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Leases | 9 Months Ended
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Sep. 30, 2025
Leases [Abstract] |
Leases | 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 September 30, 2025, we had 375 properties aggregating 39.1 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 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 September 30, 2025, all leases in which we are the lessor were classified as operating leases, w ith the exception of one direct financing and one sales-type lease. Our leases are described below. Operating leases As of September 30, 2025, our 375 properties were subject to operating lease agreements. Seven 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 in the San Francisco Bay Area market, 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 p arcel s is 67.2 years. (ii)Two operating properties in our Seattle market, 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 re maining lease terms for these operating leases are 5.4 years and 19.0 years, res pectively. (iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on property RSF) exercise date in October 2027. 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 comprising 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. We do not reassess the lease term or a lessee option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $452,603
2026 |  | 1,702,409
2027 |  | 1,564,917
2028 |  | 1,429,284
2029 |  | 1,329,387
Thereafter |  | 8,457,826
Total |  | $14,936,426
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 and sales-type leases As of September 30, 2025, we have one direct financing lease agreemen t, with a net investment balance of $42.0 million, for a parking structure with a remaining lease term of 67.2 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. As of September 30, 2025, we also have one sales-type lease for a property in the Seattle market. As of September 30, 2025, the net investment in this lease is $15.9 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of operations for the nine months ended September 30, 2025. At the end of the lease term in March 2026, the property under this lease transfers to the tenant for the sales price of approximately $18.0 million. As of September 30, 2025, our estimated provision for expected credit loss related to our direct financing lease and sales-type lease aggregated $2.2 million, which was predominantly related to our direct financing lease. We estimate the provision for expected credit loss related to our direct financing lease using a probability of default methodology, which incorporates the borrower’s investment- grade credit rating from S&P Global Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the investments to estimate potential recoveries in the event of default, among other inputs. The estimate of the expected credit loss related to our sales-type lease estimate was determined using historical industry losses and transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-term nature of this lease, and other available information. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. The components of our aggregate net investment in our direct financing and sales-type leases as of September 30, 2025 and December 31, 2024 are summarized in the table below (in thousands):
| September 30, 2025 |  | December 31, 2024
Gross investment in direct financing and sales-type leases | $265,903 |  | $251,405
Less: unearned income on direct financing lease | (205,715) |  | (207,734)
Less: provision for expected credit losses | (2,217) |  | (2,168)
Net investment in leases | $57,971 |  | $41,503
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $495
2026 |  | 18,015
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $265,903
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 September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Income from rentals: |  |  |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |  |  |
Operating leases |  | $722,643 |  | $763,947 |  | $2,176,999 |  | $2,255,634
Direct financing and sales-type leases |  | 1,409 |  | 665 |  | 3,308 |  | 1,986
Revenues subject to the lease accounting standard |  | 724,052 |  | 764,612 |  | 2,180,307 |  | 2,257,620
Revenues subject to the revenue recognition accounting standard |  | 11,797 |  | 11,132 |  | 35,996 |  | 28,837
Income from rentals |  | $735,849 |  | $775,744 |  | $2,216,303 |  | $2,286,457
Revenues subject to the revenue recognition accounting standard and 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, 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 September 30, 2025, the present value of the remaining contractual payments aggregating $778.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $362.0 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 $713.4 million. As of September 30, 2025, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.7%. 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 September 30, 2025 included leases for 31 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 $5.2 million as of September 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81 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 September 30, 2025 is in the table below (in thousands):
Year |  | Total
2025 |  | $5,389
2026 |  | 22,768
2027 |  | 21,849
2028 |  | 21,517
2029 |  | 21,025
Thereafter |  | 686,239
Total future payments under our operating leases in which we are the lessee |  | 778,787
Effect of discounting |  | (416,801)
Operating lease liability |  | $361,986
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 nine months ended September 30, 2025 and 2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee aggregated $165.2 million and $24.7 million, respectively. The increase is primarily due to the second installment of a ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year extension to our existing ground lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket. Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension options. For the three and nine months ended September 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as follows (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Gross operating lease costs |  | $11,525 |  | $10,701 |  | $36,743 |  | $29,842
Capitalized lease costs |  | (880) |  | (521) |  | (2,293) |  | (1,567)
Expenses for operating leases in which we are the lessee |  | $10,645 |  | $10,180 |  | $34,450 |  | $28,275
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in 2021 for a future development opportunity in the San Francisco Bay Area market. Based on our financial outlook for this project, we made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our remaining right-of-use asset balance. As of September 30, 2025 and December 31, 2024, we had no operating lease liability associated with this ground lease, as the related lease obligation had been fully prepaid.
