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Leases (Notes) | 12 Months Ended
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Dec. 31, 2024
Leases [Abstract] |
Leases | Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our 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 December 31, 2024, we had 391 properties aggregating 39.8 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 life science innovation cluster locations that offer the scale and strategic design integral to our Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities and services, and convenient access to transit, our Megacampus ecosystems 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 December 31, 2024, a ll 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 December 31, 2024, our 391 properties were subject to operating lease agreements. Four of these properties are subject to operating lease agreements that each contain a purchase option as described below: (i)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 67.9 years. (ii)Two operating properties, held by a consolidated real estate joint venture, are subject to purchase options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option, the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our partner’s remaining lease terms for these operating leases are 19.7 years and 6.2 years, respectively. We evaluated the impact of the purchase options on the classifications of the existing operating leases and determined that each lease continues to meet the criteria for classification as an operating lease. Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration. In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early termination fee by the tenant. At the commencement of each lease, we establish the lease term comprised of the noncancelable period for each lease together with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to the assessment, including property-based, market-based, and tenant-based factors. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $1,849,925
2026 |  | 1,775,175
2027 |  | 1,708,433
2028 |  | 1,577,208
2029 |  | 1,460,001
Thereafter |  | 9,503,137
Total |  | $17,873,879
Refer to Note 3 – “Investments in real estate” to our 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 December 31, 2024, we had one direct financing lease agreement, with a net investment balance of $41.5 million, for a parking structure with a remaining lease term of 67.9 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 December 31, 2024 and 2023 are summarized in the table below (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Gross investment in direct financing lease |  | $251,405 |  | $253,324
Less: unearned income on direct financing lease |  | (207,734) |  | (210,388)
Less: provision for expected credit losses |  | (2,168) |  | (2,839)
Net investment in direct financing lease |  | $41,503 |  | $40,097
During the year ended December 31, 2024, we recorded an adjustment of $671 thousand to reduce our estimated expected credit loss related to our direct financing lease to $2.2 million as of December 31, 2024 from $2.8 million as of December 31, 2023. We estimate an expected credit loss related to our direct financing lease using a probability of default methodology that incorporates the credit rating of the borrower to evaluate the probability of default, and projected value of the real estate assets securing the investment to estimate recoveries in the event of default, among other inputs. The adjustment during the year ended December 31, 2024 was recognized in other income in our consolidated statement of operations in connection with the improvement of the credit rating of the lessee. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our consolidated financial statements. Future lease payments to be received under the terms of our direct financing lease as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $1,976
2026 |  | 2,036
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $251,405
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):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Income from rentals: |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |
Operating leases |  | $3,005,137 |  | $2,802,567 |  | $2,534,862
Direct financing leases |  | 2,653 |  | 2,608 |  | 3,094
Revenues subject to the lease accounting standard |  | 3,007,790 |  | 2,805,175 |  | 2,537,956
Revenues subject to the revenue recognition accounting standard |  | 41,916 |  | 37,281 |  | 38,084
Income from rentals |  | $3,049,706 |  | $2,842,456 |  | $2,576,040
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 consolidated financial statements for additional information. Deferred leasing costs The following table summarizes our deferred leasing costs as of December 31, 2024 and 2023 (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Deferred leasing costs |  | $1,061,924 |  | $1,035,339
Accumulated amortization |  | (575,965) |  | (525,941)
Deferred leasing costs, net |  | $485,959 |  | $509,398
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 consolidated financial statements. As of December 31, 2024, the present value of the remaining contractual payments aggregating $949.4 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $507.1 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 $764.5 million. As of December 31, 2024, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 56 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.9%. 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. Included in the operating lease liability balance as of December 31, 2024 is the $134.3 million liability related to an amendment to our existing ground lease agreement at the Alexandria Technology Square® Megacampus aggregating 1.2 million RSF in our Cambridge submarket, which extended the lease term by 24 years from January 1, 2065 to December 31, 2088. The amendment required that we prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments in December 2024 and in January 2025. In December 2024, we made the first installment payment aggregating $135.0 million. On January 14, 2025, we made the second and final installment payment of $135.0 million. Ground lease obligations as of December 31, 2024, included leases for 32 of our properties, which accounted for approximately 8% 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 $5.6 million as of December 31, 2024, our ground lease obligations have remaining lease terms ranging from approximately 30 to 82 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 consolidated balance sheet as of December 31, 2024 is in the table below (in thousands):
