Alexandria Real Estate Equities, Inc. (ARE) Earnings Call Transcript & Summary

Good morning, everyone, and thank you to those joining us in person and via webcast for Alexandria Real Estate Equities 2025 Investor Day. This event contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning forward-looking statements and factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports with the Securities and Exchange Commission -- excuse me. And now I'd like to turn the event over to Joel Marcus, Executive Chairman and Founder. Joel?

Thank you, Paula, and welcome, everybody, to Alexandria's Investor Day 2025. With me today are Hallie Kuhn, Hunter Kass, Peter Moglia and Marc Binda. We just got finished celebrating Thanksgiving, and it's a meaningful reminder of our enduring mission why we do what we do at Alexandria. Markets may rise and fall, but our mission is steady, noble and essential. We are a unique and consequential company focused on advancing human health by enabling the creation of life-changing and life-saving treatments. Every single person in this room, either personally or family members, has been impacted by illness. Amazingly, 3.7 trillion medicines are used each year globally, which is more than one a day by each and every one of us extending globally. We are not an ordinary company leasing generic office or industrial space, but a one-of-a-kind company working each and every day with mission-critical space to improve the lives of others. And for that, we are eternally grateful. Despite the disruptive and relentless political -- I should say, despite the disruptive and relentless march of political, economic, technological and financial forces and their complexity, which no one can control or predict, our team has remained steady with unwavering resolve. We thank our one-of-a-kind team for their superlative resilience and their power of determination drive and mission. And I think one of the most important and proud things we always think about is over the last 10 or more years, over 50 -- approximately almost 50% of all FDA approvals were accomplished by Alexandria tenants. So let me move to the formal presentation. This will be the -- essentially, the material we cover today in 4 sections. And let me start with Section #1. We are, in fact, a -- both the inventor and the dominant leader in life science real estate, and intend to remain that way. We put this chart together to give you a sense of the kind of the accumulation of the impact of market regulatory policy and global activities and headwinds that have occurred just since our last Investor Day a year ago today. And if you combine that with the fifth year of a broad-based bear market, and Hallie will debunk the issue of the XBI has recovered shortly, you can see that this has been probably the single most tumultuous year I've ever seen in the biotech industry. And these events have dramatic impact on our tenants. 2025 is a year like no other. And yesterday was another one of those event riddle days where Rick Pazdur, who is a longtime friend of the company and many in the life science ecosystem and community, who is recently appointed as Director of CDER, announced his resignation as of the end of the year, and that can't be too understated. Rick, for many years, ran the oncology group at the FDA and was one of the most highly respected and important people in the FDA. In fact, many of us thought maybe he should become a director. There are really 4 bedrock foundational principles, if you will, or issues that really underpin this -- the life science industry. And this is really part of an evolution over the last 50 years, Genentech was founded in 1976, will celebrate its 50th anniversary next year. And over those years, the really 4 bedrock foundational aspects of this industry has been basic research, the capital markets, the FDA because it's a highly regulated industry, and of course, how innovative and new products get paid for, which is the whole area of reimbursement. And each of these has a profound impact on our tenants and certainly on us. And I would say this is the first time ever that we have seen all 4 factors really in a negative position. We've never seen that alignment before. And Hallie will have more to say about that. If you go back and look at the last -- or 8 years from about 2014 to 2021, an unprecedented bull market in the biotech life science industry driven by risk on and risk on kind of sentiment as well as very, very low interest rates. And then you look at the rocket ship demand of COVID, which increased demand in a rather short period of time, 4x what we experienced, coupled with, as I say, that long-term bull market and low interest rates, there was an enormous supply surge in our industry. Previously, it had been a product that most people didn't want to touch their -- tip their toe into, but these factors as they aligned, lured a lot of investors and a lot of developers into the space and the oversupply issue then emerged over the last handful of years. And so as you move from the supply then to the demand -- when you look at peak demand here in 2021, the demand has really fallen substantially a 62% decrease over the last handful of years. So you copy or you compare that, you've got this supply and this demand equation is obviously not a good combination of factors. Over the last several years, we've certainly worked hard to increase our focus on our Megacampus assets, which Hunter and Peter will describe, which we really initiated back in 2004 with the launch of our Mission Bay cluster, and we held those assets back during the great financial crisis on balance sheet. We sought to reduce our development exposure because developing into an oversupplied market while demand is receding clearly doesn't make a lot of sense, but you can't just turn off development in a single day. So we've been working hard on that. The current state of play on the battlefield really is the following. You've got a number of key submarkets that are oversupplied. You've got a supply demand juxtaposition, as we talked about, which is causing a decline in occupancy. You've got slower lease-up of development and redevelopment pipeline, and you've got increased CapEx for lease up of vacant space and clearly a higher cost of capital. So with those challenges -- and as a consequence, our key goals for this year and all of which we have been focused on over the last handful of years, but importantly, this year, our intent -- I say this year, meaning 2026, the coming year, to meet our targeted leverage and keep our balance sheet liquid and strong; optimize cash flow to support a rightsized dividend, and we announced a dividend cut this morning, and Marc will deal with that in a short while; to achieve solid returns on incremental investment and obviously increase net asset value. And if you look at those goals, the actions that we're taking and have been taking and will continue to emphasize our maintaining balance sheet strength and flexibility, liquidity, importantly, solid leverage metrics and our credit rating; to invest in our operating portfolio to drive occupancy, obviously, and NOI; to invest in near-term product -- or projects, and both Marc and I will talk about that in a moment, to drive occupancy and NOI, of course; and to incrementally and strategically invest in our Megacampus to, again, increase occupancy, NOI and create value, and Hunter and Peter will take a deep dive onto the Megacampus shortly; and then flexibly and opportunistically consider a buyback of the shares. We did make a modest buyback of shares last January. This is before President Trump was inaugurated and before the cascade of events that I put up on the screen on the first slide. So we're going to step through the 7 levers that we are focused on for 2026. And just to remind you, we have been recycling substantial assets since actually 2021, and have recycled over $7.5 billion of assets since then and larger since 2019. Clearly, we've reduced the size of our asset base and have substantially focused on our growth of the Megacampus, and I alluded to that many, many quarters ago, that was kind of our game plan. So number one, our first lever is maintain a strong and flexible balance sheet, as I said, significant liquidity and our targeted leverage. Lever 2 is to reduce our capital spend and funding needs. Lever 3 is to substantially complete large-scale noncore disposition plan in 2026. Lever 4 is to steadily improve occupancy and NOI, importantly, focusing on all the sectors of our tenant base, including the most innovative entities in a rapidly changing environment, and it is that. Lever 5 is to continue to successfully manage G&A. I think we've done a marvelous job of that. Lever 6 is to maintain optionality regarding future growth investment on the Megacampus. And Lever 7, as I mentioned, is we'll consider flexible and opportunistic share buyback. Marc will get into, obviously, guidance for 2026, an update for 2025, but our targeted investment hopefully will be less than 6x at year-end 2026. That's kind of where we're headed. In the reduction of capital spend and Lever 2 and our funding needs, we certainly made substantial cuts in CapEx. And again, our goal is not to build into oversupply submarkets. Very different than the great financial crisis when we had on balance sheet, 30% of our assets were non-income producing, and we had an unrated balance sheet. It was kind of unusual at that time. But we had much of the Mission Bay land assembled in much of the Cambridge ACKS, Alexandria Center for Kendall Square, many of those parcels. And at that time, we felt that we would weather the storm and hold on to those assets, which turned out to be the growth drivers of the next decade. Today, that's not true. At that time, there was no excess supply. Today, there is excess supply. So the game plan obviously changes. Now Marc will spend a little bit of time on this slide as well, but I want to highlight, as part of Lever 2, reducing CapEx. This is a snapshot of our 2026 pipeline, very highly leased at 86% on the Megacampus, including the delivery of Bristol-Myers Squibb this coming year. The Texas asset, we're reevaluating. We were taken to Texas. This happens to be in the Woodlands north of Houston by an important client of ours in San Francisco, which wanted to set up a major operation there. We didn't just parachute in and decided to do it. It was trying to meet the need of the tenant. But unfortunately, given the impact of the headwinds in the industry institutional demand, which is an anchor around Houston is pretty dried up, and entrepreneurial activity has decreased. And we have made a decision, and it's highlighted in our 8-K today, filed today or furnished to the SEC, that we're going to exit our Montreal assets in Canada, and Marc will talk more about that. So the 2026 [indiscernible] pipeline highly leased and the incremental NOI from that, substantial. So we're moving forward as best we can. And hopefully, we can even improve leasing beyond 86% as an average on the Megacampus. A lot of focus has been on 2027 and beyond pipeline, the incremental NOI that could deliver there is off to the side. We've spent a lot of time over the past year or 2 and a huge focus of the company in the coming years -- in the coming year, I should say. This is a more lowly leased pipeline because it's out a bit, but still we're very focused on it. Today's 8-K highlights 2 -- indicate 2 checkmarks down there for an asset in the Greater Boston and in the San Francisco Bay Area that we're now holding for sale. We're repositioning one of our Fenway projects, space that's available for office because we think that's where the demand is. And we're reevaluating several projects as to go or no go and what the tenant mix might be there. On the ones that were continuing construction, we have reasonable prospects and hopefully, we can make good progress in the coming year. Third lever is substantially complete our large-scale noncore disposition plan. There's a snapshot of assets recycled over the past handful of years. It's -- Marc will talk about this $2.9 billion. It seems like a high number, but we accomplished close to that in '21 and '22. Again, the goal is to reduce the assets -- the asset base size and position the company primarily for growth on the Megacampuses. And this is a slide about 2 issues: one, moving our noncore asset revenue down. And I said many, many quarters ago that we would hope to have, at some point, 90% of our annual rental revenue from our core Megacampuses and core assets. And the balance now, we're hoping for about 5% to 10% targeted, I should say, not hoping, but targeted in the coming year, and that really aligns well with our strategy. And as opposed to the mention about holding assets at the great financial crisis for the coming decade boom, today that -- we don't see that same situation lining up because we have an oversupplied market in some of the markets and we don't want to impair our balance sheet or hold our balance sheet with large amounts of non-income-producing assets. So the goal is to move it from about 20%, down to 11% to 16% where we feel that's rightsizing the portfolio. So stay tuned on that. This is just to reemphasize, this is where our annual rental revenues are headed from our Megacampuses, and we feel very comfortable. And Hunter and Peter will talk about the competitive advantages and why we can demonstrate pretty clearly that they represent a great investment. So the fourth lever focuses on leasing in all sectors. Given the rapidly changing technological environment, I think it's fair to say today that the disappointments that we have in demand in the marketplace would be the bottom 3 parts of the pie chart, so biomedical institutions, that demand across the country has primarily dried up because of a declaration by the federal government and the NIH that they wouldn't reimburse for indirect cost institutions, much of which goes into facility, leasing, acquisition, maintenance, et cetera. And that market has just simply dried up. And so that's a mainstay of this industry, and we hope that matters in litigation right now to over turn the 15% limitation rule. Historically, most institutions have indirect costs between 60%, 65% and some going to 85%, 90%. So this represents, and Hallie is going to talk about this a bit, a critical, critical funding source for these institutions, private biotech. Hallie will talk about the decline in venture has been substantial. And at the moment, most of the venture folks are trying to prevent companies from spending money on hiring or expansion. So that has been slower than it has been during normal times. And public biotech is kind of in the valley of death, as we call it, not necessarily true death, but a valley of financing where unless you have data, it is very hard to do financing to extend your cash runway or extend or grow in any way. So that -- those are the 3 parts of the pie chart that today are having difficulty with demand. The rest of the pie chart is in relatively stable shape. Also important, and we're going to get into this in the Megacampus section, Alexandria continues to capture outsized share of demand. I think it's fair to say if there's a tenant in the market that we want and that we have space for, we'll virtually always win the battle. And I think some of the stats that are just astounding in Greater Boston, the Bay Area and San Diego. Our leasing volume is 105%. This is as of from '23 through the end of the third quarter of this year of the next 5 largest life science real estate owners on a rentable square footage combined. I think an astounding feat and a great credit to our teams who are best in the business. We continue to have strong retention. And I think the bottom line here is where there is demand, we'll capture it. This kind of gives you a sense of where you've got the best assets in the best locations, and we do, undisputedly. The Alexandria Megacampus combined with the best leasing team and dominating the life science leasing market. We're really focused as the key lever for next year and every year, but particularly in a tougher time, vacancy leasing, renewal leasing and obviously, development and redevelopment leasing. This is a kind of a complicated chart, I don't want to spend too much time on, but it kind of gives you a sense of, okay, where does occupancy go and what might be the impact? And the first kind of set of stats that has the 1.8 over there indicates what leasing would be like if the run rate at 3Q '25 just continues, there's no increase in incremental leasing, and this is how it would play out over the coming years. And the second one is if you added 250,000 rentable square feet annually, which doesn't seem like certainly, historically, like a big stretch what occupancy might look like. And the final one, just as an example, if -- or if leasing increased 100,000 square feet per quarter, 400,000 rentable square feet for the year, what the occupancy pickup might be. So clearly, this is important to us, and we're laser-focused on it. And I think most everybody always knows, our leases are best in breed. We set the industry standard having really invented this industry. 97% of our leases have annual escalations. Those escalations create really strong annual cash rents. So something that we're very pleased about. The other side of the coin here and the other -- another lever. Lever 4 is part of those lease structures, the triple net lease structures drive really, I think, very strong operating margins for -- that we posted certainly historically over many, many years, and we intend to try to maintain those margins as best we can. Obviously, as occupancy slips and we pick up costs of vacant spaces, margins are impacted, but Marc will talk about our margin targets, and they still will remain strong. When you get to G&A, I think we're particularly proud over the last year, we've brought down G&A to about 5.7% as a percentage of NOI, almost half the industry standard. And I think we've done a really credible job of that, and Marc will talk about our targets for 2026. We obviously, to the extent that we have cash that we can invest incrementally in a smart and positive way, we clearly would like to do that on our Megacampuses in various fashions. This is just a picture of our Megacampus in San Carlos, 100% leased at this point. And the final lever that I talked about is opportunistic, flexible buyback of stock. Clearly, our current stock price is well under net add. Street sell-side and NAV. So at opportune times during the coming year, we hope to buy back stock. And then maybe finally, let me just say, going back to what I think is the winning formula for us in this really tough environment is we got the best assets. We got the best locations. We've got the best team, and where we choose to lease, we're going to win. And so with that, let me turn it over to Hallie Kuhn.