Leases | 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 September 30, 2025, we had 375 properties aggregating 39.1 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 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 September 30, 2025, all leases in which we are the lessor were classified as operating leases, w ith the exception of one direct financing and one sales-type lease. Our leases are described below. Operating leases As of September 30, 2025, our 375 properties were subject to operating lease agreements. Seven 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 in the San Francisco Bay Area market, 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 p arcel s is 67.2 years. (ii)Two operating properties in our Seattle market, 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 re maining lease terms for these operating leases are 5.4 years and 19.0 years, res pectively. (iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on property RSF) exercise date in October 2027. 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 comprising 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. We do not reassess the lease term or a lessee option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $452,603
2026 |  | 1,702,409
2027 |  | 1,564,917
2028 |  | 1,429,284
2029 |  | 1,329,387
Thereafter |  | 8,457,826
Total |  | $14,936,426
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 and sales-type leases As of September 30, 2025, we have one direct financing lease agreemen t, with a net investment balance of $42.0 million, for a parking structure with a remaining lease term of 67.2 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. As of September 30, 2025, we also have one sales-type lease for a property in the Seattle market. As of September 30, 2025, the net investment in this lease is $15.9 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of operations for the nine months ended September 30, 2025. At the end of the lease term in March 2026, the property under this lease transfers to the tenant for the sales price of approximately $18.0 million. As of September 30, 2025, our estimated provision for expected credit loss related to our direct financing lease and sales-type lease aggregated $2.2 million, which was predominantly related to our direct financing lease. We estimate the provision for expected credit loss related to our direct financing lease using a probability of default methodology, which incorporates the borrower’s investment- grade credit rating from S&P Global Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the investments to estimate potential recoveries in the event of default, among other inputs. The estimate of the expected credit loss related to our sales-type lease estimate was determined using historical industry losses and transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-term nature of this lease, and other available information. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. The components of our aggregate net investment in our direct financing and sales-type leases as of September 30, 2025 and December 31, 2024 are summarized in the table below (in thousands):
| September 30, 2025 |  | December 31, 2024
Gross investment in direct financing and sales-type leases | $265,903 |  | $251,405
Less: unearned income on direct financing lease | (205,715) |  | (207,734)
Less: provision for expected credit losses | (2,217) |  | (2,168)
Net investment in leases | $57,971 |  | $41,503
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $495
2026 |  | 18,015
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $265,903
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 September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Income from rentals: |  |  |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |  |  |
Operating leases |  | $722,643 |  | $763,947 |  | $2,176,999 |  | $2,255,634
Direct financing and sales-type leases |  | 1,409 |  | 665 |  | 3,308 |  | 1,986
Revenues subject to the lease accounting standard |  | 724,052 |  | 764,612 |  | 2,180,307 |  | 2,257,620
Revenues subject to the revenue recognition accounting standard |  | 11,797 |  | 11,132 |  | 35,996 |  | 28,837
Income from rentals |  | $735,849 |  | $775,744 |  | $2,216,303 |  | $2,286,457
Revenues subject to the revenue recognition accounting standard and 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, 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 September 30, 2025, the present value of the remaining contractual payments aggregating $778.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $362.0 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 $713.4 million. As of September 30, 2025, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.7%. 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 September 30, 2025 included leases for 31 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 $5.2 million as of September 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81 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 September 30, 2025 is in the table below (in thousands):
Year |  | Total
2025 |  | $5,389
2026 |  | 22,768
2027 |  | 21,849
2028 |  | 21,517
2029 |  | 21,025
Thereafter |  | 686,239
Total future payments under our operating leases in which we are the lessee |  | 778,787
Effect of discounting |  | (416,801)
Operating lease liability |  | $361,986
