Alexandria Q3 Loss Widens on Impairments as Leasing Strengthens

Alexandria Real Estate Equities reported a wider third-quarter loss after recording $637.9 million of real estate impairment charges, while adjusted funds from operations declined and lower occupancy weighed on same-property results. The life science real estate investment trust nevertheless maintained the midpoint of its 2026 adjusted FFO outlook, citing stronger leasing activity and continued efforts to reduce construction commitments and recycle capital.

The company posted a GAAP net loss attributable to common stockholders of $638.5 million, or $3.74 per diluted share, for the quarter ended September 30, 2026. That compared with a loss of $234.9 million, or $1.38 per share, a year earlier.

The impairments primarily involved properties classified as held for sale, including a Fenway development project and assets in Palo Alto, San Carlos and Austin. Alexandria said several of the affected properties would have required significant additional capital to complete, convert or lease.

Funds from operations attributable to common stockholders were $269.1 million, or $1.57 per diluted share. Adjusted FFO, which excludes specified investment gains and losses, impairments and financing items, fell to $264.4 million, or $1.54 per share, from $377.8 million, or $2.22 per share, in the prior-year quarter.

Total revenue declined 10.7% to $671.2 million, while income from rentals fell 11.2% to $653.6 million. The operating margin was 66%, and the adjusted EBITDA margin was 65%.

Leasing improves as occupancy pressure persists

Alexandria completed 1.24 million rentable square feet of leasing during the quarter, its highest quarterly total since the fourth quarter of 2024 and about 26% above the average from the first quarter of 2025 through the second quarter of 2026. The total included 450,961 rentable square feet of previously vacant space, the second-highest quarterly amount in the company’s history.

Renewals and re-leasing accounted for 785,069 rentable square feet. Rental rates on that space declined 2.4%, or 3.3% on a cash basis, from expiring rates. Leases executed during the first nine months of 2026 had a weighted-average term of 10.9 years, compared with the company’s 2017–2025 average of 9.0 years. Existing tenants generated 74% of leasing activity over the trailing 12 months.

Operating-property occupancy was 87.1% at quarter-end, up from 86.9% at June 30 but below 90.6% a year earlier. Including 1.3 million rentable square feet under executed leases that have not yet commenced, occupancy would have been 90.8%. Those future commencements have a weighted-average expected occupancy date of approximately June 2027 and are expected to generate about $52 million of annual rental revenue. Alexandria expects 32% of that space to be occupied by the end of 2026.

Same-property net operating income declined 6.7%, or 2.8% on a cash basis. The company attributed the decrease to lower same-property occupancy, primarily following previously disclosed lease expirations with expected downtime. Average same-property occupancy was 88.1%, compared with 91.7% in the year-earlier period.

Alexandria delivered 529,061 rentable square feet of development and redevelopment space during the quarter. The projects were 84% occupied at delivery and generated $40 million of incremental annual NOI. The company expects another $85 million of incremental annual NOI from projects scheduled for delivery through 2028, excluding three redevelopment projects still under strategic review.

Capital recycling and lower construction commitments

Alexandria is using dispositions, partial-interest sales and lower construction commitments to reduce funding needs and support its leverage targets. Completed dispositions and partial-interest sales totaled approximately $717 million as of October 26. Pending transactions, including those subject to non-refundable deposits, signed letters of intent or late-stage negotiations, brought the total completed and pending amount to approximately $2.62 billion.

In October, the company sold an approximately 29% noncontrolling interest in the Campus Point by Alexandria Megacampus for $475 million. Alexandria retained control of the joint venture and continued to consolidate its properties.

The company also agreed to sell the 339,668-square-foot project at 421 Park Drive in its Fenway Megacampus to an institutional user. The transaction, expected to close in the fourth quarter, is projected to reduce potential future construction spending by approximately $136 million.

At 311 Arsenal Street, Alexandria executed leases covering 66,859 square feet and was negotiating leases for another 100,684 square feet for advanced technology use. The company shifted the 339,020-square-foot redevelopment to a lower-cost use and reclassified it as operating, reducing potential future construction spending by about $220 million. Three other projects totaling 667,002 square feet remain under evaluation, with alternatives including continued laboratory construction, lower-investment uses, a pause in construction or disposition.

Guidance midpoint maintained

Alexandria narrowed its 2026 adjusted FFO guidance to $6.38 to $6.42 per diluted share from $6.35 to $6.45, leaving the midpoint unchanged at $6.40. The company continues to expect year-end operating occupancy of 86.2% to 87.8% and same-property NOI to decline between 8.5% and 10.5% for the year.

The midpoint of expected proceeds from dispositions and partial-interest sales was reduced to $1.9 billion from $2.9 billion following the August issuance of $1.0 billion of 7.25% junior subordinated notes due in 2057. The securities receive 50% equity treatment from key rating agencies for certain credit calculations. Alexandria does not anticipate issuing common equity in 2026.

The company maintained its fourth-quarter annualized net debt and preferred stock-to-adjusted EBITDA target of 5.6 to 6.2 times. It lowered its fixed-charge coverage target to 3.4 to 3.9 times from 3.6 to 4.1 times, primarily reflecting the subordinated note issuance. At September 30, quarter-annualized leverage was 6.9 times, or 6.6 times on a pro forma basis for the Campus Point transaction, and liquidity totaled $4.56 billion.

Alexandria said potential tenant wind-downs remain a source of uncertainty. Its 2026 outlook includes a $30 million to $35 million reduction in FFO related to such events, of which about $30 million had been recognized through the third quarter. Management preliminarily expects at least a similar reduction may be required in 2027.

The company also expects 1.4 million rentable square feet of key 2027 lease expirations, representing $100.5 million of annual rental revenue, to experience nine to 24 months of downtime. As a result, management expects average operating occupancy to decline temporarily in 2027 relative to projected year-end 2026 occupancy, before improving in 2028, subject to leasing and market conditions.