Good morning, everyone. I'm Dr. Hallie Kuhn, SVP of Life Science and Capital Markets. In this section, we're going to discuss the current state of the life science industry, including the accumulation of 2025 headwinds, future catalysts for growth and long-term opportunity. First and foremost, this is an industry driven by massive unmet medical need. And it has the opportunity to transform diseases like Alzheimer's, cancer, ultra-rare forms of genetic abnormalities into treatable conditions. This industry is also critical for the health, safety and national security of the United States, and must be recognized by the White House, Congress and the public as nothing less than a critical priority. But where do we sit today? Joel showed this chart. There has been an accumulation of 2025 events that have tested the resiliency of this industry. Just to name a few, the FDA has faced unprecedented turmoil of leadership and career staff. Venture capital fundraising is at all-time lows. The IPO window is essentially closed, and we're facing unprecedented competition, particularly from China. So here's what we need to see for catalysts for growth and importantly, for demand for lab space. Now unlike other sectors like office, for example, there's not one single indicator or simple algorithm that will say hey, we're going to see demand increase or we're going to see it go down. Instead, it's a collective set of catalysts that together impact each individual segment of the life science industry that then play into an impact to the other segments. So we're going to walk through each of these 4 pillars today. Starting with the NIH, which Joel reviewed, high level. The NIH is foundational to basic and translational research. So basic research, what we mean is, think early foundational discoveries like the structure of DNA. Translational research is taking those discoveries and translating them to new medicines, think genetically altering that DNA to cure a rare disease. Now 80% of NIH funding is to extramural or we'd say, colleges, research institutions, including those right across the street, such as NYU. And on paper, funding remains steady at approximately $50 billion with broad bipartisan support. But there still remains underlying challenges to its funding mandate. First and foremost, this 15% indirect spending cap that Joel referred to. For context, when a lab gets a grant from the NIH, the NIH pays on top of that, an overhead rate to fund critical infrastructure, literally keeping the lights on. Historically, that can range from 30% to 80%. And overnight, they proposed capping it at 15%. Now it's making its way through the courts. Hopefully, we'll come to a rational agreement on what that would look like in the future, but it has truly frozen institutional demand as they don't know what their budgets are going to look like this year, next year, the year after. However, the NIH is not the only source for innovation, biotech and pharma R&D are important innovators in this industry. Over the past 10 years, R&D spend has increased over 58%. This past year, it's near nearly $300 billion. And there are companies like Eli Lilly, where their R&D budgets may in fact exceed that of the NIH over the next 10 years. But this is not a fix for innovation as these are commercial entities, right? They're going to be focused on the near-term commercial opportunities, right, versus more basic research. And we must not take our life science leadership in the U.S. for granted. We really face a sputnik moment as China has transformed into a true biotech innovator. Orienting you to the slide, from 2014 to 2019, essentially no molecules were in-licensed from pharma companies from China. Now a mere 6 years later, that's [ 1/3 ], and it will be more this year. And these are not copycat, easy-to-make type molecules. They're true innovations, and pharma is paying real dollars to in-license them. Moving on to the second pillar, industry funding. We'll start with venture capital fundraising. What this chart shows is venture firms raising money over the past 10 years. And you can see 2025 is at a nearly a 10-year low. This is because we're in the fifth year of a bear market, and many of these funds are experiencing lackluster returns. They're also being more conservative in deploying capital, elongating their fund cycles. Moving to the public markets. As Joel mentioned, the IPO window remains essentially closed. There have been a few companies that have gone out into the public markets this quarter, but it still remains challenging, and is really reminiscent of the great financial crisis. And this is really important for private biotech companies as it offers an opportunity to exit for their investors and another opportunity to raise capital. Now these companies must rely on private venture capital for longer, and is a real bottleneck for growth in terms of how they think about the next several years. Now the XBI has partially recovered in 2025. However, the XBI is not a proxy for the broad health of the life science industry nor is it a good indicator of lab demand. The reason is most companies, 95% of the constituents of the XBI are commercial-stage companies or almost commercial companies. They have products. They're focused on regulatory, clinical, commercial scaling. They're not focused particularly in this environment and expanding their research platforms, which is a driver for lab space. One silver lining has been a strong year for M&A. This is because pharma is looking at patent expirations through 2030 that could drive up to $180 billion in revenue loss. What we mean there is as novel medicines lose exclusivity in the market either through a patent expiration or set exclusivity timings from the FDA or human health and services, new or novel generics -- sorry, not novel, but generics can come on to the market, increasing competition and decreasing prices. So pharma then looks for new sources of innovation by acquiring or in-licensing new assets. And of the top 20 pharma, they have approximately $1.1 trillion to deploy in firepower towards these types of acquisitions. M&A, as Peter will cover, is also an important driver of organic growth within our Megacampuses. Now on to the third pillar. This industry relies on a consistent, dependable regulatory agency, the FDA. The FDA has certainly rolled out a number of reforms this year to attempt to modernize the agency and expedite review processes. But executionally, there is so much turmoil. There's been over turnover of leadership just this year. Joel mentioned one in the highly respected Dr. Rick Pazdur. And we're starting to see it in the numbers. There's been approximately a 3x increase in delays or missed deadlines for reviews. What we're seeing this year is a slight decline in approvals compared to prior years. So on average, annually, there was about 50 approvals per year the past 5 years. This year, we're about 38, but these approvals also reflect years of regulatory interaction, and it's possible in the years to come, we'll see more of these issues arise given the turmoil and the agency. Now all that being said, as Joel mentioned, we are incredibly proud that 1 out of every 2 therapies approved by the FDA, over the past decade, has been by an FDA -- or has been by an Alexandria tenant. A great example, a recent interview with David Ricks, the CEO of Eli Lilly, he mentioned that 1/3 of all their approved therapies came from their San Diego research site, an Alexandria facility located on our Campus Point Megacampus. Moving to the fourth pillar. This industry, for it to be in any way investable, requires a healthy reimbursement environment for novel medicines. But to provide a little bit more context. Of the nearly $5 trillion in U.S. health care costs, 14% of that is prescription medicines. That's 3x less than all the spend on hospital and physician care, and it's about the same amount spent on what they estimate of paperwork administrative waste, right? It's a small percentage of the overall pie. Additionally, middleman, particularly PBMs or pharmacy benefit managers, needlessly mark up the prices of medicines, and 50% of all spend goes to these middlemen, with no appreciable positive impact to patients. And at the same time, 90% of the medicines patients take in the U.S. are less expensive generics. That being said, drug pricing is front and center for the White House, Congress and the public. In particular, most favored nations has been put forward in executive orders to incentivize companies to match prices to other developed countries. There has been some positive outcomes from this, for example, the U.K. in just the past couple of weeks, has indicated they are going to potentially increase their drug prices by 25%. There have also been one-off deals with pharma and the White House that have overall been relatively rational, mainly targeting Medicaid and Medicare spend. But that being said, the industry is not out of the woods. The IRA, as an example, which was passed during the Biden administration, enables CMS to set prices for therapies for Medicare, 10 to 15 a year. And a recent study came out estimating that it has led to the decrease in over 50 oncology drugs being developed. So it does have a negative impact on patients. One silver lining of this rhetoric though, is increased announcements for onshoring commitments of biomanufacturing. Now to be clear, this is not a driver of significant demand for Alexandria as biomanufacturing tends to be in less expensive areas of the country and pharma companies tend to own and not lease these biomanufacturing facilities. However, we still think it's important for the industry as it shores up supply chain resiliency and ensures we have advanced manufacturing talent in the U.S. So given all the headwinds, what's the case for the massive opportunity of this industry? Well, there's 2 realities. One, we are in the golden age of biological discoveries. Two, the potential reduction in drug development cost and time line could massively expand the biotech and life science industry as we know it. Here's where we sit today. Approximately 10% of diseases have approved therapies, and the market capitalization of the biotech and pharma industry is approximately $6 trillion. So what can we do to increase that? One, these biological discoveries. For example, we have things like the Human Cell Atlas, which is working to replicate how individual cells work in the body, genetic engineering to exquisitely target drivers of disease and automated lab robotics and AI methods to develop, predict, test novel proteins, excuse me. And we've seen what happens when a company can unlock massive areas of unmet medical need. Eli Lilly is a prime example. They are one of the leaders in GLP-1 therapies for obesity. They are the first and only pharma company to breach $1 trillion market cap. And importantly, novel therapies reduce health care costs. Think about Alzheimer's. By 2050, absent development of new medicines, the global cost of care is going to reach $3 trillion. The second tool we have are AI methods across the drug development spectrum. Starting with basic research and drug discovery. AI is still early. It's nascent. And that's because biology is infinitely complex. Everyone sitting here in this room today is made up of nearly 37 trillion cells. Each of those cells has up to 10 trillion proteins, and then there's RNA, DNA, sugars that all dynamically interact on the atomic level, right? Like if you think about it too hard, it's dizzying, right? And so AI can help uncover patterns, but it is not a silver bullet. Where we're seeing AI make, I would say, an even bigger impact, is in later-stage drug development. So regulatory preparation, clinical -- design of clinical trials, regulatory review, which is really where large language models shine, right? This is millions of pages of documents that historically had to be reviewed by humans who can now be aided by these tools. So put yourself in the shoes of an investor. Today, you're looking at approximately 10 years and over $2 billion for a company to get a drug to a patient. We're looking at a potential future where that could be cut in half or more. And in doing so, maintain the rigor and high science to get safe and effective drugs to therapies. The impact of that is potentially massive capital inflow into this industry. 50 years ago, the first biotech, Genentech, our tenant in South San Francisco, was started. Right now, as mentioned, we're still a cottage industry, right? $6 trillion, about 10% of diseases with treatments. If we can shorten that drug development cost and time line, we're looking at an expansion of this industry, that would be a true paradigm shift, more similar to tech with a generalist investor community. And the more the pie expands and this industry expands, so does the need for Alexandria infrastructure. So despite the challenges and headwinds that this industry faces in the current environment, innovation is not going away. And our Megacampuses are uniquely poised to capture the demand from this evolving and diverse tenant mix. With that, I'll pass it over to Hunter.