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 nine months ended September 30, 2025 and 2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee aggregated $165.2 million and $24.7 million, respectively. The increase is primarily due to the second installment of a ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year extension to our existing ground lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket. Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension options. For the three and nine months ended September 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as follows (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Gross operating lease costs |  | $11,525 |  | $10,701 |  | $36,743 |  | $29,842
Capitalized lease costs |  | (880) |  | (521) |  | (2,293) |  | (1,567)
Expenses for operating leases in which we are the lessee |  | $10,645 |  | $10,180 |  | $34,450 |  | $28,275
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in 2021 for a future development opportunity in the San Francisco Bay Area market. Based on our financial outlook for this project, we made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our remaining right-of-use asset balance. As of September 30, 2025 and December 31, 2024, we had no operating lease liability associated with this ground lease, as the related lease obligation had been fully prepaid.
Leases | 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 September 30, 2025, we had 375 properties aggregating 39.1 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 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 September 30, 2025, all leases in which we are the lessor were classified as operating leases, w ith the exception of one direct financing and one sales-type lease. Our leases are described below. Operating leases As of September 30, 2025, our 375 properties were subject to operating lease agreements. Seven 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 in the San Francisco Bay Area market, 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 p arcel s is 67.2 years. (ii)Two operating properties in our Seattle market, 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 re maining lease terms for these operating leases are 5.4 years and 19.0 years, res pectively. (iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on property RSF) exercise date in October 2027. 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 comprising 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. We do not reassess the lease term or a lessee option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $452,603
2026 |  | 1,702,409
2027 |  | 1,564,917
2028 |  | 1,429,284
2029 |  | 1,329,387
Thereafter |  | 8,457,826
Total |  | $14,936,426
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 and sales-type leases As of September 30, 2025, we have one direct financing lease agreemen t, with a net investment balance of $42.0 million, for a parking structure with a remaining lease term of 67.2 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. As of September 30, 2025, we also have one sales-type lease for a property in the Seattle market. As of September 30, 2025, the net investment in this lease is $15.9 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of operations for the nine months ended September 30, 2025. At the end of the lease term in March 2026, the property under this lease transfers to the tenant for the sales price of approximately $18.0 million. As of September 30, 2025, our estimated provision for expected credit loss related to our direct financing lease and sales-type lease aggregated $2.2 million, which was predominantly related to our direct financing lease. We estimate the provision for expected credit loss related to our direct financing lease using a probability of default methodology, which incorporates the borrower’s investment- grade credit rating from S&P Global Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the investments to estimate potential recoveries in the event of default, among other inputs. The estimate of the expected credit loss related to our sales-type lease estimate was determined using historical industry losses and transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-term nature of this lease, and other available information. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. The components of our aggregate net investment in our direct financing and sales-type leases as of September 30, 2025 and December 31, 2024 are summarized in the table below (in thousands):
| September 30, 2025 |  | December 31, 2024
Gross investment in direct financing and sales-type leases | $265,903 |  | $251,405
Less: unearned income on direct financing lease | (205,715) |  | (207,734)
Less: provision for expected credit losses | (2,217) |  | (2,168)
Net investment in leases | $57,971 |  | $41,503
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $495
2026 |  | 18,015
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $265,903
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 September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Income from rentals: |  |  |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |  |  |
Operating leases |  | $722,643 |  | $763,947 |  | $2,176,999 |  | $2,255,634
Direct financing and sales-type leases |  | 1,409 |  | 665 |  | 3,308 |  | 1,986