Year |  | Total
2025 |  | $157,887
2026 |  | 23,081
2027 |  | 22,162
2028 |  | 21,830
2029 |  | 21,338
Thereafter |  | 703,148
Total future payments under our operating leases in which we are the lessee |  | 949,446
Effect of discounting |  | (442,319)
Operating lease liability |  | $507,127
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. For the years ended December 31, 2024, 2023, and 2022, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are the lessee were $167.8 million, $32.2 million, and $55.2 million, respectively. The increase in 2024 from 2023 primarily relates to a $135.0 million payment made in December 2024 in connection with an amendment to our ground lease agreement at the Alexandria Technology Square® Megacampus, as described in the previous section. The decrease in 2023 from 2022 primarily relates to a $26.3 million payment made during the three months ended March 31, 2022 in connection with the execution of ground lease extensions at two properties in our Greater Stanford submarket. Our operating lease obligations related to our office leases have remaining terms of up to 12 years, exclusive of extension options. For the years ended December 31, 2024, 2023, and 2022, our costs for operating leases in which we are the lessee were as follows (in thousands):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Gross operating lease costs |  | $40,740 |  | $39,879 |  | $36,527
Capitalized lease costs |  | (1,780) |  | (5,544) |  | (3,661)
Expenses for operating leases in which we are the lessee |  | $38,960 |  | $34,335 |  | $32,866
Leases | Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our 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 December 31, 2024, we had 391 properties aggregating 39.8 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 life science innovation cluster locations that offer the scale and strategic design integral to our Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities and services, and convenient access to transit, our Megacampus ecosystems 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 December 31, 2024, a ll 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 December 31, 2024, our 391 properties were subject to operating lease agreements. Four of these properties are subject to operating lease agreements that each contain a purchase option as described below: (i)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 67.9 years. (ii)Two operating properties, held by a consolidated real estate joint venture, are subject to purchase options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option, the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our partner’s remaining lease terms for these operating leases are 19.7 years and 6.2 years, respectively. We evaluated the impact of the purchase options on the classifications of the existing operating leases and determined that each lease continues to meet the criteria for classification as an operating lease. Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration. In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early termination fee by the tenant. At the commencement of each lease, we establish the lease term comprised of the noncancelable period for each lease together with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to the assessment, including property-based, market-based, and tenant-based factors. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $1,849,925
2026 |  | 1,775,175
2027 |  | 1,708,433
2028 |  | 1,577,208
2029 |  | 1,460,001
Thereafter |  | 9,503,137
Total |  | $17,873,879
Refer to Note 3 – “Investments in real estate” to our 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 December 31, 2024, we had one direct financing lease agreement, with a net investment balance of $41.5 million, for a parking structure with a remaining lease term of 67.9 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 December 31, 2024 and 2023 are summarized in the table below (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Gross investment in direct financing lease |  | $251,405 |  | $253,324
Less: unearned income on direct financing lease |  | (207,734) |  | (210,388)
Less: provision for expected credit losses |  | (2,168) |  | (2,839)
Net investment in direct financing lease |  | $41,503 |  | $40,097
During the year ended December 31, 2024, we recorded an adjustment of $671 thousand to reduce our estimated expected credit loss related to our direct financing lease to $2.2 million as of December 31, 2024 from $2.8 million as of December 31, 2023. We estimate an expected credit loss related to our direct financing lease using a probability of default methodology that incorporates the credit rating of the borrower to evaluate the probability of default, and projected value of the real estate assets securing the investment to estimate recoveries in the event of default, among other inputs. The adjustment during the year ended December 31, 2024 was recognized in other income in our consolidated statement of operations in connection with the improvement of the credit rating of the lessee. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our consolidated financial statements. Future lease payments to be received under the terms of our direct financing lease as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $1,976
2026 |  | 2,036
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $251,405
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):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Income from rentals: |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |
Operating leases |  | $3,005,137 |  | $2,802,567 |  | $2,534,862
Direct financing leases |  | 2,653 |  | 2,608 |  | 3,094
Revenues subject to the lease accounting standard |  | 3,007,790 |  | 2,805,175 |  | 2,537,956
Revenues subject to the revenue recognition accounting standard |  | 41,916 |  | 37,281 |  | 38,084
