⁾	3,044,443		142,537		569,201		511,055		1,821,650
Ground lease obligations – operating leases	706,394		7,270		30,242		30,811		638,071
Ground lease obligations – finance lease	36,074		207		832		840		34,195
Other obligations	27,130		380		4,895		5,469		16,386
Total	$	11,363,393	$	153,725	$	619,297	$	2,426,282	$	8,164,089

Payments by Period
Total 2017 2018-2019 2020-2021 Thereafter
Secured and unsecured debt ^(1) (2)
$ 4,828,766
$ 732
$ 925,546
$ 1,181,834
$ 2,720,654
Estimated interest payments on fixed-rate and hedged variable-rate debt ⁽³⁾
1,006,863
35,059
306,472
247,533
417,799
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
Other obligations 3,607
399
3,107
101
—
Total $ 6,431,993
$ 41,992
$ 1,266,441
$ 1,453,192
$ 3,670,368


~~(1)~~	~~Amounts represent principal amounts due and exclude unamortized debt premiums/discounts and deferred financing costs reflected on the consolidated balance sheets.~~


~~(2)~~	~~Payment dates reflect any extension options that we control.~~


~~(3)~~	Estimated interest payments on our fixed-rate and hedged variable-rate debt are based upon contractual interest rates, including the impact of 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.~~

(1)Amounts represent principal amounts due and exclude unamortized premiums (discounts) and deferred financing costs reflected in the consolidated balance sheets under Item 1 of this report.

(2)Payment dates reflect any extension options that we control.

(3)Amounts are based upon contractual interest rates, including interest payment dates and scheduled maturity dates.

Secured notes payable

Secured notes payable as of ~~September~~June 30, ~~2017,~~2020, 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%~~3.57%. As of ~~September~~June 30, ~~2017,~~2020, the total book ~~values~~value of our ~~investment~~investments in real estate securing debt ~~were~~was approximately ~~$2.3~~$1.1 billion. AsAdditionally, as of ~~September~~June 30, ~~2017,~~2020, our entire secured notes payable balance of $344.8 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 $750.0 million unsecured senior line of credit

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,~~2020, were as follows:

Covenant Ratios⁽¹⁾

Requirement

~~Actual~~June 30, 2020

Total Debt to Total Assets

Less than or equal to 60%

~~37%~~34%

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~~6.9x

Unencumbered Total Asset Value to Unsecured Debt

Greater than or equal to 150%

~~272%~~273%


~~(1)~~	For definitions of 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.


~~(2)~~	(1)All covenant ratio titles utilize terms as defined in the 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~~computation of ~~credit and unsecured senior bank term loans~~EBITDA as ~~of September 30, 2017, were as follows:~~

described in Exchange Act Release No. 47226.



~~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 $750.0 million unsecured senior line of credit as of June 30, 2020, were as follows:

Covenant Ratios⁽¹⁾

Requirement

June 30, 2020

Leverage Ratio

Less than or equal to 60.0%

30.7%

Secured Debt Ratio

Less than or equal to 45.0%

1.4%

Fixed-Charge Coverage Ratio

Greater than or equal to 1.50x

3.77x

Unsecured Interest Coverage Ratio

Greater than or equal to 1.75x

5.98x

(1)All covenant ratio titles utilize terms as defined in each respective credit agreement.

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%~~2020, 94% of our debt was fixed-rate debt. For additional information regarding our debt, ~~or variable-rate debt subject to interest rate hedge agreements. Refer~~refer to Note 910 – ~~“Interest Rate Hedge Agreements”~~“Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this ~~report~~report.

Ground lease obligations

Operating lease agreements

Ground lease obligations as of June 30, 2020, included leases for ~~further information. The remaining 12%~~33 of our ~~debt~~properties, which accounted for approximately 11% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book value of $7.5 million as of ~~September~~June 30, ~~2017, was unhedged variable-rate debt based primarily on LIBOR. Interest~~2020, our ground lease obligations have remaining lease terms ranging from approximately 33 to 94 years, including available extension options that we are reasonably certain to exercise.

As of June 30, 2020, the remaining contractual payments onunder ground and office lease agreements in which we are the lessee aggregated $706.4 million and $27.1 million, respectively. We are required to recognize a right-of-use asset and a related liability to account for our ~~unhedged variable-rate debt have been calculated~~future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is measured based on ~~interest rates~~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, 2020, the present value of the remaining contractual payments, aggregating $733.5 million, under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $291.7 million, which is classified in ~~effect as~~accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets. As of ~~September~~June 30, ~~2017.~~2020, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 43 years, and the weighted-average discount rate was 5.17%. 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 $283.6 million. We classify the right-of-use asset in other assets in our consolidated balance sheets. Refer to the “Lease accounting” section of Note 82 – ~~“Secured and Unsecured Senior Debt”~~“Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report for additional ~~information regarding our debt.~~information.

~~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 billion unsecured senior line of credit, unsecured senior bank term loans, and variable-rate secured construction loans. Our derivative instruments include interest rate swaps and interest rate caps.

Our interest rate swap 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 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 30, 2017, was $250 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 30, 2017, included leases for 27 of our properties, which accounted for approximately 13% of our total number of properties, and one land development parcel. Excluding one ground lease related to one operating property that expires in 2036 with a net book value of $9.4 million as of September 30, 2017, our ground lease obligations have remaining lease terms ranging from approximately 36 to 97 years, including extension options.

Commitments

As of ~~September~~June 30, ~~2017,~~2020, remaining aggregate costs under contract for the construction of properties undergoing development, redevelopment, and improvements under the terms of leases approximated ~~$571.6 million.~~$1.2 billion. 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~~$11.1 million primarily related to construction projects.

We are committed to funding approximately $224.9 million for non-real estate investments primarily related to our ~~agreement to purchase~~investments in limited partnerships. Our funding commitments expire at various dates over the next 11 years, with a ~~10% interest in a joint venture with Uber and the Golden State Warriors.~~weighted-average expiration of 8.5 years as of June 30, 2020.

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~~

Foreign currency translation gains and losses

The following table presents the changes in accumulated other comprehensive ~~income~~

~~Accumulated other comprehensive income~~loss attributable to Alexandria Real Estate Equities, Inc. ~~consists of~~’s stockholders during the ~~following (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

~~Available-for-sale equity securities~~

~~Changes in our accumulated other comprehensive income balance relate~~six months ended June 30, 2020, due 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 the change in fair value of our interest rate hedge agreements. We reclassify amounts from accumulated other comprehensive income as we recognize interest expense related to the hedged variable-rate debt instrument.

~~Foreign currency translation~~

~~Changes in our accumulated other comprehensive income balance relate to~~ changes in the foreign exchange rates for our real estate investments in Canada and ~~Asia. Additionally, we~~Asia (in thousands). We reclassify unrealized foreign currency translation gains and losses into net income as we dispose of these holdings.


	Total
Balance as of December 31, 2019	$	(9,749)

Other comprehensive loss before reclassifications	(3,331)
Net other comprehensive loss	(3,331)

Balance as of June 30, 2020	$	(13,080)

Issuer and guarantor subsidiary summarized 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 summarized financial information presents on a combined basis for the Issuer and the Guarantor Subsidiary balance sheet financial information as of June 30, 2020, and December 31, 2019, and results of operations and comprehensive income for the six months ended June 30, 2020, and year ended December 31, 2019. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to (i) the Issuer’s interests in the Guarantor Subsidiary, (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 assets and liabilities have been allocated to the Issuer and the Guarantor Subsidiary generally based on legal entity ownership.

The following tables present combined summarized financial information for the Issuer and Guarantor Subsidiary. Amounts provided do not represent our total consolidated amounts, as of June 30, 2020, and December 31, 2019, and for the six months ended June 30, 2020, and year ended December 31, 2019 (in thousands):


	June 30, 2020		December 31, 2019
Assets:
Cash, cash equivalents, and restricted cash	$	48,774	$	4,432
Other assets	92,316		71,036
Total assets	$	141,090	$	75,468

Liabilities:
Unsecured senior notes payable	$	6,738,486	$	6,044,127
Unsecured senior lines of credit	440,000		384,000
Other liabilities	304,502		278,858
Total liabilities	$	7,482,988	$	6,706,985


	Six Months Ended June 30, 2020		Year Ended December 31, 2019
Total revenues	$	11,179	$	22,731
Total expenses	(151,220)		(317,896)
Net loss	(140,041)		(295,165)
Net income attributable to unvested restricted stock awards and preferred stock	(3,574)		(12,170)
Net loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders	$	(143,615)	$	(307,335)

Critical accounting policies

Refer to our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016,~~2019, for a discussion of our critical accounting policies ~~which include~~related to REIT compliance, investments in real estate, ~~and properties classified as held for sale,~~ impairment of long-lived assets, ~~capitalization of costs, accounting for~~equity investments, interest rate hedge agreements, ~~recognition of rental revenue~~liability and ~~tenant recoveries,~~right-of-use assets related to operating leases in which we are the lessee, and monitoring of tenant credit quality. ~~There were no significant changes to these policies during the nine months ended September 30, 2017.~~

100

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 of operating real estate assets, 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, gains or losses on early termination of interest rate hedge agreements, preferred stock redemption charges, ~~impairments of non-depreciable real estate, impairments of non-real estate investments, and~~ deal costs, the income tax effect related to such items, 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, 2020 (in thousands):



	Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures						Our Share of Unconsolidated Real Estate Joint Ventures
	June 30, 2020						June 30, 2020
	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Net income	$	13,907	$	25,820	$	3,893	$	777
Depreciation and amortization	15,775		31,645		2,858		5,501
Impairment of real estate	—		—		—		7,644
Funds from operations	$	29,682	$	57,465	$	6,751	$	13,922

101

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, 2020 and 2019. Per share amounts may not add due to rounding.


	Three Months Ended June 30,								Six Months Ended June 30,
(In thousands)	2020			2019		2020			2019
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted	$	226,600		$	76,330	$	244,845		$	200,181
Depreciation and amortization of real estate assets⁽¹⁾	165,040			134,437		337,668			268,524
Noncontrolling share of depreciation and amortization from consolidated real estate JVs	(15,775)			(6,744)		(31,645)			(12,163)
Our share of depreciation and amortization from unconsolidated real estate JVs	2,858			973		5,501			1,819
Impairment of real estate – rental properties	—			—		7,644			—
Assumed conversion of 7.00% Series D cumulative convertible preferred stock	—			1,005		—			2,031
Allocation to unvested restricted stock awards	(2,228)			(1,445)		(4,531)			(3,740)
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted⁽¹⁾	376,495			204,556		559,482			456,652
Unrealized gains on non-real estate investments	(171,652)			(11,058)		(154,508)			(83,264)
Impairment of non-real estate investments	4,702		⁽²⁾	—		24,482		⁽³⁾	—
Impairment of real estate	13,218		⁽⁴⁾	—		15,221		⁽⁴⁾	—
Loss on early extinguishment of debt	—			—		—			7,361
Preferred stock redemption charge	—			—		—			2,580
Removal of assumed conversion of 7.00% Series D cumulative convertible preferred stock	—			(1,005)		—			(2,031)
Allocation to unvested restricted stock awards	2,251			179		1,711			1,157
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	225,014		$	192,672	$	446,388		$	382,455

(1)Calculated in accordance with standards established by the Nareit Board of Governors.