Revenues subject to the lease accounting standard |  | 724,052 |  | 764,612 |  | 2,180,307 |  | 2,257,620
Revenues subject to the revenue recognition accounting standard |  | 11,797 |  | 11,132 |  | 35,996 |  | 28,837
Income from rentals |  | $735,849 |  | $775,744 |  | $2,216,303 |  | $2,286,457
Revenues subject to the revenue recognition accounting standard and 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, 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 September 30, 2025, the present value of the remaining contractual payments aggregating $778.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $362.0 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 $713.4 million. As of September 30, 2025, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.7%. 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 September 30, 2025 included leases for 31 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 $5.2 million as of September 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81 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 September 30, 2025 is in the table below (in thousands):
Year |  | Total
2025 |  | $5,389
2026 |  | 22,768
2027 |  | 21,849
2028 |  | 21,517
2029 |  | 21,025
Thereafter |  | 686,239
Total future payments under our operating leases in which we are the lessee |  | 778,787
Effect of discounting |  | (416,801)
Operating lease liability |  | $361,986
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 nine months ended September 30, 2025 and 2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee aggregated $165.2 million and $24.7 million, respectively. The increase is primarily due to the second installment of a ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year extension to our existing ground lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket. Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension options. For the three and nine months ended September 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as follows (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Gross operating lease costs |  | $11,525 |  | $10,701 |  | $36,743 |  | $29,842
Capitalized lease costs |  | (880) |  | (521) |  | (2,293) |  | (1,567)
Expenses for operating leases in which we are the lessee |  | $10,645 |  | $10,180 |  | $34,450 |  | $28,275
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in 2021 for a future development opportunity in the San Francisco Bay Area market. Based on our financial outlook for this project, we made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our remaining right-of-use asset balance. As of September 30, 2025 and December 31, 2024, we had no operating lease liability associated with this ground lease, as the related lease obligation had been fully prepaid.
Leases | 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 September 30, 2025, we had 375 properties aggregating 39.1 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 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 September 30, 2025, all leases in which we are the lessor were classified as operating leases, w ith the exception of one direct financing and one sales-type lease. Our leases are described below. Operating leases As of September 30, 2025, our 375 properties were subject to operating lease agreements. Seven 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 in the San Francisco Bay Area market, 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 p arcel s is 67.2 years. (ii)Two operating properties in our Seattle market, 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 re maining lease terms for these operating leases are 5.4 years and 19.0 years, res pectively. (iii)Three properties subject to operating lease agreements contain purchase options with a weighted-average (based on property RSF) exercise date in October 2027. 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 comprising 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. We do not reassess the lease term or a lessee option to purchase the underlying asset unless there is a lease modification that is not accounted for as a separate contract. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Amount
2025 |  | $452,603
2026 |  | 1,702,409
2027 |  | 1,564,917
2028 |  | 1,429,284
2029 |  | 1,329,387
Thereafter |  | 8,457,826
Total |  | $14,936,426
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 and sales-type leases As of September 30, 2025, we have one direct financing lease agreemen t, with a net investment balance of $42.0 million, for a parking structure with a remaining lease term of 67.2 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. As of September 30, 2025, we also have one sales-type lease for a property in the Seattle market. As of September 30, 2025, the net investment in this lease is $15.9 million. Upon recognition of the sales-type lease during the three months ended March 31, 2025, we recognized a gain on sale of real estate aggregating $12.7 million classified in gain on sales of real estate within our unaudited consolidated statement of operations for the nine months ended September 30, 2025. At the end of the lease term in March 2026, the property under this lease transfers to the tenant for the sales price of approximately $18.0 million. As of September 30, 2025, our estimated provision for expected credit loss related to our direct financing lease and sales-type lease aggregated $2.2 million, which was predominantly