Thank you, Hallie. My name is Hunter Kass, Co-President and Regional Market Director for Greater Boston. It is great to be here with you all today. Alexandria's long-standing commitment across all of our regions is to execute on our key tactical actions that support and reinforce our cornerstone strategy that will drive us into the future, Alexandria's Megacampus business model. In this section, Peter and I will discuss 4 key topics. First, Alexandria's proprietary algorithm that drives our differentiated Megacampus strategy. Second, highlight 2 key Megacampuses: Alexandria Technology Square in East Cambridge, and Campus Point by Alexandria in San Diego's University Town Center. Third, the unique brand trust that Alexandria has earned over its more than 30-year history. Fourth, we will provide clear metrics of outperformance that our Megacampuses deliver. Before we can dive into those critical topics, it is important to provide the supply and demand backdrop we are navigating in Greater Boston and San Diego, where we're going to present 2 case studies. Over the last 15 years, the Greater Boston market has grown over 175%, from 17.5 million square feet in 2010, to 48.1 million square feet by the end of 2025. From 2010 to 2015, the market saw rational growth, which is represented by availability reducing from 11% to 6%. At the same time, the market grew 25%. That rational market behavior changed between 2015 and 2025, when exponential growth was fueled by low interest rates and irrational market participants, predominantly new entrants into the sector that caused staggering market growth of 120% in that 10-year period, and availability increased 5.5x. The exponential growth translated into total demand of over 22 million square feet during the 5-year period of 2019 through 2023. At that time, the expectation was that demand would remain strong and support absorption of the new supply delivered. Instead, as Hallie described in our previous section, the life science industry was impacted by numerous macro and regulatory events that ultimately lowered total demand materially. Let us now review San Diego's market conditions, where despite the better weather, market fundamentals are remarkably similar to Greater Boston. San Diego had rational market forces from 2010 through 2015 with modest growth of 8% and availability more than cut in half from 13% to 6%. The 10-year period of 2015 through 2025 saw a growth of 55%, which is almost half of the growth realized in Greater Boston. However, the market had its availability increased significantly at 4.5x. Like Greater Boston, the growth in San Diego was driven by exceptionally strong demand of 9.5 million square feet that occurred during the 5-year period of 2019 through 2023. Across all our markets, and highlighted here in our review of Greater Boston and San Diego, the exponential market growth that delivered massive supply, coupled with change in the demand profile has translated into today's demand and supply fundamentals being structurally different when compared to previous market cycles. The market dynamics today continue to reinforce that it is mission critical for life science companies to cluster because that concentration of talent fuels innovation. Alexandria's Megacampus ecosystems are strategically located in key innovation clusters to enable us to capture an outside share of demand. Alexandria's proprietary algorithm is the combination of our clustering and Megacampus strategy that delivers Alexandria's irreplaceable platform consisting of 26 Megacampuses. Over our 30-plus year history, Alexandria has acquired, developed and redeveloped assets that laid the foundation for our differentiated Megacampus advantage. In 1994, Alexandria pioneered the life science real estate industry, providing us with a first mover advantage that we still benefit from today. We utilized Harvard Business Professor Michael Porter's cluster theory as the basis for our proven cluster model. We identified 4 critical components for the life science companies to thrive: location, innovation, talent, and capital. Highlighted here is Mission Bay, the first assemblage of our cluster campus strategy that established the foundation of our Megacampus platform. The proprietary algorithm that fuels Alexandria is a simple concept, but it takes decades to materialize, requires the combination of great real estate assets and a dedicated team committed to operational excellence. The combination of what we refer to as great hardware, the real estate, and great software, the people, is what the market calls sponsorship. Well, today, sponsorship matters. And it is clear that Alexandria's cluster model Megacampus platform and premier sponsorship delivers leasing outperformance. In Greater Boston, Alexandria's leasing volume is 110% of the next 5 largest life science real estate owners by rentable square feet combined. In San Diego, thanks to the magnificent work of a tremendous team, the region has delivered leasing volume of 150% of the next 5 largest life science real estate owners by rentable square feet combined. The leasing outperformance of 110% and 150% is truly exceptional and highlights the dominance of our Megacampus platform and operational excellence. We will now dive deeper into 2 Megacampuses. I will cover Alexandria Technology Square, and Peter will cover Campus Point by Alexandria. Peter will also explain the importance of how Alexandria brand translates into trust for our tenants. Alexandria Technology Square is our first foundational Megacampus in operation. We have been stewards of this generational asset for nearly 20 years. We will now walk through how Technology Square delivers on all 4 components of our cluster model: location, innovation, talent, and capital. And 3 components of our differentiated Megacampus platform: space, place and service. The combination of these 2 components is what delivers Alexandria's proprietary algorithm that drives our differentiated Megacampus strategy. Our Greater Boston regional portfolio has 3 Megacampuses located in East Cambridge that combined, make up 62% of the region's ARR. These campuses have taken over 20 years to aggregate and transform into the engine that anchors the region. Technology Square is directly located across from MIT's campus within walking distance of the red line, referred to commonly as the brain train. The most innovative square mile on the planet is the quote on the earlier slide. Technology Square's 60-plus-year history as the home of technology and biotechnology innovation is the reason for that description of East Cambridge. It is amazing to see how Technology Square's heritage, evolution and future underscores its integral part in the diverse and robust innovation economy. The concentration of elite talent is vital to an innovation economy like East Cambridge. Technology Square is uniquely positioned across from MIT or the [ Coke Institute ], this data center and the college of computing, just to name a few, produce talent that is the lifeblood for companies like Toyota, Google, AstraZeneca and Takeda. These companies and many more are pushing their respective innovation boundaries to deliver breakthroughs in their fields of expertise. The capital markets remain challenged and in times like today, sophisticated investors focused on core markets. While overall funding has been down recently, as Hallie has outlined, Greater Boston has a long-standing history of a strong capital base as represented by over 30% of U.S. biotech capital has been deployed to Greater Boston over the last decade. More recently, we have seen strong venture capital fundraising, with over $14 billion raised since 2023. However, we need to acknowledge that in the current risk-off environment, many venture investors have focused their investment activity on derisked and later-stage assets that do not translate into increased lab demand. Having covered the 4 key components of the cluster model, we will now focus on the components of the Megacampus platform: space, place and service. Alexandria Technology Square, since the acquisition in 2006, has been an over 1 million square foot operating Megacampus. This scale has offered an ability to deliver flexibility and strategic optionality to our tenants. What I am going to walk through here is emblematic of the dynamic Megacampus platform. I would have you look to the left side of this slide, which provides the tenant mix of Technology Square by ARR in the fourth quarter of 2023. At that time, the campus was nearly 100% leased and occupied, reinforcing that our sponsorship and the strategic optionality a Megacampus provides secures strong tenancy. Moving to the right side of the slide, we have highlighted how our Megacampus platform, now spanning multiple submarkets in Greater Boston, has secured tenancy from Technology Square. Starting at the top of the right side with [ Chimera ], a clinical-stage company that has grown by over 900% from its 300 Technology Square location, and now anchors 500 North Beacon located on our Arsenal on the Charles Megacampus in Watertown. Verve, which was acquired by Eli Lilly in July of this year for $1.3 billion, grew by over 500% from its 500 Technology Square location before moving into our Fenway Megacampus asset 201 Brooklyn. Moderna, a long-standing tenant partner relocated and grew by 270% from 200 Technology Square to 325 Binney Street located on our One Kendall Square Megacampus. In addition to supporting tenant growth, Foghorn is an excellent example of working with a tenant to adapt their space in order to meet their needs. Here, Foghorn moved from 500 Tech Square to 99 Coolidge. We recognize that this growth has translated into vacancy that we are committed to resolving. It is important to acknowledge that the vacancy also came with over 700,000 square feet of absorption across 4 Megacampuses and a net growth of 218%. The Center of Technology Square is its iconic central lawn that has been convening the brightest minds for decades. It is a great example of how each Megacampus is positioned with a strategic focus to curate ecosystems that are designed to recruit and retain top talent that will ignite collaboration and catalyze innovation. I am humbled every day by the tremendous team at Alexandria, and in honor to lock arms in our pursuit of delivering operational excellence. In Greater Boston, we had the Building Owners and Managers Association, TOBY Awards, on the night of November 20, which is the industry's highest recognition honoring excellence in building management and operations. It was a great night. The Greater Boston team secured 5 awards highlighted here. 325 Binney Street, the most sustainable building in Cambridge, earned the Earth Building Award. Our Arsenal on the Charles Megacampus in Watertown won both the Suburban Campus of the Year and had its community link building win in the public assembly category. And the Fenway 201 Brookline won the Life Science Building of the Year, and our 15 Necco property leased to the first [ trillion dollar ] life science company, Eli Lilly, won the Corporate Facility of the Year. As we round out my commentary, there are 2 key items that we wanted to highlight. The first is the strong financial performance of Alexandria Technology Square and how since its acquisition in 2006, the cash NOI has grown 313% and delivered a value creation margin of nearly 80%. The second key item relates to valuation in our core markets and in this case, East Cambridge. Over the last year, 2 key transactions occurred. The first is the well-known full building lease secured at 75 Broadway by MIT and their JV partner, BioMed Realty. The biogen lease delivers an initial cap rate or return on the $1.2 billion investment of 6.75% to the JV. The second was the sale of 730-750 Main Street by MIT to BioMed Realty and Blackstone. This transaction's value of $361 million translated into a 5.7% cap rate. When you analyze these 2 transactions, the spread between the going in and the going out cap rate is 105 basis points, called out in the center of the slide and represents an 18% profit margin. We acknowledge these are separate transactions. However, the location and quality of these assets make it a good proxy for what a developer would target for an initial yield, and what their underwriting spread may be with a credit anchor tenant secured. The main takeaway here is that real estate investment capital recognizes the value of premier assets located in core markets as exemplified by the return of 6.75% on a development deal and the 5.7% cap rate for a stabilized asset. Furthermore, the combined transactions total over $1.5 billion. That reinforces the liquidity of these assets in the capital markets today. Thank you. And I will now pass it over to my friend and colleague, Peter.

