ARE — Alexandria Real Estate Equities, Inc.

Summary of Alexandria Real Estate Equities (ARE) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Funds from Operations (FFO) per share diluted as adjusted: $1.73 for Q1 2026; reaffirmed guidance midpoint for 2026 at $6.40.
• Leasing volume: 647,000 square feet, with a notable decline attributed to lower renewals and no public biotech leases signed during the quarter.
• Occupancy rate: 87.7%, down 320 basis points from the previous quarter, primarily due to 657,000 square feet of lease expirations.
• Same-property net operating income (NOI): Decreased by 11.9% year-over-year, with expectations for stronger performance in the second half of 2026.
• General and Administrative (G&A) expenses: Reduced by $7.4 million compared to the 2024 quarterly average, with a target range for 2026 set at $134 million to $154 million.

2. Strategic Updates and Business Highlights

• Balance Sheet Management: Focus on maintaining a strong and flexible balance sheet, with $2.2 billion in pending or identified dispositions.
• Leasing Strategy: Positive momentum in development leasing with 394,000 square feet of leases and letters of intent signed.
• Asset Quality: 55% of annual rental revenue from investment-grade tenants; 78% of annual rental revenue from mega campus platform.
• Disposition Strategy: Continuing to refine and reduce capital expenditures, with a focus on non-core asset sales and joint ventures to optimize capital structure.

3. Forward Guidance and Outlook

• Leasing Expectations: Anticipate an uptick in leasing volume to around 900,000 square feet in Q2 2026.
• Occupancy Guidance: Updated year-end 2026 occupancy guidance to 87%, reflecting a reduction due to fewer anticipated asset sales with significant vacancy.
• Same-Property NOI Guidance: Adjusted to a decline of 9.5% for 2026, primarily due to changes in asset disposition strategy.
• Capitalized Interest: Expected to decline in the second half of 2026, with a revised guidance for capitalized interest reflecting earlier completion of certain projects.

4. Bad News, Challenges, or Points of Concern

• Market Conditions: Challenging operating environment with no public biotech leases signed, indicating a significant slowdown in demand from this segment.
• Regulatory Environment: Ongoing leadership challenges at the FDA and NIH, impacting confidence in the biotech sector and potentially delaying funding and expansion decisions.
• Occupancy Pressure: Anticipated further declines in occupancy due to additional lease expirations in 2026, with 747,000 square feet expected to become vacant.
• Tenant Wind-Downs: Increased reserves for potential tenant failures, now estimated between $25 million to $30 million, reflecting a cautious outlook on tenant stability.

5. Notable Q&A Insights

• Leasing Strategy: Management indicated that the lack of public biotech leases in Q1 was an anomaly, with expectations for recovery in Q2.
• Tenant Mix: Discussions on advanced technology tenants suggest a potential pivot in asset use, with some properties being considered for non-lab uses to attract a broader tenant base.
• Market Interest: There is a noted increase in interest from both domestic and international capital for high-quality assets, shifting from opportunistic to core investments.
• Future Guidance: Management emphasized the uncertainty in predicting 2027 performance due to the evolving market landscape and tenant dynamics, urging caution in modeling future occupancy and revenue.

This summary encapsulates the key points from the earnings call, providing a balanced view of Alexandria Real Estate Equities' current financial standing, strategic direction, and the challenges ahead.