related to our direct financing lease. We estimate the provision for expected credit loss related to our direct financing lease using a probability of default methodology, which incorporates the borrower’s investment- grade credit rating from S&P Global Ratings, to evaluate the probability of default. Additionally, we incorporate the projected value of the real estate securing the investments to estimate potential recoveries in the event of default, among other inputs. The estimate of the expected credit loss related to our sales-type lease estimate was determined using historical industry losses and transaction-specific information, including the estimated fair value of the underlying real estate asset securing this transaction, the short-term nature of this lease, and other available information. For further details, refer to “Provision for expected credit losses” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. The components of our aggregate net investment in our direct financing and sales-type leases as of September 30, 2025 and December 31, 2024 are summarized in the table below (in thousands):
| September 30, 2025 |  | December 31, 2024
Gross investment in direct financing and sales-type leases | $265,903 |  | $251,405
Less: unearned income on direct financing lease | (205,715) |  | (207,734)
Less: provision for expected credit losses | (2,217) |  | (2,168)
Net investment in leases | $57,971 |  | $41,503
Future lease payments to be received under the terms of our direct financing lease and our sales-type lease as of September 30, 2025 are outlined in the table below (in thousands):
Year |  | Total
2025 |  | $495
2026 |  | 18,015
2027 |  | 2,097
2028 |  | 2,160
2029 |  | 2,224
Thereafter |  | 240,912
Total |  | $265,903
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 September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Income from rentals: |  |  |  |  |  |  |  |
Revenues subject to the lease accounting standard: |  |  |  |  |  |  |  |
Operating leases |  | $722,643 |  | $763,947 |  | $2,176,999 |  | $2,255,634
Direct financing and sales-type leases |  | 1,409 |  | 665 |  | 3,308 |  | 1,986
Revenues subject to the lease accounting standard |  | 724,052 |  | 764,612 |  | 2,180,307 |  | 2,257,620
Revenues subject to the revenue recognition accounting standard |  | 11,797 |  | 11,132 |  | 35,996 |  | 28,837
Income from rentals |  | $735,849 |  | $775,744 |  | $2,216,303 |  | $2,286,457
Revenues subject to the revenue recognition accounting standard and 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, 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 September 30, 2025, the present value of the remaining contractual payments aggregating $778.8 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $362.0 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 $713.4 million. As of September 30, 2025, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 54 years, including extension options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.7%. 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 September 30, 2025 included leases for 31 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 $5.2 million as of September 30, 2025, our ground lease obligations have remaining lease terms ranging from approximately 29 to 81 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 September 30, 2025 is in the table below (in thousands):
Year |  | Total
2025 |  | $5,389
2026 |  | 22,768
2027 |  | 21,849
2028 |  | 21,517
2029 |  | 21,025
Thereafter |  | 686,239
Total future payments under our operating leases in which we are the lessee |  | 778,787
Effect of discounting |  | (416,801)
Operating lease liability |  | $361,986
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 nine months ended September 30, 2025 and 2024, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee aggregated $165.2 million and $24.7 million, respectively. The increase is primarily due to the second installment of a ground lease prepayment aggregating $135.0 million made in January 2025 for a 24-year extension to our existing ground lease agreement at the Alexandria Technology Square® Megacampus in our Cambridge submarket. Our operating lease obligations related to our office leases have remaining terms of up to 11 years, exclusive of extension options. For the three and nine months ended September 30, 2025 and 2024, our costs of operating leases in which we are the lessee were as follows (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Gross operating lease costs |  | $11,525 |  | $10,701 |  | $36,743 |  | $29,842
Capitalized lease costs |  | (880) |  | (521) |  | (2,293) |  | (1,567)
Expenses for operating leases in which we are the lessee |  | $10,645 |  | $10,180 |  | $34,450 |  | $28,275
During the three months ended March 31, 2025, we recognized an impairment charge related to a ground lease entered into in 2021 for a future development opportunity in the San Francisco Bay Area market. Based on our financial outlook for this project, we made the determination to no longer proceed with this project and recognized an impairment charge of $32.2 million to write off our remaining right-of-use asset balance. As of September 30, 2025 and December 31, 2024, we had no operating lease liability associated with this ground lease, as the related lease obligation had been fully prepaid.

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