(2)Primarily relates to two investments in privately held entities that do not report NAV.

(3)Primarily relates to four investments in privately held entities that do not report NAV.

(4)Primarily relates to a $10 million impairment charge to write off the pre-acquisition deposit for a previously pending acquisition, which was recognized in April 2020 concurrently with the submission of our notice to terminate the transaction.

102

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands)

2017 2016 2017 2016
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 51,273
$ 5,452
$ 108,564
$ (126,014 )
Depreciation and amortization 107,788
77,133
309,069
218,168
Noncontrolling share of depreciation and amortization from consolidated real estate JVs (3,608 ) (2,224 ) (10,985 ) (6,751 )
Our share of depreciation and amortization from unconsolidated real estate JVs 383
658
1,119
2,052
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
Allocation to unvested restricted stock awards (957 ) (438 ) (2,185 ) (14 )
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
Loss on early extinguishment of debt —
3,230
670
3,230
Preferred stock redemption charge —
13,095
11,279
25,614
Allocation to unvested restricted stock awards —
(359 ) (227 ) (1,736 )
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted $ 140,773
$ 107,636
$ 407,511
$ 305,814


	Three Months Ended June 30,							Six Months Ended June 30,
(Per share)	2020			2019		2020		2019
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted	$	1.82		$	0.68	$	1.99	$	1.80
Depreciation and amortization of real estate assets⁽¹⁾	1.22			1.15		2.53		2.32
Impairment of real estate – rental properties	—			—		0.06		—
Allocation to unvested restricted stock awards	(0.01)			—		(0.04)		(0.04)
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted⁽¹⁾	3.03			1.83		4.54		4.08
Unrealized gains on non-real estate investments	(1.38)			(0.10)		(1.25)		(0.75)
Impairment of non-real estate investments	0.04		⁽²⁾	—		0.20		—
Impairment of real estate	0.11		⁽²⁾	—		0.12		—
Loss on early extinguishment of debt	—			—		—		0.07
Preferred stock redemption charge	—			—		—		0.02
Allocation to unvested restricted stock awards	0.01			—		0.02		0.02
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted	$	1.81		$	1.73	$	3.63	$	3.44

Weighted-average shares of common stock outstanding⁽³⁾ for calculationsof:
EPS – diluted	124,448			111,501		123,117		111,279
Funds from operations – diluted, per share	124,448			112,077		123,117		111,857
Funds from operations – diluted, as adjusted, per share	124,448			111,501		123,117		111,279

(1)Calculated in accordance with standards established by the Nareit Board of Governors.

(2)Refer to footnotes on the previous page for additional information.

(3)Refer to the definition of “Weighted-average shares of common stock outstanding – diluted” within this section of this Item 2 for additional information.

Three Months Ended September 30, Nine Months Ended September 30,
(Per share) 2017 2016 2017 2016
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders $ 0.55
$ 0.07
$ 1.20
$ (1.69 )
Depreciation and amortization
1.11
0.97
3.26
2.85
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
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
Non-real estate investment income —
—
—
(0.06 )
Impairment of land parcels and non-real estate investments —
0.06
0.05
1.34
Loss on early extinguishment of debt —
0.04
0.01
0.04
Preferred stock redemption charge —
0.17
0.12
0.34
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

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


~~(1)~~	~~Calculated in accordance with standards established by the NAREIT Board of Governors in its April 2002 White Paper and related implementation guidance.~~

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 operations 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 (loss) 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.

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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 (loss) 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, 2020 and 2019 (dollars in thousands):


															Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,								2020		2019		2020		2019
	2017			2016			2017				2016
Net income (loss)	$	59,546		$	28,559		$	148,597			$	(69,591	)
Net income														Net income	$	243,561	$	87,179	$	274,239	$	223,997
Interest expense	31,031			25,850			92,563				75,730			Interest expense	45,014		42,879		90,753		81,979
Income taxes	1,305			355			3,405				2,374			Income taxes	1,406		890		2,747		2,187
Depreciation and amortization	107,788			77,133			309,069				218,168			Depreciation and amortization	168,027		134,437		343,523		268,524
Stock compensation expense	7,893			7,451			18,649				19,007			Stock compensation expense	9,185		11,437		19,114		22,466
Loss on early extinguishment of debt	—			3,230			670				3,230			Loss on early extinguishment of debt	—		—		—		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														Unrealized gains on non-real estate investments	(171,652)		(11,058)		(154,508)		(83,264)
Impairment of real estate														Impairment of real estate	13,218		—		22,865		—
Impairment of non-real estate investments														Impairment of non-real estate investments	4,702		—		24,482		—
Adjusted EBITDA	$	193,457		$	153,667		$	563,160			$	445,130		Adjusted EBITDA	$	313,461	$	265,764	$	623,215	$	523,250

Revenues	$	285,370		$	230,379		$	833,797		⁽¹⁾	$	672,544		Revenues	$	436,956	$	373,856	$	876,875	$	732,698
Non-real estate investments – total realized gains														Non-real estate investments – total realized gains	13,005		10,442		8,328		21,792
Impairment of non-real estate investments														Impairment of non-real estate investments	4,702		—		24,482		—
Revenues, as adjusted														Revenues, as adjusted	$	454,663	$	384,298	$	909,685	$	754,490

Adjusted EBITDA Margins	68		%	67		%	68		%		66		%
Adjusted EBITDA margin														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~~obligzations, calculated in accordance with GAAP, for leases 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,~~2020, approximately ~~97%~~93% 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.~~operations.

~~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~~“Fixed-charge coverage ~~ratio~~ratio” within 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.

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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.

Development, redevelopment, and pre-construction spending also includes the following costs: (i) certain tenant improvements and renovations that will be reimbursed, (ii) amounts to bring certain acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of acquisition), and (iii) permanent conversion of space for highly flexible, move-in-ready office/laboratory space to foster the growth of promising early- and growth-stage life science companies.

Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of property, including through improvement in the asset quality from Class B to Class A.

Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized property, including costs for renewed and re-leased space.

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Fixed-charge coverage ratio


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Adjusted EBITDA	$	313,461	$	265,764	$	623,215	$	523,250

Interest expense	$	45,014	$	42,879	$	90,753	$	81,979
Capitalized interest	30,793		21,674		55,473		40,183
Amortization of loan fees	(2,737)		(2,380)		(4,984)		(4,613)
Amortization of debt premiums	888		782		1,776		1,583
Cash interest	73,958		62,955		143,018		119,132
Dividends on preferred stock	—		1,005		—		2,031
Fixed charges	$	73,958	$	63,960	$	143,018	$	121,163

Fixed-charge coverage ratio:
– period annualized	4.2x		4.2x		4.4x		4.3x
– trailing 12 months	4.2x		4.2x		4.2x		4.2x

Initial stabilized yield (unlevered)

Initial stabilized yield is calculated as ~~the quotient of~~ the estimated amounts of net operating income at stabilization ~~and~~divided by 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, 2020, 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.

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Investments in real estate – value-creation square footage currently in rental properties

The following table represents RSF of buildings in operation as of June 30, 2020, that will be redeveloped or replaced with new development RSF upon commencement of future construction:


Property/Submarket						RSF
Intermediate-term projects:
651 Gateway Boulevard/South San Francisco						300,010
3825 Fabian Way/Greater Stanford						250,000
960 Industrial Road/Greater Stanford						110,000
10931 and 10933 North Torrey Pines Road/Torrey Pines						92,450
10260 Campus Point Drive/University Town Center						109,164
9363 and 9393 Towne Centre Drive/University Town Center						71,961
4555 Executive Drive/University Town Center						41,475
						975,060
Future projects:
3875 Fabian Way/Greater Stanford						228,000
987 and 1075 Commercial Street/Greater Stanford						26,738
219 East 42nd Street/New York City						349,947
4161 Campus Point Court/University Town Center						159,884
4110 Campus Point Court/University Town Center						12,375
4075 Sorrento Valley Boulevard/Sorrento Valley						40,000
4045 Sorrento Valley Boulevard/Sorrento Valley						10,926
601 Dexter Avenue North/Lake Union						18,680
						846,550
Total value-creation RSF currently included in rental properties						1,821,610

Joint venture financial information

We present components of balance sheet and operating results information related to our real estate joint ventures, which are not ~~in accordance with~~presented, 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, which are controlled by us through contractual rights or majority voting rights, 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, and are instead controlled jointly or by our joint venture partners through contractual rights or majority voting rights, 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 our real estate 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.

107

The components of balance sheet and operating results information related to our real estate 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~~operations 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 non-GAAP financial measure that we believe is useful to investors as a supplemental measure 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~~Refer to the ~~sum~~definition of ~~net debt, as discussed above, plus preferred stock outstanding as of period end. 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,~~2020, and December 31, ~~2016~~2019 (dollars in thousands):


	June 30, 2020		December 31, 2019
Secured notes payable	$	344,784	$	349,352
Unsecured senior notes payable	6,738,486		6,044,127
Unsecured senior lines of credit	440,000		384,000
Unamortized deferred financing costs	52,175		47,299
Cash and cash equivalents	(206,860)		(189,681)
Restricted cash	(34,680)		(53,008)
Net debt	$	7,333,905	$	6,582,089

Adjusted EBITDA:
– quarter annualized	$	1,253,844	$	1,148,620
– trailing 12 months	$	1,185,347	$	1,085,382

Net debt to Adjusted EBITDA:
– quarter annualized	5.8x		5.7x
– trailing 12 months	6.2x		6.1x

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September 30, 2017 December 31, 2016
Secured notes payable $ 1,153,890
$ 1,011,292
Unsecured senior notes payable 2,801,290
2,378,262
Unsecured senior line of credit 314,000
28,000
Unsecured senior bank term loans 547,860
746,471
Unamortized deferred financing costs 27,803
29,917
Cash and cash equivalents (118,562 ) (125,032 )
Restricted cash (27,713 ) (16,334 )
Net debt $ 4,698,568
$ 4,052,576

Net debt $ 4,698,568
$ 4,052,576
7.00% Series D cumulative convertible preferred stock 74,386
86,914
6.45% Series E cumulative redeemable preferred stock —
130,000
Net debt and preferred stock $ 4,772,954
$ 4,269,490

Adjusted EBITDA:
– quarter annualized $ 773,828
$ 662,836
– trailing 12 months $ 728,869
$ 610,839