Income from rentals |  | $3,049,706 |  | $2,842,456 |  | $2,576,040
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 consolidated financial statements for additional information. Deferred leasing costs The following table summarizes our deferred leasing costs as of December 31, 2024 and 2023 (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Deferred leasing costs |  | $1,061,924 |  | $1,035,339
Accumulated amortization |  | (575,965) |  | (525,941)
Deferred leasing costs, net |  | $485,959 |  | $509,398
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 consolidated financial statements. As of December 31, 2024, the present value of the remaining contractual payments aggregating $949.4 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $507.1 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 $764.5 million. As of December 31, 2024, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 56 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.9%. 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. Included in the operating lease liability balance as of December 31, 2024 is the $134.3 million liability related to an amendment to our existing ground lease agreement at the Alexandria Technology Square® Megacampus aggregating 1.2 million RSF in our Cambridge submarket, which extended the lease term by 24 years from January 1, 2065 to December 31, 2088. The amendment required that we prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments in December 2024 and in January 2025. In December 2024, we made the first installment payment aggregating $135.0 million. On January 14, 2025, we made the second and final installment payment of $135.0 million. Ground lease obligations as of December 31, 2024, included leases for 32 of our properties, which accounted for approximately 8% 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 $5.6 million as of December 31, 2024, our ground lease obligations have remaining lease terms ranging from approximately 30 to 82 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 consolidated balance sheet as of December 31, 2024 is in the table below (in thousands):
Year |  | Total
2025 |  | $157,887
2026 |  | 23,081
2027 |  | 22,162
2028 |  | 21,830
2029 |  | 21,338
Thereafter |  | 703,148
Total future payments under our operating leases in which we are the lessee |  | 949,446
Effect of discounting |  | (442,319)
Operating lease liability |  | $507,127
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. For the years ended December 31, 2024, 2023, and 2022, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are the lessee were $167.8 million, $32.2 million, and $55.2 million, respectively. The increase in 2024 from 2023 primarily relates to a $135.0 million payment made in December 2024 in connection with an amendment to our ground lease agreement at the Alexandria Technology Square® Megacampus, as described in the previous section. The decrease in 2023 from 2022 primarily relates to a $26.3 million payment made during the three months ended March 31, 2022 in connection with the execution of ground lease extensions at two properties in our Greater Stanford submarket. Our operating lease obligations related to our office leases have remaining terms of up to 12 years, exclusive of extension options. For the years ended December 31, 2024, 2023, and 2022, our costs for operating leases in which we are the lessee were as follows (in thousands):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Gross operating lease costs |  | $40,740 |  | $39,879 |  | $36,527
Capitalized lease costs |  | (1,780) |  | (5,544) |  | (3,661)
Expenses for operating leases in which we are the lessee |  | $38,960 |  | $34,335 |  | $32,866
Leases | Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our 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 December 31, 2024, we had 391 properties aggregating 39.8 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 life science innovation cluster locations that offer the scale and strategic design integral to our Megacampus strategy. Strategically located near top academic and medical research institutions and equipped with curated amenities and services, and convenient access to transit, our Megacampus ecosystems 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 December 31, 2024, a ll 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 December 31, 2024, our 391 properties were subject to operating lease agreements. Four of these properties are subject to operating lease agreements that each contain a purchase option as described below: (i)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 67.9 years. (ii)Two operating properties, held by a consolidated real estate joint venture, are subject to purchase options held by our partner in this joint venture, which is also a tenant at these properties. One purchase option allows our partner to purchase our 30% interest in one property for $40.0 million in 2031. Contingent upon the exercise of this option, the second purchase option allows our partner to purchase our 30% interest in one property for $69.1 million in 2034. Our partner’s remaining lease terms for these operating leases are 19.7 years and 6.2 years, respectively. We evaluated the impact of the purchase options on the classifications of the existing operating leases and determined that each lease continues to meet the criteria for classification as an operating lease. Certain operating leases contain options for the tenant to extend their lease at prevailing market rates at the time of expiration. In addition, certain operating leases contain an early termination option that requires advance notification and payment of an early termination fee by the tenant. At the commencement of each lease, we establish the lease term comprised of the noncancelable period for each lease together with periods covered by options to extend or terminate the lease that we determine the lessee is reasonably certain to exercise. Our assessment of whether a lessee is reasonably certain to exercise or not exercise an option considers all economic factors relevant to the assessment, including property-based, market-based, and tenant-based factors. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $1,849,925
2026 |  | 1,775,175
