Leases

6 Months Ended

Jun. 30, 2024

Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial

statements for information about lease accounting standards that set principles for the recognition, measurement, presentation, and

disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

Leases in which we are the lessor

As of June 30, 2024, we had 408 properties aggregating 42.1 million operating RSF in key cluster locations, including Greater

Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. We primarily focus on

developing Class A/A+ properties in AAA innovation cluster locations that offer the scale and strategic design integral to our mega

campus strategy. Strategically located near top academic medical institutions and equipped with curated amenities, services, and transit

access, our mega campuses are designed to support our tenants in attracting and retaining top talent, which we believe is a key driver

of tenant demand for our properties.

As of June 30, 2024, all leases in which we are the lessor were classified as operating leases, with the exception of one direct

financing lease. Our leases are described below.

Operating leases

As of June 30, 2024, our 408 properties were subject to operating lease agreements. Two of these properties, representing

two land parcels, are subject to lease agreements that each contain an option for the lessee to purchase the underlying asset from us at

fair market value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent

commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 68.4 years. Our leases

generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain operating leases contain

early termination options that require advance notification and payment of a penalty, which in most cases is substantial enough to be

deemed economically disadvantageous by a tenant to exercise. Future lease payments to be received under the terms of our operating

lease agreements, excluding expense reimbursements, in effect as of June 30, 2024 are outlined in the table below (in thousands):


Year		Amount
2024		$973,926
2025		1,911,248
2026		1,852,109
2027		1,769,872
2028		1,631,328
Thereafter		11,045,840
Total		$19,184,323

Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information

about our owned real estate assets, which are the underlying assets under our operating leases.

Direct financing lease

As of June 30, 2024, we had one direct financing lease agreement, with a net investment balance of $40.5 million, for a

parking structure with a remaining lease term of 68.4 years. The lessee has an option to purchase the underlying asset at fair market

value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent

commencement date of October 1, 2017.

The components of our aggregate net investment in our direct financing lease as of June 30, 2024 and December 31, 2023

are summarized in the table below (in thousands):


	June 30, 2024	December 31, 2023
Gross investment in direct financing lease	$252,368	$253,324
Less: unearned income on direct financing lease	(209,067)	(210,388)
Less: allowance for credit losses	(2,839)	(2,839)
Net investment in direct financing lease	$40,462	$40,097

As of June 30, 2024, our estimated credit loss related to our direct financing lease was $2.8 million. No adjustment to the

estimated credit loss balance was required during the six months ended June 30, 2024. For further details, refer to “Allowance for credit

losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

Future lease payments to be received under the terms of our direct financing lease as of June 30, 2024 are outlined in the

table below (in thousands):


Year		Total
2024		$963
2025		1,976
2026		2,036
2027		2,097
2028		2,160
Thereafter		243,136
Total		$252,368

Income from rentals

Our income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes

revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases	$745,626	$695,019	$1,491,687	$1,372,441
Direct financing leases	662	650	1,321	1,298
Revenues subject to the lease accounting standard	746,288	695,669	1,493,008	1,373,739
Revenues subject to the revenue recognition accounting standard	8,874	8,670	17,705	18,549
Income from rentals	$755,162	$704,339	$1,510,713	$1,392,288

Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist

primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to

“Revenues” and “Recognition of revenue arising from contracts with customers” in Note 2 – “Summary of significant accounting policies”

to our unaudited consolidated financial statements for additional information.

Residual value risk management strategy

Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual

value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business

objective to invest primarily in high-demand markets, (ii) directly managing our leased properties, conducting frequent property

inspections, proactively addressing potential maintenance issues before they arise, and/or timely resolving any occurring issues, and

(iii) carefully selecting our tenants and monitoring their credit quality throughout their respective lease terms.

Leases in which we are the lessee

Operating lease agreements

We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these

leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or

covenants imposed by the leases, nor guarantees of residual value.

We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related

liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to

account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to “Lessee accounting”

in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

As of June 30, 2024, the present value of the remaining contractual payments aggregating $837.1 million under our operating

lease agreements, including our extension options that we are reasonably certain to exercise, was $379.2 million. Our corresponding

operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to

the commencement of the lease, aggregated $510.1 million. As of June 30, 2024, the weighted-average remaining lease term of

operating leases in which we are the lessee was approximately 41 years, including extension options that we are reasonably certain to

exercise, and the weighted-average discount rate was 4.6%. The weighted-average discount rate is based on the incremental

borrowing rate estimated for each lease, 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.

Ground lease obligations as of June 30, 2024 included leases for 36 of our properties, which accounted for approximately 9%

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 $5.8 million as of June 30, 2024, our ground lease obligations have remaining lease terms ranging from approximately 30 to 98

years, including extension options that we are reasonably certain to exercise.

The reconciliation of future lease payments under noncancelable operating leases in which we are the lessee to the operating

lease liability reflected in our unaudited consolidated balance sheet as of June 30, 2024 is presented in the table below (in thousands):


Year		Total
2024		$10,819
2025		22,671
2026		22,865
2027		21,946
2028		21,614
Thereafter		737,191
Total future payments under our operating leases in which we are the lessee		837,106
Effect of discounting		(457,883)
Operating lease liability		$379,223

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 12 years, exclusive of extension options. For the three and six months ended June 30, 2024

and 2023, 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,
	2024	2023	2024	2023
Gross operating lease costs	$9,930	$11,815	$19,141	$21,272
Capitalized lease costs	(518)	(3,297)	(1,046)	(4,218)
Expenses for operating leases in which we are the lessee	$9,412	$8,518	$18,095	$17,054

For the six months ended June 30, 2024 and 2023, amounts paid and classified as operating activities in our unaudited

consolidated statements of cash flows for leases in which we are the lessee aggregated $16.4 million and $18.0 million, respectively.

Leases