Net debt to Adjusted EBITDA:
– quarter annualized 6.1 x 6.1 x
– trailing 12 months 6.4 x 6.6 x
Net debt and preferred stock to Adjusted EBITDA:
– quarter annualized 6.2 x 6.4 x
– trailing 12 months 6.5 x 7.0 x

Net operating income, net operating income (cash basis), and operating margin

The following table reconciles net income to ~~total~~ net operating income, ~~(in~~and to net operating income (cash basis) for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):


														Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,							2020		2019		2020		2019
Net income													Net income	$	243,561	$	87,179	$	274,239	$	223,997
	2017			2016			2017			2016
Net income (loss)	$	59,546		$	28,559		$	148,597		$	(69,591	)

Equity in (earnings) losses of unconsolidated real estate joint ventures	(14,100		)	(273		)	(15,050		)	270
Equity in earnings of unconsolidated real estate joint ventures													Equity in earnings of unconsolidated real estate joint ventures	(3,893)		(1,262)		(777)		(2,408)
General and administrative expenses	17,636			15,854			56,099			46,426			General and administrative expenses	31,775		26,434		63,738		51,111
Interest expense	31,031			25,850			92,563			75,730			Interest expense	45,014		42,879		90,753		81,979
Depreciation and amortization	107,788			77,133			309,069			218,168			Depreciation and amortization	168,027		134,437		343,523		268,524
Impairment of real estate	—			8,114			203			193,237			Impairment of real estate	13,218		—		15,221		—
Loss on early extinguishment of debt	—			3,230			670			3,230			Loss on early extinguishment of debt	—		—		—		7,361
Gain on sales of real estate – rental properties	—			—			(270		)	—
Gain on sales of real estate – land parcels	—			(90		)	(111		)	(90		)
Investment income													Investment income	(184,657)		(21,500)		(162,836)		(105,056)
Net operating income	$	201,901		$	158,377		$	591,770		$	467,380		Net operating income	313,045		268,167		623,861		525,508
Straight-line rent revenue													Straight-line rent revenue	(23,367)		(25,476)		(43,964)		(52,441)
Amortization of acquired below-market leases													Amortization of acquired below-market leases	(13,787)		(8,054)		(29,751)		(15,202)
Net operating income (cash basis)													Net operating income (cash basis)	$	275,891	$	234,637	$	550,146	$	457,865

Revenues	$	285,370		$	230,379		$	829,306		$	672,544
Net operating income (cash basis) – annualized													Net operating income (cash basis) – annualized	$	1,103,564	$	938,548	$	1,100,292	$	915,730

Net operating income (from above)													Net operating income (from above)	$	313,045	$	268,167	$	623,861	$	525,508
Total revenues													Total revenues	$	436,956	$	373,856	$	876,875	$	732,698
Operating margin	71%			69%			71%			69%			Operating margin	72%		72%		71%		72%

Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings ~~(losses)~~ of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, ~~impairment~~impairments of real estate, ~~gain~~gains or ~~loss~~losses on early extinguishment of debt, ~~and gain~~gains or ~~loss~~losses on sales of real ~~estate.~~estate, and investment income or loss. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for ~~evaluating~~investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates ~~the timing differences between the recognition of~~straight-line rent revenue ~~in accordance with GAAP~~ and the ~~receipt~~amortization of ~~payments reflected in our consolidated results.~~acquired above- and below-market leases.

~~Further,~~Furthermore, we believe net operating income is useful to investors as a performance measure for our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net ~~income.~~income or loss. Net operating income can be used to measure the initial stabilized yields of our properties by calculating ~~the quotient of~~ net operating income generated by a property ~~on a straight-line basis and~~divided by our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions ~~and~~or a deterioration in market conditions. We also exclude realized and unrealized investment income or loss, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as ~~loss~~losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses ~~that are~~ included in

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determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist

primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management. We calculate operating margin as net operating income divided by total revenues.

We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income or loss as presented in our consolidated statements of ~~income.~~operations. Net operating income should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows as a measure ~~either~~ of our liquidity or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, RSF, ~~annual rental revenue, annual rental revenue per occupied RSF,~~ occupancy percentage, leasing activity, ~~rental rates,~~ and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute ~~operating statistics~~the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties ~~managed by us,~~in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental revenue, refer to the definition of “Annual rental revenue” within this section of this Item 2.

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total ~~rental revenues, tenant recoveries, and~~income from rentals, as well as rental operating expenses in our operating results, can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, ~~rental revenues from~~ lease termination fees, if any, are excluded from the results of same properties. Refer to the “Same properties” subsection in the “Results of operations” section within this Item 2 for additional information.

Stabilized occupancy date

The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.

Tenant recoveries

Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.

We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenue in income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues and tenant recoveries in the “Comparison of results for the three months ended June 30, 2020, to the three months ended June 30, 2019” and “Comparison of results for the six months ended June 30, 2020, to the six months ended June 30, 2019” subsections of the “Results of operations” section within this Item 2 because we believe it promotes investors’ understanding of our operating results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes, common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant variability to components of our operating expenses.

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The following table reconciles income from rentals to tenant recoveries for the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Income from rentals	$	435,856	$	371,618	$	873,461	$	726,367
Rental revenues	(341,555)		(289,625)		(679,497)		(564,188)
Tenant recoveries	$	94,301	$	81,993	$	193,964	$	162,179

Total market capitalization

Total market capitalization is equal to the ~~sum of total equity market capitalization and total debt. Total equity market capitalization is equal to the sum of~~ outstanding shares of ~~7.00% Series D cumulative convertible preferred stock, 6.45% Series E cumulative redeemable preferred stock, and~~ common stock ~~multiplied by the related closing price of each class of security~~ at the end of ~~each~~the period ~~presented.~~multiplied by the closing price on the last trading day of the period (i.e., total equity capitalization), plus total debt outstanding at period-end.

Unencumbered net operating income as a percentage of total net operating income

Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.

The following table summarizes unencumbered net operating income as a percentage of total net operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Unencumbered net operating income	$	296,358	$	251,397	$	591,359	$	494,588
Encumbered net operating income	16,687		16,770		32,502		30,920
Total net operating income	$	313,045	$	268,167	$	623,861	$	525,508
Unencumbered net operating income as a percentage of total net operating income	95%		94%		95%		94%

Weighted-average shares of common stock outstanding – diluted

From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward Agreements”), to fund acquisitions, fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. We are required to consider the potential dilutive effect of our forward equity sales agreements under the treasury stock method while the forward equity sales agreements are outstanding. As of June 30, 2020, we had Forward Agreements outstanding to sell an aggregate of 3.5 million shares of common stock.

Prior to the conversion of our remaining outstanding shares in October 2019, we considered the effect of assumed conversion of our outstanding Series D Convertible Preferred Stock when determining potentially dilutive incremental shares to our common stock. When calculating the assumed conversion, we add back to net income or loss the dividends paid on our Series D Convertible Preferred Stock to the numerator and then include additional common shares assumed to have been issued (as displayed in the table below) to the denominator of the per share calculation. The effect of the assumed conversion is considered separately for our per share calculations of net income or loss; funds from operations, computed in accordance with the definition in the Nareit White Paper; and funds from operations, as adjusted. Prior to the conversion of our remaining outstanding shares in October 2019, our Series D Convertible Preferred Stock was dilutive and assumed to be converted when quarterly and annual basic EPS, funds from operations, or funds from operations, as adjusted, exceeded approximately $1.75 and $7.00 per share, respectively, subject to conversion ratio adjustments and the impact of repurchases of our Series D Convertible Preferred Stock. The effect of the assumed conversion was included when it was dilutive on a per share basis. The dilutive effect of less than a half cent per share appears as zero in our reconciliation of EPS – diluted to funds from operations per share – diluted, and funds from operations per share – diluted, as adjusted, even when the dilutive effect to the numerator alone appears in our reconciliation. Refer to Note 12 – “Earnings per share” and Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for more information related to our forward equity sales agreements and our Series D Convertible Preferred Stock.

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Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Unencumbered net operating income $ 164,291
$ 137,943
$ 479,754
$ 400,027
Encumbered net operating income 37,610
20,434
112,016
67,353
Total net operating income $ 201,901
$ 158,377
$ 591,770
$ 467,380
Unencumbered net operating income as a percentage of total net operating income 81%
87%
81%
86%

The weighted-average shares of common stock outstanding used in calculating EPS – diluted, funds from operations per share – diluted, and funds from operations per share – diluted, as adjusted, for the three and six months ended June 30, 2020 and 2019, are calculated as follows (in thousands):


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Weighted-average shares of common stock outstanding:
Basic shares for EPS	124,333	111,433	122,883	111,245
Outstanding forward equity sales agreements	115	68	234	34
Series D Convertible Preferred Stock	—	—	—	—
Diluted shares for EPS	124,448	111,501	123,117	111,279

Basic shares for EPS	124,333	111,433	122,883	111,245
Outstanding forward equity sales agreements	115	68	234	34
Series D Convertible Preferred Stock	—	576	—	578
Diluted shares for FFO	124,448	112,077	123,117	111,857

Basic shares for EPS	124,333	111,433	122,883	111,245
Outstanding forward equity sales agreements	115	68	234	34
Series D Convertible Preferred Stock	—	—	—	—
Diluted shares for FFO, as adjusted	124,448	111,501	123,117	111,279

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

The primary market risk to which we believe we ~~are~~may be exposed is interest rate risk, which may result from many factors, including government monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control.

In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate ~~swap~~hedge agreements, caps, floors, and other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest rates ~~carries~~may carry additional risks, such as counterparty credit risk and the legal enforceability of ~~hedging contracts.~~hedge agreements. As of June 30, 2020, we did not have any outstanding interest rate hedge agreements.

Our future earnings and fair values relating to ~~financial instruments~~our outstanding debt are primarily dependent upon prevalent market rates of ~~interest, such as LIBOR. However, our interest rate hedge agreements are intended to reduce the effects of interest rate fluctuations.~~interest. The following ~~table illustrates~~tables illustrate the effect of a 1% change in interest rates ~~assuming a LIBOR floor of 0%,~~ on our fixed- and variable-rate debt including our $1.65 billion unsecured senior line of credit, unsecured senior bank term loans, and secured construction loans, after considering the effect of our interest rate hedge agreements, secured debt, and unsecured senior notes payable as of ~~September~~June 30, ~~2017~~2020 (in thousands):


Annualized effect on future earnings due to variable-rate debt:
Rate increase of 1%	$	(2,337)
Rate decrease of 1%	$	379

Effect on fair value of total consolidated debt:
Rate increase of 1%	$	(622,535)
Rate decrease of 1%	$	703,529

Annualized effect on future earnings due to variable-rate debt:
Rate increase of 1% $ (4,509 )
Rate decrease of 1% $ 4,509

Effect on fair value of total consolidated debt and interest rate hedge agreements:
Rate increase of 1% $ (201,681 )
Rate decrease of 1% $ 216,680

These amounts are determined by considering the ~~impact~~effect of the hypothetical interest rates on our ~~borrowing cost and our interest rate hedge agreements in existence on September~~borrowings as of June 30, ~~2017.~~2020. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. ~~Further,~~Furthermore, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. Because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in our capital structure.