2027 |  | 1,708,433
2028 |  | 1,577,208
2029 |  | 1,460,001
Thereafter |  | 9,503,137
Total |  | $17,873,879
Refer to Note 3 – “Investments in real estate” to our 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 December 31, 2024, we had one direct financing lease agreement, with a net investment balance of $41.5 million, for a parking structure with a remaining lease term of 67.9 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 December 31, 2024 and 2023 are summarized in the table below (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Gross investment in direct financing lease |  | $251,405 |  | $253,324
Less: unearned income on direct financing lease |  | (207,734) |  | (210,388)
Less: provision for expected credit losses |  | (2,168) |  | (2,839)
Net investment in direct financing lease |  | $41,503 |  | $40,097
During the year ended December 31, 2024, we recorded an adjustment of $671 thousand to reduce our estimated expected credit loss related to our direct financing lease to $2.2 million as of December 31, 2024 from $2.8 million as of December 31, 2023. We estimate an expected credit loss related to our direct financing lease using a probability of default methodology that incorporates the credit rating of the borrower to evaluate the probability of default, and projected value of the real estate assets securing the investment to estimate recoveries in the event of default, among other inputs. The adjustment during the year ended December 31, 2024 was recognized in other income in our consolidated statement of operations in connection with the improvement of the credit rating of the lessee. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our consolidated financial statements. Future lease payments to be received under the terms of our direct financing lease as of December 31, 2024 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $1,976
2026 |  | 2,036
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $251,405
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):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Income from rentals: |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |
Operating leases |  | $3,005,137 |  | $2,802,567 |  | $2,534,862
Direct financing leases |  | 2,653 |  | 2,608 |  | 3,094
Revenues subject to the lease accounting standard |  | 3,007,790 |  | 2,805,175 |  | 2,537,956
Revenues subject to the revenue recognition accounting standard |  | 41,916 |  | 37,281 |  | 38,084
Income from rentals |  | $3,049,706 |  | $2,842,456 |  | $2,576,040
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 consolidated financial statements for additional information. Deferred leasing costs The following table summarizes our deferred leasing costs as of December 31, 2024 and 2023 (in thousands):
|  | December 31,
|  | 2024 |  | 2023
Deferred leasing costs |  | $1,061,924 |  | $1,035,339
Accumulated amortization |  | (575,965) |  | (525,941)
Deferred leasing costs, net |  | $485,959 |  | $509,398
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 consolidated financial statements. As of December 31, 2024, the present value of the remaining contractual payments aggregating $949.4 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $507.1 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 $764.5 million. As of December 31, 2024, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 56 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.9%. 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. Included in the operating lease liability balance as of December 31, 2024 is the $134.3 million liability related to an amendment to our existing ground lease agreement at the Alexandria Technology Square® Megacampus aggregating 1.2 million RSF in our Cambridge submarket, which extended the lease term by 24 years from January 1, 2065 to December 31, 2088. The amendment required that we prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments in December 2024 and in January 2025. In December 2024, we made the first installment payment aggregating $135.0 million. On January 14, 2025, we made the second and final installment payment of $135.0 million. Ground lease obligations as of December 31, 2024, included leases for 32 of our properties, which accounted for approximately 8% 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 $5.6 million as of December 31, 2024, our ground lease obligations have remaining lease terms ranging from approximately 30 to 82 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 consolidated balance sheet as of December 31, 2024 is in the table below (in thousands):
Year |  | Total
2025 |  | $157,887
2026 |  | 23,081
2027 |  | 22,162
2028 |  | 21,830
2029 |  | 21,338
Thereafter |  | 703,148
Total future payments under our operating leases in which we are the lessee |  | 949,446
Effect of discounting |  | (442,319)
Operating lease liability |  | $507,127
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. For the years ended December 31, 2024, 2023, and 2022, amounts paid and classified as operating activities in our consolidated statements of cash flows for leases in which we are the lessee were $167.8 million, $32.2 million, and $55.2 million, respectively. The increase in 2024 from 2023 primarily relates to a $135.0 million payment made in December 2024 in connection with an amendment to our ground lease agreement at the Alexandria Technology Square® Megacampus, as described in the previous section. The decrease in 2023 from 2022 primarily relates to a $26.3 million payment made during the three months ended March 31, 2022 in connection with the execution of ground lease extensions at two properties in our Greater Stanford submarket. Our operating lease obligations related to our office leases have remaining terms of up to 12 years, exclusive of extension options. For the years ended December 31, 2024, 2023, and 2022, our costs for operating leases in which we are the lessee were as follows (in thousands):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Gross operating lease costs |  | $40,740 |  | $39,879 |  | $36,527
Capitalized lease costs |  | (1,780) |  | (5,544) |  | (3,661)
Expenses for operating leases in which we are the lessee |  | $38,960 |  | $34,335 |  | $32,866

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