Thank you, Hunter. Good morning. I'm Peter Moglia, CEO and Chief Investment Officer. Thank you very much for joining us. I'm going to walk you through the Campus Point Megacampus in San Diego's University Town Center, a place we like to call the Miracle Mile of Medicine. And I'm going to offer proof that our Megacampus algorithm is working. Over the past 15 years, we have methodically assembled more than 100 acres and transformed it into one of the world's most diverse and dynamic research hubs. It's a story of vision, patience and persistence. This is the area that we refer to as the science sector. It's about a 4-mile radius with hundreds of innovative companies surrounded by powerhouse research institutes, such as Scripps, [indiscernible], Sanford Burnham and UCSD. We have 4 Megacampuses within the stent zone of innovation, and Campus Point is centrally located. A truly remarkable aspect of the San Diego cluster is the overlap of life science, tech and defense. The cross-pollinization of these industries creates a unique ecosystem of discovery and invention, and none of it would happen without talent. San Diego's life science talent base is well known. It has attracted many pharma companies to the cluster. But what you may not know is that San Diego actually has the largest concentration of military talent in the world, and that San Diego is actually the fastest-growing U.S. area in tech talent. Recently ranking #1 in deal volume, San Diego has benefited from a significant amount of M&A as big pharma has recognized the breakthroughs and opportunities that live within the companies that drive this ecosystem. At Campus Point, we've been able to capture 2 significant pharma requirements from Bristol-Myers and Novartis, both driven by M&A activity that had happened over many years. And as Hunter noted in the introduction, the way we win in oversupplied markets is to differentiate ourselves by applying Alexandria's proprietary algorithm, driven by space, place and service. You'll hear that a lot. Our spaces are purpose-built and human-centered with flexible, scalable infrastructure that empowers mission-critical research. We lead with great design, not because it's a decoration. It's actually a strategy to capture and retain tenants. And if you've walked through our buildings, you know they are beautiful, and that matters to tenants. Placemaking is simply designing time well spent. Our intention is for the workforce at our Megacampuses to leave work better than they were when they arrived. We want them to want to come to work, not have to go to work. At Campus Point, walking trails, wellness centers and art labs and sports fields do just that. And service is the layer that makes everything stick together. Our white glove service delivered by our operational team makes it challenging for a tenant to ever leave an Alexandria property. And as part of that service, we host events that help tenant partners build culture, which improves their employee retention and productivity. People want to be in activated environments where they can interact with others, which is why we intentionally curate moments for people to connect. Those connections can translate to collaboration and build community, and that's a powerful tenant retention tool for Alexandria. When place, space and service is done right, the campus performs. Campus Point sits at over 99% occupancy with an average lease term of 9.2 years in a market with 26.5% availability, quite remarkable. It also attracts top-tier tenants, and that's something I'm going to touch on a little later on. Even more impressive is that our tenants have grown their footprints at Campus Point by over 230%, driving a 4x increase in ARR since Campus Point became a Megacampus. When a Megacampus like this matures, it becomes like a flywheel, creating positive momentum with every turn, and that has resulted in major leases with the likes of Eli Lilly, Bristol-Myers, Novartis and Leidos. Leidos is a health and defense company that also makes the airport scanners that we all walk through and pray don't beep. To conclude this case study, Campus Point success is a result of vision, patience and persistence. It took us 15 years or over 15 years to assemble this Miracle Mile of Medicine, and that patience is paying off. Warren Buffett once said, "Someone is sitting in the shade today because someone planted a tree long ago." Campus Point is exactly that, a long tenured investment now producing outsized sustainable results. These 2 case studies Hunter and I went through are emblematic of how truly differentiated our Megacampus platform is. However, their success would not be possible without the trust tenants have in us to ensure that their mission-critical facilities are online and productive. At Alexandria, we work every day to continue earning the trust of our over 700 tenants and their tens of thousands of employees. And look -- just look how long some of these tenants have been with us. We have certainly earned their trust. Every day, our goal is to continue to be the most trusted landlord in life science real estate, and we are. Our new build-to-suit with Novartis is a perfect example of that trust. They had more than a dozen options in San Diego that could satisfy this requirement, including many buildings that were already finished and TI ready. But they chose us because they trust us to deliver the world-class, state-of-the-art research center that they had envisioned, and we will. The build-to-suit, which will deliver approximately $800 million in revenue over its 16-year term is not only a driver of future earnings, but it will elevate the entire campus ecosystem and amplify the buildings within it, much like a new beautiful house elevates a neighborhood and the value of the other houses in that neighborhood. And it isn't just Novartis that puts their trust in us. For decades, some of the world's most innovative companies have entrusted Alexandria with their mission-critical facilities. Alexandria is not just a developer. We're not just a landlord. We are a trusted partner to these amazing companies and we are very proud of that. Okay. We started this section discussing the oversupply problem and the fundamental change in demand contributing to higher market vacancy and weaker leasing fundamentals. Then we discussed why Alexandria's proprietary Megacampus algorithm, driven by the inputs of space, place and service is our best weapon to mitigate those challenges. To further illustrate this, I'm now going to present a direct comparison of the performance of our established Megacampuses and our non-Megacampus assets. The data you will see spans from the first quarter of 2023 through the most recent quarter. That time frame accurately reflects the impact of current market conditions and those we expect to manage through in the foreseeable future. First, just to set everybody's knowledge of our Megacampus platform. It comprises all properties that currently have or are projected to have 1 million square feet in operation upon full development. Altogether, we have 26 of these Megacampuses, and they account for 27.1 million square feet in operation, far away the most any other operator would have or does have, and it's not even close. To provide a meaningful comparison between the performance of our Megacampus platform and our non-Megacampuses, we identified a subset of 17 established Megacampuses to serve as a benchmark for this analysis. Each established Megacampus asset has at least 750,000 square feet in operation, ensuring that it benefits from the Megacampus algorithm input of scale. To paraphrase what Hunter said in the introduction, the inputs of our proprietary algorithm are high-quality space at scale, place in the form of activated environments, and service in the form of operational excellence contained within the substrate of our cluster model. Now let's go through some of the outputs. Rent growth is a very important metric considering its impact on future earnings. The premium realized over our 11 quarter comparison period proves that the Megacampus algorithm significantly outperforms in rental rate growth outperformance versus our non-Megacampus assets. Our established Megacampus has secured significantly longer lease terms compared to our non-Megacampuses. The data suggests that this is driven by the flexibility of the Megacampuses provide through their scale. Tenants can grow within a Megacampus much easier than in a one-off building, and the ability to grow is often a very high priority for life science CEOs. The stable occupancy and income we get through these long-term leases translates to higher asset values. The exceptional quality of our spaces, the inherent ability to scale and the vibrant activated environment we create through thoughtful place making, combined with our superior service to attract tenants that are solving for more than just cost considerations. These tenants are prioritizing recruiting and retaining world-class talent and they seek environments that support innovation, collaboration and growth, and they are often of the highest caliber. This strong credit profile also translates to higher asset values, driving long-term value for our shareholders. So because we have good third-party market occupancy data for the big 3 markets of Greater Boston, San Francisco and San Diego, we did a comparison of the performance of our established Megacampuses to our non-Megacampuses and to the market itself here. The findings clearly demonstrate that our Megacampus platform soundly outperformed the market, and so did our non-Megacampus assets, a testament to the quality of our overall asset base, our brand and our operational excellence. The supply and demand dynamic has led to a decline in fundamentals in the form of lower occupancy, negative rental growth and significant lease concessions, which we anticipate will continue to impact our results for the foreseeable future. The Megacampus algorithm is our best weapon to mitigate these circumstances, and that's why we are investing so heavily into it. Our cluster model and the Megacampus components of space, place and service will continue to deliver outsized rent growth, drive occupancy outperformance, provide longer lease terms and attract higher-quality tenants relative to the assets and entities that have created the supply challenges we're managing through. We can't control demand, but we can control where it goes, and our Megacampus platform is primed to capture it. With that, I will give you Mr. Marc Binda.