Equity price risk

We have exposure to equity price market risk because of our equity investments in ~~certain~~ publicly traded companies and privately held entities. ~~We classify~~All of our investments in ~~publicly~~actively traded public companies ~~as available-for-sale and consequently recognize them~~are reflected in the consolidated balance sheets at fair ~~value, with unrealized gains or losses reported as a component of accumulated other comprehensive income. Investments~~value. Our investments in privately held entities that report NAV per share are ~~generally accounted for under the cost method because we~~measured at fair value using NAV as a practical expedient to fair value. Our equity investments in privately held entities that do not ~~influence any~~report NAV per share are measured at cost less impairments, adjusted for observable price changes during the period. Changes in fair value of ~~the operating or financial policies~~public investments, changes in NAV per share reported by privately held entities, and observable price changes of ~~the~~privately held entities that do not report NAV per share are classified as investment income in ~~which we invest. For all investments, we recognize other-than-temporary declines in value against earnings in the same period during which the decline in value was deemed to have occurred.~~our consolidated statements of operations. There is no assurance that future declines in value will not have a material adverse ~~impact~~effect on our future results of operations. The following table illustrates the effect that a 10% change in the ~~fair~~ value of our equity investments would have on earnings as of ~~September~~June 30, ~~2017~~2020 (in thousands):


Equity price risk:
Fair value increase of 10%	$	131,847
Fair value decrease of 10%	$	(131,847)

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Equity price risk:
Fair value increase of 10% $ 48,526
Fair value decrease of 10% $ (48,526 )

Foreign currency exchange rate risk

We have exposure to foreign currency exchange rate risk related to our subsidiaries operating in Canada and Asia. The functional currencies of our foreign subsidiaries are the local currencies in each respective ~~local currencies.~~country. Gains or losses resulting from the translation of our foreign subsidiaries’ balance sheets and statements of ~~income~~operations are classified in accumulated other comprehensive income (loss) as a separate component of total ~~equity.~~equity and are excluded from net (loss) income. Gains or losses will be reflected in our consolidated statements of ~~income~~operations when there is a sale or partial sale of our investment in these operations or upon a complete or substantially complete liquidation of the investment. The following ~~table illustrates~~tables illustrate the effect that a 10% change in foreign currency rates relative to the U.S. dollar would have on our potential future earnings and on the fair value of our net investment in foreign subsidiaries based on our current operating assets outside the U.S. as of ~~September~~June 30, ~~2017~~2020 (in thousands):

Effect of potential future earnings due to foreign currency exchange rate:
Rate increase of 10% $ 70
Rate decrease of 10% $ (70 )

Effect on the fair value of net investment in foreign subsidiaries due to foreign currency exchange rate:
Rate increase of 10% $ 12,184
Rate decrease of 10% $ (12,184 )


Effect on potential future earnings due to foreign currency exchange rate:
Rate increase of 10%	$	4
Rate decrease of 10%	$	(4)

Effect on the fair value of net investment in foreign subsidiaries due to foreign currency exchange rate:
Rate increase of 10%	$	9,275
Rate decrease of 10%	$	(9,275)

This sensitivity analysis assumes a parallel shift of all foreign currency exchange rates with respect to the U.S. dollar; however, foreign currency exchange rates do not typically move in such a manner, and actual results may differ materially.

Our exposure to market risk elements for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, was consistent with the risk elements presented above, including the effects of changes in interest rates, equity prices, and foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of ~~September~~June 30, ~~2017,~~2020, we had performed an evaluation, under the supervision of our ~~Chief Executive Officer (“CEO”)~~principal executive officers and ~~Chief Financial Officer (“CFO”),~~principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized, and reported within the requisite time periods. Based on our evaluation, the ~~CEO~~principal executive officers and ~~the CFO~~principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2020.

Changes in internal control over financial reporting

There has not been any change in our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017,~~2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

~~Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may~~

~~adversely affect interest expense related to outstanding debt.~~

~~We hold certain instruments in our debt profile in which interest rates move in direct relation to LIBOR, depending on our~~

selection of borrowing options. Beginning in 2008, concerns have been raised that some of the member banks surveyed by the BBA in connection with the calculation of daily LIBOR across a range of maturities and currencies may have underreported, overreported, or otherwise manipulated the interbank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that might have resulted from reporting interbank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with a number of their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations have been instigated by regulators and government authorities in various jurisdictions. Other member banks may also enter into such settlements with, or have proceedings brought by, their regulators or law enforcement agencies in the future. If manipulation of LIBOR occurred, it may have resulted in LIBOR having been artificially lower (or higher) than it would otherwise have been. Any such manipulation could have occurred over a substantial period of time.

~~On September 28, 2012, British regulators published a report on the review of LIBOR. The report concluded that LIBOR~~

~~should be retained as a benchmark but recommended a comprehensive reform of LIBOR, including replacing the BBA with a new~~

independent administrator of LIBOR. Based on this report, final rules for the regulation and supervision of LIBOR by the Financial Conduct Authority (“FCA”) were published and came into effect on April 2, 2013 (the “FCA Rules”). In particular, the FCA Rules include requirements that (i) an independent LIBOR administrator monitor and survey LIBOR submissions to identify breaches of practice standards and/or potentially manipulative behavior, and (ii) firms submitting data to LIBOR establish and maintain a clear conflict-of-interest policy and appropriate systems and controls. In response, ICE Benchmark Administration Limited (“IBA”) was appointed as the independent LIBOR administrator, effective in early 2014. It is not possible to predict the effect of the FCA Rules, any changes in the methods pursuant to which LIBOR is determined, the administration of LIBOR by IBA, and any other reforms to LIBOR that will be enacted in the United Kingdom and elsewhere. In addition, any changes announced by the FCA, the BBA, IBA, or any other successor governance or oversight body, or future changes adopted by such body, in the method pursuant to which LIBOR is determined, as well as manipulative practices or the cessation thereof, may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the level of the index. Fluctuation or discontinuation of LIBOR would affect our interest expense and earnings and the fair value of certain of our financial instruments. We rely on interest rate hedge agreements to mitigate our exposure to such interest rate risk on a portion of our debt obligations. However, there is no assurance these arrangements will be effective in reducing our exposure to changes in interest rates.

In addition, in November 2014, the U.S. Federal Reserve established a working group composed of large U.S. financial institutions, the Alternative Reference Rates Committee (“ARRC”), to identify a set of alternative interest reference rates to LIBOR. In a May 2016 interim report, the ARRC narrowed its choice to two LIBOR alternatives. The first choice is the Overnight Bank Funding Rate (“OBFR”), which consists of domestic and foreign unsecured borrowing in U.S. dollars. The U.S. Federal Reserve has been calculating the OBFR and publishing it since March 2016. The second alternative rate to LIBOR is the Treasury General Collateral rate, which is composed of repo transactions secured by treasuries or other assets accepted as collateral by the majority of intermediaries in the repo market.

On July 27, 2017, the FCA announced that it would phase out LIBOR as a benchmark by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the ARRC, is considering replacing U.S. dollar LIBOR with a newly created index called the Broad Treasury Financing Rate, calculated with a broad set of short-term repurchase agreements backed by treasury securities. If LIBOR ceases to exist, we may need to negotiate the credit agreements with our lenders that utilize LIBOR as a factor in determining the interest rate based on a new standard that is established, if any. The transition to the alternative rate will require careful and deliberate consideration and implementation so as to not disrupt the stability of financial markets. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers.

~~Security breaches through cyber-attacks, cyber-intrusions, or other methods could disrupt our information technology networks and related systems.~~

Risks associated with security breaches, whether through cyber-attacks or cyber-intrusions over the Internet, malware, computer viruses, attachments to e-mails, or other methods, against persons inside our organization, persons with access to systems inside our organization, the U.S. government, financial markets or institutions, or major businesses, including tenants, could disrupt or disable networks and related systems, other critical infrastructures, and the normal operation of business. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Due to the fast pace and unpredictability of cyber threats, long-term implementation plans designed to address cybersecurity risks become obsolete quickly. The SEC has recently shared its concern over the rise in cases of cyber-attacks where information was stolen by hackers to gain market advantage. As a consequence, it is critical that entities not only meet SEC expectations in the cybersecurity arena, but also invest in a program to become secure, vigilant, and resilient in the face of emerging cybersecurity risks.

Even though we may not be specifically targeted, cyber-attacks on the U.S. government, financial markets, financial institutions, or other major businesses, including tenants, could disrupt our normal business operations and networks, which may in turn have a material adverse impact on our financial condition and results of operations.

Information technology networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations, including managing our building systems. They also may be critical to the operations of certain of our tenants and our service providers. Although we make efforts to maintain the security and integrity of these types of networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and in fact may not be detected. While to date we have not experienced a cyber-attack or cyber-intrusion, we may be unable to anticipate or to implement adequate security barriers or other preventive measures. A security breach or other significant disruption involving our information technology networks and related systems could:

~~Disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;~~

~~Result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines;~~

~~Result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;~~

Result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of, proprietary, confidential, sensitive, or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes;

~~Result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;~~

~~Require significant management attention and resources to remedy any damages that result;~~

~~Subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or~~

~~Damage our reputation among our tenants and investors generally.~~

~~Any or all of the foregoing could have a material adverse effect on our financial condition, results of operations, and cash flows.~~

In addition to the information set forth in this quarterly report on Form ~~10‑Q,~~10-Q, one should also carefully review and consider the information contained in our other reports and periodic filings that we make with the SEC, including, without limitation, the information contained under the caption “Item 1A. Risk ~~Factors”~~factors” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016.~~2019. Those risk factors could materially affect our business, financial condition, and results of operations. The risks that we describe in our public filings are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, also may materially adversely affect our business, financial condition, and results of operations.

There have been no material changes in our risk factors from those disclosed under the caption “Item 1A. Risk factors” to our annual report on Form 10-K for the year ended December 31, 2019, except for the following update:

The current outbreak of the novel coronavirus disease, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could adversely impact or cause disruption to our financial condition and results of operations. Further, the spread of COVID-19 has caused severe disruptions in the U.S. and global economies, may further disrupt financial markets, and could create widespread business continuity issues.

In recent years, the outbreaks of a number of diseases, including avian influenza, H1N1, and various other “superbugs,” have increased the risk of a pandemic. In December 2019, COVID-19 was reported to have surfaced in Wuhan, China. COVID-19 has since spread around the globe, including the U.S. COVID-19 has been reported in every state in the U.S., including those where we own and operate our properties, have executive offices, and conduct principal operations. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

The potential impact and duration of the COVID-19 pandemic has had, and continues to have, a significant adverse impact across regional and global economies and financial markets. The global impact of the outbreak has been rapidly evolving and as new cases of the virus have continued, particularly in the U.S., countries around the world and states around the U.S., have reacted by instituting quarantines and restrictions on travel.

Almost every state implemented some form of shelter-in-place or stay-at-home directive between March and May 2020, including, among others, the cities of Boston, San Francisco (including five other San Francisco Bay area counties), and Seattle, and the states of California, Maryland, Massachusetts, and New York, where we own properties. The lockdown restrictions implemented included quarantines, restrictions on travel, shelter-in-place orders, school closures, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects that could continue. These quarantines generally came with exceptions for essential healthcare/public health operations; health manufacturing; clinical research, development, and testing for COVID-19; research and laboratory activities; essential manufacturing for pharmaceuticals, vaccines, testing materials, laboratory supplies, medical equipment, instruments; and safety products; essential retail, including pharmacies; essential building services, such as cleaning and maintenance; skilled trades, such as plumbers and electricians; and certain essential construction projects.

Beginning in early May 2020, the U.S. began to lift the lockdown restrictions and allow for the reopening of businesses. The gradual reopening of retail, manufacturing, and office facilities came with required or recommended safety protocols. There is no assurance that the reopening of businesses, even if those businesses adhere to recommended safety protocols, will enable us or many of our tenants to avoid adverse effects on our operations and businesses.

As of the date of this report, all our ground-up development projects undergoing construction have resumed construction. Due to the increase in the number of COVID-19 cases after the reopening of many states beginning in early June 2020, there is no assurance that local and state governments will not reinstitute new lockdowns that may cause our construction projects to have to pause, causing delays on our expected future deliveries. Construction workers are also practicing social distancing and following rules that restrict gathering of large groups of people in close proximity, as well as other appropriate practices that may slow the pace of construction.

Although critical research and development efforts are continuing in our office/laboratory properties, in certain cases such research and development efforts have fewer workers, and non-critical workers in these buildings and most office buildings are working remotely. When appropriate, certain spaces have been and may continue to be subject to temporary closure for quarantine and proper disinfecting. Our properties and tenant base include a small amount of restaurant, conference center, fitness centers, and retail space, accounting for less than 1.0% of our total revenues during the six months ended June 30, 2020. Retail tenants in particular continue to be severely impacted by social distancing protocols that remain in place across all of the markets where our properties are located.

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The COVID-19 outbreak has already had a significant adverse impact on the economies of the world, including that of the U.S., and this pandemic, and future pandemics, could trigger a period of prolonged global economic slowdown or recession.

The effects of COVID-19 or another pandemic on our (or our tenants’) ability to successfully operate could be adversely impacted due to, among other factors:

•The continued service and availability of personnel, including our executive officers and other leaders that are part of our management team, and our ability to recruit, attract, and retain skilled personnel. To the extent our management or personnel are impacted in significant numbers by the outbreak of pandemic or epidemic disease and are not available or allowed to conduct work, our business and operating results may be negatively impacted;

•Our (or our tenants’) ability to operate, generally or in affected areas, or delays in the supply of products or services from our vendors that are necessary for us to operate effectively;

•Our tenants’ ability to pay rent on their leases in full and timely and, to the extent necessary, our inability to restructure our tenants’ long-term rent obligations on terms favorable to us or timely recapture the space for re-leasing (refer to the risk factor on the next page within this Item 1A of this report);

•Difficulty in our accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our (or our tenants’) ability to access capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis and may adversely affect the valuation of financial assets and liabilities, any of which could affect our (or our tenants’) ability to meet liquidity and capital expenditure requirements or have a material adverse effect on our business, financial condition, results of operations, and cash flows;

•Complete or partial closures of, or other operational issues at, one or more of our offices or properties resulting from government action or directives;

•Our (or our tenants’) ability to continue or complete construction as planned for our tenants’ operations, or delays in the supply of materials or labor necessary for construction, which may affect our (or our tenants’) ability to complete construction or to complete it timely, our ability to prevent a lease termination, and our ability to collect rent, which may have a material adverse effect on our business, financial condition, results of operations, and cash flows;

•The cost of implementing precautionary measures against COVID-19, including, but not limited to, potential additional health insurance and labor-related costs;

•Governmental efforts (such as moratoriums on or suspensions of eviction proceedings) that may affect our ability to collect rent or enforce remedies for the failure of our tenants to pay rent;

•Deterioration of global economic conditions and job losses, which may decrease demand for and occupancy levels of our rental properties and may cause our rental rates and property values to be negatively impacted;

•Our dependence on short-term and long-term debt sources, including our unsecured senior lines of credit, commercial paper program, and senior notes, which may affect our ability to continue our investing activities and pay distributions to our stockholders;

•Declines in the valuation of our properties, which may affect our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of debt funding;

•Refusal or failure by one or more of our lenders under our credit facilities to fund their financing commitment to us, which we may not be able to replace on favorable terms, or at all;

•To the extent we enter into derivative financial instruments, one or more counterparties to our derivative financial instruments could default on their obligations to us or could fail, increasing the risk that we may not realize the benefits of utilizing these instruments;

•Any possession taken of our properties, in whole or in part, by governmental authorities for public purposes in eminent domain proceedings;

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•Our level of insurance coverage and recovery we receive under any insurance we maintain, which may be delayed by, or insufficient to fully offset potential/actual losses caused by, COVID-19;

•Any increase in insurance premiums and imposition of large deductibles;

•Our level of dependence on the Internet, stemming from employees working remotely, and increases in malware campaigns and phishing attacks preying on the uncertainties surrounding COVID-19, which may increase our vulnerability to cyber attacks;

•Our ability to ensure business continuity in the event our continuity of operations plan is not effective or is improperly implemented or deployed during a disruption; and

•Our ability to operate, which may cause our business and operating results to decline or may impact our ability to comply with regulatory obligations leading to reputational harm and regulatory issues or fines.

While the rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of COVID-19, the spread of COVID-19 has resulted in, and may continue to result in, significant disruption of the global financial market and increase in unemployment in the U.S. The pandemic and public and private responses to the pandemic may lead to deterioration of economic conditions, an economic downturn and/or a recession, at a global scale, which could materially affect our (or our tenants’) performance, financial condition, results of operations, and cash flows.

The current outbreak of the novel coronavirus disease, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could adversely impact or cause disruption to our tenants’ financial condition and results of operations, which could adversely impact our ability to generate income sufficient to meet operating expenses or generate income and capital appreciation.

Our tenants, many of which conduct business in the life science, technology, or agtech industries, may incur significant costs or losses responding to the outbreak of a contagious disease (such as COVID-19), lose business due to interruption in their operations, or incur other liabilities related to shelter-in-place orders, quarantines, infection, or other related factors. Tenants that experience deteriorating financial conditions as a result of the outbreak of a contagious disease, or the COVID-19 pandemic, may be unwilling or unable to pay rent in full or timely due to bankruptcy, lack of liquidity, lack of funding, operational failures, or for other reasons. Our tenants’ defaults and delayed or partial rental payments could adversely impact our rental revenues and operating results.

The negative effects of an outbreak of a contagious disease (such as COVID-19) on our tenants in the life science industry may include, but are not limited to:

•Delays or difficulties in enrolling patients or maintaining scheduled study visits in clinical trials;

•Delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

•Diversion of healthcare resources away from clinical trials, including the diversion of hospitals serving as our tenants’ clinical trial sites and hospital staff supporting the conduct of our tenants’ clinical trials;

•Interruptions of key clinical trial or other research activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers, and others;

•Limitations in employee resources that would otherwise be focused on our tenants’ research, business, or clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, or as a result of the governmental imposition of shelter-in-place or similar working restrictions;

•Interruptions in supply chain, manufacturing, and global shipping or other delays that may affect the transport of materials necessary for our tenants’ research, clinical trials, or manufacturing activities;

•Reduction in revenue projections for our tenants’ products due to the prioritization of the treatment of COVID-19 patients over other treatments, such as specialty and elective procedures and non-COVID-19 diagnostics;

•Delays in necessary interactions with ethics committees, regulators, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

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•Delays in receiving approval from regulatory authorities to initiate planned clinical trials or research activities;

•Delays in commercialization of our tenants’ products and approval by governmental authorities (such as the U.S. Food and Drug Administration (“FDA”) and the federal and state Emergency Management Agencies) of our tenants’ products caused by disruptions, funding shortages, or health concerns, as well as by the prioritization by the FDA of the review and approvals of diagnostics, therapeutics, and vaccines that are related to COVID-19;

•Difficulty in retaining staff or rehiring staff in connection with layoffs caused by deteriorating global market conditions;

•Changes in local regulations as part of a response to the COVID-19 outbreak that may require our tenants to change the ways in which their clinical trials are conducted, which may result in unexpected costs or the discontinuation of the clinical trials altogether;

•Refusal or reluctance of the FDA to accept data from clinical trials in affected geographies outside the U.S.;

•Diminishing public trust in healthcare facilities or other facilities, such as medical office buildings, that are treating (or have treated) patients affected by contagious diseases, including COVID-19; and

•Inability to access capital on terms favorable to our tenants because of changes in company valuation and investor appetite due to the general downturn of economic and financial conditions and the volatility of the market.

The negative effects of an outbreak of a contagious disease (such as COVID-19) on our tenants in the technology industry may include, but are not limited to:

•Reduction in staff productivity due to business closures, alternative working arrangements, or illness of staff and/or illness in the family;

•Reductions in sales of our tenants’ services and products, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies, and increased price competition due to economic uncertainties and downturns;

•Disruptions to our tenants’ supply chain, manufacturing vendors, or logistics providers to deliver products or perform services;

•Limitations on business and marketing activities due to travel restrictions and virtualization, or cancellation of customer and employee events;

•Adverse impact on customer relationships and our ability to recognize revenues due to our tenants’ inability to access their clients’ sites for implementation and on-site consulting services;

•Inability to recruit and develop highly skilled employees with appropriate qualifications, to conduct background checks on potential employees, and to provide necessary equipment and training to new and existing employees;

•Network infrastructure and technology systems failures of our tenants, or of third-party services used by our tenants, which may result in system interruptions, reputational harm, loss of intellectual property, delays in product development, lengthy interruptions in services, breaches of data security, and loss of critical data;

•Higher employment compensation costs that may not be offset by improved productivity or increased sales; and

•Inability to access capital on terms favorable to our tenants because of changes in company valuation and/or investor appetite due to general downturns of economic and financial conditions and the volatility of the market.