Thank you, Peter. Good morning. My name is Marc Binda, CFO and Treasurer, and I'm going to provide you an update on 4 key topics. First, our updated guidance for 2025. Second, our initial guidance for 2026. Third, our solid balance sheet. And fourth, I do plan to share a few key data points which will be useful for thinking about 2027. And one common thread throughout this section, is that we are highly focused on pulling every lever in our arsenal of things that we can control to put us in a position to succeed. So starting with 2025. We remain on track with FFO per share diluted as adjusted occupancy leverage, asset sales and G&A consistent with our third quarter call. Earlier this morning, we filed an 8-K that announced, among other things, that we decided to monetize a large basket of public securities in the fourth quarter for 2025 for approximately $41 million. It's listed at the bottom of this page. We will use those proceeds from this sale to bolster leverage, pay down debt, and we plan to add back the $103 million onetime loss for purposes of FFO per share diluted. Now back on our most recent third quarter earnings call, we highlighted that we had closed around $508 million of dispositions and had around $1 billion of dispositions that we're tracking to close in the fourth quarter, bringing us to around $1.5 billion for the full year. We continue to remain on track. As of today, looking at the left-hand side of the slide, you can see we've closed $695 million, and we have $840 million of dispositions expected to close this month that are subject to nonrefundable deposits. We also have an additional $296 million subject to executed letters of intent or purchase and sale agreements, which we are pushing hard to close this year, which could potentially bring our total well above the $1.5 billion midpoint of our guidance to closer to $1.8 billion for 2025. As Joel touched on earlier, we continue to carefully scrutinize all spending, understanding that the incremental return hurdles and risk profiles needed to move forward in today's cost of capital environment is challenging. In most cases, the initial decision to move forward with these projects was made a long time in advance, and we're making great progress with our 2026 development and redevelopment projects, which are 81% leased or negotiating, and are expected to generate $105 million of additional annualized EBITDA by the end of 2026. In our 8-K we filed this morning, we made some new announcements on the pipeline. We recently made the decision to pause and sell certain projects, thereby eliminating the remaining capital needs to finish those projects, and allowing us to redeploy the future sale proceeds into projects that we have higher long-term conviction. That included our Canadian project highlighted here in green. Now turning to the 2027 projects, 2027 and beyond. Included in the green shading on this slide are 2 additional projects, which we designated for held for sale very recently. In addition, we've decided to pivot back to a lower investment strategy for office use for our 401 Park project located in the Fenway. As a result of these changes, we accomplished the following for the total active pipeline. We reduced the size of our committed funding needs by more than $300 million over the next few years. The pipeline has been reduced from 16 projects to 12 projects. And what remains in the pipeline will be highly concentrated and aligned with our Megacampus strategy and is expected to generate $240 million of incremental annual EBITDA upon lease-up and delivery over the next few years. One other item to point out here, we are evaluating the business strategy for another 4 assets, including the 3 projects that are listed on this slide, which includes scenarios where we could potentially continue, continue to the redevelopment or development, pursue lower investment alternatives or potentially sell. If we do ultimately choose to sell these projects, that would further reduce future funding requirements. Now I'd like to turn our attention to 2026 guidance. At our third quarter earnings call, we highlighted 5 key factors that would have an impact on 2026 FFO per share results, including core operations, capitalized interest, realized gains on nonreal estate investments, G&A expenses and dispositions. Fast forward to today, here's the relative impact of these factors, with core operations driven by near-term pressure on occupancy, a reduction in capitalized interest primarily driven by asset sales and the disposition of primarily noncore assets in aggregate driving around 75% of the decline in FFO per share as adjusted from 2025 to 2026. Our guidance range for FFO per share diluted as adjusted is $6.25 to $6.55. The midpoint is $6.40. It's important to point out that the midpoint of our refined and tightened guidance of $6.40 is $0.15 below the midpoint but within the range of the very broad range for FFO per share diluted as adjusted that we gave back on October 29 of $6.25 to $6.85. The primary reason for this is due to changes in the final composition and timing of real estate dispositions and sales of partial interest expected to close in 2026. Earlier this morning, our 8-K released the details of several of those projects that were just recently designated as held for sale. We think of the near-term period as substantially concluding the reset brought on by a variety of macro industry and regulation factors that Joel and Hallie discussed earlier. As expected, by shrinking the size of the business in the near term and funding the business with sales of land parcels and noncore assets, FFO per share results will come down. We expect to substantially complete a large portion of our total disposition and partial interest sale program by around midyear. As a result, our outlook for 2026 assumes that quarterly FFO results flatten towards the second half of 2026 as we close on transactions and provides a relevant data point for earnings as we end 2026 and head into 2027. Now we're going to dive into the key operating metrics embedded in our guidance for 2026. The pressure on same property results, occupancy and rental rates reflects our view of the current market, including the oversupply issues in the regulatory environment that Hallie and Joel, Peter and Hunter all discussed earlier. During this time, we continue to prioritize meeting the market and winning deals to boost occupancy. Our trophy Megacampus assets give us the best opportunity to do that, as you heard from Hunter and Peter earlier. Starting with same-property results. You can see from this slide that we are in unprecedented times. The stability and strength of internal cash flows has been a hallmark of the company for many, many years. Up through 2024, annual cash same property results had been positive for more than 2 decades, including during the great financial crisis. It's important to note that for most of this period, there was a rational industry supply and demand dynamics at play. 2025 marks the first negative cash same-property performance year in more than 2 decades, and our guidance for 2026 assumes a decline of 8.5% at the midpoint. The industry supply and regulatory factors have had a tremendous impact. Now let's dive into the micro factors specific to Alexandria's cash same-property results for 2026. Our guidance includes, but is not limited to 3 key factors, which are listed on the left side of this slide, all of which have a negative impact to occupancy and to net operating income. First, as we initially introduced back in our second quarter earnings and as we continue to refine, we have 1.2 million square feet or $79 million of annual rental revenue of key lease expirations in 2026 that are known vacates and are expected to have downtime for all or most of 2026. I'll come back to this with more details on the next slide. Second, in the middle there, we have 2 properties located in the San Francisco Bay Area market, which are currently occupied by existing tenants with lease terms which extend beyond 2026, but which no longer need the space. We have good activity for both these spaces with new interested parties. But if we move forward, we will have some downtime for most of 2026 for construction. So that will impact same property results in the short term. Third, on the bottom left, we are monitoring a number of tenants in our asset base today, which we believe could consider wind down in operations if their conditions worsen. Out of an abundance of caution, our guidance assumes a probability-weighted contingency that 500,000 square feet goes vacant for next year. Next, we'll dive deeper into the 1.2 million square feet I mentioned earlier or $79 million of annual rental revenue of the key known vacates for next year, which have a weighted average lease expiration date of around March 2026. We have 2 large spaces representing 12% of the annual rental revenue under negotiation today with prospective tenants, and we are laser-focused on all of this, with more than 50% of this located in our Megacampuses. Importantly, our guidance for 2026 does not assume significant income from these lease expirations in 2026, even if we get them leased ahead of time given the potential time needed for construction and delivery. For 2026, we have almost 3.1 million square feet of lease expirations as shown on the bottom right of this slide. If we exclude lease expirations related to the 1.2 million square feet of known vacates, potential asset sales and one small property expected to be taken out of service. We're left with 1,296,868 square feet of lease expirations, which is located in the middle left of the slide and the subtotal header in the blue shading. Our expectation for this space is that the retention on that 1.3 million square feet of lease expirations is in the 60% to 70% range. Next, we're going to take a look at 2027 lease expirations. While it's normally too early to tell for lease expirations that are that far out, especially in this environment, we've been asked by the investment community to give an update to the extent possible. I'll walk through each of the top 5 lease expirations, all of which exceed 100,000 square feet. First, at the top, is 190,000 square feet and represent a space that will be left behind as Bristol-Myers relocates to our 427,000 square foot development project expected to deliver at our Megacampus that Peter just mentioned at Campus Point. The good news is that we believe this space will be highly desirable to 2 other large tenants located in that particular building. Second is 170,000 square feet at our 259 East Grand campus located in South San Francisco. We've got good activity on all that space. Third is 132,000, which is currently leased to a technology tenant on our SD Tech Megacampus in San Diego. It's early there, but we have a good chance at renewal there. Fourth is 249 East Grand in South San Francisco. The existing tenant, Verily, a subsidiary of Google, is relocating back to the Google campus, but we've got good activity on that space already. And fifth is 199 East Blaine located in our East Lake Megacampus in Seattle, and we're in early discussions there with the tenant interested in taking the whole building. Now turning to occupancy for 2026. Occupancy for 2026 is expected to be down by 2.3% at the midpoint of our guidance ranges, landing at 88.5% by the end of 2026. Our guidance assumes around a 2% boost in occupancy from some combination of noncore assets that will be sold with -- that have vacancy today, which suggests around a net 4.3% decline in occupancy through the year. Two additional points to make here. First, as I highlighted earlier, we do have 1.2 million square feet of lease expirations expected to go vacant in March of 2026 on average. As a result, we expect that the occupancy in the first quarter of 2026 could drop below the midpoint of where we expect to land on occupancy by the end of 2026 of 88.5%. And second, recall that the market occupancy in our largest 3 markets is in the low 70% range. So despite the decrease in occupancy next year, we're significantly outperforming the market. Now that we've covered occupancy and same-property results for 2026, we'll turn to rental rate increases on renewed and re-leased space. As expected, we assume pressure on rental rate increases for next year. Most importantly, we expect to meet the market on lease economics and prioritize occupancy with the very best tenants. We believe our Megacampus model puts us in a great position to win deals when we have the right space available. Our guidance assumes rental rates are down 8% on a cash basis and up 2% at the midpoint for next year. As Joel mentioned earlier, we continue to manage general and administrative expenses very prudently, with an aggregate of $72 million of savings on a combined basis for 2025 and 2026 compared to 2024. As we've shared for quite some time now, some of the savings expected to be realized in 2025 were temporary in nature. So while 2026 expenses are expected to increase from '25 to '26, the recurring savings at the midpoint of our guidance for 2026 compared to 2024 are still significant at around $24 million a year or 14%. The next slide highlights the disciplined approach we've taken at managing G&A costs. As you can see, when we compare our G&A costs on the right as a percentage of net operating income, our projected results significantly outperformed the average of other S&P 500 REITs at a range of 7.4% to 8.9%. We also look at our adjusted EBITDA margins very closely. We like this metric a lot because it captures not just net operating income, but also G&A expenses. We expect margins to come down next year into the mid- to high 60% range in 2026, really driven by the anticipated decline in occupancy. But as you can see from this slide, we continued to outperform many of our REIT peers. Next, I'll cover interest expense and capitalized interest. Our guidance for next year is shown on this slide. Net interest expense for 2025 is up from 2020 -- it's up from 2025, primarily driven by lower capitalized interest. So capitalized interest. Capitalized interest is expected to decline by $85 million or 25% at the midpoint of our guidance for 2026 compared to 2025. This slide provides a high-level roll forward capitalized interest from 2025 to 2026. And as you can see on the second bar on the left, the biggest decline in capitalized interest is coming from land or projects we've chosen to pause that we now expect to sell. The $85 million reduction in capitalized interest implies around a $2 billion reduction in average basis capitalized from 2025 to 2026. Now we expect capitalized interest to decline significantly in the second half of 2026 as we work through the asset sale program. Average basis subject to capitalization is expected to decline significantly from the third quarter of 2025 of $8.4 billion shown here on the left, to the fourth quarter of 2026, with a range of $4 billion to $5.5 billion, which is a 43% decline between now and then. Given the current demand and supply trends, we'd like to see the ratio of nonincome-producing assets as a percentage of our total gross assets decline from where they are today, 20%, to the 11% to 16% range by the end of 2026, really through asset recycling of land and nonincome-producing property. Now I'll turn to investment gains on our non-real estate investments. We've had some very healthy gains from 2021 through 2025, with those averaging around $103 million a year over that 5-year period. Given the current state of the life science industry, as Hallie walked through earlier, and given factors unique to our portfolio of investments, we expect realized venture gains included in FFO per share to be in the $60 million to $90 million range in 2026, which resets these gains to effectively around the 2020 historical levels. Next, I will cover sources and uses for 2026. This slide shows a snapshot of our capital needs and funding sources for next year. I'll dive into each of these separately, starting with our uses of capital there on the bottom. So construction spending continues to represent our primary use of capital in 2026. We recognize, in this high cost of capital environment, it's important to moderate our uses of capital, particularly in the short term. This slide highlights the great work we've done here, including shrinking the size of the active pipeline from 16 projects to 12 projects very recently, selling certain noncore assets that would have otherwise required significant capital to release, and seeking to moderate our spending. So as you can see, construction spending has come down by almost 40% from the period from 2024 to 2026 compared with the preceding 3 years. We continue to intensely focus on making sure that construction dollars are spent where it makes sense. 90% of our construction spending for 2026 relates to the active development and redevelopment projects already underway on the left, and then investments into our operating assets to help with leasing of current and future vacant space. So only 10% of our construction budget relates to our future pipeline, of which, 75% of that 10% represents capitalized costs, including capitalized interest. Construction spending related to the lease-up of our operating properties is expected to increase significantly in 2026. We've mentioned this before. We measure our revenue and nonrevenue enhancing capital expenditures related to operating assets as a percentage of net operating income. This ratio had been, historically, around 15% or lower for many years, as you can see on the left side of this slide. Looking forward to 2026, we have a number of assets that are expected to undergo renovations. There are 2 projects that make up more than half of the capital expenditure bucket for next year. First is our Advanced Technologies Campus in South San Francisco. I mentioned earlier that we have good activity on this campus. And then second is our Technology Square Project in Cambridge, which Hunter covered earlier. It's been around 16 years since the last renovation of those buildings at that project, and we feel good about investing into this project given the iconic nature of the building and the location really at the center of Main and Main. Now I'll move to our funding plan. Our plan this year is to self-fund our capital needs with a combination of retained cash flows, sales of noncore assets and land and some partial interest sales of core assets. I'll get to the details of each of these in a moment. But before I do, this slide provides a snapshot how we determine the amount of funding for 2026. Starting on the left side of this page, we determined that we would need $2.7 billion of funding based upon the range of our guidance for net debt to adjusted EBITDA target for 2026. We consider that the funding would need to exceed our construction needs next year to pay down debt, given the anticipated decline in EBITDA from a variety of factors, including the 2026 [ same ] property performance and for a reduction in EBITDA in 2026 from the dispositions expected to be completed in the fourth quarter of 2025 that will carry over into 2026. Moving from left to right in the blue shading there, we expect to solve that $2.7 billion funding need with 2 strategies. First, our Board approved a reduction of the dividend of 45% today, which will generate an additional $410 million of capital that can be used to address our funding needs. And then second, we plan to address the $2.3 billion remainder with both dispositions of noncore assets and land, and sales and partial interest of core assets. You can see on this slide that the midpoint of our guidance assumes $2.9 billion of dispositions and sales of partial interest to address the $2.3 billion funding need. The reason for the dispositions and the sales of partial interest being larger than the funding need is due to the expected loss of EBITDA associated with the potential sales of noncore assets, which will require us to sell more and to pay down debt further based upon our goal for net debt to adjusted EBITDA for leverage. Next, I want to provide some context around the change to the dividend that was considered by the Board. The Board considered a variety of factors, including taxable income, our AFFO coverage ratio, current and future capital needs, the potential for $410 million of additional capital and our dividend yield. Following the dividend cut, the dividend yield is much more in line with the average of other S&P 500 REITs, as you can see on this slide. Including the dividend reduction announced today, net cash flows from operations after dividends and distributions is expected to be $525 million at the midpoint of our guidance for 2026, and will represent a significant component of our overall funding need -- our overall funding plan. Next, I will cover our disposition and sales of partial interest plan for next year. I already walked through how we arrived at the $2.9 billion at the midpoint of our guidance. Shown on the left is our initial estimate for the mix between dispositions between the 3 buckets, including the following: noncore assets, both stabilized and nonstabilized; land; and sales of partial interest related to some of our core assets. Dispositions of noncore assets and land are expected to represent around 70% of our total plan, and our hope is that 2026 is the substantial completion of our large-scale noncore disposition program. In addition, our initial guidance assumed a weighted average transaction date of around midyear. Private real estate developers, owners, users, investment funds, other REITs have all been the biggest buyers of our assets over the last 2 years, and we're laser-focused on execution. 55% of the total $2.9 billion expected for 2026 has either been identified as a partial interest sale or was recently designated as held for sale as part of the 8-K that we filed this morning. We have a number of other assets that we are evaluating for the remaining 45%. We believe that the reshaping of the portfolio is imperative in this environment, and this will set us up for the long term to have an incredibly high-quality asset base that will outperform other life science real estate. I'd also like to point out that we generated tremendous value over the last several years with realized gains of $3.6 billion through asset sales and partial interest sales since 2019. Looking back, we've sold $10 billion of assets since 2019. We also have more than $1 billion lined up to close in the fourth quarter of 2025 alone. For the noncore assets and land parcels designated very recently and included in our 8-K this morning, we did recognize $1.3 billion of impairments, which included both assets expected to be sold in the fourth quarter of '25 and also in 2026. Our 8-K has the details. This is in addition to the $1.4 billion of real estate impairments recorded from 2019 through the third quarter of 2025, as shown on this slide. In addition to generating significant proceeds to recycle into the business, we expect our 2026 disposition program to accomplish a number of highly strategic objectives, as shown on this chart. On the left, we expect to have a very high concentration of Megacampus and core assets by the end of 2026 at 90% to 95% of our total annual rental revenue. And on the right, we expect noncore assets to fall into the 5% to 10% bucket as a percentage of annual rental revenue. Last point to make on the capital plan. I mentioned earlier that we continue to prioritize the health of the balance sheet and expect to pay down debt by around $1.7 billion in 2026 in order to keep leverage in check. This should allow us to eliminate any short-term borrowings and pay off our 2026 debt maturities of $650 million with the proceeds from our asset sale program. Now that I've run through guidance and the sources and uses for 2026, I want to highlight a few important topics for 2027. I'll highlight 3 of them on this page. First, I mentioned earlier that we expect our FFO per share diluted as adjusted to be in a range from $1.40 to $1.60 by the fourth quarter of next year. We expect this to include the impact of most of the asset sales, which have a weighted average transaction date of around midyear. Second, we gave the estimated basis in 4Q 2026 expected to be subject to capitalization. This implies a low point within the year of 2026 for capitalization. And third, we expect to substantially complete the large-scale noncore asset program in 2026, which means we expect to seek a lower cost of capital in 2027 for our funding needs, which could include joint ventures of core assets. Now I'd like to turn back to the balance sheet, and I'll make a few points here. A strong balance sheet has been a hallmark of the company for many years, and we continue to recognize the importance of maintaining it. We have one of the most impressive maturity stacks in the REIT space, with only 7% of our debt maturing through 2027, and as you can see on this chart, a very well-laddered maturity profile through 2054. Our weighted average debt maturity is 11.6 years, which is about twice as long as the average for other S&P 500 REITs, and this provides us with a significant amount of flexibility and reduces our near-term risk to refinancing. Now we took advantage of the low interest rates in the prior cycle and locked in some phenomenal rates for a very long period. As of 3Q '25, our fixed rate unsecured bonds were well in the money compared to market pricing for new unsecured bonds today. From an NAV basis, this discount to par represents around $8 per share of value as of September 30, so it's significant. We have tremendous liquidity on the balance sheet, and we expect to keep it. As of the end of 2025, we expect to have around $5 billion of liquidity, which, to put that into perspective, represents enough liquidity to cover our debt maturities through 2030. We provided guidance ranges here for fixed charges and leverage on a net debt to adjusted EBITDA basis for the fourth quarter of 2026, as you can see. Leverage for 4Q 2026 is expected to be in a range of 5.6 to 6.2x on a net debt to adjusted EBITDA basis or 5.9x at the midpoint. Our near-term goal beyond 2026 is to target somewhere in the mid- to high 5 range. We expect to have a number of tools to keep leverage in check beyond 2026, including the additional EBITDA coming online from the development pipeline and the significant retained cash flow as I mentioned earlier. We also took a deep dive on the covenants in our revolver and our unsecured bonds. We published those projections here, but the bottom line is that we're in good shape on all of these covenants really with plenty of cushion. And before I wrap up, I do want to leave you with a few closing thoughts. First, COVID has had a profound impact on the world and ultimately on our business, really brought on by the following oversupply wave. And we are pulling on every thread within our control to position the company for success, including shrinking the size of the land bank, selling noncore assets and investing in our Megacampus assets, which are our greatest weapon against supply. We continue to significantly outperform the market on occupancy and leasing, as Peter and Hunter outlined. And ultimately, Alexandria remains a highly consequential company, enabling some of the greatest scientists in our tenant base to find cures and therapies that make a difference in the lives of your families and for all human kind. With that, I want to wrap it up, and I will hand it over to Joel for Q&A.