The negative effects of an outbreak of a contagious disease (such as COVID-19) on our tenants in the agtech industry may include, but are not limited to:

•Reduction in productive capacity and profitability because of decreased labor availability due, for example, to government restrictions, the inability of employees to report to work, or collective bargaining efforts;

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•Potential contract cancellations, project reductions, and reduction in demand for our tenants’ products due to the adverse effect on business confidence and consumer sentiments and the general downturn in economic conditions;

•Disruption of the logistics necessary to import, export, and deliver products to target companies and their customers, as ports and other channels of entry may be closed or may operate at only a portion of capacity;

•Disruptions to manufacturing facilities and supply lines; and

The potential impact of a pandemic or outbreak of a contagious disease with respect to our tenants or our properties is difficult to predict and could have a material adverse impact on the operations of our tenants and, in turn, on our revenues, business, and results of operations, as well as the value of our stock. The COVID-19 pandemic, or other pandemics, may directly or indirectly cause the realization of any of the other risk factors included in our annual report on Form 10-K for the year ended December 31, 2019, or this quarterly report on Form 10-Q.

Our life science tenants are subject to a number of risks unique to their industry, including (i) changes in technology, patent expiration, and intellectual property protection, (ii) high levels of regulation, (iii) failures in the safety and efficacy of their products, and (iv) significant funding requirements for product research and development. These risks may adversely affect their ability to make rental payments to us or satisfy their other lease obligations and consequently may materially adversely affect our business, results of operations, financial condition, and stock price.

Changes in technology, patent expiration, and intellectual property rights and protection

•Our tenants sell products and services in an industry that is characterized by rapid and significant technological changes, frequent new product and service introductions and enhancements, evolving industry standards, and uncertainty over the implementation of new healthcare reform legislation, which may cause them to lose competitive positions and adversely affect their operations.

•Many of our tenants and their licensors require patent, copyright, or trade secret protection and/or rights to use third-party intellectual property to develop, make, market, and sell their products and technologies. A tenant may be unable to commercialize its products or technologies if patents covering such products or technologies are not issued or are successfully challenged, narrowed, invalidated, or circumvented by third parties. Additionally, a third party may own intellectual property that limits a tenant’s ability to bring to market its product or technology without securing a license or other rights to use of the third-party intellectual property, which may require the tenant to pay an upfront fee or royalty. Failure to obtain these rights from third parties may make it challenging or impossible for a tenant to develop and commercialize its products or technologies, which could adversely affect its competitive position and operations.

•Many of our tenants depend upon patents to provide exclusive marketing rights for their products. As their product patents expire, competitors of these tenants may be able to legally produce and market products similar to those products of our tenants, which could have a material adverse effect on their sales and results of operations.

High levels of regulation:

•Some of our tenants develop and manufacture drugs that require regulatory approval, including approval from the FDA, prior to being made, marketed, sold, and used. The regulatory approval process to manufacture and market drugs is costly, typically takes several years, requires validation through clinical trials and the use of substantial resources, and is often unpredictable. A tenant may fail to obtain or may experience significant delays in obtaining these approvals. Even if the tenant obtains regulatory approvals, marketed products will be subject to ongoing regulatory review and potential loss of approvals.

•The ability of some of our tenants to commercialize any future products successfully will depend in part on the coverage and reimbursement levels set by government authorities, private health insurers, and other third-party payers. Additionally, reimbursements may decrease in the future.

119

Failures in the safety and efficacy of their products

•Some of our tenants developing potential products may find that their products are not effective, or even are harmful, when tested in humans.

•Some of our tenants depend upon the commercial success of certain products. Even if a product made by a tenant is successfully developed and proven safe and effective in human clinical trials, and the requisite regulatory approvals are obtained, subsequent discovery of safety issues with these products could cause product liability events, additional regulatory scrutiny and requirements for additional labeling, loss of approval, withdrawal of products from the market, and the imposition of fines or criminal penalties.

•A drug made by a tenant may not be well accepted by doctors and patients, or may be less effective or accepted than a competitor’s drug, even if it is successfully developed.

•The negative results of safety signals arising from the clinical trials of the competitors of our tenants may prompt regulatory agencies to take actions that may adversely affect the clinical trials or products of our tenants.

Significant funding requirements for product research and development

•Some of our tenants require significant funding to develop and commercialize their products and technologies, which funding must be obtained from venture capital firms; private investors; the public markets; companies in the life science industry; or federal, state, and local governments. Such funding may become unavailable or difficult to obtain. The ability of each tenant to raise capital will depend on its financial and operating condition, viability of their products, and the overall condition of the financial, banking, and economic environment, as well as government budget policies.

•Even with sufficient funding, some of our tenants may not be able to discover or identify potential drug targets in humans, or potential drugs for use in humans, or to create tools or technologies that are commercially useful in the discovery or identification of potential drug targets or drugs.

•Some of our tenants may not be able to successfully manufacture their drugs economically, even if such drugs are proven through human clinical trials to be safe and effective in humans.

•Marketed products also face commercialization risk, and tenants may never realize projected levels of product utilization or revenues.

•Negative news regarding the products, the clinical trials, or other business developments of our tenants may cause their stock price or credit profile to deteriorate.

We cannot assure our stockholders that our life science industry tenants will be able to develop, make, market, or sell their products and technologies due to the risks inherent in the life science industry. Any life science industry tenant that is unable to avoid, or sufficiently mitigate, the risks described above may have difficulty making rental payments to us or satisfying their other lease obligations to us. Such risks may also decrease the credit quality of our life science industry tenants or cause us to expend more funds and resources on the space leased by these tenants than we originally anticipated. The increased burden on our resources due to adverse developments relating to our life science industry tenants may cause us to achieve lower-than-expected yields on the space leased by these tenants. Negative news relating to our more significant life science industry tenants may also adversely impact our stock price.

The companies in which we invest through our non-real estate venture investment portfolio expose us to risks similar to those of our tenant base and additional risks inherent in venture capital investing, which could materially affect our reported asset and liability values and earnings and may materially and adversely affect our reported results of operations.

Through our strategic venture investment portfolio, we hold investments in companies which, similar to our tenant base, are concentrated in the life science, technology and agtech industries. The companies in which we invest are accordingly subject to risks similar to those posed by our tenant base, including those disclosed in this Form 10-Q and in our annual report on Form 10-K for the year ended December 31, 2019. In addition, the companies in which we invest through our venture investment portfolio are subject to the risks inherent in venture capital investing and may be adversely affected by external factors beyond our control and other risks, including, but not limited to the following:

120

•Risks inherent in venture capital investing, which typically focuses on relatively new and small companies with unproven technologies and limited access to capital, and is therefore generally considered more speculative than investment in larger, more established companies.

•Market disruption and volatility, which may adversely affect the value of the companies in which we hold equity investments.

•Disruptions, uncertainty, or volatility in the capital markets and global economy, which may impact the ability of the companies in which we invest to raise additional capital or access capital from venture capital investors or financial institutions on favorable terms.

•The illiquidity of the companies in which we invest, which may (i) impede our ability to realize the value at which these investments are carried if we are required to dispose of them, (ii) make it difficult for us to sell these investments on a timely basis, and (iii) impair the value of such investments.

•Changes in the political climate, potential reforms and changes to government negotiation and regulation, the effect of healthcare reform legislation, including those that may limit pricing of pharmaceutical products and drugs, market prices and conditions, prospects for favorable or unfavorable clinical trial results, new product initiatives, the manufacturing and distribution of new products, product safety and efficacy issues, and new collaborative agreements, all of which may affect the valuation, funding opportunities, business operations, and financial results of the companies in which we invest.

•Changes in U.S. federal government organizations or other agencies, including changes in policy, regulations, budgeting, retention of key leadership and other personnel, administration of drug approvals or restrictions on drug product or service development or commercialization, or a partial or complete future government shutdown resulting in temporary closures of agencies such as the Food and Drug Administration and SEC, could adversely affect the companies in which we invest, including delays in the commercialization of such companies’ products, decreased funding of research and development in the life sciences, technology and agtech industries or delays surrounding approval of budget proposals for any of these industries.

•Impacts or changes in business in connection with the COVID-19 pandemic or for other reasons, including diversion of healthcare resources away from clinical trials, delays or difficulties enrolling patients or maintaining scheduled appointments in clinical trials, interruptions and delays in lab research due to the reduction in employee resources stemming from social distancing requirements and the desire of employees to avoid contact with people, insufficient inventory of supplies and reagents necessary for lab research due to interruptions in supply chain interruptions in supply chain, delays or difficulties obtaining clinical site locations or engaging clinical site staff, interruptions on clinical site monitoring due to travel restrictions, delays in interacting with or receiving approval from regulatory agencies in connection with research activities or clinical trials, disruptions to manufacturing facilities and supply lines.

•Reduction in revenue, and revenue growth in connection with the COVID-19 pandemic, deterioration in the global economy or for other reasons, may impair the value of the companies in which we hold equity investments or impede their ability to raise additional capital.

•Seasonal weather conditions, changes in availability of transportation or labor, especially in connection with the COVID-19 pandemic, and other related factors may affect the products and services or the availability of such products and services of the companies in which we invest in the agtech sector.

Many of the factors listed above are beyond our control and, if the companies in which we invest are adversely affected by any of the foregoing, could materially affect our reported asset and liability values and earnings and may materially and adversely affect our reported results of operations. The occurrence of any of these adverse events could cause the market price of shares of our common stock to decline regardless of the performance of our primary real estate business. You should review the additional risk factors in our annual report on Form 10-K for the year ended December 31, 2019.

Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.

Our business may be adversely affected by social, political, and economic instability, unrest, or disruption in a geographic region in which we operate, regardless of cause, including protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection, or social and political unrest. Such events may result in restrictions, curfews, or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations.

121

There have been recent demonstrations and protests in cities throughout the U.S. as well as globally, including in Hong Kong, in connection with civil rights, liberties, and social and governmental reform. While protests have been peaceful in many locations, looting, vandalism, and fires have taken place in cities, including Seattle, Los Angeles, Washington, D.C., New York City, and Minneapolis, which led to the imposition of mandatory curfews and, in some locations, deployment of the U.S. National Guard. Government actions in an effort to protect people and property, including curfews and restrictions on business operations, may disrupt operations, harm perceptions of personal well-being, and increase the need for additional expenditures on security resources. In addition, action resulting from such social or political unrest may pose significant risks to our personnel, facilities, and operations. The effect and duration of the demonstrations, protests, or other factors is uncertain, and we cannot assure there will not be further political or social unrest in the future or that there will not be other events that could lead to the disruption of social, political, and economic conditions. If such events or disruptions persist for a prolonged period of time, our overall business and results of operations may be adversely affected.

Any or all of the foregoing could have a material adverse effect on our financial condition, results of operations, and cash flows, or the market price of our common stock. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, may also have potential to materially adversely affect our business, financial condition, and results of operations.