Maybe just turn off the screen or leave that, it's fine. So if we could open it up for questions, please. Tony?

Yes, Joel. I guess, with 30% vacancy in a lot of your core markets and just some of those 4 foundational items you mentioned that are causing headwinds, like how long do you think it takes for the life science space market to get back to some equilibrium?

Peter has very specific thoughts on that.

This is a crystal ball. I'm not sure. But look, I've been asked that question a number of times over the past 18 months. And originally, my thought was 2 to 3 years in general. If you take the entire overall inventory that has hit the markets since those 18 months, and you didn't look at it submarket by submarket, which is the way we should, you're probably looking at 4 to 5 years. But what I would caution you is that, that's everything. Those are -- including supply in submarkets that we think will never be lab submarkets like Summerville. If you look at our main submarkets like Torrey Pines and Cambridge and South Lake Union, I mean there's not a lot of supply there because there wasn't a lot of available land or conversion opportunities. So that certainly, in the next couple of years, should get to a stabilized run rate. How the periphery of assets that will try to compete for tenants that are normally going to those areas, how that affects our business. We don't know right now, but it's very likely that it will weaken the fundamentals. But we do believe that we will keep our core submarkets very stable, even though there will be high vacancy through -- for at least the next 4 to 5 years.

Yes. I would also say, if you look at the submarkets we're in, and you look at the changing dynamics of just technology and technology companies, you look at San Francisco as a whole today, it has the largest growth in AI-related people. You look at -- Seattle's probably second to that. You look at a number, I think Peter talked about the defense technologies down in San Diego. So there are a set of wide technology companies that surround and interact with the life science industry. If you go back to the pie chart that we showed for Campus Point, Campus Point is about 30% leased to advanced technology companies. We can't tell you the names of all the companies there because some have to remain secret, but Leidos is one that we did a build-to-suit. They -- we [ bought ] their building, tore down and then built a new building for them there. So I think you could look at San Diego, San Francisco, Seattle on the West Coast, certainly Texas and the move into Texas by a lot of very advanced technology companies, robotics automation, and then you look at some of the locations on the East Coast. I think we're -- and Hunter mentioned Technology Square and what surrounds that. So I think we're not wholly dependent on lab space demand. Please?

Aaron Hecht from Citizens Bank. A couple of questions around the slides regarding competitiveness with China and the time frame of drug development in the United States. And it's interesting to see how those drugs being developed in China are really ramping, I think, 30% for the last couple of years. Just your thoughts around the pace that they're being developed at, the dysfunction that we're seeing now in the U.S. and the likelihood of being able to shorten development time frames. And I guess, from a regulatory standpoint and whatnot, how much intestinal fortitude do we have to have in the U.S. to achieve those things?

Yes. Well, certainly, good question. One of our team members, [ Lynn ] and I were in China, maybe, what, 2013, 2014, we actually put on a program in China. And at that time, that was the first 5-year plan that put biotechnology at a -- in the top 5 categories of state-sponsored technologies that were mission-critical to the People's Republic. And at that time, literally, the Chinese could not do a clinical trial in oncology that would get any data that would be meaningful. They were really [ archaic ]. So you look fast forward 10 years, it's pretty amazing. Now they -- and I'll let Hallie answer more detailed. But a combination of state sponsorship money forcing priorities to happen. They've built an infrastructure of CROs across contract research organizations, maybe some of the best in the world, CDMOs. They brought together the means of production from beginning to end, and now clinical trial work, and they're -- their FDA, which is the SFDA, was patterned on ours, but they have compressed the time to go from preclinical into the clinic at a fraction of what we have and to go from Phase I to approved drug about half the time that Hallie's chart showed. If we don't have a national priority and Senator Young out of Indiana has a bill in Congress that starts to move this in the right direction, whether the head of HHS is listening to that, I don't know. But we have to have a national priority here or it will not be good. I mean, could you imagine if any of us are on a cancer medication, this is like rare earths, right? And suddenly, China decides, well, we're not going to supply that cancer medication or a Parkinson's medication, like we cannot be without supply and without origin. So Hallie, be more articulate.

Sure. Yes. I think the other side of that is that global competition is the reality of any industry. So this is certainly a wake-up call. And to Joel's point, the Biotech Security National Council has continued to put out proposals. We have been speaking to folks both sides of the aisle at the White House who do recognize its critical importance. And I think for the industry, it has really kicked into gear, the imperative to modernize how we think about drug development. Ultimately, we are still in the lead in terms of innovation and talent here in the U.S., and so capitalizing on that now is critical. But I also do think, just to put it in a broad perspective, if you think about tech and other industries, it's going to push this industry to be better over time.

Sometimes competition makes a big difference, but having a managed economy versus, say, a free market economy, kind of tells the story. It reminds me of the company, [ MP Materials ], which, bought out of bankruptcy, which is now going to be soup to nuts on the full integration of the supply of mining rare earths to the delivery of finished magnets. We had to be forced into kind of doing that. Now that company has partnered with the government. I think Jamie Dimon and JPMorgan are heavily involved in that. That's what we need to do in the biotech area. Other questions? Yes, Rich?

Just a question for Hallie. If you could deploy some of your 37 trillion cells in answering this question. So Peter talked about supply and the time line to sort of a stabilization. But on the demand side, I wrote down -- sorry, 5.3 million square feet in the third quarter, down from 14 million square feet in 2021. What are the -- what gives you confidence that we're sort of bottoming out on the demand side of space? What are some of the -- you used the term silver lining a few times when you were speaking. If you were to deploy your crystal ball, where are we on a -- from a demand point of view, once we get perhaps some of the political problems that are facing the industry and so on 5 years from now, what's the demand picture look like for everybody here?

Sure. Yes. 37 trillion cells and incubating more. So I wish we had a simple answer. Part of the reason that we pulled together these 4 pillars is because there's no simple kind of one thing that's going to suddenly increase demand. I think what we can say in terms of the bottom is even though demand is certainly at the lowest it's been in years, we're still seeing really great companies, right? We're not saying that we're not seeing amazing companies out there doing really interesting work that need lab space. We still see those. They take longer to make decisions because Boards, executive teams are hesitant about where their capital is going to come from over the next several years. So what we need to see, again, just kind of go back to that framework, I think we can need to see kind of everything all working in concert. We need more predictability from the FDA. We need capital markets to start opening up, which is dependent on interest rates. We need to make sure that we are continuing to reimburse and value medicines that provide care to patients and drive down long-term health care costs. And we need a value basic research. Those might not be -- basic research might not impact next year's new drug discovery, but it may impact that in 20 years, right? So I think we need to see everything. I think what gives us, again, hope on the ground, is we still see really amazing companies and founders, things are just taking longer.

Please? Can we get a mic kindly?

So you talked a little bit about kind of how AI is impacting drug development. How does that -- with your conversation with tenants and as you think about designing new buildings, how does that kind of change how you think about designing buildings, the need for traditional office space, lab space? And what are your tenants kind of saying on that front?

Sure. Where we see the biggest impact right now is really for our large multinational pharmaceutical tenants because the capital required, in particular, to deploy really significant automation in these buildings is so intense. And so Novartis is a great example in San Diego. The team has spent 2 years talking to them about what does the future of drug discovery look like? How can we future-proof the building? And what that comes down to is really robust infrastructure beyond, and I would -- well, I'd say, similar to what we already have, but beyond that. So it is ensuring that there's going to be excess air capacity that the live loads for really heavy equipment can withstand automated robotics, that they expect to have vibrations are really minimal, and then power is really big as well, ensuring that there is robust backup power and significant backup power. So all of those things are what we are good at, right? Like that is our bread and butter. We understand those infrastructure needs. It's just really ensuring that those are going to be sufficient. I would say, for smaller companies, we really don't see a change in conversation. They are not going to be once deploying $40 million towards the next kind of robotic set of automated experiments. They're still more focused on that artisanal type discovery work that still needs the same type of kind of lab. And again, I would say, even when you walk into a lab for, say, a really AI-focused company, all the benching and everything, that looks the same, right? It's just the equipment that's on top of it might look a little bit fancier, right? So there is a shift, I think, at that later stage. But across the spectrum, it's not going to drastically impact what we think about from lab side.

So one thing you might think about, there are a lot of smart people thinking about what the makeup of people on our Megacampus might look like going into the future. And some people think the breakdown might be less than 50% traditional scientists, maybe 25% data scientists, 20% engineers, maybe 15% AI-related folks. So that would be a change from historical, but that's kind of looking into the future, if you look at the makeup of people. Yes, sir.

Yes. Marc, in your comments, you talked about in 2027, potentially looking at JV financing. And I'm just kind of curious, why is that not an option kind of on a more near-term basis? I mean, do we have an issue where simply because of all the uncertainty of moving parts, it's just kind of finding a large capital partner at this point is just a little bit more difficult in kind of [ 12 ] to 18 months?

Yes. Let me answer that, and Marc can expand on it. It is on the table. We've been doing them historically over the last 5 to 7 years, and we will continue to do some of those in '26. But our main focus is reducing our exposure to land and noncore assets down to the 11% to 16%, as Marc stated. But that's clearly on the table. We're not excluding that at all. I don't know if you want to add anything, Marc?

Yes. No, it is a part of the capital plan for 2026, but it's just a smaller component. Just wanted to highlight, as we look forward to 2027, obviously, our hope is that we're substantially done with the noncore asset sales, so we would move to something different.

Yes, ma'am?

I was curious if you could add a few comments around your confidence in the midpoint of your disposition guidance? Specifically, I know we continue to talk about the uncertainty around the increase in demand. I'm curious about who the buyers are and where you see that going?

Yes. Peter, do you want to maybe talk about that? And I think we've got good confidence. Marc showed the asset recycling that we've done over the last several years. And in peak years, we're able to do over $2 billion and almost approaching $3 billion. So I think we have a reasonable confidence level, but Peter?

Yes, sure. I'm working on a presentation for our Board this week and happen to have -- what I asked our team to do is put break down who has purchased our assets from '24 through '25. So the last 2 years, an owner users represented 35%, they are the biggest customer. Private real estate firm developers, 20%; REITs, 16%; investment funds, 12%; private real estate firms -- so I don't want to give names, but there's -- those are the types of opportunistic investors that typically are backed by institutional capital, 9%; government was 2%; residential developers, 2%; and then local developers, 1%; universities, 1%. So basically, what you're trying to get to is the customers, and there are -- one of the things we've had going for us in this noncore disposition effort has been, for the last 2 years, the majority of capital out there is looking for opportunistic investments. They're not really looking for core. Now if we wanted to sell a core asset, we could get that done. That's -- we're confident of that. And that gets to the JV question, are you not doing JVs because nobody is interested in that? That's not the case. We're doing noncore asset sales because we wanted to get our portfolio positioned to compete with the massive supply. So that's why I went through, and Hunter and I went through the Megacampus model because really, we're trying to get to that 90% to 95% of our ARR coming from that. So to get there, we needed to shed these noncore assets. And serendipitously, that's where these investors, they're looking for something that they can buy from us at a really good price that has flaws. It has vacancy or coming vacancy or it has a lot of CapEx needs, that we would rather have somebody else do and save our capital for a better outcome. But they have patient money and they can do that. They can reinvest in those properties and then presumably in the next 2 to 3 or 4 years, bring them to market themselves.