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ITEM 6. EXHIBITS

Exhibit

Number

Exhibit Title

Incorporated by Reference to:

Date Filed

3.1*

Articles of Amendment and Restatement of the Company, dated May 21, 1997

Form 10-Q

August 14, 1997

3.2*

Certificate of Correction of the Company, dated June 20, 1997

Form 10-Q

August 14, 1997

3.3*

Articles of Amendment of the Company, dated May 10, 2017

Form 8-K

May 12, 2017

3.4*

~~Bylaws of the Company (as amended May 7, 2015)~~

~~Form 8-K~~

~~May 11, 2015~~

3.5*

Articles Supplementary, dated June 9, 1999, relating to the 9.50% Series A Cumulative Redeemable Preferred Stock

Form 10-Q

August 13, 1999

3.6*3.5*

Articles Supplementary, dated February 10, 2000, relating to the election to be subject to Subtitle 8 of Title 3 of the Maryland General Corporation Law

Form 8-K

February 10, 2000

3.7*3.6*

Articles Supplementary, dated February 10, 2000, relating to the Series A Junior Participating Preferred Stock

Form 8-K

February 10, 2000

3.8*3.7*

Articles Supplementary, dated January 18, 2002, relating to the 9.10% Series B Cumulative Redeemable Preferred Stock

Form 8-A

January 18, 2002

3.9*3.8*

Articles Supplementary, dated June 22, 2004, relating to the 8.375% Series C Cumulative Redeemable Preferred Stock

Form 8-A

June 28, 2004

3.10*3.9*

Articles Supplementary, dated March 25, 2008, relating to the 7.00% Series D Cumulative Convertible Preferred Stock

Form 8-K

March 25, 2008

3.11*3.10*

Articles Supplementary, dated March 12, 2012, relating to the 6.45% Series E Cumulative Redeemable Preferred Stock

Form 8-K

March 14, 2012

3.12*3.11*

Articles Supplementary, dated May 10, 2017, relating to Reclassified Preferred Stock

Form 8-K

May 12, 2017

4.1*

~~Specimen certificate representing shares of common stock~~

~~Form 10-Q~~

~~May 5, 2011~~

4.2*

~~Specimen certificate representing shares of 7.00% Series D Cumulative Convertible Preferred Stock~~

~~Form 8-K~~

~~March 25, 2008~~

4.3*

~~Indenture, dated as of February 29, 2012, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee~~

~~Form 8-K~~

~~February 29, 2012~~

4.4*

Supplemental Indenture No. 1, dated as of February 29, 2012, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee

~~Form 8-K~~

~~February 29, 2012~~

4.5*

~~Form of 4.60% Senior Note due 2022 (included in Exhibit 4.4 above)~~

~~Form 8-K~~

~~February 29, 2012~~

4.6*

~~Specimen certificate representing shares of 6.45% Series E Cumulative Redeemable Preferred Stock~~

~~Form 8-A~~

~~March 12, 2012~~

4.7*

Supplemental Indenture No. 2, dated as of June 7, 2013, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee

~~Form 8-K~~

~~June 7, 2013~~

4.8*

~~Form of 3.90% Senior Note due 2023 (included in Exhibit 4.7 above)~~

~~Form 8-K~~

~~June 7, 2013~~

4.9*

Supplemental Indenture No. 3, dated as of July 18, 2014, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee

~~Form 8-K~~

~~July 18, 2014~~

4.10*

~~Form of 2.750% Senior Note due 2020 (included in Exhibit 4.9 above)~~

~~Form 8-K~~

~~July 18, 2014~~

4.11*

Supplemental Indenture No. 4, dated as of July 18, 2014, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and the Bank of New York Mellon Trust Company, N.A., as Trustee

~~Form 8-K~~

~~July 18, 2014~~

4.12*

~~Form of 4.500% Senior Note due 2029 (included in Exhibit 4.11 above)~~

~~Form 8-K~~

~~July 18, 2014~~

4.13*

~~Indenture, dated as of November 17, 2015, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and Wilmington Trust, National Association, as Trustee~~

~~Form 8-K~~

~~November 17, 2015~~

3.12*

~~Exhibit~~

~~Number~~

~~Exhibit Title~~

~~Incorporated by Reference to:~~

~~Date Filed~~

4.14*

~~Supplemental Indenture No. 1, dated as of November 17, 2015, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and Wilmington Trust, National Association, as Trustee~~

~~Form 8-K~~

~~November 17, 2015~~

4.15*

~~Form of 4.30% Senior Note due 2026 (included in Exhibit 4.14 above)~~

~~Form 8-K~~

~~November 17, 2015~~

4.16*

~~Supplemental Indenture No. 2, dated as of June 10, 2016, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and Wilmington Trust, National Association, as Trustee~~

~~Form 8-K~~

~~June 10, 2016~~

4.17*

~~Form of 3.95% Senior Note due 2027 (included in Exhibit 4.16 above)~~

~~Form 8-K~~

~~June 10, 2016~~

4.18*

~~Indenture, dated as of March 3, 2017, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and Branch Banking and Trust Company, as Trustee~~

~~Form 8-K~~

~~March 3, 2017~~

4.19*

~~Supplemental Indenture No. 1, dated as of March 3, 2017, among the Company, as Issuer, Alexandria Real Estate Equities, L.P., as Guarantor, and Branch Banking and Trust Company, as Trustee~~

~~Form 8-K~~

~~March 3, 2017~~

4.20*

~~Form of 3.95% Senior Note due 2028 (included in Exhibit 4.19 above)~~

~~Form 8-K~~

~~March 3, 2017~~

10.1*

~~Fifth~~ Amended and Restated ~~Credit Agreement, dated as~~Bylaws of ~~July 29, 2016, among~~ the Company as Borrower, Alexandria Real Estate Equities, L.P., as Guarantor, Bank of America, N.A., as Administrative Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Chase Bank, N.A., and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, JPMorgan Chase Bank, N.A. and Citigroup Global Markets Inc., as Co-Syndication Agents, Barclays Bank PLC, BBVA Compass, Capital One, National Association, Goldman Sachs Bank USA, Mizuho Bank, Ltd., Regions Bank, Royal Bank of Canada, Sumitomo Mitsui Banking Corporation, TD Bank, N.A., The Bank of Nova Scotia, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Co-Documentation Agents(Amended July 27, 2018)

Form ~~10-Q~~8-K

~~November~~August 2, ~~2016~~2018

10.2*10.1

~~First~~L etter Amendment to ~~Amended~~Amend ed and ~~Restated Term Loan Agreement,~~Res tated Executive Employment Ag reement, dated ~~as of July 29, 2016, among the Company, as Borrower, Alexandria Real Estate Equities, L.P.~~June 8 , as Guarantor, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A. and Citigroup Global Markets Inc., as Co-Syndication Agents, Barclays Bank PLC, Capital One, N.A., Compass Bank, Credit Agricole Corporate and Investment Bank, Goldman Sachs Bank USA, HSBC Bank USA, National Association, Royal Bank of Canada, The Bank of Nova Scotia, and The Royal Bank of Scotland PLC, as Co-Documentation Agents, and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Lead Book Runners

~~Form 10-Q~~

~~November 2, 2016~~

10.3*

First Amendment to Third Amended and Restated Term Loan Agreement, dated as of July 29, 2016, among the Company, as Borrower, Alexandria Real Estate Equities, L.P., as Guarantor, Citibank, N.A., as Administrative Agent, Royal Bank of Canada and The Bank of Nova Scotia, as Co-Syndication Agents, Compass Bank, Regions Bank, MUFG Union Bank, N.A., SunTrust Bank, TD Bank, N.A., Mizuho Bank (USA), and PNC Bank National Association, as Co-Documentation Agents, and Citigroup Global Markets Inc., RBC Capital Markets, and The Bank of Nova Scotia, as Joint Lead Arrangers and Joint Book Running Managers

~~Form 10-Q~~

~~November 2, 2016~~

10.4*

~~Letter Amendment to Amended and Restated Executive Employment Agreement, dated July 3, 2017,~~2020, by and between the Company and Joel S. Marcus

~~Form 8-K~~N/A

~~July 3, 2017~~Filed herewith

~~12.1~~22.0

~~Computation~~List of ~~Consolidated Ratios~~Guarantor Subsidiaries of ~~Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends~~Alexandria Real Estate Equities, Inc.

N/A

Filed herewith

31.1

Certification of ~~Chief~~Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.2

Certification of ~~Chief~~Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.3

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

31.4

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

32.0

Certification of ~~Chief~~Principal Executive ~~Officer~~Officers and ~~Chief~~Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

N/A

Filed herewith

101.1

~~Exhibit~~

~~Number~~

~~Exhibit Title~~

~~Incorporated by Reference to:~~

~~Date Filed~~

~~101~~

The following materials from the Company’s quarterly report on Form 10-Q for the ~~three months~~quarterly period ended ~~September~~June 30, ~~2017~~2020, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2020, and December 31, ~~2016~~2019 (unaudited), (ii) Consolidated Statements of ~~Income~~Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited), (iii) Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited), (iv) Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity and Noncontrolling Interests for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020 and 2019 (unaudited), (v) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited)

N/A

Filed herewith

104

Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, is formatted in Inline XBRL and contained in Exhibit 101.1

N/A

Filed herewith

(*) Incorporated by reference.

123

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~October 31, 2017.~~

July 27, 2020.


			ALEXANDRIA REAL ESTATE EQUITIES, INC.


			~~ALEXANDRIA REAL ESTATE EQUITIES, INC.~~


	/s/ Joel S. Marcus
			Joel S. Marcus ~~Chairman/Chief~~ Executive ~~Officer~~ Chairman (Principal Executive Officer)


			/s/ Stephen A. Richardson
			Stephen A. Richardson Co-Chief Executive Officer (Principal Executive Officer)


			/s/ Peter M. Moglia
			Peter M. Moglia Co-Chief Executive Officer and Co-Chief Investment Officer (Principal Executive Officer)


			/s/ Dean A. Shigenaga
			Dean A. Shigenaga Co-President and Chief Financial Officer (Principal Financial Officer)

~~126~~

124



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


					Page
PART I – FINANCIAL INFORMATION

Item 1.			FINANCIAL STATEMENTS (UNAUDITED)

			Consolidated Balance Sheets as of June 30, 2020, and December 31, 2019		1

			Consolidated Financial Statements for the Three and Six Months Ended June 30, 2020 and 2019:

				~~Page~~
~~PART I – FINANCIAL INFORMATION~~

~~Item 1.~~	~~FINANCIAL STATEMENTS (UNAUDITED)~~

	~~Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016~~	1

	Consolidated Statements of ~~Income for the Three and Nine Months Ended September 30, 2017 and 2016~~Operations			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~~2020 and ~~2016~~2019		58