I'll give you one current example. I had an in-depth conversation yesterday with the head of real estate of one of the major investment banks, a name that you would recognize. And the individual was talking about, well, they made a move in senior housing when it kind of hit a bottom during the early days of COVID, I believe. I think Welltower even had pretty big negative same-store in those days, and it's kind of the darling of Wall Street today, a great company. And the person indicated, we're looking at the life science industry. Kind of that was perceived to be the bottom and thinking about how should we play in that and asking a bunch of questions. So I think people are looking at the industry opportunistically if what Hallie projected. I mean, again, the Lilly story is maybe the greatest story of all. If you looked at their stock running on the bottom for decades and suddenly a breakthrough of -- that no one imagined -- sorry, I was losing my voice here. No one imagined in the whole GLP-1 weight loss space. And now you've got, what, $1 trillion company. They're a lot more than GLP-1, of course. But I think that's the prospect and the question that [ Aaron ] asked, if we could get our act together from a governmental and policy perspective, we could really be continuing to be great as a country. We just need to get the right people. It reminds me of Jim Collins, you get the right people in the right seats on the bus and at the moment, in government, there are a few wrong people in the wrong seats, and that's been a hindrance. Yes, Andrew? Can we get a...

I can go loud...

One sec. I know you yell at [indiscernible].

Constantly, constantly. All right. So look, dividend cuts happen, stocks open, the stocks down. There's a lot of negative stuff. But really, the way I'm trying to look at this is finding the optimistic side, and we've talked a lot about the negative side. So let's talk about the optimistic side. We have a country that's just getting older and older and older and couldn't need the right kind of drugs, new drug discoveries to satisfy that need, which is coming. And you see it in senior housing, that's part of that drive and that direction. So we're going to have a lot of that. You guys are selling the stuff that you don't want. You're keeping the stuff that really dominates. So when the story turns, I don't know, maybe -- I mean is there any argument that the politics might change because of the graying of America, because of the need of this to happen and the competition from China. I'm just trying to look for what changes the macro story in some way because that is obviously a major problem right now. And it's -- when you're talking about 3 or 4 years, that's a long time to be holding and waiting.

Yes. I think leadership matters and the leadership of health in this country needs to be front and center on these issues, front and center on the China threat, front and center on basic research, front and center on getting the FDA realigned in a way that it can fulfill its situation to get a Fed chair in place that will rationalize interest rates and not to kill innovation by bringing drug companies in every day and bidding them up over pricing because imagine if -- I mean this is the only industry I know you create something great that helps humans and you can only sell it for a limited time and then your pricing during that limited time is beat the heck. I always say, imagine if we said to Microsoft, you've got to give up your Windows franchise in 10 years and go on to something else, I mean, what kind of a business is that. These are tough, tough issues. And I wish I had a crystal ball, but I do think it's leadership. And at the moment, we're in need of that. I mean the...

[indiscernible] getting older creates that kind of pressure on the...

No. But that's kind of a slow tsunami in a sense. But I mean, I know -- 2 of friends of mine, one lawyer, one businessperson relatively vital, both now have been stricken with Parkinson's. And when you look at the quality of their life, it's awful. And I mean that's just one example. When that sits in front of you and you see it live, and you knew that person as one of them ran a major law firm in the country and was an incredible person, you know that this industry has to address that and the government needs to put the framework together to make that much more efficient and possible and not kill innovation. I mean, otherwise, we're, I think, doomed as a society, unfortunately.

Maybe just one thing to add to that on the aging population. I think we're starting to see it and are going to see it probably sooner rather than later is on the budgetary impact, right, in terms of health care costs. And that's really, I think, going to be the biggest drivers for a recognition that medicines are one of the most inexpensive ways to manage that. So especially for Alzheimer's, people are living longer, which increases the health care cost, which increases the amount of medicines that are needed. And so I would say from an aging perspective, I do think that budgetary impact is going to be the thing that really is going to have to push people to recognize that this industry needs to be supported.

Maybe just bring it back to the real estate for one second. We are obviously laser-focused on a strategy that is the best real estate. I look at this as an opportunity to plant the green shoots for the future. As Hallie described, there's still great science out there. And if this market has proven anything, is that the tides come in, and the best real estate with the best people win, and the best talent that is coming up with these great ideas have more and more of a need for robust infrastructure, which only we can manage and want to be in the core markets where they can attract the best talent. And so as I look at it right now, it's that we have the real estate that can capture the best companies in the most challenging time, which will enable us to weather the storm and then be poised when things turn to deeply outperform on a go-forward basis and probably have way more wind at our back than we do at our faces today. And so I know we are all in the trenches every day, really running through pretty much every one of our [ PIK ] access to the end and then buying a new one and getting up and going, we got to build this thing out. We got to deliver on occupancy because that's going to be the growth for us going forward. And I have super high conviction that the redefined portfolio that is our Megacampus. I speak with super high conviction in saying that investors today will want to own that real estate as the tide turns. None of us are able to have the crystal ball to say when that is, but I have super high confidence that we're going to be the first ones out and we're going to be the ones, and I think all of our statistics speak to it today, that we're the one still putting up numbers that are very, very impressive. When you think about what is the opportunity out there, I think it's hard to say that we're not capturing every piece of that opportunity that's there. So I would like to -- I wake up every morning being the optimist, and so I share your thoughts on what could drive us on a macro to kind of have the tides turn in a way that's beneficial, frankly, to everyone. But in a little bit, these are the times where you get the scars that prove that we're going to be the better ones when we come out. So I have high conviction on our strategy.

I think well said. I think, again, you have to go back to the -- Peter, articulated our operating Megacampus. And I think if you just look at the locations, this is where innovation is happening to, I think, Hunter's point and Hallie's point. And I don't think a company could be better positioned for those opportunities. And I think, again, the world of pure laboratory and pure lab space is, I think, morphing and changing. And I think we are well positioned to take advantage of that. I think Mission Bay is a great example and what we've seen in Campus Point in San Diego. So I think we feel good about in a turbulent time to be able to get to the best tenants. And what's nice is the reputation that I think we've established on the ground in these innovation centers has brought people to us, and I don't think that's easily replicable by many people. So very, very important. Jamie?

So to Peter's point about this could take a couple of years to turn, how do we think about just tenant credit over that period? Do you think -- do you think as we're sitting here this time next year or the year after, you start to have a little bit more of a tenant credit bleed? Or how should we think about that cushion and how you guys are thinking about it?

Yes. I'll let Hallie answer that in depth. But I think how we -- we've been very fortunate over a long period of time. We've got a fabulous team that has spent a lot of time and a lot of effort underwriting tenants, especially in the venture arena. And I think we've had a really marvelous track record at avoiding major, major big blow ups. But I think it's clear today, we're in a kind of a different area. And as Marc indicated, our go-forward guidance for '26 assumes a certain amount of wind downs we've never assumed in our numbers today. And part of that is people being frustrated with either the venture capital raising market, the public markets, the time frames and the costs and feel like, well, maybe if we wind down and combine the IP and the assets with somebody else, we can be more efficient about going about that. And so we're seeing some of that out there for sure. But Hallie, do you want to maybe talk about that?

Sure. I mean, generally, and this goes back even to the good days, like this is a tough industry, right? We have companies that do have failures irrespective of the macro environment. And so our strategy is always, how do we get ahead of it, how do we mitigate any issues going forward. We have an amazing team of PhDs, MDs, folks from the biotech world on the ground, interacting with these companies directly. All of our private companies, we get financial statements as part of our standard lease form. And so it's this constant process of, hey, is there an issue? How do we get ahead of it? What's the other demand on the ground? In San Carlos, as an example, there was a company that still had a significant amount of cash over $300 million, but had a clinical failure. The San Francisco team was able to backfill them with a really strong tenant just in over the past 6 months. So as Joel said, we are not immune that there's going to be potentially more impact going forward because of those capital markets, but I think it's within how we're already operating. And what we do have in the model this year is really a contingency out of an abundance of caution because we recognize that there are unique headwinds right now that we have not had to experience in the past. But I think our team in terms of managing those issues is the best position to do it, especially combined with the fact that we continue to out lease when there is demand.

And the Fed, frankly, can have a lot to do with it because if they can push down interest rates, that is going to move a psychology of sentiment of a little more risk on and make the biotech sector a little more investable at the moment that people don't see it quite that way. So other questions? Yes, please. Can we get a...

Seth Bergey, with Citi. Just going back to kind of the capital plan, you gave the cap rate on kind of the noncore assets the range. Where do you think kind of the core asset pricing could come in on kind of the JV and partial sales? And how should we think about kind of the pricing you could get on some of the land sales as well?

Well, I think when it comes to core mega campus, core or mega campus, I think Hunter did gave you a little bit of the case study in Cambridge, and I think that's a benchmark. But Peter?

Yes, it's obviously submarket by submarket, right? But as we put that slide in the deck to kind of help answer the question. There has not been a lot of core trades in the last couple of years. The ones that Hunter brought up have really been the best data points. Our feeling is that something with a 5 handle is where our best assets are going to trade today, but it's yet to be completely proven. But those comps, which, by the way, were -- I think they were both ground lease assets, which is also kind of helpful to understand that investors were paying a 5 handle for ground lease assets. Now they were in Cambridge. So that's also saying something. But yes, if you looked at the big 3 markets and some of our periphery markets like Seattle that have historically had low cap rates, I think we do think our best assets would be in the -- would have a 5 handle. The last time we did sell an asset with a lot of income on it was in Seattle. We did sell it to a user. So maybe make an adjustment. But the cap rate there, and that was in 2024 was 4.9. So that's a little bit more support because that was 2024 during pretty much the same interest rate environment we're in today.

Tony? -- we get it. Thank you.

You mentioned potential stock buybacks. What would happen or what would have to happen on the sources and uses for that to make its way on there? Like how -- what are the drivers to that?

Yes. It would -- we would want to fund it leverage neutral. So if we pursue that, that would mean either higher dispositions, higher JVs as a funding source. Does that answer your question, Tony?

So above the [ 2.9 ]...

Above the 2.9, yes, we don't have a buyback assumption embedded in guidance right now.

But it's top of mind when possible, I can promise you that. Right here.

We appreciate the breadcumbs for '27. And I just want to reconcile, you mentioned that you hope to be at the end of '26, $4 billion to $5.5 billion in development qualifying balances. Should we think then for '27 and '28, some of that -- or most of that, I should say, is going to be the money-good projects, if you will, because you're largely done with the capital recycling. I'm just trying to understand, do we have another $4.2 billion sort of partial to digest, if you will, at the end of '26, if that makes sense. You're looking at unknown decision-making on that portfolio today? How much of that is feathered out? And how does that impact the forward look?

Yes. Really hard to comment on -- are there components of cap interest that turn off on things that were being capitalized in '26 that could potentially turn off in 2027. What I can tell you, though, is that we will have made a significant amount of headway based upon our plan. The land bank itself, I mean, if you look at the numbers today, it's about $4 billion or about half of the CIP. So that's shrinking by, in aggregate, 45%. The land component is going from 50% to somewhere between 35% and 40%. So the land bank is shrinking. So -- and we're shrinking into, by and large, things we really like the mega campuses.

One of the items you mentioned in terms of next year is prioritizing occupancy and being more willing to meet the market. I'm wondering what your views are in terms of where the market will be next year in rents, TIs, flexibility and how willing or aggressive you're going to be in order to get leases signed?

Well, your comment -- one comment I'd have and then maybe ask Peter and Hunter to answer that. You said we might be more willing to meet the market. I think we do meet the market. There's no unwillingness at all. And you saw from the stats that were up there, we have way outperformed the aggregate of the next 5 largest owners by a long shot. So we're meeting the market. In many cases, we're trying to make the market. I think the Novartis lease wasn't making the market moment in San Diego, given rental rate factors and things like that. But -- so there's no hesitation to do that if the tenant -- I mean if it's our tenant, we almost never lose. If it's not our tenant, we almost never lose if we have the space. Oftentimes, we don't have a match of space, and that's something. But when you ask about specifics in the market, I mean, every submarket is a little different. So I don't know that we could go through them all, but maybe generalizations on overall, guys?

Yes. I think your point is well taken, Joel, but maybe we look at the deals in 2 different buckets. One is your question around TIs. I think we've been stating for a long time now that the cost to construct whatever is needed for a deal to get done is going to be borne by the landlord, and that remains true today. The good news is for us is that the vast majority of our asset base is an operating asset base. So when you look at the massive spike in TI, that's really mostly influencing vacant delivered space, which is why you see a lot of the new projects stalled out right now because those capital stacks can't actually afford to strike the deal, which is an important thing to note around supply in general is that -- and we saw this with office and every other sector really is that when capital stacks are struggling to find the resources needed to make the deal, they kind of stay dormant for a while and eventually almost become in this purgatory state, but they still impact the availability, which is undeniably going to impact sentiment. So that dynamic, I think, is something we haven't done anything but stayed very truthful about being part of the reality today. To Joel's point, which is spot on, is that every submarket is very different. Obviously, when you compare the pricing power of ownership in Cambridge, that's very different than the pricing power in Summerville, though the TI dynamics may be very similar. So I think on a case-by-case basis is really the way you have to think about pricing. That being all said, as I mentioned earlier in my comments, I think our mega campuses are ones where now more than ever, there's a recognition of the value that we do provide and tenants more and more -- actually, many of them are leaving the secondary and tertiary markets because they now have the opportunity to move back to the core, and they're coming to our assets for 2 reasons. One, the talent doesn't want to go where those secondary markets are; and two, the blunt fact is most of those people have no idea what they're doing in terms of managing real estate. If you look at the supply out there in most markets, most of the supply that's sitting out there totally vacant. The sponsorship has very, very limited experience in this space, some of which were experts in totally different fields like residential and thought they could throw their hat into this ring. And the reality is 30-plus years of being in the business and having the expertise that we uniquely have really matters today. So that's the way I would think about it.

Peter, anything to add? Peter?

The only thing I would add, and a lot of you have heard me say this before, we're actually -- the rents that we are getting today are certainly pulled back 10% to 15% from the peak, but they're still above what they were in 2017, 2018. So I take some solace in that because they're still pretty strong. If it wasn't for the fact that we had to contribute so much money for TIs, a lot of our yields would have probably held in our development and redevelopment pipeline, but they've deteriorated because of the -- mostly because of the TIs and not because of rents. I guess one other thing I would add is the playbook in real estate, no matter what the product type is, is keep rents high and wait for the next day, right? Because the concessions burn off and all of a sudden, your rent roll looks great. And interest rates go down a few years go by and somebody buys that. And had you lowered the rent, you wouldn't get the value. So you try to keep rents high, you give the concessions and you wait for a better day, and that's what the market is doing.

Any other, please?

Just in terms of overall strategy of the company, just wondering, given the size that you guys are at now, it's different than it was 10, 15 years ago. Has there been any consideration for offloading all development projects, maybe retaining rights to them, taking that risk off your balance sheet? Because if the life science market is doing well, you're probably trading at a premium, you can raise capital at premiums to NAV and whatnot and create value that way and take some of the risk from the development and uncertainty on cash flows off the table.

Well, I'll let these guys maybe opine on that. But let me say this, if we said to Lilly or Bristol-Myers or Novartis or Moderna when we did their headquarters well, we're really not going to do it because our balance sheet is -- we've got a stretch or we've got to do this or do that. I think you lose your franchise, you lose your credibility in the market. You don't -- you become a property manager, you don't become the vanguard of the life science industry. So what we're doing is, I think, a judicious and really careful reduction in the pipeline, as I say, we built the company during the 2013, 2014 through 2021 on development because that's what was needed. No supply really to speak of and the demand was healthy and you have the wind of one of the longest biotech markets we had ever seen and the government situation was actually pretty neutral and friendly. I think some of those things have shifted, but you can't just offload your development pipeline. Number one, we don't think there's anybody better than us at what we do in the development side. So I don't know who we would choose. And number two, if you do that, you see your position as the go-to landlord of choice and the go-to trusted partner because it's not only just construction, it's space, place, service, it's all of those. So I think you always have to have a development capability to be credible in this area. But I think by reducing the land bank, different than we did at the GFC where we kept a big land bank and reducing the development projects in the pipeline, I think, gets us to a rightsized situation. I mean, imagine our equity market cap today is under $10 billion. We've sold more than $10 billion of assets in the last 5, 6, 7 years. I mean that's kind of astounding. But I don't know, Peter, Hunter?

So if you look through to your question, it's like how do we think about judicious deployment of capital, right? And the way I think about it is that we have one of the most sophisticated teams on the ground, which, as Joel remarked, is integral in winning the deals that you want to win to be able to secure tenancy. And I think we have a tremendous team on the transaction side across all the regions as well. And when you put those 2 together, you can think very creatively about ways to both make sure that the franchise is reinforced, you deliver on what you say you're going to do and you optimize capital deployment. And I think 2 examples that I'll just speak to because I'm very well versed in them because they occurred within Greater Boston is we executed [ 15 ECO for Eli Lilly ]. And not that far into construction, we brought in a joint venture partner, derisking the asset at the time from a capital basis, actually recycling that capital back into the system on a short term and securing what now looks like a pretty good cap rate with a 5 handle on it. We also developed 421 Park, which was one of the largest buildings in Greater Boston at over 600,000 square feet and recognized early on that maybe that was too much supply to hit the market. And we were able to secure at the time when institutions -- and by the way, they still are going to need to find space for their researchers. They're just challenged now to find the capital to do it. But at the time, Boston Children's Hospital saw the benefit of coming into an ecosystem like we do. And in that deal as well, we were able to shed almost 50% of that project when you think about a capital recycling basis. So the way I look at it is to find ways to do it creatively that optimize all components because what you're describing is not one I believe will resonate with the tenants we're trying to meet their demands, not to mention really bring complexities in on an execution level that are not tenable to be able to stand behind what you promise.

Peter?

I think if this was a commodity product, your strategy could work. But because sponsorship really matters here, and as -- I mean, I agree with everything Joel said, we're the leader. And if the leader decides to bail out on projects to -- for a financial benefit that will last maybe a year, you're trading that year for 20 years of reputation and future business. So if it was a commodity, people wouldn't really care. It's like, okay, I'll just let Company B build it and you can just sell it to them. And I don't care as long as I get my office or building or industrial property. But with lab, it's different.

Yes. And I think Hunter's point is well taken that in all the transactions we're working on, on the development side, we are on each and every one looking at creative ways to offload some of the capital risk for sure. And I think Hunter's comment about [ 15 Echo ], which is not on a mega campus actually, but is a core asset in the Seaport is just one great example of that. So thank you for the question. Please. Jay?

Thanks, Joel. Joel, in your 31 years plus as a public company, historically, you and your research team have made -- done the research and made identified and made a number of investments in private growing companies that have turned into wonderfully large tenants for you. That market is also capital constrained right now. And I'm wondering, with the dividend reduction, you've got $410 million now of recurring capital that you'll be able to retain and make investments in primarily, obviously, in real estate. But what's the environment like now to do what you've historically done really well is identify new and growing companies with emerging ideas that you can actually grow with?

Yes, that's a great question. I think we are extremely proud of some of the early investments, not all biotech, our best investment ever was Series A and Google, when we did their first campus when we got a call, and we still actually hold some of that stock today. Another one that I've mentioned time and time again was Alnylam. We were -- we did their first space. I think it was 3,500 feet or so in West Cambridge, and we took an investment in Series A. It was like a $15 million or $20 million round. And today, Alnylam is one of the [ stalwart ] highly profitable companies in the biotech arena and it turned out to be not only a great investment, but a great space play for us. And Moderna has been another one that we were very early on and had the great fortune of being able to move them as Hunter articulated from Tech Square to their own building. I mean what's happened to Moderna is a little distressing because every time people talk about vaccines, that stock gets hit. Just the mere mention of it, it's off 5%, which is very distressing. And I mean, they've done a great job. Literally, they saved a whole lot of people together with Pfizer and B&B or BioNTech, I forgot the Pfizer partner in this -- in the COVID situation. And you just couldn't have wanted a better quality of company and sponsorship there to be on the front line in the fight against this incredible pandemic. Obviously, imported from China, right, Wuhan. But maybe ask Hallie to comment on maybe a couple of the remarkable companies we're seeing today, and there's a handful of them that have gotten scooped up in San Diego recently, very, very interesting and exciting companies, and we've been part of their capital structure. So...

Sure. Well, high level, I would say, given the environment where we're currently in and our own capital, our team is incredibly disciplined, right? We are looking for opportunities that are going to drive financial return, also have a positive real estate impact. It's also a great time to find very well-priced opportunities, right? Valuations have gone down, and there's some really amazing companies out there. We do have a few great recent examples. We had a company in San Diego on our UTC campus developing -- sorry, Campus Point mega campus, developing in-vivo CAR-T. So instead of giving a patient a cell therapy to moderate really severe autoimmune diseases, you give them a form of RNA, right, that can be easily delivered and do the same thing to tamp down their immune system. And this company was bought out by AbbVie for over $2 billion, and we now have a captive high credit pharma tenant added to that campus. Just the other day, we had an investment, Joel, just because you brought up Parkinson's that came to mind, that was showing us a video of a patient treated with a cell therapy delivered to the brain, very severe Parkinson's and showing them walking before and after. And it was just one of those moments that just knocks you off your feet, right? You're like, yes, there's so many challenges. There's so much rhetoric, there's so much headline risk. But like this is why we're all here, right? Because it can be incredibly transformative, right? So we continue to see those types of opportunities. Again, where we put our capital, it is precious. The team is so diligent, but we continue to see it as a really important vertical of our business.

Yes. And I think there's a lot more intersection today between -- this is the Steve Jobs quote between biology and technology. And I think that's really an exciting area. And if we can get commercialization times compressed like China is able to do in their managed world, that's just going to be game changing. So we continue to be optimistic about that for sure. Any other questions? Yes, sir.

Just another quick question around the development pipeline. And I did notice that quite a few development projects currently have low occupancy or low pre-leasing, but the decision was to kind of still make to kind of continue developing those assets. Just kind of curious in general, the criteria that was kind of used to kind of assess those type of situations and this to kind of got the green light.

Yes. So I think we showed a couple of slides on our '26 pipeline, we're actually very highly leased here on 3 projects that are on mega campus. So we feel very good about that and the prospects for completing those. We -- I mentioned about the Texas situation, the San Francisco tenant took us there, but we're stuck in kind of the current environment where because of the 15% rule, institutional demand is like evaporated and venture demand is pretty minimal at the moment. Otherwise, it's an amazing campus. So we're evaluating that. Thanks, guys. And then Canada, we've made a decision to move out of that. So then the next is the '27 and beyond. And I think here, leasing is a little varied. We've had some success in a number of locations, and we're working hard on others. And then we've made some decisions, the 2 that you see there, one in Greater Boston, one in San Francisco for a variety of reasons, including capital we'd like not to commit in the future and occupancy vacancy issues. We've moved those to held for sale and a couple of ones we think are great projects, but there may be some alternative decisions, either go, change use or offload through a sale, and we're evaluating that. So I think we're -- I don't know if that helps answer your question, but we're laser-focused on this because this is very important. And we're not trying to initiate any large-scale new projects because we're not interested in building into an oversupplied set of markets. But again, going back to the situation in San Diego when Novartis presented itself, it really was a 2- to 3-year gestational situation. So it wasn't like we just received off the street an RFP and had to respond because if that came in today in that fashion, we probably wouldn't respond. So any other? One here, please.

Do you expect much of a carry cost in either taxes or insurance from the assets you'll stop capitalizing? Or would you sell those quickly after capitalization?

Yes. No, there will definitely be some lag between when capitalization turns off and when we sell the asset, but it's embedded in the numbers. But yes, there will be a little bit of a hit there.

Okay. If there are no other questions, thank you very much for your time. We appreciate it greatly and to the team. Thank you.