			Notes to Consolidated Financial Statements		710

Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		5543

Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		~~119~~113

Item 4.			CONTROLS AND PROCEDURES		~~120~~114

PART II – OTHER INFORMATION

Item 1A.			RISK FACTORS		~~121~~115

Item 6.			EXHIBITS		123

~~Item 6.~~SIGNATURES					~~EXHIBITS~~	~~123~~124

~~SIGNATURES~~		~~126~~



ASU		Accounting Standards Update
ATM		At the Market
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~~JV		~~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~~REIT		~~New York Stock Exchange~~
~~REIT~~	Real Estate Investment Trust
RSF		Rentable Square Feet/Foot
SEC		Securities and Exchange Commission
SF		Square Feet/Foot
~~SoMa~~SOFR		Secured Overnight Financing Rate
SoMa		South of Market (submarket of the San Francisco market)
U.S.		United States
VIE		Variable Interest Entity


	June 30, 2020		December 31, 2019
Rental properties:
Land (related to rental properties)	$	2,415,232	$	2,225,785
Buildings and building improvements	12,475,563		11,775,132
Other improvements	1,392,958		1,277,862
Rental properties	16,283,753		15,278,779
Development and redevelopment of new Class A properties:
Development and redevelopment projects	2,552,851		2,057,084
Future development projects	382,015		182,746
Gross investments in real estate	19,218,619		17,518,609
Less: accumulated depreciation	(2,967,150)		(2,704,657)
Net investments in real estate – North America	16,251,469		14,813,952
Net investments in real estate – Asia	29,656		30,086
Investments in real estate	$	16,281,125	$	14,844,038


	September 30, 2017		December 31, 2016			June 30, 2020		December 31, 2019
Assets					Assets
Investments in real estate	$	10,046,521	$	9,077,972	Investments in real estate	$	16,281,125	$	14,844,038
Investments in unconsolidated real estate joint ventures	33,692		50,221		Investments in unconsolidated real estate joint ventures	326,858		346,890
Cash and cash equivalents	118,562		125,032		Cash and cash equivalents	206,860		189,681
Restricted cash	27,713		16,334		Restricted cash	34,680		53,008
Tenant receivables	9,899		9,744		Tenant receivables	7,208		10,691
Deferred rent	402,353		335,974		Deferred rent	688,749		641,844
Deferred leasing costs	208,265		195,937		Deferred leasing costs	274,483		270,043
Investments	485,262		342,477		Investments	1,318,465		1,140,594
Other assets	213,056		201,197		Other assets	930,680		893,714
Total assets	$	11,545,323	$	10,354,888	Total assets	$	20,069,108	$	18,390,503

Liabilities, Noncontrolling Interests, and Equity					Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	1,153,890	$	1,011,292	Secured notes payable	$	344,784	$	349,352
Unsecured senior notes payable	2,801,290		2,378,262		Unsecured senior notes payable	6,738,486		6,044,127
Unsecured senior line of credit	314,000		28,000
Unsecured senior bank term loans	547,860		746,471
Accounts payable, accrued expenses, and tenant security deposits	740,070		731,671
Unsecured senior lines of credit					Unsecured senior lines of credit	440,000		384,000
Accounts payable, accrued expenses, and other liabilities					Accounts payable, accrued expenses, and other liabilities	1,343,181		1,320,268
Dividends payable	83,402		76,914		Dividends payable	133,681		126,278
Total liabilities	5,640,512		4,972,610		Total liabilities	9,000,132		8,224,025

Commitments and contingencies					Commitments and contingencies

Redeemable noncontrolling interests	11,418		11,307		Redeemable noncontrolling interests	12,122		12,300

Alexandria Real Estate Equities, Inc.’s stockholders’ equity:					Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
7.00% Series D cumulative convertible preferred stock	74,386		86,914
6.45% Series E cumulative redeemable preferred stock	—		130,000
Common stock	943		877		Common stock	1,246		1,208
Additional paid-in capital	5,287,777		4,672,650		Additional paid-in capital	9,443,274		8,874,367
Accumulated other comprehensive income	43,864		5,355
Accumulated other comprehensive loss					Accumulated other comprehensive loss	(13,080)		(9,749)
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	5,406,970		4,895,796		Alexandria Real Estate Equities, Inc.’s stockholders’ equity	9,431,440		8,865,826
Noncontrolling interests	486,423		475,175		Noncontrolling interests	1,625,414		1,288,352
Total equity	5,893,393		5,370,971		Total equity	11,056,854		10,154,178
Total liabilities, noncontrolling interests, and equity	$	11,545,323	$	10,354,888	Total liabilities, noncontrolling interests, and equity	$	20,069,108	$	18,390,503



	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


		Square Footage
Market	Number of Properties	Future Development	Active Redevelopment	Operating With Future Development/Redevelopment	Operating	Contractual Purchase Price
Greater Boston	1	—	—	—	509,702	$	226,512
San Francisco	5	260,000	—	300,010	582,309	105,000		⁽¹⁾
San Diego	2	—	—	—	219,628	102,250
Other	3	35,000	—	71,021	180,960	50,817
Three months ended March 31, 2020	11	295,000	—	371,031	1,492,599	484,579

San Francisco	2	700,000	—	26,738	—	113,250
San Diego	1	200,000	—	41,475	—	43,000
Other	1	544,825	63,774	—	—	59,000
Three months ended June 30, 2020	4	1,444,825	63,774	68,213	—	215,250

Six months ended June 30, 2020	15	1,739,825	63,774	439,244	1,492,599	$	699,829	⁽²⁾


Year	Amount
2020	$	568,696
2021	1,167,198
2022	1,162,111
2023	1,107,646
2024	1,028,838
Thereafter	6,696,779
Total	$	11,731,268


	June 30, 2020		December 31, 2019
Gross investment in direct financing lease	$	259,606	$	260,457
Less: unearned income	(219,312)		(220,541)
Less: allowance for credit losses	(2,839)		—
Net investment in direct financing lease	$	37,455	$	39,916


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



	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



	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



	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	$	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		%



	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
Assets
Investments in real estate	$	—	$	—	$	10,046,521	$	—		$	10,046,521
Investments in unconsolidated real estate JVs	—		—		33,692		—			33,692
Cash and cash equivalents	37,916		—		80,646		—			118,562
Restricted cash	138		—		27,575		—			27,713
Tenant receivables	—		—		9,899		—			9,899
Deferred rent	—		—		402,353		—			402,353
Deferred leasing costs	—		—		208,265		—			208,265
Investments	—		1,689		483,573		—			485,262
Investments in and advances to affiliates	9,158,536		8,276,072		168,449		(17,603,057		)	—
Other assets	48,095		—		164,961		—			213,056
Total assets	$	9,244,685	$	8,277,761	$	11,625,934	$	(17,603,057	)	$	11,545,323
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	—	$	—	$	1,153,890	$	—		$	1,153,890
Unsecured senior notes payable	2,801,290		—		—		—			2,801,290
Unsecured senior line of credit	314,000		—		—		—			314,000
Unsecured senior bank term loans	547,860		—		—		—			547,860
Accounts payable, accrued expenses, and tenant security deposits	91,163		—		648,907		—			740,070
Dividends payable	83,402		—		—		—			83,402
Total liabilities	3,837,715		—		1,802,797		—			5,640,512
Redeemable noncontrolling interests	—		—		11,418		—			11,418
Alexandria Real Estate Equities, Inc.’s stockholders’ equity	5,406,970		8,277,761		9,325,296		(17,603,057		)	5,406,970
Noncontrolling interests	—		—		486,423		—			486,423
Total equity	5,406,970		8,277,761		9,811,719		(17,603,057		)	5,893,393
Total liabilities, noncontrolling interests, and equity	$	9,244,685	$	8,277,761	$	11,625,934	$	(17,603,057	)	$	11,545,323



	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
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	5,217			—			303,852			—			309,069
Loss on early extinguishment of debt	670			—			—			—			670
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		)
Distributions of earnings from unconsolidated real estate JVs	—			—			249			—			249
Amortization of loan fees	5,665			—			2,913			—			8,578
Amortization of debt discounts (premiums)	441			—			(2,314		)	—			(1,873		)
Amortization of acquired below-market leases	—			—			(14,908		)	—			(14,908		)
Deferred rent	—			—			(74,362		)	—			(74,362		)
Stock compensation expense	18,649			—			—			—			18,649
Equity in earnings of affiliates	(252,434		)	(242,345		)	(4,694		)	499,473			—
Investment gains	—			(17		)	(8,408		)	—			(8,425		)
Investment losses	—			2,599			3,819			—			6,418
Changes in operating assets and liabilities:
Restricted cash	(36		)	—			(876		)	—			(912		)
Tenant receivables	—			—			(224		)	—			(224		)
Deferred leasing costs	—			—			(39,925		)	—			(39,925		)
Other assets	(10,576		)	—			(86		)	—			(10,662		)
Accounts payable, accrued expenses, and tenant security deposits	(9,813		)	(9		)	40,441			—			30,619
Net cash (used in) provided by operating activities	(112,512		)	(4		)	468,846			—			356,330

Investing Activities
Proceeds from sales of real estate	—			—			4,263			—			4,263
Additions to real estate	—			—			(660,877		)	—			(660,877		)
Purchases of real estate	—			—			(590,884		)	—			(590,884		)
Deposits for investing activities	—			—			4,700			—			4,700
Investments in subsidiaries	(753,137		)	(588,808		)	(12,160		)	1,354,105			—
Investments in unconsolidated real estate JVs	—			—			(248		)	—			(248		)
Return of capital from unconsolidated real estate JVs	—			—			38,576			—			38,576
Additions to investments	—			—			(128,190		)	—			(128,190		)
Sales of investments	—			204			18,692			—			18,896
Net cash used in investing activities	$	(753,137	)	$	(588,604	)	$	(1,326,128	)	$	1,354,105		$	(1,313,764	)



	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%

			June 30, 2020
~~(2)~~Current projects 65% leased/negotiating			~~Expected deliveries of projects are weighted toward the middle of the quarter. 91,155 RSF at 100 Binney Street in our Cambridge submarket will be placed in service in the first quarter of 2018.~~



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%

7%
Income-producing/potential cash flows/covered land play⁽¹⁾			~~Percentages calculated based on RSF as of September 30, 2017.~~

6%
~~(2)~~Land			~~Represents the three months ended September 30, 2017.~~


	Public Offering Price		Shares (in thousands)							Net Proceeds (in thousands)
Date				Settled		Outstanding			Received			Remaining
January 2020	$	155.00	3,356		3,544		$	500,001		$	519,621
July 2020	$	160.50	—		6,900		—			1,061,952
			3,356		10,444		$	500,001		$	1,581,573


~~(1)~~						~~Represents annual rental revenue~~High-Quality Cash Flows From Class A Properties in ~~effect as of September 30, 2017.~~AAA Locations



~~High-Quality Cash Flows from~~ Class A Properties in AAA Locations		AAA Locations

74%
~~Class A Properties in~~ ~~AAA Locations~~			~~AAA Locations~~

~~78%~~
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 Key Locations~~

~~95%~~
~~Over 10 Years~~
	~~Occupancy of Operating Properties as of~~ ~~September 30, 2017~~


~~(1)~~						~~Represents annual rental revenue in effect as of September 30, 2017.~~